ALLSTATE CUSTOM PORTFOLIO VARIABLE ANNUITY
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
P.O. BOX 94038, PALATINE, IL 60094-4038
TELEPHONE NUMBER: 1-800-692-4682 PROSPECTUS DATED MAY 1, 2000
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Allstate Life Insurance Company of New York ("ALLSTATE NEW YORK") is offering
the Allstate Custom Portfolio Variable Annuity, a group flexible premium
deferred variable annuity contract ("CONTRACT"). This prospectus contains
information about the Contract that you should know before investing. Please
keep it for future reference.
The Contract currently offers 29 investment alternatives ("INVESTMENT
ALTERNATIVES"). The investment alternatives include the fixed account ("FIXED
ACCOUNT") and 28 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 shares of one of the following mutual fund
portfolios ("PORTFOLIOS"):
<TABLE>
<S> <C>
AIM VARIABLE INSURANCE FUNDS: OPPENHEIMER VARIABLE ACCOUNT FUNDS:
AIM V.I. Balanced Fund Oppenheimer Aggressive Growth Fund/VA
AIM V.I. Capital Appreciation Fund Oppenheimer Main Street Growth & Income
AIM V.I. Government Securities Fund Fund/VA
AIM V.I. Growth Fund Oppenheimer Strategic Bond Fund/VA
AIM V.I. High Yield Fund THE DREYFUS SOCIALLY RESPONSIBLE GROWTH
AIM V.I. International Equity Fund FUND, INC.:
AIM V.I. Value Fund The Dreyfus Socially Responsible Growth
FIDELITY VARIABLE INSURANCE PRODUCTS Fund, Inc.
FUND (VIP): DREYFUS STOCK INDEX FUND:
Fidelity VIP Dreyfus Stock Index Fund
Contrafund-Registered Trademark- DREYFUS VARIABLE INVESTMENT FUND:
Portfolio Dreyfus VIF Appreciation Portfolio
Fidelity VIP Equity-Income Portfolio WELLS FARGO VARIABLE TRUST:
Fidelity VIP Growth Portfolio Wells Fargo VT Asset Allocation Fund
Fidelity VIP Growth Opportunities Wells Fargo VT Equity Income Fund
Portfolio Wells Fargo VT Growth Fund
Fidelity VIP Overseas Portfolio DELAWARE GROUP PREMIUM FUND, INC.:
FRANKLIN TEMPLETON VARIABLE INSURANCE Delaware GP Small Cap Value Series
PRODUCTS TRUST: Delaware GP Trend Series
Templeton Asset Strategy Fund -- Delaware GP Trend Series
Class 2 Delaware GP Trend Series
Templeton International Securities
Fund -- Class 2
HSBC VARIABLE INSURANCE FUNDS:
HSBC VI Cash Management Fund
HSBC VI Fixed Income Fund
HSBC VI Growth & Income Fund
</TABLE>
WE (Allstate New York) have filed a Statement of Additional Information, dated
May 1, 2000, with the Securities and Exchange Commission ("SEC"). It contains
more information about the Contract and is incorporated herein by reference,
which means it is legally a part of this prospectus. Its table of contents
appears on page C-1 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.
--------------------------------------------------------------------------------
<TABLE>
<C> <S>
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR
DISAPPROVED THE SECURITIES DESCRIBED IN THIS PROSPECTUS, NOR
HAS IT PASSED ON THE ACCURACY OR THE ADEQUACY OF THIS
PROSPECTUS. ANYONE WHO TELLS YOU OTHERWISE IS COMMITTING A
FEDERAL CRIME.
IMPORTANT THE CONTRACTS MAY BE DISTRIBUTED THROUGH BROKER-DEALERS THAT
NOTICES HAVE RELATIONSHIPS WITH BANKS OR OTHER FINANCIAL
INSTITUTIONS OR BY EMPLOYEES OF SUCH BANKS. HOWEVER, THE
CONTRACTS ARE NOT DEPOSITS, OR OBLIGATIONS OF, OR GUARANTEED
BY SUCH INSTITUTIONS OR ANY FEDERAL REGULATORY AGENCY.
INVESTMENT IN THE CONTRACTS INVOLVES INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THE CONTRACTS ARE NOT FDIC INSURED.
THE CONTRACTS ARE ONLY AVAILABLE IN NEW YORK.
</TABLE>
1 - PROSPECTUS
<PAGE>
TABLE OF CONTENTS
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PAGE
----------------------------------------------------------------------------
OVERVIEW
----------------------------------------------------------------------------
Important Terms 3
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The Contract at a Glance 4
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How the Contract Works 6
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Expense Table 7
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Financial Information 12
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CONTRACT FEATURES
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The Contract 13
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Purchases 14
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Contract Value 15
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Investment Alternatives 16
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The Variable Sub-Accounts 16
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The Fixed Account 18
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Transfers 20
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Expenses 22
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Access To Your Money 24
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Income Payments 25
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Death Benefits 27
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OTHER INFORMATION
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More Information: 28
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Allstate New York 28
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The Variable Account 28
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The Portfolios 29
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The Contract 29
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Qualified Plans 30
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Legal Matters 30
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Year 2000 30
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Taxes 31
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Annual Reports and Other Documents 33
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Performance Information 34
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Experts 35
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APPENDIX A -- MARKET VALUE ADJUSTMENT EXAMPLES A-1
----------------------------------------------------------------------------
APPENDIX B -- WITHDRAWAL ADJUSTMENT EXAMPLE B-1
----------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION TABLE OF CONTENTS C-1
----------------------------------------------------------------------------
2 - PROSPECTUS
<PAGE>
IMPORTANT TERMS
-------------------------------------------------------------------
This prospectus uses a number of important terms that you may not be familiar
with. The index below identifies the page that describes each term. The first
use of each term in this prospectus appears in highlights.
<TABLE>
<CAPTION>
PAGE
<S> <C>
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Accumulation Phase 6
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Accumulation Unit 12,15
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Accumulation Unit Value 12,15
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Allstate New York ("We") 1,28
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Anniversary Values 27
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Annuitant 13
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Automatic Additions Program 14
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Automatic Portfolio Rebalancing Program 21
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Beneficiary 13
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Cancellation Period 4,14
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Contract* 1,6,13
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Contract Anniversary 5
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Contract Owner ("You") 6,13
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Contract Value 15
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Contract Year 5
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Death Benefit Anniversary 27
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Dollar Cost Averaging Program 21
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Due Proof of Death 27
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Fixed Account 1,18
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Guarantee Periods 18
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Income Plan 6,25
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Investment Alternatives 1,16,18,20
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Issue Date 6
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Market Value Adjustment 20
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Payout Phase 6
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Payout Start Date 6,25
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Portfolios 1,16,29
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Preferred Withdrawal Amount 23
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Qualified Contracts 4
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Right to Cancel 14
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SEC 1
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Settlement Value 27
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Systematic Withdrawal Program 24
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Treasury Rate 20
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Valuation Date 14
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Variable Account 1,28
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Variable Sub-Account 1,16
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</TABLE>
*The Allstate Custom Portfolio Variable Annuity is a group contract and your
ownership is represented by certificates. References to "Contract" in this
prospectus include certificates, unless the context requires otherwise.
3 - PROSPECTUS
<PAGE>
THE CONTRACT AT A GLANCE
-------------------------------------------------------------------
The following is a snapshot of the Contract. Please read the remainder of this
prospectus for more information.
<TABLE>
<S> <C>
FLEXIBLE PAYMENTS You can purchase a Contract with as little
as $3,000 ($2,000 for a "QUALIFIED CONTRACT," which is a
Contract issued with a qualified plan). You can add to your
Contract as often and as much as you like, but each payment must
be at least $100. You must maintain a minimum account size of
$1,000.
--------------------------------------------------------------------------------------------------------
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 the extent federal or
state law permits to reflect the investment experience of any
amounts allocated to the Variable Account.
--------------------------------------------------------------------------------------------------------
EXPENSES You will bear the following expenses:
- Total Variable Account annual fees equal to 1.25% of
average daily net assets
- Annual contract maintenance charge of $30 (with certain
exceptions)
- Withdrawal charges ranging from 0% to 7% of payment
withdrawn (with certain exceptions)
- Transfer fee of $10 after 12th transfer in any Contract
Year (fee currently waived)
- State premium tax (New York currently does not impose
one).
- In addition, each Portfolio pays expenses that you will
bear indirectly if you invest in a Variable Sub-Account.
--------------------------------------------------------------------------------------------------------
INVESTMENT ALTERNATIVES The Contract offers 29 investment alternatives
including:
- the Fixed Account (which credits interest at rates we
guarantee), and
- 28 Variable Sub-Accounts investing in Portfolios offering
professional money management by:
- A I M Advisors, Inc.
- Fidelity Management & Research Company
- Templeton Investment Counsel, Inc.
- OppenheimerFunds, Inc.
- The Dreyfus Corporation
- Wells Fargo Bank, N.A.
- Delaware Management Company
- HSBC Asset Management (Americas) Inc.
To find out current rates being paid on the Fixed Account,
or to find out how the Variable Sub-Accounts have performed,
please call us at 1-800-692-4682.
</TABLE>
4 - PROSPECTUS
<PAGE>
<TABLE>
<S> <C>
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SPECIAL SERVICES For your convenience, we offer these special services:
- AUTOMATIC PORTFOLIO REBALANCING PROGRAM
- AUTOMATIC ADDITIONS PROGRAM
- DOLLAR COST AVERAGING PROGRAM
- 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:
- life income with guaranteed payments
- a joint and survivor life income with guaranteed payments
- guaranteed payments for a specified period (5 to 30
years)
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DEATH BENEFITS If you die before the PAYOUT START DATE, we will pay the
death benefit described in the Contract.
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TRANSFERS Before the Payout Start Date, you may transfer your Contract
value ("CONTRACT VALUE") among the investment alternatives,
with certain restrictions. Transfers to the Fixed Account
must be at least $500.
We do not currently impose a fee upon transfers. However, we
reserve the right to charge $10 per transfer after the 12th
transfer in each "CONTRACT YEAR," which we measure from the
date we issue your contract or a Contract anniversary
("CONTRACT ANNIVERSARY").
--------------------------------------------------------------------------------------------------------
WITHDRAWALS You may withdraw some or all of your Contract Value at
anytime during the ACCUMULATION PHASE. Full or partial
withdrawals also are available under limited circumstances
on or after the Payout Start Date.
In general, you must withdraw at least $50 at a time ($1,000
for withdrawals made during the PAYOUT PHASE). A 10% federal
tax penalty may apply if you withdraw before you are 59 1/2
years old. A withdrawal charge and MARKET VALUE ADJUSTMENT
also may apply.
</TABLE>
5 - PROSPECTUS
<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 29 investment alternatives and pay no
federal income taxes on any earnings until you withdraw them. You do this during
what we call the "ACCUMULATION PHASE" of the Contract. The Accumulation Phase
begins on the date we issue your Contract (we call that date the "ISSUE DATE")
and continues until the Payout Start Date, which is the date we apply your money
to provide income payments. During the Accumulation Phase, you may allocate your
purchase payments to any combination of the Variable Sub-Accounts and/or Fixed
Account. If you invest in the Fixed Account, 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 Portfolios.
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 25. 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 Portfolios. 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>
<S> <C> <C> <C> <C>
Issue Payout Start
Date Accumulation Phase Date Payout
Phase
--------------------------------------------------------------------------------------------------------------------------->
You save for retirement
| | | |
You buy You elect to receive income You can receive Or you can
a Contract payments or receive a lump income payments receive income
sum payment for a set period payments for life
</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 none, to your
Beneficiary. SEE "Death Benefits."
Please call us at 1-800-692-4682 if you have any question about how the Contract
works.
6 - PROSPECTUS
<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 Portfolio expenses, please refer to the
accompanying prospectuses for the Portfolios.
CONTRACT OWNER TRANSACTION EXPENSES
Withdrawal Charge (as a percentage of purchase payments)*
Number of Complete Years Since We Received the Purchase Payment
Being Withdrawn: 0 1 2 3 4 5 6 7+
------------------------------------------------------------------------------
Applicable Charge: 7% 6% 5% 4% 3% 2% 1% 0%
------------------------------------------------------------------------------
Annual Contract Maintenance
Charge $30.00**
------------------------------------------------------------------------------
Transfer
Fee $10.00***
------------------------------------------------------------------------------
*Each Contract Year, you may withdraw up to 15% of purchase payments without
incurring a withdrawal charge or a Market Value Adjustment.
**We will waive this charge in certain cases. See "Expenses."
***Applies solely to the thirteenth and subsequent transfers within a Contract
Year excluding transfers due to dollar cost averaging or automatic portfolio
rebalancing. We are currently waiving the transfer fee.
VARIABLE ACCOUNT ANNUAL EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY NET ASSETS
DEDUCTED FROM EACH VARIABLE SUB-ACCOUNT)
Mortality and Expense Risk Charge 1.15%
----------------------------------------------------------------------
Administrative Expense Charge 0.10%
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Total Variable Account Annual Expenses 1.25%
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7 - PROSPECTUS
<PAGE>
PORTFOLIO ANNUAL EXPENSES (After Any Fee Waivers or Reductions) (as a percentage
of Portfolio average daily net assets)(1)
<TABLE>
<CAPTION>
Total Annual
Management 12b-1 Fee Other Expenses Portfolio Expenses
Fee
<S> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------------------------------------
AIM Variable Insurance Funds:
AIM V.I. Balanced Fund(2) 0.65% 0.56% 1.21%
--------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Capital Appreciation Fund
0.62% 0.11% 0.73%
--------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Growth Fund
0.63% 0.10% 0.73%
--------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Government Securities Fund
0.50% 0.40% 0.90%
--------------------------------------------------------------------------------------------------------------------------------
AIM V.I. High Yield Fund(2)
0.35% 0.79% 1.14%
--------------------------------------------------------------------------------------------------------------------------------
AIM V.I. International Equity Fund
0.75% 0.22% 0.97%
--------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Value Fund
0.61% 0.15% 0.76%
--------------------------------------------------------------------------------------------------------------------------------
Fidelity Variable Insurance Products Fund (VIP):
Fidelity VIP Contrafund-Registered Trademark-
Portfolio(3)
0.58% 0.09% 0.67%
--------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity Income Portfolio(3)
0.48% 0.09% 0.57%
--------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio(3)
0.58% 0.08% 0.66%
--------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Opportunities Portfolio(3)
0.58% 0.11% 0.69%
--------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio(3)
0.73% 0.18% 0.91%
--------------------------------------------------------------------------------------------------------------------------------
Franklin Templeton Variable Insurance Products Trust (4)
Templeton Asset Strategy Fund -- Class 2(4) 0.60%
0.25%(5) 0.18% 1.03%
--------------------------------------------------------------------------------------------------------------------------------
Templeton International Securities Fund -- Class 2(4) 0.69%
0.25%(5) 0.19% 1.13%
--------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds:
Oppenheimer Aggressive Growth Fund/VA
0.66% 0.01% 0.67%
--------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Main Street Growth & Income Fund/VA
0.73% 0.05% 0.78%
--------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond Fund/VA
0.74% 0.04% 0.78%
--------------------------------------------------------------------------------------------------------------------------------
The Dreyfus Socially Responsible Growth Fund, Inc.:
The Dreyfus Socially Responsible Growth Fund, Inc.
0.75% 0.04% 0.79%
--------------------------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund:
Dreyfus Stock Index Fund
0.25% 0.01% 0.26%
--------------------------------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment Fund:
Dreyfus VIF Appreciation Portfolio(6)
0.75% 0.03% 0.78%
--------------------------------------------------------------------------------------------------------------------------------
Wells Fargo Variable Trust:
Wells Fargo VT Asset Allocation Fund(7) 0.42%
0.25% 0.33% 1.00%
--------------------------------------------------------------------------------------------------------------------------------
Wells Fargo VT Equity Income Fund(7) 0.38%
0.25% 0.37% 1.00%
--------------------------------------------------------------------------------------------------------------------------------
Wells Fargo VT Growth Fund(7) 0.32%
0.25% 0.43% 1.00%
--------------------------------------------------------------------------------------------------------------------------------
Delaware Group Premium Fund, Inc.:
Delaware GP Small Cap Value Series
0.75% 0.10% 0.85%
--------------------------------------------------------------------------------------------------------------------------------
Delaware GP Trend Series
0.75% 0.07% 0.82%
--------------------------------------------------------------------------------------------------------------------------------
HSBC Variable Insurance Funds:
HSBC VI Cash Management Fund(2)
0.00% 0.93% 0.93%
--------------------------------------------------------------------------------------------------------------------------------
HSBC VI Fixed Income Fund(2)
0.00% 1.15% 1.15%
--------------------------------------------------------------------------------------------------------------------------------
HSBC VI Growth & Income Fund(2)
0.33% 0.82% 1.15%
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Figures shown in the table are for the year ended December 31, 1999.
(2) Absent voluntary reductions and reimbursements for certain Portfolios,
"Management Fees," "Rule 12b-1 Fees," "Other Expenses," and "Total Portfolio
Annual Expenses" expressed as a percentage of average net assets of the
Portfolios would have been as follows:
<TABLE>
<S> <C>
<C> <C> <C>
AIM V.I. Balanced Fund
0.75% 0.56% 1.31%
----------------------------------------------------------------------------------------------------------------------
AIM V.I. High Yield Fund
0.63% 0.79% 1.42%
----------------------------------------------------------------------------------------------------------------------
HSBC VI Cash Management Fund
0.35% 1.51% 1.86%
----------------------------------------------------------------------------------------------------------------------
HSBC VI Fixed Income Fund
0.55% 2.16% 2.71%
----------------------------------------------------------------------------------------------------------------------
HSBC VI Growth & Income Fund
0.55% 0.93% 1.48%
----------------------------------------------------------------------------------------------------------------------
</TABLE>
8 - PROSPECTUS
<PAGE>
AIM Advisors, Inc. may discontinue all or part of these voluntary reductions
and reimbursements at any time. HSBC Asset Management (Americas) Inc. will
notify investors of any material revision or cancellation of a waiver or
expense reimbursement, which may be terminated at any time at the option of
HSBC Asset Management (Americas) Inc.
