The Putnam Allstate Advisor Variable Annuity
Allstate Life Insurance Company of New York Prospectus dated October 2, 2000
One Allstate Drive
Farmingville, New York 11738
Telephone Number: 1(800) 390-1277
Allstate Life Insurance Company of New York ("Allstate New York") is
offering The Putnam Allstate Advisor, a group flexible premium deferred variable
annuity contract ("Contract"). This prospectus contains information about the
Contract that you should know before investing. Please keep it for future
reference.
The Contract currently offers 29 investment alternatives ("investment
alternatives"). The investment alternatives include 2 fixed account options
("Fixed Account Options") and 27 variable sub-accounts ("Variable Sub-Accounts")
of the Allstate Life of New York Separate Account A ("Variable Account"). Each
Variable Sub-Account invests exclusively in the class IB shares of one of the
following mutual fund portfolios ("Funds") of Putnam Variable Trust:
<TABLE>
<CAPTION>
<S> <C>
Putnam VT American Government Income Fund Putnam VT International New Opportunities Fund
Putnam VT Asia Pacific Growth Fund Putnam VT Investors Fund
Putnam VT Capital Appreciation Fund Putnam VT Money Market Fund
Putnam VT Diversified Income Fund Putnam VT New Opportunities Fund
Putnam VT The George Putnam Fund of Boston Putnam VT New Value Fund
Putnam VT Global Asset Allocation Fund Putnam VT OTC & Emerging Growth Fund
Putnam VT Global Growth Fund Putnam VT Research Fund
Putnam VT Growth and Income Fund Putnam VT Small Cap Value
Putnam VT Growth Opportunities Fund Putnam VT Technology Fund
Putnam VT Health Sciences Fund Putnam VT Utilities Growth and Income Fund
Putnam VT High Yield Fund Putnam VT Vista Fund
Putnam VT Income Fund Putnam VT Voyager Fund
Putnam VT International Growth Fund Putnam VT Voyager Fund II
Putnam VT International Growth and Income Fund
</TABLE>
We (Allstate New York) have filed a Statement of Additional Information,
dated October 2, 2000, with the Securities and Exchange Commission ("SEC"). It
contains more information about the Contract and is incorporated herein by
reference, which means that it is legally a part of this prospectus. Its table
of contents appears on page 31 of this prospectus. For a free copy, please write
or call us at the address or telephone number above, or go to the SEC's Web site
(http:/ /www.sec.gov). You can find other information and documents about us,
including documents that are legally part of this prospectus, at the SEC's Web
site.
The Securities and Exchange Commission has not approved or
disapproved the securities described in this prospectus, nor
has it passed on the accuracy or the adequacy of this
prospectus. Anyone who tells you otherwise is committing a
federal crime.
IMPORTANT The Contracts may be distributed through broker-dealers that
NOTICES 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. The Contracts are not FDIC insured.
The Contracts are available only in New York.
1 - PROSPECTUS
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Table of Contents Page
Overview
Important Term 3
The Contract at a Glance 4
How the Contract Works 6
Expense Table 7
Financial Information 11
Contract Features
The Contract 12
Purchases 13
Contract Value 14
Investment Alternatives 15
The Variable Sub-Accounts 15
The Fixed Account Options 16
Transfers 16
Expenses 18
Access to Your Money 19
Income Payments 20
Death Benefits 23
Other Information
More Information 24
Taxes 27
Performance Information 30
Statement of Additional Information Table of Contents 31
Appendix A - Accumulation Unit Values A-1
Appendix B - Withdrawal Adjustment Example B-1
2 - PROSPECTUS
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Important Terms
This prospectus uses a number of important terms that you may not be familiar
with. The index below identifies the page(s) that describes each term. The first
use of each term in this prospectus appears in highlights.
Page(s)
Accumulation Phase 6
Accumulation Unit 11,14
Accumulation Unit Value 11,14
Allstate New York ("We") 1,24
Annuitant 12
Automatic Additions Program 13
Automatic Fund Rebalancing Program 17
Beneficiary 12
Cancellation Period 4,13
*Contract 1,6
Contract Anniversary 4
Contract Owner ("You") 12
Contract Value 5
Contract Year 5
Dollar Cost Averaging Program 17
Due Proof of Death 23
Fixed Account Options 16
Funds 1,15,25
Guarantee Period 16
Income Plan 6,20
Investment Alternatives 1,4,15-16
Issue Date 6
Maximum Anniversary Value 23
Payout Phase 6
Payout Start Date 20
Preferred Withdrawal Amount 18
Right to Cancel 13
SEC 1
Settlement Value 23
Systematic Withdrawal Program 20
Valuation Date 13
Variable Account 1
Variable Sub-Account 1
* The Contract is available only as a group Contract. We will issue you a
certificate that represents your ownership and that summarizes the
provisions of the group Contract. References to "Contract" in this
prospectus include certificates, unless the context requires otherwise.
3 - PROSPECTUS
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The Contract at a Glance
The following is a snapshot of the Contract. Please read the remainder of this
prospectus for more information.
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<CAPTION>
<S> <C>
Flexible Payments You can purchase a Contract
with as little as $1,000 ($500 for
"Qualified Contracts", which are
Contracts issued with a qualified
plan). You can add to your Contract as
often and as much as you like, but
each payment must be at least $500
($50 for automatic payments). We
reserve the right to accept a lesser
initial purchase payment amount. We
may limit the amount of any additional
purchase payment to a maximum of
$1,000,000.
Right to Cancel You may cancel your Contract
within 10 days after receipt (pursuant
to New York law, 60 days if you are
exchanging another contract for the
Contract described in this prospectus)
("Cancellation Period"). Upon
cancellation, we will return your
purchase payments adjusted, to the
extent federal or state law permits,
to reflect the investment experience
of any amounts allocated to the
Variable Account.
Expenses You will bear the following expenses:
o Mortality and expense risk charge
equal to 1.25% of average daily net
assets
o Annual contract maintenance
charge of $30 (waived in certain
cases)
o Withdrawal charges ranging
from 0% to 7% of purchase payments
withdrawn (with certain exceptions) ?
Transfer fee equal to 0.50% of the
amount transferred, up to a maximum
charge of $25, after the 12th transfer
in any Contract Year. We measure a
Contract Year from the date we issue
your Contract or a Contract
Anniversary ("Contract Anniversary").
o State premium tax (New York
currently does not impose one) In
addition, each Fund pays expenses that
you will bear indirectly if you invest
in a Variable Sub-Account.
4 - PROSPECTUS
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Investment Alternatives The Contract offers 29
investment alternatives including:
o 2 Fixed Account Options (which
credit interest at rates we guarantee)
o 27 Variable Sub-Accounts investing
in Funds offering professional money
management by Putnam Investment
Management, Inc.
To find out current rates being paid
on the Fixed Account Options, or to
find out how the Variable Sub-Accounts
have performed, please call us at
1(800)390-1277.
Special Services For your convenience, we offer these
special services:
o Automatic Fund Rebalancing Program
o Automatic Additions Program
o Dollar Cost Averaging Program
o Systematic Withdrawal Program
Income Payments You can choose fixed income payments, variable income payments, or a combination of the
two. You can receive your income payments in one of the following ways:
o life income with guaranteed payments
o a joint and survivor life income with guaranteed payments
o guaranteed payments for a specified period
o combination life income and guaranteed payments for a specified period
o combination joint and survivor life income and guaranteed payments for a specified
period
o life income with cash refund
o joint life income with cash refund
o life income with installment refund
o joint life income with installment refund
Death Benefits If you die before the Payout Start Date, we will pay the death benefit described in the
Contract.
Transfers Before the Payout Start Date, you may
transfer your Contract value
("Contract Value") among the
investment alternatives, with certain
restrictions. The minimum amount you
may transfer is $100 or the amount
remaining in the investment
alternative, if less. A charge will
apply after the 12th transfer in each
Contract Year, ("Contract Year") which
we measure from the date we issue your
Contract or a Contract Anniversary.
Withdrawals You may withdraw some or all of your
Contract Value at anytime prior to the
Payout Start Date. Full or partial
withdrawals are also available under
limited circumstances after the Payout
Start Date. In general, you must
withdraw at least $50 at a time
($1,000 for withdrawals made during
the Payout Phase). A 10% federal tax
penalty may apply if you withdraw
before you are 591'2 years old. A
withdrawal charge also may apply.
</TABLE>
5 - PROSPECTUS
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How the Contract Works
The Contract basically works in two ways.
First, the Contract can help you (we assume you are the "Contract Owner")
save for retirement because you can invest in up to 29 investment alternatives
and pay no federal income taxes on any earnings until you withdraw them. You do
this during what we call the "Accumulation Phase" of the Contract. The
Accumulation Phase begins on the date we issue your Contract (we call that date
the "Issue Date") and continues until the Payout Start Date, which is the date
we apply your money to provide income payments. During the Accumulation Phase,
you may allocate your purchase payments to any combination of the Variable
Sub-Accounts and/or Fixed Account Options. If you invest in either of the Fixed
Account Options, you will earn a fixed rate of interest that we declare
periodically. If you invest in any of the Variable Sub-Accounts, your investment
return will vary up or down depending on the performance of the corresponding
Funds.
Second, the Contract can help you plan for retirement because you can use
it to receive retirement income for life and/or for a pre-set number of years,
by selecting one of the income payment options (we call these "Income Plans")
described on page 20. You receive income payments during what we call the
"Payout Phase" of the Contract, which begins on the Payout Start Date and
continues until we make the last payment required by the Income Plan you select.
During the Payout Phase, if you select a fixed income payment option, we
guarantee the amount of your payments, which will remain fixed. If you select a
variable income payment option, based on one or more of the Variable
Sub-Accounts, the amount of your payments will vary up or down depending on the
performance of the corresponding Funds. The amount of money you accumulate under
your Contract during the Accumulation Phase and apply to an Income Plan will
determine the amount of your income payments during the Payout Phase.
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<CAPTION>
The timeline below illustrates how you might use your Contract.
ISSUE ACCUMULATION PHASE PAYOUT START PAYOUT PHASE
DATE DATE
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
You buy You save for retirement You elect to You can receive Or you can
a Contract receive income income payments receive income
payments or for a set period payments for life
receive a lump
sum payment
</TABLE>
Other income payment options are also available. See "Income Payments."
As the Contract Owner, you exercise all of the rights and privileges
provided by the Contract. If you die, any surviving Contract Owner or, if there
is none, the Beneficiary will exercise the rights and privileges provided by the
Contract. See "The Contract." In addition, if you die before the Payout Start
Date, we will pay a death benefit to any surviving Contract Owner or, if there
is none, to your Beneficiary. See "Death Benefits."
Please call us at 1(800)390-1277 if you have any question about how the
Contract works.
6 - PROSPECTUS
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Expense Table
The table below lists the expenses that you will bear directly or
indirectly when you buy a Contract. The table and the examples that follow do
not reflect premium taxes because New York currently does not impose premium
taxes on annuities. For more information about Variable Account expenses, see
"Expenses," below. For more information about Fund expenses, please refer to the
accompanying prospectus for the Putnam Variable Trust. Contract Owner
Transaction Expenses Withdrawal Charge (as a percentage of purchase payments
withdrawn)*
Number of Complete Years Since We Received the Purchase Payment Being
Withdrawn: 0 1 2 3 4 5 6 7+
Applicable Charge: 7% 7% 6% 5% 4% 3% 2% 0%
Annual Contract Maintenance Charge $30.00**
Transfer Fee 0.50% of the amount transferred***
* Each Contract Year, you may withdraw up to the greater of earnings not
previously withdrawn or 15% of your total purchase payments without
incurring a withdrawal charge.
** Waived in certain cases. See "Expenses."
*** Applies solely to the thirteenth and subsequent transfers within a
Contract Year, excluding transfers due to dollar cost averaging and
automatic fund rebalancing. This charge will not exceed $25 per
transfer.
Variable Account Annual Expenses (as a percentage of average daily net asset
value deducted from each Variable Sub-Account)
Mortality and Expense Risk Charge 1.25%
Administrative Charge 0.00%
Total Variable Account Annual Expenses 1.25%
7 - PROSPECTUS
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<CAPTION>
Fund Annual Expenses (After Voluntary Reductions and Reimbursements) (as a
percentage of Fund average daily net assets)(1)
Fund Management Rule 12b-1 Other Total Annual
Fee Fee Expenses Fund Expenses(1)
<S> <C> <C> <C> <C>
Putnam VT American Government Income Fund(2) 0.41% 0.15% 0.49% 1.05%
Putnam VT Asia Pacific Growth Fund 0.80% 0.15% 0.33% 1.28%
Putnam VT Capital Appreciation Fund 0.65% 0.15% 0.27% 1.07%
Putnam VT Diversified Income Fund 0.68% 0.15% 0.10% 0.93%
Putnam VT The George Putnam Fund of Boston 0.65% 0.15% 0.18% 0.98%
Putnam VT Global Asset Allocation Fund 0.65% 0.15% 0.12% 0.92%
Putnam VT Global Growth Fund 0.61% 0.15% 0.12% 0.88%
Putnam VT Growth and Income Fund 0.46% 0.15% 0.04% 0.65%
Putnam VT Growth Opportunities Fund 0.70% 0.15% 0.20% 1.05%
Putnam VT Health Sciences Fund 0.70% 0.15% 0.13% 0.98%
Putnam VT High Yield Fund 0.65% 0.15% 0.07% 0.87%
Putnam VT Income Fund 0.60% 0.15% 0.07% 0.82%
Putnam VT International Growth Fund 0.80% 0.15% 0.22% 1.17%
Putnam VT International Growth and Income Fund 0.80% 0.15% 0.18% 1.13%
Putnam VT International New Opportunities Fund 1.08% 0.15% 0.33% 1.56%
Putnam VT Investors Fund 0.63% 0.15% 0.08% 0.86%
Putnam VT Money Market Fund 0.41% 0.15% 0.08% 0.64%
Putnam VT New Opportunities Fund 0.54% 0.15% 0.05% 0.74%
Putnam VT New Value Fund 0.70% 0.15% 0.10% 0.95%
Putnam VT OTC & Emerging Growth Fund(3) 0.53% 0.15% 0.37% 1.05%
Putnam VT Research Fund(3) 0.54% 0.15% 0.31% 1.00%
Putnam VT Small Cap Value Fund 0.53% 0.15% 0.76% 1.44%
Putnam VT Technology Fund 1.00% 0.15% 0.19% 1.34%
Putnam VT Utilities Growth and Income Fund 0.65% 0.15% 0.06% 0.86%
Putnam VT Vista Fund 0.65% 0.15% 0.10% 0.90%
Putnam VT Voyager Fund 0.53% 0.15% 0.04% 0.72%
Putnam VT Voyager Fund II 0.70% 0.15% 0.30% 1.15%
(1) Figures shown in the table are based on the Funds' last fiscal year
ended December 31, 1999, except that the figures for Putnam VT Small
Cap Value Fund, which commenced operations on April 30, 1999, Putnam VT
American Government Income Fund and Putnam VT Growth Opportunities
Fund, which commenced operations on January 31, 2000, Putnam VT
Technology Fund, which commenced operations on June 14, 2000, and
Putnam VT Capital Appreciation Fund and Putnam VT Voyager Fund II,
which commenced operations on September 1, 2000, are based on estimates
for the Funds' current fiscal year. Figures shown in the table include
amounts paid through expense offset and brokerage service arrangements.
See the prospectus for the Putnam Variable Trust for more information
about Rule 12b-1 fees payable under the Funds' distribution plan.
(2) Absent voluntary reductions and reimbursements, the estimated
management fees, Rule 12b-1 fees, other expenses, and total annual fund
expenses for the Putnam VT American Government Income Fund expressed as
a percentage of average net assets of the Fund would have been as
follows:
Putnam VT American Government Income Fund 0.65% 0.15% 0.49% 1.29%
(3) Absent voluntary reductions and reimbursements for certain Funds (but
including amounts paid through expense offset and brokerage service
arrangements), management fees, Rule 12b-1 fees, other expenses, and
total annual Fund expenses expressed as a percentage of average net
assets of the Funds would have been as follows:
Putnam VT OTC & Emerging Growth Fund 0.70% 0.15% 0.37% 1.22%
Putnam VT Research Fund 0.65% 0.15% 0.31% 1.11%
</TABLE>
8 - PROSPECTUS
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Example 1
The example below shows the dollar amount of expenses that you would bear
directly or indirectly if you:
o invested $1,000 in a Variable Sub-Account,
o earned a 5% annual return on your investment, and
o surrendered your Contract, or began receiving income payments for a
specified period of less than 120 months, at the end of each time
period.
The example assumes that any fund expense waivers or reimbursement
arrangements described in the footnotes above are in effect for the time periods
presented below. The example does not include any taxes or tax penalties you may
be required to pay if you surrender your Contract.
Sub-Account 1 Year 3 Years
Putnam American Government Income $84 $117
Putnam Asia Pacific Growth $86 $124
Putnam Capital Appreciation $84 $118
Putnam Diversified Income $83 $113
The George Putnam Fund of Boston $83 $115
Putnam Global Asset Allocation $82 $113
Putnam Global Growth $82 $112
Putnam Growth and Income $81 $109
Putnam Growth Opportunities $84 $117
Putnam Health Sciences $83 $115
Putnam High Yield $82 $111
Putnam Income $81 $110
Putnam International Growth $85 $121
Putnam International Growth and Income $85 $120
Putnam International New Opportunities $89 $133
Putnam Investors $82 $111
Putnam Money Market $80 $104
Putnam New Opportunities $81 $107
Putnam New Value $83 $114
Putnam OTC & Emerging Growth $84 $117
Putnam Research $83 $115
Putnam Small Cap Value $88 $129
Putnam Technology $87 $126
Putnam Utilities Growth and Income $82 $111
Putnam Vista $82 $112
Putnam Voyager $80 $107
Putnam Voyager II $85 $120
9 - PROSPECTUS
<PAGE>
Example 2
Same assumptions as Example 1 above, except that you decided not to
surrender your Contract, or you began receiving income payments for at least 120
months if under an Income Plan for a specified period, at the end of each
period.
Sub-Account 1 Year 3 Years
Putnam American Government Income $24 $75
Putnam Asia Pacific Growth $27 $82
Putnam Capital Appreciation $24 $75
Putnam Diversified Income $23 $71
The George Putnam Fund of Boston $24 $72
Putnam Global Asset Allocation $23 $71
Putnam Global Growth $22 $69
Putnam Growth and Income $20 $62
Putnam Growth Opportunities $24 $75
Putnam Health Sciences $24 $72
Putnam High Yield $22 $69
Putnam Income $22 $67
Putnam International Growth $25 $78
Putnam International Growth and Income $25 $77
Putnam International New Opportunities $29 $90
Putnam Investors $22 $69
Putnam Money Market $20 $62
Putnam New Opportunities $21 $65
Putnam New Value $23 $71
Putnam OTC & Emerging Growth $24 $75
Putnam Research $24 $73
Putnam Small Cap Value $28 $87
Putnam Technology $27 $83
Putnam Utilities Growth and Income $22 $69
Putnam Vista $23 $70
Putnam Voyager $21 $64
Putnam Voyager II $25 $78
Please remember that you are looking at examples and not a representation
of past or future expenses. Your actual expenses may be lower or greater than
those shown above. Similarly, your rate of return may be lower or greater than
5%, which is not guaranteed. To reflect the contract maintenance charge in the
examples, we estimated an equivalent percentage charge, based on an assumed
average Contract size of $45,000.
10 - PROSPECTUS
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Financial Information
To measure the value of your investment in the Variable Sub-Accounts during
the Accumulation Phase, we use a unit of measure we call the "Accumulation
Unit." Each Variable Sub-Account has a separate value for its Accumulation Units
we call "Accumulation Unit Value." Accumulation Unit Value is analogous to, but
not the same as, the share price of a mutual fund.
Attached as Appendix A to this prospectus is a table showing the
Accumulation Unit Values of each Variable Sub-Account since its inception. To
obtain a fuller picture of each Variable Sub-Account's finances, please refer to
the Variable Account's financial statements contained in the Statement of
Additional Information. The financial statements of Allstate New York also
appear in the Statement of Additional Information.
11 - PROSPECTUS
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The Contract
CONTRACT OWNER
The Putnam Allstate Advisor is a contract between you, the Contract Owner,
and Allstate New York, a life insurance company. As the Contract Owner, you may
exercise all of the rights and privileges provided to you by the Contract. That
means it is up to you to select or change (to the extent permitted):
o the investment alternatives during the Accumulation and Payout Phases,
o the amount and timing of your purchase payments and withdrawals,
o the programs you want to use to invest or withdraw money,
o the income payment plan you want to use to receive retirement income,
o the Annuitant (either yourself or someone else) on whose life the
income payments will be based,
o the Beneficiary or Beneficiaries who will receive the benefits that
the Contract provides when the last surviving Contract Owner dies, and
o any other rights that the Contract provides.
If you die, any surviving Contract Owner or, if none, the Beneficiary will
exercise the rights and privileges provided to them by the Contract. The
Contract cannot be jointly owned by both a non-natural person and a natural
person. The maximum age of any Contract owner on the Issue Date for the Contract
is 85.
You can use the Contract with or without a qualified plan. A qualified plan
is a retirement savings plan, such as an IRA or tax-sheltered annuity, that
meets the requirements of the Internal Revenue Code. Qualified plans may limit
or modify your rights and privileges under the Contract. We use the term
"Qualified Contract" to refer to a Contract issued with a qualified plan. See
"Tax Qualified Contracts" on page 29.
You may change the Contract Owner at any time. Once we have received a
satisfactory written request for a change of Contract Owner, the change will
take effect as of the date you signed it. We are not liable for any payment we
make or other action we take before receiving any written request for a change
from you.
ANNUITANT
The Annuitant is the individual whose age determines the latest Payout
Start Date and whose life determines the amount and duration of income payments
(other than under Income Plans with guaranteed payments for a specified period).
If the Annuitant dies prior to the Payout Start Date, and the Contract Owner
does not name a new Annuitant, the new Annuitant will be the youngest Owner;
otherwise, the youngest beneficiary. You may designate a joint Annuitant, who is
a second person on whose life income payments depend, at the time you select an
Income Plan.
BENEFICIARY
The Beneficiary is the person who may elect to receive the death benefit or
become the new Contract Owner if the sole surviving Contract Owner dies before
the Payout Start Date. If the sole surviving Contract Owner dies after the
Payout Start Date, the Beneficiary will receive any guaranteed income payments
scheduled to continue.
You may name one or more Beneficiaries when you apply for a Contract. You
may change or add Beneficiaries at any time by writing to us before income
payments begin, unless you have designated an irrevocable Beneficiary. We will
provide a change of Beneficiary form to be signed and filed with us. Any change
will be effective at the time you sign the written notice. Until we receive your
written notice to change a Beneficiary, we are entitled to rely on the most
recent Beneficiary information in our files. We will not be liable as to any
payment or settlement made prior to receiving the written notice. Accordingly,
if you wish to change your Beneficiary, you should deliver your written notice
to us promptly.
If you did not name a Beneficiary or unless otherwise provided in the
Beneficiary designation, if a Beneficiary predeceases the Contract Owner and
there are no other surviving Beneficiaries when the death benefit becomes
payable, the new Beneficiary will be:
o your spouse or, if he or she is no longer alive,
o your surviving children equally, or if you have no surviving children,
o your estate.
If more than one Beneficiary survives you, we will divide the death benefit
among your Beneficiaries according to your most recent written instructions. If
you have not given us written instructions, we will pay the death benefit in
equal amounts to the surviving Beneficiaries.
MODIFICATION OF THE CONTRACT
Only an Allstate New York officer may approve a change in or waive any
provision of the Contract. Any change or waiver must be in writing. None of our
agents has the authority to change or waive the provisions of the Contract. We
may not change the terms of the Contract without your consent, except to conform
the Contract to applicable law or changes in the law. If a provision of the
Contract is inconsistent with state law, we will follow state law.
ASSIGNMENT
We will not honor an assignment of an interest in a Contract as collateral
or security for a loan. No Beneficiary may assign benefits under the Contract
until they are due. We will not be bound by any assignment until the assignor
signs it and files it with us. We are not responsible for the validity of any
assignment. Federal law prohibits or restricts the assignment of benefits under
many types of retirement plans and the terms of such plans may themselves
contain restrictions on assignments. An assignment may also result in taxes or
tax penalties. You should consult with an attorney before trying to assign your
Contract.
12 - PROSPECTUS
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Purchases
MINIMUM PURCHASE PAYMENTS
Your initial purchase payment must be at least $1,000 ($500 for a Qualified
Contract). All subsequent purchase payments under a Contract must be $500 or
more. You may make purchase payments at any time prior to the Payout Start Date.
