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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 1, 1997
FILE NO. 33-92842
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 2 /X/
------------------------
GLENBROOK LIFE AND ANNUITY COMPANY
(Exact Name of Registrant as specified in its charter)
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ILLINOIS 6311 35-1113325
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) Number)
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3100 Sanders Road
Northbrook, Illinois 60062
(Address of Principal Executive Office)
MICHAEL J. VELOTTA
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:
GREGOR B. MCCURDY, ESQUIRE JOHN R. HEDRICK, ESQUIRE
ROUTIER AND JOHNSON, P.C. ALLSTATE LIFE FINANCIAL
1700 K. STREET N. W., SUITE SERVICES, INC.
1003 3100 SANDERS ROAD
WASHINGTON, D.C. 20006 NORTHBROOK, IL 60062
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
THE ANNUITY CONTRACT COVERED BY THIS REGISTRATION STATEMENT IS TO BE ISSUED
PROMPTLY AND FROM
TIME TO TIME AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box: /X/
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE CHART
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Proposed Maximum Proposed Maximum Amount of
Title of Each Class of Amount to Offering Price Aggregate Registration Fee
Securities to be Registered be Registered Per Share Offering Price
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Deferred Annuity Contracts
and Participating Interests
therein . . . . . . . . . . . . * * * *
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* These Contracts are not issued in predetermined amounts or units.
A maximum aggregate offering price of $150,290,000 was previously registered.
No additional amount of securities is being registered by this post effective
amendment to the registration statement.
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
3100 SANDERS ROAD
NORTHBROOK, ILLINOIS 60062
(800) 755-5275
INDIVIDUAL FLEXIBLE PAYMENT DEFERRED ANNUITY CONTRACTS
This prospectus describes the Individual Flexible Payment Deferred Annuity
Contract ("Contract") offered by Glenbrook Life and Annuity Company ("Company"),
a wholly owned subsidiary of Allstate Life Insurance Company. Allstate Life
Financial Services, Inc. is the principal underwriter.
The Contract has the flexibility to allow you to shape an annuity to fit your
particular needs. It is designed to aid you in your choice of short-term,
mid-term, or long-term financial planning and can be used for retirement
planning regardless of whether the plan qualifies for special federal income tax
treatment. The Company will accept an initial purchase payment of $3,000 ($2,000
for a Qualified Contract). Additional purchase payments of $100 or more may be
added to the Contract.
Withdrawals under the Contract may be subject to a Market Value Adjustment.
Therefore, the Owner bears some investment risk under the Contract.
THE CONTRACTS MAY BE DISTRIBUTED THROUGH BROKER-DEALERS WHICH HAVE RELATIONSHIPS
WITH BANKS OR OTHER FINANCIAL INSTITUTIONS; HOWEVER, THE CONTRACTS ARE NOT
DEPOSITS, OR OBLIGATIONS OF, OR GUARANTEED BY SUCH INSTITUTIONS OR ANY FEDERAL
REGULATORY AGENCY. INVESTMENT IN THE CONTRACTS INVOLVES INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL. THESE CONTRACTS ARE NOT FDIC INSURED.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
PLEASE READ THIS PROSPECTUS CAREFULLY AND RETAIN IT FOR FUTURE REFERENCE.
THE DATE OF THIS PROSPECTUS IS MAY 1, 1997.
<PAGE>
THE CONTRACTS MAY NOT BE AVAILABLE IN ALL STATES.
At least once each Contract Year prior to the Payout Start Date, the Company
will send the Owner an annual statement that contains certain information
pertinent to the individual Owner's Contract. The annual statement details
values and specific Contract data that 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. Our Company files annual and
quarterly reports and other information with the SEC. You may read and copy any
reports, statements or other information we file at the SEC's public reference
room in Washington, D.C. You can request copies of these documents upon payment
of a duplicating fee, by writing to the SEC. Please call the SEC at
1-800-SEC-0330 for further information on the operation of the public reference
rooms. Our SEC filings are also available to the public on the SEC Internet site
http://www.sec.gov.).
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.
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TABLE OF CONTENTS
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GLOSSARY................................................................. 4
THE CONTRACTS............................................................ 6
The Purchase of the Contract.......................................... 6
The Accumulation Phase................................................ 7
Adjustments to Account Value (Withdrawal Charge, Market Value
Adjustment and Taxes)................................................ 9
The Parties to the Contract........................................... 11
The Death Benefit Provisions.......................................... 12
The Payout Phase...................................................... 13
AMENDMENT OF THE CONTRACTS............................................... 14
DISTRIBUTION OF THE CONTRACTS............................................ 14
FEDERAL TAX MATTERS...................................................... 15
Introduction.......................................................... 15
Taxation of the Company............................................... 15
Taxation of Annuities in General...................................... 15
Tax Deferral...................................................... 15
Taxation of Partial and Full Withdrawals.......................... 15
Taxation of Annuity Payments...................................... 15
Taxation of Annuity Death Benefits................................ 16
Penalty Tax on Premature Distributions............................ 16
Aggregation of Annuity Contracts.................................. 16
IRS Required Distribution at Death Rules.......................... 16
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2
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Qualified Plans....................................................... 16
Types of Qualified Plans.............................................. 17
Individual Retirement Annuities................................... 17
Simplified Employee Pension Plans................................. 17
Savings Incentive Match Plans for Employees (SIMPLE Plans)........ 17
Tax Sheltered Annuities........................................... 17
Corporate and Self-Employed Pension and Profit Sharing Plans...... 17
State and Local Government and Tax-Exempt Organization Deferred
Compensation Plans............................................... 17
Income Tax Withholding............................................ 18
THE COMPANY.............................................................. 18
Business.............................................................. 18
Reinsurance Agreements................................................ 18
Investments by the Company............................................ 19
SELECTED FINANCIAL DATA.................................................. 20
Management's Discussion and Analysis of Financial Condition and
Results
of Operations........................................................ 20
Results of Operations............................................. 21
Financial Position................................................ 21
Liquidity and Capital Resources................................... 22
Pending Accounting Standard....................................... 23
COMPETITION.............................................................. 23
EMPLOYEES................................................................ 23
PROPERTIES............................................................... 23
STATE AND FEDERAL REGULATION............................................. 23
EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY.......................... 24
EXECUTIVE COMPENSATION................................................... 26
LEGAL PROCEEDINGS........................................................ 27
EXPERTS.................................................................. 27
LEGAL MATTERS............................................................ 27
FINANCIAL STATEMENTS..................................................... F-1
APPENDIX A............................................................... A-1
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GLOSSARY ACCOUNT(S) -- Are distinguished by Guarantee Period(s) and the
dates the period(s) begins. Accounts are established when
purchase payments are made and when previous accounts expire and
a new Guarantee Period is selected.
ACCOUNT VALUE -- The Account Value is the accumulation of funds
allocated to that Account and interest credited less any
withdrawals.
ADJUSTED ACCOUNT VALUE -- The Account Value adjusted by any
Market Value Adjustment.
ANNUITANT(S) -- The person or persons whose life determines the
latest Payout Start Date and the amount and duration of any
income payments for Income Plan options other than Guaranteed
Payments for a Specified Period.
BENEFICIARY(IES) -- The person(s) to whom any benefits are due
when a Death Benefit is payable and there is no surviving Owner.
COMPANY("WE," "US") -- Glenbrook Life and Annuity Company.
CONTRACT -- The Glenbrook Life and Annuity Company Flexible
Payment Deferred Annuity Contract, known as "The Glenbrook Choice
Plus" that is described in this prospectus.
CONTRACT ANNIVERSARY -- An anniversary of the date that the
Contract was issued.
CONTRACT VALUE -- The sum of all Account Values.
CONTRACT YEAR -- A period of 12 months starting with the issue
date or any Contract Anniversary.
DEATH BENEFIT -- The Death Benefit is the Contract Value plus any
positive Market Value Adjustment applied to the portion of the
Contract Value in excess of the Free Withdrawal Amount.
FREE WITHDRAWAL AMOUNT -- A portion of each Account Value which
may be withdrawn each year without incurring a Withdrawal Charge
or a Market Value Adjustment.
GUARANTEE PERIOD -- A period of years for which a specified
effective annual interest rate is guaranteed by the Company.
INCOME PLAN -- One of several ways in which a series of payments
are made after the Payout Start Date. Income payments are based
on the Contract Value adjusted by any applicable Market Value
Adjustment on the Payout Start Date.
ISSUE DATE -- The date the Contract becomes effective.
MARKET VALUE ADJUSTMENT -- The Market Value Adjustment is an
increase or decrease in a withdrawal payment, Death Benefit
payment or in the amount applied to an Income Plan reflecting the
impact of changes in interest rates between the time the Account
was established and the time of distribution.
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4
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OWNER(S)("YOU") -- The person or persons designated as the Owner
in the Contract.
PAYOUT START DATE -- The date the Contract Value adjusted by any
Market Value Adjustment is applied to an Income Plan.
TREASURY RATE -- The U.S. Treasury Note Constant Maturity weekly
yield as reported in Federal Reserve Bulletin Release H.15.
WITHDRAWAL CHARGE -- The charge that is assessed by the Company
on withdrawals in excess of the Free Withdrawal Amount.
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5
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THE CONTRACTS
THE PURCHASE OF 1. WHAT IS THE PURPOSE OF THE CONTRACT?
THE CONTRACT The Contract described in this prospectus is designed to
aid you in your choice of short-term, mid-term, or
long-term financial planning and can be used for retirement
planning regardless of whether the plan qualifies for
special federal income tax treatment. The Contract has an
accumulation phase and a payout phase. The accumulation
phase is the first of the two phases and begins on the
issue date and continues until the Payout Start Date.
During the accumulation phase, interest is credited to the
purchase payment(s) and both a cash withdrawal benefit and
a Death Benefit are available. The payout phase begins on
the Payout Start Date and provides income payments under an
Income Plan. The payout phase continues until the Company
makes the last payment as provided by the Income Plan.
2. HOW IS A CONTRACT PURCHASED?
The minimum initial purchase payment the Company will
accept is $3,000 ($2,000 for a qualified contract).
Additional purchase payments of $100 or more may be added
to the Contract. The Owner must select the Guarantee
Period(s) in which to allocate each purchase payment.
Guarantee Periods will be offered at the Company's
discretion and may range from one to ten years. No less
than $100 may be allocated to any one Guarantee Period. The
Company reserves the right to limit or increase the amount
of purchase payments it will accept.
3. DOES THIS CONTRACT HAVE A FREE-LOOK PROVISION?
Yes. The Owner may cancel the Contract anytime within 20
days after receipt of the Contract, or longer if required
by state law, and receive a full refund of all purchase
payments. For Contracts issued in California, the Owner
will receive the greater of the Adjusted Account Value or
the sum of all purchase payments.
4. CAN ADDITIONS BE MADE TO THE CONTRACT AFTER THE INITIAL
PURCHASE PAYMENT?
Yes, additional purchase payments may be made at any time
during the accumulation phase of the Contract. Subsequent
purchase payments must be at least $100 and may be made
from a bank account through Automatic Additions. For each
purchase payment, the Owner must select a Guarantee
Period(s) to which the purchase payment will be allocated.
The Company reserves the right to limit the number of
additional purchase payments.
5. ONCE A CONTRACT IS PURCHASED, HOW IS THE OWNER INFORMED
AS TO THE STATUS OF THE CONTRACT?
There are several ways an Owner may receive information
about the Contract. At least once a year, prior to the
Payout Start Date, the Owner will be sent a statement
containing Account Value information of the Contract.
Another option the Owner has is to call the Company's
Customer Support Unit directly at 1-800-755-5275.
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6
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THE ACCUMULATION 6. HOW IS INTEREST CREDITED TO THE CONTRACT?
PHASE Interest will be credited to initial purchase payments from
the Issue Date. Interest will be credited to subsequent
purchase payments from the date of receipt by the Company.
No deductions are made from purchase payments. Therefore,
the full amount of every purchase payment is invested in an
Account for accumulation of interest. Interest is credited
daily to each Guarantee Period in the Contract and is based
upon the interest rate of the Guarantee Period which has
been chosen. For current interest rate information, please
contact your sales representative or the Company's Customer
Support Unit at 1-800-755-5275.
The following example illustrates how an Account Value
would grow given an assumed purchase payment, Guarantee
Period, and effective annual interest rate. The effective
annual interest rate is defined as the yield resulting when
interest credited at the underlying daily rate has
compounded for a full year.
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EXAMPLE OF INTEREST CREDITING DURING THE GUARANTEE PERIOD:
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Purchase Payment:.............................................. $10,000.00
Guarantee Period:.............................................. 5 years
Effective Annual Rate:......................................... 4.50%
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END OF CONTRACT YEAR:
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YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
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<S> <C> <C> <C> <C> <C>
Beginning Account Value $ 10,000.00
X (1 + Effective Annual Rate) 1.045
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$ 10,450.00
Account Value at end of Contract $ 10,450.00
year 1 X (1 + Effective Annual 1.045
-------------
Rate) $ 10,920.25
Account Value at end of Contract $ 10,920.25
year 2 X (1 + Effective Annual 1.045
-------------
Rate) $ 11,411.66
Account Value at end of Contract $ 11,411.66
year 3 X (1 + Effective Annual 1.045
-------------
Rate) $ 11,925.19
Account Value at end of Contract $ 11,925.19
year 4 X (1 + Effective Annual 1.045
-------------
Rate)
Account Value at end of Guarantee
Period: $ 12,461.82
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TOTAL INTEREST CREDITED IN GUARANTEE PERIOD: $2,461.82 ($12,461.82 - $10,000.00)
</TABLE>
NOTE: The above illustration assumes no withdrawals of any amount during the
entire five year period. A Market Value Adjustment and Withdrawal Charge would
apply to any such interim withdrawal in excess of the Free Withdrawal Amount.
The hypothetical interest rate is for illustrative purposes only and is not
intended to predict future interest rates to be declared under the Contract.
Actual interest rates declared for any given Guarantee Period may be more or
less than shown above but will never be less than the guaranteed minimum rate as
found in the Contract.
7
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The Company has no specific formula for determining the rate of
interest that it will declare initially or in the future. Such
interest rates will be reflective of investment returns available
at the time of the determination. In addition, the management of
the Company may also consider various other factors in
determining interest rates, including regulatory and tax
requirements, sales commissions and administrative expenses borne
by the Company, general economic trends, and competitive factors.
THE MANAGEMENT OF THE COMPANY WILL MAKE THE FINAL DETERMINATION
AS TO THE INTEREST RATES TO BE DECLARED. THE COMPANY CAN NEITHER
PREDICT NOR GUARANTEE FUTURE INTEREST RATES TO BE DECLARED.
7. WHAT HAPPENS TO THE ACCOUNT VALUE AT THE END OF A GUARANTEE
PERIOD?
Prior to the end of a Guarantee Period, a notice will be mailed
to the Owner outlining the options available at the end of a
Guarantee Period. Within 30 days after the end of a Guarantee
Period the Owner may:
- take no action and the Company will automatically apply the
Account Value to a new Guarantee Period of the same duration to
be established on the day the previous Guarantee Period
expired; or
- notify the Company to apply the Account Value to a Guarantee
Period(s) of a new duration to be established on the day the
previous Guarantee Period expired; or
- receive a portion of the Account Value or the entire Account
Value through a partial or full withdrawal that is not subject to
a Market Value Adjustment. In this case, the amount withdrawn
will be deemed to have been withdrawn on the day the Guarantee
Period expired.
8. IS IT POSSIBLE TO PRESELECT A RENEWAL GUARANTEE PERIOD AT THE
POINT OF PURCHASE?
Yes. The Automatic Laddering Program allows the Owner to choose,
in advance, one renewal Guarantee Period for all renewing
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.
9. CAN A PARTIAL WITHDRAWAL OR A FULL WITHDRAWAL BE TAKEN AT ANY
TIME?
Yes. As long as the Contract is still in the accumulation phase
and has not entered the payout phase, the Owner may withdraw
money from the Contract or surrender the Contract at any time (a
Withdrawal Charge, Market Value Adjustment and taxes may apply,
including a 10% penalty tax for withdrawals prior to the Owner
attaining age 59 1/2). Partial withdrawals may be taken
automatically through Systematic Withdrawals. The Owner must
specify the Account from which the withdrawal will be taken. If
any partial withdrawal reduces an Account Value to less than
$100, the withdrawal will be treated as a request to withdraw the
entire Account Value. If the withdrawal reduces the Contract
Value to less than $2,000, the withdrawal will be treated as a
request to withdraw the entire Contract Value. The Company may
defer payment of any partial withdrawal or full withdrawal for a
period not exceeding six months from the date of the receipt of
the request.
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ADJUSTMENTS TO
ACCOUNT VALUE 10. IF A PARTIAL WITHDRAWAL OR FULL WITHDRAWAL IS REQUESTED, HOW
(WITHDRAWAL CHARGE, IS THE AMOUNT RECEIVED DETERMINED?
MARKET VALUE The main component in determining the amount received by the
ADJUSTMENT AND Owner is the amount which was requested, however, there may be
TAXES) adjustments to the requested amount. A Withdrawal Charge may
reduce the amount requested. A Market Value Adjustment may apply
which would reduce or increase the amount requested. Premium
taxes and federal income tax withholding may apply and would
reduce the amount requested. In summary:
The amount received by the Owner under a partial withdrawal or
full withdrawal request equals the amount requested less a
Withdrawal Charge (if applicable) plus or minus a Market Value
Adjustment (if applicable) less premium taxes and withholding (if
applicable).
The questions which follow further clarify the components used in
determining the amount received upon a partial withdrawal or full
withdrawal.
