<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 16, 1997
REGISTRATION NO. 333-7275
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
POST-EFFECTIVE AMENDMENT NO. 1
UNDER
THE SECURITIES ACT OF 1933
----------------
GLENBROOK LIFE AND ANNUITY COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
ILLINOIS 6311
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER)
35-1113325
(I.R.S. EMPLOYER IDENTIFICATION NUMBER)
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3100 SANDERS ROAD
NORTHBROOK, ILLINOIS 60062
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
----------------
MICHAEL J. VELOTTA, ESQUIRE
VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
GLENBROOK LIFE AND ANNUITY COMPANY
3100 SANDERS ROAD
NORTHBROOK, ILLINOIS 60062
847/402-2400
(NAME AND COMPLETE ADDRESS OF AGENT FOR SERVICE)
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COPY TO: COPY TO:
STEPHEN E. ROTH, ESQ. JOHN R. HEDRICK, ESQ.
SUTHERLAND, ASBILL & BRENNAN, L.L.P. ALLSTATE LIFE FINANCIAL SERVICES,
1275 PENNSYLVANIA AVENUE, N.W. INC.
WASHINGTON, D.C. 20004 3100 SANDERS ROAD J5B
NORTHBROOK, ILLINOIS 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]
CALCULATION OF REGISTRATION FEE
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<CAPTION>
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE FEE
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<S> <C> <C> <C> <C>
Deferred Annuity Contracts and
Participating
Interests therein............... * ** ** --
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</TABLE>
* The Registrant previously registered $100,000,000 of securities.
** These Contracts are not issued in predetermined amounts or units.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
3100 SANDERS ROAD
NORTHBROOK, ILLINOIS 60062
(800) 776-6978
FLEXIBLE PAYMENT DEFERRED ANNUITY CONTRACTS
AND
SINGLE PAYMENT DEFERRED ANNUITY CONTRACTS
----------------
This prospectus describes the Flexible Payment Deferred Annuity Contract and
the Single Payment Deferred Annuity Contract ("Contracts") 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 Contracts are issued as individual Contracts or as group Contracts. In
states where the Contracts are available only as group Contracts, a certificate
is issued that summarizes the provisions of the group Contract. For
convenience, this prospectus refers to both Contracts and certificates as
"Contracts."
The Contracts have the flexibility to allow You to shape an annuity to fit
your particular needs. The Flexible Payment Deferred Annuity Contract
("Flexible Payment Contract") permits You to add additional purchase payments
to your Flexible Payment Contract. Additional purchase payments of any amount
may be added to the Flexible Payment Contract until the Payout Start Date.
The Single Payment Deferred Annuity Contract permits You to plan for
retirement with one single purchase payment. The Contracts are 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 a minimum
initial purchase payment of $5,000 for the Contracts ($2,000 for Qualified
Contracts).
Withdrawals under the Contracts may be subject to a Market Value Adjustment.
Therefore, the Owner bears some investment risk under the Contracts.
The Contracts may be distributed through broker-dealers which have
relationships with banks or other financial institutions or by employees of
such banks; however, the Contracts 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.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES, OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Please read this prospectus carefully and retain it for future reference.
The Contracts may not be available in all states.
At least once each Contract Year prior to the Payout Start Date, our Company
will send You an annual statement that contains certain information pertinent
to your individual Contract. The annual statement details values and specific
Contract data that apply to each particular Contract. The annual statement does
not contain financial statements of the Company although the Company's
financial statements are on page F-1 of this prospectus.
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.
PROSPECTUS
July 15, 1997
<PAGE>
TABLE OF CONTENTS
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PAGE
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<S> <C>
GLOSSARY.................................................................. 3
THE CONTRACTS............................................................. 4
The Purchase of Contracts................................................ 4
The Accumulation Phase................................................... 4
Adjustments to Account Value (Withdrawal Charge, Market Value Adjustment
and Taxes).............................................................. 6
The Parties to the Contract.............................................. 8
The Death Benefit Provisions............................................. 8
The Payout Phase......................................................... 9
AMENDMENT OF THE CONTRACTS................................................ 10
DISTRIBUTION OF THE CONTRACTS............................................. 10
FEDERAL TAX MATTERS....................................................... 11
Introduction............................................................. 11
Taxation of the Company.................................................. 11
Taxation of Annuities in General......................................... 11
Tax Deferral............................................................ 11
Delayed Maturity Date................................................... 11
Taxation of Partial and Full Withdrawals................................ 11
Taxation of Annuity Payments............................................ 11
Taxation of Annuity Death Benefits...................................... 12
Penalty Tax on Premature Distributions.................................. 12
Aggregation of Annuity Contracts........................................ 12
IRS Required Distribution at Death Rules................................ 12
Qualified Plans.......................................................... 12
Types of Qualified Plans................................................. 12
Individual Retirement Annuities......................................... 12
Simplified Employee Pension Plans....................................... 13
Savings Incentive Match Plans for Employees (SIMPLE Plans).............. 13
Tax Sheltered Annuities................................................. 13
Corporate and Self-Employed Pension and Profit Sharing Plans............ 13
State and Local Government and Tax-Exempt Organization Deferred
Compensation Plans..................................................... 13
</TABLE>
<TABLE>
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PAGE
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<S> <C>
Income Tax Withholding................................................... 13
THE COMPANY............................................................... 13
Business................................................................. 13
Reinsurance Agreements................................................... 14
Investments by the Company............................................... 14
SELECTED FINANCIAL DATA................................................... 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS............................................................... 15
Results of Operations.................................................... 15
Financial Position....................................................... 16
Liquidity and Capital Resources.......................................... 17
Pending Accounting Standard.............................................. 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THE QUARTER ENDED MARCH 31, 1997.......................... 17
Results of Operations.................................................... 18
Financial Position....................................................... 18
Liquidity and Capital Resources.......................................... 19
Pending Accounting Standards............................................. 19
COMPETITION............................................................... 19
EMPLOYEES................................................................. 19
PROPERTIES................................................................ 19
STATE AND FEDERAL REGULATION.............................................. 19
EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY........................... 20
EXECUTIVE COMPENSATION.................................................... 22
LEGAL PROCEEDINGS......................................................... 22
EXPERTS................................................................... 22
LEGAL MATTERS............................................................. 22
FINANCIAL STATEMENTS...................................................... F-1
APPENDIX A................................................................ A-1
</TABLE>
2
<PAGE>
GLOSSARY
ACCOUNT--An Account consists of funds that are allocated to a Guarantee Period.