(3) A portion of the brokerage commissions that these Portfolios paid was used
to reduce the Portfolios' expenses. In addition, certain Portfolios, or
Fidelity Management & Research Company ("FMR") on behalf of certain
Portfolios, have entered into arrangements with their custodian whereby
credits realized as a result of uninvested cash balances were used to reduce
custodian expenses. Including these reductions, total operating expenses
would have been 0.65% for VIP Contrafund-Registered Trademark-, 0.56% for
VIP Equity Income, 0.65% for VIP Growth, 0.68% for VIP Growth Opportunities,
and 0.87% for VIP Overseas.
(4) On February 28, 2000, shareholders approved a merger and reorganization that
combined the Templeton Variable Products Series Fund with the Franklin
Templeton Variable Insurance Products Trust, effective May 1, 2000. The
merger and reorganization also combined the Templeton Asset Allocation Fund
with the Templeton Global Asset Allocation Fund, now called the Templeton
Asset Strategy Fund, and the Templeton International Fund with the Templeton
International Equity Fund, now called the Templeton International Securities
Fund, effective May 1, 2000. Allstate New York has made corresponding
changes to the names of the Variable Sub-Accounts that invest in these
Portfolios.
The shareholders of the Templeton Global Asset Allocation Fund and the
Templeton International Equity Fund had approved new management fees, which
apply to the combined funds effective May 1, 2000. The table shows restated
total expenses based on the new fees and the assets of the Portfolios as of
December 31, 1999, and not the assets of the combined Portfolios. However,
if the table reflected both the new fees and the combined assets, the
Portfolios' expenses after May 1, 2000 would be estimated as follows:
<TABLE>
<S> <C>
<C> <C> <C>
Templeton Asset Strategy Fund -- Class 2 0.60%
0.25% 0.14% 0.99%
----------------------------------------------------------------------------------------------------------------------
Templeton International
Securities Fund -- Class 2 0.65%
0.25% 0.20% 1.10%
----------------------------------------------------------------------------------------------------------------------
</TABLE>
(5) The Portfolios' Class 2 distribution plan or "Rule 12b-1 plan" is described
in the Portfolios' respective prospectuses. While the maximum amount payable
under the Portfolios' Class 2 Rule 12b-1 plan is 0.35% per year of the
Portfolios' average daily net assets, the Board of Trustees of Franklin
Templeton Variable Insurance Products Trust has set the current rate at
0.25% per year.
(6) Effective May 1, 2000, Dreyfus VIF Capital Appreciation Portfolio was
renamed Dreyfus VIF Appreciation Portfolio. Allstate New York has made
corresponding changes to the names of the Variable Sub-Accounts that invest
in these Portfolios.
(7) The figures shown in the table represent Expenses as of December 31, 1999
and have been adjusted for changes in contract that occurred during 1999.
The Portfolios' "Rule 12b-1 plan" is described in the Portfolios' respective
prospectuses.
9 - PROSPECTUS
<PAGE>
EXAMPLE 1
The example below shows the dollar amount of expenses that you would bear
directly or indirectly if you:
- invested $1,000 in a Variable Sub-Account,
- earned a 5% annual return on your investment, and
- 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 YOU MAY BE REQUIRED TO PAY IF YOU
SURRENDER YOUR CONTRACT. THE EXAMPLE DOES NOT INCLUDE DEDUCTIONS FOR PREMIUM
TAXES BECAUSE NEW YORK DOES NOT CHARGE PREMIUM TAXES ON ANNUITIES.
<TABLE>
<CAPTION>
Sub-Account 1 Year 3
Years 5 Years 10 Years
<S> <C>
<C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------------
AIM Variable Insurance Funds:
AIM V.I. Balanced $ 85
$122 $ 161 $289
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Capital Appreciation $ 81
$107 $ 137 $239
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Government Securities $ 82
$113 $ 146 $257
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Growth $ 81
$107 $ 137 $239
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. High Yield $ 85
$120 $ 158 $282
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. International Equity $ 83
$115 $ 149 $264
---------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Value $ 81
$108 $ 138 $242
---------------------------------------------------------------------------------------------------------------------------------
Fidelity Variable Insurance Products Fund (VIP):
Fidelity VIP Contrafund-Registered Trademark- $ 80
$105 $ 134 $233
---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity Income $ 79
$102 $ 128 $222
---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth $ 81
$105 $ 133 $231
---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Opportunities $ 80
$106 $ 135 $235
---------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas $ 82
$113 $ 146 $258
---------------------------------------------------------------------------------------------------------------------------------
Franklin Templeton Variable Insurance Products Trust:
Templeton Asset Strategy -- Class 2 $ 84
$117 $ 152 $270
---------------------------------------------------------------------------------------------------------------------------------
Templeton International Securities -- Class 2 $ 85
$120 $ 157 $280
---------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds:
Oppenheimer Aggressive Growth/VA $ 80
$105 $ 134 $233
---------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Main Street Growth & Income/VA $ 81
$109 $ 139 $244
---------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond/VA $ 81
$109 $ 139 $244
---------------------------------------------------------------------------------------------------------------------------------
The Dreyfus Socially Responsible Growth Fund, Inc.:
The Dreyfus Socially Responsible Growth, Inc. $ 81
$109 $ 140 $245
---------------------------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund:
Dreyfus Stock Index $ 76 $
93 $ 112 $188
---------------------------------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment Fund:
Dreyfus VIF Appreciation $ 81
$109 $ 139 $244
---------------------------------------------------------------------------------------------------------------------------------
Wells Fargo Variable Trust:
Wells Fargo VT Asset Allocation $ 83
$116 $ 151 $267
---------------------------------------------------------------------------------------------------------------------------------
Wells Fargo VT Equity Income $ 83
$116 $ 151 $267
---------------------------------------------------------------------------------------------------------------------------------
Wells Fargo VT Growth $ 83
$116 $ 151 $267
---------------------------------------------------------------------------------------------------------------------------------
Delaware Group Premium Fund, Inc.:
Delaware GP Small Cap Value Series $ 82
$111 $ 143 $252
---------------------------------------------------------------------------------------------------------------------------------
Delaware GP Trend Series $ 81
$110 $ 141 $248
---------------------------------------------------------------------------------------------------------------------------------
HSBC Variable Insurance Funds:
HSBC VI Cash Management $ 92
$142 $ 194 $352
---------------------------------------------------------------------------------------------------------------------------------
HSBC VI Fixed Income $101
$168 $ 236 $429
---------------------------------------------------------------------------------------------------------------------------------
HSBC VI Growth & Income $ 88
$130 $ 175 $316
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
10 - PROSPECTUS
<PAGE>
EXAMPLE 2
Same assumptions as Example 1 above, except that you decided not to surrender
your Contract, or you began receiving income payments (for at least 120 months
if under an Income Plan with a specified period), at the end of each period.
<TABLE>
<CAPTION>
Sub-Account 1 Year 3
Years 5 Years 10 Years
<S> <C>
<C> <C> <C>
------------------------------------------------------------------------------------------------------------------------------
AIM Variable Insurance Funds:
AIM V.I. Balanced $26 $
80 $136 $289
------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Capital Appreciation $21 $
65 $111 $239
------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Government Securities $23 $
70 $120 $257
------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Growth $21 $
65 $111 $239
------------------------------------------------------------------------------------------------------------------------------
AIM V.I. High Yield $25 $
78 $132 $282
------------------------------------------------------------------------------------------------------------------------------
AIM V.I. International Equity $23 $
72 $124 $264
------------------------------------------------------------------------------------------------------------------------------
AIM V.I. Value $21 $
66 $113 $242
------------------------------------------------------------------------------------------------------------------------------
Fidelity Variable Insurance Products Fund (VIP):
Fidelity VIP Contrafund-Registered Trademark- $20 $
63 $108 $233
------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity Income $19 $
63 $103 $222
------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth $20 $
64 $108 $231
------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Opportunities $21 $
64 $109 $235
------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas $23 $
70 $121 $258
------------------------------------------------------------------------------------------------------------------------------
Franklin Templeton Variable Insurance Products Trust:
Templeton Asset Strategy -- Class 2 $24 $
74 $127 $270
------------------------------------------------------------------------------------------------------------------------------
Templeton International Securities -- Class 2 $25 $
77 $132 $280
------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds:
Oppenheimer Aggressive Growth/VA $20 $
63 $108 $233
------------------------------------------------------------------------------------------------------------------------------
Oppenheimer VA Main Street Growth & Income/VA $22 $
66 $114 $244
------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Strategic Bond/VA $22 $
66 $114 $244
------------------------------------------------------------------------------------------------------------------------------
The Dreyfus Socially Responsible Growth Fund, Inc.:
The Dreyfus Socially Responsible Growth, Inc. $22 $
67 $114 $245
------------------------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund:
Dreyfus Stock Index $16 $
50 $ 86 $188
------------------------------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment Fund:
Dreyfus VIF Appreciation $22 $
66 $114 $244
------------------------------------------------------------------------------------------------------------------------------
Wells Fargo Variable Trust:
Wells Fargo VT Asset Allocation $24 $
73 $125 $267
------------------------------------------------------------------------------------------------------------------------------
Wells Fargo VT Equity Income $24 $
73 $125 $267
------------------------------------------------------------------------------------------------------------------------------
Wells Fargo VT Growth $24 $
73 $125 $267
------------------------------------------------------------------------------------------------------------------------------
Delaware Group Premium Fund, Inc.:
Delaware GP Small Cap Value Series $22 $
69 $117 $252
------------------------------------------------------------------------------------------------------------------------------
Delaware GP Trend Series $22 $
68 $116 $248
------------------------------------------------------------------------------------------------------------------------------
HSBC Variable Insurance Funds:
HSBC VI Cash Management $33 $
99 $169 $352
------------------------------------------------------------------------------------------------------------------------------
HSBC VI Fixed Income $41
$125 $210 $429
------------------------------------------------------------------------------------------------------------------------------
HSBC VI Growth & Income $29 $
88 $150 $316
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
PLEASE REMEMBER THAT YOU ARE LOOKING AT EXAMPLES AND NOT A REPRESENTATION OF
PAST OR FUTURE EXPENSES. THE EXAMPLES ASSUME THAT ANY PORTFOLIO EXPENSE WAIVERS
OR REIMBURSEMENT ARRANGEMENTS DESCRIBED IN THE FOOTNOTES ON PAGES 8-9 ARE IN
EFFECT FOR THE TIME PERIODS PRESENTED ABOVE. YOUR ACTUAL EXPENSES MAY BE LESSER
OR GREATER THAN THOSE SHOWN ABOVE. SIMILARLY, YOUR RATE OF RETURN MAY BE LESSER
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 $40,000.
11 - PROSPECTUS
<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.
There are no Accumulation Unit Values to report because the Contracts were not
offered prior to the date of this prospectus. The financial statements of the
Variable Account and Allstate New York appear in the Statement of Additional
Information.
12 - PROSPECTUS
<PAGE>
THE CONTRACT
-------------------------------------------------------------------
CONTRACT OWNER
The Allstate Custom Portfolio Variable Annuity 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):
- the investment alternatives during the Accumulation and Payout Phases,
- the amount and timing of your purchase payments and withdrawals,
- the programs you want to use to invest or withdraw money,
- the income payment plan you want to use to receive retirement income,
- the Annuitant (either yourself or someone else) on whose life the income
payments will be based,
- the Beneficiary or Beneficiaries who will receive the benefits that the
Contract provides when the last surviving Contract owner dies, and
- any other rights that the Contract provides.
If you die, any surviving Contract owner or, if none, the Beneficiary may
exercise the rights and privileges provided to them by the Contract.
The Contract cannot be jointly owned by both a non-natural person and a natural
person. The maximum issue age of any Contract owner is age 85. The maximum issue
age of any Annuitant is age 80.
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 30.
ANNUITANT
The Annuitant is the individual whose life determines the amount and duration of
income payments (other than under Income Plans with guaranteed payments for a
specified period). You initially designate an Annuitant in your application. If
the Contract owner is a natural person you may change the Annuitant prior to the
Payout Start Date. In our discretion, we may permit you to designate a joint
Annuitant, who is a second person on whose life income payments depend, on the
Payout Start Date.
If the Annuitant dies prior to the Payout Start Date, the new Annuitant will be:
- the youngest Contract owner, if living, otherwise
- the youngest Beneficiary.
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, 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, whether or not the Annuitant is living when we
receive the 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 do not name a Beneficiary or, if the named Beneficiary is no longer
living and there are no other surviving Beneficiaries, the new Beneficiary will
be:
- your spouse or, if he or she is no longer alive,
- your surviving children equally, or if you have no surviving children,
- your estate.
If more than one Beneficiary survives you (or the Annuitant if the Contract
owner is not a natural person), 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
13 - PROSPECTUS
<PAGE>
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. However, you may assign periodic income payments under the
Contract prior to the Payout Start Date. No Beneficiary may assign benefits
under the Contract until they are due. We will not be bound by any assignment
until the assignor signs it and files it with us. We are not responsible for the
validity of any assignment. Federal law prohibits or restricts the assignment of
benefits under many types of retirement plans and the terms of such plans may
themselves contain restrictions on assignments. An assignment may also result in
taxes or tax penalties. YOU SHOULD CONSULT WITH AN ATTORNEY BEFORE TRYING TO
ASSIGN YOUR CONTRACT.
PURCHASES
-------------------------------------------------------------------
MINIMUM PURCHASE PAYMENTS
Your initial purchase payment must be at least $3,000 ($2,000 for a Qualified
Contract). All subsequent purchase payments must be $100 or more. You may make
purchase payments at any time prior to the Payout Start Date. We reserve the
right to limit the maximum amount of purchase payments, or reduce the minimum
purchase payment we will accept. We reserve the right to reject any application.
AUTOMATIC ADDITIONS PROGRAM
You may make subsequent purchase payments of at least $100 ($500 for allocation
to the Fixed Account) by automatically transferring amounts from your bank
account. Please consult with your representative for detailed information.
ALLOCATION OF PURCHASE PAYMENTS
At the time you apply for a Contract, you must decide how to allocate your
purchase payments 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 notifying us in writing. We reserve the right to limit the
availability of the investment alternatives.
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 service center. If your application is incomplete, we will ask you to
complete your application within 5 business days. If you do so, we will credit
your initial purchase payment to your Contract within that 5 business day
period. If you do not, we will return your purchase payment at the end of the 5
business day period unless you expressly allow us to hold it until you complete
the application. We will credit subsequent purchase payments to the Contract at
the close of the business day on which we receive the purchase payment at our
service center located in Northbrook, Illinois (mailing address: P.O. Box 94038,
Palatine, Illinois, 60094-4038; overnight mail: 3100 Sanders Road, Suite J4A,
Northbrook, Illinois, 60062).
We are open for business each day Monday through Friday that the New York Stock
Exchange is open for business. We also refer to these days as "VALUATION DATES."
Our business day closes when the New York Stock Exchange closes, usually 4:00
p.m. Eastern Time (3:00 p.m. Central Time). If we receive your purchase payment
after 4:00 p.m. Eastern Time (3:00 p.m. Central 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. Upon
cancellation, as permitted by federal or state law, we will return your purchase
payments allocated to the Variable Account after an adjustment to the extent
federal or state law
14 - PROSPECTUS
<PAGE>
permits to reflect investment gain or loss that occurred from the date of
allocation through the date of cancellation. If your Contract is qualified under
Section 408 of the Internal Revenue Code, we will refund the greater of any
purchase payments or the Contract Value.
CONTRACT VALUE
-------------------------------------------------------------------
On the Issue Date, the Contract Value is equal to the initial purchase payment.
Your Contract Value at any other time during the Accumulation Phase is equal to
the sum of the value as of the most recent Valuation Date of your Accumulation
Units in the Variable Sub-Accounts you have selected, plus the value of your
interest in the Fixed Account.
ACCUMULATION UNITS
To determine the number of Accumulation Units of each Variable Sub-Account to
credit to your Contract, we divide (i) the amount of the purchase payment or
transfer you have allocated to a Variable Sub-Account by (ii) the Accumulation
Unit Value of that Variable Sub-Account next computed after we receive your
payment or transfer. For example, if we receive a $10,000 purchase payment
allocated to a Variable Sub-Account when the Accumulation Unit Value for the
Sub-Account is $10, we would credit 1,000 Accumulation Units of that Variable
Sub-Account to your Contract. Withdrawals and transfers from a Variable
Sub-Account would, of course, reduce the number of Accumulation Units of that
Sub-Account allocated to your Contract.
ACCUMULATION UNIT VALUE
As a general matter, the Accumulation Unit Value for each Variable Sub-Account
will rise or fall to reflect:
- changes in the share price of the Portfolio in which the Variable Sub-Account
invests, and
- the deduction of amounts reflecting the mortality and expense risk charge,
administrative expense 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
(currently waived) separately for each Contract. They do not affect Accumulation
Unit Value. Instead, we obtain payment of those charges and fees by redeeming
Accumulation Units. For details on how we calculate 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 PROSPECTUSES FOR THE PORTFOLIOS THAT ACCOMPANY THIS
PROSPECTUS FOR A DESCRIPTION OF HOW THE ASSETS OF EACH PORTFOLIO ARE VALUED,
SINCE THAT DETERMINATION DIRECTLY BEARS ON THE ACCUMULATION UNIT VALUE OF THE
CORRESPONDING VARIABLE SUB-ACCOUNT AND, THEREFORE, YOUR CONTRACT VALUE.
15 - PROSPECTUS
<PAGE>
INVESTMENT ALTERNATIVES: THE VARIABLE SUB-ACCOUNTS
-------------------------------------------------------------------
You may allocate your purchase payments to up to 28 Variable Sub-Accounts. Each
Variable Sub-Account invests in the shares of a corresponding Portfolio. Each
Portfolio has its own investment objective(s) and policies. We briefly describe
the Portfolios below.