We may limit the amount of any additional purchase payment to a maximum of
$1,000,000. We reserve the right to accept a lesser initial purchase payment
amount. We reserve the right to limit the availability of the investment
alternatives for additional investments. We also reserve the right to reject any
application.
AUTOMATIC ADDITIONS PROGRAM
You may make subsequent purchase payments of $50 or more per month by
automatically transferring money from your bank account. Please consult with
your representative for detailed information.
ALLOCATION OF PURCHASE PAYMENTS
At the time you apply for a Contract, you must decide how to allocate your
purchase payment among the investment alternatives. The allocation you specify
on your application will be effective immediately. All allocations must be in
whole percents that total 100% or in whole dollars. You can change your
allocations by calling 1(800)390-1277.
We will allocate your purchase payments to the investment alternatives
according to your most recent instructions on file with us. Unless you notify us
in writing otherwise, we will allocate subsequent purchase payments according to
the allocation for the previous purchase payment. We will effect any change in
allocation instructions at the time we receive written notice of the change in
good order.
We will credit the initial purchase payment that accompanies your completed
application to your Contract within 2 business days after we receive the payment
at our customer service center. If your application is incomplete, we will ask
you to complete your application within 5 business days. If you do so, we will
credit your initial purchase payment to your Contract within that 5 business day
period. If you do not, we will return your purchase payment at the end of the 5
business day period unless you expressly allow us to hold it until you complete
the application. We will credit subsequent purchase payments to the Contract at
the close of the business day on which we receive the purchase payment at our
customer service center.
We use the term "business day" to refer to each day Monday through Friday
that the New York Stock Exchange is open for business. We also refer to these
days as "Valuation Dates." Our business day closes when the New York Stock
Exchange closes, usually 4:00 p.m. Eastern Time. If we receive your purchase
payment after 4:00 p.m. Eastern Time on any Valuation Date, we will credit your
purchase payment using the Accumulation Unit Values computed on the next
Valuation Date.
RIGHT TO CANCEL
You may cancel the Contract by returning it to us within the Cancellation
Period, which is the 10 day period after you receive the Contract (pursuant to
New York law, 60 days if you are exchanging another contract for the Contract
described in this prospectus). You may return it by delivering it or mailing it
to us. If you exercise this "Right to Cancel," the Contract terminates and we
will pay you the full amount of your purchase payments allocated to the Fixed
Account. We also will return your purchase payments allocated to the Variable
Account after an adjustment, to the extent state or federal law permits, to
reflect investment gain or loss that occurred from the date of allocation
through the date of cancellation. If your Contract is qualified under Section
408 of the Internal Revenue Code, we will refund the greater of any purchase
payments or the Contract Value.
13 - PROSPECTUS
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Contract Value
On the Issue Date, the Contract Value is equal to the initial purchase
payment. Thereafter, your Contract Value at any time during the Accumulation
Phase is equal to the sum of the value of your Accumulation Units in the
Variable Sub-Accounts you have selected, plus the value of your investment in
the Fixed Account Options.
ACCUMULATION UNITS
To determine the number of Accumulation Units of each Variable Sub-Account
to allocate to your Contract, we divide (i) the amount of the purchase payment
or transfer you have allocated to a Variable Sub-Account by (ii) the
Accumulation Unit Value of that Variable Sub-Account next computed after we
receive your payment or transfer. For example, if we receive a $10,000 purchase
payment allocated to a Variable Sub-Account when the Accumulation Unit Value for
the Sub-Account is $10, we would credit 1,000 Accumulation Units of that
Variable Sub-Account to your Contract. Withdrawals and transfers from a Variable
Sub-Account would, of course, reduce the number of Accumulation Units of that
Sub-Account allocated to your Contract.
ACCUMULATION UNIT VALUE
As a general matter, the Accumulation Unit Value for each Variable
Sub-Account will rise or fall to reflect:
o changes in the share price of the Fund in which the Variable
Sub-Account invests, and
o the deduction of amounts reflecting the mortality and expense risk
charge and any provision for taxes that have accrued since we last
calculated the Accumulation Unit Value.
We determine contract maintenance charges, withdrawal charges, and transfer
fees separately for each Contract. They do not affect the Accumulation Unit
Value. Instead, we obtain payment of those charges and fees by redeeming
Accumulation Units. For details on how we compute Accumulation Unit Value,
please refer to the Statement of Additional Information.
We determine a separate Accumulation Unit Value for each Variable
Sub-Account on each Valuation Date.
You should refer to the prospectus for the Putnam Variable Trust that
accompanies this prospectus for a description of how the assets of each Fund are
valued, since that determination directly bears on the Accumulation Unit Value
of the corresponding Variable Sub-Account and, therefore, your Contract Value.
14 - PROSPECTUS
<PAGE>
Investment Alternatives: The Variable Sub-Accounts
You may allocate your purchase payments to up to 27 Variable Sub-Accounts.
Each Variable Sub-Account invests in the shares of a corresponding Fund. Each
Fund has its own investment objective(s) and policies. We briefly describe the
Funds below.
For more complete information about each Fund, including expenses and risks
associated with the Fund, please refer to the accompanying prospectus for the
Putnam Variable Trust. You should carefully review the prospectus for the Funds
before allocating amounts to the Variable Sub-Accounts. Putnam Investment
Management, Inc. ("Putnam Management") serves as the investment adviser to each
Fund.
<TABLE>
<CAPTION>
Fund: Each Fund Seeks:
<S> <C>
Putnam VT American Government Income Fund High current income with preservation of capital as a
secondary objective
Putnam VT Asia Pacific Growth Fund Capital appreciation
Putnam VT Capital Appreciation Fund Capital appreciation
Putnam VT Diversified Income Fund High current income consistent with capital preservation
Putnam VT The George Putnam Fund of Boston To provide a balanced investment composed of a
well-diversified portfolio of stocks and bonds that will
produce both capital growth and current income
Putnam VT Global Asset Allocation Fund A high level of long-term total
return consistent with preservation of capital
Putnam VT Global Growth Fund Capital appreciation
Putnam VT Growth and Income Fund Capital growth and current income
Putnam VT Growth Opportunities Fund Capital appreciation
Putnam VT Health Sciences Fund Capital appreciation
Putnam VT High Yield Fund High current income; capital growth is a
secondary objective when consistent
with high current income
Putnam VT Income Fund Current income consistent with preservation of capital
Putnam VT International Growth Fund Capital growth
Putnam VT International Growth and Income Fund Capital growth; current income is a secondary objective
Putnam VT International New Opportunities Fund Long-term capital appreciation
Putnam VT Investors Fund Long-term growth of capital and any increased income that
results from this growth
Putnam VT Money Market Fund As high a rate of current income as Putnam
Management believes is consistent with
preservation of capital and maintenance of
liquidity
Putnam VT New Opportunities Fund Long-term capital appreciation
Putnam VT New Value Fund Long-term capital appreciation
Putnam VT OTC & Emerging Growth Fund Capital appreciation
Putnam VT Research Fund Capital appreciation
Putnam VT Small Cap Value Fund Capital appreciation
Putnam VT Technology Fund Capital appreciation
Putnam VT Utilities Growth and Income Fund Capital growth and current income
Putnam VT Vista Fund Capital appreciation
Putnam VT Voyager Fund Capital appreciation
Putnam VT Voyager Fund II Long-term growth of capital
</TABLE>
Amounts you allocate to Variable Sub-Accounts may grow in value, decline in
value, or grow less than you expect, depending on the investment performance of
the Funds in which those Variable Sub-Accounts invest. You bear the investment
risk that the Funds might not meet their investment objectives. Shares of the
Funds are not deposits, or obligations of, or guaranteed or endorsed by any bank
and are not insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board or any other agency.
15 - PROSPECTUS
<PAGE>
Investment Alternatives: The Fixed Account
Options You may allocate all or a portion of your purchase payments to the
Fixed Account. You may choose from among 2 Fixed Account Options, including the
7-to-12 Month Dollar Cost Averaging Option and the Standard Fixed Account
Option. We will credit a minimum annual interest rate of 3% to money you
allocate to either of the Fixed Account Options. Please consult with your
representative for current information. The Fixed Account supports our insurance
and annuity obligations. The Fixed Account consists of our general assets other
than those in segregated asset accounts. We have sole discretion to invest the
assets of the Fixed Account, subject to applicable law. Any money you allocate
to a Fixed Account Option does not entitle you to share in the investment
experience of the Fixed Account.
DOLLAR COST AVERAGING FIXED ACCOUNT OPTION
You may establish a Dollar Cost Averaging Program, as described on page 17,
by allocating purchase payments to the Fixed Account for up to 12 months (the
"7-to-12 Month Dollar Cost Averaging Option"). Your purchase payments will earn
interest for the period you select at the current rates in effect at the time of
allocation. Rates may differ from those available for the Standard Fixed Account
Option described below.
You must transfer all of your money out of the 7-to-12 Month Dollar Cost
Averaging Option to other investment alternatives in equal monthly installments.
At the end of the 12 month transfer period, we will transfer any remaining
amounts in the 7-to-12 Month Dollar Cost Averaging Option to the Putnam Money
Market Variable Sub-Account unless you request a different investment
alternative. Transfers out of the 7-to-12 Month Dollar Cost Averaging Option do
not count towards the 12 transfers you can make without paying a transfer fee.
You may not transfer money from other investment alternatives to the
7-to-12 Month Dollar Cost Averaging Option.
STANDARD FIXED ACCOUNT OPTION
Each payment or transfer allocated to the Standard Fixed Account Option
earns interest at the current rate in effect at the time of allocation. We
guarantee that rate for a period of years we call Guarantee Periods. We are
currently offering Guarantee Periods of 1 year in length. In the future we may
offer Guarantee Periods of different lengths or stop offering some Guarantee
Periods. You select a Guarantee Period for each purchase or transfer. After the
initial Guarantee Period, we will guarantee a renewal rate.
Allstate New York reserves the right to delete or add Fixed Account
Options.
Investment Alternatives: Transfers
TRANSFERS DURING THE ACCUMULATION PHASE
During the Accumulation Phase, you may transfer Contract Value among the
investment alternatives. We do not permit transfers into the 7-to-12 Month
Dollar Cost Averaging Option. You may request transfers in writing on a form
that we provide or by telephone according to the procedure described below.
You may make 12 transfers per Contract Year without charge. A transfer fee
equal to 0.50% of the amount transferred up to a maximum charge of $25 applies
to each transfer after the 12th transfer in any Contract Year.
The minimum amount that you may transfer from the Standard Fixed Account
Option or a Variable Sub-Account is $100 or the total remaining balance in the
Standard Fixed Account Option or the Variable Sub-Account, if less. These
limitations do not apply to the 7-to-12-Month Dollar Cost Averaging Option.
The most you can transfer from the Standard Fixed Account Option during any
Contract Year is the greater of (i) 30% of the Standard Fixed Account Option
balance as of the last Contract Anniversary or (ii) the greatest dollar amount
of any prior transfer from the Standard Fixed Account Option. This limitation
does not apply to the Dollar Cost Averaging Program. Also, if the interest rate
on any renewed Guarantee Period is at least one percentage point less than the
previous interest rate, you may transfer up to 100% of the monies receiving that
reduced rate within 60 days of the notification of the interest rate decrease.
We will process transfer requests that we receive before 4:00 p.m. Eastern
Time on any Valuation Date using the Accumulation Unit Values for that Date. We
will process requests completed after 4:00 p.m. Eastern Time on any Valuation
Date using the Accumulation Unit Values for the next Valuation Date. The
Contract permits us to defer transfers from the Fixed Account Options for up to
6 months from the date we receive your request. If we decide to postpone
transfers from either Fixed Account Option for 10 days or more, we will pay
interest as required by applicable law. Any interest would be payable from the
date we receive the transfer request to the date we make the transfer.
We reserve the right to waive any transfer restrictions.
16 - PROSPECTUS
<PAGE>
TRANSFERS DURING THE PAYOUT PHASE
During the Payout Phase, you may make transfers among the Variable
Sub-Accounts so as to change the relative weighting of the Variable Sub-Accounts
on which your variable income payments will be based. You may not convert any
portion of your fixed income payments into variable income payments.
You may not make any transfers for the first 6 months after the Payout
Start Date. Thereafter, you may make transfers among the Variable Sub-Accounts
or make transfers from the Variable Sub-Accounts to increase the proportion of
your income payments consisting of fixed income payments if Income Plan 3 or the
guaranteed payment portion of Income Plans 4 and 5, described below, is in
effect. Your transfers must be at least 6 months apart.
TELEPHONE TRANSFERS
You may make transfers by telephone by calling 1(800)390-1277. The cut off
time for telephone transfer requests is 4:00 p.m. Eastern Time. In the event
that the New York Stock Exchange closes early, i.e., before 4:00 p.m. Eastern
Time, or in the event that the Exchange closes early for a period of time but
then reopens for trading on the same day, we will process telephone transfer
requests as of the close of the Exchange on that particular day. We will not
accept telephone requests received from you at any telephone number other than
the number that appears in this paragraph or received after the close of trading
on the Exchange. If you own the Contract with a joint Contract Owner, unless we
receive contrary instructions, we will accept instructions from either you or
the other Contract Owner.
We use procedures that we believe provide reasonable assurance that the
telephone transfers are genuine. For example, we tape telephone conversations
with persons purporting to authorize transfers and request identifying
information. Accordingly, we disclaim any liability for losses resulting from
allegedly unauthorized telephone transfers. However, if we do not take
reasonable steps to help ensure that a telephone authorization is valid, we may
be liable for such losses.
EXCESSIVE TRADING LIMITS
We reserve the right to limit transfers in any Contract Year, or to refuse
any transfer request for a Contract Owner or certain Contract Owners, if:
o we believe, in our sole discretion, that excessive trading by such
Contract Owner or Owners, or a specific transfer request or group of
transfer requests, may have a detrimental effect on the Accumulation
Unit Values of any Variable Sub-Account or the share prices of the
corresponding Funds or would be to the disadvantage of other Contract
Owners; or
o we are informed by one or more of the corresponding Funds that they
intend to restrict the purchase or redemption of Fund shares because
of excessive trading or because they believe that a specific transfer
or group of transfers would have a detrimental effect on the prices of
Fund shares.
We may apply the restrictions in any manner reasonably designed to prevent
transfers that we consider disadvantageous to other Contract Owners.
DOLLAR COST AVERAGING PROGRAM
You may automatically transfer a set amount from any Variable Sub-Account
or Fixed Account Option to any of the other Variable Sub-Accounts through our
Dollar Cost Averaging Program. The Program is available only during the
Accumulation Phase.
We will not charge a transfer fee for transfers made under this Program,
nor will such transfers count against the 12 transfers you can make each
Contract Year without paying a transfer fee.
The theory of dollar cost averaging is that if purchases of equal dollar
amounts are made at fluctuating prices, the aggregate average cost per unit will
be less than the average of the unit prices on the same purchase dates. However,
participation in this Program does not assure you of a greater profit from your
purchases under the Program nor will it prevent or necessarily reduce losses in
a declining market.
AUTOMATIC FUND REBALANCING PROGRAM
Once you have allocated your money among the Variable Sub-Accounts, the
performance of each Sub-Account may cause a shift in the percentage you
allocated to each Sub-Account. If you select our Automatic Fund Rebalancing
Program, we will automatically rebalance the Contract Value in each Variable
Sub-Account and return it to the desired percentage allocations. Money you
allocate to the Fixed Account will not be included in the rebalancing.
We will rebalance your account quarterly, semi-annually, or annually. We
will measure these periods according to your instructions. We will transfer
amounts among the Variable Sub-Accounts to achieve the percentage allocations
you specify. You can change your allocations at any time by contacting us in
writing or by telephone. The new allocation will be effective with the first
rebalancing that occurs after we receive your written or telephone request. We
are not responsible for rebalancing that occurs prior to receipt of proper
notice of your request.
17 - PROSPECTUS
<PAGE>
Example:
Assume that you want your initial purchase payment split among 2
Variable Sub-Accounts. You want 40% to be in the Putnam Income Variable
Sub-Account and 60% to be in the Putnam Global Growth Variable
Sub-Account. Over the next 2 months the bond market does very well
while the stock market performs poorly. At the end of the first
quarter, the Putnam Income Variable Sub-Account now represents 50% of
your holdings because of its increase in value. If you choose to have
your holdings rebalanced quarterly, on the first day of the next
quarter we would sell some of your units in the Putnam Income Variable
Sub-Account and use the money to buy more units in the Putnam Global
Growth Variable Sub-Account so that the percentage allocations would
again be 40% and 60% respectively.
The Automatic Fund Rebalancing Program is available only during the
Accumulation Phase. The transfers made under the program do not count towards
the 12 transfers you can make without paying a transfer fee, and are not subject
to a transfer fee. We may sometimes refer to this Program as the "Putnam
Automatic Rebalancing Program."
Fund rebalancing is consistent with maintaining your allocation of
investments among market segments, although it is accomplished by reducing your
Contract Value allocated to the better performing segments. Expenses As a
Contract Owner, you will bear, directly or indirectly, the charges and expenses
described below.
CONTRACT MAINTENANCE CHARGE
During the Accumulation Phase, on each Contract Anniversary, we will deduct
a $30 contract maintenance charge from your assets invested in the Putnam Money
Market Variable Sub-Account. If there are insufficient assets in that Variable
Sub-Account, we will deduct the charge proportionally from the other Variable
Sub-Accounts. We also will deduct this charge if you withdraw your entire
Contract Value, unless your Contract qualifies for a waiver. During the Payout
Phase, we will deduct the charge proportionately from each variable income
payment.
The charge is to compensate us for the cost of administering the Contracts
and the Variable Account. Maintenance costs include expenses we incur in
collecting purchase payments; keeping records; processing death claims, cash
withdrawals, and policy changes; proxy statements; calculating Accumulation Unit
Values and income payments; and issuing reports to Contract Owners and
regulatory agencies. We cannot increase the charge. We will waive this charge
if:
o your total Contract Value is $50,000 or more on a Contract Anniversary
or on the Payout Start Date, or
o all money is allocated to the Fixed Account options on the Contract
Anniversary, or
o all income payments are fixed income payments.
In addition, we reserve the right to waive this charge for all Contracts.
MORTALITY AND EXPENSE RISK CHARGE
We deduct a mortality and expense risk charge daily at an annual rate of
1.25% of the average daily net assets you have invested in the Variable
Sub-Accounts. The mortality and expense risk charge is for all the insurance
benefits available with your Contract (including our guarantee of annuity rates
and the death benefits), for certain expenses of the Contract, and for assuming
the risk (expense risk) that the current charges will be sufficient in the
future to cover the cost of administering the Contract. If the charges under the
Contract are not sufficient, then Allstate New York will bear the loss.
We guarantee the mortality and expense risk charge and we cannot increase
it. We assess the mortality and expense risk charge during both the Accumulation
Phase and the Payout Phase.
TRANSFER FEE
We impose a fee upon transfers in excess of 12 during any Contract Year.
The fee is equal to 0.50% of the dollar amount transferred up to a maximum
charge of $25. We will not charge a transfer fee on transfers that are part of a
Dollar Cost Averaging Program or Automatic Fund Rebalancing Program.
WITHDRAWAL CHARGE
We may assess a withdrawal charge of up to 7% of the purchase payment(s)
you withdraw. The charge declines to 0% after 7 complete years from the date we
received the purchase payment being withdrawn. A schedule showing how the charge
declines appears on page 7. During each Contract Year, you can withdraw up to
the greater of earnings not previously withdrawn or 15% of your total purchase
payments without paying the charge. Unused portions of this 15% "Preferred
Withdrawal Amount" are not carried forward to future Contract Years. Each
withdrawal taken, including withdrawals of earnings, is assumed to be taken from
purchase payments first. When all purchase payments have
18 - PROSPECTUS
<PAGE>
been withdrawn, additional withdrawals will not be assessed a withdrawal charge.
We will deduct withdrawal charges, if applicable, from the amount paid. For
purposes of the withdrawal charge, we will treat withdrawals as coming from the
oldest purchase payments first. However, for federal income tax purposes, please
note that withdrawals are considered to have come first from earnings in the
Contract, which means you pay taxes on the earnings portion of your withdrawal.
We do not apply a withdrawal charge in the following situations:
o on the Payout Start Date (a withdrawal charge may apply if you elect
to receive income payments for a specified period of less than 120
months);
o the death of the Contract Owner or Annuitant (unless the Settlement
Value is used); or
o withdrawals taken to satisfy IRS minimum distribution rules for the
Contract.
We use the amounts obtained from the withdrawal charge to pay sales
commissions and other promotional or distribution expenses associated with
marketing the Contracts. To the extent that the withdrawal charge does not cover
all sales commissions and other promotional or distribution expenses, we may use
any of our corporate assets, including potential profit which may arise from the
mortality and expense risk charge or any other charges or fee described above,
to make up any difference.
Withdrawals also may be subject to tax penalties or income tax. You should
consult your own tax counsel or other tax advisers regarding any withdrawals.
PREMIUM TAXES
Currently, we do not make deductions for premium taxes under the Contract
because New York does not charge premium taxes on annuities. We may deduct taxes
that may be imposed in the future from purchase payments or the Contract Value
when the tax is incurred or at a later time.
OTHER EXPENSES
Each Fund deducts advisory fees and other expenses from its assets. You
indirectly bear the charges and expenses of the Fund whose shares are held by
the Variable Sub-Accounts. These fees and expenses are described in the
accompanying prospectus for Putnam Variable Trust. For a summary of current
estimates of those charges and expenses, see page 8. We may receive compensation
from the Funds' investment adviser, distributor, or their affiliates for
administrative services we provide to the Funds.
Access to Your Money
You can withdraw some or all of your Contract Value at any time prior to
the Payout Start Date. Withdrawals are also available under limited
circumstances on or after the Payout Start Date. See "Income Plans" on page 20.
The amount payable upon withdrawal is the Contract Value next computed
after we receive the request for a withdrawal at our customer service center,
less any withdrawal charges, contract maintenance charges, income tax
withholding, penalty tax and any premium taxes. We will pay withdrawals from the
Variable Account within 7 days of receipt of the request, subject to
postponement in certain circumstances.
You can withdraw money from the Variable Account or the Fixed Account
Options. To complete a partial withdrawal from the Variable Account, we will
cancel Accumulation Units in an amount equal to the withdrawal and any
applicable withdrawal charge and premium taxes.
You must name the investment alternative from which you are taking the
withdrawal. If none is named, then the withdrawal request is incomplete and
cannot be honored.
Withdrawals may be subject to income tax and a 10% penalty tax, as
described below.
In general, you must withdraw at least $50 at a time. If you request a
total withdrawal, we may require that you return your Contract to us. Your
Contract will terminate if you withdraw all of your Contract Value. We will,
however, ask you to confirm your withdrawal request before terminating your
Contract. If we terminate your Contract, we will distribute to you its Contract
Value, less withdrawal and other charges and taxes.
POSTPONEMENT OF PAYMENTS
We may postpone the payment of any amounts due from the Variable Account
under the Contract if:
1. the New York Stock Exchange is closed for other than usual weekends or
holidays, or trading on the Exchange is otherwise restricted,
2. an emergency exists as defined by the SEC, or
3. the SEC permits delay for your protection.
In addition, we may delay payments or transfers from the Fixed Account
Options for up to 6 months or shorter period if required by law. If we delay
payment or transfer for 10 days or more, we will pay interest as required by
law.
19 - PROSPECTUS
<PAGE>
SYSTEMATIC WITHDRAWAL PROGRAM
You may choose to receive systematic withdrawal payments on a monthly,
quarterly, semi-annual, or annual basis at any time prior to the Payout Start
Date. Please consult your representative or call us at 1(800)390-1277 for more
information. Depending on fluctuations in the net asset value of the Variable
Sub-Accounts and the value of the Fixed Account Options, systematic withdrawals
may reduce or even exhaust the Contract Value. Income taxes may apply to
systematic withdrawals. Please consult your tax adviser before taking any
withdrawal.
19 - PROSPECTUS
<PAGE>
Income Payments
PAYOUT START DATE
The Payout Start Date is the day that we apply your money to an Income
Plan. The Payout Start Date must be:
o at least 30 days after the Issue Date; and
o no later than the Annuitant's 90th birthday.
You may change the Payout Start Date at any time by notifying us in writing
of the change at least 30 days before the scheduled Payout Start Date. Absent a
change, we will use the Payout Start Date stated in your Contract.
INCOME PLANS
An "Income Plan" is a series of payments made on a scheduled basis to you
or to another person designated by you. You may choose and change your choice of
Income Plan until 30 days before the Payout Start Date. If you do not select an
Income Plan, we will make income payments in accordance with Income Plan 1 with
guaranteed payments for 10 years. Income payments to Beneficiaries may be
subject to restrictions established by the Contract owner. After the Payout
Start Date, and except as described below, you may not make withdrawals or
change your choice of Income Plan.
