Allstate Life Insurance Company of New York
One Allstate Drive
Farmingville, New York 11738-9075
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 24 investment alternatives ("investment
alternatives"). The investment alternatives include 2 fixed account options
("Fixed Account Options") and 22 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 Asia Pacific Growth Fund Putnam VT International New Opportunities Fund
Putnam VT Diversified Income Fund Putnam VT Investors Fund
Putnam VT The George Putnam Fund of Boston Putnam VT Money Market Fund
Putnam VT Global Asset Allocation Fund Putnam VT New Opportunities Fund
Putnam VT Global Growth Fund Putnam VT New Value Fund
Putnam VT Growth and Income Fund Putnam VT OTC & Emerging Growth Fund
Putnam VT Health Sciences Fund Putnam VT Research Fund
Putnam VT High Yield Fund Putnam VT Small Cap Value
Putnam VT Income Fund Putnam VT Utilities Growth and Income Fund
Putnam VT International Growth Fund Putnam VT Vista Fund
Putnam VT International Growth and Income Fund Putnam VT Voyager Fund
</TABLE>
We (Allstate New York) have filed a Statement of Additional Information,
dated December 10, 1999, 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 29 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
NOTICES that 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.
<PAGE>
Table of Contents
Page
Overview
Important Terms 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 22
Other Information
More Information 23
Taxes 26
Performance Information 28
Statement of Additional Information Table of Contents 29
Appendix A A-1
<PAGE>
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, 23
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, 14
Contract Year 5
Dollar Cost Averaging Program 17
Due Proof of Death 22
Fixed Account Options 16
Funds 1, 15, 24
Guarantee Period 16
Income Plan 6, 20
Investment Alternatives 1, 4, 15-16
Issue Date 6
Maximum Anniversary Value 22
Payout Phase 6
Payout Start Date 20
Preferred Withdrawal Amount 19
Right to Cancel 4, 13
SEC 1
Settlement Value 22
Systematic Withdrawal Program 20
Valuation Date 13
Variable Account 1, 24
Variable Sub-Account 1, 15
* 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.
<PAGE>
The Contract at a Glance
The following is a snapshot of the Contract. Please read the remainder
of this prospectus for more information.
Flexible Payments You can purchase a Contract
with as little as $1,000 ($500 for
"Qualified Contracts", which are
Contracts issued with aqualified
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 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 (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 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" 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)
o Transfer fee equal to 0.50% of
the amount transferred, up to a
maximum charge of $25, after 12th
transfer in any Contract Year.
We measure a Contract Year from
the date we issue your Contract or a
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.
Investment Alternatives The Contract offers 24 investment
alternatives including:
o 2 Fixed Account Options (which
credit interest at rates we guarantee)
o 22 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 (5 to 30 years)
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. In general, you
must withdraw at least $50 at a time.
A 10% federal tax penalty may apply if
you withdraw before you are 591/2
years old. A withdrawal charge also
may apply.
<PAGE>
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 24 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.
The timeline below illustrates how you might use your Contract.
<TABLE>
<CAPTION>
EFFECTIVE 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>
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.
<PAGE>
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.
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%
<PAGE>
Fund Annual Expenses (After Voluntary Reductions and Reimbursements) (as a
percentage of Fund average daily net assets)(1)
<TABLE>
<CAPTION>
Fund Management 12b-1 Other Total Annual
Fees Fees Expenses Fund Expenses(1)
<S> <C> <C> <C> <C>
Putnam VT Asia Pacific Growth Fund 0.80% 0.15% 0.32% 1.27%
Putnam VT Diversified Income Fund 0.67% 0.15% 0.11% 0.93%
Putnam VT The George Putnam Fund of Boston(2) 0.49% 0.15% 0.36% 1.00%
Putnam VT Global Asset Allocation Fund 0.65% 0.15% 0.13% 0.93%
Putnam VT Global Growth Fund 0.60% 0.15% 0.12% 0.87%
Putnam VT Growth and Income Fund 0.46% 0.15% 0.04% 0.65%
Putnam VT Health Sciences Fund(2) 0.56% 0.15% 0.34% 1.05%
Putnam VT High Yield Fund 0.64% 0.15% 0.07% 0.86%
Putnam VT Income Fund 0.60% 0.15% 0.07% 0.82%
Putnam VT International Growth Fund 0.80% 0.15% 0.27% 1.22%
Putnam VT International Growth and Income Fund 0.80% 0.15% 0.19% 1.14%
Putnam VT International New Opportunities Fund(2) 1.18% 0.15% 0.42% 1.75%
Putnam VT Investors Fund(2) 0.52% 0.15% 0.33% 1.00%
Putnam VT Money Market Fund 0.45% 0.15% 0.08% 0.68%
Putnam VT New Opportunities Fund 0.56% 0.15% 0.05% 0.76%
Putnam VT New Value Fund 0.70% 0.15% 0.11% 0.96%
Putnam VT OTC & Emerging Growth Fund(2) 0.56% 0.15% 0.34% 1.05%
Putnam VT Research Fund(2) 0.37% 0.15% 0.48% 1.00%
Putnam VT Small Cap Value Fund(3) 0.80% 0.15% 0.59% 1.54%
Putnam VT Utilities Growth and Income Fund 0.65% 0.15% 0.07% 0.87%
Putnam VT Vista Fund 0.65% 0.15% 0.12% 0.92%
Putnam VT Voyager Fund 0.54% 0.15% 0.04% 0.73%
(1) Since the Funds have not offered Class IB shares for a full fiscal year,
figures shown in the table (except for Putnam VT Small Cap Value Fund) are
for the period ended December 31, 1998 and are estimates based on the
corresponding expenses for the Fund's Class IA shares for the last fiscal
year. Each Fund commenced operations on April 30, 1998, except for Putnam
VT Diversified Income Fund, Putnam VT Growth and Income Fund, and Putnam VT
International Growth Fund, which commenced operations on April 6, 1998, and
Putnam VT Research Fund, which commenced operations September 30, 1998, and
Putnam VT Small Cap Value Fund, which commenced operations on April 30,
1999. Figures shown in the table include amounts paid through expense
offset and brokerage service arrangements.
(2) Absent voluntary reductions and reimbursements for certain Funds (including
amounts paid through expense offset and brokerage service arrangements),
advisory 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 The George Putnam Fund of Boston 0.65% 0.15% 0.36% 1.16%
Putnam VT Health Sciences Fund 0.70% 0.15% 0.34% 1.19%
Putnam VT International New Opportunities Fund 1.20% 0.15% 0.42% 1.77%
Putnam VT Investors Fund 0.65% 0.15% 0.33% 1.13%
Putnam VT OTC & Emerging Growth Fund 0.70% 0.15% 0.34% 1.19%
Putnam VT Research Fund 0.65% 0.15% 0.48% 1.28%
(3) Putnam VT Small Cap Value Fund commenced operations on April 30, 1999;
therefore, the management fee, other expenses and total annual fund
operating expenses are based on estimates for the fund's first full fiscal
year.
</TABLE>
<PAGE>
Example 1
The example below shows the dollar amount of expenses that you would bear
directly or indirectly if you:
o invested a $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 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 Asia Pacific Growth $86 $124
Putnam Diversified Income $83 $113
The George Putnam Fund $83 $115
Putnam Global Asset Allocation $83 $113
Putnam Global Growth $82 $111
Putnam Growth and Income $80 $105
Putnam Health Sciences $84 $117
Putnam High Yield $82 $111
Putnam Income $81 $110
Putnam International Growth $85 $122
Putnam International Growth and Income $85 $120
Putnam International New Opportunities $91 $138
Putnam Investors $83 $115
Putnam Money Market $80 $106
Putnam New Opportunities $81 $108
Putnam New Value $83 $114
Putnam OTC & Emerging Growth $84 $117
Putnam Research $83 $115
Putnam Small Cap Value $89 $132
Putnam Utilities Growth and Income $82 $111
Putnam Vista $82 $113
Putnam Voyager $80 $107
<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 Asia Pacific Growth $26 $81
Putnam Diversified Income $23 $71
The George Putnam Fund $24 $73
Putnam Global Asset Allocation $23 $71
Putnam Global Growth $22 $69
Putnam Growth and Income $20 $62
Putnam Health Sciences $24 $75
Putnam High Yield $22 $69
Putnam Income $22 $67
Putnam International Growth $26 $80
Putnam International Growth and Income $25 $77
Putnam International New Opportunities $31 $96
Putnam Investors $24 $73
Putnam Money Market $20 $63
Putnam New Opportunities $21 $66
Putnam New Value $23 $72
Putnam OTC & Emerging Growth $24 $75
Putnam Research $24 $73
Putnam Small Cap Value $29 $90
Putnam Utilities Growth and Income $22 $69
Putnam Vista $23 $71
Putnam Voyager $21 $65
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.