An Account is established when a purchase payment is made or when a previous
Guarantee Period expires and a new Guarantee Period is selected.
ACCOUNT VALUE--The Account Value is equal to the funds allocated to an
Account(s) plus interest credited less any withdrawals.
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 ("Flexible Payment Contract"), or the Glenbrook Life and
Annuity Company Single Payment Deferred Annuity Contract ("Single Payment
Contract") known as "The Glenbrook Value Reserve" that is described in this
prospectus. The Flexible Payment Contract and the Single Payment Contract are
collectively referred to as the "Contracts."
CONTRACT ANNIVERSARY--An anniversary of the date that the Contract was issued.
CONTRACT VALUE--The sum of the Account Values.
CONTRACT YEAR--A period of 12 months starting with the issue date or any
Contract Anniversary.
DEATH BENEFIT--The Death Benefit is equal to either the Contract Value or the
amount that would have been payable in the event of a full withdrawal of the
Contract Value on the date We determine the Death Benefit.
FREE WITHDRAWAL AMOUNT--A portion of the 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, an increase in a Death Benefit payment, or an increase
or decrease in an 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.
OWNER(S)("YOU")--The person or persons designated as the Owner(s) 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.
3
<PAGE>
THE CONTRACTS
THE PURCHASE OF CONTRACTS
1. WHAT IS THE PURPOSE OF THE CONTRACTS?
The Contracts described in this prospectus are 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 Flexible Payment Contract permits You to add
additional purchase payments to your Flexible Payment Contract. The Single
Payment Contract permits You to plan for retirement with one single purchase
payment. The Contracts have an accumulation phase and a payout phase. The
accumulation phase is the first phase and begins on the Issue Date and
continues until the Payout Start Date. During the accumulation phase, interest
is credited to your purchase payment 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 You select. The payout phase
continues until the Company makes the last payment as provided by the Income
Plan.
2. HOW ARE THE CONTRACTS PURCHASED?
The minimum initial purchase payment the Company will accept is $5,000
($2,000 for qualified Contracts). Additional purchase payments of any amount
may be added to the Flexible Payment Contract until the Payout Start Date. The
Owner of a Flexible Payment Contract may make additional purchase payments by
check or through automatic additions. The Company reserves the right to limit
the number of additional purchase payments it will accept. The Owner must
select the Guarantee Period(s) in which to allocate the purchase payment. The
Owner may elect to allocate the purchase payments to one Guarantee Period or
may split the purchase payments between many Guarantee Periods. The Company
currently offers Guarantee Periods for 1, 2, 3, 4, 5, 6, 7, 8, 9 and 10 years
for the Flexible Payment Contract and one Guarantee Period for the Single
Payment Contract. Guarantee Periods will be offered at the Company's discretion
and may range from one to fifteen years. The Company reserves the right to
limit or increase the amount of the purchase payments it will accept.
3. DO THE CONTRACTS HAVE A FREE-LOOK PROVISION?
Yes. The Owner may cancel the Contract within 20 days after receipt of the
Contract, or longer if required by state law, and receive a full refund of the
initial purchase payment.
4. ONCE A CONTRACT IS PURCHASED, HOW IS THE OWNER INFORMED AS TO THE STATUS OF
THE CONTRACT?
At least once a year, prior to the Payout Start Date, the Owner will be sent
a statement containing information about the Account Value of the Contract. In
addition, the Owner can call the Company's Customer Support Unit directly at 1-
800-776-6978 at anytime.
THE ACCUMULATION PHASE
5. HOW IS INTEREST CREDITED TO THE CONTRACTS?
Interest will be credited to the purchase payments from the Issue Date or
date of receipt under the Flexible Payment Contract. No deductions are made
from the purchase payment. Therefore, the full amount of the 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 1-800-776-6978.
4
<PAGE>
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.
EXAMPLE OF INTEREST CREDITING DURING THE GUARANTEE PERIOD:
<TABLE>
<S> <C>
Purchase Payment:................................................... $10,000.00
Guarantee Period:................................................... 5 years
Assumed Effective Annual Rate:...................................... 4.50%
</TABLE>
END OF CONTRACT YEAR:
<TABLE>
<CAPTION>
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Beginning Account Value $10,000.00
X (1 + Effective Annual
Rate) 1.045
----------
$10,450.00
Account Value at end of
Contract $10,450.00
year 1 X (1 + Effective
Annual Rate) 1.045
----------
$10,920.25
Account Value at end of
Contract $10,920.25
year 2 X (1 + Effective
Annual Rate 1.045
----------
$11,411.66
Account Value at end of
Contract $11,411.66
year 3 X (1 + Effective
Annual Rate) 1.045
----------
$11,925.19
Account Value at end of
Contract $11,925.19
year 4 X (1 + Effective
Annual Rate) 1.045
----------
Account Value at end of
Guarantee Period: $12,461.82
==========
</TABLE>
TOTAL INTEREST CREDITED IN GUARANTEE PERIOD: $2,461.82 ($12,416.82 -
$10,000.00)
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
declared under the Contract. Actual interest rates declared for any given
Guarantee Period may be more or less than shown above.
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.
6. 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 as the expiring Guarantee
Period to be established on the day the previous Guarantee Period
expired; or
. notify the Company to apply the Account Value to a new Guarantee
Period(s) to be established on the day the previous Guarantee Period
expired; or
5
<PAGE>
. 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 (Withdrawal Charges may apply). In this case, the amount
withdrawn will be deemed to have been withdrawn on the day the Guarantee
Period expired.
7. 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 the renewing Account. 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.
8. 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 a partial withdrawal
reduces the Contract Value to less than $2,000, the withdrawal will be treated
as a request to withdraw the entire Contract Value. If You withdraw the entire
Contract Value, the Contract will terminate. 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.