11. UPON A FULL WITHDRAWAL OF THE ENTIRE CONTRACT, IS IT POSSIBLE
THAT THE MARKET VALUE ADJUSTMENT AND WITHDRAWAL CHARGE COULD
CAUSE THE AMOUNT RECEIVED TO BE LESS THAN THE INITIAL PURCHASE
PAYMENT AND ANY SUBSEQUENT PAYMENTS?
No. This Contract has a return of purchase payment guarantee
which provides that the amount received upon a full withdrawal is
guaranteed never to be less than the sum of initial and any
subsequent purchase payments less amounts previously received
(prior to withholding and the deduction of any taxes if
applicable). However, to the extent that premium taxes are
assessed against the Contract or income tax is withheld, the
amount received upon a full withdrawal may be less than the
initial and any subsequent purchase payments.
The renewal of any individual Account(s) within the entire
Contract does not in any way change the return of purchase
payment guarantee provided by this Contract. Upon Account
renewal, the return of purchase payment guarantee will not be
adjusted to include any accrued interest, but will continue to
apply to the initial and any subsequent purchase payments.
12. UPON A PARTIAL WITHDRAWAL OR FULL WITHDRAWAL, IS THE ENTIRE
AMOUNT REQUESTED SUBJECT TO A WITHDRAWAL CHARGE AND A MARKET
VALUE ADJUSTMENT?
No. Only amounts in excess of any remaining Free Withdrawal
Amount within an Account will be subject to a Withdrawal Charge
and a Market Value Adjustment. A Free Withdrawal Amount is
available in every payment year of a Guarantee Period and is
equal to 10% of the purchase payment allocated to the Guarantee
Period. Any unused Free Withdrawal Amount in a payment year may
not be used to increase the Free Withdrawal Amount in a
subsequent Account year nor may it be used to increase the Free
Withdrawal Amount in another Guarantee Period.
In addition to the Free Withdrawal Amount, any amounts withdrawn
from Accounts which are within the first 30 days of their renewal
Guarantee Periods will be completely free from any Market Value
Adjustment.
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13. WHAT IS THE WITHDRAWAL CHARGE UPON A PARTIAL WITHDRAWAL OR
FULL WITHDRAWAL?
The amount withdrawn from the Account Value in excess of the Free
Withdrawal Amount is subject to the following Withdrawal Charge:
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PAYMENT YEAR 1 2 3 4 5 6 AND LATER
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Percentage 7% 7% 6% 5% 4% 0%
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For each purchase payment withdrawal, the payment year in the
above table is measured from the date we received the purchase
payment.
The Withdrawal Charge is determined by multiplying the percentage
corresponding to the payment year times that part of each
withdrawal that is in excess of the Free Withdrawal Amount.
The Company will waive any Withdrawal Charge prior to the Payout
Start Date if at least 30 days after the Issue Date any Owner (or
Annuitant if the Owner is not a natural person) is first confined
to a long term care facility or hospital for at least 90
consecutive days, confinement is prescribed by a physician and is
medically necessary, and the request for a withdrawal and
adequate written proof of confinement are received by us no later
than 90 days after discharge.
14. WHAT IS THE MARKET VALUE ADJUSTMENT UPON A PARTIAL OR FULL
WITHDRAWAL OR AT DEATH?
The Market Value Adjustment will be applied to all amounts
withdrawn, paid at death or applied to an Income Plan, which are
not exempt from adjustment as discussed in question 12.
The Market Value Adjustment reflects the relationship between (1)
the Treasury Rate for the time remaining in the Guarantee Period
at the time of death or the request for withdrawal, and (2) the
Treasury Rate at the time the Account was established for a
maturity equal to the Account Guarantee Period. Since current
Treasury Rates are the basis for the investment yields at the
time, and current interest rates are based, in part, upon
investment yields available when the Account was established, the
effect of the Market Value Adjustment will be closely related to
the levels of such yields. As such, the Owner bears some
investment risk under the Contract.
Generally, if the Treasury Rate at the time the Account was
established is lower than the Treasury Rate (interest rate for a
period equal to the time remaining in the Account), then the
Market Value Adjustment will result in a lower amount payable to
the Owner. Similarly, if the Treasury Rate at the time the
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.
For example, assume the Owner purchases a Contract and selects an
initial Guarantee Period of five years and the Treasury Rate for
that duration is 4.5%. Assume that at the end of 3 years, the
Owner makes a partial withdrawal. If, at that later time, the
Treasury Rate for a 2 year Guarantee Period is 4.8%, then the
Market Value Adjustment will be negative, which will result in a
decrease in the amount payable to the Owner. Similarly, if the
Treasury Rate for the 2 year Guarantee Period is 4.2%, then the
Market Value Adjustment will be positive, which will result in an
increase in the amount payable to the Owner.
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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.
15. THE IRS REQUIRES ANNUAL WITHDRAWALS TO BE TAKEN FROM
QUALIFIED CONTRACTS UPON ATTAINMENT OF AGE 70. WILL THESE
WITHDRAWALS INCUR WITHDRAWAL CHARGES AND MARKET VALUE
ADJUSTMENTS?
No. Both the Withdrawal Charge and Market Value Adjustment will
be waived on withdrawals taken to satisfy IRS required minimum
distribution rules for this Contract.
16. WHAT ARE THE TAX IMPLICATIONS ASSOCIATED WITH THE CONTRACT?
It varies based upon the Owner's circumstances. Generally, the
two areas which may give rise to a taxable situation are personal
federal and state income taxation and taxation of the Company.
With respect to personal federal and state income tax, an annuity
contract Owner who is a natural person is not taxed on increases
in the Contract Value until a distribution occurs. For federal
income tax purposes, distributions include the receipt of
proceeds from loans and an assignment or pledge of any portion of
the value of the Contract, as well as withdrawals, income
payments, or Death Benefits. In addition, personal federal and
state income tax withholding may be deducted from partial
withdrawal and full withdrawal payments. Amounts withheld for
personal taxes do not necessarily represent the Owner's entire
income tax liability.
With respect to taxation of the Company, premium taxes and other
applicable taxes imposed on the Company may be deducted from the
Contract's purchase payment or Contract Value upon a full
withdrawal or annuitization of the Contract. Current premium tax
rates range from 0 to 3.5%, but are subject to change by state
regulation.
There are several exceptions to the above generalizations. More
complete information can be found in the "Federal Tax Matters"
section found on page 15 of this prospectus.
THE PARTIES TO THE 17. WHAT RIGHTS DOES AN OWNER HAVE IN THIS CONTRACT?
CONTRACT This Contract offers the Owner several rights. The Owner may:
- receive any withdrawals or periodic income payments from the
Contract, unless the Owner has directed the Company to pay them
to someone else;
- name and change the Owner, Beneficiary, and Annuitant (only if
Owner is a natural person);
- assign benefits under the Contract prior to the Payout Start
Date;
- elect a Death Benefit option upon death of a co-owner or
Annuitant if the Owner is not a natural person; and
- terminate the Contract.
The above may be subject to the rights of any irrevocable
Beneficiary.
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18. WHAT PURPOSE DOES THE ANNUITANT SERVE?
The Annuitant's life determines the income payments which will
begin on the Payout Start Date. This Contract requires an
Annuitant at all times during the accumulation phase and on the
Payout Start Date. The Annuitant must be a natural person. A
Death Benefit may be payable upon the death of the Annuitant only
if the Owner is not a natural person.
19. WHO IS THE BENEFICIARY TO THE CONTRACT?
The Beneficiary varies based upon who the Owner is, and the
designation of the parties to the Contract by the Owner. If the
Owner is a natural person, the Beneficiary will be determined
from the most recent written request of the Owner. If the Owner
does not name a Beneficiary or if the Beneficiaries named are no
longer living, the Beneficiary will be:
- a contingent beneficiary named by the Owner; otherwise
- the Owner's spouse if living; otherwise
- the Owner's children, equally, if living; otherwise
- the Owner's estate.
20. WHAT PURPOSE DOES THE BENEFICIARY SERVE?
The Beneficiary becomes the new Owner if the sole surviving Owner
dies prior to the Payout Start Date. If the sole surviving Owner
dies after the Payout Start Date, the Beneficiary will receive
any guaranteed income payments scheduled to continue.
THE DEATH BENEFITS 21. UPON DEATH OF THE OWNER, WHO IS THE NEW OWNER OF THE
PROVISIONS CONTRACT?
The new Owner is any surviving joint Owner(s) or if none, the
Beneficiary.
22. UPON DEATH OF THE OWNER, WHAT OPTIONS DOES THE NEW OWNER
HAVE?
In most cases, the new Owner of the Contract has the following
three options:
- receive the Contract Value adjusted by any positive Market
Value Adjustment within 5 years of the date of death; or
- receive the Death Benefit in a lump sum. The Death Benefit is
equal to the Contract Value plus any positive Market Value
Adjustment; or
- apply the Death Benefit to an Income Plan with income payments
beginning within one year of the date of death. Income payments
must be made over the life of the new Owner, or a period not to
exceed the life expectancy of the new Owner, or the life of the
new Owner with payments guaranteed for a period not to exceed
the life expectancy of the new Owner.
If the new Owner is the spouse of the deceased Owner, the new
Owner may elect to continue the Contract. See question 23, below.
If the new Owner is a non-natural person, then the new Owner must
receive the Death Benefit in a lump sum within 5 years.
23. IF THE NEW OWNER IS THE SURVIVING SPOUSE OF THE DECEASED
OWNER, WHAT HAPPENS TO THE CONTRACT UPON THE OWNER'S DEATH?
In addition to the options available in question 22, a surviving
spousal Owner has the following options:
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- continue the Contract as if the death had not occurred; and
- if the Contract is continued, one withdrawal of any amount
within the year of death is allowed which will not be assessed a
Withdrawal Charge (a Market Value Adjustment will apply). If
the surviving spouse is under 59 1/2, a 10% penalty tax may
apply to the withdrawal.
24. IF THE OWNER IS NOT THE ANNUITANT AND THE ANNUITANT DIES
PRIOR TO THE PAYOUT START DATE, WHAT HAPPENS TO THE CONTRACT?
If the Owner is a natural person, the Contract will continue as
if the death had not occurred. The new Annuitant will be the
youngest Owner; or
If the Owner is not a natural person, the Owner will receive the
Death Benefit in a lump sum within 5 years of the date of death.
THE PAYOUT PHASE 25. WHAT IS THE PAYOUT START DATE?
The date on which the accumulation phase ceases and the payout
phase begins. During the payout phase, the Owner receives income
payments based upon an Income Plan selected by the Owner from the
Contract. The payout phase will continue until the Company makes
the last payment as provided by the Income Plan chosen. The Owner
may change the Payout Start Date at anytime by notifying the
Company in writing of the change at least 30 days before the
scheduled Payout Start Date. The Payout Start Date must be at
least one month after the issue date and on or before the later
of:
- the Annuitant's 90th birthday; or
- the 10th anniversary of the Contract's Issue Date.
26. WHAT TYPES OF INCOME PLANS ARE AVAILABLE IN THE CONTRACT?
Income payments are made under an Income Plan which may be chosen
by the Owner. The types of Income Plans which are available are
as follows:
- Life Income with Guaranteed Payments -- If the Annuitant dies
before all the guaranteed payments have been made, the remainder
of the guaranteed payments will be made to the Owner; or
- Joint and Survivor Life Income with Guaranteed Payments -- If
both the Annuitant and Joint Annuitant die before the guaranteed
payments have been made, the remainder of the guaranteed
payments will be made to the Owner; or
- Guaranteed Payments for a Specified Period -- Payments under
this option do not depend on the continuation of the Annuitant's
life.
Any period for which payments are guaranteed may range from 60 to
360 months. If any Owner dies, guaranteed income payments will
continue as scheduled. Up to 30 days before the Payout Start
Date, the Owner may change the Income Plan or request any other
form of Income Plan agreeable to both the Company and the Owner.
If the Company does not receive a written choice from the Owner,
the Income Plan will be life income with 120 monthly payments
guaranteed. If an Income Plan is chosen which depends on the
Annuitant's or Joint Annuitant's life, proof of age will be
required before income payments begin. The Company reserves the
right to accept other Income Plans.
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27. HOW ARE THE INCOME PAYMENTS FROM AN INCOME PLAN DETERMINED?
To determine the income payments, the Contract Value, adjusted by
any Market Value Adjustment less any applicable premium taxes,
will be applied to the greater of:
- payment plan rates declared by the Company; or
- guaranteed payment plan rates as described in the Contract.
If the monthly income payments determined under the Income Plan
are less than $20, the Company may pay the Contract Value,
adjusted by any Market Value Adjustment less any applicable
premium taxes, in a lump sum or change the payment frequency to
an interval which results in income payments of at least $20.
The Contracts are based on life annuity tables that provide for
different benefit payments to men and women of the same age
(except in states which require unisex annuity tables).
Nevertheless, in accordance with the U.S. Supreme Court's
decision in ARIZONA GOVERNING COMMITTEE V. NORRIS, in certain
employment-related situations, annuity tables that do not vary on
the basis of sex may be used. Accordingly, if the Contract is to
be used in connection with an employment-related retirement or
benefit plan, consideration should be given in consultation with
legal counsel, to the impact of NORRIS on any such plan before
making any contributions under these Contracts.
The dollar amount of income payments is generally affected by the
duration of the Income Plan selected. For example, if an Income
Plan Guaranteed for Life is chosen, the income payments may be
greater or less than income payments under an Income Plan for a
specified period depending on the life expectancy of the
Annuitant. Also, the Company may require proof that the Annuitant
or joint Annuitant is still alive before the Company makes each
payment that depends on their continued life.
28. CAN PARTIAL WITHDRAWALS BE TAKEN FROM THE CONTRACT OR CAN THE
CONTRACT BE SURRENDERED ONCE IT HAS ENTERED THE PAYOUT PHASE?
No. After the Contract Value has been applied to an Income Plan
on the Payout Start Date, the Income Plan can not be changed, the
exchange of the Contract Value for an Income Plan can not be
reversed, and no withdrawals can be made.
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AMENDMENT OF THE The Company reserves the right to amend the Contracts to meet the
CONTRACTS requirements of applicable federal or state laws or regulations.
The Company will notify the Owner of any such amendments.
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DISTRIBUTION OF THE Allstate Life Financial Services, Inc. ("ALFS"), 3100 Sanders
CONTRACTS 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.
The Company may pay up to a maximum sales commission of 8% both
upon sale of the Contract and upon renewal of a Guarantee Period.
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The Underwriting Agreement between the Company and ALFS provides
that the Company will indemnify ALFS for certain damages that may
be caused by actions, statements or omissions by the Company.
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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 THE The Company is taxed as a life insurance company under Part I of
COMPANY Subchapter L of the Internal Revenue Code. The following
discussion assumes that the Company is taxed as a life insurance
company under Part I of Subchapter L.
TAXATION OF TAX DEFERRAL. In general, an annuity contract owned by a natural
ANNUITIES IN GENERAL person is not taxed on increases in the contract value until a
distribution occurs. Annuity contracts owned by non-natural
persons are generally not treated as annuity contracts for
federal income tax purposes and the income on such contracts is
taxed as ordinary income received or accrued by the owner during
the taxable year. There are exceptions to the non-natural owner
rule and you should discuss these with your tax advisor.
TAXATION OF PARTIAL AND FULL WITHDRAWALS. In the case of a
partial withdrawal under a non-qualified contract, amounts
received are taxable to the extent the contract value, without
regard to any surrender charges, exceeds the investment in the
contract. In the case of a partial withdrawal under a qualified
contract, the portion of the payment that bears the same ratio to
the total payment that the investment in the contract bears to
the contract value, can be excluded from income. In the case of a
full withdrawal under a non-qualified contract or a qualified
contract, the amount received will be taxable only to the extent
it exceeds the investment in the contract. If an individual
transfers an annuity contract without full and adequate
consideration to a person other than the individual's spouse (or
to a former spouse incident to a divorce), the owner will be
taxed on the difference between the contract value and the
investment in the contract at the time of transfer. Other than in
the case of certain qualified contracts, any amount received as a
loan under a contract, and any assignment or pledge (or agreement
to assign or pledge) of the contract value is treated as a
withdrawal of such amount or portion.
TAXATION OF ANNUITY PAYMENTS. Generally, the rule for income
taxation of payments received from an annuity contract provides
for the return of the owner's investment in the contract in equal
tax-free amounts over the payment period. The balance of each
payment received is taxable. In the case of fixed annuity
payments, the amount excluded from income is determined by
multiplying the payment by the ratio of the investment in the
contract (adjusted for any refund feature or period certain) to
the total expected value of annuity payments for the term of the
contract.
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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; or (4) made under an immediate annuity. Similar rules
apply for distributions from qualified contracts.
AGGREGATION OF ANNUITY CONTRACTS. All non-qualified annuity
contracts issued by the Company (or its affiliates) to the same
owner during any calendar year will be aggregated and treated as
one annuity contract for purposes of determining the taxable
amount of a distribution.
IRS REQUIRED DISTRIBUTION AT DEATH RULES. In order to be
considered an annuity contract for federal income tax purposes,
an annuity contract must provide: (1) if any owner dies on or
after the annuity start date but before the entire interest in
the contract has been distributed, the remaining portion of such
interest must be distributed at least as rapidly as under the
method of distribution being used as of the date of the owner's
death; (2) if any owner dies prior to the annuity start date, the
entire interest in the contract will be distributed within five
years after the date of the owner's death. These requirements are
satisfied if any portion of the owner's interest which is payable
to, or for the benefit of, a designated beneficiary is
distributed over the life of such beneficiary (or over a period
not extending beyond the life expectancy of the beneficiary) and
the distributions begin within one year of the owner's death. If
the owner's designated beneficiary is the surviving spouse of the
owner, the contract may be continued with the surviving spouse as
the new owner. If the owner of the contract is a nonnatural
person, then the annuitant will be treated as the owner for
purposes of applying the distribution at death rules. Also, a
change of annuitant on a contract owned by a nonnatural person
will be treated as the death of the owner.