<PAGE>
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.
Thereare no Accumulation Unit Values to report because the Contracts were
first offered as of the date of this prospectus. The financial statements of
Allstate New York and the Variable Account appear in the Statement of Additional
Information.
<PAGE>
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 or the Annuitant
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.
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
"Qualified Plans" on page 25.
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 you sign it and file
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.
<PAGE>
Purchases
MINIMUM PURCHASE PAYMENTS
Your initial purchase payment must be at least $1,000 ($500 for a Qualified
Contract). All subsequent purchase payments 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 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 sales 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 home office. 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
home office.
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 p.m. Eastern Time. If we receive your purchase
payment after 4 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 (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 reflect investment gain or loss that occurred from the date of
allocation through the date of cancellation.
<PAGE>
Contract Value
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 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. 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.
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.
<PAGE>
Investment Alternatives: The Variable Sub-Accounts
You may allocate your purchase payments to up to 22 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 Asia Pacific Growth 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 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 appreciation
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 Utilities Growth and Income Fund Capital growth and current income
Putnam VT Vista Fund Capital appreciation
Putnam VT Voyager Fund Capital appreciation
</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.
<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 sales
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 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.
<PAGE>
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. 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 30 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.
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,
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.
<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.
<PAGE>
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 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 billing
and 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 on a Contract
Anniversary.
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.
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; or
o withdrawals taken to satisfy IRS minimum distribution rules.
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.
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.
<PAGE>
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 home office, less any
withdrawal charges, contract maintenance charges, income tax withholding, 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.
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 any premium 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 30 days or more, we will pay interest as required by
law.
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 sales 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.
<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 day the Annuitant reaches age 90.
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
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.
Three Income Plans are available under the Contract. Each is available to
provide:
o fixed income payments;
o variable income payments; or
o a combination of the two.
The three Income Plans are:
Income Plan 1 - 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 guaranteed income payments, we
will continue to pay the remainder of the guaranteed income payments as required
by the Contract.
Income Plan 2 - 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 the 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.
Income Plan 3 - Guaranteed Payments for a Specified Period (5 Years to 30
Years). 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.
The length of any guaranteed payment period under your selected Income Plan
generally will affect the dollar amount of each income payment. As a general
rule, longer guarantee periods result in lower income payments, all other things
being equal. For example, if you choose an Income Plan with payments that depend
on the life of the Annuitant but with no minimum specified period for guaranteed
payments, the income payments generally will be greater than the income payments
made under the same Income Plan with a minimum specified period for guaranteed
payments.
If you choose Income Plan 1 or 2, or, if available, another 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 such Income Plans, if
you elect to take no minimum guaranteed payments, it is possible that the payee
could receive only 1 income payment if the Annuitant and any joint Annuitant
both die before the second income payment, or only 2 income payments if they die
before the third income payment, and so on.
Generally, you may not make withdrawals after the Payout Start Date. One
exception to this rule applies if you are receiving variable income payments
that do not depend on the life of the Annuitant (such as under Income Plan 3).
In that case you may terminate the Variable Account portion of the income
payments at any time and receive a lump sum equal to the present value of the
remaining variable payments due. A withdrawal charge may apply. We deduct
applicable premium taxes from the Contract Value at the Payout Start Date.
We may make other Income Plans available. You may obtain information about
them by writing or calling us.
You may apply your Contract Value to an Income Plan. 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 we have
received no purchase payments for 2 years, and your Contract Value is less than
$2,000, or not enough to provide an initial payment of at least $20:
o we may pay you the Contract Value, less any applicable taxes, in a
lump sum instead of the periodic payments you have chosen, or
o we may 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 and (b) the
amount of our administration expenses.
We cannot predict the total amount of your variable income payments. 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) the Annuitant could live longer or shorter than we
expect based on the tables we use.
In calculating the amount of the periodic payments in the annuity tables in
the Contract, we assumed an annual investment rate of 3%. If the actual net
investment return of the Variable Sub-Accounts you choose is less than this
assumed investment rate, 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 assumed investment
rate. The dollar amount of the variable income payments stays level if the net
investment return equals the assumed investment rate. Please refer to the
Statement of Additional Information for more detailed information as to how we
determine variable income payments.
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 30 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.
<PAGE>
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 or, if none, the Beneficiary. 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 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 (a) divided by (b),
with the result multiplied by (c), where:
(a) = the withdrawal amount,
(b) = the Contract Value immediately prior to the withdrawal, and
(c) = the value of the applicable death benefit alternative immediately prior to
the withdrawal.
See Appendix A 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. Income payments must be:
(a) over the life of the new Contract Owner,
(b) for a guaranteed number of payments from 5 to 30 years but 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 from 5 to 30 years but 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 p.m. 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. If the
new Contract Owner continues the Contract in the Accumulation Phase, 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.
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 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 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
the withdrawal.
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.
<PAGE>
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 office is
located in Palatine, Illinois.
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, 22 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 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 Life Financial Services, Inc. ("ALFS"), located at 3100
Sanders Road, Northbrook, IL 60062-7154, serves as distributor of the Contracts.
ALFS is a wholly owned subsidiary of Allstate Life. ALFS 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 ALFS 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 6% of all purchase payments (on a present value
basis). 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 ALFS a commission for distribution of the
Contracts. The underwriting agreement with ALFS provides that we will reimburse
ALFS 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 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 plan intended to mitigate and/or prevent the adverse effects of the
Year 2000 Issue. 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 includes Allstate New York actively working with
its major external counterparties and suppliers to assess their compliance
efforts and Allstate New York's exposure to them. Allstate New York presently
believes that it will resolve the Year 2000 Issue in a timely manner, and the
financial impact will not materially affect its results of operations, liquidity
or financial position. Year 2000 costs are and will be expensed as incurred.
<PAGE>
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 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 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.
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
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.
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.
Allstate New York reserves the right to limit the availability of the
Contract for use with any of the qualified plans listed above.
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.
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 591/2,
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.
<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.
<PAGE>
Statement of Additional Information
Table of Contents
Page
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
Sales Commissions 13
Legal Matters 14
Experts 14
Financial Statements 14
-----------
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.
<PAGE>
Appendix A
Withdrawal Adjustment Example
<TABLE>
<CAPTION>
Issue Date: January 1, 1999
Initial Purchase Payment: $50,000
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>
1/1/99 Issue Date n $50,000 $50,000 $50,000 $50,000
1/1/00 Contract Anniversary $55,000 n $55,000 $50,000 $55,000
7/1/00 Partial Withdrawal $60,000 $15,000 $45,000 $37,500 $41,125
</TABLE>
Withdrawal adjustment equals the partial withdrawal amount divided by the
Contract Value immediately prior to the partial withdrawal multiplied by the
value of the applicable death benefit amount alternative immediately prior to
the partial withdrawal.
<TABLE>
<CAPTION>
Purchase Payment Value Death Benefit
<S> <C> <C>
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>
This example represents the proportional reduction applicable in all
contracts.
<PAGE>
The Putnam Allstate Advisor
<TABLE>
<CAPTION>
<S> <C>
Allstate Life Insurance Company of New York Statement of Additional Information
3100 Sanders Road dated December __, 1999
Northbrook, Illinois 60062
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
December __, 1999, 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
REINVESTMENT
THE CONTRACT
INCOME PAYMENTS
GENERAL MATTERS
FEDERAL TAX MATTERS
SALES COMMISSIONS
LEGAL MATTERS
EXPERTS
FINANCIAL STATEMENTS
<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 Life Financial Services, Inc.
("ALFS"), distributes the Contracts. ALFS 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.
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
Free 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 contract size of
$45,000. We then multiply the resulting percentage by a hypothetical $1,000
investment.
No standardized total returns are available for the Variable Sub-Accounts, which
commenced operations as of the date of this Statement of Additional Information.