ADJUSTMENTS TO ACCOUNT VALUE (WITHDRAWAL CHARGE, MARKET VALUE ADJUSTMENT AND
TAXES)
9. IF A PARTIAL WITHDRAWAL OR FULL WITHDRAWAL IS REQUESTED, HOW IS THE AMOUNT
RECEIVED DETERMINED?
The main component in determining the amount received by the Owner is the
amount which was requested, however, there may be adjustments to the requested
amount. A Withdrawal Charge may reduce the amount requested. A Market Value
Adjustment may apply which may 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.
10. 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 the Free Withdrawal Amount will be subject to
a Withdrawal Charge and a Market Value Adjustment. Each year the Free
Withdrawal Amount for each Account is equal to 10% of the purchase payments.
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 following year.
Also, the Free Withdrawal Amount that is not withdrawn from one Account may
not be transferred to increase a Free Withdrawal Amount in another Account.
In addition to the Free Withdrawal Amount, any funds withdrawn which are
within the first 30 days of their renewal Guarantee Period will be completely
free from any Market Value Adjustment.
11. 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:
<TABLE>
<CAPTION>
PURCHASE PAYMENT YEAR 1 2 3 4 5 6 7 8 AND LATER
- --------------------- --- --- --- --- --- --- --- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Percentage.............................. 7% 7% 6% 5% 4% 3% 2% 0%
</TABLE>
For each withdrawal, the year in the above table is measured starting from
the date We receive the purchase payment.
The Withdrawal Charge is determined by multiplying the percentage
corresponding to the purchase payment year times the amount withdrawn in
excess of the Free Withdrawal Amount.
At the expiration of the 5 year and the 6 year Guarantee Periods, any funds
withdrawn which are within the first 30 days of their renewal Guarantee Period
will be completely free from Withdrawal Charges.
6
<PAGE>
For Flexible Payment Contracts only, the Company will waive any Withdrawal
Charge and any Market Value Adjustment 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) 1) is first confined to a long-term care facility or hospital
for at least 90 consecutive days and the request for a withdrawal and adequate
written proof of confinement are received by Us no later than 90 days after
discharge. Confinement is prescribed by a physician and is medically necessary;
or 2) is first diagnosed by a physician as having a terminal illness and a
request for a withdrawal and adequate proof of diagnosis are received by Us.
12. WHAT IS THE MARKET VALUE ADJUSTMENT UPON A PARTIAL OR FULL WITHDRAWAL, AT
DEATH, OR APPLIED TO AN INCOME PLAN?
The Market Value Adjustment will be applied to all amounts withdrawn, some
amounts paid at death, or all amounts applied to an Income Plan which are not
exempt from adjustment as discussed in question 10.
The Market Value Adjustment reflects the relationship between (1) the current
Treasury Rate at the time of request for withdrawal, death, or Income Plan
payment request for a maturity equal to the Account Guarantee Period, and (2)
the original 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 original Treasury Rate at the time the Account was
established is higher than the applicable current Treasury Rate (interest rate
for a period equal to the Account Guarantee Period), then the Market Value
Adjustment will result in a higher amount payable to the Owner. Similarly, if
the original Treasury Rate at the time the Account was established is lower
than the current Treasury Rate, then the Market Value Adjustment will result in
a lower 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
4.50%. Assume that at the end of three years, the Owner makes a partial
withdrawal. If, at that later time, the current Treasury Rate for a five year
Guarantee Period is 4.20%, then the Market Value Adjustment will be positive,
which will result in an increase in the amount payable to the Owner. Similarly,
if the current Treasury Rate for the five year Guarantee Period is 4.80%, then
the Market Value Adjustment will be negative, which will result in a decrease
in the amount payable to the Owner.
The formula for calculating the Market Value Adjustment is set forth in
Appendix A to this prospectus which also contains additional illustrations of
the application of the Market Value Adjustment.
13. 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.
14. WHAT ARE THE TAX IMPLICATIONS ASSOCIATED WITH THE CONTRACTS?
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 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 11
of this prospectus.
7
<PAGE>
THE PARTIES TO THE CONTRACT
15. WHAT RIGHTS DOES AN OWNER HAVE UNDER THIS 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 the Owner
is a natural person);
. assign periodic income payments 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.
16. 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. Joint Annuitants are only permitted
on or after the Payout Start Date.
17. 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. 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.
18. 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 BENEFIT PROVISIONS
19. UPON DEATH OF THE OWNER, WHO IS THE NEW OWNER OF THE CONTRACT?
The new Owner is any surviving joint Owner(s) or if none, the
Beneficiary(ies).
20. UPON DEATH OF THE OWNER, WHAT OPTIONS DOES THE NEW OWNER HAVE?
If the Owner eligible to receive a distribution upon death is not a natural
person, then the Owner may elect to receive the distribution upon death in one
or more distributions. Otherwise, if the Owner is a natural person, the Owner
may elect to receive a distribution upon death in one or more distributions or
periodic payments through an Income Plan.
A Death Benefit will be paid: 1) if the Owner elects to receive the Death
Benefit in a single payment distributed within 180 days of the date of death;
and 2) if the Death Benefit is paid as of the day the value of the Death
Benefit is determined. Otherwise the settlement value will be paid. The
settlement value is the same amount that would be paid in the event of
withdrawal of the Contract Value. The Company will calculate the settlement
value at the end of the period coinciding with the requested distribution date
for payment or on the mandatory distribution date of 5 years after the date of
death.
8
<PAGE>
In any event, the entire distribution upon death must be distributed within
five years after the date of death unless an Income Plan is selected or a
surviving spouse continues the Contract in accordance with the following
sections:
Payments from the Income Plan must begin within one year of the date of death
and must be payable throughout:
. the life of the Owner; or
. a period not to exceed the life expectancy of the Owner; or
. the life of the Owner with payments guaranteed for a period not to exceed
the life expectancy of the Owner.
Prior to the Payout Start Date, the benefit is equal to the greatest of:
(a) the Contract Value on the date the Company determines the Death
Benefit; or
(b) the amount that would have been payable in the event of a full
withdrawal of the Contract Value on the date the Company determines the
Death Benefit; or
If the new Owner is the spouse of the deceased Owner, the new Owner may elect
to continue the Contract. See question 21, below.