QUALIFIED PLANS This annuity contract may be used with several types of qualified
plans. The tax rules applicable to participants in such qualified
plans vary according to the type of plan and the terms and
conditions of the plan itself. Adverse tax consequences may
result from excess contributions, premature distributions,
distributions that do not conform to specified commencement and
minimum distribution rules, excess distributions and in other
circumstances. Owners and participants under the plan and
annuitants and beneficiaries under the contract may be subject to
the terms and conditions of the plan regardless of the terms of
the contract.
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TYPES OF QUALIFIED INDIVIDUAL RETIREMENT ANNUITIES. Section 408 of the Code permits
PLANS eligible individuals to contribute to an individual retirement
program known as an Individual Retirement Annuity. Individual
Retirement Annuities are subject to limitations on the amount
that can be contributed and on the time when distributions may
commence. Certain distributions from other types of qualified
plans may be "rolled over" on a tax-deferred basis into an
Individual Retirement Annuity.
SIMPLIFIED EMPLOYEE PENSION PLANS. Section 408(k) of the Code
allows employers to establish simplified employee pension plans
for their employees using the employees' individual retirement
annuities if certain criteria are met. Under these plans the
employer may, within specified limits, make deductible
contributions on behalf of the employees to their individual
retirement annuities.
SAVINGS INCENTIVE MATCH PLANS FOR EMPLOYEES (SIMPLE PLANS).
Sections 408(p) and 401(k) of the Code allow employers with 100
or fewer employees to establish SIMPLE retirement plans for their
employees. SIMPLE plans may be structured as a SIMPLE retirement
account using an employee's IRA to hold the assets or as a
Section 401(k) qualified cash or deferred arrangement. In
general, a SIMPLE plan consists of a salary deferral program for
eligible employees and matching contributions made by employers.
Employers intending to use the contract in conjunction with
SIMPLE PLANS should seek competent tax and legal advice.
TAX SHELTERED ANNUITIES. Section 403(b) of the Code permits
public school employees and employees of certain types of
tax-exempt organizations (specified in Section 501(c)(3) of the
Code) to have their employers purchase annuity contracts for
them, and subject to certain limitations, to exclude the purchase
payments from the employees' gross income. An annuity contract
used for a Section 403(b) plan must provide that distributions
attributable to salary reduction contributions made after
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 the account of
hardship (earnings on salary reduction contributions may not be
distributed for hardship).
CORPORATE AND SELF-EMPLOYED PENSION AND PROFIT SHARING
PLANS. Sections 401(a) and 403(a) of the Code permit corporate
employers to establish various types of tax favored retirement
plans for employees. The Self-Employed Individuals Retirement Act
of 1962, as amended, (commonly referred to as "H.R. 10" or
"Keogh") permits self-employed individuals to establish tax
favored retirement plans for themselves and their employees. Such
retirement plans may permit the purchase of annuity contracts in
order to provide benefits under the plans.
STATE AND LOCAL GOVERNMENT AND TAX-EXEMPT ORGANIZATION DEFERRED
COMPENSATION PLANS. Section 457 of the Code permits employees of
state and local governments and tax-exempt organizations to defer
a portion of their compensation without paying current taxes. The
employees must be participants in an eligible deferred
compensation plan. Generally, under the non-natural owner rules,
such contracts are not treated as annuity contracts for federal
income tax purposes. However, under these plans, contributions
made for the benefit of the employees will not be includible in
the employees' gross income until distributed from the plan.
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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.
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THE COMPANY
BUSINESS Glenbrook Life and Annuity Company (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 wholly owned by Allstate Life Insurance Company
("Allstate Life"), which is wholly owned by Allstate Insurance
Company, a wholly owned subsidiary of The Allstate Corporation
(the "Corporation"). 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.
REINSURANCE Effective December 31, 1993, the Company entered into an
AGREEMENTS assumption reinsurance treaty with an affiliate, Glenbrook Life
Insurance Company, to reinsure certain annuity contracts. Per the
terms of the agreement, the Company assumed all of Glenbrook Life
Insurance Company's liability under such contracts.
The Company and Allstate Life entered into a reinsurance
agreement effective on June 5, 1992. All business issued
subsequent to that date is reinsured with Allstate Life, while
previously issued business is reinsured with non-affiliated
reinsurers. Under the reinsurance agreement, Purchase Payments
under general account contracts are automatically transferred to
and become invested with the assets of Allstate Life, which
accepts 100% of the liability under such contracts. Accordingly,
the results of operations with respect to applications received
and contracts issued by the Company are not reflected in the
Company's financial statements. The amounts reflected in the
Company's financial statements related only to the investment of
those assets of the Company that are not transferred to Allstate
Life under the reinsurance agreement. The obligations of Allstate
Life under the terms of the reinsurance agreement are to the
Company; the Company remains the sole obligor under the contracts
to the Owners.
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INVESTMENTS BY THE The Company's general account assets, like the general account
COMPANY assets of other insurance companies, including Allstate Life,
must be invested in accordance with applicable state laws. These
laws govern the nature and quality of investments that may be
made by life insurance companies and the percentage of their
assets that may be committed to any particular type of
investment. In general, these laws permit investments, within
specified limits and subject to certain qualifications, in
federal, state, and municipal obligations, corporate bonds,
preferred stocks, real estate mortgages, real estate and certain
other investments. All of the Company's general account assets
are available to meet the Company's obligations.
The Company will primarily invest its general account assets in
investment-grade fixed income securities including the following:
Securities issued by the United States Government or its
agencies or instrumentalities, which may or may not be
guaranteed by the United States Government;
Debt instruments, including, but not limited to, issues of or
guaranteed by banks or bank holding companies, and of
corporations, which are deemed by the Company's management to
have qualities appropriate for inclusion in this portfolio;
Commercial mortgages, mortgage-backed securities
collateralized by real estate mortgage loans, or securities
collateralized by other assets, that are insured or
guaranteed by the Federal Home Loan Mortgage Association, the
Federal National Mortgage Association or the Government
National Mortgage Association, or that have an investment
grade at time of purchase within the four highest grades
assigned by Moody's Investors Services, Inc. (Aaa, Aa, A or
Baa), Standard & Poor's Corporation (AAA, AA, A or BBB) or
any other nationally recognized rating service;
Commercial paper, cash, or cash equivalents, and other
short-term investments having a maturity of less than one
year that are considered by the Company's management to have
investment quality comparable to securities having the
ratings stated above.
In addition, interest rate swaps, futures, options, rate caps,
and other hedging instruments may be used solely for
non-speculative hedging purposes. Anticipated use of these
financial instruments shall be limited to protecting the value of
portfolio sales or purchases, or to enhance yield through the
creation of a synthetic security.
In addition, the Company maintains certain unitized Separate
Accounts which invest in shares of open-end investment companies
registered under the Investment Company Act of 1940. These
Separate Account assets, which relate to the Company's variable
annuity and variable life contracts, do not support the Company's
obligations under the Contracts.
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SELECTED FINANCIAL The following selected financial data for the Company should be
DATA read in conjunction with the financial statements and notes
thereto included in this prospectus beginning on page F-1.
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GLENBROOK LIFE AND ANNUITY COMPANY
SELECTED FINANCIAL DATA
($ IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR-END FINANCIAL DATA 1996 1995 1994 1993 1992(1)
- ---------------------------------------- ------------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
For The Years Ended December 31:
Income Before Income Tax Expense...... $ 3,774 $ 4,455 $ 2,017 $ 836 $ 337
Net Income............................ 2,435 2,879 1,294 529 212
As of December 31:
Total Assets.......................... 2,404,770 1,409,705 750,245 169,361 12,183
</TABLE>
- ------------------------
(1) For the period from April 1, 1992 (date of acquisition) to December 31,
1992.
Effective December 31, 1993, the Company adopted Statement of Financial
Accounting Standard ("SFAS") No. 115, "Accounting for Certain Investments in
Debt and Equity Securities." Under SFAS No. 115, fixed income securities
classified as available for sale are carried at fair value. The net effect of
adoption of this SFAS increased shareholder's equity at December 31, 1993 by
$693 thousand, and did not have a material impact on net income.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
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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.
The Company, which is wholly owned by Allstate Life Insurance
Company ("ALIC"), 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 $10.0 million
seed money contribution from the Company in 1995. Investment
income and realized gains and losses of the Separate Accounts,
other than the portion related to the Company's participation,
accrue directly to the contractholders and, therefore, are not
included in the Company's statements of operations.
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RESULTS OF
OPERATIONS
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<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C> <C>
($ IN THOUSANDS)
Net investment income...................... $ 3,774 $ 3,996 $ 2,017
--------- --------- ---------
Realized capital gains, after tax.......... $ -- $ 298 $ --
--------- --------- ---------
Net income................................. $ 2,435 $ 2,879 $ 1,294
--------- --------- ---------
Fixed income securities, at amortized
cost...................................... $ 46,925 $ 44,112 $ 51,527
--------- --------- ---------
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Net income decreased by $444 thousand or 15.4% in 1996 to $2.4
million due to decreases in net investment income and realized
capital gains. The $1.6 million increase in net income in 1995
reflects the increase in net investment income and realized
capital gains.
As a result of the reinsurance agreement, the Company's results
of operations include only investment income earned on its
investment portfolio. Net investment income in 1996 decreased
5.6% or $222 thousand to $3.8 million compared to $4.0 million in
1995. The decrease reflects the impact of the Company's $10.0
million original 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 $10.0 million was invested prior to the
fourth quarter of 1995. This decrease in income was partially
offset by additional investment income earned on the higher base
of investments arising from positive cash flows from operating
activities in 1996. Net investment income increased $2.0 million
in 1995 due to an increased level of investments and a $40.0
million capital contribution received from ALIC in the third
quarter of 1994.
Realized capital gains after tax of $298 thousand in 1995 were
the result of sales of investments to fund the Company's
participation in the Separate Accounts.
FINANCIAL POSITION
</TABLE>
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<CAPTION>
1996 1995
------------- -------------
<S> <C> <C> <C>
($ IN THOUSANDS)
Fixed income securities, at fair value.......... $ 49,389 $ 48,815
------------- -------------
Short-term investments.......................... $ 1,287 $ 2,102
------------- -------------
Separate Account assets......................... $ 272,420 $ 15,578
------------- -------------
Contractholder funds............................ $ 2,060,419 $ 1,340,925
------------- -------------
Reinsurance recoverable from ALIC............... $ 2,060,419 $ 1,340,925
------------- -------------
Separate Account liabilities.................... $ 260,290 $ 5,048
------------- -------------
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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. At December 31, 1996, net
unrealized capital gains on the fixed income securities portfolio
totaled $4.3 million compared to $5.2 million as of December 31,
1995. The decrease in the unrealized gain position is primarily
attributable to rising interest rates, partially offset by an
increase in unrealized gains on the Company's participation in
the Separate Account.
All of the Company's fixed income securities portfolio is rated
investment grade, with a National Association of Insurance
Commissioners ("NAIC") rating of 1 or a Moody's rating of Aaa, Aa
or A.
At December 31, 1996 and 1995, $16.4 million and $19.2 million,
respectively, of the fixed income portfolio were invested in
mortgage-backed securities ("MBS"). At December 31, 1996, all of
the MBS were investment grade and have underlying collateral that
is guaranteed by U.S. government entities.
MBS, however, are subject to interest rate risk as the duration
and ultimate realized yield are affected by the rate of repayment
of the underlying mortgages. The Company attempts to limit
interest rate risk by purchasing MBS whose cost does not
significantly exceed par value, and with repayment protection to
provide a more certain cash flow to the Company. At December 31,
1996, the amortized cost of the MBS portfolio was below par value
by $402 thousand.
The Company closely monitors its fixed income portfolio for
declines in value that are other than temporary. Securities are
placed on non-accrual status when they are in default or when the
receipt of interest payments is in doubt.
The Company's short-term investment portfolio was $1.3 million
and $2.1 million at December 31, 1996 and 1995, respectively. The
Company invests all available cash balances in taxable and
tax-exempt short-term securities having a final maturity date or
redemption date of one year or less.
During 1996, contractholder funds and amounts recoverable from
ALIC under the reinsurance agreement increased by $719.5 million.
The increases 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 $256.8 million and Separate
Account liabilities increased by $255.2 million as compared with
December 31, 1995. 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.
</TABLE>
<TABLE>
<S> <C>
LIQUIDITY AND ALIC authorized a $20.0 million capital contribution to the
CAPITAL RESOURCES Company in 1996, which the Company received in January 1997.
</TABLE>
22
<PAGE>
<TABLE>
<S> <C>
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 NAIC has a standard for assessing the solvency of insurance
companies, which is referred to as risk-based capital ("RBC").
The requirement consists of a formula for determining each
insurer's RBC and a model law specifying regulatory actions if an
insurer's RBC falls below specified levels. The RBC formula for
life insurance companies establishes capital requirements
relating to insurance risk, business risk, asset risk and
interest rate risk. At December 31, 1996, RBC for the Company was
significantly above a level that would require regulatory action.
PENDING ACCOUNTING In June 1996, the Financial Accounting Standards Board issued
STANDARD Statement of Financial Accounting Standards No. 125, "Accounting
for Transfers of Financial Assets and Extinguishments of
Liabilities." This standard distinguishes between transfers of
financial assets as sales versus financing transactions based
upon relinquishment of control and addresses the accounting for
securitizations, securities lending, repurchase agreements and
insubstance defeasance transactions. The requirements of this
statement that were effective on January 1, 1997 were adopted and
are not expected to have a material impact on the results of
operations or financial position of the Company.
----------------------------------------------------------------
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 1,700 stock, mutual and
other types of insurers in business in the United States. A.M.
Best Company assigns A+ (Superior) to Allstate Life which
automatically reinsures all net business of the Company. A.M.
Best Company also assigns the Company the rating of A+(r) because
the Company automatically reinsures all business with Allstate
Life. Standard & Poor's Insurance Rating Services assigns AA+
(Excellent) to Glenbrook Life's claims-paying ability and Moody's
assigns an Aa3 (Excellent) financial stability rating to
Glenbrook Life. The Company shares the same ratings of its
parent, Allstate Life Insurance Company.
----------------------------------------------------------------
EMPLOYEES As of December 31, 1996, Glenbrook Life and Annuity Company has
approximately 123 employees at its home office in Northbrook,
Illinois.
----------------------------------------------------------------
PROPERTIES The Company occupies office space provided by Allstate Insurance
Company, in Northbrook, Illinois. Expenses associated with these
offices are allocated on a direct and indirect basis to the
Company.
----------------------------------------------------------------
STATE AND FEDERAL The insurance business of the Company is subject to comprehensive
REGULATION and detailed regulation and supervision throughout the United
States.
</TABLE>
23
<PAGE>
<TABLE>
<S> <C>
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 The directors and executive officers are listed below, together
AND DIRECTORS OF THE with information as to their ages, dates of election and
COMPANY principal business occupations during the last five years (if
other than their present business occupations).
LOUIS G. LOWER, II, 51, Chief Executive Officer and Chairman of
the Board (1995)*
Also Director (1986-Present) and Senior Vice President
(1995-Present) of Allstate Insurance Company; Director
(1991-Present) of Allstate Life Financial Services, Inc.;
Director (1986-Present) and President (1990-Present) Allstate
Life Insurance Company; Director (1983-Present) and Chairman of
the Board (1990-Present) of Allstate Life Insurance Company of
New York; Director (1990-Present), Chairman of the Board of
Directors and Chief Executive Officer (1995-Present), Chairman of
the Board of Directors and President (1990-1995) of Glenbrook
Life Insurance Company; Director and Chairman of the Board
(1995-Present) of Laughlin Group Holdings, Inc.; Director and
Chairman of the Board of Directors and Chief Executive Officer
(1989-Present) Lincoln Benefit Life Company; Director
(1986-Present), Chairman of the
</TABLE>
24
<PAGE>
<TABLE>
<S> <C>
Board of Directors and Chief Executive Officer (1995-Present) of
Northbrook Life Insurance Company; and Chairman of the Board of
Directors and Chief Executive Officer (1995-Present) Surety Life
Insurance Company.
PETER H. HECKMAN, 51, President, Chief Operating Officer and
Director (1996)*
Also Director and Vice President (1988-Present) of Allstate Life
Insurance Company; Director (1990-1996), Vice President
(1989-Present), Allstate Life Insurance Company of New York;
Director (1991-1993) of Allstate Life Financial Services, Inc.;
Director (1990-Present), President and Chief Operating Officer
(1996-Present), and Vice President (1990-1996), Glenbrook Life
Insurance Company; Director (1995-Present) and Vice Chairman of
the Board (1996-Present) Laughlin Group Holdings, Inc.; Director
(1990-Present) and Vice Chairman of the Board (1996-Present)
Lincoln Benefit Life Company; Director (1988-Present) President
and Chief Operating Officer (1996-Present), and was Vice
President (1989-1996), Northbrook Life Insurance Company; and
Director (1995-Present) and Vice Chairman of the Board
(1996-Present) Surety Life Insurance Company.