Currently nine Income Plans are available. Each is available to provide:
o fixed income payments;
o variable income payments; or
o a combination of the two.
The nine Income Plans are:
Income Plan 1
o Life Income with Guaranteed Payments.Under this plan, we make periodic
income payments for at least as long as the Annuitant lives. If the
Annuitant dies before we have made all of the selected number of
guaranteed income payments, we will continue to pay the remainder of
the guaranteed income payments as required by the Contract. In
general, more guaranteed payments means that each payment will be
smaller than it would have been with a shorter guarantee payment
period.
Income Plan 2
o Joint and Survivor Life Income with Guaranteed Payments.Under this
plan, we make periodic income payments for at least as long as either
the Annuitant or the joint Annuitant, named at the time the plan was
selected, is alive. If both the Annuitant and joint Annuitant die
before we have made all of the guaranteed income payments, we will
continue to pay the remainder of the guaranteed income payments as
required by the Contract. You may elect a reduced survivor plan of
50%, 66% or 75% of the payment amount. If you do not elect a reduced
survivor payment plan, the amount of each income payment initially
will be higher, but a reduction will take effect at the later of 1)
the death of an Annuitant; or 2) at the end of the guaranteed payment
period.
Income Plan 3
o Guaranteed Payments for a Specified Period.Under this plan, we make
periodic income payments for the period you have chosen. These
payments do not depend on the Annuitant's life. Income payments for
less than 120 months may be subject to a withdrawal charge. We will
deduct the mortality and expense risk charge from the assets of the
Variable Sub-Accounts supporting this Plan even though we may not bear
any mortality risk. Income payments under Income Plan 3 are subject to
the rules set forth in the Guaranteed Payment Plan section below.
Income Plan 4
o Combination Life Income and Guaranteed Payments for a Specified
Period.Under this plan, we make periodic income payments under two
separate coverages: a life annuity and a guaranteed payment annuity. A
life annuity (one that does not contain any guaranteed payment period)
provides income payments over the Annuitant's life. A guaranteed
payment annuity provides income payments over a specified period. The
guaranteed payment portion of Income Plan 4 is subject to the rules
set forth in the Guaranteed Payment Plan section below.
Income Plan 5
o Combination Joint and Survivor Life Income and Guaranteed Payments for
a Specified Period.Under this plan, we make periodic income payments
under two separate coverages: a joint life and survivor annuity and a
guaranteed payment annuity. A joint life and survivor annuity (one
that does not contain any guaranteed payment period) provides income
payments for at least as long as either the Annuitant or joint
Annuitant is alive. A guaranteed payment annuity provides income
payments over a specified period, and is subject to the rules set
forth in the Guaranteed Payment Plan section below. On the life
coverage, you may elect a reduced survivor plan of 50%, 66% or 75% of
the payment amount. If you do not elect a
20 - PROSPECTUS
<PAGE>
reduced survivor amount, then remaining payments will remain at 100%.
If you elect a reduced survivor payment plan, the payments initially
will be larger, but a reduction will take effect at the death of an
Annuitant.
Income Plan 6
o Life Income with Cash Refund.Under this plan, we make periodic income
payments until the death of the Annuitant. If the death of the
Annuitant occurs before the total amount applied to an Income Plan is
paid out, we will pay a lump sum payment of the remaining amount.
Payments under this plan are available only as fixed income payments.
Income Plan 7
o Joint Life Income with Cash Refund.Under this plan, we make periodic
income payments until the deaths of both the Annuitant and joint
Annuitant. If the deaths of both the Annuitant and joint Annuitant
occur before the total amount applied to an Income Plan is paid out,
we will pay a lump sum payment of the remaining amount. Currently, a
reduced survivor plan is not available. Payments under this plan are
available only as fixed income payments.
Income Plan 8
o Life Income with Installment Refund.Under this plan, we make periodic
income payments until the later of (1) the death of the Annuitant, or
(2) the total amount paid out under the annuity is equal to the total
amount applied to the Income Plan. If the death of the Annuitant
occurs before the total amount applied to an Income Plan is paid out,
we will continue to make payments in the same manner until any
remaining payments are paid out. Payments under this plan are
available only as fixed income payments.
Income Plan 9
o Joint Life Income with Installment Refund.Under this plan, we make
periodic income payments until the later of (1) the deaths of both the
Annuitant and joint Annuitant, or (2) the total amount paid out under
the annuity is equal to the total amount applied to the Income Plan.
If the deaths of both the Annuitant and joint Annuitant occur before
the total amount applied to an Income Plan is paid out, we will
continue to make payments in the same manner until any remaining
payments are paid out. Currently, a reduced survivor plan is not
available. Payments under this plan are available only as fixed income
payments.
If you choose an Income Plan with payments that continue for the life of
the Annuitant or joint Annuitant, we may require proof of age and sex of the
Annuitant or joint Annuitant before starting income payments, and proof that the
Annuitant or joint Annuitant are alive before we make each payment. Please note
that under Income Plans 1 and 2, and the life annuity and joint and survivor
life annuity portion of Income Plans 4 and 5, respectively, if you elect to take
no minimum guaranteed payments, it is possible that the payee could receive only
one income payment if the Annuitant or any joint Annuitant both die before the
second income payment, or only two income payments if they die before the third
income payment, and so on.
Guaranteed Payment Plans. For Income Plan 3 and the guaranteed payment
annuity portion of Income Plans 4 and 5 ("guaranteed payment plans"):
o The minimum payment period you may choose is 5 years.
o If the oldest Annuitant is under age 70, you may choose a period up to
age 100 subject to a maximum of 50 years.
o If the oldest Annuitant is age 70 or over, you may choose a period up
to a maximum of 30 years.
In general, the longer the guarantee period you select, the smaller each
payment will be.
You may make withdrawals from a guaranteed payment plan after the Payout
Start Date. You may terminate all or part of the income payments at any time and
receive a lump sum equal to their present value as of the close of the Valuation
Date (see Valuation Date above) on which we receive your request. To determine
the present value of any remaining variable income payments being withdrawn, we
use a discount rate equal to the assumed annual investment rate that we use to
compute such variable income payments. To determine the present value of any
fixed income payments being withdrawn, we discount each payment using our
currently applicable interest rates. The minimum amount you may withdraw under
this feature is $1,000. A withdrawal charge may apply. You may not make any
withdrawals after the Payout Start Date on the life annuity portion of Income
Plans 4 and 5.
During the guaranteed payment period, you may request to modify the length
of the payment period. Currently, we allow you to make this change once each
365-day period. We reserve the right to change this practice at any time without
prior notice. If you elect to change the length of the payment period, the new
payment period must be within the original maximum and minimum period you would
have been permitted to select on your original Payout Start Date. We may apply a
withdrawal charge.
If you change the length of your guaranteed payment period, we will compute
the present value of your remaining payments, using the same assumptions we
would use if you were terminating the guaranteed payment plan, as described
above. Then we adjust the size of the remaining guaranteed payments to equal
what that value would support based on those same assumptions and based on the
revised guarantee period. A shorter guarantee period will generally mean that
each payment is larger, while a longer guarantee period will generally mean that
each payment is smaller.
Under guaranteed payment plans, we currently allow you to change the
frequency of your payments. Any change in the frequency of payments takes effect
on the next payment date.
Changes to either the frequency of payments or length of a guaranteed
payment plan will result in a change to the
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payment amount and may change the amount of each payment that is taxable to you.
Additional Information.We may make other Income Plans available. You may obtain
information about them by writing or calling us.
You must apply at least the Contract Value in the Fixed Account on the
Payout Start Date to fixed income payments. If you wish to apply any portion of
your Fixed Account balance to provide variable income payments, you should plan
ahead and transfer that amount to the Variable Sub-Accounts prior to the Payout
Start Date. If you do not tell us how to allocate your Contract Value among
fixed and variable income payments, we will apply your Contract Value in the
Variable Account to variable income payments and your Contract Value in the
Fixed Account to fixed income payments.
We will apply your Contract Value, less applicable taxes, to your Income
Plan on the Payout Start Date. We can make income payments in monthly,
quarterly, semi-annual or annual installments, as you select. If the Contract
Owner has not made any purchase payments for at least 2 years preceding the
Payout Start Date, and the Contract Value is less than $2,000, or not enough to
provide an initial payment of at least $20, and state law permits, we may:
o terminate the Contract and pay you the Contract value, less any
applicable taxes, in a lump sum instead of the periodic payments you
have chosen, or
o reduce the frequency of your payments so that each payment will be at
least $20.
VARIABLE INCOME PAYMENTS
The amount of your variable income payments depends upon the investment
results of the Variable Sub-Accounts you select, the premium taxes you pay, the
age and sex of the Annuitant, and the Income Plan you choose. We guarantee that
the payments will not be affected by (a) actual mortality experience or (b) the
amount of our administration expenses.
We cannot predict the total amount of your variable income payments. The
total amount of your variable income payments may be more or less than your
total purchase payments because (a) variable income payments vary with the
investment results of the underlying Funds; and (b) under some of the Income
Plans, we make income payments only so long as an Annuitant is alive or any
applicable guarantee payment period had not yet expired.
In calculating the amount of the periodic payments in the annuity tables in
the Contract, we used an assumed investment rate ("AIR," also known as benchmark
rate) of 3%. We reserve the right to offer other assumed investment rates. If
the actual net investment return of the Variable Sub-Accounts you choose is less
than this AIR, then the dollar amount of your variable income payments will
decrease. The dollar amount of your variable income payments will increase,
however, if the actual net investment return exceeds the AIR. The dollar amount
of the variable income payments stays level if the net investment return equals
the AIR. Please refer to the Statement of Additional Information for more
detailed information as to how we determine variable income payments.
You may also elect a variable income payment stream consisting of level
monthly payments that are recalculated annually. You may elect level monthly
payments at or before your Payout Start Date. You cannot elect any fixed income
payments while variable level monthly payments are being made. We will determine
the amount of each annual payment as described above, place this amount in our
general account, and distribute it in level monthly payments. The sum of the
level payments will exceed the annual calculated amount because of an interest
rate factor we use, which may vary from year to year but will not be less than
2.0% per year. We do not allow withdrawals of the annual amount unless you make
a full or partial withdrawal request of the value of the remaining payments
under a guaranteed payment plan. If the Annuitant dies during the period of
level monthly payments, any life contingencies you chose will be the same as
under the Income Plan you chose. For example, if your Income Plan contains a
life only payment plan and the Annuitant dies during the year, the Beneficiary
is not entitled to the remaining levelized monthly payments for the year.
FIXED INCOME PAYMENTS
We guarantee income payment amounts derived from either Fixed Account
Option for the duration of the Income Plan. We calculate the fixed income
payments by:
1. deducting any applicable premium tax; and
2. applying the resulting amount to the greater of (a) the appropriate
value from the income payment table in your Contract or (b) such other
value as we are offering at that time.
We may defer making fixed income payments for a period of up to 6 months or
whatever shorter time state law may require. If we defer payments for 10 days or
more, we will pay interest as required by law from the date we receive the
withdrawal request to the date we make payment.
CERTAIN EMPLOYEE BENEFIT PLANS
The Contracts offered by this prospectus contain income payment tables that
provide for different payments to men and women of the same age. We reserve the
right to use income payment tables that do not distinguish on the basis of sex
to the extent permitted by law. In certain employment-related situations,
employers are required by law to use the same income payment tables for men and
women. Accordingly, if the Contract is to be used in connection with an
employment-related retirement or benefit plan, you should consult with legal
counsel as to whether the purchase of a Contract is appropriate.
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Death Benefits
We will pay a death benefit if, prior to the Payout Start Date:
1. any Contract Owner dies, or
2. the Annuitant dies.
We will pay the death benefit to the new Contract Owner as determined
immediately after the death. The new Contract Owner would be a surviving
Contract Owner(s) or, if none, the Beneficiary(ies). In the case of the death of
the Annuitant, we will pay the death benefit to the current Contract Owner.
DEATH BENEFIT AMOUNT
Prior to the Payout Start Date, the death benefit is equal to the greatest
of the following death benefit alternatives:
1. the Contract Value as of the date we determine the death benefit, or
2. the sum of all purchase payments made less an adjustment for withdrawals
(see "Withdrawal Adjustment" below), or
3. the most recent Maximum Anniversary Value prior to the date we determine
the death benefit (see "Maximum Anniversary Value" below).
We will determine the value of the death benefit as of the end of the
Valuation Date on which we receive a complete request for payment of the death
benefit. If we receive a request after 4:00 p.m. Eastern Time on a Valuation
Date, we will process the request as of the end of the following Valuation Date.
A request for payment of the death benefit must include Due Proof of Death. We
will accept the following documentation as "Due Proof of Death":
o a certified copy of a death certificate,
o a certified copy of a decree of a court of competent jurisdiction as
to the finding of death, or
o other documentation as we may accept in our sole discretion.
Withdrawal Adjustment.The withdrawal adjustment is equal to (1)
divided by (2), with the result multiplied by (3), where:
(1) = the withdrawal amount,
(2) = the Contract Value immediately prior to the withdrawal, and
(3) = the value of the applicable death benefit alternative immediately prior
to the withdrawal.
See Appendix B for an example of a withdrawal adjustment. Maximum
Anniversary Value.On the Issue Date, the Maximum Anniversary Value is equal to
the initial purchase payment. After the Issue Date, we recalculate the Maximum
Anniversary Value when a purchase payment or withdrawal is made or on a Contract
Anniversary as follows:
1. For purchase payments, the Maximum Anniversary Value is equal to the most
recently calculated Maximum Anniversary Value plus the purchase payment.
2. For withdrawals, the Maximum Anniversary Value is equal to the most
recently calculated Maximum Anniversary Value reduced by a withdrawal
adjustment, as defined above.
3. On each Contract Anniversary, the Maximum Anniversary Value is equal to the
greater of the Contract Value or the most recently calculated Maximum
Anniversary Value.
In the absence of any withdrawals or purchase payments, the Maximum
Anniversary Value will be the greatest of all anniversary Contract Values on or
prior to the date we calculate the death benefit.
We will recalculate the Maximum Anniversary Value until the first Contract
Anniversary after the 80th birthday of the oldest Contract Owner or, if no
Contract Owner is a living individual, the Annuitant. After that date, we will
recalculate the Maximum Anniversary Value only for purchase payments and
withdrawals. The Maximum Anniversary Value will never be greater than the
maximum death benefit allowed by any applicable state non-forfeiture laws.
DEATH BENEFIT PAYMENTS
Death of Contract Owner.
Within 180 days of the date of your death, the new Contract Owner may elect
to:
1. receive the death benefit in a lump sum, or
2. apply an amount equal to the death benefit to one of the available Income
Plans described above. The Payout Start Date must be within one year of the
date of your death. Income payments must be:
(a) over the life of the new Contract Owner,
(b) for a guaranteed number of payments not to exceed the life expectancy
of new Contract Owner, or
(c) over the life of the new Contract Owner with a guaranteed number of
payments not to exceed the life expectancy of the new Contract Owner.
Otherwise, the new Contract Owner will receive the Settlement Value. The
"Settlement Value" is the Contract Value, less any applicable withdrawal charge,
contract maintenance charge, and premium tax. We will calculate the Settlement
Value as of the end of the Valuation Date coinciding with the requested
distribution date for payment or on the mandatory distribution date of 5 years
after the date of your death, whichever is earlier. If we receive a request
after 4:00 p.m.
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Eastern Time on a Valuation Date, we will process the request as of the end of
the following Valuation Date. We are currently waiving the 180 day limit, but we
reserve the right to enforce the limitation in the future.
In any event, the entire value of the Contract must be distributed within 5
years after the date of death unless an Income Plan is elected or a surviving
spouse continues the Contract in accordance with the provisions described below.
If the new Contract Owner is a natural person, the new Contract Owner may
elect one of the options listed above. The new Contract Owner may make a single
withdrawal of any amount within 1 year of the date of death without incurring a
withdrawal charge. If the new Contract Owner is your spouse, then he or she may
elect one of the options listed above or may continue the Contract in the
Accumulation Phase as if the death had not occurred. On the date the Contract is
continued, the Contract Value will equal the amount of the death benefit as
determined as of the Valuation Date on which we received Due Proof of Death (the
next Valuation Date if we receive Due Proof of Death after 4:00 p.m. Eastern
Time). The Contract may only be continued once. If the surviving spouse
continues the Contract in the Accumulation Phase, the surviving spouse may make
a single withdrawal of any amount within 1 year of the date of death without
incurring a withdrawal charge. Prior to the Payout Start Date, the death benefit
or the continued Contract will be the greater of:
o the sum of all purchase payments reduced by a withdrawal adjustment,
as defined under the "Death Benefit Amount" section; or
o the Contract Value on the date we determine the death benefit; or
o the Maximum Anniversary Value as defined in the "Death Benefit Amount"
section, with the following changes:
o "Issue Date" is replaced by the date the Contract is continued,
o "Initial Purchase Payment" is replaced with the death benefit as
described at the end of the Valuation Period during which we received
Due Proof of Death.
If the surviving spouse is under age 591/2, a 10% penalty tax may apply to
withdrawals under the Contract.
If the new Contract Owner is a corporation, trust, or other non-natural
person, then the new Contract Owner may elect, within 180 days of your death, to
receive the death benefit in lump sum or may elect to receive the Settlement
Value in a lump sum within 5 years of death. We are currently waiving the 180
day limit, but we reserve the right to enforce the limitation in the future.
Death of Annuitant. If the Annuitant who is not also the Contract Owner dies
prior to the Payout Start Date, the Contract Owner must elect one of the
applicable options described below.
If the Contract Owner is a natural person, the Contract Owner may elect to
continue the Contract as if the death had not occurred, or, if we receive Due
Proof of Death within 180 days of the date of the Annuitant's death, the
Contract Owner may choose to:
1. receive the death benefit in a lump sum; or
2. apply the death benefit to an Income Plan that must begin within 1 year of
the date of death.
If the Contract Owner elects to continue the Contract or to apply the death
benefit to an Income Plan, the new Annuitant will be the youngest Contract
Owner, unless the Contract Owner names a different Annuitant.
If the Contract Owner is a non-natural person, the non-natural Contract
Owner may elect, within 180 days of the Annuitant's date of death, to receive
the death benefit in a lump sum or may elect to receive the Settlement Value
payable in a lump sum within 5 years of the Annuitant's date of death. If the
non-natural Contract Owner does not make one of the above described elections,
the Settlement Value must be withdrawn by the non-natural Contract Owner on or
before the mandatory distribution date 5 years after the Annuitant's death. We
are currently waiving the 180 day limit, but we reserve the right to enforce the
limitation in the future.
More Information
ALLSTATE NEW YORK
Allstate New York is the issuer of the Contract. Allstate New York is a
stock life insurance company organized under the laws of the State of New York.
Allstate New York was incorporated in 1967 and was known as "Financial Life
Insurance Company" from 1967 to 1978. From 1978 to 1984, Allstate New York was
known as "PM Life Insurance Company." Since 1984 the company has been known as
"Allstate Life Insurance Company of New York."
Allstate New York is currently licensed to operate in New York. Our home
office is located in Farmingville, New York. Our customer service center is
located in Northbrook, Illinois (mailing address: P.O. Box 94036, Palatine,
Illinois,
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60094-4036; overnight mail: 3100 Sanders Road, Suite J4A, Northbrook, Illinois,
60062).
Allstate New York is a wholly owned subsidiary of Allstate Life Insurance
Company ("Allstate Life"), a stock life insurance company incorporated under the
laws of the State of Illinois. Allstate Life is a wholly owned subsidiary of
Allstate Insurance Company, a stock property-liability insurance company
incorporated under the laws of Illinois. With the exception of directors'
qualifying shares, all of the outstanding capital stock of Allstate Insurance
Company is owned by The Allstate Corporation.
Several independent rating agencies regularly evaluate life insurers'
claims-paying ability, quality of investments, and overall stability. A.M. Best
Company assigns Allstate New York the financial performance rating of A+(g).
Standard & Poor's Insurance Rating Services assigns an AA+ (Very Strong)
financial strength rating and Moody's assigns an Aa2 (Excellent) financial
strength rating to Allstate New York. We may from time to time advertise these
ratings in our sales literature. THE VARIABLE ACCOUNT Allstate New York
established the Allstate Life of New York Separate Account A on December 15,
1995. We have registered the Variable Account with the SEC as a unit investment
trust. The SEC does not supervise the management of the Variable Account or
Allstate New York.
We own the assets of the Variable Account. The Variable Account is a
segregated asset account under New York law. That means we account for the
Variable Account's income, gains and losses separately from the results of our
other operations. It also means that only the assets of the Variable Account
that are in excess of the reserves and other Contract liabilities with respect
to the Variable Account are subject to liabilities relating to our other
operations. Our obligations arising under the Contracts are general corporate
obligations of Allstate New York.
The Variable Account consists of multiple Variable Sub-Accounts, 27 of
which are available through the Contracts. Each Variable Sub-Account invests in
a corresponding Fund. We may add new Variable Sub-Accounts or eliminate one or
more of them, if we believe marketing, tax, or investment conditions so warrant.
We do not guarantee the investment performance of the Variable Account, its
Sub-Accounts or the Funds. We may use the Variable Account to fund our other
annuity contracts. We will account separately for each type of annuity contract
funded by the Variable Account.
THE FUNDS
Dividends and Capital Gain Distributions. We automatically reinvest all
dividends and capital gains distributions from the Funds in shares of the
distributing Fund at their net asset value.
Voting Privileges.As a general matter, you do not have a direct right to
vote the shares of the Funds held by the Variable Sub-Accounts to which you have
allocated your Contract Value. Under current law, however, you are entitled to
give us instructions on how to vote those shares on certain matters. Based on
our present view of the law, we will vote the shares of the Funds that we hold
directly or indirectly through the Variable Account in accordance with
instructions that we receive from Contract Owners entitled to give such
instructions. We will apply voting instructions to abstain on any item to be
voted upon on a pro rata basis to reduce the votes eligible to be cast.
As a general rule, before the Payout Start Date, the Contract Owner or
anyone with a voting interest is the person entitled to give voting
instructions. The number of shares that a person has a right to instruct will be
determined by dividing the Contract Value allocated to the applicable Variable
Sub-Account by the net asset value per share of the corresponding Fund as of the
record date of the meeting. After the Payout Start Date, the person receiving
income payments has the voting interest. The payee's number of votes will be
determined by dividing the reserve for such Contract allocated to the applicable
Sub-Account by the net asset value per share of the corresponding Fund as of the
record date of the meeting. After the Payout Start Date, the votes decrease as
income payments are made and as the reserves for the Contract decrease.
We will vote shares attributable to Contracts for which we have not
received instructions, as well as shares attributable to us, in the same
proportion as we vote shares for which we have received instructions, unless we
determine that we may vote such shares in our own discretion.
We reserve the right to vote Fund shares as we see fit without regard to
voting instructions to the extent permitted by law. If we disregard voting
instructions, we will include a summary of that action and our reasons for that
action in the next semi-annual financial report to you.
Changes in Funds.We reserve the right, subject to any applicable law, to
make additions to, deletions from or substitutions for the Fund shares held by
any Variable Sub-Account. If the shares of any of the Funds are no longer
available for investment by the Variable Account or if, in our judgment, further
investment in such shares is no longer desirable in view of the purposes of the
Contract, we may eliminate that Fund and substitute shares of another eligible
investment fund. Any substitution of securities will comply with the
requirements of the Investment Company Act of 1940. We also may add new Variable
Sub-Accounts that invest in additional mutual funds. We will notify you in
advance of any change.
Conflicts of Interest.Certain of the Funds sell their shares to separate
accounts underlying both variable life insurance and variable annuity contracts.
It is conceivable that in the future it may be unfavorable for variable life
insurance
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separate accounts and variable annuity separate accounts to invest in the same
Fund. The board of trustees of these Funds monitor for possible conflicts among
separate accounts buying shares of the Funds. Conflicts could develop for a
variety of reasons. For example, differences in treatment under tax and other
laws or the failure by a separate account to comply with such laws could cause a
conflict. To eliminate a conflict, a Fund's board of trustees may require a
separate account to withdraw its participation in a Fund. A Fund's net asset
value could decrease if it had to sell investment securities to pay redemption
proceeds to a separate account withdrawing because of a conflict.
THE CONTRACT
Distribution.
Allstate Distributors, L.L.C. ("Allstate Distributors"), a broker-dealer
jointly owned by Allstate Life and Putnam Investments, located at 3100 Sanders
Road, Northbrook, IL 60062-7154, serves as principal underwriter of the
Contracts. Allstate Distributors is a registered broker dealer under the
Securities and Exchange Act of 1934, as amended ("Exchange Act"), and is a
member of the National Association of Securities Dealers, Inc. Contracts are
sold by registered representatives of unaffiliated broker-dealers or bank
employees who are licensed insurance agents appointed by Allstate New York,
either individually or through an incorporated insurance agency and have entered
into a selling agreement with Allstate Distributors to sell the Contract.