For more complete information about each Portfolio, including expenses and risks
associated with the Portfolio, please refer to the accompanying prospectus for
the Portfolio. You should carefully review the Portfolio prospectuses before
allocating amounts to the Variable Sub-Accounts.
<TABLE>
<CAPTION>
PORTFOLIO: EACH PORTFOLIO SEEKS:
INVESTMENT ADVISER:
<S> <C> <C>
AIM VARIABLE INSURANCE FUNDS:
AIM V.I. Balanced Fund* As high a total return as possible,
A I M
consistent with preservation of
Advisors, Inc.
capital
AIM V.I. Capital Appreciation Fund* Growth of capital
AIM V.I. Government Securities Fund* A high level of current income
consistent with reasonable concern for
safety of principal
AIM V.I. Growth Fund* Growth of capital
AIM V.I. High Yield Fund* A high level of current income
AIM V.I. International Equity Fund* Long-term growth of capital
AIM V.I. Value Fund* Long-term growth of capital; income is
a secondary objective
FIDELITY VARIABLE INSURANCE PRODUCTS FUND:
Fidelity VIP Long-term capital appreciation
Fidelity Management
Contrafund-Registered Trademark- &
Research Company
Portfolio
Fidelity VIP Equity-Income Portfolio Reasonable income
Fidelity VIP Growth Portfolio Capital appreciation
Fidelity VIP Growth Opportunities Capital growth
Portfolio
Fidelity VIP Overseas Portfolio Long-term growth of capital
FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS FUND:
Templeton Asset Strategy Fund -- High total return
Templeton
Class 2 (previously Templeton Asset
Investment
Allocation Fund -- Class 2)
Counsel, Inc.
Templeton International Securities Long-term capital growth
Fund -- Class 2 (previously Templeton
International Fund -- Class 2)
OPPENHEIMER VARIABLE ACCOUNT FUNDS:
Oppenheimer Aggressive Growth Fund/VA Capital appreciation
OppenheimerFunds,
Inc.
Oppenheimer Main Street Growth & High total return, which includes
Income Fund/VA growth in the value of its shares as
well as current income, from equity
and debt securities
Oppenheimer Strategic Bond Fund/VA High level of current income
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.; THE DREYFUS STOCK INDEX FUND; AND
THE DREYFUS
VARIABLE INVESTMENT FUND (VIF):
The Dreyfus Socially Responsible Capital growth and, secondarily, The
Dreyfus
Growth Fund, Inc. current income
Corporation
Dreyfus Stock Index Fund To match the total returns of the
Standard & Poor's 500 Composite Stock
Index
Dreyfus VIF Appreciation Portfolio Long-term
capital growth consistent with the
preservation of capital; current income
is a secondary goal
</TABLE>
- PROSPECTUS
16
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO: EACH PORTFOLIO SEEKS:
INVESTMENT ADVISER:
WELLS FARGO VARIABLE TRUST:
<S> <C> <C>
Wells Fargo VT Asset Allocation Fund Long-term total return, consistent Wells
Fargo Bank,
with reasonable risk
N.A.
Wells Fargo VT Equity Income Fund Long-term capital appreciation and
above-average dividend income
Wells Fargo VT Growth Fund Long-term capital appreciation
DELAWARE GROUP PREMIUM FUND, INC.:
Delaware GP Small Cap Value Series Capital appreciation
Delaware Management
Company
Delaware GP Trend Series Long-term capital appreciation HSBC VARIABLE INSURANCE
FUNDS: HSBC VI Cash Management Fund As high a level of current income as HSBC
Asset
is consistent with preservation of
Management
capital and liquidity
(Americas) Inc.
HSBC VI Fixed Income Fund High current income consistent with
appreciation of capital
HSBC VI Growth & Income Fund Long-term growth of capital and
current income
</TABLE>
* The Portfolios' investment objectives may be changed by the Portfolios' Board
of Trustees without shareholder approval.
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 PORTFOLIOS IN WHICH THOSE VARIABLE SUB-ACCOUNTS INVEST. YOU BEAR THE
INVESTMENT RISK THAT THE PORTFOLIOS MIGHT NOT MEET THEIR INVESTMENT OBJECTIVES.
SHARES OF THE PORTFOLIOS 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.
17 - PROSPECTUS
<PAGE>
INVESTMENT ALTERNATIVES: THE FIXED ACCOUNT
-------------------------------------------------------------------
You may allocate all or a portion of your purchase payments to the Fixed
Account. 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 the Fixed Account
does not entitle you to share in the investment experience of the Fixed Account.
GUARANTEE PERIODS
Each payment or transfer allocated to the Fixed Account earns interest at a
specified rate that we guarantee for a period of years we call a GUARANTEE
PERIOD. Guarantee Periods may range from 1 to 10 years. We are currently
offering Guarantee Periods of 1, 3, 5, 7, and 10 years in length. In the future
we may offer Guarantee Periods of different lengths or stop offering some
Guarantee Periods. You select one or more Guarantee Periods for each purchase
payment or transfer. If you do not select the Guarantee Period for a purchase
payment or transfer, we will assign the shortest Guarantee Period available
under the Contract for such payment or transfer.
Each payment or transfer allocated to a Guarantee Period must be at least $500.
We reserve the right to limit the number of additional purchase payments that
you may allocate to the Fixed Account. Please consult with your sales
representative for more information.
INTEREST RATES
We will tell you what interest rates and Guarantee Periods we are offering at a
particular time. We may declare different interest rates for Guarantee Periods
of the same length that begin at different times. We will not change the
interest rate that we credit to a particular allocation until the end of the
relevant Guarantee Period.
We have no specific formula for determining the rate of interest that we will
declare initially or in the future. We will set those interest rates based on
investment returns available at the time of the determination. In addition, we
may consider various other factors in determining interest rates including
regulatory and tax requirements, our sales commission and administrative
expenses, general economic trends, and competitive factors. We determine the
interest rates to be declared in our sole discretion. We can neither predict nor
guarantee what those rates will be in the future. For current interest rate
information, please contact your sales representative or Allstate New York at
1-800-692-4682. The interest rate will never be less than the minimum guaranteed
amount stated in the Contract.
HOW WE CREDIT INTEREST
We will credit interest daily to each amount allocated to a Guarantee Period at
a rate that compounds to the effective annual interest rate that we declared at
the beginning of the applicable Guarantee Period.
18 - PROSPECTUS
<PAGE>
The following example illustrates how a purchase payment allocated to the Fixed
Account would grow, given an assumed Guarantee Period and effective annual
interest rate:
<TABLE>
<S> <C>
Purchase Payment............................................ $10,000
Guarantee Period............................................ 5 years
Annual Interest Rate........................................ 4.50%
</TABLE>
END OF CONTRACT YEAR
<TABLE>
<CAPTION>
YEAR 1 YEAR 2 YEAR
3 YEAR 4 YEAR 5
---------- ----------
---------- ---------- ----------
<S> <C> <C>
<C> <C> <C>
Beginning Contract Value...................... $10,000.00
X (1 + Annual Interest Rate) 1.045
----------
$10,450.00
Contract Value at end of Contract Year........ $10,450.00
X (1 + Annual Interest Rate) 1.045
----------
$10,920.25
Contract Value at end of Contract Year........ $10,920.25
X (1 + Annual Interest Rate) 1.045
----------
$11,411.66
Contract Value at end of Contract
Year........ $11,411.66
X (1 + Annual Interest
Rate) 1.045
----------
$11,925.19
Contract Value at end of Contract
Year........ $11,925.19
X (1 + Annual Interest
Rate) 1.045
----------
$12,461.82
</TABLE>
TOTAL INTEREST CREDITED DURING GUARANTEE PERIOD = $2,461.82 ($12,461.82-$10,000)
This example assumes no withdrawals during the entire 5 year Guarantee Period.
If you were to make a withdrawal, you may be required to pay a withdrawal
charge. In addition, the amount withdrawn may be increased or decreased by a
Market Value Adjustment that reflects changes in interest rates since the time
you invested the amount withdrawn. The hypothetical interest rate is for
illustrative purposes only and is not intended to predict future interest rates
to be declared under the Contract. Actual interest rates declared for any given
Guarantee Period may be more or less than shown above but will never be less
than the guaranteed minimum rate stated in the Contract.
RENEWALS. At least 15 but not more than 45 days prior to the end of each
Guarantee Period, we will mail you a notice asking you what to do with your
money, including the accrued interest. During the 30-day period after the end of
the Guarantee Period, you may:
1) take no action. We will automatically apply your money to a new
Guarantee Period of the shortest duration available. The new Guarantee
Period will begin on the day the previous Guarantee Period ends. The new
interest rate will be our then current declared rate for a Guarantee
Period of that length; or
2) instruct us to apply your money to one or more new Guarantee Periods of
your choice. The new Guarantee Period(s) will begin on the day the
previous Guarantee Period ends. The new interest rate will be our then
current declared rate for those Guarantee Periods; or
3) instruct us to transfer all or a portion of your money to one or more
Variable Sub-Accounts. We will effect the transfer on the day we receive
your instructions. We will not adjust the amount transferred to include
a Market Value Adjustment; or
4) withdraw all or a portion of your money. You may be required to pay a
withdrawal charge, but we will not adjust the amount withdrawn to
include a Market Value Adjustment. You may also be required to pay
premium taxes and withholding (if applicable). The amount withdrawn will
be deemed to have been withdrawn on the day the previous Guarantee
Period ends. Unless you specify otherwise, amounts not withdrawn will be
applied to a new Guarantee Period of the shortest duration available.
The new Guarantee Period will begin on the day the previous Guarantee
Period ends.
Under our automatic laddering program ("Automatic Laddering Program"), you may
choose, in advance, to
19 - PROSPECTUS
<PAGE>
use Guarantee Periods of the same length for all renewals. You can select this
Program at any time during the Accumulation Phase, including on the Issue Date.
We will apply renewals to Guarantee Periods of the selected length until you
direct us in writing to stop. We may stop offering this Program at any time. For
additional information on the Automatic Laddering Program, please call our
customer service center at 1-800-692-4682.
MARKET VALUE ADJUSTMENT. All withdrawals in excess of the PREFERRED WITHDRAWAL
AMOUNT, and transfers from a Guarantee Period, other than those taken during the
30 day period after such Guarantee Period expires, are subject to a Market Value
Adjustment. A Market Value Adjustment also applies when you apply amounts
currently invested in a Guarantee Period to an Income Plan (unless paid or
applied during the 30 day period after such Guarantee Period expires). A
positive Market Value Adjustment will apply to amounts currently invested in a
Guarantee Period that are paid out as death benefits. We will not apply a Market
Value Adjustment to a transfer you make as part of a Dollar Cost Averaging
Program. We also will not apply a Market Value Adjustment to a withdrawal you
make:
- within the Preferred Withdrawal Amount as described on page 23, or
- to satisfy the IRS minimum distribution rules for the Contract.
We apply the Market Value Adjustment to reflect changes in interest rates from
the time you first allocate money to a Guarantee Period to the time it is
removed from that Guarantee Period. We calculate the Market Value Adjustment by
comparing the TREASURY RATE for a period equal to the Guarantee Period at its
inception to the Treasury Rate for a period equal to the time remaining in the
Guarantee Period when you remove your money. "Treasury Rate" means the U.S.
Treasury Note Constant Maturity Yield as reported in Federal Reserve Bulletin
Release H.15.
The Market Value Adjustment may be positive or negative, depending on changes in
interest rates. As such, you bear the investment risk associated with changes in
interest rates. If interest rates increase significantly, the Market Value
Adjustment and any withdrawal charge, premium taxes, and income tax withholding
(if applicable) could reduce the amount you receive upon full withdrawal of your
Contract Value to an amount that is less than the purchase payment plus interest
at the minimum guaranteed interest rate under the Contract.
Generally, if the Treasury Rate at the time you allocate money to a Guarantee
Period is higher than the applicable current Treasury Rate for a period equal to
the time remaining in the Guarantee Period, then the Market Value Adjustment
will result in a higher amount payable to you or transferred. Conversely, if the
Treasury Rate at the time you allocate money to a Guarantee Period is lower than
the applicable Treasury Rate for a period equal to the time remaining in the
Guarantee Period, then the Market Value Adjustment will result in a lower amount
payable to you or transferred.
For example, assume that you purchase a Contract and you select an initial
Guarantee Period of 5 years and the 5 year Treasury Rate for that duration is
4.50%. Assume that at the end of 3 years, you make a partial withdrawal. If, at
that later time, the current 2 year Treasury Rate is 4.20%, then the Market
Value Adjustment will be positive, which will result in an increase in the
amount payable to you. Conversely, if the current 2 year Treasury Rate is 4.80%,
then the Market Value Adjustment will be negative, which will result in a
decrease in the amount payable to you.
The formula for calculating Market Value Adjustments is set forth in Appendix A
to this prospectus, which also contains additional examples of the application
of the Market Value Adjustment.
INVESTMENT ALTERNATIVES: TRANSFERS
-------------------------------------------------------------------
TRANSFERS DURING THE ACCUMULATION PHASE
During the Accumulation Phase, you may transfer Contract Value among the
investment alternatives at any time. The minimum amount that you may transfer
into a Guarantee Period is $500. You may request transfers in writing on a form
that we provided or by telephone according to the procedure described below. We
currently do not assess, but reserve the right to assess, a $10 charge on each
transfer in excess of 12 per Contract Year. We treat transfers to or from more
than one Portfolio on the same day as one transfer. Transfers you make as part
of a Dollar Cost Averaging
20 - PROSPECTUS
<PAGE>
Program or Automatic Portfolio Rebalancing Program do not count against the 12
free transfers per Contract Year.
We will process transfer requests that we receive before 4:00 p.m. Eastern Time
(3:00 p.m. Central Time) on any Valuation Date using the Accumulation Unit
Values for that Date. We will process requests completed after 4:00 p.m. Eastern
Time (3:00 p.m. Central Time) on any Valuation Date using the Accumulation Unit
Values for the next Valuation Date. The Contract permits us to defer transfers
from the Fixed Account for up to 6 months from the date we receive your request.
If we decide to postpone transfers from the Fixed Account for 10 days or more,
we will pay interest as required by applicable law. Any interest would be
payable from the date we receive the transfer request to the date we make the
transfer.
If you transfer an amount from a Guarantee Period other than during the 30 day
period after such Guarantee Period expires, we will increase or decrease the
amount by a Market Value Adjustment. If any transfer reduces your value in such
Guarantee Period to less than $500, we will treat the request as a transfer of
the entire value in such Guarantee Period.
We reserve the right to waive any transfer fees and restrictions.
TRANSFERS DURING THE PAYOUT PHASE
During the Payout Phase, you may make transfers among the Variable Sub-Accounts
to change the relative weighting of the Variable Sub-Accounts on which your
variable income payments will be based. In addition, you will have a limited
ability to make transfers from the Variable Sub-Accounts to increase the
proportion of your income payments consisting of fixed income payments. You may
not, however, convert any portion of your right to receive 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. Your transfers must be at
least 6 months apart.
TELEPHONE TRANSFERS
You may make transfers by telephone by calling 1-800-692-4682, if you first send
us a completed authorization form. The cut off time for telephone transfer
requests is 4:00 p.m. Eastern Time (3:00 p.m. Central Time). In the event that
the New York Stock Exchange closes early, i.e., before 4:00 p.m. Eastern Time
(3:00 p.m. Central 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 at any telephone number
other than the number that appears in this paragraph or received after the close
of trading on the Exchange.
We may suspend, modify or terminate the telephone transfer privilege at any time
without notice.
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.
DOLLAR COST AVERAGING PROGRAM
Through the Dollar Cost Averaging Program, you may automatically transfer a set
amount every month during the Accumulation Phase from any Variable Sub-Account,
or the 1 year Guarantee Period of the Fixed Account, to any other Variable
Sub-Account. You may not use dollar cost averaging to transfer amounts to the
Fixed Account.
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. In addition, we will not apply the Market
Value Adjustment to these transfers.
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.
Call or write us for instructions on how to enroll.
AUTOMATIC PORTFOLIO 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 Portfolio Rebalancing
Program, we will
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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 each quarter 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 request. We are not
responsible for rebalancing that occurs prior to receipt of your request.
Example:
Assume that you want your initial purchase payment split among 2 Variable
Sub-Accounts. You want 40% to be in the AIM V.I. Balanced Variable
Sub-Account and 60% to be in the Fidelity VIP 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 AIM V.I. Balanced
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
AIM V.I. Balanced Variable Sub-Account and use the money to buy more units
in the Fidelity VIP Growth Variable Sub-Account so that the percentage
allocations would again be 40% and 60% respectively.
The Automatic Portfolio 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.
Portfolio rebalancing is consistent with maintaining your allocation of
investments among market segments, although it is accomplished by reducing your
Contract Value allocated to the better performing segments.
EXPENSES
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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 Contract Value invested in each
Variable Sub-Account in proportion to the amount invested. We also will deduct a
full contract maintenance charge if you withdraw your entire Contract Value,
unless your Contract qualifies for a waiver, described below. During the Payout
Phase, we will deduct the charge proportionately from each income payment.
The charge is for the cost of maintaining each Contract 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:
- total purchase payments equal $50,000 or more, or
- all of your money is allocated to the Fixed Account on a Contract Anniversary.
MORTALITY AND EXPENSE RISK CHARGE
We deduct a mortality and expense risk charge daily at an annual rate of 1.15%
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 we 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.
ADMINISTRATIVE EXPENSE CHARGE
We deduct an administrative expense charge daily at an annual rate of 0.10% of
the average daily net assets you have invested in the Variable Sub-Accounts. We
intend this charge to cover actual administrative expenses that
22 - PROSPECTUS
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exceed the revenues from the contract maintenance charge. There is no necessary
relationship between the amount of administrative charge imposed on a given
Contract and the amount of expenses that may be attributed to that Contract. We
assess this charge each day during the Accumulation Phase and the Payout Phase.