NON-STANDARDIZED TOTAL RETURNS
From time to time, we also may quote average annual total returns that do not
reflect the withdrawal charge. We calculate these "non-standardized total
returns" in exactly the same way as the standardized total returns described
above, except that we replace the ending redeemable value of the hypothetical
account for the period with an ending redeemable value for the period that does
not take into account any charges on amounts surrendered.
In addition, we may advertise the total return over different periods of time by
means of aggregate, average, year-by-year or other types of total return
figures. Such calculations would not reflect deductions for withdrawal charges
which may be imposed on the Contracts which, if reflected, would reduce the
performance quoted. The formula for computing such total return quotations
involves a per unit change calculation. This calculation is based on the
Accumulation Unit Value at the end of the defined period divided by the
Accumulation Unit Value at the beginning of such period, minus 1. The periods
included in such advertisements are "year-to-date" (prior calendar year end to
the day of the advertisement); "year to most recent quarter" (prior calendar
year end to the end of the most recent quarter); "the prior calendar year"; "
'n' most recent Calendar Years"; and "Inception (commencement of the
Sub-account's operation) to date" (day of the advertisement).
No non-standardized total returns are shown for the Variable Sub-Accounts, which
commenced operations on the date of this Statement of Additional Information.
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 for the
periods ended September 30, 1999 are set out below.
<PAGE>
<TABLE>
<CAPTION>
Ten Years or Since
Variable Sub-Account One Year Five Years Inception of Fund*
<S> <C> <C> <C>
Putnam Asia Pacific Growth 71.06% N/A 26.24%
Putnam Diversified Income -0.83% 28.82% 26.12%
The George Putnam Fund 6.88% N/A 0.98%
Putnam Global Asset Allocation 15.06% 88.07% 171.22%
Putnam Global Growth 34.74% 108.84% 186.43%
Putnam Growth and Income 14.63% 121.46% 231.36%
Putnam Health Sciences 0.78% N/A -5.09%
Putnam High Yield 1.24% 39.26% 128.61%
Putnam Income -2.26% 36.69% 95.35%
Putnam International Growth 42.86% N/A 58.55%
Putnam International Growth and Income 34.31% N/A 50.75%
Putnam International New Opportunities 52.23% N/A 44.49%
Putnam Investors 28.57% N/A 19.94%
Putnam Money Market 3.60% 22.34% 65.36%
Putnam New Opportunities 44.79% 168.90% 184.45%
Putnam New Value 13.74% N/A 20.11%
Putnam OTC & Emerging Growth 62.96% N/A 27.82%
Putnam Research 25.44% N/A 25.43%
Putnam Small Cap Value N/A N/A -0.93%
Putnam Utilities Growth and Income 6.80% 107.20% 132.37%
Putnam Vista 32.27% N/A 55.04%
Putnam Voyager 40.68% 167.95% 381.59%
- --------------------
</TABLE>
* Each of the above Funds (Class IB) corresponding to the Variable Sub-Accounts
commenced operations on April 30, 1998, except for the Putnam VT Diversified
Income, Growth and Income, and International Growth Funds, which commenced
operations on April 6, 1998, and the Putnam VT Research Fund, which commenced
operations September 30, 1998. For periods prior to the inception dates of the
Funds (Class IB), the performance shown is based on the historical performance
of the Funds (Class IA), adjusted to reflect the current expenses of the Funds
(Class IB). The inception dates for the Funds (Class IA) are as follows:
Global Asset Allocation, Growth and Income, High Yield, Money Market, U.S.
Government and High Quality Bond, Voyager commenced operations on February 1,
1988; Global Growth commenced operations on May 1, 1990; Utilities Growth and
Income commenced operations on May 1, 1992; Diversified Income commenced
operations on September 15, 1993; New Opportunities commenced operations on May
2, 1994; Asia Pacific Growth commenced operations on May 1, 1995; International
Growth, International Growth and Income, International New Opportunities, New
Value and Vista commenced operations on January 2, 1997; The George Putnam Fund
of Boston, Health Sciences, Investors and OTC & Emerging Growth commenced
operations on April 30, 1998.
<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 3:00 p.m. Central 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 and administrative expense 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 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.
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.
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
7.0% 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 of Allstate Life Insurance Company of New York as of
December 31, 1998 and 1997 and for each of the three years in the period ended
December 31, 1998 and the financial statements of Allstate Life of New York
Separate Account A as of December 31, 1998 and for each of the two years in the
period ended December 31, 1998 appearing in this Statement of Additional
Information (which is incorporated by reference in the prospectus of Allstate
Life of New York Separate Account A of Allstate Life Insurance Company of New
York) have been audited by Deloitte & Touche LLP, independent auditors as stated
in their reports appearing herein, and are included in reliance upon the reports
of such firm given upon their authority as experts in accounting and auditing.
FINANCIAL STATEMENTS
The financial statements of Allstate New York and the Variable Account begin on
Page F-1 of this Statement of Additional Information.
<PAGE>
Financial Statements
Index
-----
Page
----
Independent Auditors' Report...............................................F-1
Financial Statements:
Statements of Financial Position,
December 31, 1998 and 1997...............................F-2
Statements of Operations and Comprehensive Income for the Years Ended
December 31, 1998, 1997 and 1996.........................F-3
Statements of Shareholder's Equity for the Years Ended
December 31, 1998, 1997 and 1996.........................F-4
Statements of Cash Flows for the Years Ended
December 31, 1998, 1997 and 1996.........................F-5
Notes to Financial Statements.....................................F-6
Schedule IV - Reinsurance for the Years Ended
December 31, 1998, 1997 and 1996.........................F-22
Schedule V - Valuation and Qualifying Accounts
December 31, 1998, 1997 and 1996.........................F-23
18
<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, 1998 and 1997, 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, 1998. 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, 1998 and
1997, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 1998 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 19, 1999
F-1
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF FINANCIAL POSITION
December 31,
------------
($ in thousands) 1998 1997
---- ----
ASSETS
Investments
Fixed income securities, at fair value
(amortized cost $1,648,972 and $1,510,110) $1,966,067 $1,756,257
Mortgage loans 145,095 114,627
Short-term 76,127 9,513
Policy loans 29,620 27,600
---------- ----------
Total investments 2,216,909 1,907,997
Deferred acquisition costs 87,830 71,946
Accrued investment income 22,685 21,725
Reinsurance recoverables 2,210 1,726
Cash 3,117 393
Other assets 9,887 6,167
Separate Accounts 366,247 308,595
---------- ----------
TOTAL ASSETS $2,708,885 $2,318,549
========== ==========
LIABILITIES
Reserve for life-contingent contract benefits $1,208,104 $1,084,409
Contractholder funds 703,264 607,474
Current income taxes payable 14,029 1,419
Deferred income taxes 25,449 16,990
Other liabilities and accrued expenses 23,463 10,985
Payable to affiliates, net 38,835 5,267
Separate Accounts 366,247 308,595
---------- ----------
TOTAL LIABILITIES 2,379,391 2,035,139
---------- ----------
COMMITMENTS AND CONTINGENT LIABILITIES (NOTE 10)
SHAREHOLDER'S EQUITY
Common stock, $25 par value, 80,000 shares
authorized, issued and outstanding 2,000 2,000
Additional capital paid-in 45,787 45,787
Retained income 198,801 171,144
Accumulated other comprehensive income:
Unrealized net capital gains 82,906 64,479
---------- ----------
Total accumulated other comprehensive income 82,906 64,479
---------- ----------
TOTAL SHAREHOLDER'S EQUITY 329,494 283,410
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $2,708,885 $2,318,549
========== ==========
See notes to financial statements.
F-2
<PAGE>
<TABLE>
<CAPTION>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
Year Ended December 31,
-----------------------
($ in thousands) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
REVENUES
Premiums and contract charges (net of reinsurance
ceded of $3,204, $3,087 and $2,273) $ 119,052 $ 118,963 $ 117,106
Net investment income 134,413 124,887 112,862
Realized capital gains and losses 4,697 701 (1,581)
--------- --------- ---------
258,162 244,551 228,387
--------- --------- ---------
COSTS AND EXPENSES
Contract benefits (net of reinsurance recoveries
of $997, $1,985 and $2,827) 183,839 179,872 172,772
Amortization of deferred acquisition costs 7,029 5,023 6,512
Operating costs and expenses 24,703 23,644 16,874
--------- --------- ---------
215,571 208,539 196,158
--------- --------- ---------
INCOME FROM OPERATIONS BEFORE INCOME TAX EXPENSE 42,591 36,012 32,229
Income tax expense 14,934 13,296 11,668
--------- --------- ---------
NET INCOME 27,657 22,716 20,561
--------- --------- ---------
OTHER COMPREHENSIVE INCOME
Change in unrealized net capital gains and losses 18,427 27,627 (37,561)
--------- --------- ---------
COMPREHENSIVE INCOME $ 46,084 $ 50,343 $ (17,000)
========= ========= =========
<FN>
See notes to financial statements.