We will pay commissions to broker-dealers who sell the Contracts.
Commissions paid may vary, but we estimate that the total commission paid on all
Contract sales will not exceed 8.5% of all purchase payments. From time to time,
we may pay or permit other promotional incentives, in cash or credit or other
compensation. The commission is intended to cover distribution expenses.
Contracts may be sold by representatives or employees of banks which may be
acting as broker-dealers without separate registration under the Exchange Act,
pursuant to legal and regulatory exceptions.
Allstate New York may pay Allstate Distributors a commission for
distribution of the Contracts. The underwriting agreement with Allstate
Distributors provides that we will reimburse Allstate Distributors for expenses
incurred in distributing the Contracts, including any liability to Contract
Owners arising out of services rendered or Contracts issued.
Administration.
We have primary responsibility for all administration of the Contracts and
the Variable Account.
We provide the following administrative services, among others:
o issuance of the Contracts;
o maintenance of Contract Owner records;
o Contract Owner services;
o calculation of unit values;
o maintenance of the Variable Account; and
o preparation of Contract Owner reports.
We will send you Contract statements and transaction confirmations at least
annually. You should notify us promptly in writing of any address change. You
should read your statements and confirmations carefully and verify their
accuracy. You should contact us promptly if you have a question about a periodic
statement. We will investigate all complaints and make any necessary adjustments
retroactively, but you must notify us of a potential error within a reasonable
time after the date of the questioned statement. If you wait too long, we will
make the adjustment as of the date that we receive notice of the potential
error.
We will also provide you with additional periodic and other reports,
information and prospectuses as may be required by federal securities laws.
QUALIFIED PLANS
If you use the Contract with a qualified plan, the plan may impose
different or additional conditions or limitations on withdrawals, waivers of
withdrawal charges, death benefits, Payout Start Dates, income payments, and
other Contract features. In addition, adverse tax consequences may result if
qualified plan limits on distributions and other conditions are not met. Please
consult your qualified plan administrator for more information.
LEGAL MATTERS
Freedman, Levy, Kroll & Simonds, Washington, D.C., has advised Allstate New
York on certain federal securities law matters. All matters of New York law
pertaining to the Contracts, including the validity of the Contracts and
Allstate New York's right to issue such Contracts under New York insurance law,
have been passed upon by Michael J. Velotta, General Counsel of Allstate New
York.
YEAR 2000
Allstate New York is heavily dependent upon complex computer systems for
all phases of its operations, including customer service, risk management and
policy and contract administration. Since many of Allstate New York's older
computer software programs recognize only the last two digits of the year in any
date, some software may fail to operate properly in or after the year 1999, if
the software is not reprogrammed or replaced ("Year 2000 Issue"). Allstate New
York believes that many of its counterparties and suppliers also have Year 2000
Issues which could affect Allstate New York. In 1995, Allstate Insurance Company
commenced a four phase plan intended to mitigate and/or prevent the adverse
effects of Year 2000 Issues. These strategies include normal development and
enhancement of new and existing systems, upgrades to operating systems already
covered by maintenance agreements, and modifications to existing systems to make
them Year 2000 compliant. The plan also included Allstate New York actively
working
26 - PROSPECTUS
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with its major external counterparties and suppliers to assess their compliance
efforts and Allstate New York's exposure to them. Because of the accuracy of
this plan, and its timely completion, Allstate New York has experienced no
material impacts on its results of operations, liquidity or financial position
due to the Year 2000 Issue. Year 2000 costs are expensed as incurred.
Taxes
The following discussion is general and is not intended as tax advice.
Allstate New York 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 your individual circumstances.
If you are concerned about any tax consequences with regard to your individual
circumstances, you should consult a competent tax adviser.
TAXATION OF ANNUITIES IN GENERAL
Tax Deferral.Generally, you are not taxed on increases in the Contract
Value until a distribution occurs. This rule applies only where:
1. the Contract Owner is a natural person,
2. the investments of the Variable Account are "adequately diversified"
according to Treasury Department regulations, and
3. Allstate New York is considered the owner of the Variable Account assets
for federal income tax purposes.
Non-natural Owners.As a general rule, annuity contracts owned by
non-natural persons such as corporations, trusts, or other entities are not
treated as annuity contracts for federal income tax purposes. The income on such
contracts is taxed as ordinary income received or accrued by the owner during
the taxable year. Please see the Statement of Additional Information for a
discussion of several exceptions to the general rule for Contracts owned by
non-natural persons.
Diversification Requirements.For a Contract to be treated as an annuity for
federal income tax purposes, the investments in the Variable Account must be
"adequately diversified" consistent with standards under Treasury Department
regulations. If the investments in the Variable Account are not adequately
diversified, the Contract will not be treated as an annuity contract for federal
income tax purposes. As a result, the income on the Contract will be taxed as
ordinary income received or accrued by the Contract Owner during the taxable
year. Although Allstate New York does not have control over the Funds or their
investments, we expect the Funds to meet the diversification requirements.
Ownership Treatment.The IRS has stated that you will be considered the
owner of Variable Account assets if you possess incidents of ownership in those
assets, such as the ability to exercise investment control over the assets. At
the time the diversification regulations were issued, the Treasury Department
announced that the regulations do not provide guidance concerning circumstances
in which investor control of separate account investments may cause an investor
to be treated as the owner of the separate account. The Treasury Department also
stated that future guidance would be issued regarding the extent that owners
could direct sub-account investments without being treated as owners of the
underlying assets of the separate account.
Your rights under the Contract are different than those described by the
IRS in rulings in which it found that contract owners were not owners of
separate account assets. For example, you have the choice to allocate premiums
and Contract Values among more investment alternatives. Also, you may be able to
transfer among investment alternatives more frequently than in such rulings.
These differences could result in you being treated as the owner of the Variable
Account. If this occurs, income and gain from the Variable Account assets would
be includible in your gross income. Allstate New York does not know what
standards will be set forth in any regulations or rulings which the Treasury
Department may issue. It is possible that future standards announced by the
Treasury Department could adversely affect the tax treatment of your Contract.
We reserve the right to modify the Contract as necessary to attempt to prevent
you from being considered the federal tax owner of the assets of the Variable
Account. However, we make no guarantee that such modification to the Contract
will be successful.
Taxation of Partial and Full Withdrawals.If you make a partial withdrawal
under a non-Qualified Contract, amounts received are taxable to the extent the
Contract Value, without regard to surrender charges, exceeds the investment in
the Contract. The investment in the Contract is the gross premium paid for the
Contract minus any amounts previously received from the Contract if such amounts
were properly excluded from your gross income. If you make a partial withdrawal
under a Qualified Contract, the portion of the payment that bears the same ratio
to the total payment that the investment in the Contract (i.e., nondeductible
IRA contributions, after tax contributions to qualified plans) bears to the
Contract Value, is excluded from your income. If you make a full withdrawal
under a non-Qualified Contract or a
27 - PROSPECTUS
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Qualified Contract, the amount received will be taxable only to the extent it
exceeds the investment in the Contract.
"Nonqualified distributions" from Roth IRAs are treated as made from
contributions first and are included in gross income only to the extent that
distributions exceed contributions. "Qualified distributions" from Roth IRAs are
not included in gross income. "Qualified distributions" are any distributions
made more than 5 taxable years after the taxable year of the first contribution
to any Roth IRA and which are:
o made on or after the date the individual attains age 591/2,
o made to a beneficiary after the Contract Owner's death,
o attributable to the Contract Owner being disabled, or
o for a first time home purchase (first time home purchases are subject
to a lifetime limit of $10,000).
If you transfer a non-Qualified Contract without full and adequate
consideration to a person other than your spouse (or to a former spouse incident
to a divorce), you will be taxed on the difference between the Contract Value
and the investment in the Contract at the time of transfer. Except for certain
Qualified Contracts, any amount you receive 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
annuity payments received from a non-Qualified Contract provides for the return
of your investment in the Contract in equal tax-free amounts over the payment
period. The balance of each payment received is taxable. For 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. If you elect variable annuity payments, the amount
excluded from taxable income is determined by dividing the investment in the
Contract by the total number of expected payments. The annuity payments will be
fully taxable after the total amount of the investment in the Contract is
excluded using these ratios. If you die, and annuity payments cease before the
total amount of the investment in the Contract is recovered, the unrecovered
amount will be allowed as a deduction for your last taxable year.
Taxation of Level Monthly Variable Annuity Payments.You may have an option
to elect a variable income payment stream consisting of level monthly payments
that are recalculated annually. Although your levelized payment will be reported
to the IRS in the year distributed, it is possible the IRS could determine that
receipt of the first monthly payout of each annual payment is constructive
receipt of the entire annual payment. Thus, the total taxable amount for each
annual payment would be accelerated to the time of the first monthly payout and
reported in the tax year in which the first monthly payout is received.
Partial Commutation of Annuity Payments.The Federal tax treatment of Income
Payment Options is unclear in some respects. As a result, it is possible that a
greater or lesser portion of payments may be includible in your taxable income
than described above or that we plan to report to the Internal Revenue Service.
The tax law is also unclear regarding the portion of any additional withdrawal
received after the Payout Start Date that is taxable, and thus it is also
possible that a greater or lesser portion of such a payment could be taxable
than the amount we determine.
Taxation of Annuity Death Benefits.Death of a Contract Owner, or death of
the Annuitant if the Contract is owned by a non-natural person, will cause a
distribution of death benefits from a Contract. Generally, such amounts are
included 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. Please see the Statement of Additional
Information for more detail on distribution at death requirements.
Penalty Tax on Premature Distributions. A 10% penalty tax applies to the
taxable amount of any premature distribution from a non-Qualified Contract. The
penalty tax generally applies to any distribution made prior to the date you
attain age 591'2. However, no penalty tax is incurred on distributions:
1. made on or after the date the Contract Owner attains age 591/2;
2. made as a result of the Contract Owner's death or disability;
3. made in substantially equal periodic payments over the Contract Owner's
life or life expectancy,
4. made under an immediate annuity, or
5. attributable to investment in the Contract before August 14, 1982.
You should consult a competent tax advisor to determine if any other
exceptions to the penalty apply to your situation. Similar exceptions may apply
to distributions from Qualified Contracts.
Substantially Equal Periodic Payments.With respect to non-Qualified
Contracts using substantially equal periodic payments or immediate annuity
payments as an exception to the penalty tax on premature distributions, any
additional withdrawal or other modification of the payment stream would violate
the requirement that payments must be substantially equal. Failure to meet this
requirement would mean that the income portion of each payment received prior to
the later of 5 years or attaining age 59 1/2 would be subject to a 10% penalty
tax unless another exception to the penalty
28 - PROSPECTUS
<PAGE>
tax applies. The tax for the year of the modification is increased by the
penalty tax that would have been imposed without the exception, plus interest
for the years in which the exception was used. Allstate New York believes such
modifications would violate the substantially equal periodic payments and
immediate annuity exceptions to the 10% penalty tax. Similar treatment may apply
to additional withdrawals or other modifications of the payment stream from
Qualified Contracts. You should consult a competent tax advisor prior to taking
a withdrawal. Aggregation of Annuity Contracts.All non-qualified deferred
annuity contracts issued by Allstate New York (or its affiliates) to the same
Contract Owner during any calendar year will be aggregated and treated as one
annuity contract for purposes of determining the taxable amount of a
distribution.
TAX QUALIFIED CONTRACTS
Contracts may be used as investments with certain qualified plans such as:
o Individual Retirement Annuities or Accounts (IRAs) under Section 408
of the Code;
o Roth IRAs under Section 408A of the Code;
o Simplified Employee Pension Plans under Section 408(k) of the Code;
o Savings Incentive Match Plans for Employees (SIMPLE) Plans under
Section 408(p) of the Code;
o Tax Sheltered Annuities under Section 403(b) of the Code;
o Corporate and Self Employed Pension and Profit Sharing Plans; and
o State and Local Government and Tax-Exempt Organization Deferred
Compensation Plans.
In the case of certain qualified plans, the terms of the plans may govern
the right to benefits, regardless of the terms of the Contract. Generally,
qualified plans require minimum distributions upon reaching age 70 1/2. Failure
to withdraw the required minimum distribution will result in a 50% tax penalty
on the shortfall not withdrawn from the contract. Not all income plans offered
under this annuity contract satisfy the requirements for minimum distributions.
Please see a competent tax advisor to make sure the qualified plan distribution
requirements for this annuity are satisfied. The income on qualified plan and
IRA investments is tax deferred and variable annuities held by such plans do not
receive any additional tax deferral. You should review the annuity features,
including all benefits and expenses, prior to purchasing a variable annuity in a
qualified plan or IRA. Allstate New York reserves the right to limit the
availability of the Contract for use with any of the qualified plans listed
above.
Restrictions Under Section 403 Plans.Section 403(b) of the Tax Code
provides tax-deferred retirement savings plans for employees of certain
non-profit and educational organizations. Under Section 403(b), any Contract
used for a 403(b) plan must provide that distributions attributable to salary
reduction contributions made after 12/31/88, and all earnings on salary
reduction contributions, may be made only:
1. on or after the date of employee
o attains age 59 1/2,
o separates from service,
o dies,
o becomes disabled, or
2. on account of hardship (earnings on salary reduction contributions may not
be distributed on the account of hardship).
These limitations do not apply to withdrawals where Allstate New York is
directed to transfer some or all of the Contract Value to another 403(b) plan.
INCOME TAX WITHHOLDING
Allstate New York is required to withhold federal income tax at a rate of
20% on all "eligible rollover distributions" unless you elect to make a "direct
rollover" of such amounts to an IRA or eligible retirement plan. 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,
3. over the life (joint lives) of the participant (and beneficiary).
Allstate New York may be required to withhold federal and state income
taxes on any distributions from non-Qualified Contracts or Qualified Contracts
that are not eligible rollover distributions, unless you notify us of your
election to not have taxes withheld.
29 - PROSPECTUS
<PAGE>
Performance Information
We may advertise the performance of the Variable Sub-Accounts, including
yield and total return information. Total return represents the change, over a
specified period of time, in the value of an investment in a Variable
Sub-Account after reinvesting all income distributions. Yield refers to the
income generated by an investment in a Variable Sub-Account over a specified
period. All performance advertisements will include, as applicable, standardized
yield and total return figures that reflect the deduction of insurance charges,
the contract maintenance charge, and withdrawal charge. Performance
advertisements also may include total return figures that reflect the deduction
of insurance charges, but not the contract maintenance or withdrawal charges.
The deduction of such charges would reduce the performance shown. In addition,
performance advertisements may include aggregate, average, year-by-year, or
other types of total return figures.
Performance information for periods prior to the inception date of the
Variable Sub-Accounts will be based on the historical performance of the
corresponding Funds for the periods beginning with the inception dates of the
Funds and adjusted to reflect current Contract expenses. You should not
interpret these figures to reflect actual historical performance of the Variable
Account.
We may include in advertising and sales materials tax deferred compounding
charts and other hypothetical illustrations that compare currently taxable and
tax deferred investment programs based on selected tax brackets. Our
advertisements also may compare the performance of our Variable Sub-Accounts
with: (a) certain unmanaged market indices, including but not limited to the Dow
Jones Industrial Average, the Standard & Poor's 500, and the Shearson Lehman
Bond Index; and/or (b) other management investment companies with investment
objectives similar to the underlying funds being compared. In addition, our
advertisements may include the performance ranking assigned by various
publications, including the Wall Street Journal, Forbes, Fortune, Money,
Barron's, Business Week, USA Today, and statistical services, including Lipper
Analytical Services Mutual Fund Survey, Lipper Annuity and Closed End Survey,
the Variable Annuity Research Data Survey, and SEI.
30 - PROSPECTUS
<PAGE>
Statement of Additional Information
Table of Contents
Additions, Deletions or Substitutions of Investments 3
The Contract 4
Peformance Information 5
Calculation of Accumulation Unit Values 8
Calculation of Variable Income Payments 9
General Matters 10
Federal Tax Matters 11
Qualified Plans 12
Sales Commissions 14
Legal Matters 15
Experts 15
Financial Statements 15
-----------
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN
WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE. WE DO NOT AUTHORIZE ANYONE TO
PROVIDE ANY INFORMATION OR REPRESENTATIONS REGARDING THE OFFERING DESCRIBED IN
THIS PROSPECTUS OTHER THAN AS CONTAINED IN THIS PROSPECTUS.
31 - PROSPECTUS
<PAGE>
Appendix A
Accumulation Unit Value and Number of
Accumulation Units Outstanding for
Each Variable Sub-Account Since Inception*
For the period December 10 through December 31, 1999
Putnam Asia Pacific Growth
Accumulation Unit Value, Beginning of Period $15.244
Accumulation Unit Value, End of Period $17.437
Number of Units Outstanding, End of Period 0
Putnam Diversified Income
Accumulation Unit Value, Beginning of Period $9.863
Accumulation Unit Value, End of Period $9.866
Number of Units Outstanding, End of Period 0
The George Putnam Fund of Boston
Accumulation Unit Value, Beginning of Period $9.313
Accumulation Unit Value, End of Period $9.299
Number of Units Outstanding, End of Period 0
Putnam Global Asset Allocation
Accumulation Unit Value, Beginning of Period $10.469
Accumulation Unit Value, End of Period $10.696
Number of Units Outstanding, End of Period 0
Putnam Global Growth
Accumulation Unit Value, Beginning of Period $13.887
Accumulation Unit Value, End of Period $15.665
Number of Units Outstanding, End of Period 0
Putnam Growth and Income
Accumulation Unit Value, Beginning of Period $9.168
Accumulation Unit Value, End of Period $9.172
Number of Units Outstanding, End of Period 0
Putnam Health Sciences
Accumulation Unit Value, Beginning of Period $9.953
Accumulation Unit Value, End of Period $10.597
Number of Units Outstanding, End of Period 0
Putnam High Yield
Accumulation Unit Value, Beginning of Period $9.896
Accumulation Unit Value, End of Period $9.934
Number of Units Outstanding, End of Period 0
A-1
<PAGE>
Putnam Income
Accumulation Unit Value, Beginning of Period $9.861
Accumulation Unit Value, End of Period $9.714
Number of Units Outstanding, End of Period 0
Putnam International Growth
Accumulation Unit Value, Beginning of Period $13.249
Accumulation Unit Value, End of Period $14.427
Number of Units Outstanding, End of Period 0
Putnam International Growth and Income
Accumulation Unit Value, Beginning of Period $10.839
Accumulation Unit Value, End of Period $10.968
Number of Units Outstanding, End of Period 0
Putnam International New Opportunities
Accumulation Unit Value, Beginning of Period $15.988
Accumulation Unit Value, End of Period $18.134
Number of Units Outstanding, End of Period 0
Putnam Investors
Accumulation Unit Value, Beginning of Period $11.364
Accumulation Unit Value, End of Period $12.168
Number of Units Outstanding, End of Period 0
Putnam Money Market
Accumulation Unit Value, Beginning of Period $10.208
Accumulation Unit Value, End of Period $10.231
Number of Units Outstanding, End of Period 0
Putnam New Opportunities
Accumulation Unit Value, Beginning of Period $14.041
Accumulation Unit Value, End of Period $15.692
Number of Units Outstanding, End of Period 0
Putnam New Value
Accumulation Unit Value, Beginning of Period $8.705
Accumulation Unit Value, End of Period $8.795
Number of Units Outstanding, End of Period 0
Putnam OTC & Emerging Growth
Accumulation Unit Value, Beginning of Period $18.177
Accumulation Unit Value, End of Period $19.838
Number of Units Outstanding, End of Period 0
Putnam Research
Accumulation Unit Value, Beginning of Period $10.894
Accumulation Unit Value, End of Period $11.598
Number of Units Outstanding, End of Period 0
Putnam Small Cap Value
Accumulation Unit Value, Beginning of Period $9.813
Accumulation Unit Value, End of Period $10.302
Number of Units Outstanding, End of Period 0
Putnam Utilities Growth and Income
Accumulation Unit Value, Beginning of Period $10.047
Accumulation Unit Value, End of Period $9.987
Number of Units Outstanding, End of Period 0
A-2
<PAGE>
Putnam Vista
Accumulation Unit Value, Beginning of Period $12.501
Accumulation Unit Value, End of Period $14.088
Number of Units Outstanding, End of Period 0
Putnam Voyager
Accumulation Unit Value, Beginning of Period $12.868
Accumulation Unit Value, End of Period $14.326
Number of Units Outstanding, End of Period 0
* The Contracts were first offered for sale on December 10, 1999. No
Accumulation Unit data is shown for the Putnam American Government Income
or the Putnam Growth Opportunities Variable Sub-Accounts which were first
offered as of February 4, 2000, for the Putnam Technology Variable
Sub-Account, which was first offered as of July 17, 2000, or for the Putnam
Capital Appreciation or the Putnam Voyager II Variable Sub-Accounts which
were first offered as of October 2, 2000.
A-3
<PAGE>
Appendix B
Withdrawal Adjustment Example
Issue Date: January 1, 2000
Initial Purchase Payment: $50,000
<TABLE>
<CAPTION>
Date Type Beginning Transaction Contract Purchase Maximum
of Contract Amount Value Payment Anniversary
Occurrence Value After Value Value
Occurrence
Death Benefit Amount
<S> <C> <C> <C> <C> <C> <C>
1/1/01 Contract Anniversary $55,000 ? $55,000 $50,000 $55,000
7/1/01 Partial Withdrawal $60,000 $15,000 $45,000 $37,500 $41,125
</TABLE>
The following shows how we compute the adjusted death benefits in the
example above. Please note that the Purchase Payment Value is reduced by the
amount of the withdrawal, whereas the withdrawal adjustment reduces the Maximum
Anniversary Value by the same proportion as the withdrawal reduces the Contract
Value.
<TABLE>
<CAPTION>
<S> <C> <C>
Purchase Payment Value Death Benefit
Partial Withdrawal Amount (w) $15,000
Contract Value Immediately Prior to Partial Withdrawal (a) $60,000
Value of Applicable Death Benefit Amount Immediately Prior to Partial Withdrawal (d) $50,000
Withdrawal Adjustment [(w)/(a)]*(d) $12,500
Adjusted Death Benefit $37,500
Maximum Anniversary Value Death Benefit
Partial Withdrawal Amount (w) $15,000
Contract Value Immediately Prior to Partial Withdrawal (a) $60,000
Value of Applicable Death Benefit Amount Immediately Prior to Partial Withdrawal (d) $55,000
Withdrawal Adjustment [(w)/(a)]*(d) $13,750
Adjusted Death Benefit $41,250
</TABLE>
* For purposes of illustrating the withdrawal adjustment calculation, the
example assumes the same hypothetical Contract Values and Maximum
Anniversary Values for the Contract, net of applicable fees and charges.
Please remember that you are looking at an example and that your investment
performance may be greater or lower than the figures shown.
B-1
<PAGE>
The Putnam Allstate Advisor Variable Annuity
<TABLE>
<CAPTION>
<S> <C>
Allstate Life Insurance Company of New York Statement of Additional Information
One Allstate Drive dated October 2, 2000
Farmingville, New York 11738
1 (800) 390-1277
</TABLE>
This Statement of Additional Information supplements the information in the
prospectus for The Putnam Allstate Advisor. This Statement of Additional
Information is not a prospectus. You should read it with the prospectus, dated
October 2, 2000, for the Contract. You may obtain a prospectus by calling or
writing us at the address or telephone number listed above.
Except as otherwise noted, this Statement of Additional Information uses the
same defined terms as the prospectus.
<PAGE>
TABLE OF CONTENTS
PAGE
ADDITIONS, DELETIONS OR SUBSTITUTIONS OF INVESTMENTS 3
THE CONTRACT 4
PERFORMANCE INFORMATION 5
CALCULATION OF ACCUMULATION UNIT VALUES 8
CALCULATION OF VARIABLE INCOME PAYMENTS 9
GENERAL MATTERS 10
FEDERAL TAX MATTERS 11
QUALIFIED PLANS 12
SALES COMMISSIONS 14
LEGAL MATTERS 15
EXPERTS 15
FINANCIAL STATEMENTS 15
- ------------------------------------------------------------------------------
<PAGE>
ADDITIONS, DELETIONS OR SUBSTITUTIONS OF INVESTMENTS
We may add, delete, or substitute the Fund shares held by any Variable
Sub-Account to the extent the law permits. We may substitute shares of any Fund
with those of another Fund of the same or different mutual fund if the shares of
the Fund are no longer available for investment, or if we believe investment in
any Fund would become inappropriate in view of the purposes of the Variable
Account.
We will not substitute shares attributable to a Contract Owner's interest in a
Variable Sub-Account until we have notified the Contract Owner of the change,
and until the Securities and Exchange Commission has approved the change, to the
extent such notification and approval are required by law. Nothing contained in
this Statement of Additional Information shall prevent the Variable Account from
purchasing other securities for other series or classes of contracts, or from
effecting a conversion between series or classes of contracts on the basis of
requests made by Contract Owners.