MICHAEL J. VELOTTA, 50, Vice President, Secretary, General
Counsel, and Director (1992)*
Also Director and Secretary (1993-Present) of Allstate Life
Financial Services, Inc.; Director (1992-Present) Vice President,
Secretary and General Counsel (1993-Present) Allstate Life
Insurance Company; Director (1992-Present) Vice President,
Secretary and General Counsel (1993-Present) Allstate Life
Insurance Company of New York; Director (1992-Present) Vice
President, Secretary and General Counsel (1993-Present) Glenbrook
Life Insurance Company; Director and Secretary (1995-Present)
Laughlin Group Holdings, Inc.; Director (1992-Present) and
Assistant Secretary (1995-Present) Lincoln Benefit Life Company;
Director (1992-Present) Vice President, Secretary and General
Counsel (1993-Present) Northbrook Life Insurance Company; and
Director and Assistant Secretary (1995-Present) Surety Life
Insurance Company.
JOHN R. HUNTER, 41, Director (1996)*
Also Assistant Vice President (1990-Present) Allstate Life
Insurance Company; Assistant Vice President (1996-Present)
Allstate Life Insurance Company of New York; Director
(1996-Present) Glenbrook Life Insurance Company; and Director
(1994-Present) and Assistant Vice President (1990-Present)
Northbrook Life Insurance Company.
G. CRAIG WHITEHEAD, 50, Senior Vice President and Director
(1995)*
Also Assistant Vice President (1991-Present) Allstate Life
Insurance Company; Director (1994-Present) Assistant Vice
President (1991-Present) Glenbrook Life Insurance Company;
Assistant Vice President (1992-Present) Secretary (1995)
Glenbrook Life and Annuity Company; Director (1995-Present)
Laughlin Group Holdings, Inc.
MARLA G. FRIEDMAN, 43, Vice President (1996)*
Also Director (1991-Present) and Vice President (1988-Present)
Allstate Life Insurance Company; Director (1993-1996) Allstate
Life Financial Services, Inc.; Assistant Vice President
(1996-Present) Allstate Life Insurance Company of New York;
Director (1991-1996), President and Chief Operating Officer
</TABLE>
25
<PAGE>
<TABLE>
<S> <C>
(1995-1996) and Vice President (1990-1995) and (1996-Present)
Glenbrook Life Insurance Company; Director and Vice Chairman of
the Board (1995-1996) Laughlin Group Holdings, Inc.; and Director
(1989-1996), President and Chief Operating Officer (1995-1996)
and Vice President (1996-Present) Northbrook Life Insurance
Company.
KEVIN R. SLAWIN, 39, Vice President (1996)*
Also Assistant Vice President and Assistant Treasurer (1995-1996)
Allstate Insurance Company; Director (1996-Present) and Assistant
Treasurer (1995-1996) Allstate Life Financial Services, Inc.;
Director and Vice President (1996-Present) and Assistant
Treasurer (1995-1996) Allstate Life Insurance Company; Director
and Vice President (1996-Present) and Assistant Treasurer
(1995-1996) Allstate Life Insurance Company of New York; Director
and Vice President (1996-Present) and Assistant Treasurer
(1995-1996) Glenbrook Life Insurance Company; Director
(1996-Present) and Assistant Treasurer (1995-1996) Laughlin Group
Holdings, Inc.; Director (1996-Present) Lincoln Benefit Life
Company; Director and Vice President (1996-Present) and Assistant
Treasurer (1995-1996) Northbrook Life Insurance Company; Director
(1996-Present) Surety Life Insurance Company; and Assistant
Treasurer and Director (1994-1995) Sears Roebuck and Co.; and
Treasurer and First Vice President (1986-1994) Sears Mortgage
Corporation.
CASEY J. SYLLA, 53, Chief Investment Officer (1995)*
Also Director (1995-Present) Senior Vice President and Chief
Investment Officer (1995-Present) Allstate Insurance Company;
Director (1995-Present) Chief Investment Officer (1995-Present)
Allstate Life Insurance Company; Chief Investment Officer
(1995-Present) Allstate Life Insurance Company of New York; Chief
Investment Officer (1995-Present) Glenbrook Life Insurance
Company; and Director and Chief Investment Officer (1995-Present)
Northbrook Life Insurance Company. Prior to 1995 he was Senior
Vice President and Executive Officer-Investments (1992-1995) of
Northwestern Mutual Life Insurance Company.
JAMES P. ZILS, 46, Treasurer (1995)*
Also Vice President and Treasurer (1995-Present) Allstate
Insurance Company; Treasurer (1995-Present) Allstate Life
Financial Services, Inc.; Treasurer (1995-Present) Allstate Life
Insurance Company; Treasurer (1995-Present) Allstate Life
Insurance Company of New York; Treasurer (1995-Present) Glenbrook
Life Insurance Company; Treasurer (1995-Present) Laughlin Group
Holdings, Inc.; and Treasurer (1995-Present) Northbrook Life
Insurance Company. Prior to 1995 he was Vice President of
Allstate Life Insurance Company. Prior to 1993 he held various
management positions.
* Date elected to current office.
----------------------------------------------------------------
EXECUTIVE Executive officers of the Company also serve as officers of
COMPENSATION 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 1996.
The allocated cash compensation of all officers of the Company as
a group for services rendered in
</TABLE>
26
<PAGE>
<TABLE>
<S> <C>
all capacities to the Company during 1996 totalled $3,965.52.
Directors of the Company receive no compensation in addition to
their compensation as employees of the Company.
Shares of the Company and Allstate Life are not directly owned by
any director or officer of the Company. The percentage of shares
of The Allstate Corporation beneficially owned by any director,
and by all directors and officers of the Company as a group, does
not exceed one percent of the class outstanding.
</TABLE>
SUMMARY COMPENSATION TABLE
(ALLSTATE LIFE INSURANCE COMPANY)
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
--------------------------------------------------
AWARDS PAYOUTS
ANNUAL COMPENSATION ------------------------- ----------------------
---------------------------------- (G)
(E) (F) SECURITIES (H) (I)
(C) (D) OTHER ANNUAL RESTRICTED UNDERLYING LTIP ALL OTHER
(A) (B) SALARY BONUS COMPENSATION STOCK OPTIONS/SARS PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) $ AWARD(S) (#) ($) ($)
- ------------------------------------ ---- --------- -------- ------------ ---------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Louis G. Lower, II 1996 $ 436,800 $246,781 $10,246 $ 0 $ 18,258 $ 0 $5,250(1)
Chief Executive Officer and 1995 $ 416,000 $266,175 $17,044 199,890 $131,997 $411,122 $5,250(1)
Chairman 1994 $ 389,050 $ 43,973 $26,990 $170,660 N/A 0 $1,890(1)
<FN>
- ------------------------------
(1) Amount received by Mr. Lower which represents the value allocated to his
account from employer contributions under The Savings and Profit Sharing
Fund of Allstate Employees and prior to 1996, The Profit Sharing Fund and
to its predecessor, The Savings and Profit Sharing Fund of Sears employees.
</TABLE>
<TABLE>
<S> <C>
----------------------------------------------------------------
LEGAL PROCEEDINGS The Company is involved in pending and threatened litigation in
the normal course of its business in which claims for monetary
damages are asserted. Management, after consultation with legal
counsel, does not anticipate the ultimate liability arising from
such pending or threatened litigation to have a material effect
on the financial condition of the Company.
----------------------------------------------------------------
EXPERTS The financial statements, and financial statement schedule of the
Company 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 Certain legal matters relating to the federal securities laws
applicable to the issue and sale of the Contracts have been
passed upon by Routier and Johnson, P.C., of Washington, D.C. 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.
----------------------------------------------------------------
</TABLE>
27
<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 (the "Company") as of December 31, 1996 and 1995, and
the related Statements of Operations, Shareholder's Equity and Cash Flows for
each of the three years in the period ended December 31, 1996. 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, 1996 and 1995, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1996 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.
/s/ Deloitte & Touche LLP
Chicago, Illinois
February 21, 1997
F-1
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1996 1995
($ IN THOUSANDS) ------------- -------------
<S> <C> <C>
ASSETS
Investments
Fixed income securities, at fair value (amortized cost $46,925 and
$44,112)................................................................... $ 49,389 $ 48,815
Short-term.................................................................. 1,287 2,102
------------- -------------
Total investments........................................................... 50,676 50,917
Reinsurance recoverable from Allstate Life Insurance Company.................. 2,060,419 1,340,925
Cash.......................................................................... -- 264
Net receivable from affiliates................................................ 19,206 --
Other assets.................................................................. 2,049 2,021
Separate Accounts............................................................. 272,420 15,578
------------- -------------
Total assets............................................................ $ 2,404,770 $ 1,409,705
------------- -------------
------------- -------------
LIABILITIES
Contractholder funds.......................................................... $ 2,060,419 $ 1,340,925
Income taxes payable.......................................................... 653 1,637
Deferred income taxes......................................................... 1,528 1,828
Net payable to affiliates..................................................... -- 255
Separate Accounts............................................................. 260,290 5,048
------------- -------------
Total liabilities....................................................... 2,322,890 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.................................................... 69,641 49,641
Unrealized net capital gains.................................................. 2,790 3,357
Retained income............................................................... 7,349 4,914
------------- -------------
Total shareholder's equity.............................................. 81,880 60,012
------------- -------------
Total liabilities and shareholder's equity.............................. $ 2,404,770 $ 1,409,705
------------- -------------
------------- -------------
</TABLE>
See notes to financial statements.
F-2
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
($ IN THOUSANDS) --------- --------- ---------
<S> <C> <C> <C>
REVENUES
Net investment income..................................................... $ 3,774 $ 3,996 $ 2,017
Realized capital gains and losses......................................... -- 459 --
--------- --------- ---------
INCOME BEFORE INCOME TAX EXPENSE.......................................... 3,774 4,455 2,017
INCOME TAX EXPENSE........................................................ 1,339 1,576 723
--------- --------- ---------
NET INCOME................................................................ $ 2,435 $ 2,879 $ 1,294
--------- --------- ---------
--------- --------- ---------
</TABLE>
See notes to financial statements.
F-3
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
($ IN THOUSANDS) --------- --------- ---------
<S> <C> <C> <C>
COMMON STOCK.......................................................... $ 2,100 $ 2,100 $ 2,100
--------- --------- ---------
ADDITIONAL CAPITAL PAID-IN
Balance, beginning of year............................................ 49,641 49,641 9,641
Capital contributions................................................. 20,000 -- 40,000
--------- --------- ---------
Balance, end of year.................................................. 69,641 49,641 49,641
--------- --------- ---------
UNREALIZED NET CAPITAL GAINS
Balance, beginning of year............................................ 3,357 (1,118) 693
Net (decrease) increase............................................... (567) 4,475 (1,811)
--------- --------- ---------
Balance, end of year.................................................. 2,790 3,357 (1,118)
--------- --------- ---------
RETAINED INCOME
Balance, beginning of year............................................ 4,914 2,035 741
Net income............................................................ 2,435 2,879 1,294
--------- --------- ---------
Balance, end of year.................................................. 7,349 4,914 2,035
--------- --------- ---------
Total shareholder's equity........................................ $ 81,880 $ 60,012 $ 52,658
--------- --------- ---------
--------- --------- ---------
</TABLE>
See notes to financial statements.
F-4
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1996 1995 1994
($ IN THOUSANDS) --------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income............................................................ $ 2,435 $ 2,879 $ 1,294
Adjustments to reconcile net income to net cash provided by operating
activities
Change in deferred income taxes..................................... 4 (39) 71
Realized capital gains and losses................................... -- (459) --
Changes in other operating assets and liabilities................... (510) 1,217 (251)
--------- ---------- ----------
Net cash provided by operating activities......................... 1,929 3,598 1,114
--------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Fixed income securities
Proceeds from sales................................................. -- 7,836 --
Investment collections.............................................. 2,891 1,568 649
Investment purchases................................................ (5,667) (1,491) (42,729)
Participation in Separate Accounts.................................... (232) (10,069) --
Change in short-term investments, net................................. 815 (1,178) 667
--------- ---------- ----------
Net cash used in investing activities............................. (2,193) (3,334) (41,413)
--------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Capital contribution.................................................. -- -- 40,000
--------- ---------- ----------
Net cash provided by financing activities......................... -- -- 40,000
--------- ---------- ----------
NET (DECREASE) INCREASE IN CASH....................................... (264) 264 (299)
CASH AT BEGINNING OF YEAR............................................. 264 -- 299
--------- ---------- ----------
CASH AT END OF YEAR................................................... $ -- $ 264 $ --
--------- ---------- ----------
--------- ---------- ----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Noncash financing activity:
Capital contribution receivable from Allstate Life Insurance
Company............................................................ $ 20,000 $ -- $ --
--------- ---------- ----------
--------- ---------- ----------
</TABLE>
See notes to financial statements.
F-5
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
1. GENERAL
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
("AIC"), 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"). These financial statements have been
prepared in conformity with generally accepted accounting principles.
To conform with the 1996 presentation, certain items in the prior years'
financial statements and notes have been reclassified.
NATURE OF OPERATIONS
The Company markets interest-sensitive life insurance and various annuity
products in the United States through banks and broker-dealers. Annuities
include deferred annuities, such as variable annuities and fixed rate flexible
premium annuities. The Company has entered into exclusive distribution
arrangements with management investment companies to market its variable annuity
contracts.
Annuity and life insurance 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 ALIC (see Note
3), which invests premiums and deposits to create cash flows that will fund
future benefits and expenses. In order to support competitive credited rates,
ALIC adheres to a basic philosophy of matching assets with related liabilities
to limit interest rate risk, while maintaining adequate liquidity and a prudent
and diversified level of credit risk.
The Company monitors economic and regulatory developments which have the
potential to impact its business. There continues to be proposed federal
legislation and regulation which would allow banks greater participation in
securities and insurance businesses, which could present an increased level of
competition for sales of the Company's annuity contracts. Furthermore, the
market for deferred annuities and interest-sensitive life insurance is enhanced
by the tax incentives available under current law. Any legislative changes which
lessen these incentives are likely to negatively impact the market for these
products.
The Company is authorized to sell life and annuity products in all states except
New York, as well as the District of Columbia. The top geographic locations for
statutory premiums earned are Florida, California, Pennsylvania, Michigan,
Oregon, Texas and Georgia for the year ended December 31, 1996. No other
jurisdiction accounted for more than 5% of statutory premiums. All premiums and
contract charges are ceded to ALIC under reinsurance agreements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENTS
Fixed income securities include bonds and mortgage-backed securities. All fixed
income securities are carried at fair value and may be sold prior to their
contractual maturity ("available for sale"). The difference between amortized
cost and fair value, net of deferred income taxes, is reflected as a
F-6
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
($ IN THOUSANDS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
component of shareholder's equity. Provisions are recognized for declines in the
value of fixed income securities 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.
RECOGNITION OF PREMIUM REVENUE AND CONTRACT CHARGES
Revenues on interest-sensitive life insurance contracts are comprised of
contract charges and fees, and are recognized when assessed against the
policyholder account balance. Revenues on annuities, which are considered
investment contracts, include contract charges and fees for contract
administration and surrenders. These revenues are recognized when levied against
the contract balances.
REINSURANCE
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.
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.
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
regulations. Deferred income taxes also arise from unrealized capital gains or
losses on fixed income securities carried at fair value.
SEPARATE ACCOUNTS
During 1995, the Company began issuing flexible premium deferred variable
annuity contracts, the assets and liabilities of which are legally segregated
and shown 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, including the Company's ownership interest
("Participation"), are invested in funds of management investment companies and
are carried at fair value. Unrealized gains and losses on the Company's
Participation, net of deferred income taxes, is shown as a component of
F-7
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
($ IN THOUSANDS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
shareholder's equity. Investment income and realized capital gains and losses
arising from the Participation are included in the Company's statements of
operations. At December 31, 1996 and 1995, the Participation amounted to $12,130
and $10,530, respectively. The Company intends to liquidate its Participation
during 1997.
Investment income and realized capital gains and losses of the Separate
Accounts, other than the portion related to the 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 ceded to ALIC.
CONTRACTHOLDER FUNDS
Contractholder funds arise from the issuance of individual or group contracts
that include an investment component, including most annuities and
interest-sensitive life insurance. Payments received are recorded as
interest-bearing liabilities. Contractholder funds are equal to deposits
received and interest credited to the benefit of the contractholder less
withdrawals, mortality charges and administrative expenses. Credited interest
rates on contractholder funds ranged from 3.15% to 7.45% for those contracts
with fixed interest rates and from 4.25% to 7.90% for those with flexible rates
during 1996.
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. RELATED PARTY TRANSACTIONS
REINSURANCE
Contract charges ceded to ALIC under reinsurance agreements were $4,254, $1,523
and $409 in 1996, 1995, and 1994, respectively. Credited interest, policy
benefits and expenses ceded to ALIC amounted to $113,703, $71,905, and $26,177
in 1996, 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 are owned and managed by ALIC under the terms of the
reinsurance agreements.
BUSINESS OPERATIONS
The Company utilizes services and business facilities owned or leased, and
operated by AIC in conducting its business activities. The Company reimburses
AIC for the operating expenses incurred by AIC on behalf of the Company. The
cost to the Company is determined by various allocation methods and is primarily
related to the level of services provided. Operating expenses, including
compensation and retirement and other benefit programs, allocated to the Company
were $759, $348 and $271 in 1996, 1995 and 1994, respectively. Of these costs,
the Company retains investment related expenses. All other costs are ceded to
ALIC under reinsurance agreements.
LAUGHLIN GROUP
Laughlin Group, Inc. ("Laughlin") is an indirect wholly owned subsidiary of
ALIC. Laughlin markets certain of the Company's flexible premium deferred
variable annuity contracts and flexible premium deferred fixed annuity
contracts. Sales commissions paid to Laughlin and ceded to ALIC were $8,623
F-8
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
($ IN THOUSANDS)
3. RELATED PARTY TRANSACTIONS (CONTINUED)
during 1996 and $3,439 subsequent to the Laughlin acquisition in September 1995.