We guarantee that we will not raise this charge.
TRANSFER FEE
We do not currently impose a fee upon transfers among the investment
alternatives. However, we reserve the right to charge $10 per transfer after the
12th transfer in each Contract Year. We will not charge a transfer fee on
transfers that are part of a Dollar Cost Averaging or Automatic Portfolio
Rebalancing Program.
WITHDRAWAL CHARGE
We may assess a withdrawal charge of up to 7% of the purchase payment(s) you
withdraw in excess of the Preferred Withdrawal Amount, adjusted by a Market
Value Adjustment. The charge declines by 1% annually to 0% after 7 complete
years from the day we receive 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 15% of purchase payments without paying the charge.
Unused portions of this 15% "PREFERRED WITHDRAWAL AMOUNT" are not carried
forward to future Contract Years.
We determine the withdrawal charge by:
- multiplying the percentage corresponding to the number of complete years since
we received the purchase payment being withdrawn, times
- the part of each purchase payment withdrawal that is in excess of the
Preferred Withdrawal Amount, adjusted by a Market Value Adjustment.
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:
- 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);
- the death of the Contract owner or Annuitant (unless the Settlement Value is
used);
- withdrawals taken to satisfy IRS minimum distribution rules for the Contract;
and
- withdrawals made after all purchase payments have been withdrawn.
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 may be subject to tax penalties or income tax and a Market Value
Adjustment. You should consult your own tax counsel or other tax advisers
regarding any withdrawals.
PREMIUM TAXES
Currently, we do not make deductions for premium taxes under the Contract
because New York does not charge premium taxes on annuities. We may deduct taxes
that may be imposed in the future from purchase payments or the Contract Value
when the tax is incurred or at a later time.
DEDUCTION FOR VARIABLE ACCOUNT INCOME TAXES
We are not currently making a provision for taxes. In the future, however, we
may make a provision for taxes if we determine, in our sole discretion, that we
will incur a tax as a result of the operation of the Variable Account. We will
deduct for any taxes we incur as a result of the operation of the Variable
Account, whether or not we previously made a provision for taxes and whether or
not it was sufficient. Our status under the Internal Revenue Code is briefly
described in the Statement of Additional Information.
OTHER EXPENSES
Each Portfolio deducts advisory fees and other expenses from its assets. You
indirectly bear the charges and expenses of the Portfolios whose shares are held
by the Variable Sub-Accounts. These fees and expenses are described in the
accompanying prospectus for the Portfolios. For a summary of these charges and
expenses, see pages 8-9. We may receive compensation from the investment
advisers or administrators of the Portfolios for administrative services we
provide to the Portfolios.
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ACCESS TO YOUR MONEY
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You can withdraw some or all of your Contract Value at any time prior to the
Payout Start Date. Full or partial withdrawals also are available under limited
circumstances on or after the Payout Start Date. See "Income Plans" on page 25.
The amount payable upon withdrawal is the Contract Value next computed after we
receive the request for a withdrawal at our customer service center, adjusted by
any Market Value Adjustment, less any withdrawal charges, contract maintenance
charges, income tax withholding, penalty tax, and any premium taxes. We will pay
withdrawals from the Variable Account within 7 days of receipt of the request,
subject to postponement in certain circumstances.
You can withdraw money from the Variable Account or the Fixed Account. 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. You also may withdraw a
lesser amount if you are withdrawing your entire interest in a Variable Sub-
Account.
If you request a total withdrawal, you must return your Contract to us.
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 for up to
6 months or a shorter period if required by law. If we delay payment or transfer
for 10 business days or more, we will pay interest as required by law. Any
interest would be payable from the date we receive the withdrawal request to the
date we make the payment or transfer.
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. The minimum amount of each systematic withdrawal is $50. At our
discretion, systematic withdrawals may not be offered in conjunction with the
Dollar Cost Averaging Program or the Automatic Portfolio Rebalancing Program.
Depending on fluctuations in the net asset value of the Variable Sub-Accounts
and the value of the Fixed Account, systematic withdrawals may reduce or even
exhaust the Contract Value. Income taxes may apply to systematic withdrawals.
Please consult your tax advisor before taking any withdrawal.
We will make systematic withdrawal payments to you or your designated payee. We
may modify or suspend the Systematic Withdrawal Program and charge a processing
fee for the service. If we modify or suspend the Systematic Withdrawal Program,
existing systematic withdrawal payments will not be affected.
MINIMUM CONTRACT VALUE
If your request for a partial withdrawal would reduce the amount in any
Guarantee Period to less than $500, we will treat it as a request to withdraw
the entire amount invested in such Guarantee Period. In addition, if your
request for a partial withdrawal would reduce the Contract Value to less than
$1,000, we may treat it as a request to withdraw your entire Contract Value.
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, adjusted by any applicable Market Value Adjustment, less
withdrawal and other charges and applicable taxes.
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INCOME PAYMENTS
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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 no later than the Annuitant's 90th birthday.
You may change the Payout Start Date at any time by notifying us in writing of
the change at least 30 days before the scheduled Payout Start Date. Absent a
change, we will use the Payout Start Date stated in your Contract.
INCOME PLANS
An "Income Plan" is a series of payments on a scheduled basis to you or to
another person designated by you. You may choose and change your choice of
Income Plan until 30 days before the Payout Start Date. If you do not select an
Income Plan, we will make income payments in accordance with Income Plan 1 with
guaranteed payments for 10 years. After the Payout Start Date, you may not make
withdrawals (except as described below) or change your choice of Income Plan.
Three Income Plans are available under the Contract. Each is available to
provide:
- fixed income payments;
- variable income payments; or
- 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 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 Variable Sub-Account
assets that support variable income payments 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 amounts 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 is 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 all or part of 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 income payments associated with the amount
withdrawn. To determine the present value of any remaining variable income
payments being withdrawn, we use a discount rate equal to the assumed annual
investment rate that we use to compute such variable income payments. The
minimum amount you may withdraw under this feature is $1,000. A withdrawal
charge may apply. You will also have a limited ability to make transfers from
the Variable Account portion of the income payments to increase the proportion
of your income payments consisting of fixed income payments. You may not,
however, convert any portion of your right to receive fixed income payments into
variable income payments. 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.
25 - PROSPECTUS
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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, adjusted by a Market Value Adjustment, less
applicable taxes to your Income Plan on the Payout Start Date. If the Contract
Value is less than $2,000 or not enough to provide an initial payment of at
least $20, and state law permits, we may:
- terminate the Contract and pay you the Contract Value, adjusted by any Market
Value Adjustment and less any applicable taxes, in a lump sum instead of the
periodic payments you have chosen, or
- 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 Portfolio 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 the Fixed Account for the
duration of the Income Plan. We calculate the fixed income payments by:
1. adjusting the portion of the Contract Value in the Fixed Account on the
Payout Start Date by any applicable Market Value Adjustment;
2. deducting any applicable premium tax; and
3. 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 such
shorter time as state law may require. If we defer payments for 10 business 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. However, 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. For qualified
plans, where it is appropriate, we may use income payment tables that do not
distinguish on the basis of sex.
26 - PROSPECTUS
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DEATH BENEFITS
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We will pay a death benefit if, prior to the Payout Start Date:
1. any Contract owner dies or,
2. the Annuitant dies, if the Contract owner is not a natural person.
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(ies).
DEATH BENEFIT AMOUNT. Prior to the Payout Start Date, the death benefit is equal
to the greatest of:
1. the Contract Value as of the date we determine the death benefit, or
2. the SETTLEMENT VALUE (that is, the amount payable on a full withdrawal of
Contract Value) on the date we determine the death benefit, or
3. the Contract Value on the DEATH BENEFIT ANNIVERSARY immediately preceding the
date we determine the death benefit, adjusted by any purchase payments,
withdrawal adjustment as defined below, and charges made since that Death
Benefit Anniversary. A "Death Benefit Anniversary" is every seventh Contract
Anniversary beginning with the Issue Date. For example, the Issue Date, 7th and
14th Contract Anniversaries are the first three Death Benefit Anniversaries, or
4. the greatest of the Anniversary Values as of the date we determine the death
benefit. An "ANNIVERSARY VALUE" is equal to the Contract Value on a Contract
Anniversary, increased by purchase payments made since that anniversary and
reduced by the amount of any withdrawal adjustment, as defined below, since that
anniversary. Anniversary Values will be calculated for each Contract Anniversary
prior to the earlier of:
(i) the date we determine the death benefit, or
(ii) the deceased's 75th birthday or 5 years after the Issue Date, if later.
A positive Market Value Adjustment will apply to amounts currently invested in a
Guarantee Period that are paid out as death benefits.
The value of the death benefit will be determined at the end of the Valuation
Date on which we receive a complete request for payment of the death benefit,
which includes DUE PROOF OF DEATH.
The withdrawal adjustment is equal to (a) divided by (b), with the result
multiplied by (c), where:
<TABLE>
<S> <C> <C>
(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.
</TABLE>
See Appendix B for an example representative of how the withdrawal adjustment
applies.
We will not settle any death claim until we receive Due Proof of Death. We will
accept the following documentation as Due Proof of Death:
- a certified copy of a death certificate; or
- a certified copy of a decree of a court of competent jurisdiction as to a
finding of death; or
- any other proof acceptable to us.
DEATH BENEFIT PAYMENTS. A death benefit will be paid:
1. if the Contract owner elects to receive the death benefit distributed in a
single payment within 180 days of the date of death, and
2. if the death benefit is paid as of the day the value of the death benefit is
determined.
Otherwise, the Settlement Value will be paid. The new Contract owner may make a
single withdrawal of any amount within one year of the date of death without
incurring a withdrawal charge. However, any applicable Market Value Adjustment,
determined as of the date of the withdrawal, will apply. We are currently
waiving the 180 day limit, but we reserve the right to enforce the limitation in
the future. The Settlement Value paid will be the Settlement Value next computed
on or after the requested distribution date for payment, or on the mandatory
distribution date of 5 years after the date of death.
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 Contract owner eligible to receive the death benefit is not a natural
person, the Contract owner may elect to receive the distribution upon death in
one or more distributions.
If the Contract owner is a natural person, the Contract owner may elect to
receive the distribution upon death either in one or more distributions, or by
periodic
27 - PROSPECTUS
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payments through an Income Plan. Payments from the Income Plan must begin within
one year of the date of death and must be payable throughout:
- the life of the Contract owner; or
- a period not to exceed the life expectancy of the Contract owner; or
- the life of the Contract owner with payments guaranteed for a period not to
exceed the life expectancy of the Contract owner.
If the surviving spouse of the deceased Contract owner is the new Contract
owner, then the spouse may elect one of the options listed above or may continue
the Contract in the Accumulation Phase as if the death had not occurred. The
Contract may only be continued once. If the Contract is continued in the
Accumulation Phase, the surviving spouse may make a single withdrawal of any
amount within one year of the date of death without incurring a withdrawal
charge. However, any applicable Market Value Adjustment, determined as of the
date of the withdrawal, will apply.
MORE INFORMATION
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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 One Allstate Drive, Farmingville, New York 11738. Our service center is
located in Northbrook, 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 the State of Illinois. With the exception of the
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. These ratings do not reflect the
investment performance of the Variable Account. 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, 28 of which are
available through the Contracts. Each Variable Sub-Account invests in a
corresponding Portfolio. 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 Portfolios. 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.
28 - PROSPECTUS
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THE PORTFOLIOS
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. We automatically reinvest all
dividends and capital gains distributions from the Portfolios in shares of the
distributing Portfolio at their net asset value.
VOTING PRIVILEGES. As a general matter, you do not have a direct right to vote
the shares of the Portfolios 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 Portfolios 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.
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 Portfolio 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 Variable
Sub-Account by the net asset value per share of the corresponding Portfolio. 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 will apply voting instructions to
abstain on any item to be voted on a pro-rata basis to reduce the votes eligible
to be cast.
We reserve the right to vote Portfolio 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 we send to you.
CHANGES IN PORTFOLIOS. If the shares of any of the Portfolios 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 Portfolio and substitute shares of another
eligible investment portfolio. Any substitution of securities will comply with
the requirements of the 1940 Act. We also may add new Variable Sub-Accounts that
invest in additional mutual funds. We will notify you in advance of any changes.
CONFLICTS OF INTEREST. Certain of the Portfolios sell their shares to Variable
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 Variable Accounts and variable annuity Variable Accounts to invest in
the same Portfolio. The boards of directors of these Portfolios monitor for
possible conflicts among Variable Accounts buying shares of the Portfolios.
Conflicts could develop for a variety of reasons. For example, differences in
treatment under tax and other laws or the failure by a Variable Account to
comply with such laws could cause a conflict. To eliminate a conflict, a
Portfolio's board of directors may require a Variable Account to withdraw its
participation in a Portfolio. A Portfolio's net asset value could decrease if it
had to sell investment securities to pay redemption proceeds to a Variable
Account withdrawing because of a conflict.
THE CONTRACT
DISTRIBUTION. ALFS, Inc.* ("ALFS"), located at 3100 Sanders Road, Northbrook,
Illinois 60062, serves as principal underwriter of the Contracts. ALFS is a
wholly owned subsidiary of Allstate Life Insurance Company. 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.
We will pay commissions to broker-dealers who sell the Contracts. Commissions
paid may vary, but we estimate that the total commissions paid on all Contract
sales will not exceed 6.25% of any purchase payments. These commissions are
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 does not pay ALFS a commission for distribution of the
Contracts. The underwriting agreement with ALFS provides that we will reimburse
ALFS for any liability to Contract owners arising out of services rendered or
Contracts issued.
------------------------
* Effective May 1, 2000, Allstate Life Financial Services, Inc. was renamed
ALFS, Inc.
29 - PROSPECTUS
<PAGE>
ADMINISTRATION. We have primary responsibility for all administration of the
Contracts and the Variable Account. We provide the following administrative
services, among others:
- issuance of the Contracts;
- maintenance of Contract owner records;
- Contract owner services;
- calculation of unit values;
- maintenance of the Variable Account; and
- preparation of Contract owner reports.
We will send you Contract statements and transaction confirmations at least
annually. The annual statement details values and specific Contract data for
each particular Contract. 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 also will 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 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 have failed to operate properly in or after the year 1999, if the
software was not reprogrammed or replaced ("Year 2000 Issue"). Allstate New York
believes that many of its counterparties and suppliers also had potential Year
2000 Issues that could affect Allstate New York. In 1995, Allstate Insurance
Company commenced a four-phase plan intended to mitigate and/or prevent the
adverse effects of Year 2000 Issues. These strategies included normal
development and enhancement of new and existing systems, upgrades to operating
systems already covered by maintenance agreements, and modifications to existing
systems to make them Year 2000 compliant. The plan also included Allstate New
York actively working with its major external counterparties and suppliers to
assess their compliance efforts and Allstate New York's exposure to them.
Because of the accuracy of this plan, and its timely completion, Allstate New
York has experienced no material impacts on its results of operations, liquidity
or financial position due to the Year 2000 issue. Year 2000 costs are expensed
as incurred.
30 - PROSPECTUS
<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 owner during the taxable year.
Although Allstate New York does not have control over the Portfolios or their
investments, we expect the Portfolios 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 the Variable Account investments may cause an investor to be
treated as the owner of the Variable 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 Variable 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 Variable
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
31 - PROSPECTUS
<PAGE>
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:
- made on or after the date the individual attains age 59 1/2,
- made to a beneficiary after the Contract owner's death,
- attributable to the Contract owner being disabled, or
- 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
59 1/2. However, no penalty tax is incurred on distributions:
1) made on or after the date the Contract owner attains age 59 1/2;
2) made as a result of the Contract owner's death or disability;
3) made in substantially equal periodic payments over the 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:
- Individual Retirement Annuities or Accounts (IRAs) under Section 408 of the
Code;
- Roth IRAs under Section 408A of the Code;
- Simplified Employee Pension Plans under Section 408(k) of the Code;
- Savings Incentive Match Plans for Employees (SIMPLE) Plans under Section
408(p) of the Code;
- Tax Sheltered Annuities under Section 403(b) of the Code;
32 - PROSPECTUS
<PAGE>
- Corporate and Self Employed Pension and Profit Sharing Plans; and
- 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(b) 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 December 31, 1988, and all earnings on salary reduction
contributions, may be made only:
1. on or after the date the employee
- attains age 59 1/2,
- separates from service,
- dies,
- becomes disabled, or
2. on account of hardship (earnings on salary reduction contributions may not be
distributed on 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.
ANNUAL REPORTS AND OTHER DOCUMENTS
-------------------------------------------------------------------
Allstate New York's annual report on Form 10-K for the year ended December 31,
1999 is incorporated herein by reference, which means that it is legally a part
of this prospectus.
After the date of this prospectus and before we terminate the offering of the
securities under this prospectus, all documents or reports we file with the SEC
under the Exchange Act are also incorporated herein by reference, which means
that they also legally become a part of this prospectus.
Statements in this prospectus, or in documents that we file later with the SEC
and that legally become a part of this prospectus, may change or supersede
statements in other documents that are legally part of this prospectus.
Accordingly, only the statement that is changed or replaced will legally be a
part of this prospectus.
We file our Exchange Act documents and reports, including our annual and
quarterly reports on Form 10-K and Form 10-Q electronically on the SEC's "EDGAR"
system using the identifying number CIK No. 0000948255. The SEC maintains a Web
site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the SEC. The
address of the site is http://www.sec.gov. You also can view these materials at
the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.
20549. For more information on the operations of SEC's Public Reference Room,
call 1-800-SEC-0330.
If you have received a copy of this prospectus, and would like a free copy of
any document incorporated herein by reference (other than exhibits not
specifically incorporated by reference into the text of such documents), please
write or call us at Customer Service, P.O. Box 94038, Palatine, Illinois
60094-4038 (telephone: 1-800-692-4682).