We also may establish additional Variable Sub-Accounts or series of Variable
Sub-Accounts. Each additional Variable Sub-Account would purchase shares in a
new Fund of the same or different mutual fund. We may establish new Variable
Sub-Accounts when we believe marketing needs or investment conditions warrant.
We determine the basis on which we will offer any new Variable Sub-Accounts in
conjunction with the Contract to existing Contract Owners. We may eliminate one
or more Variable Sub-Accounts if, in our sole discretion, marketing, tax or
investment conditions so warrant.
We may, by appropriate endorsement, change the Contract as we believe necessary
or appropriate to reflect any substitution or change in the Funds. If we believe
the best interests of persons having voting rights under the Contracts would be
served, we may operate the Variable Account as a management company under the
Investment Company Act of 1940 or we may withdraw its registration under such
Act if such registration is no longer required.
<PAGE>
THE CONTRACT
- ------------------------------------------------------------------------------
The Contract is primarily designed to aid individuals in long-term financial
planning. You can use it for retirement planning regardless of whether the
retirement plan qualifies for special federal income tax treatment.
PURCHASE OF CONTRACTS
We offer the Contracts to the public through banks as well as brokers licensed
under the federal securities laws and state insurance laws. The principal
underwriter for the Variable Account, Allstate Distributors, L.L.C. ("Allstate
Distributors"). distributes the Contracts. Allstate Distributors is an affiliate
of Allstate Life Insurance Company of New York ("Allstate"). The offering of the
Contracts is continuous. We do not anticipate discontinuing the offering of the
Contracts, but we reserve the right to do so at any time.
TAX-FREE EXCHANGES (1035 EXCHANGES, ROLLOVERS AND TRANSFERS)
We accept purchase payments that are the proceeds of a Contract in a transaction
qualifying for a tax-free exchange under Section 1035 of the Internal Revenue
Code ("Code"). Except as required by federal law in calculating the basis of the
Contract, we do not differentiate between Section 1035 purchase payments and
non-Section 1035 purchase payments.
We also accept "rollovers" and transfers from Contracts qualifying as
tax-sheltered annuities ("TSAs"), individual retirement annuities or accounts
("IRAs"), or any other Qualified Contract that is eligible to "rollover" into an
IRA. We differentiate among non-Qualified Contracts, TSAs, IRAs and other
Qualified Contracts to the extent necessary to comply with federal tax laws. For
example, we restrict the assignment, transfer, or pledge of TSAs and IRAs so the
Contracts will continue to qualify for special tax treatment. A Contract Owner
contemplating any such exchange, rollover or transfer of a Contract should
contact a competent tax adviser with respect to the potential effects of such a
transaction.
<PAGE>
PERFORMANCE INFORMATION
- ------------------------------------------------------------------------------
From time to time we may advertise the "standardized," "non-standardized," and
"adjusted historical" total returns of the Variable Sub-Accounts, as described
below. Please remember that past performance is not an estimate or guarantee of
future performance and does not necessarily represent the actual experience of
amounts invested by a particular Contract Owner. Also, please note that the
performance figures shown do not reflect any applicable taxes.
STANDARDIZED TOTAL RETURNS
A Variable Sub-Account's standardized total return represents the average annual
total return of that Sub-Account over a particular period. We compute
standardized total return by finding the annual percentage rate that, when
compounded annually, will accumulate a hypothetical $1,000 purchase payment to
the redeemable value at the end of the one, five or ten year period, or for a
period from the date of commencement of the Variable Sub-Account's operations,
if shorter than any of the foregoing. We use the following formula prescribed by
the SEC for computing standardized total return:
1000(1 + T)n = ERV
where:
T = average annual total return
ERV = ending redeemable value of a hypothetical $1,000 payment made at the
beginning of 1, 5, or 10 year periods or shorter period
n = number of years in the period
1000 = hypothetical $1,000 investment
When factoring in the withdrawal charge assessed upon redemption, we exclude the
Preferred Withdrawal Amount, which is the amount you can withdraw from the
Contract without paying a withdrawal charge. We also use the withdrawal charge
that would apply upon redemption at the end of each period. Thus, for example,
when factoring in the withdrawal charge for a one year standardized total return
calculation, we would use the withdrawal charge that applies to a withdrawal of
a purchase payment made one year prior.
When factoring in the contract maintenance charge, we pro rate the charge by
dividing (i) the contract maintenance charge by (ii) an assumed average contract
size of $45,000. We then multiply the resulting percentage by a hypothetical
$1,000 investment.
<PAGE>
Set out below are the standardized total returns for each Variable Sub-Account
(other than the Putnam American Government Income, Putnam Growth Opportunities,
Putnam Technology, Putnam Capital Appreciation, Putnam Voyager II and Putnam
Money Market Variable Sub-Accounts) since its inception through December 31,
1999. All of the Variable Sub-Accounts commenced operations on December 10, 1999
except for the Putnam American Government Income and Putnam Growth Opportunities
Variable Sub-Accounts, which commenced operations on February 4, 2000, the
Putnam Technology Variable Sub-Account, which commenced operations on July 17,
2000, and the Putnam Capital Appreciation and Putnam Voyager II Variable
Sub-Accounts, which commenced operations on October 2, 2000. The standardized
total returns shown are not annualized.
<TABLE>
<CAPTION>
- ------------------------------------------------- ----------- ------------- ------------------
<S> <C> <C> <C>
Variable Sub-Account One Year Five Years Since Inception
Putnam Asia Pacific Growth N/A N/A 8.37%
Putnam Diversified Income N/A N/A -5.99%
The George Putnam Fund of Boston N/A N/A -6.17%
Putnam Global Asset Allocation N/A N/A -3.84%
Putnam Global Growth N/A N/A 6.78%
Putnam Growth and Income N/A N/A -5.98%
Putnam Health Sciences N/A N/A 0.45%
Putnam High Yield N/A N/A -5.64%
Putnam Income N/A N/A -7.51%
Putnam International Growth N/A N/A 2.88%
Putnam International Growth and Income N/A N/A -4.83%
Putnam Investors N/A N/A 1.06%
Putnam New Opportunities N/A N/A 5.75%
Putnam New Value N/A N/A -4.98%
Putnam International New Opportunities N/A N/A 7.41%
Putnam OTC & Emerging Growth N/A N/A 3.12%
Putnam Research N/A N/A 0.44%
Putnam Small Cap Value N/A N/A -1.04%
Putnam Utilities Growth and Income N/A N/A -6.62%
Putnam Vista N/A N/A 6.68%
Putnam Voyager N/A N/A 5.31%
- ----------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
NON-STANDARDIZED TOTAL RETURNS
From time to time, we also may quote rates of return that reflect changes in the
values of each Variable Sub-Account's Accumulation Units. We may quote these
"non-standardized total returns" on an annualized, cumulative, year-by-year, or
other basis. These rates of return take into account asset-based charges, such
as the mortality and expense risk charge. However, these rates of return do not
reflect withdrawal charges, contract maintenance charges, or any taxes. Such
charges, if reflected, would reduce the performance shown.
Annualized returns reflect the rate of return that, when compounded annually,
would equal the cumulative rate of return for the period shown. We compute
annualized returns according to the following formula:
Annualized Return = (1 + r)1/n - 1
where r = cumulative rate of return for the period shown, and n =
number of years in the period.
The method of computing annualized rates of return is similar to that for
computing standardized performance, described above, except that rather than
using a hypothetical $1,000 investment and the ending redeemable value thereof,
we use the changes in value of an Accumulation Unit.
Cumulative rates of return reflect the cumulative change in value of an
Accumulation Unit over the period shown. Year-by-year rates of return reflect
the change in value of an Accumulation Unit during the course of each year
shown. We compute these returns by dividing the Accumulation Unit Value at the
end of each period shown, by the Accumulation Unit Value at the beginning of
that period, and subtracting one. We compute other total returns on a similar
basis.
We may quote non-standardized total returns for 1, 3, 5 and 10 year periods, or
period since inception of the Variable Sub-Account's operations, as well as
other periods, such as year-to-date (prior calendar year end to the day stated
in the advertisement); "year to most recent quarter" (prior calendar year end to
the end of the most recent quarter); "the prior calendar year"; and the "n" most
recent calendar years.
The non-standardized total returns for each Variable Sub-Account (other than the
Putnam American Government Income, Putnam Growth Opportunities, Putnam
Technology, Putnam Capital Appreciation, Putnam Voyager II and Putnam Money
Market Variable Sub-Accounts) since its inception through December 31, 1999 are
set out below. All of the Variable Sub-Accounts commenced operations on December
10, 1999 except for the Putnam American Government Income and Putnam Growth
Opportunities Variable Sub-Accounts, which commenced operations on February 4,
2000, the Putnam Technology Variable Sub-Account, which commenced operations on
July 17, 2000, and the Putnam Capital Appreciation and Putnam Voyager II
Variable Sub-Accounts, which commenced operations on October 2, 2000. The
non-standardized total returns shown are not annualized.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ------------------------------------------------- ----------- ------------- -------------------
Variable Sub-Account One Year Five Years Since Inception
Putnam Asia Pacific Growth N/A N/A 14.38%
Putnam Diversified Income N/A N/A 0.03%
The George Putnam Fund of Boston N/A N/A -0.15%
Putnam Global Asset Allocation N/A N/A 2.18%
Putnam Global Growth N/A N/A 12.80%
Putnam Growth and Income N/A N/A 0.04%
Putnam Health Sciences N/A N/A 6.46%
Putnam High Yield N/A N/A 0.38%
Putnam Income N/A N/A -1.49%
Putnam International Growth N/A N/A 8.89%
Putnam International Growth and Income N/A N/A 1.19%
Putnam Investors N/A N/A 7.08%
Putnam New Opportunities N/A N/A 11.76%
Putnam New Value N/A N/A 1.04%
Putnam International New Opportunities N/A N/A 13.42%
Putnam OTC & Emerging Growth N/A N/A 9.14%
Putnam Research N/A N/A 6.46%
Putnam Small Cap Value N/A N/A 4.98%
Putnam Utilities Growth and Income N/A N/A -0.60%
Putnam Vista N/A N/A 12.69%
Putnam Voyager N/A N/A 11.33%
- ------------------------------------------------- ----------- ------------- -------------------
</TABLE>
ADJUSTED HISTORICAL TOTAL RETURNS
We may advertise the total return for periods prior to the date that the
Variable Sub-Accounts commenced operations. We will calculate such "adjusted
historical total returns" using the performance of the underlying Funds and
adjusting such performance to reflect the current level of charges that apply to
the Variable Sub-Accounts under the Contract.
The adjusted historical total returns for the Variable Sub-Accounts (other than
the Putnam American Government Income, Putnam Growth Opportunities, Putnam
Technology, Putnam Capital Appreciation, Putnam Voyager II and Putnam Money
Market Variable Sub-Accounts) for the periods ended December 31, 1999 are set
out below. Each of the Funds' Class IB shares corresponding to the Variable
Sub-Accounts were first offered on April 30, 1998, except for the Putnam VT
Diversified Income, Putnam VT Growth and Income, and Putnam VT International
Growth Funds, which were first offered on April 6, 1998, the Putnam VT Research
Fund, which was first offered on September 30, 1998, the Putnam VT Small Cap
Value Fund, which was first offered on April 30, 1999, the Putnam VT American
Government Income and Putnam VT Growth Opportunities Funds, which were first
offered on January 31, 2000, the Putnam VT Technology Fund, which was first
offered on June 14, 2000, and the Putnam VT Capital Appreciation and Putnam VT
Voyager II Funds, which were first offered on September 1, 2000. For periods
prior to the inception dates of the Funds' Class IB shares, the performance
shown is based on the historical performance of the Funds' Class IA shares,
adjusted to reflect the current expenses of the Funds' Class IB shares. The
inception dates for the Funds are as follows:
- ------------------------------------------------- ----------------------
Variable Sub-Account Inception Date of
Corresponding Fund
- ------------------------------------------------- ----------------------
- ------------------------------------------------- ----------------------
Putnam American Government Income January 31, 2000
Putnam Asia Pacific Growth May 1, 1995
Putnam Capital Appreciation September 1, 2000
Putnam Diversified Income September 15, 1993
The George Putnam Fund of Boston April 30, 1998
Putnam Global Asset Allocation February 1, 1988
Putnam Global Growth May 1, 1990
Putnam Growth and Income February 1, 1988
Putnam Growth Opportunities January 31, 2000
Putnam Health Sciences April 30, 1998
Putnam High Yield February 1, 1988
Putnam Income February 1, 1988
Putnam International Growth January 2, 1997
Putnam International Growth and Income January 2, 1997
Putnam International New Opportunities January 2, 1997
Putnam Investors April 30, 1998
Putnam Money Market February 1, 1988
Putnam New Opportunities May 2, 1994
Putnam New Value January 2, 1997
Putnam OTC & Emerging Growth April 30, 1998
Putnam Research September 29, 1998
Putnam Small Cap Value April 30, 1999
Putnam Technology June 14, 2000
Putnam Utilities Growth and Income May 1, 1992
Putnam Vista January 2, 1997
Putnam Voyager February 1, 1988
Putnam Voyager II September 1, 2000
- ------------------------------------------------- ----------------------
The adjusted historical total returns for the Variable Sub-Accounts for the
periods ended December 31, 1999 are set out below.
<TABLE>
<CAPTION>
- ------------------------------------------------- ----------- ----------- --------------------
Variable Sub-Account One Year Five Years Ten Years or Since
Inception
of Fund
- ------------------------------------------------- ----------- ----------- --------------------
- ------------------------------------------------- ----------- ----------- --------------------
<S> <C> <C> <C>
Putnam Asia Pacific Growth 98.49% N/A 12.19%
Putnam Diversified Income -5.54% 4.96% 3.36%
The George Putnam Fund of Boston -7.67% N/A -3.01%
Putnam Global Asset Allocation 4.35% 15.05% 10.67%
Putnam Global Growth 56.49% 25.06% 15.53%
Putnam Growth and Income -5.82% 17.43% 12.37%
Putnam Health Sciences -11.20% N/A -1.95%
Putnam High Yield -1.53% 6.83% 9.25%
Putnam Income -9.40% 5.34% 6.02%
Putnam International Growth 52.02% N/A 27.39%
Putnam International Growth and Income 16.78% N/A 15.39%
Putnam International New Opportunities 94.27% N/A 30.03%
Putnam Investors 22.34% N/A 23.48%
Putnam Money Market -2.62% 3.20% 3.46%
Putnam New Opportunities 60.97% 30.82% 28.33%
Putnam New Value -7.01% N/A 4.78%
Putnam OTC & Emerging Growth 117.60% N/A 59.21%
Putnam Research 20.08% N/A 33.55%
Putnam Small Cap Value N/A N/A -4.43%
Putnam Utilities Growth and Income -8.04% 15.16% 11.02%
Putnam Vista 44.67% N/A 28.27%
Putnam Voyager 50.03% 29.60% 20.57%
- ------------------------------------------------- ----------- ----------- --------------------
</TABLE>
<PAGE>
CALCULATION OF ACCUMULATION UNIT VALUES
- ------------------------------------------------------------------------------
The value of Accumulation Units will change each Valuation Period according to
the investment performance of the Fund shares purchased by each Variable
Sub-Account and the deduction of certain expenses and charges. A "Valuation
Period" is the period from the end of one Valuation Date and continues to the
end of the next Valuation Date. A Valuation Date ends at the close of regular
trading on the New York Stock Exchange (currently 4:00 p.m. Eastern Time).
The Accumulation Unit Value of a Variable Sub-Account for any Valuation Period
equals the Accumulation Unit Value as of the immediately preceding Valuation
Period, multiplied by the Net Investment Factor (described below) for that
Sub-Account for the current Valuation Period.
NET INVESTMENT FACTOR
The Net Investment Factor for a Valuation Period is a number representing the
change, since the last Valuation Period, in the value of Variable Sub-Account
assets per Accumulation Unit due to investment income, realized or unrealized
capital gain or loss, deductions for taxes, if any, and deductions for the
mortality and expense risk charge. We determine the Net Investment Factor for
each Variable Sub-Account for any Valuation Period by dividing (A) by (B) and
subtracting (C) from the result, where:
(A) is the sum of:
(1) the net asset value per share of the Fund underlying the Variable
Sub-Account determined at the end of the current Valuation Period; plus,
(2) the per share amount of any dividend or capital gain distributions made by
the Fund underlying the Variable Sub-Account during the current Valuation
Period;
(B) is the net asset value per share of the Fund underlying the Variable
Sub-Account determined as of the end of the immediately preceding Valuation
Period; and
(C) is the mortality and expense risk charge corresponding to the portion of
the current calendar year that is in the current Valuation Period.
<PAGE>
CALCULATION OF VARIABLE INCOME PAYMENTS
- ------------------------------------------------------------------------------
We calculate the amount of the first variable income payment under an Income
Plan by applying the Contract Value allocated to each Variable Sub-Account less
any applicable premium tax charge deducted at the time, to the income payment
tables in the Contract. We divide the amount of the first variable annuity
income payment by the Variable Sub-Account's then current Annuity Unit value to
determine the number of annuity units ("Annuity Units") upon which later income
payments will be based. To determine income payments after the first, we simply
multiply the number of Annuity Units determined in this manner for each Variable
Sub-Account by the then current Annuity Unit value ("Annuity Unit Value") for
that Variable Sub-Account.
CALCULATION OF ANNUITY UNIT VALUES
Annuity Units in each Variable Sub-Account are valued separately and Annuity
Unit Values will depend upon the investment experience of the particular Fund in
which the Variable Sub-Account invests. We calculate the Annuity Unit Value for
each Variable Sub-Account at the end of any Valuation Period by:
o multiplying the Annuity Unit Value at the end of the immediately preceding
Valuation Period by the Variable Sub-Account's Net Investment Factor
(described in the preceding section) for the Period; and then
o dividing the product by the sum of 1.0 plus the assumed investment rate for
the Valuation Period.
The assumed investment rate adjusts for the interest rate assumed in the income
payment tables used to determine the dollar amount of the first variable income
payment, and is at an effective annual rate which is disclosed in the Contract.
We determine the amount of the first variable income payment paid under an
Income Plan using the income payment tables set out in the Contracts. The
Contracts include tables that differentiate on the basis of sex, except in
states that require the use of unisex tables.
<PAGE>
GENERAL MATTERS
- ------------------------------------------------------------------------------
INCONTESTABILITY
We will not contest the Contract after we issue it.
SETTLEMENTS
The Contract must be returned to us prior to any settlement. We must receive due
proof of the Contract Owner(s) death (or Annuitant's death if there is a
non-natural Contract Owner) before we will settle a death claim.
SAFEKEEPING OF THE VARIABLE ACCOUNT'S ASSETS
We hold title to the assets of the Variable Account. We keep the assets
physically segregated and separate and apart from our general corporate assets.
We maintain records of all purchases and redemptions of the Fund shares held by
each of the Variable Sub-Accounts.
The Funds do not issue stock certificates. Therefore, we hold the Variable
Account's assets in open account in lieu of stock certificates. See the Funds'
prospectuses for a more complete description of the custodian of the Funds.
PREMIUM TAXES
Applicable premium tax rates depend on the Contract Owner's state of residency
and the insurance laws and our status in those states where premium taxes are
incurred. Premium tax rates may be changed by legislation, administrative
interpretations, or judicial acts. Currently, the State of New York does not
assess a premium tax on annuities.
TAX RESERVES
We do not establish capital gains tax reserves for any Variable Sub-Account nor
do we deduct charges for tax reserves because we believe that capital gains
attributable to the Variable Account will not be taxable. However, we reserve
the right to deduct charges to establish tax reserves for potential taxes on
realized or unrealized capital gains.
<PAGE>
FEDERAL TAX MATTERS
- ------------------------------------------------------------------------------
THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE. WE MAKE
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 ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
Allstate is taxed as a life insurance company under Part I of Subchapter L of
the Internal Revenue Code. Since the Variable Account is not an entity separate
from Allstate, and its operations form a part of Allstate, it will not be taxed
separately as a "Regulated Investment Company" under Subchapter M of the Code.
Investment income and realized capital gains of the Variable Account are
automatically applied to increase reserves under the Contract. Under existing
federal income tax law, Allstate believes that the Variable Account investment
income and capital gains will not be taxed to the extent that such income and
gains are applied to increase the reserves under the Contract. Accordingly,
Allstate does not anticipate that it will incur any federal income tax liability
attributable to the Variable Account, and therefore Allstate does not intend to
make provisions for any such taxes. If Allstate is taxed on investment income or
capital gains of the Variable Account, then Allstate may impose a charge against
the Variable Account in order to make provision for such taxes.
EXCEPTIONS TO THE NON-NATURAL OWNER RULE
There are several exceptions to the general rule that annuity contracts held by
a non-natural owner are not treated as annuity contracts for federal income tax
purposes. Contracts will generally be treated as held by a natural person if the
nominal owner is a trust or other entity which holds the Contract as agent for a
natural person. However, this special exception will not apply in the case of an
employer who is the nominal owner of an annuity contract under a non-qualified
deferred compensation arrangement for its employees. Other exceptions to the
non-natural owner rule are: (1) Contracts acquired by an estate of a decedent by
reason of the death of the decedent; (2) certain Qualified Contracts; (3)
Contracts purchased by employers upon the termination of certain qualified
plans; (4) certain Contracts used in connection with structured settlement
agreements, and (5) Contracts purchased with a single premium when the annuity
starting date is no later than a year from purchase of the annuity and
substantially equal periodic payments are made, not less frequently than
annually, during the annuity period.
IRS REQUIRED DISTRIBUTION AT DEATH RULES
In order to be considered an annuity contract for federal income tax purposes,
the Contract must provide: (1) if any Contract Owner dies on or after the Payout
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 Contract Owner dies prior to the Payout Start Date, the entire
interest in the Contract will be distributed within 5 years after the date of
the Owner's death. These requirements are satisfied if any portion of the
Contract Owner's interest that 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 1 year of the Owner's death. If the Contract Owner's
designated Beneficiary is the surviving spouse of the Owner, the Contract may be
continued with the surviving spouse as the new Contract Owner. If the Contract
Owner is a non-natural person, then the Annuitant will be treated as the
Contract Owner for purposes of applying the distribution at death rules. In
addition, a change in the Annuitant on a Contract owned by a non-natural person
will be treated as the death of the Contract Owner.
<PAGE>
QUALIFIED PLANS
- ------------------------------------------------------------------------------
The Contract may be used with several types of qualified plans. The income on
qualified plan and IRA investments is tax deferred and variable annuities held
by such plans do not receive any additional tax deferral. You should review the
annuity features, including all benefits and expenses, prior to purchasing a
variable annuity in a qualified plan or IRA. Allstate New York reserves the
right to limit the availability of the Contract for use with any of the
Qualified Plans listed below. 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. Contract 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.
INDIVIDUAL RETIREMENT ANNUITIES
Section 408 of the Code permits eligible individuals to contribute to an
individual retirement program known as an Individual Retirement Annuity (IRA).
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. An IRA generally may
not provide life insurance, but it may provide a death benefit that equals the
greater of the premiums paid and the Contract's Cash Value. The Contract
provides a death benefit that in certain circumstances may exceed the greater of
the payments and the Contract Value. It is possible that the death benefit could
be viewed as violating the prohibition on investment in life insurance contracts
with the result that the Contract would not be viewed as satisfying the
requirements of an IRA.
<PAGE>
ROTH INDIVIDUAL RETIREMENT ANNUITIES
Section 408A of the Code permits eligible individuals to make nondeductible
contributions to an individual retirement program known as a Roth Individual
Retirement Annuity. Roth Individual Retirement Annuities are subject to
limitations on the amount that can be contributed and on the time when
distributions may commence. "Qualified distributions" from Roth Individual
Retirement Annuities are not includible in gross income. "Qualified
distributions" are any distributions made more than five taxable years after the
taxable year of the first contribution to the Roth Individual Retirement
Annuity, and which are made on or after the date the individual attains age 59
1/2, made to a beneficiary after the owner's death, attributable to the owner
being disabled or for a first time home purchase (first time home purchases are
subject to a lifetime limit of $10,000). "Nonqualified distributions" are
treated as made from contributions first and are includible in gross income to
the extent such distributions exceed the contributions made to the Roth
Individual Retirement Annuity. The taxable portion of a "nonqualified
distribution" may be subject to the 10% penalty tax on premature distributions.
Subject to certain limitations, a traditional Individual Retirement Account or
Annuity may be converted or "rolled over" to a Roth Individual Retirement
Annuity. The taxable portion of a conversion or rollover distribution is
includible in gross income, but is exempted from the 10% penalty tax on
premature distributions.