The Company will not settle any death claims until it receives due proof of
death.
21. 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 20, the surviving spouse of
the deceased Owner has the following options:
. continue the Contract as if the death had not occurred; and
. if the Contract is continued, one withdrawal of any amount within one
year of the date of death is allowed without incurring a Withdrawal
Charge. However, a Market Value Adjustment will apply.
22. IF THE OWNER IS NOT THE ANNUITANT AND THE ANNUITANT DIES PRIOR TO THE
PAYOUT START DATE, WHAT HAPPENS TO THE CONTRACT?
In most cases, the Contract will continue as if the death had not occurred
and the new Annuitant will be the youngest Owner. However, when the Annuitant
dies and the Owner is not a natural person, the Owner may elect to receive the
distribution upon death in one or more distributions within five years of the
Annuitant's death. A Death Benefit will be paid: 1) if the Owner elects to
receive the Death Benefit in a single payment distributed within 180 days of
the date of death; and 2) if the Death Benefit is paid as of the day the value
of the Death Benefit is determined. Otherwise, the settlement value will be
paid.
THE PAYOUT PHASE
23. 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. 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 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 Annuitant's 90th birthday; or
.the 10th anniversary of the Contract's Issue Date, whichever is later.
24. 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--Payments will be made for the life
of the Annuitant. 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--Payments will be
made for the life of either the Annuitant or joint Annuitant. 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
9
<PAGE>
GUARANTEED PAYMENTS FOR A SPECIFIED PERIOD--Payments will be made for a
specified period beginning on the Payout Start Date. 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 guaranteed payments. If an
Income Plan is chosen which depends on the Annuitant's or joint Annuitant's
life, proof that the Annuitant or joint Annuitant is still alive before each
payment and proof of age and sex may be required before income payments begin.
The Company reserves the right to offer other Income Plans.
25. 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 lesser 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
either Annuitant's continued life.
26. 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.
AMENDMENT OF THE CONTRACTS
The Company reserves the right to amend the Contracts to meet the
requirements of applicable federal or state laws or regulations. The Company
will notify the Owner of any such amendments.
DISTRIBUTION OF THE CONTRACTS
Allstate Life Financial Services, Inc. ("ALFS"), 3100 Sanders Road,
Northbrook, Illinois, a wholly owned subsidiary of Allstate Life Insurance
Company, 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 unaffiliated registered representatives of broker-
dealers or bank employees who are licensed insurance agents appointed by the
Company, either individually or through an incorporated insurance agency. In
some states, Contracts may be sold by representatives or employees of banks
that may be acting as broker-dealers without separate registration under the
Securities Act of 1934, pursuant to legal and regulatory exceptions.
Commissions paid may vary, but in aggregate are not anticipated to exceed 8%
of any purchase payment. In addition, under certain circumstances, certain
sellers of the Contracts may be paid persistency bonuses which will take into
account, among other
10
<PAGE>
things, the length of time purchase payments have been held under a Contract,
and Contract Values. A persistency bonus is not expected to exceed 1.20%, on an
annual basis, of the Contract Values considered in connection with the bonus.
These commissions are intended to cover distribution expenses.
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.
The Company and ALFS reserve the right to offer the Contract at a special
interest rate(s) for specific time periods to customers of certain broker-
dealers. The Company and ALFS may also negotiate special commissions with such
broker-dealers.
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 COMPANY
The Company is taxed as a life insurance company under Part I of 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 ANNUITIES IN GENERAL
TAX DEFERRAL
In general, an annuity contract owned by a natural person is not taxed on
increases in the contract value until a distribution occurs. Annuity contracts
owned by nonnatural 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 nonnatural owner rule and You should discuss these with
your tax advisor.
DELAYED MATURITY DATE
If the contract's scheduled maturity date is at a time when the annuitant has
reached an advanced age, it is possible that the contract would not be treated
as an annuity. In that event, the income and gains under the contract would be
currently includible in the owner's income.
TAXATION OF PARTIAL AND FULL WITHDRAWALS
In the case of a partial withdrawal under a non-qualified contract, amounts
received are taxable to the extent the contract value, without regard to any
surrender charges, exceeds the investment in the contract. The investment in
the contract is the gross premium or other consideration paid for the contract
reduced by any amounts previously received from the contract to the extent such
amounts were properly excluded from the owner's gross income. In the case of a
partial withdrawal under a qualified contract, the portion of the payment that
bears the same ratio to the total payment that the investment in the contract
bears to the contract value, can be excluded from income. No definitive
guidance exists on the proper tax treatment of Market Value Adjustments, so you
should contact a competent tax advisor with respect to the potential tax
consequences of a Market Value Adjustment. 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
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<PAGE>
the case of fixed annuity payments, the amount excluded from income is
determined by multiplying the payment by the ratio of the investment in the
contract (adjusted for any refund feature or period certain) to the total
expected value of annuity payments for the term of the contract. Once the total
amount of the investment in the contract is excluded using this ratio, the
annuity payments will be fully taxable. If annuity payments cease because of
the death of the annuitant before the total amount of the investment in the
contract is recovered, the unrecovered amount will be allowed as a deduction to
the annuitant for his last taxable year.
TAXATION OF ANNUITY DEATH BENEFITS
Amounts may be distributed from an annuity contract because of the death of
an owner or annuitant. Generally, such amounts are includible in income as
follows: (1) if distributed in a lump sum, the amounts are taxed in the same
manner as a full withdrawal or (2) if distributed under an annuity option, the
amounts are taxed in the same manner as an annuity payment.
PENALTY TAX ON PREMATURE DISTRIBUTIONS
There is a 10% penalty tax on the taxable amount of any premature
distribution from a non-qualified annuity contract. The penalty tax generally
applies to any distribution made prior to the owner attaining age 59 1/2.
However, there should be no penalty tax on distributions to owners (1) made on
or after the owner attains age 59 1/2; (2) made as a result of an 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.
TYPES OF QUALIFIED PLANS
INDIVIDUAL RETIREMENT ANNUITIES
Section 408 of the Code permits 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.
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<PAGE>
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 or nonelective 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.
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.