The Company had a receivable of $850 from Laughlin at December 31, 1996, which
is included in net receivable from affiliates in the statements of financial
position.
4. INVESTMENTS
FAIR VALUES
The amortized cost, gross unrealized gains and losses and fair value for fixed
income securities are as follows:
<TABLE>
<CAPTION>
GROSS UNREALIZED
AMORTIZED ---------------------- FAIR
COST GAINS (LOSSES) VALUE
----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
AT DECEMBER 31, 1996
- ------------------------------------------------------
U.S. government and agencies.......................... $ 24,265 $ 1,722 $ (3) $ 25,984
Corporate............................................. 6,970 96 (15) 7,051
Mortgage-backed securities............................ 15,690 664 -- 16,354
----------- --------- --- ---------
Total............................................... $ 46,925 $ 2,482 $ (18) $ 49,389
----------- --------- --- ---------
----------- --------- --- ---------
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
----------- --------- --- ---------
Total............................................... $ 44,112 $ 4,703 $ -- $ 48,815
----------- --------- --- ---------
----------- --------- --- ---------
</TABLE>
SCHEDULED MATURITIES
The scheduled maturities for fixed income securities at December 31, 1996 are as
follows:
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
----------- ---------
<S> <C> <C>
Due in one year or less................................................... $ -- $ --
Due after one year through five years..................................... -- --
Due after five years through ten years.................................... 22,395 23,325
Due after ten years....................................................... 8,840 9,710
----------- ---------
31,235 33,035
Mortgage-backed securities................................................ 15,690 16,354
----------- ---------
Total................................................................... $ 46,925 $ 49,389
----------- ---------
----------- ---------
</TABLE>
Actual maturities may differ from those scheduled as a result of prepayments by
the issuers.
F-9
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
($ IN THOUSANDS)
4. INVESTMENTS (CONTINUED)
NET INVESTMENT INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Fixed income securities............................................ $ 3,478 $ 3,850 $ 1,984
Short-term......................................................... 126 113 48
Participation in Separate Accounts................................. 232 69 --
--------- --------- ---------
Investment income, before expense................................ 3,836 4,032 2,032
Investment expense............................................... 62 36 15
--------- --------- ---------
Net investment income.......................................... $ 3,774 $ 3,996 $ 2,017
--------- --------- ---------
--------- --------- ---------
</TABLE>
PROCEEDS FROM SALES OF FIXED INCOME SECURITIES AND REALIZED CAPITAL GAINS
There were no sales of investments in 1996 or 1994. In 1995, proceeds from sales
of investments in fixed income securities were $7,836. These sales resulted in
gross realized gains of $459 and related income taxes of $161.
UNREALIZED NET CAPITAL GAINS AND LOSSES
Unrealized net capital gains and losses on fixed income securities and the
Company's participation in the Separate Accounts included in shareholder's
equity at December 31, 1996 are as follows:
<TABLE>
<CAPTION>
AMORTIZED FAIR UNREALIZED
COST VALUE NET GAINS
----------- --------- -----------
<S> <C> <C> <C>
Fixed income securities....................................... $ 46,925 $ 49,389 $ 2,464
Participation in Separate Accounts............................ 10,301 12,130 1,829
----------- --------- -----------
Total....................................................... $ 57,226 $ 61,519 4,293
----------- ---------
----------- ---------
Deferred income taxes......................................... (1,503)
-----------
Unrealized net capital gains.................................. $ 2,790
-----------
-----------
</TABLE>
CHANGE IN UNREALIZED NET CAPITAL GAINS AND LOSSES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Fixed income securities.......................................... $ (2,239) $ 6,423 $ (2,786)
Participation in Separate Accounts............................... 1,368 461 --
Deferred income taxes............................................ 304 (2,409) 975
--------- --------- ---------
Change in unrealized net capital gains and losses................ $ (567) $ 4,475 $ (1,811)
--------- --------- ---------
--------- --------- ---------
</TABLE>
SECURITIES ON DEPOSIT
At December 31, 1996, fixed income securities with a carrying value of $9,105
were on deposit with regulatory authorities as required by law.
F-10
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
($ IN THOUSANDS)
5. FINANCIAL INSTRUMENTS
In the normal course of business, the Company invests in various financial
assets and incurs various financial liabilities. The fair value estimates of
financial instruments are not necessarily indicative of the amounts the Company
might pay or receive in actual market transactions. Potential taxes and other
transaction costs have not been considered in estimating fair value. The
disclosures that follow do not reflect the fair value of the Company as a whole
since a number of the Company's assets (including reinsurance recoverable) and
liabilities (including deferred income taxes) are not considered financial
instruments and are not carried at fair value. Other assets and liabilities
considered financial instruments, including accrued investment income and cash,
are generally of a short-term nature. It is assumed that their carrying value
approximates fair value.
FINANCIAL ASSETS
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------------------------------------
1996 1995
------------------------ --------------------
CARRYING CARRYING FAIR
VALUE FAIR VALUE VALUE VALUE
----------- ----------- --------- ---------
<S> <C> <C> <C> <C>
Fixed income securities................................... $ 49,389 $ 49,389 $ 48,815 $ 48,815
Short-term investments.................................... 1,287 1,287 2,102 2,102
Separate Accounts......................................... 272,420 272,420 15,578 15,578
</TABLE>
Fair values for fixed income securities are based on quoted market prices.
Short-term investments are highly liquid investments with maturities of less
than one year whose carrying value approximates fair value. Assets of the
Separate Accounts are carried in the statements of financial position at fair
value.
FINANCIAL LIABILITIES
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------------------------------------------------
1996 1995
---------------------------- ----------------------------
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Contractholder funds on investment contracts... $ 2,059,642 $ 1,949,329 $ 1,340,925 $ 1,282,248
Separate Accounts.............................. 260,290 260,290 5,048 5,048
</TABLE>
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 account balance less surrender charges. The fair value of
immediate annuities and annuities without life contingencies with fixed terms is
estimated using discounted cash flow calculations based on interest rates
currently offered for contracts with similar terms and durations. Separate
Account liabilities are carried at the fair value of the underlying assets.
6. INCOME TAXES
The Company will file a separate federal income tax return and is not a party to
any tax sharing agreements in the current tax year.
F-11
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
($ IN THOUSANDS)
6. INCOME TAXES (CONTINUED)
Prior to the Distribution, the Corporation and all of its domestic subsidiaries
including the Company (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"). 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 Company 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 recognized in a separate return, were
allocated according to the Tax Sharing Agreement.
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.
The Company will be eligible for inclusion in the consolidated federal income
tax return of the Corporation and its subsidiaries in 1997.
The components of the deferred income tax liability at December 31, 1996 and
1995 are as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------------
1996 1995
--------- ---------
<S> <C> <C>
Unrealized net capital gains on fixed income securities...................... $ 1,503 $ 1,807
Difference in tax bases of investments....................................... 25 21
--------- ---------
Total deferred liability................................................... $ 1,528 $ 1,828
--------- ---------
--------- ---------
</TABLE>
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Current.............................................................. $ 1,335 $ 1,615 $ 652
Deferred............................................................. 4 (39) 71
--------- --------- ---------
Total income tax expense........................................... $ 1,339 $ 1,576 $ 723
--------- --------- ---------
--------- --------- ---------
</TABLE>
The Company paid income taxes of $2,597, $874 and $57 in 1996, 1995 and 1994,
respectively. The Company had income taxes payable of $653 and $1,637 at
December 31, 1996 and 1995, respectively.
F-12
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
($ IN THOUSANDS)
7. 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,
-------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Balance per generally accepted accounting principles............... $ 2,435 $ 2,879 $ 1,294
Deferred income taxes............................................ 4 (39) 71
Unrealized gain on participation in Separate Accounts............ 1,368 -- --
Non-admitted assets and statutory reserves....................... (50) (171) (80)
--------- --------- ---------
Balance per statutory accounting practices......................... $ 3,757 $ 2,669 $ 1,285
--------- --------- ---------
--------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
SHAREHOLDER'S EQUITY
--------------------
AT DECEMBER 31,
--------------------
1996 1995
--------- ---------
<S> <C> <C>
Balance per generally accepted accounting principles....................... $ 81,880 $ 60,012
Deferred income taxes.................................................... 1,528 1,828
Unrealized gain/loss on fixed income securities.......................... (2,464) (4,703)
Non-admitted assets and statutory reserves............................... (3,751) (1,419)
Other.................................................................... (1,499) (1,413)
--------- ---------
Balance per statutory accounting practices................................. $ 75,694 $ 54,305
--------- ---------
--------- ---------
</TABLE>
PERMITTED STATUTORY ACCOUNTING PRACTICES
The Company prepares its statutory financial statements in accordance with
accounting principles and practices prescribed or permitted by the Illinois
Department of Insurance. Prescribed statutory accounting practices include a
variety of publications of the National Association of Insurance Commissioners,
as well as state laws, regulations, and general administrative rules. Permitted
statutory accounting practices encompass all accounting practices not so
prescribed. The Company does not follow any permitted statutory accounting
practices that have a material effect on statutory surplus or risk-based
capital.
DIVIDENDS
The ability of the Company to pay dividends is dependent on business conditions,
income, cash requirements of the Company and other relevant factors. The payment
of shareholder dividends by insurance companies without the prior approval of
the state insurance regulator is limited to formula amounts based on net income
and capital and surplus, determined in accordance with statutory accounting
practices, as well as the timing and amount of dividends paid in the preceding
twelve months. The maximum amount of dividends that the Company can distribute
during 1997 without prior approval of the Illinois Department of Insurance is
$7,359.
F-13
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
SCHEDULE IV -- REINSURANCE
($ IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS NET
AMOUNT CEDED AMOUNT
--------- --------- ---------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996
- -----------------------------------------------------------------------------
Life insurance in force...................................................... $ 2,436 $ 2,436 $ --
--------- --------- ---------
--------- --------- ---------
Premiums and contract charges:
Life and annuities......................................................... $ 4,254 $ 4,254 $ --
--------- --------- ---------
--------- --------- ---------
<CAPTION>
GROSS NET
AMOUNT CEDED AMOUNT
--------- --------- ---------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1995
- -----------------------------------------------------------------------------
Life insurance in force...................................................... $ 1,250 $ 1,250 $ --
--------- --------- ---------
--------- --------- ---------
Premiums and contract charges:
Life and annuities......................................................... $ 6,571 $ 6,571 $ --
--------- --------- ---------
--------- --------- ---------
<CAPTION>
GROSS NET
AMOUNT CEDED 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 $ --
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-14
<PAGE>
APPENDIX A
MARKET VALUE ADJUSTMENT
The Market Value Adjustment is based on the following:
<TABLE>
<S> <C> <C>
I = Treasury Rate for a maturity equal to the Account's Guarantee Period for the week preceding the
establishment of the Account
N = the number of whole and partial years from the date we receive the withdrawal or Death Benefit
request, or from the Payout Start Date to the end of the Account's Guarantee Period; and
J = the Treasury Rate for a maturity of length N for the week preceding the date we determine the
Market Value Adjustment. If a note with a maturity of length N is not available, a weighted
average will be used. If N is one year or less, J will be the 1-year Treasury Rate.
</TABLE>
The Market Value Adjustment factor is determined from the following formula:
.9 X (I-J) X N
Any amount withdrawn from the Account Value which is subject to a Market Value
Adjustment 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
Guaranteed
Interest Rate: 4.50%
5-Year Treasury
Rate at the time
the Sub-Account
is
established: 4.50%
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 X (1.045)3 = $11,411.66
Step 2: Calculate the Free Withdrawal Amount:
Free Withdrawal Amount:
= .10 X 10,000.00 = $1,000.00
Step 3: Calculate the Withdrawal Charge:
= .06 X (11,411.66) - (1,000) = $624.70
Step 4: Calculate the Market Value Adjustment:
I = 4.50%
J = 4.20%
N = 5 years - 3 years = 2 years
A-1
<PAGE>
<TABLE>
<S> <C> <C> <C>
Market Value Adjustment factor: .9 X (I-J) X N
.9 X (.045 - .042) X 2 = .0054
Market Value Adjustment = factor X amount subject to Market Value Adjustment:
= .0054 X (11,411.66 - 1,000) = $56.22
Step 5: Calculate the actual amount received by customers as a result of a full withdrawal at
the end of Contract Year 3:
= 11,411.66 - 624.70 + 56.22 = $10,843.18
EXAMPLE 2: (Assumes rising interest rates)
Step 1: Calculate Account Value at end of Contract Year 3:
= 10,000.00 X (1.045)3 = $11,411.66
Step 2: Calculate the Free Withdrawal Amount:
Free Withdrawal Amount:
= .10 X 10,000.00 = $1,000.00
Step 3: Calculate the Withdrawal Charge:
= .06 X (11,411.66 - 1,000) = $624.70
Step 4: Calculate the Market Value Adjustment:
I = 4.50%
J = 4.80%
N = 5 years - 3 years = 2 years
Market Value Adjustment factor: .9 X (I-J) X N
= .9 X (.045 - .048) X 2 = -.0054
Market Value Adjustment = factor X amount subject to Market Value Adjustment:
= -.0054 (11,411.66 - 1,000) = - $56.22
Step 5: Calculate the net surrender value at end of Contract Year 3:
= 11,411.66 - 624.70 - 56.22 = $10,730.74
</TABLE>
A-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 approximately $23,525 will be
incurred or are anticipated to be incurred in connection with the issuance
and distribution of the securities to be registered: registration fees - 0;
cost of printing and engraving - $18,475; legal fees - $5,000; and accounting
fees - $500. All amounts are estimated.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The By-Laws of Glenbrook Life and Annuity Company ("Registrant") which
are incorporated herein by reference as Exhibit (3), provide that Registrant
will indemnify its officers and directors for certain damages and expenses that
may be incurred in the performance of their duty to Registrant. No
indemnification is provided, however, when such person is adjudged to be liable
for negligence or misconduct in the performance of his or her duty, unless
indemnification is deemed appropriate by the court upon application.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Not applicable.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
<S> <C>
(1) Form of Underwriting Agreement*
(2) Not Applicable
(3) (i) Articles of Incorporation**
(ii) By-Laws**
(4) Form of Glenbrook Life and Annuity Flexible Payment
Deferred Annuity 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
(21) Not Applicable
(23)(a) Consent of Independent Public Accountants
(23)(b) Consent of Counsel
(24) Powers of Attorney
(25) Not Applicable
(26) Not Applicable
(27) Financial Data Schedule***
(28) Not Applicable
(99) Resolution of Board of Directors*
</TABLE>
* Previously filed in Form S-1 Registration Statement No. 33-92842 dated
April 10, 1996.
** Previously filed in Form S-1 Registration Statement No. 333-07275 dated
June 28, 1996 and incorporated by reference.
*** Previously filed in Registrants Form 10-K filed March 31, 1997.
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;
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination
of the offering.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant, Glenbrook Life and Annuity Company, pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by 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, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, and its seal to be hereunto affixed
and attested, in the Township of Northfield State of Illinois, on the 26th
day of March, 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 Vice President, Secretary and
and Assistant General General Counsel
Counsel
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been duly signed below by the following Directors
and Officers of Glenbrook Life and Annuity Company on the 26th day of March,
1997.
*/LOUIS G. LOWER, II Chairman of the Board of Directors and
- ----------------------- Chief Executive Officer
Louis G. Lower, II (Principal Executive Officer)
/s/MICHAEL J. VELOTTA
- ----------------------- Vice President, Secretary, General
Michael J. Velotta Counsel and Director
*/PETER H. HECKMAN
- ----------------------- President, Chief Operating Officer
Peter H. Heckman and Director
*/JOHN R. HUNTER Director
- -----------------------
John R. Hunter
*/G. CRAIG WHITEHEAD
- ----------------------- Senior Vice President and Director
G. Craig Whitehead
*/MARLA G. FRIEDMAN
- ----------------------- Vice President
Marla G. Friedman
*/KEVIN R. SLAWIN Vice President
- ----------------------- (Principal Financial Officer)
Kevin R. Slawin
*/CASEY J. SYLLA
- ----------------------- Chief Investment Officer and Director
Casey J. Sylla
*/KEITH A. HAUSCHILDT Assistant Vice President and Controller
- ----------------------- (Principal Accounting Officer)
Keith A. Hauschildt
*/JAMES P. ZILS
- ----------------------- Treasurer
James P. Zils
*/By Michael J. Velotta, pursuant to power of attorney filed herewith.
II-3
<PAGE>
INDEX TO EXHIBITS
The following exhibits are filed herewith:
<TABLE>
<S> <C>
(1) Form of Underwriting Agreement*
(2) Not Applicable
(3) (i) Articles of Incorporation**
(ii) By-Laws**
(4) Form of Glenbrook Life and Annuity Company Flexible Premium Deferred
Annuity 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
(21) Not Applicable
(23)(a) Consent of Independent Public Accountants
(23)(b) Consent of Counsel
(24) Powers of Attorney
(25) Not Applicable
(26) Not Applicable
(27) Financial Data Schedule***
(28) Not Applicable
(99) Resolution of Board of Directors*
</TABLE>
* Previously filed in Form S-1 Registration Statement No. 33-92842 dated
April 10, 1996.
** Previously filed in Form S-1 Registration Statement No. 333-07275 dated
June 28, 1996 and incorporated by reference.
*** Previously filed in Registrants Form 10-K filed March 31, 1997.
<PAGE>
FLEXIBLE PAYMENT DEFERRED
ANNUITY CONTRACT
GLENBROOK LIFE AND ANNUITY COMPANY, A Stock Company, Home Office:
Allstate Plaza, Northbrook, Illinois 60062
This Contract is issued in consideration of the initial purchase payment and any
application. Glenbrook Life and Annuity Company will pay the benefits of this
Contract, subject to its terms and conditions.