</FN>
</TABLE>
F-3
<PAGE>
<TABLE>
<CAPTION>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF SHAREHOLDER'S EQUITY
December 31,
------------
($ in thousands) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
COMMON STOCK $ 2,000 $ 2,000 $ 2,000
--------- --------- ---------
ADDITIONAL CAPITAL PAID-IN 45,787 45,787 45,787
--------- --------- ---------
RETAINED INCOME
Balance, beginning of year 171,144 148,428 127,867
Net income 27,657 22,716 20,561
--------- --------- ---------
Balance, end of year 198,801 171,144 148,428
--------- --------- ---------
ACCUMULATED OTHER COMPREHENSIVE INCOME
Balance, beginning of year 64,479 36,852 74,413
Change in unrealized net capital gains and losses 18,427 27,627 (37,561)
--------- --------- ---------
Balance, end of year 82,906 64,479 36,852
--------- --------- ---------
Total shareholder's equity $ 329,494 $ 283,410 $ 233,067
========= ========= =========
<FN>
See notes to financial statements.
</FN>
</TABLE>
F-4
<PAGE>
<TABLE>
<CAPTION>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF CASH FLOWS
Year Ended December 31,
-----------------------
($ in thousands) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 27,657 $ 22,716 $ 20,561
Adjustments to reconcile net income to net
cash provided by operating activities
Amortization and other non-cash items (34,890) (31,112) (26,172)
Realized capital gains and losses (4,697) (701) 1,581
Interest credited to contractholder funds 41,200 31,667 25,817
Changes in:
Life-contingent contract benefits
and contractholder funds 53,343 68,114 75,217
Deferred acquisition costs (16,693) (10,781) (6,859)
Accrued investment income (960) (1,404) (1,493)
Income taxes payable 13,865 (158) 1,986
Other operating assets and liabilities (15,014) 9,949 (5,963)
--------- --------- ---------
Net cash provided by operating activities 63,811 88,290 84,675
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of fixed income securities 65,281 15,723 28,454
Investment collections
Fixed income securities 159,648 120,061 72,751
Mortgage loans 5,855 5,365 12,508
Investment purchases
Fixed income securities (292,444) (236,984) (236,252)
Mortgage loans (24,252) (35,200) (10,325)
Change in short-term investments, net (55,846) 16,342 (18,598)
Change in policy loans, net (2,020) (2,241) (2,574)
--------- --------- ---------
Net cash used in investing activities (143,778) (116,934) (154,036)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Contractholder fund deposits 137,473 79,384 115,420
Contractholder fund withdrawals (54,782) (51,374) (46,504)
--------- --------- ---------
Net cash provided by financing activities 82,691 28,010 68,916
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH 2,724 (634) (445)
CASH AT BEGINNING OF YEAR 393 1,027 1,472
--------- --------- ---------
CASH AT END OF YEAR $ 3,117 $ 393 $ 1,027
========= ========= =========
<FN>
See notes to financial statements.
</FN>
</TABLE>
F-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 1998 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. Life insurance includes traditional products such as whole
life and term life insurance, as well as universal life and other
interest-sensitive life products. Savings products include deferred annuities,
such as variable annuities and fixed rate single and flexible premium annuities,
and immediate annuities such as structured settlement annuities. The Company
distributes its products using a combination of Allstate agents, which include
life specialists as well as banks, independent insurance agents, brokers and
direct marketing.
Structured settlement annuity contracts issued by the Company are long-term in
nature and involve fixed guarantees relating to the amount and timing of benefit
payments. Annuity contracts and life insurance policies issued by the Company
are subject to discretionary withdrawal or surrender by customers, subject to
applicable surrender charges. In low interest rate environments, funds from
maturing investments, particularly those supporting long-term structured
settlement annuity obligations, may be reinvested at substantially lower
interest rates than those which prevailed when the funds were previously
invested.
The Company monitors economic and regulatory developments which have the
potential to impact its business. There continues to be proposed federal and
state regulation and legislation that, if passed, would allow banks greater
participation in the securities and insurance businesses. Such events would
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 have a
detrimental effect on the Company's sales.
F-6
<PAGE>
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 acquisition costs, and reserves for life and annuity policy 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.
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 dividends on short-term
investments. 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 futures contracts which are derivative financial
instruments. When futures contracts meet specific criteria they may be
designated as accounting hedges and accounted for on either a fair value or
deferral basis, depending upon the nature of the hedge strategy and the method
used to account for the hedged item. 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 futures contract
becomes ineffective (including if the 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 either deferred and amortized over the
remaining life of either the hedge or the hedged item, whichever is shorter, or
are reported in shareholder's equity, consistent with the accounting for the
hedged item. Futures contracts must reduce the primary market risk exposure on
an enterprise or transaction basis in conjunction with the 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.
DEFERRAL ACCOUNTING Under deferral accounting, gains and losses on futures
contracts are deferred on the statement of financial position and recognized in
earnings in conjunction with earnings on the hedged item. The Company accounts
for interest rate futures contracts 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.
F-7
<PAGE>
Changes in fair values of these types of derivatives are initially deferred as
other liabilities and accrued expenses. Once the anticipated transaction occurs,
the deferred gains or losses are considered part of the cost basis of the asset
and reported net of tax in shareholder's equity or recognized as a gain or loss
from disposition of the asset, as appropriate. The Company reports initial
margin deposits on futures in short-term investments. Fees and commissions paid
on these derivatives are also deferred as an adjustment to the carrying value of
the hedged item.
RECOGNITION OF PREMIUM REVENUES AND CONTRACT CHARGES
Premiums for traditional life insurance and certain life-contingent annuities
are recognized as revenue when due. Accident and disability premiums are earned
on a pro rata basis over the policy period. Revenues on universal life-type
insurance policies are comprised of contract charges and fees, and are
recognized when assessed against the policyholder account balance. Revenues on
investment contracts include contract charges and fees for contract
administration and surrenders. These revenues are recognized when levied against
the contract balance. Gross premium in excess of the net premium on limited
payment contracts are deferred and recognized over the contract period.
REINSURANCE
The Company has reinsurance agreements whereby certain premiums and contract
benefits are ceded and reflected net of such reinsurance in the statements of
operations and comprehensive income. Reinsurance recoverable and the related
reserves 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.
DEFERRED ACQUISITION COSTS
Certain costs of acquiring life and annuity business, principally agents'
remuneration, premium taxes, certain underwriting costs and direct mail
solicitation expenses are deferred and amortized to income. For traditional life
insurance, limited payment contracts and accident and disability insurance,
these costs are amortized in proportion to the estimated revenues on such
business. For universal life-type policies and investment contracts, the costs
are amortized in relation to the present value of estimated gross profits on
such business. Changes in the amount or timing of estimated gross profits will
result in adjustments in the cumulative amortization of these costs. To the
extent that unrealized gains or losses on fixed income securities carried at
fair value would result in an adjustment of deferred acquisition costs had those
gains or losses actually been realized, the related unamortized deferred
acquisition costs are recorded as a reduction of the unrealized gains or losses
included in shareholder's equity.
INCOME TAXES
The income tax provision is calculated under the liability method and presented
net of reinsurance. 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 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 flexible premium deferred variable annuities, the assets and
liabilities of which are legally segregated and reflected in the accompanying
statements of financial position as assets and liabilities of the Separate
Accounts. The Company's Separate Accounts consist of: Allstate Life of New York
Variable Annuity Account, Allstate Life of New York Variable Annuity Account II
and Allstate Life of New York Separate Account A. Each of the Separate Accounts
are unit investment trusts registered with the Securities and Exchange
Commission.
F-8
<PAGE>
Assets of the Separate Accounts are carried at fair value. 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 fees, administration fees and
mortality and expense risk charges.