33 - PROSPECTUS
<PAGE>
PERFORMANCE INFORMATION
-------------------------------------------------------------------
We may advertise the performance of the Variable Sub-Accounts, including yield
and total return information. Yield refers to the income generated by an
investment in a Variable Sub-Account over a specified period. 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.
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
Portfolios for the periods beginning with the inception dates of the Portfolios
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.
34 - PROSPECTUS
<PAGE>
EXPERTS
-------------------------------------------------------------------
The financial statements and related financial statement schedules of Allstate
New York as of December 31, 1999 and 1998 and for each of the three years in the
period ended December 31, 1999, which are incorporated herein by reference, have
been audited by Deloitte & Touche LLP, independent auditors, as stated in their
report, which are incorporated herein by reference, and are included in reliance
upon the report of such firm given upon their authority as experts in accounting
and auditing.
The financial statements of the Variable Account as of December 31, 1999, and
for each of the periods in the two years then ended, which are incorporated
herein by reference, have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report, which are incorporated herein by reference,
and are included in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
35 - PROSPECTUS
<PAGE>
APPENDIX A
MARKET VALUE ADJUSTMENT EXAMPLES
-------------------------------------------------------------------
The Market Value Adjustment is based on the following:
I = the Treasury Rate for a maturity equal to the applicable Guarantee
Period for the week preceding the establishment of the Guarantee
Period.
N = the number of whole and partial years from the date we receive the
withdrawal, transfer or death benefit request, or from the Payout
Start Date to the end of the Guarantee Period.
J = the Treasury Rate for a maturity of length N for the week preceding
the receipt of the withdrawal, transfer, death benefit, or income
payment request. If a note with a maturity of length N is not
available, a weighted average will be used. If N is one year or less,
J will be the 1-year Treasury Rate.
Treasury Rate means the U.S. Treasury Note Constant Maturity yield as
reported in Federal Reserve Bulletin Release H.15.
The Market Value Adjustment factor is determined from the following formula:
.9 X (I - J) X N
To determine the Market Value Adjustment, we will multiply the Market Value
Adjustment factor by the amount transferred, withdrawn (in excess of the
Preferred Withdrawal Amount), paid as a death benefit, or applied to an Income
Plan, from a Guarantee Period at any time other than during the 30 day period
after such Guarantee Period expires.
EXAMPLES OF MARKET VALUE ADJUSTMENT
<TABLE>
<S> <C>
Purchase Payment: $10,000 allocated to a Guarantee Period
Guarantee Period: 5 years
Guaranteed Interest Rate: 4.50%
5 Year Treasury Rate at the time the
Guarantee Period is established: 4.50%
Full Surrender: End of Contract Year 3
</TABLE>
NOTE: These examples assume that premium taxes are not applicable.
EXAMPLE 1: (ASSUMES DECLINING INTEREST RATES)
<TABLE>
<S> <C>
Step 1. Calculate Contract Value at End of Contract Year 3: 10,000.00 X (1.045)3 = $11,411.66
Step 2. Calculate the Preferred Withdrawal Amount: .15 X 10,000.00 = $1,500.00
Step 3. Calculate the Market Value Adjustment: I = 4.5%
J = 4.2%
730 days
N = -------
365 days = 2
Market Value Adjustment Factor: .9 X (I - J) X N
= .9 X (.045 - .042) X (730/365) = .0054
Market Value Adjustment = Market Value Adjustment
Factor X Amount Subject to
Market Value Adjustment:
= .0054 X (11,411.66 - 1,500.00) = $53.52
Step 4. Calculate the Withdrawal Charge: .05 X (10,000.00 - 1,500.00 + 53.52) = $427.68
Step 5. Calculate the amount received by Customers as
a result of full withdrawal at the end of Contract Year 3: 11,411.66 - 427.68 + 53.52 = $11,037.50
</TABLE>
A-1
<PAGE>
<TABLE>
<S> <C>
EXAMPLE 2: (ASSUMES RISING INTEREST RATES)
Step 1. Calculate Contract Value at End of Contract Year 3: 10,000.00 X (1.045)3 = $11,411.66
Step 2. Calculate the Preferred Withdrawal Amount: .15 X 10,000.00 = $1,500.00
Step 3. Calculate the Market Value Adjustment: I = 4.5%
J = 4.8%
730 days
N = -------
365 days = 2
Market Value Adjustment Factor: .9 X (I - J) X N
= .9 X (.045 - .048) X (730/365) = -.0054
Market Value Adjustment = Market Value Adjustment
Factor X Amount Subject to
Market Value Adjustment:
-.0054 X (11,411.66 - 1,500.00) = -$53.52
Step 4. Calculate the Withdrawal Charge: .05 X(10,000.00 - 1,500.00 - 53.52) = $422.32
Step 5. Calculate the amount received by customers as
a result of full withdrawal at the end of Contract Year 3: 11,411.66 - 422.32 - 53.52 = $10,935.82
</TABLE>
A-2
<PAGE>
APPENDIX B
-------------------------------------------------------------------
WITHDRAWAL ADJUSTMENT EXAMPLE
<TABLE>
<S> <C>
Issue Date: January 1, 2000
Initial Purchase Payment: $50,000
</TABLE>
<TABLE>
<CAPTION>
DEATH BENEFIT AMOUNT
---------------------------------------
DEATH
CONTRACT CONTRACT BENEFIT GREATEST
VALUE BEFORE TRANSACTION VALUE AFTER ANNIVERSARY ANNIVERSARY
DATE TYPE OF OCCURRENCE OCCURRENCE AMOUNT OCCURRENCE VALUE VALUE
---- ------------------ ------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
1/1/00 Issue Date -- $50,000 $50,000 $50,000 $50,000
1/1/01 Contract Anniversary $55,000 -- $55,000 $50,000 $55,000
7/1/01 Partial Withdrawal $60,000 $15,000 $45,000 $37,500 $41,250
</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>
<S>
<C> <C>
Death Benefit 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) $50,000
Withdrawal Adjustment [(w)/(a)]X(d) $12,500
Adjusted Death Benefit $37,500
Greatest 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)]X(d) $13,750
Adjusted Death Benefit $41,250
</TABLE>
Please remember that you are looking at a hypothetical example, and that your
investment performance may be greater or less than the figures shown.
B-1
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
-------------------------------------------------------------------
<TABLE>
<CAPTION>
DESCRIPTION PAGE
<S> <C>
----------------------------------------------------------------------------
ADDITIONS, DELETIONS OR SUBSTITUTIONS OF INVESTMENTS 3
----------------------------------------------------------------------------
THE CONTRACT 4
----------------------------------------------------------------------------
Purchases 4
----------------------------------------------------------------------------
Tax-free Exchanges (1035 Exchanges, Rollovers and Transfers) 4
----------------------------------------------------------------------------
PERFORMANCE INFORMATION 5
----------------------------------------------------------------------------
CALCULATION OF ACCUMULATION UNIT VALUES 11
----------------------------------------------------------------------------
CALCULATION OF VARIABLE INCOME PAYMENTS 12
----------------------------------------------------------------------------
</TABLE>
<TABLE>
----------------------------------------------------------------------------
<CAPTION>
DESCRIPTION PAGE
<S> <C>
GENERAL MATTERS 13
----------------------------------------------------------------------------
Incontestability 13
----------------------------------------------------------------------------
Settlements 13
----------------------------------------------------------------------------
Safekeeping of the Variable Account's Assets 13
----------------------------------------------------------------------------
Premium Taxes 13
----------------------------------------------------------------------------
Tax Reserves 13
----------------------------------------------------------------------------
FEDERAL TAX MATTERS 14
----------------------------------------------------------------------------
QUALIFIED PLANS 15
----------------------------------------------------------------------------
EXPERTS 17
----------------------------------------------------------------------------
FINANCIAL STATEMENTS 18
----------------------------------------------------------------------------
</TABLE>
------------------------------
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.
C-1
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Allstate Life Insurance Company of New York Statement of Additional Information
Allstate Life of New York Separate Account A dated May 1, 2000
One Allstate Drive, Farmingville, New York 11738
</TABLE>
Service Center
P.O. Box 94038, Palatine, IL 60094-4038
Telephone Number: 1-800-692-4682
This Statement of Additional Information supplements the information in the
prospectus for the Allstate Custom Portfolio Variable Annuity. This Statement of
Additional Information is not a prospectus. You should read it with the
prospectus, dated May 1, 2000, for the Contract. You may obtain a prospectus by
writing or calling us at the service center 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>
<CAPTION>
TABLE OF CONTENTS
Description Page
<S> <C>
Additions, Deletions or Substitutions of Investments
The Contract
Purchases
Tax-free Exchanges (1035 Exchanges, Rollovers
and Transfers)
Performance Information
Calculation of Accumulation Unit Values
Calculation of Variable Income Payments
General Matters
Incontestability
Settlements
Safekeeping of the Variable Account's Assets
Premium Taxes
Tax Reserves
Federal Tax Matters
Qualified Plans
Experts
Financial Statements
</TABLE>
<PAGE>
ADDITIONS, DELETIONS OR SUBSTITUTIONS OF INVESTMENTS
------------------------------------------------------------------------------
We may add, delete, or substitute the Portfolio shares held by any Variable
Sub-Account to the extent the law permits. We may substitute shares of any
Portfolio with those of another Portfolio of the same or different mutual fund
if the shares of the Portfolio are no longer available for investment, or if we
believe investment in any Portfolio 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 Portfolio 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 Portfolios. 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, ALFS, Inc.* ("ALFS"), distributes the
Contracts. ALFS is an affiliate of Allstate New York. 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.
*Effective May 1, 2000, Allstate Life Financial Services, Inc. was renamed ALFS,
Inc.
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. The performance figures shown
do not reflect any applicable taxes.
STANDARDIZED TOTAL RETURNS
A Variable Sub-Account's standardized total return represents the average annual
total return of that Sub-Account over a particular period. We compute
standardized total return by finding the annual percentage rate that, when
compounded annually, will accumulate a hypothetical $1,000 purchase payment to
the redeemable value at the end of the one, five or ten year period, or for a
period from the date of commencement of the Variable Sub-Account's operations,
if shorter than any of the foregoing. We use the following formula prescribed by
the SEC for computing standardized total return:
1000(1 + T)n = ERV
where:
T = average annual total return
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of 1, 5, or 10 year
periods or shorter period
n = number of years in the period
1000 = hypothetical $1,000 investment
When factoring in the withdrawal charge assessed upon redemption, we exclude the
Preferred Withdrawal Amount, which is the amount you can withdraw from the
Contract without paying a withdrawal charge. We also use the withdrawal charge
that would apply upon redemption at the end of each period. Thus, for example,
when factoring in the withdrawal charge for a one year standardized total return
calculation, we would use the withdrawal charge that applies to a withdrawal of
a purchase payment made one year prior.
When factoring in the contract maintenance charge, we pro rate the charge by
dividing (i) the contract maintenance charges by (ii) an assumed average
Contract size of $40,000. We then multiply the resulting percentage by a
hypothetical $1,000 investment.
The standardized total returns for the Variable Sub-Accounts for the periods
ended December 31, 1999 are set out below. No standardized total returns are
shown for the HSBC VI Cash Management Variable Sub-Account. In addition, no
standardized total returns are shown for the Fidelity VIP Contrafund, Fidelity
VIP Equity-Income, Fidelity VIP Growth, Fidelity VIP Growth Opportunities,
Fidelity VIP Overseas, Templeton Asset Strategy - Class 2*, Templeton
International Securities - Class 2*, Oppenheimer Aggressive Growth/VA,
Oppenheimer Main Street Growth & Income/VA, Oppenheimer Strategic Bond/VA,
Dreyfus Socially Responsible Growth, Dreyfus Stock Index, Dreyfus VIF
Appreciation**, Wells Fargo VT Asset Allocation, Wells Fargo VT Equity Income,
Wells Fargo VT Growth, Delaware GP Small Cap Value Series, Delaware GP Trend
Series, HSBC VI Fixed Income, and HSBC VI Growth & Income Variable Sub-Accounts,
which had not commenced operations as of the date of this Statement of
Additional Information.
The offering of the Allstate Custom Portfolio Variable Annuity Contracts to the
public had not commenced prior to the date of this Statement of Additional
Information. Accordingly, performance figures for the Variable Sub-Accounts
prior to that date reflect the historical performance of the Variable
Sub-Accounts, adjusted to reflect the current level of charges that apply to the
Variable Sub-Accounts under the Contracts, as well as the withdrawal charge and
contract maintenance charge described above.
<PAGE>
The Variable Sub-Accounts commenced operations on the following dates:
AIM V.I. Balanced October 25, 1999
AIM V.I. Capital Appreciation October 14, 1996
AIM V.I. Government Securities October 14, 1996
AIM V.I. Growth October 14, 1996
AIM V.I. High Yield October 25, 1999
AIM V.I. International Equity October 14, 1996
AIM V.I. Value October 14, 1996
*On February 28, 2000, shareholders approved a merger and reorganization that
combined the Templeton Asset Allocation Fund with the Templeton Global Asset
Allocation Fund, now called the Templeton Asset Strategy Fund, and the Templeton
International Fund with the Templeton International Equity Fund, now called the
Templeton International Securities Fund, effective May 1, 2000. Allstate New
York has made corresponding changes to the names of the Variable Sub-Accounts
that invest in these Portfolios.
**Effective May 1, 2000, the Dreyfus VIF Capital Appreciation Portfolio was
renamed the Dreyfus VIF Appreciation Portfolio. Allstate New York has made
corresponding changes to the names of the Variable Sub-Accounts that invest in
these Portfolios.
<TABLE>
<CAPTION>
Variable Sub-Account One Year Five Years Since Inception
<S> <C> <C> <C>
AIM V.I. Balanced N/A N/A 53.64%*
AIM V.I. Capital Appreciation 36.80% N/A 19.63%
AIM V.I. Government Securities -8.56% N/A 2.62%
AIM V.I. Growth 24.54% N/A 25.32%
AIM V.I. High Yield N/A N/A -2.79%*
AIM V.I. International Equity 47.11% N/A 21.95%
AIM V.I. Value 22.27% N/A 24.33%
</TABLE>
* Standardized total returns for the AIM V.I. Balanced and High Yield Variable
Sub-Accounts are not annualized.
<PAGE>
NON-STANDARDIZED TOTAL RETURNS
From time to time, we also may quote rates of return that reflect changes in the
values of each Variable Sub-Account's accumulation units. We may quote these
"non-standardized total returns" on an annualized, cumulative, year-by-year, or
other basis. These rates of return take into account asset-based charges, such
as the mortality and expense risk charge and administration charge. However,
these rates of return do not reflect withdrawal charges, contract maintenance
charges, or any taxes. Such charges, if reflected, would reduce the performance
shown.
Annualized returns reflect the rate of return that, when compounded annually,
would equal the cumulative rate of return for the period shown. We compute
annualized returns according to the following formula:
Annualized Return = (1 + r)1/n - 1
where r = cumulative rate of return for the period shown, and n =
number of years in the period.
The method of computing annualized rates of return is similar to that for
computing standardized performance, described above, except that rather than
using a hypothetical $1,000 investment and the ending redeemable value thereof,
we use the changes in value of an accumulation unit.
Cumulative rates of return reflect the cumulative change in value of an
accumulation unit over the period shown. Year -by-year rates of return reflect
the change in value of an accumulation unit during the course of each year
shown. We compute these returns by dividing the accumulation unit value at the
end of each period shown, by the accumulation unit value at the beginning of
that period, and subtracting one. We compute other total returns on a similar
basis.
We may quote non-standardized total returns for 1, 3, 5 and 10 year periods, or
period since inception of the Variable Sub-Account's operations, as well as
other periods, such as year-to-date (prior calendar year end to the day stated
in the advertisement); "year to most recent quarter" (prior calendar year end to
the end of the most recent quarter); "the prior calendar year"; and the "n" most
recent calendar years.
<PAGE>
The non-standardized total returns for the Variable Sub-Accounts for the period
ended December 31, 1999 are set out below. The Contracts were first offered for
sale as of the date of this Statement of Additional Information. Certain of the
Variable Sub-Accounts were available for investment prior to that date.
Accordingly, the performance shown reflects the historical performance of the
Variable Sub-Accounts, adjusted to reflect the current asset-based charges that
apply to the Variable Sub-Accounts under the Contracts (but not the withdrawal
charge, contract maintenance charge, or applicable taxes). No non-standardized
total returns are shown for the HSBC VI Cash Management Variable Sub-Account. In
addition, no non-standardized total returns are shown for the Fidelity VIP
Contrafund, Fidelity VIP Equity-Income, Fidelity VIP Growth, Fidelity VIP Growth
Opportunities, Fidelity VIP Overseas, Templeton Asset Strategy - Class 2,
Templeton International Securities - Class 2, Oppenheimer Aggressive Growth/VA,
Oppenheimer Main Street Growth & Income/VA, Oppenheimer Strategic Bond/VA,
Dreyfus Socially Responsible Growth, Dreyfus Stock Index, Dreyfus VIF
Appreciation, Wells Fargo VT Asset Allocation, Wells Fargo VT Equity Income,
Wells Fargo VT Growth, Delaware GP Small Cap Value Series, Delaware GP Trend
Series, HSBC VI Fixed Income, and HSBC VI Growth & Income Variable Sub-Accounts,
which had not commenced operations as of the date of this Statement of
Additional Information.
The inception date of each Variable Sub-Account appears under "Standardized
Total Returns," above.
<TABLE>
<CAPTION>
Variable Sub-Account One Year Five Years Since Inception
<S> <C> <C> <C>
AIM V.I. Balanced N/A N/A 106.27%*
AIM V.I. Capital Appreciation 42.82% N/A 20.40%
AIM V.I. Government Securities -2.54% N/A 3.68%
AIM V.I. Growth 33.56% N/A 26.01%
AIM V.I. High Yield N/A N/A 33.86%*
AIM V.I. International Equity 53.12% N/A 22.68%
AIM V.I. Value 28.29% N/A 25.03%
</TABLE>
*Non-standardized total returns for the AIM V.I. Balanced and High Yield
Variable Sub-Accounts are not annualized.