Throughout this Contract, "you" and "your" refer to the Contract owner(s).
"We", "us" and "our" refer to Glenbrook Life and Annuity Company.
This flexible payment deferred annuity provides a cash withdrawal benefit and a
death benefit prior to the Payout Start Date and periodic income payments
beginning on the Payout Start Date. THE CASH WITHDRAWAL BENEFIT, THE DEATH
BENEFIT AND THE AMOUNT APPLIED TO AN INCOME PLAN MAY BE SUBJECT TO A MARKET
VALUE ADJUSTMENT WHICH MAY RESULT IN AN UPWARD OR DOWNWARD ADJUSTMENT OF THE
AMOUNT DISTRIBUTED.
This Contract does not pay dividends.
The tax status as it applies to the owner should be reviewed each year.
PLEASE READ YOUR CONTRACT CAREFULLY
THIS IS A LEGAL CONTRACT BETWEEN THE CONTRACT OWNER(S) AND GLENBROOK LIFE AND
ANNUITY COMPANY.
IMPORTANT
YOU HAVE PURCHASED A MODIFIED GUARANTEED ANNUITY CONTRACT. CAREFULLY REVIEW IT
FOR LIMITATIONS.
THIS CONTRACT MAY BE RETURNED WITHIN 30 DAYS FROM THE DATE YOU RECEIVED IT FOR
A REFUND OF THE GREATER OF PURCHASE PAYMENTS OR THE CONTRACT VALUE ADJUSTED BY
ANY MARKET VALUE ADJUSTMENT ON THE DAY THE CONTRACT IS RECEIVED BY THE INSURANCE
COMPANY OR AGENT WHO SOLD YOU THIS CONTRACT. A RETURN OF THE CONTRACT AFTER
30 DAYS MAY RESULT IN A SUBSTANTIAL PENALTY, KNOWN AS A WITHDRAWAL CHARGE (SEE
PAGE 6).
/s/ Michael J. Velotta /s/ Louis G. Lower, II
Secretary Chief Executive Officer
Flexible Payment Deferred Annuity
PAGE 1
<PAGE>
- --------------------------------------------------------------------------------
ANNUITY DATA
- --------------------------------------------------------------------------------
CONTRACT NUMBER: . . . . . . . . . . . . . . . . . . . . . . . 444444444
ISSUE DATE:. . . . . . . . . . . . . . . . . . . . . . . . . . JULY 1, 1993
INITIAL PURCHASE PAYMENT:. . . . . . . . . . . . . . . . . . . $10,000.00
RATE
ALLOCATED GUARANTEE GUARANTEED GUARANTEED
AMOUNT ($) PERIOD INTEREST RATE THROUGH
- ---------- --------- ------------- ----------
2,000.00 1 YEARS 4.50% 06/30/1994
2,000.00 3 YEARS 4.55% 06/30/1996
1,000.00 5 YEARS 5.25% 06/30/1998
1,000.00 6 YEARS 5.35% 06/30/1999
1,000.00 7 YEARS 5.50% 06/30/2000
1,000.00 8 YEARS 5.60% 06/30/2001
1,000.00 9 YEARS 5.70% 06/30/2002
1,000.00 10 YEARS 5.80% 06/30/2003
MINIMUM GUARANTEED RATE: . . . . . . . . . . . . . . . . . . . 3.00%
OWNER: . . . . . . . . . . . . . . . . . . . . . . . . . . . . JOHN DOE
ANNUITANT: . . . . . . . . . . . . . . . . . . . . . . . . . . JOHN DOE
AGE AT ISSUE: . . . . . . . . . . . . . . . . . . . . . . 35
SEX:. . . . . . . . . . . . . . . . . . . . . . . . . . . MALE
RELATIONSHIP
BENEFICIARY TO OWNER PERCENTAGE
- ----------- ------------ ----------
JANE DOE WIFE 100%
PAYOUT START DATE: . . . . . . . . . . . . . . . . . . . . . . JULY 1, 2048
<PAGE>
- --------------------------------------------------------------------------------
GENERAL DEFINITIONS
- --------------------------------------------------------------------------------
ACCOUNT. An Account consists of funds that are allocated to a Guarantee Period.
You will create an Account(s):
- - when you make a purchase payment; or
- - when you select a new Guarantee Period after the prior Guarantee Period
expires.
The Account continues until the end of the Guarantee Period.
ACCOUNT VALUE. The funds allocated to an Account plus the interest credited to
it minus any withdrawals.
CONTRACT VALUE. The sum of the Account Values.
GUARANTEE PERIOD. A period of years for which a specified interest rate is
guaranteed.
MARKET VALUE ADJUSTMENT. An increase or decrease in a withdrawal payment to
you, in a death benefit payment, or in the amount applied to an income plan,
reflecting changes in the level of interest rates since the Account was
established. The method of calculation is explained on Page 7.
PAYOUT START DATE. The date the Contract Value adjusted by any Market Value
Adjustment is applied to an income plan. The projected date is shown on the
Annuity Data Page. You may change the Payout Start Date by writing to us at
least 30 days prior to this date. The Payout Start Date must be on or before
the later of:
- - the annuitant's 90th birthday; or
- - the 10th anniversary of the Contract's issue date.
PAGE 3
<PAGE>
- --------------------------------------------------------------------------------
THE PERSONS INVOLVED
- --------------------------------------------------------------------------------
OWNER. The person named at the time of application is the owner of this
Contract unless subsequently changed. As owner, you will receive any periodic
income payments, unless you have directed us to pay them to someone else.
You may exercise all rights stated in this Contract, subject to the rights of
any irrevocable beneficiary.
You may change the owner or beneficiary at any time. Once we have received a
satisfactory written request for an owner or beneficiary change, the change will
take effect as of the date you signed it. We are not liable for any payment we
make or other action we take before receiving any written request for a change
from you.
You may not assign an interest in this Contract as collateral or security for a
loan. However, prior to the Payout Start Date, you may assign periodic income
payments under this Contract. We are bound by an assignment only if it is
signed by the assignor and filed with us. We are not responsible for the
validity of an assignment.
If the sole surviving owner dies prior to the Payout Start Date, the beneficiary
becomes the new owner. If the sole surviving owner dies after the Payout Start
Date, the beneficiary becomes the new owner and will receive any subsequent
guaranteed income payments.
If more than one person is designated as owner:
- - owner as used in this Contract refers to all people named as owners,
unless otherwise indicated;
- - any request to exercise ownership rights must be signed by all owners;
and
- - on the first death of a person who is an owner, the surviving
person(s) named as owner will continue as owner.
ANNUITANT. The annuitant must be a natural person. If the annuitant dies prior
to the Payout Start Date, the new annuitant will be:
- - the youngest owner; otherwise,
- - the youngest beneficiary.
BENEFICIARY. The beneficiary is the person(s) named on the Annuity Data Page,
but may be changed by the owner, as described above. We will determine the
beneficiary from the most recent written request we have received from you. If
you do not name a primary beneficiary or if all of the primary beneficiaries
named are no longer living, the beneficiary will be:
- - a contingent beneficiary named by you; otherwise
- - your spouse if living; otherwise
- - your children equally if living; otherwise
- - your estate.
The beneficiary may become the owner under the circumstances described above.
The beneficiary may not assign benefits under the Contract until the beneficiary
becomes the owner.
PAGE 4
<PAGE>
- --------------------------------------------------------------------------------
PURCHASE PAYMENTS AND CONTRACT VALUE
- --------------------------------------------------------------------------------
MAKING PURCHASE PAYMENTS. You may make purchase payments at any time until the
earlier of the Payout Start Date and the end of the contract year in which the
oldest owner attains age 91. The minimum purchase payment that can be allocated
to any one Account is $100. We may limit the maximum amount of total purchase
payments we will accept.
You must select the Guarantee Period for each purchase payment made. If you do
not select a Guarantee Period for a purchase payment, we will assign the same
period as used for the most recent purchase payment. Guarantee Periods may be
1, 3, 5, 6, 7, 8, 9, or 10 years. We may change the Guarantee Periods available
for additional purchase payments.
We may deduct premium taxes from purchase payments or from later payments we
make to you.
SELECTING A NEW GUARANTEE PERIOD. We will mail you a notice prior to the
expiration of each Guarantee Period outlining the options available at the end
of a Guarantee Period. During the 30 day period after a Guarantee Period
expires you may:
- - take no action and we will automatically apply the Account Value to a
new Guarantee Period of the same duration to be established on the day
the previous Guarantee Period expired; or
- - notify us to apply the Account Value to a new Guarantee Period(s) to
be established on the day the previous Guarantee Period expired; or
- - receive a portion of the Account Value or the entire Account Value
through a partial or full withdrawal that is not subject to a Market
Value Adjustment. In this case, the amount withdrawn will be deemed
to have been withdrawn on the day the Guarantee Period expired.
The minimum amount that can be allocated to a new Guarantee Period is $100.
CREDITING INTEREST. We credit interest daily to each Account at a rate which
compounds over one year to the interest rate we guaranteed when the Account was
established. We credit interest to the initial purchase payment from the issue
date. We credit interest to subsequent purchase payments from the date we
receive them. The interest rates will be no less than the minimum guaranteed
rate shown on the Annuity Data Page.
DETERMINING THE CONTRACT VALUE. Your Contract Value is the sum of the Account
Values. If you withdraw the entire Contract Value, you may receive an amount
greater or less than the Contract Value because a Market Value Adjustment, a
Withdrawal Charge, income tax withholding, and a premium tax charge may apply.
PAGE 5
<PAGE>
- --------------------------------------------------------------------------------
WITHDRAWALS
- --------------------------------------------------------------------------------
WITHDRAWAL LIMITS. You may withdraw part or all of your Contract Value at any
time prior to the Payout Start Date. You must specify the Account(s) from which
you wish to make a withdrawal. A withdrawal must be at least $50. If any
withdrawal reduces an Account Value to less than $100, we will treat the request
as a withdrawal of the entire Account Value. If any withdrawal reduces the
Contract Value to less than $2,000, we will treat the request as a withdrawal of
the entire Contract Value. However, we will require confirmation of your
withdrawal request before we make such a withdrawal. If you withdraw the entire
Contract Value, the Contract will terminate.
WITHDRAWALS WHEN A GUARANTEE PERIOD EXPIRES. You may withdraw part or all of
the Account Value without a Market Value Adjustment during the 30 day period
after a Guarantee Period expires. However, any applicable Withdrawal Charge
will apply to the amount withdrawn in excess of the free withdrawal amount. The
amount withdrawn will be deemed to have been withdrawn on the day the Guarantee
Period expired.
FREE WITHDRAWAL AMOUNT. The Free Withdrawal Amount for each Account is equal to
10% of the amount initially allocated to the Account. Each year you may
withdraw the Free Withdrawal Amount from each Account without any Withdrawal
Charge or Market Value Adjustment. Each year begins on the anniversary of the
date the Account was established.
Any Free Withdrawal Amount which is not actually withdrawn in a year may not be
carried over to increase the Free Withdrawal Amount in a subsequent year.
Similarly, a Free Withdrawal Amount not withdrawn from one Account may not be
transferred to increase a Free Withdrawal Amount in another Account.
OTHER WITHDRAWALS. A Market Value Adjustment and any applicable Withdrawal
Charge will be applied to the amount withdrawn from the Account Value in excess
of the Free Withdrawal Amount.
IMPACT OF WITHDRAWAL ON THE ACCOUNT VALUE. The Account Value will be reduced by
the amount we pay you, income tax we withhold for you, the Withdrawal Charge,
and any applicable premium tax charge. The Account Value will also be increased
by a positive Market Value Adjustment or reduced by a negative Market Value
Adjustment.
WITHDRAWAL CHARGE. The amount withdrawn from the Account Value in excess of the
Free Withdrawal Amount is subject to a Withdrawal Charge as follows:
Payment Year: 1 2 3 4 5 6 and Later
Percentage: 7% 7% 6% 5% 4% 0%
For each purchase payment or interest withdrawal, the Payment Year in the table
is measured from the date we received the purchase payment.
The Withdrawal Charge is determined by multiplying the percentage corresponding
to the Payment Year times the amount withdrawn in excess of the Free Withdrawal
Amount.
PAGE 6
<PAGE>
MARKET VALUE ADJUSTMENT. A Market Value Adjustment is an increase or decrease
in a withdrawal payment to you, in a death benefit payment, or in the amount
applied to an income plan, reflecting changes in the level of interest rates
since the Account was established. As used in this provision, "Treasury Rate"
means the U. S. Treasury Note Constant Maturity weekly yield as reported in
Federal Reserve Bulletin Release H.15. The Market Value Adjustment is based on
the following:
I = the Treasury Rate for a maturity equal to the Account's
Guarantee Period for the week preceding the establishment of
the Account;
N = the number of whole and partial years from the date we
receive the withdrawal or death benefit request, or from the
Payout Start Date, to the end of the Account's Guarantee
Period;
J = the Treasury Rate for a maturity of length N for the week
preceding the receipt of the withdrawal request, death
benefit request, or Income Payment request. If a Note with
a maturity of length N is not available, a weighted average
will be used. If N is one year or less, J will be the
1-year Treasury Rate.
An adjustment factor is determined from the following formula:
.9 x (I-J) x N
Any amount withdrawn from the Account Value which is subject to a Market Value
Adjustment is multiplied by the adjustment factor to determine the amount of the
Market Value Adjustment.
RETURN OF PURCHASE PAYMENT GUARANTEE. If you withdraw the entire Contract Value
to terminate the Contract, the amount we pay you (including any premium tax and
income tax we withhold for you) will never be less than all purchase payments
minus any prior amounts we paid you (including income tax we withheld for you).
PAGE 7
<PAGE>
- --------------------------------------------------------------------------------
DEATH BENEFIT
- --------------------------------------------------------------------------------
A death benefit may be paid to the owner determined immediately after the death
if, prior to the Payout Start Date:
- - any owner dies; or
- - the annuitant dies and the owner is not a natural person.
DEATH BENEFIT AMOUNT. The death benefit is the Contract Value plus any positive
Market Value Adjustment applied to the portion of the Contract Value in excess
of the Free Withdrawal Amount. (Refer to Pages 6 and 7 for an explanation of
Market Value Adjustment and Free Withdrawal Amount.) Any applicable taxes may
be deducted.
We will calculate the value of the death benefit as of the date we receive due
proof of death, consisting of one of the following:
- - a certified copy of a death certificate; or
- - a certified copy of a decree of a court of competent jurisdiction as
to a finding of death; or
- - any other proof acceptable to us.
DISTRIBUTION OF DEATH BENEFIT. If the owner eligible to receive the death
benefit is not a natural person, then the owner must receive the death benefit
in a lump sum within five years.
Otherwise, within 60 days of the date when the death benefit is calculated, the
owner may elect to receive the death benefit under an income plan or in a lump
sum. 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.
Any death benefit payable in a lump sum must be paid within five years of the
date of death. If no election is made, funds will be distributed at the end of
the five year period.
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 as if the
death had not occurred. If the Contract is continued as if the death had not
occurred, the surviving spouse may make a single withdrawal of any amount within
one year of the date of death without incurring a Withdrawal Charge. However, a
Market Value Adjustment, determined as of the date of the withdrawal, will
apply. The single withdrawal amount is in addition to the annual Free
Withdrawal Amount. If the Contract is continued and there is no annuitant, the
new annuitant will be the surviving spouse.
PAGE 8
<PAGE>
- --------------------------------------------------------------------------------
INCOME PAYMENT OPTIONS
- --------------------------------------------------------------------------------
INCOME PLANS. The Contract Value adjusted by any Market Value Adjustment on the
Payout Start Date, less any applicable taxes, will be applied to your income
plan choice from the following list. Minimum guaranteed payments for each
income plan are shown in the income payment tables on Page 10.
1. LIFE INCOME WITH GUARANTEED PAYMENTS. We will make payments for as
long as theannuitant lives. If the annuitant dies before the selected
number of guaranteed payments have been made, we will continue to pay
the remainder of the guaranteed payments.
2. JOINT AND SURVIVOR LIFE INCOME WITH GUARANTEED PAYMENTS. We will
make payments for as long as either the annuitant or joint annuitant,
named at the time of income plan selection, lives. If both the
annuitant and the joint annuitant die before the selected number of
guaranteed payments have been made, we will continue to pay the
remainder of the guaranteed payments.
3. GUARANTEED PAYMENTS FOR A SPECIFIED PERIOD. We will make payments for
a specified period beginning on the Payout Start Date. These payments
do not depend on the annuitant's life. The number of months
guaranteed may be from 60 to 360.
We reserve the right to make available other income plans.
PAYOUT TERMS AND CONDITIONS. The income payments are subject to the following
terms and conditions:
- - If the Contract Value adjusted by any Market Value Adjustment and
applicable premium taxes is not enough to provide an initial payment
of at least $20, we reserve the right to:
- change the payment frequency to make the payment at least
$20; or
- terminate the Contract and pay you the Contract Value
adjusted by any Market Value Adjustment and applicable
premium taxes in a lump sum.
- - If we do not receive a written choice of an income plan from you at
least 30 days before the Payout Start Date, the income plan will be
life income with guaranteed payments for 120 months.
- - If you choose an income plan which depends on any person's life, we
may require:
- proof of age and sex before income payments begin; and
- proof that the annuitant or joint annuitant is still alive
before we make each payment.
- - After the Payout Start Date, the income plan cannot be changed and
withdrawals cannot be made.
- - If any owner dies after the Payout Start Date, the remaining income
payments will be paid to the successor owner as scheduled.