RESERVES FOR LIFE-CONTINGENT CONTRACT BENEFITS
The reserve for life-contingent contract benefits, which relates to traditional
life insurance, group retirement annuities and structured settlement annuities
with life contingencies, disability insurance and accident insurance, is
computed on the basis of assumptions as to future investment yields, mortality,
morbidity, terminations and expenses. 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. Reserve interest rates
ranged from 4.0% to 11.0% during 1998. 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 individual or group policies and
contracts that include an investment component, including most fixed annuities
and universal life policies. Payments received are recorded as interest-bearing
liabilities. Contractholder funds are equal to deposits received and interest
credited to the benefit of the contractholder less withdrawals, mortality
charges and administrative expenses. During 1998, credited interest rates on
contractholder funds ranged from 3.46% to 11.00% for those contracts with fixed
interest rates and from 3.50% to 7.75% for those with flexible rates.
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.
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 1998, the Company adopted Statement of Financial Accounting Standards
("SFAS") No. 125, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishment of Liabilities" under the guidance of SFAS No. 127 "Deferral
of the Effective Date of Certain Provisions of FASB Statement No. 125". As a
result, the Company has recorded an asset and corresponding liability
representing the collateral received in connection with the Company's securities
lending program.
In 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive Income."
Comprehensive income is a measurement of certain changes in shareholder's equity
that result from transactions and other economic events other than transactions
with shareholders. For the Company, these consist of changes in unrealized gains
and losses on the investment portfolio (See Note 9).
In 1998, the Company adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." SFAS 131 redefines how segments are
determined and requires additional segment disclosures for both annual and
interim financial reporting. The Company has identified itself as a single
operating segment.
F-9
<PAGE>
PENDING ACCOUNTING STANDARDS
In December 1997, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position ("SOP")
97-3, "Accounting by Insurance and Other Enterprises for Insurance-related
Assessments." The SOP is required to be adopted in 1999. 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. The Company is currently evaluating the effects of this
SOP on its accounting for insurance-related assessments. Certain information
required for compliance is not currently available and therefore the Company is
studying alternatives for estimating the accrual. In addition, industry groups
are working to improve the information available. Adoption of this standard is
not expected to be material to the results of operations or financial position
of the Company.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133
replaces existing pronouncements and practices with a single, integrated
accounting framework for derivatives and hedging activities. The requirements
are effective for fiscal years beginning after June 15, 1999. Earlier
application is encouraged but is only permitted as of the beginning of any
fiscal quarter after issuance. 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 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 Company expects to adopt
SFAS No. 133 as of January 1, 2000. Based on existing interpretations of the
requirements of SFAS No. 133, the impact of 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 recoverable 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.
F-10
<PAGE>
The following amounts were ceded to the ALIC under reinsurance agreements.
YEAR ENDED DECEMBER 31,
-----------------------
($ in thousands) 1998 1997 1996
---- ---- ----
Premiums $ 2,519 $ 2,171 $ 1,383
Policy benefits 315 327 1,662
Included in the reinsurance recoverable at December 31, 1998 and 1997 are
amounts due from the ALIC of $532 and $342, respectively.
STRUCTURED SETTLEMENT ANNUITIES
AIC, through an affiliate, purchased $12,747, $12,766 and $15,610 of structured
settlement annuities from the Company in 1998, 1997 and 1996, respectively. Of
these amounts, $5,152, $3,468 and $8,517 relate to structured settlement
annuities with life contingencies and are included in premium income in 1998,
1997 and 1996, respectively. Additionally, the reserve for life-contingent
contract benefits was increased by approximately 94% of such premium received in
each of these years.
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. The
Company reimburses AIC and ALIC for the operating expenses incurred on behalf of
the Company. The cost to the Company is determined by various allocation methods
and is primarily related to the level of services provided. Operating expenses,
including compensation and retirement and other benefit programs, allocated to
the Company were $32,326, $27,632 and $23,134 in 1998, 1997 and 1996,
respectively. A portion of these expenses relate to the acquisition of life and
annuity 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>
AMORTIZED GROSS UNREALIZED FAIR
COST GAINS LOSSES VALUE
---- ----- ------ -----
<S> <C> <C> <C> <C>
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
========== ========== ========== ==========
AT DECEMBER 31, 1997
U.S. government and agencies $ 416,203 $ 126,824 $ (212) $ 542,815
Municipal 35,382 2,449 (22) 37,809
Corporate 803,935 103,700 (479) 907,156
Mortgage-backed securities 215,465 13,442 (166) 228,741
Asset-backed securities 39,125 642 (31) 39,736
---------- ---------- ---------- ----------
Total fixed income securities $1,510,110 $ 247,057 $ (910) $1,756,257
========== ========== ========== ==========
</TABLE>
F-11
<PAGE>
SCHEDULED MATURITIES
The scheduled maturities for fixed income securities are as follows at December
31, 1998:
AMORTIZED FAIR
COST VALUE
---- -----
Due in one year or less $ 14,903 $ 15,087
Due after one year through five years 79,333 84,372
Due after five years through ten years 227,770 250,208
Due after ten years 1,001,830 1,276,829
---------- ----------
1,323,836 1,626,496
Mortgage- and asset-backed securities 325,136 339,571
---------- ----------
Total $1,648,972 $1,966,067
========== ==========
Actual maturities may differ from those scheduled as a result of prepayments by
the issuers.
NET INVESTMENT INCOME
YEAR ENDED DECEMBER, 31 1998 1997 1996
---- ---- ----
Fixed income securities $124,100 $116,763 $104,583
Mortgage loans 10,309 7,896 7,113
Other 2,940 2,200 2,942
-------- -------- --------
Investment income, before expense 137,349 126,859 114,638
Investment expense 2,936 1,972 1,776
-------- -------- --------
Net investment income $134,413 $124,887 $112,862
======== ======== ========
REALIZED CAPITAL GAINS AND LOSSES
YEAR ENDED DECEMBER 31, 1998 1997 1996
---- ---- ----
Fixed income securities $ 4,755 $ 955 $(1,522)
Mortgage loans (65) (221) (59)
Other 7 (33) --
------- ------- -------
Realized capital gains and losses 4,697 701 (1,581)
Income tax 1,644 245 (553)
------- ------- -------
Realized capital gains and losses, after tax $ 3,053 $ 456 $(1,028)
======= ======= =======
Excluding calls and prepayments, gross gains of $2,905, $471 and $480 and gross
losses of $164, $105 and $2,308 were realized on sales of fixed income
securities during 1998, 1997 and 1996, respectively.
F-12
<PAGE>
UNREALIZED NET CAPITAL GAINS
Unrealized net capital gains on fixed income securities included in
shareholder's equity at December 31, 1998 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 $ 1,648,972 $ 1,966,067 $ 318,742 $ (1,647) $ 317,095
=========== =========== =========== ===========
Reserve for life-contingent
contract benefits (187,706)
Deferred income taxes (44,642)
Deferred acquisition costs
and other (1,841)
-----------
Unrealized net capital gains $ 82,906
===========
</TABLE>
<TABLE>
<CAPTION>
CHANGE IN UNREALIZED NET CAPITAL GAINS
YEAR ENDED DECEMBER 31, 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Fixed income securities $ 70,948 $ 123,519 $ (82,847)
Reserves for life contingent-contract benefits (42,251) (80,155) 24,300
Deferred income taxes (9,922) (14,876) 20,224
Deferred acquisition costs and other (348) (861) 762
--------- --------- ---------
Increase (decrease) in unrealized net
capital gains $ 18,427 $ 27,627 $ (37,561)
========= ========= =========
</TABLE>
INVESTMENT LOSS PROVISIONS AND VALUATION ALLOWANCES
Pretax provisions for investment losses, principally relating to other than
temporary declines in value of fixed income securities and valuation allowances
on mortgage loans were $114, $261 and $208 in 1998, 1997 and 1996, respectively.
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, 1998, 1997 and 1996.
Interest income is recognized on a cash basis for impaired loans carried at the
fair value of the collateral, beginning at the time of impairment. For other
impaired loans, interest is accrued based on the net carrying value. There were
no impaired loans during 1998 and 1997. In 1996, the Company recognized interest
income of $281 on impaired loans, which was received in cash during the year.
The average recorded investment in impaired loans was $5,154 during 1996.
Valuation allowances for mortgage loans at December 31, 1998, 1997 and 1996 were
$600, $486 and $225, respectively. There were no direct write-downs of mortgage
loan valuation allowances for the years ended December 31, 1998 and 1997. For
the year ended December 31, 1996, direct write-downs of mortgage loan valuation
allowances were $1,431. Net (reductions) additions to the mortgage loan
valuation allowances were $114, $261 and $(296) for the years ended December 31,
1998, 1997 and 1996, respectively.