<PAGE>
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 historical performance of the underlying
Portfolios and adjusting such performance to reflect the current level of
charges that apply to the Variable Sub-Accounts under the Contract, the contract
maintenance charge and the appropriate withdrawal charge.
The adjusted historical total returns for the Variable Sub-Accounts for the
periods ended December 31, 1999 are set out below. No adjusted historical total
returns are shown for the HSBC VI Cash Management Variable Sub-Account. In
addition, no adjusted historical total returns are shown for the HSBC VI Fixed
Income and HSBC VI Growth & Income Variable Sub-Accounts, because the Portfolios
in which they invest had not commenced operations as of the date of this
Statement of Additional Information.
The following list provides the inception date for the Portfolio corresponding
to each of the Variable Sub-Accounts included in the tables.
Inception Date of
Variable Sub-Account Corresponding Portfolio
AIM V.I. Balanced May 1, 1998
AIM V.I. Capital Appreciation May 5, 1993
AIM V.I. Government Securities May 5, 1993
AIM V.I. Growth May 5, 1993
AIM V.I. High Yield May 1, 1998
AIM V.I. International Equity May 5, 1993
AIM V.I. Value May 5, 1993
Fidelity VIP Contrafund January 3, 1995
Fidelity VIP Equity-Income October 9, 1986
Fidelity VIP Growth October 9, 1986
Fidelity VIP Growth Opportunities January 3, 1995
Fidelity VIP Overseas January 28, 1987
Templeton Asset Strategy - Class 2* August 24, 1988
Templeton International Securities - Class 2* May 1, 1992
Oppenheimer Aggressive Growth/VA August 15, 1986
Oppenheimer Main Street Growth & Income/VA July 5, 1995
Oppenheimer Strategic Bond/VA May 3, 1993
Dreyfus Socially Responsible Growth October 7, 1993
Dreyfus Stock Index September 29, 1989
Dreyfus VIF Appreciation** April 5, 1993
Wells Fargo VT Asset Allocation April 15, 1994
Wells Fargo VT Equity Income May 6, 1996
Wells Fargo VT Growth April 12, 1994
Delaware GP Small Cap Value Series December 27, 1993
Delaware GP Trend Series December 27, 1993
* On February 28, 2000, shareholders approved a merger and reorganization that
combined the Templeton Asset Allocation Fund with the Templeton Global Asset
Allocation Fund, now called the Templeton Asset Strategy Fund, and the
Templeton International Fund with the Templeton International Equity Fund, now
called the Templeton International Securities Fund, effective May 1, 2000.
Allstate New York has made corresponding changes to the names of the Variable
Sub-Accounts that invest in these Portfolios.
<PAGE>
**Effective May 1, 2000, the Dreyfus VIF Capital Appreciation Portfolio was
renamed the Dreyfus VIF Appreciation Portfolio. Allstate New York has made
corresponding changes to the names of the Variable Sub-Accounts that invest in
these Portfolios.
<TABLE>
<CAPTION>
10 Years or
Since Inception
Variable Sub-Account One Year Five Years of Portfolio (if less)
<S> <C> <C> <C>
AIM V.I. Balanced 11.81% N/A 14.28%
AIM V.I. Capital Appreciation 36.80% 23.04% 20.20%
AIM V.I. Government Securities -8.56% 4.53% 3.20%
AIM V.I. Growth 27.54% 26.01% 20.04%
AIM V.I. High Yield 3.14% N/A -5.90%
AIM V.I. International Equity 47.11% 19.92% 17.10%
AIM V.I. Value 22.27% 24.16% 20.56%
Fidelity VIP Contrafund 16.70% N/A 24.44%
Fidelity VIP Equity-Income -1.01% 14.89% 12.00%
Fidelity VIP Growth 29.72% 24.26% 16.66%
Fidelity VIP Growth Opportunities -5.02% N/A 17.86%
Fidelity VIP Overseas 34.88% 15.52% 8.77%
Templeton Asset Strategy - Class 2 15.03% 15.14% 11.27%
Templeton International Securities - Class 2 15.71% 15.26% 13.79%
Oppenheimer Aggressive Growth/VA 75.31% 27.85% 18.76%
Oppenheimer Main Street Growth & Income/VA 14.18% N/A 23.92%
Oppenheimer Strategic Bond/VA -4.47% 6.46% 5.59%
Dreyfus Socially Responsible Growth 22.45% 25.82% 21.69%
Dreyfus Stock Index 13.09% 26.26% 16.16%
Dreyfus VIF Appreciation 4.06% 23.73% 18.49%
Wells Fargo VT Asset Allocation 1.87% 10.71% 9.45%
Wells Fargo VT Equity Income 0.54% N/A 14.90%
Wells Fargo VT Growth 12.92% 17.93% 16.29%
Delaware GP Small Cap Value Series -12.06% 11.03% 9.55%
Delaware GP Trend Series 63.32% 28.12% 23.05%
</TABLE>
<PAGE>
CALCULATION OF ACCUMULATION UNIT VALUES
------------------------------------------------------------------------------
The value of Accumulation Units will change each Valuation Period according to
the investment performance of the Portfolio shares purchased by each Variable
Sub-Account and the deduction of certain expenses and charges. A "Valuation
Period" is the period from the end of one Valuation Date and continues to the
end of the next Valuation Date. A Valuation Date ends at the close of regular
trading on the New York Stock Exchange (currently 4:00 p.m. Eastern Time).
The Accumulation Unit Value of a Variable Sub-Account for any Valuation Period
equals the Accumulation Unit Value as of the immediately preceding Valuation
Period, multiplied by the Net Investment Factor (described below) for that
Sub-Account for the current Valuation Period.
NET INVESTMENT FACTOR
The Net Investment Factor for a Valuation Period is a number representing the
change, since the last Valuation Period, in the value of 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 Portfolio 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 Portfolio underlying the Variable
Sub-Account during the current Valuation Period;
(B) is the net asset value per share of the Portfolio underlying the
Variable Sub-Account determined as of the end of the immediately
preceding Valuation Period; and
(C) is the sum of the annualized mortality and expense risk and
administrative expense charges divided by the number of days in the
current calendar year and then multiplied by the number of calendar days
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 each such portion 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
Portfolio 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
We may require you to return the Contract 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 Portfolio shares
held by each of the Variable Sub-Accounts.
The Portfolios do not issue stock certificates. Therefore, we hold the Variable
Account's assets in open account in lieu of stock certificates. See the
Portfolios' prospectuses for a more complete description of the custodian of the
Portfolios.
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. The State of New York currently does not
impose a premium tax.
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 New York 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 New York, and its operations form a part of
Allstate New York, 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 New York
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 New York does not anticipate
that it will incur any federal income tax liability attributable to the Variable
Account, and therefore Allstate New York does not intend to make provisions for
any such taxes. If Allstate New York is taxed on investment income or capital
gains of the Variable Account, then Allstate New York 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,
an annuity contract must provide: (1) if any owner dies on or after the annuity
start date but before the entire interest in the contract has been distributed,
the remaining portion of such interest must be distributed at least as rapidly
as under the method of distribution being used as of the date of the owner's
death; (2) if any owner dies prior to the annuity start date, the entire
interest in the contract will be distributed within five years after the date of
the owner's death. These requirements are satisfied if any portion of the
owner's interest which is payable to (or for the benefit of) a designated
beneficiary is distributed over the life of such beneficiary (or over a period
not extending beyond the life expectancy of the beneficiary) and the
distributions begin within one year of the owner's death. If the owner's
designated beneficiary is the surviving spouse of the owner, the contract may be
continued with the surviving spouse as the new owner. If the owner of the
contract is a non-natural person, then the annuitant will be treated as the
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 owner.
<PAGE>
QUALIFIED PLANS
-----------------------------------------------------------------------------
The Contract may be used with several types of qualified plans. The income on
qualified plan and IRA investments is tax deferred and variable annuities held
by such plans do not receive any additional tax deferral. You should review the
annuity features, including all benefits and expenses, prior to purchasing a
variable annuity in a qualified plan or IRA. Allstate New York reserves the
right to limit the availability of the Contract for use with any of the
Qualified Plans listed below. The tax rules applicable to participants in such
qualified plans vary according to the type of plan and the terms and conditions
of the plan itself. Adverse tax consequences may result from excess
contributions, premature distributions, distributions that do not conform to
specified commencement and minimum distribution rules, excess distributions and
in other circumstances. Contract owners and participants under the plan and
annuitants and beneficiaries under the Contract may be subject to the terms and
conditions of the plan regardless of the terms of the Contract.
INDIVIDUAL RETIREMENT ANNUITIES
Section 408 of the Code permits eligible individuals to contribute to an
individual retirement program known as an Individual Retirement Annuity (IRA).
Individual Retirement Annuities are subject to limitations on the amount that
can be contributed and on the time when distributions may commence. Certain
distributions from other types of qualified plans may be "rolled over" on a
tax-deferred basis into an Individual Retirement Annuity. An IRA generally may
not provide life insurance, but it may provide a death benefit that equals the
greater of the premiums paid and the Contract's Cash Value. The Contract
provides a death benefit that in certain circumstances may exceed the greater of
the payments and the Contract Value. It is possible that the death benefit could
be viewed as violating the prohibition on investment in life insurance contracts
with the result that the Contract would not be viewed as satisfying the
requirements of an IRA.
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. In
particular, employers should consider that 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.
<PAGE>
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 New York 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.
<PAGE>
EXPERTS
------------------------------------------------------------------------------
The financial statements and related financial statement schedules of Allstate
New York as of December 31, 1999 and 1998 and for each of the three years in the
period ended December 31, 1999 that appear in this Statement of Additional
Information have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report appearing herein, and are included in reliance upon the
report of such firm given upon their authority as experts in accounting and
auditing.
The financial statements of the Variable Account as of December 31, 1999, and
for each of the periods in the two years then ended that appear in this
Statement of Additional Information have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report appearing herein, and are
included in reliance upon the report of such firm given upon their authority as
experts in accounting and auditing.
<PAGE>
FINANCIAL STATEMENTS
------------------------------------------------------------------------------
The financial statements of the Variable Account as of December 31, 1999 and for
the periods in the two years then ended the financial statements and related
financial statement schedules of Allstate New York as of December 31, 1999 and
1998 and for each of the three years in the period ended December 31, 1999 and
the accompanying Independent Auditors' Reports appear on the pages that follow.
The financial statements of Allstate New York included herein should be
considered only as bearing upon the ability of Allstate New York to meet its
obligations under the Contracts.
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND SHAREHOLDER OF
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK:
We have audited the accompanying Statements of Financial Position of Allstate
Life Insurance Company of New York (the "Company", an affiliate of The Allstate
Corporation) as of December 31, 1999 and 1998, and the related Statements of
Operations and Comprehensive Income, Shareholder's Equity and Cash Flows for
each of the three years in the period ended December 31, 1999. Our audits also
included Schedule IV - Reinsurance and Schedule V - Valuation and Qualifying
Accounts. These financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial statement schedules based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 1999 and
1998, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 1999 in conformity with generally
accepted accounting principles. Also, in our opinion, Schedule IV - Reinsurance,
and Schedule V - Valuation and Qualifying Accounts, when considered in relation
to the basic financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein.
/s/ Deloitte & Touche LLP
Chicago, Illinois
February 25, 2000
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------
1999 1998
------------------ -------------------
<S> <C> <C>
($ in thousands, except par value data)
ASSETS
Investments
Fixed income securities, at fair value
(amortized cost $1,858,216 and $1,648,972) $ 1,912,545 $ 1,966,067
Mortgage loans 166,997 145,095
Short-term 46,037 76,127
Policy loans 31,109 29,620
----------------- ------------------
Total investments 2,156,688 2,216,909
Cash 1,135 3,117
Deferred policy acquisition costs 106,932 87,830
Accrued investment income 25,712 22,685
Reinsurance recoverables 1,949 2,210
Other assets 7,803 9,887
Separate Accounts 443,705 366,247
----------------- ------------------
TOTAL ASSETS $ 2,743,924 $ 2,708,885
================= ==================
LIABILITIES
Reserve for life-contingent contract benefits $ 1,098,016 $ 1,208,104
Contractholder funds 839,157 703,264
Current income taxes payable 10,132 14,029
Deferred income taxes 3,077 25,449
Other liabilities and accrued expenses 41,218 23,463
Payable to affiliates, net 4,731 38,835
Separate Accounts 443,705 366,247
----------------- ------------------
TOTAL LIABILITIES 2,440,036 2,379,391
----------------- ------------------
COMMITMENTS AND CONTINGENT LIABILITIES (NOTE 13)
SHAREHOLDER'S EQUITY
Common stock, $25 par value, 100,000 and 80,000
shares authorized, issued and outstanding 2,500 2,000
Additional capital paid-in 45,787 45,787
Retained income 225,367 198,801
Accumulated other comprehensive income:
Unrealized net capital gains 30,234 82,906
----------------- ------------------
TOTAL ACCUMULATED OTHER COMPREHENSIVE INCOME 30,234 82,906
----------------- ------------------
TOTAL SHAREHOLDER'S EQUITY 303,888 329,494
----------------- ------------------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $ 2,743,924 $ 2,708,885
================= ==================
</TABLE>
See notes to financial statements.
2
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
($ in thousands) 1999 1998 1997
------------------ ------------------ ------------------
<S> <C> <C> <C>
REVENUES
Premiums (net of reinsurance ceded
of $4,253, $3,204 and $3,087 ) $ 63,748 $ 85,771 $ 90,366
Contract charges 38,626 33,281 28,597
Net investment income 148,331 134,413 124,887
Realized capital gains and losses (2,096) 4,697 701
--------- --------- --------
248,609 258,162 244,551
--------- --------- --------
COSTS AND EXPENSES
Contract benefits (net of reinsurance recoveries
of $1,166, $997 and $1,985 ) 178,267 183,839 179,872
Amortization of deferred policy acquisition costs 8,985 7,029 5,023
Operating costs and expenses 20,151 24,703 23,644
--------- --------- --------
207,403 215,571 208,539
--------- --------- --------
INCOME FROM OPERATIONS
BEFORE INCOME TAX EXPENSE 41,206 42,591 36,012
Income tax expense 14,640 14,934 13,296
--------- --------- --------
NET INCOME 26,566 27,657 22,716
--------- --------- --------
OTHER COMPREHENSIVE (LOSS) INCOME, AFTER TAX
Change in unrealized net capital gains and losses (52,672) 18,427 27,627
--------- -------- --------
COMPREHENSIVE (LOSS) INCOME $ (26,106) $ 46,084 $ 50,343
========= ======== ========
</TABLE>
See notes to financial statements.
3
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------------------
1999 1998 1997
------------------ ------------------- -----------------
($ in thousands)
COMMON STOCK
<S> <C> <C> <C>
Balance, beginning of year $ 2,000 $ 2,000 $ 2,000
Issuance of new shares of stock 500 - -
----------------- ----------------- -----------------
Balance, end of year 2,500 2,000 2,000
----------------- ----------------- -----------------
ADDITIONAL CAPITAL PAID-IN $ 45,787 $ 45,787 $ 45,787
----------------- ----------------- -----------------
RETAINED INCOME
Balance, beginning of year $ 198,801 $ 171,144 $ 148,428
Net income 26,566 27,657 22,716
----------------- ----------------- -----------------
Balance, end of year 225,367 198,801 171,144
----------------- ----------------- -----------------
ACCUMULATED OTHER COMPREHENSIVE INCOME
Balance, beginning of year $ 82,906 $ 64,479 $ 36,852
Change in unrealized net capital gains
and losses (52,672) 18,427 27,627
----------------- ----------------- -----------------
Balance, end of year 30,234 82,906 64,479
----------------- ----------------- -----------------
TOTAL SHAREHOLDER'S EQUITY $ 303,888 $ 329,494 $ 283,410
================= ================= =================
</TABLE>
See notes to financial statements.
4
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
($ in thousands) 1999 1998 1997
------------------ ------------------- -----------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 26,566 $ 27,657 $ 22,716
Adjustments to reconcile net income to net cash
provided by operating activities
Amortization and other non-cash items (37,619) (34,890) (31,112)
Realized capital gains and losses 2,096 (4,697) (701)
Interest credited to contractholder funds 36,736 41,200 31,667
Changes in:
Life-contingent contract benefits and
contractholder funds 38,527 53,343 68,114
Deferred policy acquisition costs (17,262) (16,693) (10,781)
Income taxes payable 2,094 13,865 (158)
Other operating assets and liabilities 13,049 (15,974) 8,545
----------------- ----------------- -----------------
Net cash provided by operating activities 64,187 63,811 88,290
----------------- ----------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of fixed income securities 161,443 65,281 15,723
Investment collections
Fixed income securities 21,822 159,648 120,061
Mortgage loans 7,479 5,855 5,365
Investments purchases
Fixed income securities (383,961) (292,444) (236,984)
Mortgage loans (31,888) (24,252) (35,200)
Change in short-term investments, net 29,493 (55,846) 16,342
Change in policy loans, net (1,489) (2,020) (2,241)
----------------- ----------------- -----------------
Net cash used in investing activities (197,101) (143,778) (116,934)
----------------- ----------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 500 - -
Contractholder fund deposits 197,439 137,473 79,384
Contractholder fund withdrawals (67,007) (54,782) (51,374)
----------------- ----------------- -----------------
Net cash provided by financing activities 130,932 82,691 28,010
----------------- ----------------- -----------------
NET (DECREASE) INCREASE IN CASH (1,982) 2,724 (634)
CASH AT THE BEGINNING OF YEAR 3,117 393 1,027
----------------- ----------------- -----------------
CASH AT END OF YEAR $ 1,135 $ 3,117 $ 393
================= ================= =================
</TABLE>
See notes to financial statements.