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. Employers intending to use
the Contract in connection with such plans should seek competent advice.
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.
<PAGE>
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
on or after the date 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). These limitations
do not apply to withdrawals where Allstate is directed to transfer some or all
of the Contract Value to another 403(b) plan.
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. To the extent the Contracts are used in connection with an
eligible plan, employees are considered general creditors of the employer and
the employer as owner of the Contract has the sole right to the proceeds of the
Contract. Generally, under the non-natural owner rules, such Contracts are not
treated as annuity contracts for federal income tax purposes. 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. However, under a
Section 457 plan all the compensation deferred under the plan must remain solely
the property of the employer, subject only to the claims of the employer's
general creditors, until such time as made available to the employee or a
beneficiary.
SALES COMMISSIONS
Commissions paid may vary, but in the aggregate are not anticipated to exceed
8.5% of any purchase payment. In addition, under certain circumstances, Allstate
New York may pay certain sellers of the contracts a persistency bonus which will
take into account, among other things, the length of time purchase payments have
been held under a contract and the amount of purchase payments.
<PAGE>
LEGAL MATTERS
Freedman, Levy, Kroll & Simonds, Washington, D.C., has advised Allstate New York
on certain federal securities laws matters. All matters of New York law
pertaining to the contracts, including the validity of the contracts and
Allstate New York's right to issue such contracts under New York insurance law,
have been passed upon by Michael J. Velotta, General Counsel of Allstate New
York.
EXPERTS
The financial statements and related financial statement schedules of Allstate
New York as of December 31, 1999 and 1998 and for each of the three years in the
period ended December 31, 1999 that appear in this Statement of Additional
Information have been audited by Deloitte & Touche LLP, 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.
The financial statements of the Variable Account as of December 31, 1999 and for
each of the periods in the two years then ended that appear in this Statement of
Additional Information have been audited by Deloitte & Touche LLP, 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.
FINANCIAL STATEMENTS
The financial statements of the Variable Account as of December 31, 1999 and for
the periods in the two years then ended, the financial statements and related
financial statement schedule of Allstate New York as of December 31, 1999 and
1998 and for each of the three years in the period ended December 31, 1999 and
the accompanying Independent Auditors' Reports appear in the pages that follow.
The financial statements of Allstate New York included herein should be
considered only as bearing upon the ability of Allstate New York to meet its
obligations under the Contacts.
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND SHAREHOLDER OF
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK:
We have audited the accompanying Statements of Financial Position of Allstate
Life Insurance Company of New York (the "Company", an affiliate of The Allstate
Corporation) as of December 31, 1999 and 1998, and the related Statements of
Operations and Comprehensive Income, Shareholder's Equity and Cash Flows for
each of the three years in the period ended December 31, 1999. Our audits also
included Schedule IV - Reinsurance and Schedule V - Valuation and Qualifying
Accounts. These financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial statement schedules 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 the Company as of December 31, 1999 and
1998, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 1999 in conformity with generally
accepted accounting principles. Also, in our opinion, Schedule IV - Reinsurance,
and Schedule V - Valuation and Qualifying Accounts, when considered in relation
to the basic financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein.
/s/ Deloitte & Touche LLP
Chicago, Illinois
February 25, 2000
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------
1999 1998
------------------ -------------------
<S> <C> <C>
($ in thousands, except par value data)
ASSETS
Investments
Fixed income securities, at fair value
(amortized cost $1,858,216 and $1,648,972) $ 1,912,545 $ 1,966,067
Mortgage loans 166,997 145,095
Short-term 46,037 76,127
Policy loans 31,109 29,620
----------------- ------------------
Total investments 2,156,688 2,216,909
Cash 1,135 3,117
Deferred policy acquisition costs 106,932 87,830
Accrued investment income 25,712 22,685
Reinsurance recoverables 1,949 2,210
Other assets 7,803 9,887
Separate Accounts 443,705 366,247
----------------- ------------------
TOTAL ASSETS $ 2,743,924 $ 2,708,885
================= ==================
LIABILITIES
Reserve for life-contingent contract benefits $ 1,098,016 $ 1,208,104
Contractholder funds 839,157 703,264
Current income taxes payable 10,132 14,029
Deferred income taxes 3,077 25,449
Other liabilities and accrued expenses 41,218 23,463
Payable to affiliates, net 4,731 38,835
Separate Accounts 443,705 366,247
----------------- ------------------
TOTAL LIABILITIES 2,440,036 2,379,391
----------------- ------------------
COMMITMENTS AND CONTINGENT LIABILITIES (NOTE 13)
SHAREHOLDER'S EQUITY
Common stock, $25 par value, 100,000 and 80,000
shares authorized, issued and outstanding 2,500 2,000
Additional capital paid-in 45,787 45,787
Retained income 225,367 198,801
Accumulated other comprehensive income:
Unrealized net capital gains 30,234 82,906
----------------- ------------------
TOTAL ACCUMULATED OTHER COMPREHENSIVE INCOME 30,234 82,906
----------------- ------------------
TOTAL SHAREHOLDER'S EQUITY 303,888 329,494
----------------- ------------------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $ 2,743,924 $ 2,708,885
================= ==================
</TABLE>
See notes to financial statements.
2
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
($ in thousands) 1999 1998 1997
------------------ ------------------ ------------------
<S> <C> <C> <C>
REVENUES
Premiums (net of reinsurance ceded
of $4,253, $3,204 and $3,087 ) $ 63,748 $ 85,771 $ 90,366
Contract charges 38,626 33,281 28,597
Net investment income 148,331 134,413 124,887
Realized capital gains and losses (2,096) 4,697 701
--------- --------- --------
248,609 258,162 244,551
--------- --------- --------
COSTS AND EXPENSES
Contract benefits (net of reinsurance recoveries
of $1,166, $997 and $1,985 ) 178,267 183,839 179,872
Amortization of deferred policy acquisition costs 8,985 7,029 5,023
Operating costs and expenses 20,151 24,703 23,644
--------- --------- --------
207,403 215,571 208,539
--------- --------- --------
INCOME FROM OPERATIONS
BEFORE INCOME TAX EXPENSE 41,206 42,591 36,012
Income tax expense 14,640 14,934 13,296
--------- --------- --------
NET INCOME 26,566 27,657 22,716
--------- --------- --------
OTHER COMPREHENSIVE (LOSS) INCOME, AFTER TAX
Change in unrealized net capital gains and losses (52,672) 18,427 27,627
--------- -------- --------
COMPREHENSIVE (LOSS) INCOME $ (26,106) $ 46,084 $ 50,343
========= ======== ========
</TABLE>
See notes to financial statements.
3
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------------------
1999 1998 1997
------------------ ------------------- -----------------
($ in thousands)
COMMON STOCK
<S> <C> <C> <C>
Balance, beginning of year $ 2,000 $ 2,000 $ 2,000
Issuance of new shares of stock 500 - -
----------------- ----------------- -----------------
Balance, end of year 2,500 2,000 2,000
----------------- ----------------- -----------------
ADDITIONAL CAPITAL PAID-IN $ 45,787 $ 45,787 $ 45,787
----------------- ----------------- -----------------
RETAINED INCOME
Balance, beginning of year $ 198,801 $ 171,144 $ 148,428
Net income 26,566 27,657 22,716
----------------- ----------------- -----------------
Balance, end of year 225,367 198,801 171,144
----------------- ----------------- -----------------
ACCUMULATED OTHER COMPREHENSIVE INCOME
Balance, beginning of year $ 82,906 $ 64,479 $ 36,852
Change in unrealized net capital gains
and losses (52,672) 18,427 27,627
----------------- ----------------- -----------------
Balance, end of year 30,234 82,906 64,479
----------------- ----------------- -----------------
TOTAL SHAREHOLDER'S EQUITY $ 303,888 $ 329,494 $ 283,410
================= ================= =================
</TABLE>
See notes to financial statements.
4
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
($ in thousands) 1999 1998 1997
------------------ ------------------- -----------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 26,566 $ 27,657 $ 22,716
Adjustments to reconcile net income to net cash
provided by operating activities
Amortization and other non-cash items (37,619) (34,890) (31,112)
Realized capital gains and losses 2,096 (4,697) (701)
Interest credited to contractholder funds 36,736 41,200 31,667
Changes in:
Life-contingent contract benefits and
contractholder funds 38,527 53,343 68,114
Deferred policy acquisition costs (17,262) (16,693) (10,781)
Income taxes payable 2,094 13,865 (158)
Other operating assets and liabilities 13,049 (15,974) 8,545
----------------- ----------------- -----------------
Net cash provided by operating activities 64,187 63,811 88,290
----------------- ----------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of fixed income securities 161,443 65,281 15,723
Investment collections
Fixed income securities 21,822 159,648 120,061
Mortgage loans 7,479 5,855 5,365
Investments purchases
Fixed income securities (383,961) (292,444) (236,984)
Mortgage loans (31,888) (24,252) (35,200)
Change in short-term investments, net 29,493 (55,846) 16,342
Change in policy loans, net (1,489) (2,020) (2,241)
----------------- ----------------- -----------------
Net cash used in investing activities (197,101) (143,778) (116,934)
----------------- ----------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 500 - -
Contractholder fund deposits 197,439 137,473 79,384
Contractholder fund withdrawals (67,007) (54,782) (51,374)
----------------- ----------------- -----------------
Net cash provided by financing activities 130,932 82,691 28,010
----------------- ----------------- -----------------
NET (DECREASE) INCREASE IN CASH (1,982) 2,724 (634)
CASH AT THE BEGINNING OF YEAR 3,117 393 1,027
----------------- ----------------- -----------------
CASH AT END OF YEAR $ 1,135 $ 3,117 $ 393
================= ================= =================
</TABLE>
See notes to financial statements.
5
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
1. GENERAL
BASIS OF PRESENTATION
The accompanying financial statements include the accounts of Allstate Life
Insurance Company of New York (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"). These financial statements have been prepared in conformity
with generally accepted accounting principles.
To conform with the 1999 presentation, certain amounts in the prior years'
financial statements and notes have been reclassified.
NATURE OF OPERATIONS
The Company markets a broad line of life insurance and savings products in the
state of New York through a combination of exclusive agencies, securities firms,
banks, specialized brokers and through direct response marketing. Life insurance
consists of traditional products, including term and whole life,
interest-sensitive life and immediate annuities with life contingencies. Savings
products include deferred annuities and immediate annuities without life
contingencies. Deferred annuities include fixed rate, market value adjusted and
variable annuities. Group pension savings products include immediate annuities
also referred to as retirement annuities. In 1999, annuity premiums and deposits
represented 76.2% of the Company's total statutory premiums and deposits.
The Company monitors economic and regulatory developments which have the
potential to impact its business. Recently enacted federal legislation will
allow for banks and other financial organizations to have greater participation
in the securities and insurance businesses. This legislation may present an
increased level of competition for sales of the Company's products. 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 demand
for these products.
Additionally, traditional demutualizations of mutual insurance companies and
enacted and pending state legislation to permit mutual insurance companies to
convert to a hybrid structure known as a mutual holding company could have a
number of significant effects on the Company by (1) increasing industry
competition through consolidation caused by mergers and acquisitions related to
the new corporate form of business; and (2) increasing competition in capital
markets.
Although the Company currently benefits from agreements with financial services
entities who market and distribute its products, change in control of these
non-affliliated entities with which the Company has alliances could negatively
impact the Company's sales.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENTS
Fixed income securities include bonds and mortgage-backed and asset-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, certain
deferred policy acquisition costs, and certain reserves for life-contingent
contract benefits, 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.
6
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
Mortgage loans are carried at outstanding principal balance, net of unamortized
premium or discount and valuation allowances. Valuation allowances are
established for impaired loans when it is probable that contractual principal
and interest will not be collected. Valuation allowances for impaired loans
reduce the carrying value to the fair value of the collateral or the present
value of the loan's expected future repayment cash flows discounted at the
loan's original effective interest rate. Valuation allowances on loans not
considered to be impaired are established based on consideration of the
underlying collateral, borrower financial strength, current and expected market
conditions, and other factors.
Short-term investments are carried at cost or amortized cost which approximates
fair value, and includes collateral received in connection with securities
lending activities. Policy loans are carried at the unpaid principal balances.
Investment income consists primarily of interest and short-term investment
dividends. Interest is recognized on an accrual basis and dividends are recorded
at the ex-dividend date. Interest income on mortgage-backed and asset-backed
securities is determined on the effective yield method, based on estimated
principal repayments. Accrual of income is suspended for fixed income securities
and mortgage loans 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.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company utilizes financial futures contracts which are derivative financial
instruments. By meeting specific criteria these futures are designated as
accounting hedges and accounted for on a deferral basis. In order to qualify as
accounting hedges, financial futures contracts must reduce the primary market
risk exposure on an enterprise or transaction basis in conjunction with a hedge
strategy; be designated as a hedge at the inception of the transaction; and be
highly correlated with the fair value of, or interest income or expense
associated with, the hedged item at inception and throughout the hedge period.
Derivatives that are not designated as accounting hedges are accounted for on a
fair value basis.
If, subsequent to entering into a hedge transaction, the financial futures
contract becomes ineffective (including if the occurrence of a hedged
anticipatory transaction is no longer probable), the Company terminates the
derivative position. Gains and losses on these terminations are reported in
realized capital gains and losses in the period they occur. The Company may also
terminate derivatives as a result of other events or circumstances. Gains and
losses on these terminations are deferred and amortized over the remaining life
of the hedged item.
The Company accounts for financial futures as hedges using deferral accounting
for anticipatory investment purchases and sales when the criteria for futures
(discussed above) are met. In addition, anticipated transactions must be
probable of occurrence and their significant terms and characteristics
identified. Under deferral accounting, gains and losses on financial futures
contracts are deferred as other liabilities and accrued expenses. Once the
anticipated transaction occurs, the deferred gains and losses are considered
part of the cost basis of the asset and reported net of tax in shareholder's
equity. The gains and losses deferred are then recognized in conjunction with
the earnings on the hedged item. Fees and commissions paid on these derivatives
are also deferred as an adjustment to the carrying value of the hedged item.
RECOGNITION OF INSURANCE REVENUE AND RELATED BENEFITS AND INTEREST CREDITED
Traditional life insurance products consist principally of products with fixed
and guaranteed premiums and benefits, primarily term and whole life insurance
products and certain annuities with life contingencies. Premiums from these
products are recognized as revenue when due. Benefits are recognized in relation
to
7
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
such revenue so as to result in the recognition of profits over the life of
the policy and are reflected in contract benefits.
Interest-sensitive life contracts are insurance contracts whose terms are not
fixed and guaranteed. The terms that may be changed include premiums paid by the
contractholder, interest credited to the contractholder account balance and one
or more amounts assessed against the contractholder. Premiums from these
contracts are reported as deposits to the contractholder funds. Contract charge
revenue consists of fees assessed against the contractholder account balance for
cost of insurance (mortality risk), contract administration and surrender
charges. Contract benefits include interest credited to contracts and claims
incurred in excess of the related contractholder account balance.
Limited payment contracts, a type of life-contingent immediate annuity or
traditional life product, are contracts that provide insurance protection over a
contract period that extends beyond the period in which premiums are collected.
Gross premiums in excess of the net premium on limited payment contracts are
deferred and recognized over the contract period. Contract benefits are
recognized in relation to such revenue so as to result in the recognition of
profits over the life of the policy.
Contracts that do not subject the Company to significant risks arising from
mortality or morbidity are referred to as investment contracts. Fixed rate
annuities, market value adjusted annuities and immediate annuities without life
contingencies are considered investment contracts. Deposits received for such
contracts are reported as deposits to contractholder funds. Contract charge
revenue for investment contracts consists of charges assessed against the
contractholder account balance for contract administration and surrenders.
Contract benefits include interest credited and claims incurred in excess of the
related contractholder account balance.
Crediting rates for fixed rate annuities and interest-sensitive life contracts
are adjusted periodically by the Company to reflect current market conditions.
Investment contracts also include variable annuity contracts which are sold as
Separate Accounts products. The assets supporting these products are legally
segregated and available only to settle Separate Accounts contract obligations.
Deposits received are reported as Separate Accounts liabilities. The Company's
contract charge revenue for these contracts consists of charges assessed against
the Separate Accounts fund balances for contract maintenance, administration,
mortality, expense and surrenders.
DEFERRED POLICY ACQUISITION COSTS
Certain costs which vary with and are primarily related to acquiring life and
savings business, principally agents and brokers remuneration, premium taxes,
certain underwriting costs and direct mail solicitation expenses, are deferred
and amortized into income. Deferred policy acquisition costs are periodically
reviewed as to recoverability and written down where necessary.
For traditional life insurance and limited payment contracts, these costs are
amortized in proportion to the estimated revenue on such business. Assumptions
relating to estimated revenue, as well as to all other aspects of the deferred
acquisition costs and reserve calculations, are determined based upon conditions
as of the date of the policy issue and are generally not revised during the life
of the policy. Any deviations from projected business inforce, resulting from
actual policy terminations differing from expected levels, and any estimated
premium deficiencies change the rate of amortization in the period such events
occur. Generally, the amortization period for these contracts approximates the
estimated lives of the policies.
For interest-sensitive life and investment contracts, the costs are amortized in
proportion to the estimated gross profits on such business over the estimated
lives of the contract periods. Gross profits are determined
8
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
at the date of policy issue and comprise estimated investment, mortality,
expense margins and surrender charges. Assumptions underlying the gross profits
are periodically updated to reflect actual experience, and changes in the amount
or timing of estimated gross profits will result in adjustments to the
cumulative amortization of these costs.
The present value of future profits inherent in acquired blocks of insurance is
classified as a component of deferred policy acquisition costs. The present
value of future profits is amortized over the life of the blocks of insurance
using current crediting rates.
To the extent unrealized gains or losses on securities carried at fair value
would result in an adjustment of estimated gross profits had those gains or
losses actually been realized, the related carrying value of deferred
acquisition costs, including present value of future profits, are adjusted
together with accumulated unrealized net capital gains included in shareholder's
equity.
REINSURANCE RECOVERABLE
In the normal course of business, the Company seeks to limit aggregate and
single exposure to losses on large risks by purchasing reinsurance from other
insurers. Reinsurance recoverables are estimated based upon assumptions
consistent with those used in establishing the underlying reinsured contacts.
Insurance liabilities are reported gross of reinsurance recoverables.
Reinsurance does not extinguish the Company's primary liability under the
policies written and therefore reinsurers and amounts recoverable therefrom are
regularly evaluated by the Company and allowances for uncollectible reinsurance
are established as appropriate.
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 at the enacted tax
rates. The principal assets and liabilities giving rise to such differences are
insurance reserves and deferred policy acquisition costs. Deferred income taxes
also arise from unrealized capital gains and losses on fixed income securities
carried at fair value.
SEPARATE ACCOUNTS
The Company issues deferred variable annuity contracts, the assets and
liabilities of which are legally segregated and recorded as assets and
liabilities of the Separate Accounts. Absent any contract provisions wherein the
Company contractually guarantees either a minimum return or account value to the
beneficiaries of the contractholders in the form of a death benefit, the
contractholders bear the investment risk that the Separate Accounts' funds may
not meet their stated investment objectives.
The assets of the Separate Accounts are carried at fair value. Separate Accounts
liabilities represent the contractholders' claims to the related assets and are
carried at the fair value of the assets. In the event that the asset value of
certain contractholder accounts are projected to be below the value guaranteed
by the Company, a liability is established through a charge to earnings.
Investment income and realized capital gains and losses of the Separate Accounts
accrue directly to the contractholders and therefore, are not included in the
Company's statements of operations and comprehensive income. Revenues to the
Company from the Separate Accounts consist of contract maintenance and
administration fees, and mortality, surrender and expense charges.
RESERVES FOR LIFE-CONTINGENT CONTRACT BENEFITS
The reserve for life-contingent contract benefits, which relates to traditional
life insurance, group retirement annuities, immediate annuities with life
contingencies and certain variable annuity guarantees, is computed on the basis
of assumptions as to mortality, future investment yields, terminations and
9
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
expenses at the time the policy is issued. These assumptions, which for
traditional life insurance are applied using the net level premium method,
include provisions for adverse deviation and generally vary by such
characteristics as type of coverage, year of issue and policy duration. Detailed
reserve assumptions and reserve interest rates are outlined in Note 7. To the
extent that unrealized gains on fixed income securities would result in a
premium deficiency had those gains actually been realized, the related increase
in reserves is recorded as a reduction of the unrealized gains included in
shareholder's equity.
CONTRACTHOLDER FUNDS
Contractholder funds arise from the issuance of interest-sensitive life and
certain investment contracts. Deposits received are recorded as interest-bearing
liabilities. Contractholder funds are equal to deposits received, net of
commissions, and interest credited to the benefit of the contractholder less
withdrawals, mortality charges and administrative expenses. Detailed information
on crediting rates and surrender and withdrawal protection on contractholder
funds are outlined in Note 7.
OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS
Commitments to extend mortgage loans have only off-balance-sheet risk because
their contractual amounts are not recorded in the Company's statements of
financial position. The contractual amounts and fair values of these instruments
are presented in Note 5.
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.
NEW ACCOUNTING STANDARDS
In 1999, the Company adopted Statement of Position ("SOP") 97-3, "Accounting by
Insurance and Other Enterprises for Insurance-Related Assessments." The SOP
provides guidance concerning when to recognize a liability for insurance-related
assessments and how those liabilities should be measured. Specifically,
insurance-related assessments should be recognized as liabilities when all of
the following criteria have been met: 1) an assessment has been imposed or it is
probable that an assessment will be imposed, 2) the event obligating an entity
to pay an assessment has occurred and 3) the amount of the assessment can be
reasonably estimated. Adoption of this statement was not material to the
Company's results of operations or financial position.
PENDING ACCOUNTING STANDARDS
In June 1999, the Financial Accounting Standards Board delayed the effective
date of Statement of Financial Accounting Standards ("SFAS") No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS 133
replaces existing pronouncements and practices with a single, integrated
accounting framework for derivatives and hedging activities. This statement
requires that all derivatives be recognized on the balance sheet at fair value.
Derivatives that are not hedges must be adjusted to fair value through income.
If the derivative is a hedge, depending on the nature of the hedge, changes in
the fair value of derivatives will either be offset against the change in the
fair value of the hedged assets, liabilities, or firm commitments through
earnings or recognized in other comprehensive income until the hedged item is
recognized in earnings. Additionally, the change in fair value of a derivative
which is not effective as a hedge will be immediately recognized in earnings.
The delay was effected through the issuance of SFAS No. 137, which extends the
SFAS No. 133 requirements to fiscal years beginning after June 15, 2000. As
such, the Company expects to adopt the provisions of SFAS No. 133 as of January
1, 2001. The impact of this statement is dependent upon the Company's derivative
positions and market conditions existing at the date of adoption. Based on
existing interpretations of the requirements of SFAS
10
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
No. 133, the impact of the adoption is not expected to be material to the
results of operations or financial position of the Company.
3. RELATED PARTY TRANSACTIONS
REINSURANCE
The Company has reinsurance agreements with ALIC in order to limit aggregate and
single exposure on large risks. A portion of the Company's premiums and policy
benefits are ceded to ALIC and reflected net of such reinsurance in the
statements of operations and comprehensive income. Reinsurance recoverables and
the related reserve for life-contingent contract benefits 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.
The following amounts were ceded to ALIC under reinsurance agreements.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Premiums $ 3,408 $ 2,519 $ 2,171
Policy benefits 211 315 327
</TABLE>
Included in reinsurance recoverables at December 31, 1999 and 1998 are the net
amounts owed to ALIC of $458 and $3, respectively.
STRUCTURED SETTLEMENT ANNUITIES
The Company issued $14,561, $12,747 and $12,766 of structured settlement
annuities, a type of immediate annuity, in 1999, 1998 and 1997, respectively, at
prices determined based upon interest rates in effect at the time of purchase,
to fund structured settlements in matters involving AIC. Of these amounts,
$4,298, $5,152 and $3,468 relate to structured settlement annuities with life
contingencies and are included in premium income in 1999, 1998 and 1997,
respectively. Additionally, the reserve for life-contingent contract benefits
was increased by approximately 94% of such premium received in each of these
years. In most cases, these annuities were issued to Allstate Settlement
Corporation ("ASC"), a subsidiary of ALIC, which, under a "qualified
assignment", assumed AIC's obligation to make the future payments.
AIC has issued surety bonds to guarantee the payment of structured settlement
benefits assumed by ASC (from both AIC and non-related parties) and funded by
certain annuity contracts issued by the Company. ASC has entered into General
Indemnity Agreements pursuant to which it indemnified AIC for any liabilities
associated with the surety bonds and gives AIC certain collateral security
rights with respect to the annuities and certain other rights in the event of
any defaults covered by the surety bonds. Reserves recorded by the Company for
annuities related to the surety bonds were $1.19 billion and $1.08 billion at
December 31, 1999 and 1998, respectively.