PAGE 9
<PAGE>
INCOME PAYMENT TABLES. Income payments will be at least the amount based on the
adjusted age of the annuitant(s) and the tables below, less any federal income
taxes which are withheld. The adjusted age is the actual age on the Payout
Start Date reduced by one year for each six full years between January 1, 1983
and the Payout Start Date. Income payments for ages and guaranteed payment
periods not shown below will be determined on a basis consistent with that used
to determine those that are shown. The income payment tables are based on 3%
interest and the 1983a Annuity Mortality Tables.
INCOME PLAN 1 - LIFE INCOME WITH GUARANTEED PAYMENTS FOR 120 MONTHS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Monthly Income Payment for each $1,000 Applied to this Income Plan
- ----------------------------------------------------------------------------------------------------------------------------
Annuitant's Annuitant's Annuitant's
Age Male Female Age Male Female Age Male Female
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
35 $3.43 $3.25 49 $4.15 $3.82 63 $5.52 $4.97
36 3.47 3.28 50 4.22 3.88 64 5.66 5.09
37 3.51 3.31 51 4.29 3.94 65 5.80 5.22
38 3.55 3.34 52 4.37 4.01 66 5.95 5.35
39 3.60 3.38 53 4.45 4.07 67 6.11 5.49
40 3.64 3.41 54 4.53 4.14 68 6.27 5.64
41 3.69 3.45 55 4.62 4.22 69 6.44 5.80
42 3.74 3.49 56 4.71 4.29 70 6.61 5.96
43 3.79 3.53 57 4.81 4.38 71 6.78 6.13
44 3.84 3.58 58 4.92 4.46 72 6.96 6.31
45 3.90 3.62 59 5.02 4.55 73 7.13 6.50
46 3.96 3.67 60 5.14 4.65 74 7.31 6.69
47 4.02 3.72 61 5.26 4.75 75 7.49 6.88
48 4.08 3.77 62 5.39 4.86
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
INCOME PLAN 2 - JOINT AND SURVIVOR LIFE INCOME WITH GUARANTEED PAYMENTS
FOR 120 MONTHS
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Monthly Income Payment for each $1,000 Applied to this Income Plan
- ----------------------------------------------------------------------------------------------------------------------------
Female Annuitant's Age
-----------------------------------------------------------------------------------------------------------
Male
Annuitant's 35 40 45 50 55 60 65 70 75
Age
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
35 $3.09 $3.16 $3.23 $3.28 $3.32 $3.36 $3.39 $3.40 $3.42
40 3.13 3.22 3.31 3.39 3.46 3.51 3.56 3.59 3.61
45 3.17 3.28 3.39 3.50 3.60 3.69 3.76 3.81 3.85
50 3.19 3.32 3.45 3.60 3.74 3.87 3.98 4.07 4.14
55 3.21 3.35 3.51 3.68 3.87 4.06 4.23 4.37 4.48
60 3.23 3.37 3.55 3.75 3.98 4.23 4.47 4.70 4.88
65 3.24 3.39 3.57 3.80 4.07 4.37 4.71 5.04 5.34
70 3.24 3.40 3.59 3.83 4.13 4.48 4.90 5.36 5.81
75 3.25 3.41 3.61 3.86 4.17 4.56 5.04 5.61 6.22
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
INCOME PLAN 3 - GUARANTEED PAYMENTS FOR A SPECIFIED PERIOD
- -------------------------------------------------------------
- -------------------------------------------------------------
Monthly Income Payment for each
Specified Period $1,000 Applied to this Income Plan
- -------------------------------------------------------------
10 Years $9.61
11 Years 8.86
12 Years 8.24
13 Years 7.71
14 Years 7.26
15 Years 6.87
16 Years 6.53
17 Years 6.23
18 Years 5.96
19 Years 5.73
20 Years 5.51
- -------------------------------------------------------------
- -------------------------------------------------------------
PAGE 10
<PAGE>
- --------------------------------------------------------------------------------
GENERAL PROVISIONS
- --------------------------------------------------------------------------------
THE ENTIRE CONTRACT. The entire Contract consists of this Contract, any
attached application, and any attached endorsements.
All statements made in written applications are representations and not
warranties. We will not use any statement in defense of a claim or to void the
Contract unless it is included in a written application.
Only our officers may change the Contract or waive a right or requirement. No
other individual may do this.
We may not modify this Contract without your consent, except to make it comply
with any changes in the Internal Revenue Code or as required by any other
applicable law.
INCONTESTABILITY. We will not contest the validity of this Contract after the
issue date.
MISSTATEMENT OF AGE OR SEX. If any age or sex has been misstated, we will pay
the amounts which would have been paid at the correct age and sex.
If we find the misstatement of age or sex after the income payments begin, we
will:
- - pay all amounts underpaid including interest; or
- - stop payments until the total payments are equal to the corrected amount.
For purposes of the Misstatement of Age or Sex provision, interest will be
calculated at an effective annual rate of 6%.
ANNUAL STATEMENT. At least once a year, prior to the Payout Start Date, we will
send you a statement containing Contract Value information. We will provide you
with Contract Value information at any time upon request. The information
provided will comply with any applicable law.
SETTLEMENTS. We may require that this Contract be returned to us prior to any
settlement. Any full withdrawal or death benefit under this Contract will not
be less than the minimum benefits required by any statute of the state in which
the Contract is delivered.
DEFERMENT OF PAYMENTS. We reserve the right to defer payment of any withdrawal
for up to six months after the date you request it.
PAGE 11
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
(HEREIN CALLED "WE" OR "US")
AMENDATORY ENDORSEMENT FOR WAIVER OF CHARGES
The following provisions are added to your Contract:
We will waive any withdrawal charge prior to the Payout Start Date if beginning
at least 30 days after the Contract date:
1. any owner becomes confined to a Long Term Care Facility or a Hospital for
at least 90 consecutive days;
2. the request for a withdrawal and adequate proof of confinement are received
by us no later than 90 days after discharge from a Long Term Care Facility
or Hospital; and
3. confinement in a Long Term Care Facility is prescribed by a Physician and
is Medically Necessary.
"Long Term Care Facility" is a facility which:
1. is located in the United States or its territories;
2. is licensed by the jurisdiction in which it is located;
3. provides custodial care under the supervision of a registered nurse (R.N.);
and
4. can accommodate three or more persons.
Long Term Care Facility does not include any place owned or operated by your
spouse, children, parents, grandparents, grandchildren, siblings, or in-laws.
"Hospital" is a facility which:
1. is licensed as a hospital by the jurisdiction in which it is located;
2. is supervised by a staff of licensed physicians;
3. provides nursing services 24 hours a day by, or under the supervision, of a
registered nurse (R.N.);
4. operates primarily for the care and treatment of sick or injured persons as
inpatients for a charge; and
5. has access to medical, diagnostic and major surgical facilities.
"Physician" is a licensed medical doctor (M.D.) or a licensed doctor of
osteopathy (D.O.) practicing within the scope of his or her license. Physician
does not include the individual, a spouse, children, parents, grandparents,
grandchildren, siblings, or in-laws.
"Medically Necessary" means appropriate and consistent with the diagnosis in
accord with accepted standards of practice, and which could not have been
omitted without adversely affecting the individual's condition.
/s/ Michael J. Velotta /s/ Louis G. Lower, II
Secretary Chief Executive Officer
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
(HEREIN CALLED "WE" OR "US")
AMENDATORY ENDORSEMENT FOR IRA PLANS
This contract is changed as follows:
1. The owner of this contract must be the Annuitant.
2. Except in the case of a rollover contribution (as permitted by Section
402(c), 403(a)(4), 403(a)(5), 403(b)(8) or 408(d)(3) of the Internal
Revenue Code (the "Code") or a contribution made in accordance with the
terms of a Simplified Employee Pension (SEP) as described in Section 408(k)
of the Code, no contributions will be accepted unless they are in cash, and
the total of such contributions shall not exceed $2,000 for any taxable
year.
3. You and your beneficiaries may not:
a. transfer;
b. sell;
c. assign;
d. discount; or
e. pledge
this contract for any purpose.
4. Your rights in this contract are nonforfeitable. This contract is for the
exclusive benefit of you and your beneficiaries.
5. Notwithstanding any provision of the contract to the contrary, the
distribution of your interest in the contract shall be made in accordance
with the minimum distribution requirements of Section 408(b)(3) of the Code
and the regulations thereunder, including the incidental death benefit
provisions of Section 1.401(a)(9)-2 of the proposed regulations, all of
which are incorporated by reference.
Your entire interest in the contract must be distributed, or begin to be
distributed, by your required beginning date, which is the April 1st
following the calendar year you reach age 70 1/2. For each succeeding year,
a distribution must be made on or before December 31st. By the required
beginning date you may elect to have your interest distributed in one of
the following forms:
a. a single sum payment;
b. equal or substantially equal payments over your life;
c. equal or substantially equal payments over your life and the life of
your designated beneficiary;
d. equal or substantially equal payments over a specified period that may
not be longer than your life expectancy; or
e. equal or substantially equal payments over a specified period that may
not be longer than the joint life and last survivor expectancy of you
and your designated beneficiary.
6. If you die before your entire interest is distributed, the entire remaining
interest will be distributed as follows:
<PAGE>
a. If you die on or after distributions have begun under Paragraph 5, the
entire remaining interest must be distributed at least as rapidly as
provided by Paragraph 5;
b. If you die before distributions have begun under Paragraph 5, the
entire remaining interest must be distributed as elected by you, or if
you have not made an election, as elected by the beneficiary or
beneficiaries as follows:
1) by December 31st of the year containing the fifth anniversary of
your death; or
2) in equal or substantially equal payments over the life of life
expectancy of the designated beneficiary or beneficiaries
starting by December 31st of the year following the year of your
death. If, however, the beneficiary is your surviving spouse,
then this distribution is not required to begin before December
31st of the year in which you would have turned 70 1/2.
c. If the designated beneficiary is your surviving spouse, the spouse may
treat the contract as his or her own IRA. This election will be deemed
to have been made if such surviving spouse makes a regular IRA
contribution to the contract, makes a rollover to or from such
contract, or fails to elect any of the above provisions.
7. Unless you elect otherwise prior to the commencement of distributions under
Paragraph 5 or, if applicable, by the surviving spouse if you die before
distributions have begun, the life expectancy of you or your spouse
beneficiary shall be recalculated annually for purposes of distributions
under Paragraph 5 and 6. An election not to recalculate shall be
irrevocable and shall apply to all subsequent years. The life expectancy of
a non-spouse beneficiary shall not be recalculated.
8. You may satisfy the minimum distribution requirements under Section
408(a)(6) and 408(b)(3) of the Code by receiving a distribution from one
IRA that is equal to the amount required to satisfy the minimum
distribution requirements for two or more IRA's. For this purpose, if you
own more than one IRA, you may use the 'alternative method' described in
Notice 88-38, 1988-1 C.B. 524, to satisfy the minimum distribution
requirements described above.
9. We will issue annual reports containing account value information.
/s/ Michael J. Velotta /s/ Louis G. Lower, II
Secretary Chief Executive Officer
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
AMENDATORY ENDORSEMENT FOR UNISEX PLANS
All references to sex are deleted from your Contract. The following language
and tables replace the INCOME PAYMENT TABLES section of your Contract.
Income payments will be at least the amount based on the adjusted age of the
annuitant(s) and the tables below, less any federal income taxes which are
withheld. The adjusted age is the actual age on the Payout Start Date reduced
by one year for each six full years between January 1, 1983 and the Payout Start
Date. Income payments for ages and guaranteed payment periods not shown below
will be determined on a basis consistent with that used to determine those that
are shown. The Income Payment Tables are based on 3.0% interest and an 80%
female, 20% male blend of the sex distinct 1983a Annuity Mortality Tables.
INCOME PLAN 1 - LIFE INCOME WITH GUARANTEED PAYMENTS FOR 120 MONTHS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
Monthly Income Payment for each $1,000 Applied to this Income Plan
- --------------------------------------------------------------------------------------------------
Annuitant's Monthly Annuitant's Monthly Annuitant's Monthly
Age Payment Age Payment Age Payment
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
45 $3.68 59 $4.64 73 $6.63
46 3.73 60 4.75 74 6.81
47 3.78 61 4.85 75 7.00
48 3.83 62 4.97 76 7.21
49 3.89 63 5.08 77 7.41
50 3.95 64 5.20 78 7.60
51 4.01 65 5.34 79 7.79
52 4.08 66 5.47 80 7.98
53 4.15 67 5.61 81 8.16
54 4.22 68 5.77 82 8.34
55 4.30 69 5.93 83 8.50
56 4.37 70 6.09 84 8.65
57 4.47 71 6.26 85 8.78
58 4.55 72 6.44
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
</TABLE>
INCOME PLAN 2 - JOINT AND SURVIVOR LIFE INCOME WITH GUARANTEED PAYMENTS
FOR 120 MONTHS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
Monthly Income Payment for each $1,000 Applied to this Income Plan
- --------------------------------------------------------------------------------------------------
Annuitant's
Age 45 50 55 60 65 70 75 80 85
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
45 $3.35 $3.44 $3.51 $3.56 $3.60 $3.63 $3.65 $3.67 $3.67
50 3.44 3.55 3.66 3.75 3.82 3.87 3.91 3.93 3.94
55 3.51 3.66 3.81 3.95 4.07 4.16 4.22 4.26 4.29
60 3.56 3.75 3.95 4.15 4.34 4.49 4.61 4.68 4.72
65 3.60 3.82 4.07 4.34 4.61 4.86 5.07 5.21 5.29
70 3.63 3.87 4.16 4.49 4.86 5.24 5.57 5.83 5.98
75 3.65 3.91 4.22 4.61 5.07 5.57 6.08 6.51 6.79
80 3.67 3.93 4.26 4.68 5.21 5.83 6.51 7.13 7.59
85 3.67 3.94 4.29 4.72 5.29 5.98 6.79 7.59 8.20
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
INCOME PLAN 3 - GUARANTEED PAYMENTS FOR A SPECIFIED PERIOD
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Monthly Income Payments for each
Specified Period $1,000 Applied to this Income Plan
- --------------------------------------------------------------------------------
10 Years $9.61
11 Years 8.86
12 Years 8.24
13 Years 7.71
14 Years 7.26
15 Years 6.87
16 Years 6.53
17 Years 6.23
18 Years 5.96
19 Years 5.73
20 Years 5.51
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
/s/ Michael J. Velotta /s/ Louis G. Lower, II
Secretary Chief Executive Officer
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
(HEREIN CALLED "WE" OR "US")
AMENDATORY ENDORSEMENT FOR 403(b) ANNUITIES
The following provisions are added to your Contract:
1. The owner of this Contract must be the annuitant.
2. You may not:
a. transfer;
b. sell;
c. assign;
d. discount; or
e. pledge
this Contract for any purpose to any person but us.
3. Account balances accruing after December 31, 1986 must begin to be paid out
by the April 1 after the calendar year in which you reach age 70 1/2. The
distribution may be made in a single sum or in periodic payments.
a. The payments must be over:
1) your life; or
2) the lives of you and your "designated beneficiary"; or
3) a period certain not extending beyond your life expectancy; or
4) a period certain not extending beyond the life expectancy of you
and your "designated beneficiary".
For the purpose of this endorsement, the "designated beneficiary" is the
natural person that you name prior to the payout start date.
b. The minimum amount you are required to receive for any tax year is:
1) the value of the Contract at the end of the prior year,
divided by;
2) your life expectancy (or the joint and last survivor expectancy
of you and your "designated beneficiary") using the age(s) as of
your birthday(s) in that year.
4. For account balances accruing after December 31, 1988, distributions of
purchase payments made under a salary reduction agreement may only occur
upon:
a. or after attainment of age 59 1/2; or
b. separation from service; or
c. death; or
d. disability (as defined in Internal Revenue Code Section 72(m)(7)); or
e. hardship.
In the case of hardship distributions, earnings due to these purchase
payments cannot be withdrawn. The plan administrator will be responsible
for determining whether an individual's circumstances meet the definition
of hardship as set forth in the Internal Revenue Code and Regulations.
<PAGE>
5. For the purpose of this endorsement, "account balances" includes:
a. any purchase payments make after the specified date:
1) December 31, 1986; or
2) December 31, 1988
whichever is applicable; and
b. all earnings credited after the specified date.
You are permitted to directly rollover all or a portion of any
eligible rollover distribution which you receive, to an eligible
retirement plan (i.e., IRA, 401(a), or 403(b)). In the case of an
eligible rollover distribution to your surviving spouse, an
eligible retirement plan is limited to an IRA.
An eligible rollover distribution is any distribution from your account
except:
1. one of a series of payments pursuant to a life or a joint life
income option, or
2. one of a series of payments pursuant to a period certain income
option based on your life expectancy (or joint life expectancy of
you and your designated beneficiary), or
3. one of a series of substantially equal periodic payments for a
specified period of ten years or more, or
4. one that qualifies as a required minimum distribution as defined
by section 401(a)(9) of the Internal Revenue Code.