5
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
1. GENERAL
BASIS OF PRESENTATION
The accompanying financial statements include the accounts of Allstate Life
Insurance Company of New York (the "Company"), a wholly owned subsidiary of
Allstate Life Insurance Company ("ALIC"), which is wholly owned by Allstate
Insurance Company ("AIC"), a wholly owned subsidiary of The Allstate Corporation
(the "Corporation"). These financial statements have been prepared in conformity
with generally accepted accounting principles.
To conform with the 1999 presentation, certain amounts in the prior years'
financial statements and notes have been reclassified.
NATURE OF OPERATIONS
The Company markets a broad line of life insurance and savings products in the
state of New York through a combination of exclusive agencies, securities firms,
banks, specialized brokers and through direct response marketing. Life insurance
consists of traditional products, including term and whole life,
interest-sensitive life and immediate annuities with life contingencies. Savings
products include deferred annuities and immediate annuities without life
contingencies. Deferred annuities include fixed rate, market value adjusted and
variable annuities. Group pension savings products include immediate annuities
also referred to as retirement annuities. In 1999, annuity premiums and deposits
represented 76.2% of the Company's total statutory premiums and deposits.
The Company monitors economic and regulatory developments which have the
potential to impact its business. Recently enacted federal legislation will
allow for banks and other financial organizations to have greater participation
in the securities and insurance businesses. This legislation may present an
increased level of competition for sales of the Company's products. Furthermore,
the market for deferred annuities and interest-sensitive life insurance is
enhanced by the tax incentives available under current law. Any legislative
changes which lessen these incentives are likely to negatively impact the demand
for these products.
Additionally, traditional demutualizations of mutual insurance companies and
enacted and pending state legislation to permit mutual insurance companies to
convert to a hybrid structure known as a mutual holding company could have a
number of significant effects on the Company by (1) increasing industry
competition through consolidation caused by mergers and acquisitions related to
the new corporate form of business; and (2) increasing competition in capital
markets.
Although the Company currently benefits from agreements with financial services
entities who market and distribute its products, change in control of these
non-affliliated entities with which the Company has alliances could negatively
impact the Company's sales.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENTS
Fixed income securities include bonds and mortgage-backed and asset-backed
securities. All fixed income securities are carried at fair value and may be
sold prior to their contractual maturity ("available for sale"). The difference
between amortized cost and fair value, net of deferred income taxes, certain
deferred policy acquisition costs, and certain reserves for life-contingent
contract benefits, is reflected as a component of shareholder's equity.
Provisions are recognized for declines in the value of fixed income securities
that are other than temporary. Such writedowns are included in realized capital
gains and losses.
6
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
Mortgage loans are carried at outstanding principal balance, net of unamortized
premium or discount and valuation allowances. Valuation allowances are
established for impaired loans when it is probable that contractual principal
and interest will not be collected. Valuation allowances for impaired loans
reduce the carrying value to the fair value of the collateral or the present
value of the loan's expected future repayment cash flows discounted at the
loan's original effective interest rate. Valuation allowances on loans not
considered to be impaired are established based on consideration of the
underlying collateral, borrower financial strength, current and expected market
conditions, and other factors.
Short-term investments are carried at cost or amortized cost which approximates
fair value, and includes collateral received in connection with securities
lending activities. Policy loans are carried at the unpaid principal balances.
Investment income consists primarily of interest and short-term investment
dividends. Interest is recognized on an accrual basis and dividends are recorded
at the ex-dividend date. Interest income on mortgage-backed and asset-backed
securities is determined on the effective yield method, based on estimated
principal repayments. Accrual of income is suspended for fixed income securities
and mortgage loans that are in default or when the receipt of interest payments
is in doubt. Realized capital gains and losses are determined on a specific
identification basis.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company utilizes financial futures contracts which are derivative financial
instruments. By meeting specific criteria these futures are designated as
accounting hedges and accounted for on a deferral basis. In order to qualify as
accounting hedges, financial futures contracts must reduce the primary market
risk exposure on an enterprise or transaction basis in conjunction with a hedge
strategy; be designated as a hedge at the inception of the transaction; and be
highly correlated with the fair value of, or interest income or expense
associated with, the hedged item at inception and throughout the hedge period.
Derivatives that are not designated as accounting hedges are accounted for on a
fair value basis.
If, subsequent to entering into a hedge transaction, the financial futures
contract becomes ineffective (including if the occurrence of a hedged
anticipatory transaction is no longer probable), the Company terminates the
derivative position. Gains and losses on these terminations are reported in
realized capital gains and losses in the period they occur. The Company may also
terminate derivatives as a result of other events or circumstances. Gains and
losses on these terminations are deferred and amortized over the remaining life
of the hedged item.
The Company accounts for financial futures as hedges using deferral accounting
for anticipatory investment purchases and sales when the criteria for futures
(discussed above) are met. In addition, anticipated transactions must be
probable of occurrence and their significant terms and characteristics
identified. Under deferral accounting, gains and losses on financial futures
contracts are deferred as other liabilities and accrued expenses. Once the
anticipated transaction occurs, the deferred gains and losses are considered
part of the cost basis of the asset and reported net of tax in shareholder's
equity. The gains and losses deferred are then recognized in conjunction with
the earnings on the hedged item. Fees and commissions paid on these derivatives
are also deferred as an adjustment to the carrying value of the hedged item.
RECOGNITION OF INSURANCE REVENUE AND RELATED BENEFITS AND INTEREST CREDITED
Traditional life insurance products consist principally of products with fixed
and guaranteed premiums and benefits, primarily term and whole life insurance
products and certain annuities with life contingencies. Premiums from these
products are recognized as revenue when due. Benefits are recognized in relation
to
7
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
such revenue so as to result in the recognition of profits over the life of
the policy and are reflected in contract benefits.
Interest-sensitive life contracts are insurance contracts whose terms are not
fixed and guaranteed. The terms that may be changed include premiums paid by the
contractholder, interest credited to the contractholder account balance and one
or more amounts assessed against the contractholder. Premiums from these
contracts are reported as deposits to the contractholder funds. Contract charge
revenue consists of fees assessed against the contractholder account balance for
cost of insurance (mortality risk), contract administration and surrender
charges. Contract benefits include interest credited to contracts and claims
incurred in excess of the related contractholder account balance.
Limited payment contracts, a type of life-contingent immediate annuity or
traditional life product, are contracts that provide insurance protection over a
contract period that extends beyond the period in which premiums are collected.
Gross premiums in excess of the net premium on limited payment contracts are
deferred and recognized over the contract period. Contract benefits are
recognized in relation to such revenue so as to result in the recognition of
profits over the life of the policy.
Contracts that do not subject the Company to significant risks arising from
mortality or morbidity are referred to as investment contracts. Fixed rate
annuities, market value adjusted annuities and immediate annuities without life
contingencies are considered investment contracts. Deposits received for such
contracts are reported as deposits to contractholder funds. Contract charge
revenue for investment contracts consists of charges assessed against the
contractholder account balance for contract administration and surrenders.
Contract benefits include interest credited and claims incurred in excess of the
related contractholder account balance.
Crediting rates for fixed rate annuities and interest-sensitive life contracts
are adjusted periodically by the Company to reflect current market conditions.
Investment contracts also include variable annuity contracts which are sold as
Separate Accounts products. The assets supporting these products are legally
segregated and available only to settle Separate Accounts contract obligations.
Deposits received are reported as Separate Accounts liabilities. The Company's
contract charge revenue for these contracts consists of charges assessed against
the Separate Accounts fund balances for contract maintenance, administration,
mortality, expense and surrenders.
DEFERRED POLICY ACQUISITION COSTS
Certain costs which vary with and are primarily related to acquiring life and
savings business, principally agents and brokers remuneration, premium taxes,
certain underwriting costs and direct mail solicitation expenses, are deferred
and amortized into income. Deferred policy acquisition costs are periodically
reviewed as to recoverability and written down where necessary.
For traditional life insurance and limited payment contracts, these costs are
amortized in proportion to the estimated revenue on such business. Assumptions
relating to estimated revenue, as well as to all other aspects of the deferred
acquisition costs and reserve calculations, are determined based upon conditions
as of the date of the policy issue and are generally not revised during the life
of the policy. Any deviations from projected business inforce, resulting from
actual policy terminations differing from expected levels, and any estimated
premium deficiencies change the rate of amortization in the period such events
occur. Generally, the amortization period for these contracts approximates the
estimated lives of the policies.
For interest-sensitive life and investment contracts, the costs are amortized in
proportion to the estimated gross profits on such business over the estimated
lives of the contract periods. Gross profits are determined
8
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
at the date of policy issue and comprise estimated investment, mortality,
expense margins and surrender charges. Assumptions underlying the gross profits
are periodically updated to reflect actual experience, and changes in the amount
or timing of estimated gross profits will result in adjustments to the
cumulative amortization of these costs.
The present value of future profits inherent in acquired blocks of insurance is
classified as a component of deferred policy acquisition costs. The present
value of future profits is amortized over the life of the blocks of insurance
using current crediting rates.
To the extent unrealized gains or losses on securities carried at fair value
would result in an adjustment of estimated gross profits had those gains or
losses actually been realized, the related carrying value of deferred
acquisition costs, including present value of future profits, are adjusted
together with accumulated unrealized net capital gains included in shareholder's
equity.
REINSURANCE RECOVERABLE
In the normal course of business, the Company seeks to limit aggregate and
single exposure to losses on large risks by purchasing reinsurance from other
insurers. Reinsurance recoverables are estimated based upon assumptions
consistent with those used in establishing the underlying reinsured contacts.
Insurance liabilities are reported gross of reinsurance recoverables.
Reinsurance does not extinguish the Company's primary liability under the
policies written and therefore reinsurers and amounts recoverable therefrom are
regularly evaluated by the Company and allowances for uncollectible reinsurance
are established as appropriate.
INCOME TAXES
The income tax provision is calculated under the liability method. Deferred tax
assets and liabilities are recorded based on the difference between the
financial statement and tax bases of assets and liabilities at the enacted tax
rates. The principal assets and liabilities giving rise to such differences are
insurance reserves and deferred policy acquisition costs. Deferred income taxes
also arise from unrealized capital gains and losses on fixed income securities
carried at fair value.
SEPARATE ACCOUNTS
The Company issues deferred variable annuity contracts, the assets and
liabilities of which are legally segregated and recorded as assets and
liabilities of the Separate Accounts. Absent any contract provisions wherein the
Company contractually guarantees either a minimum return or account value to the
beneficiaries of the contractholders in the form of a death benefit, the
contractholders bear the investment risk that the Separate Accounts' funds may
not meet their stated investment objectives.
The assets of the Separate Accounts are carried at fair value. Separate Accounts
liabilities represent the contractholders' claims to the related assets and are
carried at the fair value of the assets. In the event that the asset value of
certain contractholder accounts are projected to be below the value guaranteed
by the Company, a liability is established through a charge to earnings.
Investment income and realized capital gains and losses of the Separate Accounts
accrue directly to the contractholders and therefore, are not included in the
Company's statements of operations and comprehensive income. Revenues to the
Company from the Separate Accounts consist of contract maintenance and
administration fees, and mortality, surrender and expense charges.
RESERVES FOR LIFE-CONTINGENT CONTRACT BENEFITS
The reserve for life-contingent contract benefits, which relates to traditional
life insurance, group retirement annuities, immediate annuities with life
contingencies and certain variable annuity guarantees, is computed on the basis
of assumptions as to mortality, future investment yields, terminations and
9
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
expenses at the time the policy is issued. These assumptions, which for
traditional life insurance are applied using the net level premium method,
include provisions for adverse deviation and generally vary by such
characteristics as type of coverage, year of issue and policy duration. Detailed
reserve assumptions and reserve interest rates are outlined in Note 7. To the
extent that unrealized gains on fixed income securities would result in a
premium deficiency had those gains actually been realized, the related increase
in reserves is recorded as a reduction of the unrealized gains included in
shareholder's equity.
CONTRACTHOLDER FUNDS
Contractholder funds arise from the issuance of interest-sensitive life and
certain investment contracts. Deposits received are recorded as interest-bearing
liabilities. Contractholder funds are equal to deposits received, net of
commissions, and interest credited to the benefit of the contractholder less
withdrawals, mortality charges and administrative expenses. Detailed information
on crediting rates and surrender and withdrawal protection on contractholder
funds are outlined in Note 7.
OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS
Commitments to extend mortgage loans have only off-balance-sheet risk because
their contractual amounts are not recorded in the Company's statements of
financial position. The contractual amounts and fair values of these instruments
are presented in Note 5.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
NEW ACCOUNTING STANDARDS
In 1999, the Company adopted Statement of Position ("SOP") 97-3, "Accounting by
Insurance and Other Enterprises for Insurance-Related Assessments." The SOP
provides guidance concerning when to recognize a liability for insurance-related
assessments and how those liabilities should be measured. Specifically,
insurance-related assessments should be recognized as liabilities when all of
the following criteria have been met: 1) an assessment has been imposed or it is
probable that an assessment will be imposed, 2) the event obligating an entity
to pay an assessment has occurred and 3) the amount of the assessment can be
reasonably estimated. Adoption of this statement was not material to the
Company's results of operations or financial position.
PENDING ACCOUNTING STANDARDS
In June 1999, the Financial Accounting Standards Board delayed the effective
date of Statement of Financial Accounting Standards ("SFAS") No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS 133
replaces existing pronouncements and practices with a single, integrated
accounting framework for derivatives and hedging activities. This statement
requires that all derivatives be recognized on the balance sheet at fair value.
Derivatives that are not hedges must be adjusted to fair value through income.
If the derivative is a hedge, depending on the nature of the hedge, changes in
the fair value of derivatives will either be offset against the change in the
fair value of the hedged assets, liabilities, or firm commitments through
earnings or recognized in other comprehensive income until the hedged item is
recognized in earnings. Additionally, the change in fair value of a derivative
which is not effective as a hedge will be immediately recognized in earnings.
The delay was effected through the issuance of SFAS No. 137, which extends the
SFAS No. 133 requirements to fiscal years beginning after June 15, 2000. As
such, the Company expects to adopt the provisions of SFAS No. 133 as of January
1, 2001. The impact of this statement is dependent upon the Company's derivative
positions and market conditions existing at the date of adoption. Based on
existing interpretations of the requirements of SFAS
10
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
No. 133, the impact of the adoption is not expected to be material to the
results of operations or financial position of the Company.
3. RELATED PARTY TRANSACTIONS
REINSURANCE
The Company has reinsurance agreements with ALIC in order to limit aggregate and
single exposure on large risks. A portion of the Company's premiums and policy
benefits are ceded to ALIC and reflected net of such reinsurance in the
statements of operations and comprehensive income. Reinsurance recoverables and
the related reserve for life-contingent contract benefits and contractholder
funds are reported separately in the statements of financial position. The
Company continues to have primary liability as the direct insurer for risks
reinsured.
The following amounts were ceded to ALIC under reinsurance agreements.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Premiums $ 3,408 $ 2,519 $ 2,171
Policy benefits 211 315 327
</TABLE>
Included in reinsurance recoverables at December 31, 1999 and 1998 are the net
amounts owed to ALIC of $458 and $3, respectively.
STRUCTURED SETTLEMENT ANNUITIES
The Company issued $14,561, $12,747 and $12,766 of structured settlement
annuities, a type of immediate annuity, in 1999, 1998 and 1997, respectively, at
prices determined based upon interest rates in effect at the time of purchase,
to fund structured settlements in matters involving AIC. Of these amounts,
$4,298, $5,152 and $3,468 relate to structured settlement annuities with life
contingencies and are included in premium income in 1999, 1998 and 1997,
respectively. Additionally, the reserve for life-contingent contract benefits
was increased by approximately 94% of such premium received in each of these
years. In most cases, these annuities were issued to Allstate Settlement
Corporation ("ASC"), a subsidiary of ALIC, which, under a "qualified
assignment", assumed AIC's obligation to make the future payments.
AIC has issued surety bonds to guarantee the payment of structured settlement
benefits assumed by ASC (from both AIC and non-related parties) and funded by
certain annuity contracts issued by the Company. ASC has entered into General
Indemnity Agreements pursuant to which it indemnified AIC for any liabilities
associated with the surety bonds and gives AIC certain collateral security
rights with respect to the annuities and certain other rights in the event of
any defaults covered by the surety bonds. Reserves recorded by the Company for
annuities related to the surety bonds were $1.19 billion and $1.08 billion at
December 31, 1999 and 1998, respectively.
BUSINESS OPERATIONS
The Company utilizes services performed by AIC and ALIC and business facilities
owned or leased, and operated by AIC in conducting its business activities. In
addition, the Company shares the services of employees with AIC. The Company
reimburses AIC and ALIC for the operating expenses incurred on behalf of the
Company. The Company is charged for the cost of these operating expenses based
on the level of services provided. Operating expenses, including compensation
and retirement and other benefit programs, allocated to the Company were
$16,155, $23,369 and $19,425 in 1999, 1998 and 1997, respectively. A
11
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
portion of these expenses relate to the acquisition of business which are
deferred and amortized over the contract period.