BUSINESS OPERATIONS
The Company utilizes services performed by AIC and ALIC and business facilities
owned or leased, and operated by AIC in conducting its business activities. In
addition, the Company shares the services of employees with AIC. The Company
reimburses AIC and ALIC for the operating expenses incurred on behalf of the
Company. The Company is charged for the cost of these operating expenses based
on the level of services provided. Operating expenses, including compensation
and retirement and other benefit programs, allocated to the Company were
$16,155, $23,369 and $19,425 in 1999, 1998 and 1997, respectively. A
11
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
portion of these expenses relate to the acquisition of business which are
deferred and amortized over the contract period.
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, 1999
U.S. government and agencies $ 413,875 $ 53,717 $ (2,705) $ 464,887
Municipal 60,256 997 (1,976) 59,277
Corporate 996,298 36,303 (31,695) 1,000,906
Foreign government 61,987 3,217 (639) 64,565
Mortgage-backed securities 291,304 4,770 (7,370) 288,704
Asset-backed securities 34,496 26 (316) 34,206
-------------- -------------- -------------- --------------
Total fixed income securities $ 1,858,216 $ 99,030 $ (44,701) $ 1,912,545
============== ============== ============== ==============
AT DECEMBER 31, 1998
U.S. government and agencies $ 443,930 $ 179,455 $ (1) $ 623,384
Municipal 31,617 2,922 (19) 34,520
Corporate 848,289 121,202 (899) 968,592
Mortgage-backed securities 291,520 14,294 (700) 305,114
Asset-backed securities 33,616 869 (28) 34,457
-------------- -------------- -------------- --------------
Total fixed income securities $ 1,648,972 $ 318,742 $ (1,647) $ 1,966,067
============== ============== ============== ==============
</TABLE>
SCHEDULED MATURITIES
The scheduled maturities for fixed income securities are as follows at December
31, 1999:
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
---- -----
<S> <C> <C>
Due in one year or less $ 6,720 $ 6,798
Due after one year through five years 168,795 168,859
Due after five years through ten years 217,305 218,381
Due after ten years 1,139,596 1,195,597
--------------- ---------------
1,532,416 1,589,635
Mortgage- and asset-backed securities 325,800 322,910
--------------- ---------------
Total $ 1,858,216 $ 1,912,545
=============== ===============
</TABLE>
Actual maturities may differ from those scheduled as a result of prepayments by
the issuers.
12
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
NET INVESTMENT INCOME
YEAR ENDED DECEMBER 31, 1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Fixed income securities $ 135,561 $ 124,100 $ 116,763
Mortgage loans 12,346 10,309 7,896
Other 3,495 2,940 2,200
------------- ------------- -------------
Investment income, before expense 151,402 137,349 126,859
Investment expense 3,071 2,936 1,972
------------- ------------- -------------
Net investment income $ 148,331 $ 134,413 $ 124,887
============= ============= =============
</TABLE>
REALIZED CAPITAL GAINS AND LOSSES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Fixed income securities $ (2,207) $ 4,755 $ 955
Mortgage loans 42 (65) (221)
Other 69 7 (33)
------------ ----------- -------------
Realized capital gains and losses (2,096) 4,697 701
Income taxes (765) 1,644 245
------------ ----------- -------------
Realized capital gains and losses, after tax $ (1,331) $ 3,053 $ 456
============ =========== =============
</TABLE>
Excluding calls and prepayments, gross gains of $1,713, $2,905 and $471 and
gross losses of $3,920, $164 and $105 were realized on sales of fixed income
securities during 1999, 1998 and 1997, respectively.
UNREALIZED NET CAPITAL GAINS
Unrealized net capital gains on fixed income securities included in
shareholder's equity at December 31, 1999 are as follows:
<TABLE>
<CAPTION>
COST/ GROSS UNREALIZED UNREALIZED
AMORTIZED COST FAIR VALUE GAINS LOSSES NET GAINS
-------------- ---------- ----- ------ ---------
<S> <C> <C> <C> <C> <C>
Fixed income securities $1,858,216 $1,912,545 $ 99,030 $(44,701) $ 54,329
========== ========== ======== ========
Reserve for life-contingent
contract benefits (7,815)
Deferred income taxes (16,280)
--------
Unrealized net capital gains $ 30,234
========
</TABLE>
<TABLE>
<CAPTION>
CHANGE IN UNREALIZED NET CAPITAL GAINS
YEAR ENDED DECEMBER 31, 1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Fixed income securities $(262,766) $ 70,948 $123,519
Reserves for life contingent-contract benefits 179,891 (42,251) (80,155)
Deferred income taxes 28,362 (9,922) (14,876)
Deferred policy acquisition costs and other 1,841 (348) (861)
--------- -------- --------
(Decrease) increase in unrealized net capital gains $ (52,672) $ 18,427 $ 27,627
========= ======== ========
</TABLE>
13
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
INVESTMENT LOSS PROVISIONS AND VALUATION ALLOWANCES
Pretax provisions for investment losses, principally relating to valuation
allowances on mortgage loans were $114 and $261 in 1998 and 1997, respectively.
There was not a provision for investment losses in 1999.
MORTGAGE LOAN IMPAIRMENT
A mortgage loan is impaired when it is probable that the Company will be unable
to collect all amounts due according to the contractual terms of the loan
agreement.
The Company had no impaired loans at December 31, 1999 and 1998.
Valuation allowances for mortgage loans at December 31, 1999, 1998 and 1997 were
$600, $600 and $486, respectively. For the years ended December 31, 1999, 1998
and 1997, there were no reductions of the mortgage loan valuation allowance for
dispositions of impaired loans. Net additions to the mortgage loan valuation
allowances were $114 and $261 for the years ended December 31, 1998 and 1997,
respectively. There were no additions or reductions to the mortgage loan
valuation allowance for the year ended December 31, 1999.
INVESTMENT CONCENTRATION FOR MUNICIPAL BOND AND COMMERCIAL MORTGAGE PORTFOLIOS
AND OTHER INVESTMENT INFORMATION
The Company maintains a diversified portfolio of municipal bonds. The largest
concentrations in the portfolio are presented below. Except for the following,
holdings in no other state exceeded 5% of the portfolio at December 31, 1999:
<TABLE>
<CAPTION>
(% of municipal bond portfolio carrying value) 1999 1998
---- ----
<S> <C> <C>
Arizona 22.7% - %
California 20.2 17.4
Ohio 16.4 30.2
Illinois 11.6 21.1
Pennsylvania 7.5 -
Indiana 5.0 -
</TABLE>
The Company's mortgage loans are collateralized by a variety of commercial real
estate property types located throughout the United States. Substantially all of
the commercial mortgage loans are non-recourse to the borrower. The states with
the largest portion of the commercial mortgage loan portfolio are listed below.
Except for the following, holdings in no other state exceeded 5% of the
portfolio at December 31, 1999:
<TABLE>
<CAPTION>
(% of commercial mortgage portfolio carrying value) 1999 1998
---- ----
<S> <C> <C>
California 34.9% 41.9%
New York 27.6 26.3
Illinois 13.2 15.8
New Jersey 12.3 6.9
Pennsylvania 9.7 6.2
</TABLE>
14
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
The types of properties collateralizing the commercial mortgage loans at
December 31, are as follows:
<TABLE>
<CAPTION>
(% of commercial mortgage portfolio carrying value) 1999 1998
---- ----
<S> <C> <C>
Retail 33.1% 39.5%
Office buildings 18.9 11.7
Warehouse 18.5 19.2
Apartment complex 15.8 18.5
Industrial 4.6 5.5
Other 9.1 5.6
----- -----
100.0% 100.0%
===== =====
</TABLE>
The contractual maturities of the commercial mortgage loan portfolio as of
December 31, 1999, for loans that were not in foreclosure are as follows:
<TABLE>
<CAPTION>
NUMBER OF LOANS CARRYING VALUE PERCENT
--------------- -------------- -------
<S> <C> <C>
2000 2 $ 4,475 2.7%
2001 5 7,165 4.3
2002 2 5,904 3.5
2004 4 5,289 3.2
Thereafter 33 144,164 86.3
----- --------------- -----
Total 46 $ 166,997 100.0%
===== =============== =====
</TABLE>
In 1999, there were no commercial mortgage loans which were contractually due.
SECURITIES ON DEPOSIT
At December 31, 1999, fixed income securities with a carrying value of $1,903
were on deposit with regulatory authorities as required by law.
5. FINANCIAL INSTRUMENTS
In the normal course of business, the Company invests in various financial
assets, incurs various financial liabilities and enters into agreements
involving derivative financial instruments and other off-balance-sheet financial
instruments. The fair value estimates of financial instruments presented on the
following page are not necessarily indicative of the amounts the Company might
pay or receive in actual market transactions. Potential taxes and other
transaction costs have not been considered in estimating fair value. The
disclosures that follow do not reflect the fair value of the Company as a whole
since a number of the Company's significant assets (including deferred policy
acquisition costs and reinsurance recoverables) and liabilities (including
traditional life and interest-sensitive life insurance reserves and deferred
income taxes) are not considered financial instruments and are not carried at
fair value. Other assets and liabilities considered financial instruments such
as accrued investment income and cash are generally of a short-term nature.
Their carrying values are assumed to approximate fair value.
15
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
FINANCIAL ASSETS
The carrying value and fair value of financial assets at December 31, are as
follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
----- ----- ----- -----
<S> <C> <C> <C> <C>
Fixed income securities $ 1,912,545 $ 1,912,545 $ 1,966,067 $ 1,966,067
Mortgage loans 166,997 159,853 145,095 154,872
Short-term investments 46,037 46,037 76,127 76,127
Policy loans 31,109 31,109 29,620 29,620
Separate Accounts 443,705 443,705 366,247 366,247
</TABLE>
CARRYING VALUE AND FAIR VALUE INCLUDE THE EFFECTS OF DERIVATIVE FINANCIAL
INSTRUMENTS WHERE APPLICABLE.
Fair values for fixed income securities are based on quoted market prices where
available. Non-quoted securities are valued based on discounted cash flows using
current interest rates for similar securities. Mortgage loans are valued based
on discounted contractual cash flows. Discount rates are selected using current
rates at which similar loans would be made to borrowers with similar
characteristics, using similar properties as collateral. Loans that exceed 100%
loan-to-value are valued at the estimated fair value of the underlying
collateral. Short-term investments are highly liquid investments with maturities
of less than one year whose carrying value are deemed to approximate fair value.
The carrying value of policy loans are deemed to approximate fair value.
Separate Accounts assets are carried in the statements of financial position at
fair value based on quoted market prices.
FINANCIAL LIABILITIES
The carrying value and fair value of financial liabilities at December 31, are
as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
----- ----- ----- -----
<S> <C> <C> <C> <C>
Contractholder funds on
investment contracts $ 627,488 $ 605,113 $ 512,239 $ 518,448
Separate Accounts 443,705 443,705 366,247 366,247
</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
Accounts liabilities are carried at the fair value of the underlying assets.
DERIVATIVE FINANCIAL INSTRUMENTS
The only derivative financial instruments used by the Company are financial
futures contracts. The Company primarily uses this derivative financial
instrument to reduce its exposure to market risk, specifically interest rate
risk, in conjunction with asset/liability management. The Company does not hold
or issue these instruments for trading purposes.
16
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
The following table summarizes the contract amount, credit exposure, fair value
and carrying value of the Company's derivative financial instruments:
<TABLE>
<CAPTION>
CARRYING
VALUE
CONTRACT CREDIT FAIR ASSETS/
AMOUNT EXPOSURE VALUE (LIABILITIES)
------ -------- ----- -------------
<S> <C> <C> <C> <C>
AT DECEMBER 31, 1999
Financial futures contracts $ 8,700 $ - $ (29) $ 588
AT DECEMBER 31, 1998
Financial futures contracts $ 15,000 $ - $ (15) $ (223)
</TABLE>
CARRYING VALUE IS REPRESENTATIVE OF DEFERRED GAINS AND LOSSES.
The contract amounts are used to calculate the exchange of contractual payments
under the agreements and are not representative of the potential for gain or
loss on these agreements.
Credit exposure represents the Company's potential loss if all of the
counterparties failed to perform under the contractual terms of the contracts
and all collateral, if any, became worthless. This exposure is measured by the
fair value of contracts with a positive fair value at the reporting date. The
Company manages its exposure to credit risk primarily by establishing risk
control limits. To date, the Company has not incurred any losses as financial
futures contracts have limited off-balance-sheet credit risk as they are
executed on organized exchanges and require daily cash settlement of margins.
Fair value is the estimated amount that the Company would receive (pay) to
terminate or assign the contracts at the reporting date, thereby taking into
account the current unrealized gains or losses of open contracts. Dealer and
exchange quotes are used to value the Company's derivatives.
Financial futures are commitments to either purchase or sell designated
financial instruments at a future date for a specified price or yield. They may
be settled in cash or through delivery. As part of its asset/liability
management, the Company generally utilizes financial futures contracts to manage
its market risk related to anticipatory investment purchases and sales.
Financial futures used as hedges of anticipatory transactions pertain to
identified transactions which are probable to occur and are generally completed
within 90 days.
Market risk is the risk that the Company will incur losses due to adverse
changes in market rates and prices. Market risk exists for all of the derivative
financial instruments that the Company currently holds, as these instruments may
become less valuable due to adverse changes in market conditions. The Company
mitigates this risk through established risk control limits set by senior
management. In addition, the change in the value of the Company's derivative
financial instruments designated as hedges are generally offset by the change in
the value of the related assets and liabilities.
OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS
Commitments to extend mortgage loans are agreements to lend to a borrower
provided there is no violation of any condition established in the contract. The
Company enters into these agreements to commit to future loan fundings at a
predetermined interest rate. Commitments generally have fixed expiration dates
or other termination clauses. Commitments to extend mortgage loans, which are
secured by the underlying properties, are valued based on estimates of fees
charged by other institutions to make
17
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
similar commitments to borrowers. At December 31, 1999, the Company had $10,000
in mortgage loan commitments which had a fair value of $100. The Company had no
mortgage loan commitments at December 31, 1998.
6. DEFERRED POLICY ACQUISITION COSTS
Certain costs of acquiring business which were deferred and amortized for the
years ended December 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Balance, beginning of year $ 87,830 $ 71,946
Acquisition costs deferred 26,247 23,723
Amortization charged to income (8,861) (8,238)
Adjustment from unlocking assumptions (124) 1,209
Effect of unrealized gains/(losses) 1,840 (810)
------------ ------------
Balance, end of year $ 106,932 $ 87,830
============ ============
</TABLE>
7. RESERVE FOR LIFE-CONTINGENT CONTRACT BENEFITS AND CONTRACTHOLDER FUNDS
At December 31, the reserve for life-contingent contract benefits consists of
the following:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Immediate annuities:
Structured settlement annuities $ 1,024,049 $ 1,135,813
Other immediate annuities 2,933 2,577
Traditional life 70,254 68,511
Other 780 1,203
----------- ------------
Total life-contingent contract benefits $ 1,098,016 $ 1,208,104
=========== ============
</TABLE>
The assumptions for mortality generally utilized in calculating reserves
include, the U.S. population with projected calendar year improvements and age
setbacks for impaired lives for structured settlement annuities; the 1983 group
annuity mortality table for other immediate annuities; and actual Company
experience plus loading for traditional life. Interest rate assumptions vary
from 3.5% to 10.3% for immediate annuities and 4.5% to 7.0% for traditional
life. Other estimation methods include the present value of contractually fixed
future benefits for structured settlement annuities, the present value of
expected future benefits based on historical experience for other immediate
annuities and the net level premium reserve method using the Company's
withdrawal experience rates for traditional life.
Premium deficiency reserves are established, if necessary and have been recorded
for the structured settlement annuity business, to the extent the unrealized
gains on fixed income securities would result in a premium deficiency had those
gains actually been realized. A liability of $8 million and $188 million is
included in the reserve for life-contingent contract benefits with respect to
this deficiency for the years ended December 31, 1999 and 1998, respectively.
The decrease in this liability in 1999 reflects declines in unrealized capital
gains on fixed income securities.
18
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
At December 31, contractholder funds consists of the following:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Interest-sensitive life $211,729 $189,970
Fixed annuities:
Immediate annuities 303,564 285,977
Deferred annuities 273,864 177,317
Other investment contracts 50,000 50,000
-------- --------
Total contractholder funds $839,157 $703,264
======== ========
</TABLE>
Contractholder funds are equal to deposits received, net of commissions, and
interest credited to the benefit of the contractholder less withdrawals,
mortality charges and administrative expenses. Interest rates credited range
from 5.5% to 6.5% for interest-sensitive life contracts; 3.5% to 9.8% for
immediate annuities; 4.0% to 7.9% for deferred annuities and 6.6% for other
investment contracts. Withdrawal and surrender charge protection includes: i)
for interest-sensitive life, either a percentage of account balance or dollar
amount grading off generally over 20 years; and ii) for deferred annuities not
subject to a market value adjustment, either a declining or a level percentage
charge generally over nine years or less. Approximately 2% of deferred annuities
are subject to a market value adjustment.
8. CORPORATION RESTRUCTURING
On November 10, 1999 the Corporation announced a series of strategic initiatives
to aggressively expand its selling and servicing capabilities. The Corporation
also announced that it is implementing a program to reduce expenses by
approximately $600 million. The reduction will result in the elimination of
approximately 4,000 current non-agent positions, across all employment grades
and categories by the end of 2000, or approximately 10% of the Corporation's
non-agent work force. The impact of the reduction in employee positions is not
expected to materially impact the results of operations of the Company.
These cost reductions are part of a larger initiative to redeploy the cost
savings to finance new initiatives including investments in direct access and
internet channels for new sales and service capabilities, new competitive
pricing and underwriting techniques, new agent and claim technology and enhanced
marketing and advertising. As a result of the cost reduction program, the
Corporation recorded restructuring and related charges of $81 million pretax
during the fourth quarter of 1999. The Corporation anticipates that additional
pretax restructuring related charges of approximately $100 million will be
expensed as incurred throughout 2000. The Company's allocable share of these
expenses were immaterial in 1999 and are expected to be immaterial in 2000.
9. INCOME TAXES
The Company joins the Corporation and its other eligible domestic subsidiaries
(the "Allstate Group") in the filing of a consolidated federal income tax return
and is party to a federal income tax allocation agreement (the "Allstate Tax
Sharing Agreement"). Under the Allstate Tax Sharing Agreement, the Company pays
to or receives from the Corporation the amount, if any, by which the Allstate
Group's federal income tax liability is affected by virtue of inclusion of the
Company in the consolidated federal income tax return. Effectively, this
19
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
results in the Company's annual income tax provision being computed, with
adjustments, as if the Company filed a separate return.
Prior to June 30, 1995, the Corporation was a subsidiary of Sears, Roebuck & Co.
("Sears") and, with its eligible domestic subsidiaries, was included in the
Sears consolidated federal income tax return and federal income tax allocation
agreement. Effective June 30, 1995, the Corporation and Sears entered into a new
tax sharing agreement, which governs their respective rights and obligations
with respect to federal income taxes for all periods during which the
Corporation was a subsidiary of Sears, including the treatment of audits of tax
returns for such periods.
The Internal Revenue Service ("IRS") has completed its review of the Allstate
Group's federal income tax returns through the 1993 tax year. Any adjustments
that may result from IRS examinations of tax returns are not expected to have a
material impact on the financial position, liquidity or results of operations of
the Company.
The components of the deferred income tax assets and liabilities at December 31,
are as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
DEFERRED ASSETS
Life and annuity reserves $ 42,248 $ 41,073
Discontinued operations 366 364
Other postretirement benefits 296 328
Other assets 1,319 2,023
------------- -------------
Total deferred assets 44,229 43,788
DEFERRED LIABILITIES
Deferred policy acquisition costs (25,790) (20,573)
Unrealized net capital gains (16,280) (44,642)
Difference in tax bases of investments (3,194) (1,784)
Prepaid commission expense (682) (790)
Other liabilities (1,360) (1,448)
------------- -------------
Total deferred liabilities (47,306) (69,237)
------------- -------------
Net deferred liability $ (3,077) $ (25,449)
============= =============
</TABLE>
The components of income tax expense for the year ended December 31, are as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Current $ 8,650 $ 13,679 $ 14,874
Deferred 5,990 1,255 (1,578)
-------- -------- --------
Total income tax expense $ 14,640 $ 14,934 $ 13,296
======== ======== ========
</TABLE>
The Company paid income taxes of $12,547, $3,788 and $13,350 in 1999, 1998 and
1997, respectively.
20
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
A reconciliation of the statutory federal income tax rate to the effective
income tax rate on income from operations for the year ended December 31, is as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax rate 35.0% 35.0% 35.0%
State income tax expense 1.6 1.6 2.2
Other (1.1) (1.5) (.3)
----- ----- -----
Effective income tax rate 35.5% 35.1% 36.9%
===== ===== =====
</TABLE>
Prior to January 1, 1984, the Company was entitled to exclude certain amounts
from taxable income and accumulate such amounts in a "policyholder surplus"
account. The balance in this account at December 31, 1999, approximately $389,
will result in federal income taxes payable of $136 if distributed by the
Company. No provision for taxes has been made as the Company has no plan to
distribute amounts from this account. No further additions to the account have
been permitted since the Tax Reform Act of 1984.
10. STATUTORY FINANCIAL INFORMATION
The Company's statutory capital and surplus was $214,738 and $196,416 at
December 31, 1999 and 1998, respectively. The Company's statutory net income was
$18,767, $13,649 and $18,592 for the years ended December 31, 1999, 1998 and
1997, respectively.
PERMITTED STATUTORY ACCOUNTING PRACTICES
The Company prepares its statutory financial statements in accordance with
accounting practices prescribed or permitted by the New York Department of
Insurance. Prescribed statutory accounting practices include a variety of
publications of the National Association of Insurance Commissioners ("NAIC"), 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 significant impact on statutory surplus or statutory net
income.
The NAIC's codification initiative has produced a comprehensive guide of
statutory accounting principles, which the Company will implement in January
2001. The Company's state of domicile, New York, continues to review
codification and existing statutory accounting requirements for desired
revisions to existing state laws and regulations. The requirements are not
expected to have a material impact on the statutory surplus of the Company.
DIVIDENDS
The ability of the Company to pay dividends is dependent on business conditions,
income, cash requirements of the Company and other relevant factors. Under New
York Insurance Law, a notice of intention to distribute any dividend must be
filed with the New York Superintendent of Insurance not less than 30 days prior
to the distribution. Such proposed declaration is subject to the
Superintendent's disapproval.
RISK-BASED CAPITAL
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,
business, asset and
21
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
interest rate risks. At December 31, 1999, RBC for the Company was significantly
above a level that would require regulatory action.
11. BENEFIT PLANS
PENSION PLANS
Defined benefit pension plans, sponsored by AIC, cover domestic full-time
employees and certain part-time employees. Benefits under the pension plans are
based upon the employee's length of service, average annual compensation and
estimated social security retirement benefits. AIC's funding policy for the
pension plans is to make annual contributions in accordance with accepted
actuarial cost methods. The (benefit) and cost to the Company included in net
income was $(263), $382 and $597 for the pension plans in 1999, 1998 and 1997,
respectively.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
AIC also provides certain health care and life insurance benefits for retired
employees. Qualified employees may become eligible for these benefits if they
retire in accordance with AIC's established retirement policy and are
continuously insured under AIC's group plans or other approved plans for ten or
more years prior to retirement. AIC shares the cost of the retiree medical
benefits with retirees based on years of service, with AIC's share being subject
to a 5% limit on annual medical cost inflation after retirement. AIC's
postretirement benefit plans currently are not funded. AIC has the right to
modify or terminate these plans.
PROFIT SHARING FUND
Employees of the Corporation and its domestic subsidiaries, including the
Company are also eligible to become members of The Savings and Profit Sharing
Fund of Allstate Employees ("Allstate Plan"). The Corporation's contributions
are based on the Corporation's matching obligation and performance.
The Company paid $176, $567, $164 in 1999, 1998 and 1997, respectively for
profit sharing.