F-13
<PAGE>
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, 1998 and
1997:
(% of municipal bond portfolio carrying value) 1998 1997
---- ----
Ohio 30.2% 28.4%
Illinois 21.1 19.8
California 17.4 22.7
Maryland 8.2 8.0
Minnesota 5.9 5.5
New York 5.7 5.4
Maine 5.3 5.6
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, 1998 and 1997:
(% of commercial mortgage portfolio carrying value) 1998 1997
---- ----
California 41.9% 47.7%
New York 26.3 30.5
Illinois 15.8 15.3
New Jersey 6.9 -
Pennsylvania 6.2 3.3
The types of properties collateralizing the commercial mortgage loans at
December 31, are as follows:
(% of commercial mortgage portfolio carrying value) 1998 1997
---- ----
Retail 39.5% 38.8%
Warehouse 19.2 25.4
Apartment complex 18.5 14.9
Office buildings 11.7 15.3
Industrial 5.5 4.9
Other 5.6 .7
------ ------
100.0% 100.0%
===== =====
F-14
<PAGE>
The contractual maturities of the commercial mortgage loan portfolio as of
December 31, 1998, for loans that were not in foreclosure are as follows:
NUMBER OF LOANS CARRYING VALUE PERCENT
--------------- -------------- -------
1999 1 $ 2,832 2.0%
2000 4 7,762 5.3
2001 5 7,066 4.9
2002 2 6,154 4.2
Thereafter 31 121,281 83.6
-------- -------- --------
Total 43 $145,095 100.0%
======== ======== ========
In 1998, there were no commercial mortgage loans which were contractually due.
SECURITIES ON DEPOSIT
At December 31, 1998, fixed income securities with a carrying value of $2,109
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 below
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 acquisition costs and reinsurance
recoverables) and liabilities (including traditional life and universal
life-type 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.
FINANCIAL ASSETS
The carrying value and fair value of financial assets at December 31, are as
follows:
1998 1997
---- ----
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
----- ----- ----- -----
Fixed income securities $1,966,067 $1,966,067 $1,756,257 $1,756,257
Mortgage loans 145,095 154,872 114,627 120,849
Short-term investments 76,127 76,127 9,513 9,513
Policy loans 29,620 29,620 27,600 27,600
Separate Accounts 366,247 366,247 308,595 308,595
Carrying value and fair value include the effects of derivative financial
instruments where applicable.
F-15
<PAGE>
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 approximates fair value.
The carrying value of policy loans approximates its 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:
1998 1997
---- ----
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
----- ----- ----- -----
Contractholder funds on
investment contracts $512,239 $518,448 $437,449 $466,136
Separate Accounts 366,247 366,247 308,595 308,595
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 interest rate
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.
The following table summarizes the contract amount, credit exposure, fair value
and carrying value of the Company's derivative financial instruments:
CARRYING
VALUE
CONTRACT CREDIT FAIR ASSETS/
AMOUNT EXPOSURE VALUE (LIABILITIES)
------ -------- ----- -------------
AT DECEMBER 31, 1998
- --------------------
Financial futures contracts $15,000 $ -- $ (15) $ (223)
AT DECEMBER 31, 1997
- --------------------
Financial futures contracts $29,800 $ -- $ (153) $ (810)
Carrying value is representative of deferred gains and losses.
F-16
<PAGE>
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 on derivative
financial instruments due to counterparty nonperformance.
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 futures contracts to manage its
market risk related to anticipatory investment purchases and sales, as well as
other risk management purposes. Futures used as hedges of anticipatory
transactions pertain to identified transactions which are probable to occur and
are generally completed within 90 days. Futures contracts have limited
off-balance-sheet credit risk as they are executed on organized exchanges and
require security deposits, as well as the daily cash settlement of margins.
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 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 similar commitments to similar borrowers.
The Company had no mortgage loan commitments at December 31, 1998. At December
31, 1997 the Company had $18,000 in mortgage loan commitments which had a fair
value of $180.
F-17
<PAGE>
6. 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 results
in the Company's annual income tax provision being computed, with adjustments,
as if the Company filed a separate return.
Prior to Sears, Roebuck and Co.'s ("Sears") distribution ("Sears distribution")
on June 30, 1995 of its 80.3% ownership in the Corporation to Sears
shareholders, the Allstate Group joined with Sears and its domestic business
units (the "Sears Group") in the filing of a consolidated federal income tax
return (the "Sears Tax Group") and were parties to a federal income tax
allocation agreement (the "Tax Sharing Agreement"). Under the Tax Sharing
Agreement, the Company, through the Corporation, paid to or received from the
Sears Group the amount, if any, by which the Sears Tax Group's federal income
tax liability was affected by virtue of inclusion of the Company in the
consolidated federal income tax return.
As a result of the Sears distribution, the Allstate Group was no longer included
in the Sears Tax Group, and the Tax Sharing Agreement was terminated.
Accordingly, the Allstate Group and Sears Group entered into a new tax sharing
agreement, which adopts many of the principles of the Tax Sharing Agreement and
governs their respective rights and obligations with respect to federal income
taxes for all periods prior to the Sears distribution, 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:
1998 1997
---- ----
DEFERRED ASSETS
Life and annuity reserves $ 41,073 $ 34,084
Difference in tax bases of investments -- 742
Discontinued operations 364 364
Other postretirement benefits 328 352
Other assets 2,023 255
-------- --------
Total deferred assets 43,788 35,797
-------- --------
DEFERRED LIABILITIES
Unrealized net capital gains (44,642) (34,720)
Deferred acquisition costs (20,573) (15,821)
Difference in tax bases of investments (1,784) --
Prepaid commission expense (790) (792)
Other liabilities (1,448) (1,454)
-------- --------
Total deferred liabilities (69,237) (52,787)
-------- --------
Net deferred liability $(25,449) $(16,990)
======== ========
F-18
<PAGE>
Although realization is not assured, management believes it is more likely than
not that the deferred tax assets will be realized based on the assumptions that
certain levels of income will be achieved.
The components of income tax expense for the year ended December 31, are as
follows:
1998 1997 1996
-------- -------- --------
Current $ 13,679 $ 14,874 $ 11,411
Deferred 1,255 (1,578) 257
-------- -------- --------
Total income tax expense $ 14,934 $ 13,296 $ 11,668
======== ======== ========
The Company paid income taxes of $3,788, $13,350 and $11,968 in 1998, 1997 and
1996, respectively. The Company had a current income tax liability of $14,029
and $1,419 at December 31, 1998 and 1997, respectively.
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:
1998 1997 1996
------ ------ ------
Statutory federal income tax rate 35.0% 35.0% 35.0%
State income tax expense 1.6 2.2 2.4
Other (1.5) (.3) (1.2)
------ ------ ------
Effective income tax rate 35.1% 36.9% 36.2%
====== ====== ======
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, 1998, 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.
7. STATUTORY FINANCIAL INFORMATION
PERMITTED STATUTORY ACCOUNTING PRACTICES
The Company prepares its statutory financial statements in accordance with
accounting principles and 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 revised
statutory accounting principles. While the NAIC has approved a January 1, 2001
implementation date for the newly developed guidance, companies must adhere to
the implementation date adopted by their state of domicile. The Company's state
of domicile, New York, is continuing its comparison of codification and current
statutory accounting requirements to determine necessary revisions to existing
state laws and regulations. The requirements are not expected to have a material
impact on the statutory surplus of the Company.
F-19
<PAGE>
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.
8. BENEFIT PLANS
PENSION PLANS
Defined benefit pension plans, sponsored by the Corporation, 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. The
Corporation's funding policy for the pension plans is to make annual
contributions in accordance with accepted actuarial cost methods. The costs to
the Company included in net income were $382, $597 and $490 for the pension
plans in 1998, 1997 and 1996, respectively.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Corporation 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 the Corporation's established
retirement policy and are continuously insured under the Corporation's group
plans or other approved plans for ten or more years prior to retirement. The
Corporation shares the cost of the retiree medical benefits with retirees based
on years of service, with the Corporation's share being subject to a 5% limit on
annual medical cost inflation after retirement. The Corporation's postretirement
benefit plans currently are not funded. The Corporation has the right to modify
or terminate these plans.