THE COMPANY
BUSINESS
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.
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The Company is wholly owned by Allstate Life Insurance Company ("Allstate
Life" or "ALIC"), 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 AGREEMENTS
Effective December 31, 1993, the Company entered into an assumption
reinsurance treaty with an affiliate, Glenbrook Life Insurance Company, to
reinsure certain annuity contracts. Under 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
June 5, 1992. All business issued after that date is reinsured with Allstate
Life, while business issued before that date 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.
INVESTMENTS BY THE COMPANY
The Company's general account assets, like the general account 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 DATA
The following selected financial data for the Company should be read in
conjunction with the financial statements and notes thereto included in this
prospectus beginning on page F-1.
GLENBROOK LIFE AND ANNUITY COMPANY
SELECTED FINANCIAL DATA
($ IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR-END FINANCIAL DATA 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.
<TABLE>
<CAPTION>
QUARTERLY FINANCIAL DATA 1997 1996
- ------------------------ ---------- ----------
<S> <C> <C>
For The Quarters Ended March 31:
Income Before Income Tax Expense........................ $ 1,249 $ 923
Net Income.............................................. 808 594
As of March 31:
Total Assets........................................... 2,628,250 1,591,244
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion highlights significant factors influencing results
of operations and financial position of Glenbrook Life and Annuity Company
(the "Company"). It should be read in conjunction with the financial
statements and related notes.
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 $10.0 million seed money contribution from the
Company in 1995. Investment income and realized gains and losses of the
Separate Accounts, other than the portion related to the Company's
participation, accrue directly to the contractholders and, therefore, are not
included in the Company's statements of operations.
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
($ IN THOUSANDS)
<S> <C> <C> <C>
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
======= ======= =======
</TABLE>
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<PAGE>
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 $298 thousand in 1995 were the result of
sales of investments to fund the Company's participation in the Separate
Accounts.
FINANCIAL POSITION
<TABLE>
<CAPTION>
1996 1995
---------- ----------
($ IN THOUSANDS)
<S> <C> <C>
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
========== ==========
</TABLE>
The Company's fixed income securities portfolio consists of publicly traded
corporate bonds, mortgage-backed securities and U.S. government bonds. The
Company generally holds its fixed income securities for the long term, but has
classified all of these securities as available for sale to allow maximum
flexibility in portfolio management. 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
16
<PAGE>
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.
LIQUIDITY AND CAPITAL RESOURCES
ALIC authorized a $20.0 million capital contribution to the Company in 1996,
which the Company received in January 1997.
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 STANDARD
In June 1996, the Financial Accounting Standards Board issued 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.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE QUARTER ENDED MARCH 31, 1997
The following discussion highlights significant factors influencing results
of operations and financial position of Glenbrook Life and Annuity Company
(the "Company"). It should be read in conjunction with the financial
statements and related notes thereto found under Items 7 and 8 of Part II of
the Glenbrook Life and Annuity Company Annual Report on Form 10-K for the year
ended December 31, 1996.
The Company is wholly owned by Allstate Life Insurance Company ("ALIC"). The
Company markets life insurance contracts and annuity products through banks
and broker-dealers.
The Company and ALIC entered into a reinsurance agreement effective on June
5, 1992. All business issued subsequent to that date is ceded to ALIC. Life
insurance in force prior to that date is ceded to non-affiliated reinsurers.
The Company's results of operations relate to the investment of those assets
of the Company that are not transferred to ALIC under the reinsurance
agreement.
Separate Account assets and liabilities are carried at fair value in the
statements of financial position. The Separate Account investment portfolios
were initially funded with a $10.0 million seed money contribution from the
Company in 1995. Investment income and realized gains and losses of the
Separate Accounts, other than the portion related to the Company's
participation, accrue directly to the contractholders (net of fees) and,
therefore, are not included in the Company's statements of operations. The
Company plans to liquidate the investment in the Separate Account during the
second and third quarters of 1997.
17
<PAGE>
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
---------------
1997 1996
------- -------
($ IN
THOUSANDS)
<S> <C> <C>
Net investment income.......................................... $ 1,242 $ 923
======= =======
Realized capital gains, after tax.............................. $ 4 $ --
======= =======
Net income..................................................... $ 808 $ 594
======= =======
Total investments.............................................. $70,484 $50,676
======= =======
</TABLE>
Net income increased $214 thousand or 36.0% for the first quarter of 1997
when compared to first quarter of 1996 primarily due to the increase in net
investment income.
Net investment income for the first quarter of 1997 increased 34.6% or $319
thousand to $1.2 million compared to $923 thousand for the first quarter of
1996. Increased investment income was the result of the higher base of
investments primarily arising from a $20 million capital contribution received
from ALIC in January, 1997.
FINANCIAL POSITION
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
---------- ------------
($ IN THOUSANDS)
<S> <C> <C>
Total investments....................................... $ 70,484 $ 50,676
========== ==========
Separate Account assets................................. $ 343,099 $ 272,420
========== ==========
Contractholder funds.................................... $2,212,158 $2,060,419
========== ==========
Reinsurance recoverable from ALIC....................... $2,212,158 $2,060,419
========== ==========
Separate Account liabilities............................ $ 330,925 $ 260,290
========== ==========
</TABLE>
The Company's fixed income securities portfolio consists of publicly traded
corporate bonds, mortgage-backed securities and U.S. government bonds. The
Company generally holds its fixed income securities for the long term, but has
classified all of these securities as available for sale to allow maximum
flexibility in portfolio management. Total investments increased to $70.5
million at March 31, 1997 from $50.7 million at December 31, 1996. The increase
in investments was primarily due to a $20.0 million capital infusion from ALIC
in January which was partially offset by a decrease of $2.2 milion in the
unrealized gains on fixed income securities. The decrease in the unrealized
gain position is primarily attributable to rising interest rates on fixed
income securities.
All of the Company's fixed income securities portfolio is rated investment
grade, with a National Association of Insurance Commissioners rating of 1 or 2
and a Moody's rating of Aaa, Aa, or A.