12. OTHER COMPREHENSIVE INCOME
The components of other comprehensive income on a pretax and after-tax basis for
the year ended December 31, are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------------------------------ ----------------------------- ------------------------------
AFTER- AFTER- AFTER-
PRETAX TAX TAX PRETAX TAX TAX PRETAX TAX TAX
------ --- ------ ------ --- ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
UNREALIZED CAPITAL GAINS
AND LOSSES:
Unrealized holding
(losses) gains arising
during the period $(83,241) $ 29,134 $(54,107) $ 33,218 $(11,626) $ 21,592 $ 43,686 $(15,290) $ 28,396
Less: reclassification
adjustments (2,207) 772 (1,435) 4,869 (1,704) 3,165 1,183 (414) 769
-------- -------- -------- -------- -------- -------- -------- -------- --------
Unrealized net capital
(losses) gains (81,034) 28,362 (52,672) 28,349 (9,922) 18,427 42,503 (14,876) 27,627
-------- -------- -------- -------- -------- -------- -------- -------- --------
Other comprehensive
(loss) income $(81,034) $ 28,362 $(52,672) $ 28,349 $ (9,922) $ 18,427 $ 42,503 $(14,876) $ 27,627
======== ======== ========= ======== ======== ======== ======== ======== ========
</TABLE>
22
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
13. COMMITMENTS AND CONTINGENT LIABILITIES
REGULATIONS AND LEGAL PROCEEDINGS
The Company's business is subject to the effect of a changing social, economic
and regulatory environment. Public and regulatory initiatives have varied and
have included 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 rates and
benefits. The ultimate changes and eventual effects, if any, of these
initiatives are uncertain.
From time to time the Company is involved in pending and threatened litigation
in the normal course of its business in which claims for monetary damages are
asserted. In the opinion of management, the ultimate liability, if any, arising
from such pending or threatened litigation is not expected to have a material
effect on the results of operations, liquidity or financial position of the
Company.
GUARANTY FUNDS
Under state insurance guaranty fund laws, insurers doing business in a state can
be assessed, up to prescribed limits, for certain obligations of insolvent
insurance companies to policyholders and claimants. The Company's expense
related to these funds have been immaterial.
MARKETING AND COMPLIANCE ISSUES
Companies operating in the insurance and financial services markets have come
under the scrutiny of regulators with respect to market conduct and compliance
issues. Under certain circumstances, companies have been held responsible for
providing incomplete or misleading sales materials and for replacing existing
policies with policies that were less advantageous to the policyholder. The
Company monitors its sales materials and enforces compliance procedures to
mitigate any exposure to potential litigation. The Company is a member of the
Insurance Marketplace Standards Association, an organization which advocates
ethical market conduct.
23
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
SCHEDULE IV--REINSURANCE
($ IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS NET
YEAR ENDED DECEMBER 31, 1999 AMOUNT CEDED AMOUNT
---------------------------- ------ ----- ------
<S> <C> <C> <C>
Life insurance in force $ 14,140,049 $ 1,066,993 $ 13,073,056
============ =========== ============
Premiums and contract charges:
Life and annuities $ 99,760 $ 3,397 $ 96,363
Accident and health 6,867 856 6,011
------------ ----------- ------------
$ 106,627 $ 4,253 $ 102,374
============ =========== ============
</TABLE>
<TABLE>
<CAPTION>
GROSS NET
YEAR ENDED DECEMBER 31, 1998 AMOUNT CEDED AMOUNT
---------------------------- ------ ----- ------
<S> <C> <C> <C>
Life insurance in force $ 12,656,826 $ 857,500 $ 11,799,326
============ =========== ============
Premiums and contract charges:
Life and annuities $ 116,455 $ 2,318 $ 114,137
Accident and health 5,801 886 4,915
------------ ----------- ------------
$ 122,256 $ 3,204 $ 119,052
============ =========== ============
</TABLE>
<TABLE>
<CAPTION>
GROSS NET
YEAR ENDED DECEMBER 31, 1997 AMOUNT CEDED AMOUNT
---------------------------- ------ ----- ------
<S> <C> <C> <C>
Life insurance in force $ 11,339,990 $ 721,040 $ 10,618,950
============ =========== ============
Premiums and contract charges:
Life and annuities $ 116,167 $ 2,185 $ 113,982
Accident and health 5,883 902 4,981
------------ ----------- ------------
$ 122,050 $ 3,087 $ 118,963
============ =========== ============
</TABLE>
24
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
SCHEDULE V--VALUATION AND QUALIFYING ACCOUNTS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
OF PERIOD EXPENSES DEDUCTIONS PERIOD
--------- -------- ---------- ------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1999
Allowance for estimated losses
on mortgage loans $ 600 $ - $ - $ 600
============ ============ ============ ============
YEAR ENDED DECEMBER 31, 1998
Allowance for estimated losses
on mortgage loans $ 486 $ 114 $ - $ 600
============ ============ ============ ============
YEAR ENDED DECEMBER 31, 1997
Allowance for estimated losses
on mortgage loans $ 225 $ 261 $ - $ 486
============ ============ ============ ============
</TABLE>
25
<PAGE>
---------------------------------------------
ALLSTATE LIFE OF NEW
YORK SEPARATE
ACCOUNT A
FINANCIAL STATEMENTS AS OF DECEMBER 31, 1999
AND FOR THE PERIODS ENDED DECEMBER 31, 1999
AND DECEMBER 31, 1998 AND INDEPENDENT
AUDITORS' REPORT
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholder of
Allstate Life Insurance Company of New York:
We have audited the accompanying statement of net assets of Allstate Life of
New York Separate Account A as of December 31, 1999 (including the assets of
each of the individual sub-accounts which comprise the Account as disclosed
in Note 1), and the related statements of operations for the period then
ended and the statements of changes in net assets for each of the periods in
the two year period then ended for each of the individual sub-accounts which
comprise the Account. These financial statements are the responsibility of
management. Our responsibility is to express an opinion on these financial
statements 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.
Our procedures included confirmation of securities owned at December 31, 1999
by correspondence with the account custodians. 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 Allstate Life of New York Separate
Account A as of December 31, 1999 (including the assets of each of the
individual sub-accounts which comprise the Account), and the results of
operations for each of the individual sub-accounts for the period then ended
and the changes in their net assets for each of the periods in the two year
period then ended in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Chicago, Illinois
March 27, 2000
<PAGE>
ALLSTATE LIFE OF NEW YORK SEPARATE ACCOUNT A
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS
DECEMBER 31, 1999
------------------------------------------------------------------------------------------------
<S> <C>
ASSETS
Allocation to Sub-Accounts investing in the AIM Variable Insurance Funds:
Aggressive Growth, 12,432 shares (cost $158,759) $ 177,153
Balanced Fund, 6,444 shares (cost $79,572) 84,024
Capital Appreciation, 255,543 shares (cost $6,215,783) 9,092,204
Capital Development, 3,871 shares (cost $40,870) 46,028
Diversified Income, 262,808 shares (cost $2,884,027) 2,643,852
Global Utilities, 55,043 shares (cost $987,756) 1,254,971
Government Securities, 114,229 shares (cost $1,272,606) 1,214,257
Growth, 300,263 shares (cost $7,319,062) 9,683,482
Growth and Income, 493,077 shares (cost $11,214,069) 15,576,292
High Yield, 1,933 shares (cost $17,487) 17,433
International Equity, 165,155 shares (cost $3,272,322) 4,837,388
Money Market, 1,578,022 shares (cost $1,578,022) 1,578,022
Value, 665,744 shares (cost $17,789,516) 22,302,412
--------------
Total Assets 68,507,518
LIABILITIES
Payable to Allstate Life Insurance Company of New York:
Accrued contract maintenance charges 19,014
--------------
Net Assets $ 68,488,504
==============
</TABLE>
See notes to financial statements.
2
<PAGE>
ALLSTATE LIFE OF NEW YORK SEPARATE ACCOUNT A
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
----------------------------------------------------------------------------------------------------------------------------------
AIM Variable Insurance Funds Sub-Accounts
---------------------------------------------------------------------------
For the Period Ended December 31, 1999
---------------------------------------------------------------------------
Aggressive Capital Capital Diversified
Growth (a) Balanced (a) Appreciation Development (a) Income
---------- ------------ ------------ --------------- -------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ - $ 1,095 $ 188,516 $ - $ 164,843
Charges from Allstate Life Insurance Company
of New York
Mortality and expense risk (143) (119) (76,212) (56) (28,287)
Administrative expense (11) (9) (5,645) (4) (2,095)
---------- ------------ ------------ --------------- -------------
Net investment income (loss) (154) 967 106,659 (60) 134,461
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of investments:
Proceeds from sales 123 189 324,982 55 476,703
Cost of investments sold 117 182 276,808 52 493,648
---------- ------------ ------------ --------------- -------------
Net realized gains (losses) 6 7 48,174 3 (16,945)
---------- ------------ ------------ --------------- -------------
Change in unrealized gains (losses) 18,394 4,451 2,401,290 5,157 (181,607)
---------- ------------ ------------ --------------- -------------
Net gains (losses) on investments 18,400 4,458 2,449,464 5,160 (198,552)
---------- ------------ ------------ --------------- -------------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $ 18,246 $ 5,425 $2,556,123 $ 5,100 $ (64,091)
========== ============ ============ =============== =============
</TABLE>
(a) For the Period Beginning October 25, 1999 and Ended December 31, 1999
See notes to financial statements.
3
<PAGE>
ALLSTATE LIFE OF NEW YORK SEPARATE ACCOUNT A
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
---------------------------------------------------------------------------------------------------------------------------------
AIM Variable Insurance Funds Sub-Accounts
------------------------------------------------------------------------
For the Period Ended December 31, 1999
------------------------------------------------------------------------
Global Government Growth High
Utilities Securities Growth and Income Yield (a)
----------- ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 18,906 $ 43,946 $ 337,039 $ 129,184 $ 399
Charges from Allstate Life Insurance Company
of New York
Mortality and expense risk (9,493) (32,564) (83,130) (132,390) (14)
Administrative expense (703) (2,412) (6,158) (9,807) (1)
----------- ------------ ------------ ------------ -------------
Net investment income (loss) 8,710 8,970 247,751 (13,013) 384
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of investments:
Proceeds from sales 157,147 2,759,791 423,990 458,270 15
Cost of investments sold 137,026 2,894,175 359,129 380,204 15
----------- ------------ ------------ ------------ -------------
Net realized gains (losses) 20,121 (134,384) 64,861 78,066 -
----------- ------------ ------------ ------------ -------------
Change in unrealized gains (losses) 236,069 (54,186) 1,792,381 3,178,263 (54)
----------- ------------ ------------ ------------ -------------
Net gains (losses) on investments 256,190 (188,570) 1,857,242 3,256,329 (54)
----------- ------------ ------------ ------------ -------------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $ 264,900 $ (179,600) $2,104,993 $3,243,316 $ 330
=======-=== ============ ============ ============ =============
</TABLE>
(a) For the Period Beginning October 25, 1999 and Ended December 31, 1999
See notes to financial statements.
4
<PAGE>
ALLSTATE LIFE OF NEW YORK SEPARATE ACCOUNT A
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
-----------------------------------------------------------------------------------------------------------------
AIM Variable Insurance Funds Sub-Accounts
---------------------------------------------------------
For the Period Ended December 31, 1999
---------------------------------------------------------
International Money
Equity Market Value
-------------- ------------ -------------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 154,775 $ 61,128 $ 355,310
Charges from Allstate Life Insurance Company
of New York
Mortality and expense risk (37,180) (17,854) (173,801)
Administrative expense (2,754) (1,322) (12,874)
-------------- ------------ -------------
Net investment income (loss) 114,841 41,952 168,635
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of investments:
Proceeds from sales 300,780 1,206,358 530,128
Cost of investments sold 248,263 1,206,358 459,369
-------------- ------------ -------------
Net realized gains (losses) 52,517 - 70,759
-------------- ------------ -------------
Change in unrealized gains (losses) 1,419,551 - 3,419,919
-------------- ------------ -------------
Net gains (losses) on investments 1,472,068 - 3,490,678
-------------- ------------ -------------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $1,586,909 $ 41,952 $ 3,659,313
============== ============ =============
</TABLE>
See notes to financial statements.
5
<PAGE>
ALLSTATE LIFE OF NEW YORK SEPARATE ACCOUNT A
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31,
--------------------------------------------------------------------------------------------------------------------------
AIM Variable Insurance Funds Sub-Accounts
-------------------------------------------------------------------------
Aggressive Capital
Growth Balanced Capital Appreciation Development
------------ ------------ ----------------------------- ------------
1999 (a) 1999 (a) 1999 1998 1999 (a)
------------ ------------ ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ (154) $ 967 $ 106,659 $ 66,071 $ (60)
Net realized gains (losses) 6 7 48,174 760 3
Change in unrealized gains (losses) 18,394 4,451 2,401,290 457,939 5,157
------------ ------------ ------------- ------------- ------------
Change in net assets resulting from operations 18,246 5,425 2,556,123 524,770 5,100
------------ ------------ ------------- ------------- ------------
FROM CAPITAL TRANSACTIONS
Deposits 43,819 49,251 2,073,160 2,056,465 17,015
Benefit payments - - (23,548) (29,888) -
Payments on termination - (79) (225,136) (115,473) -
Contract maintenance charges (48) (24) (3,267) (1,759) (12)
Transfers among the sub-accounts
and with the Fixed Account - net 115,087 29,427 408,212 (181,131) 23,912
------------ ------------ ------------- ------------- ------------
Change in net assets resulting
from capital transactions 158,858 78,575 2,229,421 1,728,214 40,915
------------ ------------ ------------- ------------- ------------
INCREASE (DECREASE) IN NET ASSETS 177,104 84,000 4,785,544 2,252,984 46,015
NET ASSETS AT BEGINNING OF PERIOD - - 4,304,137 2,051,153 -
------------ ------------ ------------- ------------- ------------
NET ASSETS AT END OF PERIOD $ 177,104 $ 84,000 $ 9,089,681 $ 4,304,137 $ 46,015
============ ============ ============= ============= ============
</TABLE>
(a) For the Period Beginning October 25, 1999 and Ended December 31, 1999
See notes to financial statements.
6
<PAGE>
ALLSTATE LIFE OF NEW YORK SEPARATE ACCOUNT A
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------------------------------------------
AIM Variable Insurance Funds Sub-Accounts
----------------------------------------------------------------------------
Diversified Income Global Utilities Government Securities
------------------------- ------------------------ --------------------------
1999 1998 1999 1998 1999 1998
------------ ------------ ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 134,461 $ 94,730 $ 8,710 $ 4,558 $ 8,970 $ 79,067
Net realized gains (losses) (16,945) 7,969 20,121 (484) (134,384) 109,308
Change in unrealized gains (losses) (181,607) (85,959) 236,069 24,459 (54,186) (23,404)
------------ ------------ ------------ ----------- ------------ ------------
Change in net assets resulting from operations (64,091) 16,740 264,900 28,533 (179,600) 164,971
------------ ------------ ------------ ----------- ------------ ------------
FROM CAPITAL TRANSACTIONS
Deposits 1,187,532 1,222,826 734,901 356,711 635,526 2,725,221
Benefit payments (12,220) (32,778) (3,120) (4,815) (661,198) -
Payments on termination (185,900) (37,509) (82,757) (3,609) (403,351) (8,618)
Contract maintenance charges (810) (491) (463) (223) 317 (913)
Transfers among the sub-accounts
and with the Fixed Account - net (46,215) (98,970) (53,342) (93,970) (1,749,948) 268,867
------------ ------------ ------------ ----------- ------------ ------------
Change in net assets resulting
from capital transactions 942,387 1,053,078 595,219 254,094 (2,178,654) 2,984,557
------------ ------------ ------------ ----------- ------------ ------------
INCREASE (DECREASE) IN NET ASSETS 878,296 1,069,818 860,119 282,627 (2,358,254) 3,149,528
------------ ------------ ------------ ----------- ------------ ------------
NET ASSETS AT BEGINNING OF PERIOD 1,764,822 695,004 394,504 111,877 3,572,174 422,646
------------ ------------ ------------ ----------- ------------ ------------
NET ASSETS AT END OF PERIOD $2,643,118 $1,764,822 $1,254,623 $ 394,504 $1,213,920 $3,572,174
============ ============ ============ =========== ============ ============
</TABLE>
See notes to financial statements.
7
<PAGE>
ALLSTATE LIFE OF NEW YORK SEPARATE ACCOUNT A
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31,
--------------------------------------------------------------------------------------------------------------------
AIM Variable Insurance Funds Sub-Accounts
-------------------------------------------------------------------
Growth Growth and Income High Yield
-------------------------- --------------------------- ----------
1999 1998 1999 1998 1999 (a)
------------ ------------ ------------- ------------ ----------
<S> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 247,751 $ 225,339 $ (13,013) $ 21,895 $ 384
Net realized gains (losses) 64,861 29,091 78,066 17,916 -
Change in unrealized gains (losses) 1,792,381 542,074 3,178,263 1,076,360 (54)
------------ ------------ ------------- ------------ ----------
Change in net assets resulting from operations 2,104,993 796,504 3,243,316 1,116,171 330
------------ ------------ ------------- ------------ ----------
FROM CAPITAL TRANSACTIONS
Deposits 3,265,114 2,076,025 5,424,896 3,226,558 17,103
Benefit payments (26,647) (7,214) (46,523) (82,435) -
Payments on termination (298,191) (100,412) (319,041) (161,641) -
Contract maintenance charges (3,399) (1,377) (5,525) (2,399) (5)
Transfers among the sub-accounts
and with the Fixed Account - net 453,397 30,657 672,802 75,882 -
------------ ------------ ------------- ------------ ----------
Change in net assets resulting
from capital transactions 3,390,274 1,997,679 5,726,609 3,055,965 17,098
------------ ------------ ------------- ------------ ----------
INCREASE (DECREASE) IN NET ASSETS 5,495,267 2,794,183 8,969,925 4,172,136 17,428
NET ASSETS AT BEGINNING OF PERIOD 4,185,527 1,391,344 6,602,044 2,429,908 -
------------ ------------ ------------- ------------ ----------
NET ASSETS AT END OF PERIOD $9,680,794 $4,185,527 $15,571,969 $6,602,044 $ 17,428
============ ============ ============= ============ ==========
</TABLE>
(a) For the Period Beginning October 25, 1999 and Ended December 31, 1999
See notes to financial statements.
8
<PAGE>
ALLSTATE LIFE OF NEW YORK SEPARATE ACCOUNT A
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31,
----------------------------------------------------------------------------------------------------------------------------------
AIM Variable Insurance Funds Sub-Accounts
----------------------------------------------------------------------------------
International Equity Money Market Value
-------------------------- ------------------------- ---------------------------
1999 1998 1999 1998 1999 1998
------------ ------------ ------------ ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 114,841 $ (7,420) $ 41,952 $ 26,737 $ 168,635 $ 261,042
Net realized gains (losses) 52,517 5,640 - - 70,759 32,103
Change in unrealized gains (losses) 1,419,551 165,760 - - 3,419,919 1,022,492
------------ ------------ ------------ ----------- ------------- ------------
Change in net assets resulting from operations 1,586,909 163,980 41,952 26,737 3,659,313 1,315,637
------------ ------------ ------------ ----------- ------------- ------------
FROM CAPITAL TRANSACTIONS
Deposits 1,110,124 716,187 1,305,204 509,817 11,613,584 3,273,006
Benefit payments (27,341) (6,664) (28,371) (36,887) (57,538) (7,168)
Payments on termination (93,590) (33,261) (413,731) (16,252) (646,773) (103,596)
Contract maintenance charges (1,428) (726) (468) (218) (7,380) (2,602)
Transfers among the sub-accounts
and with the Fixed Account - net 298,246 41,000 (295,054) 32,193 584,939 235,246
------------ ------------ ------------ ----------- ------------- ------------
Change in net assets resulting
from capital transactions 1,286,011 716,536 567,580 488,653 11,486,832 3,394,886
------------ ------------ ------------ ----------- ------------- ------------
INCREASE (DECREASE) IN NET ASSETS 2,872,920 880,516 609,532 515,390 15,146,145 4,710,523
NET ASSETS AT BEGINNING OF PERIOD 1,963,126 1,082,610 968,052 452,662 7,150,077 2,439,554
------------ ------------ ------------ ----------- ------------- ------------
NET ASSETS AT END OF PERIOD $4,836,046 $1,963,126 $1,577,584 $ 968,052 $22,296,222 $7,150,077
============ ============ ============ =========== ============= ============
</TABLE>
See notes to financial statements.
9
<PAGE>
ALLSTATE LIFE OF NEW YORK SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
1. ORGANIZATION
Allstate Life of New York Separate Account A (the "Account"), a unit
investment trust registered with the Securities and Exchange Commission
under the Investment Company Act of 1940, is a Separate Account of
Allstate Life Insurance Company of New York ("Allstate New York"). The
assets of the Account are legally segregated from those of Allstate New
York. Allstate New York is wholly owned by Allstate Life Insurance
Company, a wholly owned subsidiary of Allstate Insurance Company, which is
wholly owned by The Allstate Corporation.
Allstate New York issues two variable annuity contracts, the AIM Lifetime
Plus-SM- ("Lifetime Plus") and the AIM Lifetime Plus-SM-II ("Lifetime Plus
II"), the deposits of which are invested at the direction of the
contractholders in the sub-accounts that comprise the Account. Absent any
contract provisions wherein Allstate New York contractually guarantees
either a minimum return or account value to the beneficiaries of the
contractholders in the form of a death benefit, the contractholders bear
the investment risk that the sub-accounts may not meet their stated
objectives. The sub-accounts invest in the following underlying mutual
fund portfolios of the AIM Variable Insurance Funds (the "Funds").
Aggressive Growth Growth
Balanced Growth and Income
Capital Appreciation High Yield
Capital Development International Equity
Diversified Income Money Market
Global Utilities Value
Government Securities
Allstate New York provides insurance and administrative services to the
contractholders for a fee. Allstate New York also maintains a fixed
account ("Fixed Account"), to which contractholders may direct their
deposits and receive a fixed rate of return. Allstate New York has sole
discretion to invest the assets of the Fixed Account, subject to
applicable law.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
VALUATION OF INVESTMENTS - Investments consist of shares of the Funds,
and are stated at fair value based on quoted market prices at
December 31, 1999.
INVESTMENT INCOME - Investment income consists of dividends declared by
the Funds and is recognized on the ex-dividend date.
REALIZED GAINS AND LOSSES - Realized gains and losses represent the
difference between the proceeds from sales of portfolio shares by the
Account and the cost of such shares, which is determined on a weighted
average basis.
10
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FEDERAL INCOME TAXES - The Account intends to qualify as a segregated
asset account as defined in the Internal Revenue Code ("Code"). As such,
the operations of the Account are included in the tax return of Allstate
New York. Allstate New York is taxed as a life insurance company under the
Code. No federal income taxes are allocable to the Account as the Account
did not generate taxable income.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could differ
from those estimates.
3. EXPENSES
ADMINISTRATIVE EXPENSE CHARGE - Allstate New York deducts administrative
expense charges daily at a rate equal to .10% per annum of the average
daily net assets of the Account for the Lifetime Plus and Lifetime Plus
II. Allstate New York guarantees that the amount of this charge will not
increase over the life of the contract.
CONTRACT MAINTENANCE CHARGE - Allstate New York deducts an annual
maintenance charge of $35 for Lifetime Plus and Lifetime Plus II on each
contract anniversary and guarantees that this charge will not increase
over the life of the contract. This charge will be waived if certain
conditions are met.
MORTALITY AND EXPENSE RISK CHARGE - Allstate New York assumes mortality
and expense risks related to the operations of the Account and deducts
charges daily based on the daily net assets of the Account. The mortality
and expense risk charge covers insurance benefits available with the
contract and certain expenses of the contract. It also covers the risk
that the current charges will not be sufficient in the future to cover the
cost of administering the contract. Allstate New York guarantees that the
amount of this charge will not increase over the life of the contract. At
the contractholder's discretion, additional options, primarily death
benefits, may be purchased for an additional charge.
11
<PAGE>
4. UNITS ISSUED AND REDEEMED
<TABLE>
<CAPTION>
(Units in whole amounts) Unit activity during 1999
---------------------------------------------
Accumulation
Units Outstanding Units Units Units Outstanding Unit Value
December 31, 1998 Issued Redeemed December 31, 1999 December 31, 1999
----------------- ------------ ------------ ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Investments in the AIM Variable Insurance
Funds Sub-Accounts:
Aggressive Growth - 12,664 (3) 12,661 $ 13.99
Balanced - 6,390 (8) 6,382 13.16
Capital Appreciation 287,336 167,925 (29,513) 425,748 21.35
Capital Development - 3,949 (1) 3,948 11.66
Diversified Income 146,644 128,234 (47,677) 227,201 11.63
Global Utilities 25,418 45,026 (9,036) 61,408 20.43
Government Securities 301,983 79,492 (272,981) 108,494 11.19
Growth 220,831 192,666 (30,283) 383,214 25.26
Growth and Income 361,890 324,260 (41,017) 645,133 24.14
High Yield - 1,751 - 1,751 9.96
International Equity 136,898 105,320 (21,528) 220,690 21.91
Money Market 87,010 167,828 (117,406) 137,432 11.48
Value 405,246 646,140 (64,309) 987,077 22.59
Units relating to accrued contract maintenance charges are included in units redeemed.
</TABLE>
12