PROFIT SHARING FUND
Employees of the Corporation and its domestic subsidiaries 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's contribution to the Allstate Plan was $567, $164 and $111 in 1998,
1997 and 1996, respectively.
F-20
<PAGE>
9. 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>
1998 1997 1996
------------------------------- ------------------------------------------------------------------
After- After- After-
Pretax Tax tax Pretax Tax tax Pretax Tax tax
------ --- --- ------ --- --- ------ --- ---
Unrealized capital gains
and losses:
- --------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unrealized holding gains
(losses) arising during
the period $75,817 $(26,536) $49,281 $ 124,702 $(43,645) $ 81,057 $(86,096) $ 30,133 $(55,963)
Adjustments to unrealized
capital gains and losses
arising during the period:
Deferred acquisition costs (348) 122 (226) (861) 301 (560) 762 (267) 495
Reserve for life insurance
policy benefits (42,251) 14,788 (27,463) (80,155) 28,054 (52,101) 24,300 (8,505) 15,795
------- -------- ------- --------- -------- -------- -------- -------- --------
Net unrealized holding
gains arising during the
period 33,218 (11,626) 21,592 43,686 (15,290) 28,396 (61,034) 21,361 (39,673)
------- -------- ------- --------- -------- -------- -------- -------- --------
Less: reclassification
adjustment for realized
net capital gains included
in net income 4,869 (1,704) 3,165 1,183 (414) 769 (3,249) 1,137 (2,112)
------- -------- ------- --------- -------- -------- -------- -------- --------
Unrealized net capital
gains (losses) 28,349 (9,922) 18,427 42,503 (14,876) 27,627 (57,785) 20,224 (37,561)
------- -------- ------- --------- -------- -------- -------- -------- --------
OTHER COMPREHENSIVE
INCOME $28,349 $ (9,922) $18,427 $ 42,503 $(14,876) $ 27,627 $(57,785) $ 20,224 $(37,561)
======= ======== ======= ========= ======== ======== ======== ======== ========
</TABLE>
10. COMMITMENTS AND CONTINGENT LIABILITIES
REGULATIONS AND LEGAL PROCEEDINGS
The Company's business is subject to the effect of a changing social, economic
and regulatory environment. Public and regulatory initiatives have varied and
have included employee benefit regulation, controls on medical care costs,
removal of barriers preventing banks from engaging in the securities and
insurance business, tax law changes affecting the taxation of insurance
companies, the tax treatment of insurance products and its impact on the
relative desirability of various personal investment vehicles, and proposed
legislation to prohibit the use of gender in determining insurance rates and
benefits. The ultimate changes and eventual effects, if any, of these
initiatives are uncertain.
From time to time the Company is involved in pending and threatened litigation
in the normal course of its business in which claims for monetary damages are
asserted. In the opinion of management, the ultimate liability, if any, arising
from such pending or threatened litigation is not expected to have a material
effect on the results of operations, liquidity or financial position of the
Company.
F-21
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
SCHEDULE IV--REINSURANCE
($ in thousands)
GROSS NET
YEAR ENDED DECEMBER 31, 1998 AMOUNT CEDED AMOUNT
- ---------------------------- ------ ----- ------
Life insurance in force $12,656,826 $ 857,500 $11,799,326
=========== =========== ===========
Premiums and contract charges:
Life and annuities $ 116,678 $ 2,541 $ 114,137
Accident and health 5,578 663 4,915
----------- ----------- -----------
$ 122,256 $ 3,204 $ 119,052
=========== =========== ===========
GROSS NET
YEAR ENDED DECEMBER 31, 1997 AMOUNT CEDED AMOUNT
- ---------------------------- ------ ----- ------
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
=========== =========== ===========
GROSS NET
YEAR ENDED DECEMBER 31, 1996 AMOUNT CEDED AMOUNT
- ---------------------------- ------ ----- ------
Life insurance in force $ 9,962,300 $ 553,628 $ 9,408,672
=========== =========== ===========
Premiums and contract charges:
Life and annuities $ 114,296 $ 1,398 $ 112,898
Accident and health 5,083 875 4,208
----------- ----------- -----------
$ 119,379 $ 2,273 $ 117,106
=========== =========== ===========
F-22
<PAGE>
<TABLE>
<CAPTION>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
SCHEDULE V--VALUATION AND QUALIFYING ACCOUNTS
($ in thousands)
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, 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
============ ============ ============ ============
YEAR ENDED DECEMBER 31, 1996
- ----------------------------
Allowance for estimated losses
on mortgage loans $ 1,952 $ (296) $ 1,431 $ 225
============ ============ ============ ============
</TABLE>
F-23
<PAGE>
ALLSTATE LIFE OF NEW YORK SEPARATE ACCOUNT A
Financial Statements as of December 31, 1998
and for the periods ended December 31, 1998
and December 31, 1997, and
Independent Auditors' Report
F-24
<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 net assets of each of the
sub-accounts ("portfolios" for purposes of this report) that comprise Allstate
Life of New York Separate Account A (the "Account"), a Separate Account of
Allstate Life Insurance Company of New York, an affiliate of The Allstate
Corporation, as of December 31, 1998, and the related statements of operations
and changes in net assets for the years ended December 31, 1998 and December 31,
1997 of the Capital Appreciation, Diversified Income, Global Utilities,
Government Securities, Growth, Growth and Income, International Equity, Money
Market, and Value portfolios of the AIM Variable Insurance Funds, Inc. that
comprise the Account. These financial statements are the responsibility of the
Account's 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 audits 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, 1998. 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 each of the portfolios that comprise the
Account as of December 31, 1998, and the results of their operations for the
year then ended and the changes in their net assets for each of the two years in
the period then ended, of each of the portfolios comprising the Account, in
conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Chicago, Illinois
March 18, 1999
F-25
<PAGE>
ALLSTATE LIFE OF NEW YORK SEPARATE ACCOUNT A
STATEMENTS OF NET ASSETS
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
($ and shares in thousands)
ASSETS
Investments in the AIM Variable Insurance Funds, Inc. Portfolios:
Capital Appreciation, 171 shares (cost $3,829) $ 4,305
Diversified Income, 161 shares (cost $1,824) 1,765
Global Utilities, 23 shares (cost $364) 395
Government Securities, 320 shares (cost $3,576) 3,573
Growth, 169 shares (cost $3,615) 4,187
Growth and Income, 278 shares (cost $5,421) 6,604
International Equity, 100 shares (cost $1,818) 1,964
Money Market, 968 shares (cost $968) 968
Value, 272 shares (cost $6,060) 7,152
--------------
Total assets 30,913
LIABILITIES
Payable to Allstate Life Insurance Company of New York:
Accrued contract maintenance charges 8
--------------
Net assets $ 30,905
==============
See notes to financial statements.