During the first quarter of 1997, contractholder funds and amounts
recoverable from ALIC under the reinsurance agreement increased by $151.7
million. The increases primarily resulted from sales of the Company's flexible
premium deferred annuities, interest credited to contractholders, and sales of
single premium life insurance policies, partially offset by surrenders,
withdrawals and death benefits. Reinsurance recoverable from ALIC relates to
contract benefit obligations ceded to ALIC.
Separate Account assets increased by $70.7 million and Separate Account
liabilities increased by $70.6 million as compared to December 31, 1996. The
increases were attributable to increased sales of flexible premium deferred
variable annuity contracts and the favorable investment performance of the
Separate Account investment portfolios, partially offset by variable annuity
contract charges, surrenders and withdrawals.
18
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
In January 1997, a $20.0 million capital contribution from ALIC was received,
which was accrued at December 31, 1996.
Under the terms of intercompany reinsurance agreements, assets of the Company
that relate to insurance in force, excluding Separate Account assets, are
transferred to ALIC, which maintains the investment portfolios supporting the
Company's products. The Company continues to have primary liability as a direct
reinsurer for risks reinsured.
PENDING ACCOUNTING STANDARDS
In January 1997, the Securities and Exchange Commission issued Financial
Reporting Release No. 48 ("FRR 48") "Disclosure of Accounting Policies for
Derivative Financial Instruments and Derivative Commodity Instruments and
Disclosure of Quantitative and Qualitative Information about Market Risk
Inherent in Derivative Financial Instruments, Other Financial Instruments, and
Derivative Commodity Instruments."
Among other things, FRR 48 requires annual disclosure of quantitative and
qualitative information about the market risk inherent in the Company's market
risk sensitive instruments, including but not limited to, the Company's fixed
income securities. The quantitative and qualitative disclosures are effective
for the Company's year-end 1998 reporting, but recent Congressional events may
ultimately impact the nature and effective date of FRR 48.
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 REGULATION
The insurance business of the Company is subject to comprehensive and
detailed regulation and supervision throughout the United States.
The laws of the various jurisdictions establish supervisory agencies with
broad administrative powers with respect to licensing to transact business,
overseeing trade practices, licensing agents, approving policy forms,
establishing reserve requirements, fixing maximum interest rates on life
insurance policy loans and minimum rates for accumulation of surrender values,
prescribing the form and content of required financial statements and
regulating the type and amounts of investments permitted. Each insurance
company is required to file detailed annual reports with supervisory agencies
in each of the jurisdictions in which it does business and its operations and
accounts are subject to examination by such agencies at regular intervals.
Under insurance guaranty fund law, in most states, insurers doing business
therein can be assessed up to prescribed limits for contract owner losses
incurred as a result of company insolvencies. The amount of any future
assessments on the Company under these laws cannot be reasonably estimated.
Most of these laws do provide, however, that an assessment may be excused or
deferred if it would threaten an insurer's own financial strength.
19
<PAGE>
In addition, several states, including Illinois, regulate affiliated groups
of insurers, such as the Company and its affiliates, under insurance holding
company legislation. Under such laws, intercompany transfers of assets and
dividend payments from insurance subsidiaries may be subject to prior notice or
approval, depending on the size of such transfers and payments in relation to
the financial positions of the companies.
Although the federal government generally does not directly regulate the
business of insurance, federal initiatives often have an impact on the business
in a variety of ways. Current and proposed federal measures which may
significantly affect the insurance business include employee benefit
regulation, controls on medical care costs, removal of barriers preventing
banks from engaging in the securities and insurance business, tax law changes
affecting the taxation of insurance companies, the tax treatment of insurance
products and its impact on the relative desirability of various personal
investment vehicles, and proposed legislation to prohibit the use of gender in
determining insurance and pension rates and benefits.
EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY
The directors and executive officers are listed below, together with
information as to their ages, dates of election and principal business
occupations during the last five years (if other than their present business
occupations).
LOUIS G. LOWER, II, 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 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.
20
<PAGE>
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 (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/appointed to current office.
21
<PAGE>
EXECUTIVE COMPENSATION
Executive officers of the Company also serve as officers of Allstate Life and
receive no compensation directly from the Company. Some of the officers also
serve as officers of other companies affiliated with the Company. Allocations
have been made as to each individual's time devoted to his or her duties as an
executive officer of the Company. However, no officer's compensation allocated
to the Company exceeded $100,000 in 1996. The allocated cash compensation of
all officers of the Company as a group for services rendered in all capacities
to the Company during 1996 totaled $3,965.52. Directors of the Company receive
no compensation in addition to their compensation as employees of the Company.
Shares of the Company and Allstate Life are not directly owned by any
director or officer of the Company. The percentage of shares of The Allstate
Corporation beneficially owned by any director, and by all directors and
officers of the Company as a group, does not exceed one percent of the class
outstanding.
SUMMARY COMPENSATION TABLE
(ALLSTATE LIFE INSURANCE COMPANY)
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
--------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------ ---------- ------------
(A) (B) (C) (D) (E) (F) (G) (H) (I)
SECURITIES
RESTRICTED UNDERLYING
SALARY BONUS OTHER ANNUAL STOCK OPTIONS/SARS LTIP ALL OTHER
NAME AND PRINCIPAL POSITION YEAR ($) ($) COMPENSATION AWARD(S) (#) PAYOUTS COMPENSATION
- --------------------------- ---- -------- -------- ------------ ---------- ------------ -------- ------------
<S> <C> <C> <C> <C> <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 1995 $416,000 $266,175 $17,044 $199,890 $131,997 $411,122 $5,250(1)
Executive
Officer and
Chairman 1994 $389,050 $ 43,973 $26,990 $170,660 N/A 0 $1,890(1)
</TABLE>
- --------
(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, to The Profit Sharing Fund
and to its predecessor, The Savings and Profit Sharing Fund of Sears
employees.
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
Sutherland, Asbill & Brennan, L.L.P. of Washington, D.C. has provided advice
on certain matters relating to the federal securities laws. 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.
22
<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) ---------- ----------
ASSETS
<S> <C> <C>
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
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.
F-6
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
($ IN THOUSANDS)
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
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 $10,530, respectively. The Company intends to liquidate its
Participation during 1997.