/s/ Michael J. Velotta /s/ Louis G. Lower, II
Secretary Chief Executive Officer
<PAGE>
<TABLE>
<S><C>
GLENBROOK LIFE Glenbrook Life and Annuity Company
------------------------------ P.O. Box 94042
A MEMBER OF THE ALLSTATE GROUP Palatine, IL 60094
ANNUITY DATA PAGE AND APPLICATION FOR THE GLENBROOK CHOICE PLUS ANNUITY
CONTRACT NUMBER________________________ PAYOUT START DATE / / Annuitant's 90th Birthday
INITIAL PURCHASE PAYMENT_______________ / / 10th Anniversary of Issue Date
ISSUE DATE ______/______/______ / / Qualified Minimum Distribution
TAX QUALIFIED PLAN / / Yes / / No
/ / IRA Rollover / / IRA Transfer / / IRA/Year of Contribution________ / / Other___________
MINIMUM GUARANTEED RATE FOR FIXED ACCOUNT: 3.00%
INVESTMENT ALTERNATIVE ALLOCATION
$ __________ at ________ % 1 Year Guarantee Period $ __________ at ________ % 7 Year Guarantee Period
$ __________ at ________ % 3 Year Guarantee Period $ __________ at ________ % 8 Year Guarantee Period
$ __________ at ________ % 5 Year Guarantee Period $ __________ at ________ % 9 Year Guarantee Period
$ __________ at ________ % 6 Year Guarantee Period $ __________ at ________ % 10 Year Guarantee Period
OWNER(S)
Name_______________________________________ Soc. Sec. No. _______-_______-_______ Birth Date ____/____/____
Address ___________________________________ City ________________________________ State ______ Zip ________
/ / Male / / Female Relationship to Other Owner ___________________________________
Name_______________________________________ Soc. Sec. No. _______-_______-_______ Birth Date ____/____/____
/ / Male / / Female Relationship to Other Owner ___________________________________
ANNUITANT (LEAVE BLANK IF ANNUITANT SAME AS SOLE OWNER.)
Name_______________________________________ Soc. Sec. No. _______-_______-_______ Birth Date ____/____/____
Address ___________________________________ City ________________________________ State ______ Zip ________
/ / Male / / Female
BENEFICIARY
Primary_____________________________________________________ Relationship to Owner ________________________
Contingent _________________________________________________ Relationship to Owner ________________________
SPECIAL INSTRUCTIONS: REPLACEMENT:
Will the annuity applied for replace
any existing insurance or annuity? / / Yes / / No
Company ___________________________________________
Policy No. _________________________________________
___________________________________________________________________________________________________________
I UNDERSTAND THAT ANY DISTRIBUTION PRIOR TO THE END OF A RATE GUARANTEE PERIOD MAY BE SUBJECT TO A MARKET
VALUE ADJUSTMENT. I HAVE RECEIVED THE CURRENT PROSPECTUS FOR THIS GLENBROOK LIFE FLEXIBLE PAYMENT DEFERRED
ANNUITY.
I have read the above statements. I represent that they are complete and true to the best of my knowledge.
Signed at ______________________________________________________________ Date ____/____/____
City State
Signature(s) of Owner(s) ________________________________________________________________________________
Phone No(s). of Owner(s) __________________________________________________________________________________
___________________________________________________________________________________________________________
AGENT USE ONLY Do you have any reason to believe that the Contract applied for is to replace or change any
existing annuity or life insurance? / / Yes / / No
Agent's Signature__________________________________ Agent/Branch No._______________________________________
Agent's Name_______________________________________ License Identification No.____________________________
OWNER (CA)
</TABLE>
<PAGE>
<TABLE>
<S><C>
GLENBROOK LIFE Glenbrook Life and Annuity Company
------------------------------ P.O. Box 94042
A MEMBER OF THE ALLSTATE GROUP Palatine, IL 60094
ANNUITY DATA PAGE AND APPLICATION FOR: FLEXIBLE PAYMENT DEFERRED ANNUITY (GLAU120)
CONTRACT NUMBER________________________ PAYOUT START DATE / / Annuitant's 90th Birthday
INITIAL PURCHASE PAYMENT_______________ / / 10th Anniversary of Issue Date
ISSUE DATE ______/______/______ / / Qualified Minimum Distribution
TAX QUALIFIED PLAN / / Yes / / No
/ / IRA Rollover / / IRA Transfer / / IRA/Year of Contribution________ / / Other___________
MINIMUM GUARANTEED RATE FOR FIXED ACCOUNT: 3.00%
INVESTMENT ALTERNATIVE ALLOCATION
$ __________ at ________ % 1 Year Guarantee Period $ __________ at ________ % 7 Year Guarantee Period
$ __________ at ________ % 3 Year Guarantee Period $ __________ at ________ % 8 Year Guarantee Period
$ __________ at ________ % 5 Year Guarantee Period $ __________ at ________ % 9 Year Guarantee Period
$ __________ at ________ % 6 Year Guarantee Period $ __________ at ________ % 10 Year Guarantee Period
OWNER(S)
Name_______________________________________ Soc. Sec. No. _______-_______-_______ Birth Date ____/____/____
Address ___________________________________ City ________________________________ State ______ Zip ________
/ / Male / / Female Relationship to Other Owner ___________________________________
Name_______________________________________ Soc. Sec. No. _______-_______-_______ Birth Date ____/____/____
/ / Male / / Female Relationship to Other Owner ___________________________________
ANNUITANT (LEAVE BLANK IF ANNUITANT SAME AS SOLE OWNER.)
Name_______________________________________ Soc. Sec. No. _______-_______-_______ Birth Date ____/____/____
Address ___________________________________ City ________________________________ State ______ Zip ________
/ / Male / / Female
BENEFICIARY
Primary_____________________________________________________ Relationship to Owner ________________________
Contingent _________________________________________________ Relationship to Owner ________________________
SPECIAL INSTRUCTIONS: REPLACEMENT:
Will the annuity applied for replace
any existing insurance or annuity? / / Yes / / No
Company ___________________________________________
Policy No. _________________________________________
___________________________________________________________________________________________________________
I UNDERSTAND THAT ANY DISTRIBUTION PRIOR TO THE END OF A RATE GUARANTEE PERIOD MAY BE SUBJECT TO A MARKET
VALUE ADJUSTMENT. I HAVE RECEIVED THE CURRENT PROSPECTUS FOR THIS GLENBROOK LIFE FLEXIBLE PAYMENT DEFERRED
ANNUITY.
I have read the above statements. I represent that they are complete and true to the best of my knowledge.
Signed at ______________________________________________________________ Date ____/____/____
City State
Signature(s) of Owner(s) ________________________________________________________________________________
Phone No(s). of Owner(s) __________________________________________________________________________________
___________________________________________________________________________________________________________
AGENT USE ONLY Do you have any reason to believe that the Contract applied for is to replace or change any
existing annuity or life insurance? / / Yes / / No
Agent's Signature__________________________________ Agent/Branch No._______________________________________
Agent's Name_______________________________________ License Identification No.____________________________
OWNER (FL)
</TABLE>
<PAGE>
TABLE OF MINIMUM GUARANTEED VALUES*
YEARS SINCE
PURCHASE TOTAL
PAYMENT ACCOUNT WITHDRAWAL
WAS MADE VALUE VALUE
----------- ----------- ----------
$ $
1 1,030 1,000
2 2,090 2,000
3 3,183 3,000
4 4,309 4,067
5 5,468 5,183
6 6,662 6,372
7 7,892 7,595
8 9,159 8,852
9 10,463 10,144
10 11,807 11,473
11 13,192 12,840
12 14,617 14,246
13 16,086 15,692
14 17,598 17,180
15 19,156 18,710
16 20,761 20,283
17 22,414 21,902
18 24,116 23,567
19 25,870 25,280
20 27,676 27,042
*These Minimum Guaranteed Values assume that a Contract is issued with an
initial purchase payment of $1,000 and subsequent purchase payments of $1,000
are made each year for the remaining 19 years. It is assumed that all purchase
payments are allocated to the 1 Year Guarantee Period. Interest is credited at
the minimum guaranteed effective annual interest rate shown on the reverse side.
These values assume that no partial withdrawals are made and no state premium
taxes must be paid. If withdrawals are made or state premium taxes must be paid,
the Minimum Guaranteed Values will be less than those shown. The same
calculation method applies to subsequent purchase payments. The Total Withdrawal
Value does not reflect any Market Value Adjustment that may be taken.
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
LAW AND REGULATION DEPARTMENT
3100 Sanders Road, J5B
Northbrook, Illinois 60062
Direct Dial Number 847-402-2400
Facsimile 847-402-4371
Michael J. Velotta Please direct reply to:
Vice President, Secretary Post Office Box 3005
and General Counsel Northbrook, Illinois 60065-3005
May 25, 1995
TO: Glenbrook Life and Annuity Company
Northbrook, Illinois 60062
FROM: Michael J. Velotta
Vice President, Secretary and General Counsel
RE: Form S-1 Registration Statement
Under the Securities Act of 1933
File No. 33-
With reference to the Registration Statement on Form S-1 filed by Glenbrook
Life and Annuity Company with the Securities and Exchange Commission covering
Flexible Payment Deferred Annuity Contracts ("Contracts"), I have examined such
documents and such law as I have considered necessary and appropriate, and on
the basis of such examination, it is my opinion that:
1. Glenbrook Life and Annuity Company is duly organized and existing
under the laws of the State of Illinois and has been duly authorized
to do business and to issue the Contracts by the Director of Insurance
of the State of Illinois.
2. The Contracts covered by the above Registration Statement are 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
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 Post-Effective Amendment No. 2 to Registration
Statement No. 033-92842 of Glenbrook Life and Annuity Company on Form S-1 of our
report dated February 21, 1997 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
March 28, 1997
<PAGE>
ROUTIER, MACKEY AND JOHNSON, P.C.
ATTORNEYS AT LAW
1700 K. STREET, N.W.
SUITE 1003
WASHINGTON, D.C. 20006 (202) 296-4852
August 15, 1995
CONSENT OF COUNSEL
Re: Glenbrook Life and Annuity Company
Registration Statement on Form S-1
File No. 33-92842
----------------------------------
We hereby consent to the reference to this firm under the caption "Legal
Matters" in the prospectus forming part of the above-referenced registration
statement under the Securities Act of 1933 with respect to certain deferred
annuity contracts to be issued by Glenbrook Life and Annuity.
Routier, Mackey and Johnson, P.C.
By: /s/ GREGOR B. MCCURDY
--------------------------
Gregor B. McCurdy
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO THE GLENBROOK LIFE AND ANNUITY COMPANY
FLEXIBLE PAYMENT DEFERRED ANNUITY CONTRACT
WITH MARKET VALUE ADJUSTED FIXED ACCOUNT
"THE GLENBROOK CHOICE PLUS ANNUITY" AS FILED ON FORM S-1
Know all men by these presents that Louis G. Lower II, whose signature
appears below, constitutes and appoints Michael J. Velotta, his attorney-in-
fact, with power of substitution, and his in any and all capacities, to sign any
registration statements and amendments thereto for the Glenbrook Life and
Annuity Company Contract referenced above 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
attorney-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
January 23, 1997
------------------------------
Date
/s/ LOUIS G. LOWER, II
------------------------------
Louis G. Lower, II
Chairman of the Board and
Chief Executive Officer
Glenbrook Life and Annuity Company
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO THE GLENBROOK LIFE AND ANNUITY COMPANY
FLEXIBLE PAYMENT DEFERRED ANNUITY CONTRACT
WITH MARKET VALUE ADJUSTED FIXED ACCOUNT
"THE GLENBROOK CHOICE PLUS ANNUITY" AS FILED ON FORM S-1
Know all men by these presents that Marla G. Friedman whose signature
appears below, constitutes and appoints Louis G. Lower, II, and Michael J.
Velotta, her attorneys-in-fact, with power of substitution, and her in any and
all capacities, to sign any registration statements and amendments thereto for
the Glenbrook Life and Annuity Company Contract referenced above 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.
January 23, 1997
------------------------------
Date
/s/ MARLA G. FRIEDMAN
------------------------------
Marla G. Friedman
Vice President
Glenbrook Life and Annuity Company
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO THE GLENBROOK LIFE AND ANNUITY COMPANY
FLEXIBLE PAYMENT DEFERRED ANNUITY CONTRACT
WITH MARKET VALUE ADJUSTED FIXED ACCOUNT
"THE GLENBROOK CHOICE PLUS ANNUITY" AS FILED ON FORM S-1
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, his
attorneys-in-fact, with power of substitution, and him in any and all
capacities, to sign any registration statements and amendments thereto for the
Glenbrook Life and Annuity Company Contract referenced above 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.
January 23, 1997
------------------------------
Date
/s/ KEVIN R. SLAWIN
------------------------------
Kevin R. Slawin
Vice President
Glenbrook Life and Annuity Company
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO THE GLENBROOK LIFE AND ANNUITY COMPANY
FLEXIBLE PAYMENT DEFERRED ANNUITY CONTRACT
WITH MARKET VALUE ADJUSTED FIXED ACCOUNT
"THE GLENBROOK CHOICE PLUS ANNUITY" AS FILED ON FORM S-1
Know all men by these presents that Peter H. Heckman whose signature
appears below, constitutes and appoints Louis G. Lower, II, and Michael J.
Velotta, his attorneys-in-fact, with power of substitution, and him in any and
all capacities, to sign any registration statements and amendments thereto for
the Glenbrook Life and Annuity Company Contract referenced above 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.
January 23, 1997
------------------------------
Date
/s/ PETER H. HECKMAN
------------------------------
Peter H. Heckman
President, Chief Operating Officer
and Director
Glenbrook Life and Annuity Company
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO THE GLENBROOK LIFE AND ANNUITY COMPANY
FLEXIBLE PAYMENT DEFERRED ANNUITY CONTRACT
WITH MARKET VALUE ADJUSTED FIXED ACCOUNT
"THE GLENBROOK CHOICE PLUS ANNUITY" AS FILED ON FORM S-1
Know all men by these presents that Keith A. Hauschildt whose signature
appears below, constitutes and appoints Louis G. Lower, II, and Michael J.
Velotta, his attorneys-in-fact, with power of substitution, and him in any and
all capacities, to sign any registration statements and amendments thereto for
the Glenbrook Life and Annuity Company Contract referenced above 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.
January 23, 1997
------------------------------
Date
/s/ KEITH A. HAUSCHILDT
------------------------------
Keith A. Hauschildt
Assistant Vice President & Controller
Glenbrook Life and Annuity Company
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO THE GLENBROOK LIFE AND ANNUITY COMPANY
FLEXIBLE PAYMENT DEFERRED ANNUITY CONTRACT
WITH MARKET VALUE ADJUSTED FIXED ACCOUNT
"THE GLENBROOK CHOICE PLUS ANNUITY" AS FILED ON FORM S-1
Know all men by these presents that Michael J. Velotta, whose signature
appears below, constitutes and appoints Louis G. Lower, II, his attorney-in-
fact, with power of substitution, and his in any and all capacities, to sign any
registration statements and amendments thereto for the Glenbrook Life and
Annuity Company Contract referenced above 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
attorney-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
January 23, 1997
------------------------------
Date
/s/ MICHAEL J. VELOTTA
------------------------------
Michael J. Velotta
Vice President, Secretary, General
Counsel and Director
Glenbrook Life and Annuity Company
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO THE GLENBROOK LIFE AND ANNUITY COMPANY
FLEXIBLE PAYMENT DEFERRED ANNUITY CONTRACT
WITH MARKET VALUE ADJUSTED FIXED ACCOUNT
"THE GLENBROOK CHOICE PLUS ANNUITY" AS FILED ON FORM S-1
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, his
attorneys-in-fact, with power of substitution, and him in any and all
capacities, to sign any registration statements and amendments thereto for the
Glenbrook Life and Annuity Company Contract referenced above 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.
January 23, 1997
------------------------------
Date
/s/ JOHN R. HUNTER
------------------------------
John R. Hunter
Director
Glenbrook Life and Annuity Company
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO THE GLENBROOK LIFE AND ANNUITY COMPANY
FLEXIBLE PAYMENT DEFERRED ANNUITY CONTRACT
WITH MARKET VALUE ADJUSTED FIXED ACCOUNT
"THE GLENBROOK CHOICE PLUS ANNUITY" AS FILED ON FORM S-1
Know all men by these presents that G. Craig Whitehead whose signature
appears below, constitutes and appoints Louis G. Lower, II, and Michael J.
Velotta, his attorneys-in-fact, with power of substitution, and him in any and
all capacities, to sign any registration statements and amendments thereto for
the Glenbrook Life and Annuity Company Contract referenced above 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.
January 23, 1997
------------------------------
Date
/s/ G. CRAIG WHITEHEAD
------------------------------
G. Craig Whitehead
Senior Vice President and Director
Glenbrook Life and Annuity Company
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO THE GLENBROOK LIFE AND ANNUITY COMPANY
FLEXIBLE PAYMENT DEFERRED ANNUITY CONTRACT
WITH MARKET VALUE ADJUSTED FIXED ACCOUNT
"THE GLENBROOK CHOICE PLUS ANNUITY" AS FILED ON FORM S-1
Know all men by these presents that Casey J. Sylla whose signature appears
below, constitutes and appoints Louis G. Lower, II, and Michael J. Velotta, his
attorneys-in-fact, with power of substitution, and him in any and all
capacities, to sign any registration statements and amendments thereto for the
Glenbrook Life and Annuity Company Contract referenced above 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.
January 23, 1997
------------------------------
Date
/s/ CASEY J. SYLLA
------------------------------
Casey J. Sylla
Chief Investment Officer
Glenbrook Life and Annuity Company
<PAGE>
POWER OF ATTORNEY
WITH RESPECT TO THE GLENBROOK LIFE AND ANNUITY COMPANY
FLEXIBLE PAYMENT DEFERRED ANNUITY CONTRACT
WITH MARKET VALUE ADJUSTED FIXED ACCOUNT
"THE GLENBROOK CHOICE PLUS ANNUITY" AS FILED ON FORM S-1
Know all men by these presents that James P. Zils whose signature appears
below, constitutes and appoints Louis G. Lower, II, and Michael J. Velotta, his
attorneys-in-fact, with power of substitution, and him in any and all
capacities, to sign any registration statements and amendments thereto for the
Glenbrook Life and Annuity Company Contract referenced above 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.
January 23, 1997
------------------------------
Date
/s/ JAMES P. ZILS
------------------------------
James P. Zils
Treasurer
Glenbrook Life and Annuity Company