F-26
<PAGE>
<TABLE>
<CAPTION>
ALLSTATE LIFE OF NEW YORK SEPARATE ACCOUNT A
STATEMENTS OF OPERATIONS
- ----------------------------------------------------------------------------------------------------------------------------------
($ in thousands)
AIM Variable Insurance Funds, Inc. Portfolios
---------------------------------------------------------------------------------------
For the Year Ended December 31, 1998
---------------------------------------------------------------------------------------
Capital Diversi- Globa Govt. Growth Inter-
Appreci- fied Utili- Securi- and national Money
ation Income ties ties Growth Income Equity Market Value
------- ------ ------- ------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 115 $ 114 $ 8 $ 95 $ 264 $ 89 $ 16 $ 38 $ 327
Charges from Allstate Life Insurance
Company of New York:
Mortality and expense risk (45) (18) (3) (15) (36) (62) (21) (10) (61)
Administrative expense (4) (1) -- (1) (3) (5) (2) (1) (4)
------- ------- ------- ------- ------- ------- ------- ------- -------
Net investment income (loss) 66 95 5 79 225 22 (7) 27 262
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of
investments:
Proceeds from sales 574 233 124 551 243 395 227 352 342
Cost of investments sold 573 225 125 442 214 377 222 352 310
------- ------- ------- ------- ------- ------- ------- ------- -------
Net realized gains (losses) 1 8 (1) 109 29 18 5 -- 32
Change in unrealized gains (losses) 458 (86) 24 (23) 542 1,076 166 -- 1,022
------- ------- ------- ------- ------- ------- ------- ------- -------
Net gains (losses) on investments 459 (78) 23 86 571 1,094 171 -- 1,054
------- ------- ------- ------- ------- ------- ------- ------- -------
CHANGE IN NET ASSETS RESULTING
FROM OPERATIONS $ 525 $ 17 $ 28 $ 165 $ 796 $ 1,116 $ 164 $ 27 $ 1,316
======= ======= ======= ======= ======= ======= ======= ======= =======
<FN>
See notes to financial statements
</FN>
</TABLE>
F-27
<PAGE>
<TABLE>
<CAPTION>
ALLSTATE LIFE OF NEW YORK SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------------------------------------------------------
($ in thousands)
AIM Variable Insurance Funds, Inc. Portfolios
---------------------------------------------------------------------------------------
For the Year Ended December 31, 1998
---------------------------------------------------------------------------------------
Capital Diversi- Globa Govt. Growth Inter-
Appreci- fied Utili- Securi- and national Money
ation Income ties ties Growth Income Equity Market Value
------- ------ ------- ------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 66 $ 95 $ 5 $ 79 $ 225 $ 22 $ (7) $ 27 $ 262
Net realized gains (losses) 1 8 (1) 109 29 18 5 -- 32
Change in unrealized gains (losses) 458 (86) 24 (23) 542 1,076 166 -- 1,022
------- ------- ------- ------- ------- ------- ------- ------ -------
Change in net assets resulting from
operations 525 17 28 165 796 1,116 164 27 1,316
FROM CAPITAL TRANSACTIONS
Deposits 2,056 1,223 357 2,725 2,076 3,227 716 510 3,273
Benefit payments (30) (33) (5) -- (7) (82) (7) (37) (7)
Payments on termination (115) (38) (4) (9) (100) (162) (33) (16) (104)
Contract maintenance charges (2) -- -- (1) (1) (2) (1) -- (3)
Transfers among the portfolios and with
the Fixed Account - net (183) (99) (94) 268 31 76 42 32 236
------- ------- ------- ------- ------- ------- ------- ------ -------
Change in net assets resulting from
capital transactions 1,726 1,053 254 2,983 1,999 3,057 717 489 3,395
------- ------- ------- ------- ------- ------- ------- ------ -------
INCREASE IN NET ASSETS 2,251 1,070 282 3,148 2,795 4,173 881 516 4,711
NET ASSETS AT BEGINNING OF YEAR 2,053 695 113 424 1,391 2,429 1,082 452 2,439
------- ------- ------- ------- ------- ------- ------- ------ -------
NET ASSETS AT END OF YEAR $ 4,304 $ 1,765 $ 395 $ 3,572 $ 4,186 $ 6,602 $ 1,963 $ 968 $ 7,150
======= ======= ======= ======= ======= ======= ======= ======= =======
<FN>
See notes to financial statements.
</FN>
</TABLE>
F-28
<PAGE>
<TABLE>
<CAPTION>
ALLSTATE LIFE OF NEW YORK SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------------------------------------------------------
($ and units in thousands, except value per unit)
AIM Variable Insurance Funds, Inc. Portfolios
--------------------------------------------------------------------------------------
For the Year Ended December 31, 1997
--------------------------------------------------------------------------------------
Capital Diversi- Global Govt. Growth Inter-
Appreci- fied Utili- Securi- and national Money
ation Income ties ties Growth Income Equity Market Value
------- ------ ------- ------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 12 $ (3) $ -- $ (3) $ 39 $ (10) $ 13 $ 10 $ 67
Net realized gains 1 -- -- -- 1 3 1 -- 2
Change in unrealized gains (losses) 17 30 7 20 31 106 (22) -- 70
------- ------- ------- ------- ------- ------- ------- ------- -------
Change in net assets resulting from
operations 30 27 7 17 71 99 (8) 10 139
FROM CAPITAL TRANSACTIONS
Deposits 1,832 570 106 406 1,279 2,277 988 694 2,294
Benefit payments -- -- -- -- -- (49) -- (75) (49)
Payments on termination (10) (5) -- -- (11) (20) (2) (16) (19)
Contract maintenance charges -- -- -- -- -- (1) -- -- (1)
Transfers among the portfolios and with
the Fixed Account - net 113 53 -- 1 25 60 39 (206) 9
------- ------- ------- ------- ------- ------- ------- ------- -------
Change in net assets resulting from
capital transactions 1,935 618 106 407 1,293 2,267 1,025 397 2,234
------- ------- ------- ------- ------- ------- ------- ------- -------
INCREASE IN NET ASSETS 1,965 645 113 424 1,364 2,366 1,017 407 2,373
NET ASSETS AT BEGINNING OF YEAR 88 50 -- -- 27 63 65 45 66
------- ------- ------- ------- ------- ------- ------- ------- -------
NET ASSETS AT END OF YEAR $ 2,053 $ 695 $ 113 $ 424 $ 1,391 $ 2,429 $ 1,082 $ 452 $ 2,439
======= ======= ======= ======= ======= ======= ======= ======= =======
Net asset value per unit at end of year $ 12.74 $ 11.79 $ 13.52 $ 10.83 $ 14.34 $ 14.50 $ 12.60 $ 10.74 $ 13.52
======= ======= ======= ======= ======= ======= ======= ======= =======
Units outstanding at end of year 161 59 8 39 97 168 86 42 180
======= ======= ======= ======= ======= ======= ======= ======= =======
<FN>
See notes to financial statements.
</FN>
</TABLE>
F-29
<PAGE>
ALLSTATE LIFE OF NEW YORK SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS
TWO YEARS ENDED DECEMBER 31, 1998
- --------------------------------------------------------------------------------
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 ("ALNY"). The assets of the Account are
legally segregated from those of ALNY. ALNY is wholly owned by Allstate
Life Insurance Company, a wholly owned subsidiary of Allstate Insurance
Company, which is wholly owned by The Allstate Corporation.
ALNY issues certain annuity contracts, the deposits of which are invested
at the direction of the contractholder in the sub-accounts ("portfolios"
for purposes of this report) that comprise the Account. Contractholders
bear all investment risk for amounts allocated to the Account. The
portfolios invest in the AIM Variable Insurance Funds, Inc. (the "Fund").
ALNY provides insurance and administrative services to the contractholders
for a fee.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Valuation of Investments - Investments consist of shares of the Fund and
are stated at fair value based on quoted market prices at December 31,
1998.
Investment Income - Investment income consists of dividends declared by the
Fund and is recognized on the date of record.
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.
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 with and taxed as a part of ALNY.
ALNY is taxed as a life insurance company under the Code. No federal income
taxes are payable by the Account in 1998 as the Account did not generate
taxable income.
3. CONTRACT CHARGES
ALNY assumes mortality and expense risks related to the operations of the
Account and deducts charges daily at a rate equal to 1.35% per annum of the
daily net assets of the Account. ALNY guarantees that the amount of this
charge will not increase over the life of the contract.
ALNY deducts administrative expense charges daily at a rate equal to .10%
per annum of the daily net assets of the Account.
If aggregate deposits are less than $50,000, ALNY will deduct an annual
maintenance fee of $35 on each contract anniversary.
4. FINANCIAL INSTRUMENTS
The investments of the Account are carried at fair value, based upon quoted
market prices. Accrued contract maintenance charges are of a short-term
nature. It is assumed that their carrying value approximates fair value.
F-30
<PAGE>
<TABLE>
<CAPTION>
5. UNITS ISSUED AND REDEEMED
(Units in whole amounts) Unit activity during 1998
-------------------------
Units Units Accumulation
Outstanding Outstanding Unit Value
December 31, Units Units December 31, December 31,
1997 Issued Redeemed 1998 1998
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Investments in the AIM Variable
Insurance Funds, Inc. Portfolio:
Capital Appreciation 161,013 184,864 (58,541) 287,336 $ 14.98
Diversified Income 58,958 110,754 (23,068) 146,644 12.03
Global Utilities 8,276 32,920 (15,778) 25,418 15.52
Government Securities 39,009 329,878 (66,904) 301,983 11.83
Growth 97,039 150,194 (26,402) 220,831 18.95
Growth and Income 167,625 228,614 (34,349) 361,890 18.24
International Equity 85,934 69,780 (18,816) 136,898 14.34
Money Market 42,128 76,593 (31,711) 87,010 11.13
Value 180,440 251,601 (26,795) 405,246 17.64
<FN>
Units relating to accrued contract maintenance charges are included in units
redeemed.
</FN>
</TABLE>
F-31