Investment income and realized capital gains and losses of the Separate
Accounts, other than the portion related to the Participation, accrue directly
to the contractholders and, therefore, are not included in the accompanying
statements of operations. Revenues to the Company from the Separate Accounts
consist of contract maintenance fees, administrative fees and mortality and
expense risk charges, which are ceded to ALIC.
CONTRACTHOLDER FUNDS
Contractholder funds arise from the issuance of individual or group
contracts that include an investment component, including most annuities and
interest-sensitive life insurance. Payments received are recorded as interest-
bearing liabilities. Contractholder funds are equal to deposits received and
interest credited to the benefit of the contractholder less withdrawals,
mortality charges and administrative expenses. Credited interest rates on
contractholder funds ranged from 3.15% to 7.45% for those contracts with fixed
interest rates and from 4.25% to 7.90% for those with flexible rates during
1996.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
F-7
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
($ IN THOUSANDS)
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
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 $ -- $48,815
======= ========= ======= =======
</TABLE>
F-8
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
($ IN THOUSANDS)
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.
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>
UNREALIZED
AMORTIZED FAIR NET
COST VALUE 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>
F-9
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
($ IN THOUSANDS)
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.
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 FAIR CARRYING FAIR
VALUE 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 $1,282,248
Separate Accounts............ 260,290 260,290 5,048 5,048
</TABLE>
The fair value of contractholder funds on investment contracts is based on
the terms of the underlying contracts. Reserves on investment contracts with
no stated maturities (single premium and flexible premium deferred annuities)
are valued at the account balance less surrender charges. The fair value of
immediate annuities and annuities without life contingencies with fixed terms
is estimated using discounted cash flow calculations based on interest rates
currently offered for contracts with similar terms and durations. Separate
Account liabilities are carried at the fair value of the underlying assets.
F-10
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
($ IN THOUSANDS)
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.
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 $1,637 at
December 31, 1996 and 1995, respectively.
F-11
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
($ 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 $7,359.
F-12
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
SCHEDULE IV--REINSURANCE
($ 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 $--
====== ====== ====
</TABLE>
F-13
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
FINANCIAL STATEMENTS FOR THE QUARTER ENDED MARCH 31, 1997
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
----------- ------------
($ IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
ASSETS
Investments
Fixed income securities, at fair value (amortized
cost $67,393 and $46,925).......................... $ 67,704 $ 49,389
Short-term.......................................... 2,780 1,287
---------- ----------
Total investments................................... 70,484 50,676
Reinsurance recoverable from Allstate Life Insurance
Company.............................................. 2,212,158 2,060,419
Net receivable from affiliates........................ -- 19,206
Other assets.......................................... 2,509 2,049
Separate Accounts..................................... 343,099 272,420
---------- ----------
Total assets...................................... $2,628,250 $2,404,770
========== ==========
LIABILITIES
Contractholder funds.................................. $2,212,158 $2,060,419
Income taxes payable.................................. 1,167 653
Deferred income taxes................................. 771 1,528
Net payable to affiliates............................. 1,953 --
Separate Accounts..................................... 330,925 260,290
---------- ----------
Total liabilities................................. 2,546,974 2,322,890
SHAREHOLDER'S EQUITY
Common stock, $500 par value, 4,200 shares authorized,
issued, and outstanding.............................. 2,100 2,100
Additional capital paid-in............................ 69,641 69,641
Unrealized net capital gains.......................... 1,378 2,790
Retained income....................................... 8,157 7,349
---------- ----------
Total shareholder's equity........................ 81,276 81,880
---------- ----------
Total liabilities and shareholder's equity........ $2,628,250 $2,404,770
========== ==========
</TABLE>
See notes to financial statements.
F-14
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE
MONTHS
ENDED
MARCH 31,
-----------
1997 1996
($ IN THOUSANDS) ------ ----
(UNAUDITED)
<S> <C> <C>
REVENUES
Net investment income $1,242 $923
Realized capital gains and losses 7 --
------ ----
INCOME BEFORE INCOME TAX EXPENSE 1,249 923
INCOME TAX EXPENSE 441 329
------ ----
NET INCOME $ 808 $594
====== ====
</TABLE>
See notes to financial statements.
F-15
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,
-----------------
1997 1996
($ IN THOUSANDS) -------- -------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income................................................. $ 808 $ 594
Adjustments to reconcile net income to net cash provided by
operating activities
Change in deferred income taxes.......................... 3 3
Realized capital gains and losses........................ (7) --
Changes in other operating assets and liabilities........ 1,212 (71)
-------- -------
Net cash provided by operating activities.............. 2,016 526
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Fixed income securities
Investment collections................................... 523 430
Investment purchases..................................... (20,981) --
Participation in Separate Accounts......................... (65) (52)
Change in short-term investments, net...................... (1,493) (1,168)
-------- -------
Net cash used in investing activities.................. (22,016) (790)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Capital contribution....................................... 20,000 --
-------- -------
Net cash provided by financing activities.............. 20,000 --
-------- -------
NET DECREASE INCREASE IN CASH.............................. -- (264)
CASH AT BEGINNING OF PERIOD................................ -- 264
-------- -------
CASH AT END OF PERIOD...................................... $ -- $ --
======== =======
</TABLE>
See notes to financial statements.
F-16
<PAGE>
GLENBROOK LIFE AND ANNUITY COMPANY
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying financial statements include the accounts of Glenbrook Life
and Annuity Company (the "Company") a wholly owned subsidiary of Allstate Life
Insurance Company ("ALIC"), which is wholly owned by Allstate Insurance
Company, a wholly owned subsidiary of The Allstate Corporation.
The statements of financial position as of March 31, 1997, the statements of
operations for the three-month periods ended March 31, 1997 and 1996, and the
statements of cash flows for the three-month periods then ended are unaudited.
The interim financial statements reflect all adjustments (consisting only of
normal recurring accruals) which are, in the opinion of management, necessary
for the fair presentation of the financial position, results of operations and
cash flows for the interim periods. These financial statements should be read
in conjunction with the financial statements and notes thereto included in the
Glenbrook Life and Annuity Company Annual Report on Form 10-K for 1996. The
results of operations for the interim period should not be considered
indicative of results to be expected for the full year.
2. REINSURANCE
The Company and ALIC entered into a reinsurance agreement effective June 5,
1992. All business issued subsequent to that date is ceded to ALIC. Life
insurance in force prior to that date is ceded to non-affiliated reinsurers.
Contract charges and credited interest are ceded and shown net of such
cessions in the statements of operations. Under the reinsurance agreement with
ALIC, all premiums and deposits are transferred to ALIC. The amounts shown in
the Company's statements of operations relate to the investment of those
assets of the Company that are not transferred to ALIC under the reinsurance
agreement. Reinsurance recoverable and contractholder funds are reported
separately in the statements of financial position. The Company continues to
have primary liability as the direct insurer for risks reinsured.
Contract charges ceded to ALIC under reinsurance agreements were $2.1
million for the three-month period ended March 31, 1997 and $597 thousand for
the three-month period ended March 31, 1996. Credited interest, policy
benefits and expenses ceded to ALIC amounted to $37.6 million and $25.2
million for the three-month periods ended March 31, 1997 and 1996,
respectively. Investment income earned on the assets which support
contractholder funds is not included in the Company's financial statements as
those assets are owned and managed by ALIC under the terms of reinsurance
agreements.
F-17
<PAGE>
APPENDIX A
MARKET VALUE ADJUSTMENT
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; and
J = the Treasury Rate for a maturity equal to the Account's Guarantee
Period for the week preceding the receipt of the withdrawal request,
death benefit request, or income payment request. If a note with a
maturity of the original Guarantee Period is not available, a weighted
average will be used.
The Market Value Adjustment factor is determined from the following formula:
.9 X (I - J) X N
Any amount withdrawn in excess of the Free Withdrawal Amount will be
multiplied by the Market Value Adjustment factor to determine the Market Value
Adjustment.
ILLUSTRATION
EXAMPLE OF MARKET VALUE ADJUSTMENT
Purchase Payment: $10,000
Guarantee Period: 5 years
Guaranteed Interest Rate: 4.50%
Full Withdrawal: End of Contract Year 3
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= 2 years (5 years - 3 years)
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
A-1
<PAGE>
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= 2 years (5 years - 3 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 = $11,730.74
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 $65,215.15 will be incurred
or are anticipated to be incurred in connection with the issuance and
distribution of the securities to be registered: registration fees - $30,215.15;
cost of printing and engraving - $17,000; legal fees - $15,000; and accounting
fees - $3,000.
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
(1) Form of Underwriting Agreement*
(2) None
(3) (i) Articles of Incorporation*
(ii) By-Laws*
(4) Form of Glenbrook Life and Annuity Company Flexible and Single
Payment Deferred Annuity Contracts and Application*
(5) Opinion of General Counsel re: Legality*
(6) None
(7) None
(8) None
(9) None
(10) Reinsurance Agreement*
(11) None
(12) None
(14) None
<PAGE>
(15) None
(16) None
(21) None
(23) (i) Consent of Experts
(ii) Consent of Counsel**
(24) Powers of Attorney**
(25) None
(26) None
(27) Financial Data Schedule***
(28) None
* Previously filed in Form S-1 Registration Statement, File Number 333-07275,
dated June 28, 1996, and incorporated by reference.
** Previously filed in Form S-1 Registration Statement, File Number 333-07275,
dated April 1, 1997, and incorporated by reference.
*** Previously filed in Registrant's Form 10-K filed on March 31, 1997.
<PAGE>
ITEM 17. UNDERTAKINGS.
The undersigned registrant 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 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 the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit ore 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 Securities Act and will be governed by the final
adjudication of such issue.
<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 12th day of
May, 1997.
GLENBROOK LIFE AND ANNUITY COMPANY
(Registrant)
(SEAL)
Attest: /s/ BRENDA D. SNEED By: /s/ MICHAEL J. VELOTTA
------------------------ -------------------------
Brenda D. Sneed Michael J. Velotta
Assistant Secretary and Vice President, Secretary and
Assistant General Counsel General 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 12th day of May, 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
- ---------------------- Counsel and Director
Michael J. Velotta
*/PETER H. HECKMAN President, Chief Operating Officer and
- ------------------ Director
Peter H. Heckman
*/JOHN R. HUNTER Director
- ----------------
John R. Hunter
*/KEVIN R. SLAWIN Vice President
- ----------------- (Principal Financial Officer)
Kevin R. Slawin
*/MARLA G. FRIEDMAN Vice President
- -------------------
Marla G. Friedman
*/G. CRAIG WHITEHEAD Senior Vice President and Director
- --------------------
G. Craig Whitehead
*/JAMES P. ZILS Treasurer
- ---------------
James P. Zils
*/CASEY J. SYLLA Chief Investment Officer
- ----------------
Casey J. Sylla
*/KEITH A. HAUSCHILDT Assistant Vice President and Controller
- --------------------- (Principal Accounting Officer)
Keith A. Hauschildt
*/By Michael J. Velotta, pursuant to Power of Attorney, previously filed.
<PAGE>
INDEX TO EXHIBITS
The following exhibits are filed herewith:
(1) Form of Underwriting Agreement*
(2) None
(3) (i) Articles of Incorporation*
(ii) By-Laws*
(4) Form of Glenbrook Life and Annuity Company Flexible and Single Payment
Deferred Annuity Contracts and Application*
(5) Opinion of General Counsel re: Legality*
(6) None
(7) None
(8) None
(9) None
(10) Reinsurance Agreement*
(11) None
(12) None
(14) None
(15) None
(16) None
(21) None
(23) (i) Consent of Experts
(ii) Consent of Counsel**
(24) Powers of Attorney**
(25) None
(26) None
(27) Financial Data Schedule***
(28) None
* Previously filed in Form S-1 Registration Statement, File Number 333-07275,
dated June 28, 1996, and incorporated by reference.
** Previously filed in Form S-1 Registration Statement, File Number 333-07275,
dated April 1, 1997, and incorporated by reference.
*** Previously filed in Registrant's Form 10-K filed on March 31, 1997.
<PAGE>
EXHIBIT (23) (i)
Consent of Experts
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Post-Effective Amendment No. 1 to Registration
Statement No. 333-07275 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
May 16, 1997