4. INVESTMENTS
FAIR VALUES
The amortized cost, gross unrealized gains and losses, and fair value for fixed
income securities are as follows:
<TABLE>
<CAPTION>
GROSS UNREALIZED
AMORTIZED ---------------- FAIR
COST GAINS LOSSES VALUE
---- ----- ------ -----
<S> <C> <C> <C> <C>
AT DECEMBER 31, 1999
U.S. government and agencies $ 413,875 $ 53,717 $ (2,705) $ 464,887
Municipal 60,256 997 (1,976) 59,277
Corporate 996,298 36,303 (31,695) 1,000,906
Foreign government 61,987 3,217 (639) 64,565
Mortgage-backed securities 291,304 4,770 (7,370) 288,704
Asset-backed securities 34,496 26 (316) 34,206
-------------- -------------- -------------- --------------
Total fixed income securities $ 1,858,216 $ 99,030 $ (44,701) $ 1,912,545
============== ============== ============== ==============
AT DECEMBER 31, 1998
U.S. government and agencies $ 443,930 $ 179,455 $ (1) $ 623,384
Municipal 31,617 2,922 (19) 34,520
Corporate 848,289 121,202 (899) 968,592
Mortgage-backed securities 291,520 14,294 (700) 305,114
Asset-backed securities 33,616 869 (28) 34,457
-------------- -------------- -------------- --------------
Total fixed income securities $ 1,648,972 $ 318,742 $ (1,647) $ 1,966,067
============== ============== ============== ==============
</TABLE>
SCHEDULED MATURITIES
The scheduled maturities for fixed income securities are as follows at December
31, 1999:
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
---- -----
<S> <C> <C>
Due in one year or less $ 6,720 $ 6,798
Due after one year through five years 168,795 168,859
Due after five years through ten years 217,305 218,381
Due after ten years 1,139,596 1,195,597
--------------- ---------------
1,532,416 1,589,635
Mortgage- and asset-backed securities 325,800 322,910
--------------- ---------------
Total $ 1,858,216 $ 1,912,545
=============== ===============
</TABLE>
Actual maturities may differ from those scheduled as a result of prepayments by
the issuers.
12
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
NET INVESTMENT INCOME
YEAR ENDED DECEMBER 31, 1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Fixed income securities $ 135,561 $ 124,100 $ 116,763
Mortgage loans 12,346 10,309 7,896
Other 3,495 2,940 2,200
------------- ------------- -------------
Investment income, before expense 151,402 137,349 126,859
Investment expense 3,071 2,936 1,972
------------- ------------- -------------
Net investment income $ 148,331 $ 134,413 $ 124,887
============= ============= =============
</TABLE>
REALIZED CAPITAL GAINS AND LOSSES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Fixed income securities $ (2,207) $ 4,755 $ 955
Mortgage loans 42 (65) (221)
Other 69 7 (33)
------------ ----------- -------------
Realized capital gains and losses (2,096) 4,697 701
Income taxes (765) 1,644 245
------------ ----------- -------------
Realized capital gains and losses, after tax $ (1,331) $ 3,053 $ 456
============ =========== =============
</TABLE>
Excluding calls and prepayments, gross gains of $1,713, $2,905 and $471 and
gross losses of $3,920, $164 and $105 were realized on sales of fixed income
securities during 1999, 1998 and 1997, respectively.
UNREALIZED NET CAPITAL GAINS
Unrealized net capital gains on fixed income securities included in
shareholder's equity at December 31, 1999 are as follows:
<TABLE>
<CAPTION>
COST/ GROSS UNREALIZED UNREALIZED
AMORTIZED COST FAIR VALUE GAINS LOSSES NET GAINS
-------------- ---------- ----- ------ ---------
<S> <C> <C> <C> <C> <C>
Fixed income securities $1,858,216 $1,912,545 $ 99,030 $(44,701) $ 54,329
========== ========== ======== ========
Reserve for life-contingent
contract benefits (7,815)
Deferred income taxes (16,280)
--------
Unrealized net capital gains $ 30,234
========
</TABLE>
<TABLE>
<CAPTION>
CHANGE IN UNREALIZED NET CAPITAL GAINS
YEAR ENDED DECEMBER 31, 1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Fixed income securities $(262,766) $ 70,948 $123,519
Reserves for life contingent-contract benefits 179,891 (42,251) (80,155)
Deferred income taxes 28,362 (9,922) (14,876)
Deferred policy acquisition costs and other 1,841 (348) (861)
--------- -------- --------
(Decrease) increase in unrealized net capital gains $ (52,672) $ 18,427 $ 27,627
========= ======== ========
</TABLE>
13
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
INVESTMENT LOSS PROVISIONS AND VALUATION ALLOWANCES
Pretax provisions for investment losses, principally relating to valuation
allowances on mortgage loans were $114 and $261 in 1998 and 1997, respectively.
There was not a provision for investment losses in 1999.
MORTGAGE LOAN IMPAIRMENT
A mortgage loan is impaired when it is probable that the Company will be unable
to collect all amounts due according to the contractual terms of the loan
agreement.
The Company had no impaired loans at December 31, 1999 and 1998.
Valuation allowances for mortgage loans at December 31, 1999, 1998 and 1997 were
$600, $600 and $486, respectively. For the years ended December 31, 1999, 1998
and 1997, there were no reductions of the mortgage loan valuation allowance for
dispositions of impaired loans. Net additions to the mortgage loan valuation
allowances were $114 and $261 for the years ended December 31, 1998 and 1997,
respectively. There were no additions or reductions to the mortgage loan
valuation allowance for the year ended December 31, 1999.
INVESTMENT CONCENTRATION FOR MUNICIPAL BOND AND COMMERCIAL MORTGAGE PORTFOLIOS
AND OTHER INVESTMENT INFORMATION
The Company maintains a diversified portfolio of municipal bonds. The largest
concentrations in the portfolio are presented below. Except for the following,
holdings in no other state exceeded 5% of the portfolio at December 31, 1999:
<TABLE>
<CAPTION>
(% of municipal bond portfolio carrying value) 1999 1998
---- ----
<S> <C> <C>
Arizona 22.7% - %
California 20.2 17.4
Ohio 16.4 30.2
Illinois 11.6 21.1
Pennsylvania 7.5 -
Indiana 5.0 -
</TABLE>
The Company's mortgage loans are collateralized by a variety of commercial real
estate property types located throughout the United States. Substantially all of
the commercial mortgage loans are non-recourse to the borrower. The states with
the largest portion of the commercial mortgage loan portfolio are listed below.
Except for the following, holdings in no other state exceeded 5% of the
portfolio at December 31, 1999:
<TABLE>
<CAPTION>
(% of commercial mortgage portfolio carrying value) 1999 1998
---- ----
<S> <C> <C>
California 34.9% 41.9%
New York 27.6 26.3
Illinois 13.2 15.8
New Jersey 12.3 6.9
Pennsylvania 9.7 6.2
</TABLE>
14
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
The types of properties collateralizing the commercial mortgage loans at
December 31, are as follows:
<TABLE>
<CAPTION>
(% of commercial mortgage portfolio carrying value) 1999 1998
---- ----
<S> <C> <C>
Retail 33.1% 39.5%
Office buildings 18.9 11.7
Warehouse 18.5 19.2
Apartment complex 15.8 18.5
Industrial 4.6 5.5
Other 9.1 5.6
----- -----
100.0% 100.0%
===== =====
</TABLE>
The contractual maturities of the commercial mortgage loan portfolio as of
December 31, 1999, for loans that were not in foreclosure are as follows:
<TABLE>
<CAPTION>
NUMBER OF LOANS CARRYING VALUE PERCENT
--------------- -------------- -------
<S> <C> <C>
2000 2 $ 4,475 2.7%
2001 5 7,165 4.3
2002 2 5,904 3.5
2004 4 5,289 3.2
Thereafter 33 144,164 86.3
----- --------------- -----
Total 46 $ 166,997 100.0%
===== =============== =====
</TABLE>
In 1999, there were no commercial mortgage loans which were contractually due.
SECURITIES ON DEPOSIT
At December 31, 1999, fixed income securities with a carrying value of $1,903
were on deposit with regulatory authorities as required by law.
5. FINANCIAL INSTRUMENTS
In the normal course of business, the Company invests in various financial
assets, incurs various financial liabilities and enters into agreements
involving derivative financial instruments and other off-balance-sheet financial
instruments. The fair value estimates of financial instruments presented on the
following page are not necessarily indicative of the amounts the Company might
pay or receive in actual market transactions. Potential taxes and other
transaction costs have not been considered in estimating fair value. The
disclosures that follow do not reflect the fair value of the Company as a whole
since a number of the Company's significant assets (including deferred policy
acquisition costs and reinsurance recoverables) and liabilities (including
traditional life and interest-sensitive life insurance reserves and deferred
income taxes) are not considered financial instruments and are not carried at
fair value. Other assets and liabilities considered financial instruments such
as accrued investment income and cash are generally of a short-term nature.
Their carrying values are assumed to approximate fair value.
15
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
FINANCIAL ASSETS
The carrying value and fair value of financial assets at December 31, are as
follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
----- ----- ----- -----
<S> <C> <C> <C> <C>
Fixed income securities $ 1,912,545 $ 1,912,545 $ 1,966,067 $ 1,966,067
Mortgage loans 166,997 159,853 145,095 154,872
Short-term investments 46,037 46,037 76,127 76,127
Policy loans 31,109 31,109 29,620 29,620
Separate Accounts 443,705 443,705 366,247 366,247
</TABLE>
CARRYING VALUE AND FAIR VALUE INCLUDE THE EFFECTS OF DERIVATIVE FINANCIAL
INSTRUMENTS WHERE APPLICABLE.
Fair values for fixed income securities are based on quoted market prices where
available. Non-quoted securities are valued based on discounted cash flows using
current interest rates for similar securities. Mortgage loans are valued based
on discounted contractual cash flows. Discount rates are selected using current
rates at which similar loans would be made to borrowers with similar
characteristics, using similar properties as collateral. Loans that exceed 100%
loan-to-value are valued at the estimated fair value of the underlying
collateral. Short-term investments are highly liquid investments with maturities
of less than one year whose carrying value are deemed to approximate fair value.
The carrying value of policy loans are deemed to approximate fair value.
Separate Accounts assets are carried in the statements of financial position at
fair value based on quoted market prices.
FINANCIAL LIABILITIES
The carrying value and fair value of financial liabilities at December 31, are
as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
----- ----- ----- -----
<S> <C> <C> <C> <C>
Contractholder funds on
investment contracts $ 627,488 $ 605,113 $ 512,239 $ 518,448
Separate Accounts 443,705 443,705 366,247 366,247
</TABLE>
The fair value of contractholder funds on investment contracts is based on the
terms of the underlying contracts. Reserves on investment contracts with no
stated maturities (single premium and flexible premium deferred annuities) are
valued at the account balance less surrender charges. The fair value of
immediate annuities and annuities without life contingencies with fixed terms is
estimated using discounted cash flow calculations based on interest rates
currently offered for contracts with similar terms and durations. Separate
Accounts liabilities are carried at the fair value of the underlying assets.
DERIVATIVE FINANCIAL INSTRUMENTS
The only derivative financial instruments used by the Company are financial
futures contracts. The Company primarily uses this derivative financial
instrument to reduce its exposure to market risk, specifically interest rate
risk, in conjunction with asset/liability management. The Company does not hold
or issue these instruments for trading purposes.
16
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
The following table summarizes the contract amount, credit exposure, fair value
and carrying value of the Company's derivative financial instruments:
<TABLE>
<CAPTION>
CARRYING
VALUE
CONTRACT CREDIT FAIR ASSETS/
AMOUNT EXPOSURE VALUE (LIABILITIES)
------ -------- ----- -------------
<S> <C> <C> <C> <C>
AT DECEMBER 31, 1999
Financial futures contracts $ 8,700 $ - $ (29) $ 588
AT DECEMBER 31, 1998
Financial futures contracts $ 15,000 $ - $ (15) $ (223)
</TABLE>
CARRYING VALUE IS REPRESENTATIVE OF DEFERRED GAINS AND LOSSES.
The contract amounts are used to calculate the exchange of contractual payments
under the agreements and are not representative of the potential for gain or
loss on these agreements.
Credit exposure represents the Company's potential loss if all of the
counterparties failed to perform under the contractual terms of the contracts
and all collateral, if any, became worthless. This exposure is measured by the
fair value of contracts with a positive fair value at the reporting date. The
Company manages its exposure to credit risk primarily by establishing risk
control limits. To date, the Company has not incurred any losses as financial
futures contracts have limited off-balance-sheet credit risk as they are
executed on organized exchanges and require daily cash settlement of margins.
Fair value is the estimated amount that the Company would receive (pay) to
terminate or assign the contracts at the reporting date, thereby taking into
account the current unrealized gains or losses of open contracts. Dealer and
exchange quotes are used to value the Company's derivatives.
Financial futures are commitments to either purchase or sell designated
financial instruments at a future date for a specified price or yield. They may
be settled in cash or through delivery. As part of its asset/liability
management, the Company generally utilizes financial futures contracts to manage
its market risk related to anticipatory investment purchases and sales.
Financial futures used as hedges of anticipatory transactions pertain to
identified transactions which are probable to occur and are generally completed
within 90 days.
Market risk is the risk that the Company will incur losses due to adverse
changes in market rates and prices. Market risk exists for all of the derivative
financial instruments that the Company currently holds, as these instruments may
become less valuable due to adverse changes in market conditions. The Company
mitigates this risk through established risk control limits set by senior
management. In addition, the change in the value of the Company's derivative
financial instruments designated as hedges are generally offset by the change in
the value of the related assets and liabilities.
OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS
Commitments to extend mortgage loans are agreements to lend to a borrower
provided there is no violation of any condition established in the contract. The
Company enters into these agreements to commit to future loan fundings at a
predetermined interest rate. Commitments generally have fixed expiration dates
or other termination clauses. Commitments to extend mortgage loans, which are
secured by the underlying properties, are valued based on estimates of fees
charged by other institutions to make
17
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
similar commitments to borrowers. At December 31, 1999, the Company had $10,000
in mortgage loan commitments which had a fair value of $100. The Company had no
mortgage loan commitments at December 31, 1998.
6. DEFERRED POLICY ACQUISITION COSTS
Certain costs of acquiring business which were deferred and amortized for the
years ended December 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Balance, beginning of year $ 87,830 $ 71,946
Acquisition costs deferred 26,247 23,723
Amortization charged to income (8,861) (8,238)
Adjustment from unlocking assumptions (124) 1,209
Effect of unrealized gains/(losses) 1,840 (810)
------------ ------------
Balance, end of year $ 106,932 $ 87,830
============ ============
</TABLE>
7. RESERVE FOR LIFE-CONTINGENT CONTRACT BENEFITS AND CONTRACTHOLDER FUNDS
At December 31, the reserve for life-contingent contract benefits consists of
the following:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Immediate annuities:
Structured settlement annuities $ 1,024,049 $ 1,135,813
Other immediate annuities 2,933 2,577
Traditional life 70,254 68,511
Other 780 1,203
----------- ------------
Total life-contingent contract benefits $ 1,098,016 $ 1,208,104
=========== ============
</TABLE>
The assumptions for mortality generally utilized in calculating reserves
include, the U.S. population with projected calendar year improvements and age
setbacks for impaired lives for structured settlement annuities; the 1983 group
annuity mortality table for other immediate annuities; and actual Company
experience plus loading for traditional life. Interest rate assumptions vary
from 3.5% to 10.3% for immediate annuities and 4.5% to 7.0% for traditional
life. Other estimation methods include the present value of contractually fixed
future benefits for structured settlement annuities, the present value of
expected future benefits based on historical experience for other immediate
annuities and the net level premium reserve method using the Company's
withdrawal experience rates for traditional life.
Premium deficiency reserves are established, if necessary and have been recorded
for the structured settlement annuity business, to the extent the unrealized
gains on fixed income securities would result in a premium deficiency had those
gains actually been realized. A liability of $8 million and $188 million is
included in the reserve for life-contingent contract benefits with respect to
this deficiency for the years ended December 31, 1999 and 1998, respectively.
The decrease in this liability in 1999 reflects declines in unrealized capital
gains on fixed income securities.
18
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
At December 31, contractholder funds consists of the following:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Interest-sensitive life $211,729 $189,970
Fixed annuities:
Immediate annuities 303,564 285,977
Deferred annuities 273,864 177,317
Other investment contracts 50,000 50,000
-------- --------
Total contractholder funds $839,157 $703,264
======== ========
</TABLE>
Contractholder funds are equal to deposits received, net of commissions, and
interest credited to the benefit of the contractholder less withdrawals,
mortality charges and administrative expenses. Interest rates credited range
from 5.5% to 6.5% for interest-sensitive life contracts; 3.5% to 9.8% for
immediate annuities; 4.0% to 7.9% for deferred annuities and 6.6% for other
investment contracts. Withdrawal and surrender charge protection includes: i)
for interest-sensitive life, either a percentage of account balance or dollar
amount grading off generally over 20 years; and ii) for deferred annuities not
subject to a market value adjustment, either a declining or a level percentage
charge generally over nine years or less. Approximately 2% of deferred annuities
are subject to a market value adjustment.
8. CORPORATION RESTRUCTURING
On November 10, 1999 the Corporation announced a series of strategic initiatives
to aggressively expand its selling and servicing capabilities. The Corporation
also announced that it is implementing a program to reduce current annual
expenses by approximately $600 million. The reduction will result in the
elimination of approximately 4,000 current non-agent positions, across all
employment grades and categories by the end of 2000, or approximately 10% of the
Corporation's non-agent work force. The impact of the reduction in employee
positions is not expected to materially impact the results of operations of the
Company.
These cost reductions are part of a larger initiative to redeploy the cost
savings to finance new initiatives including investments in direct access and
internet channels for new sales and service capabilities, new competitive
pricing and underwriting techniques, new agent and claim technology and enhanced
marketing and advertising. As a result of the cost reduction program, the
Corporation recorded restructuring and related charges of $81 million pretax
during the fourth quarter of 1999. The Corporation anticipates that additional
pretax restructuring related charges of approximately $100 million will be
expensed as incurred throughout 2000. The Company's allocable share of these
expenses were immaterial in 1999 and are expected to be immaterial in 2000.
9. INCOME TAXES
The Company joins the Corporation and its other eligible domestic subsidiaries
(the "Allstate Group") in the filing of a consolidated federal income tax return
and is party to a federal income tax allocation agreement (the "Allstate Tax
Sharing Agreement"). Under the Allstate Tax Sharing Agreement, the Company pays
to or receives from the Corporation the amount, if any, by which the Allstate
Group's federal income tax liability is affected by virtue of inclusion of the
Company in the consolidated federal income tax return. Effectively, this
19
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
results in the Company's annual income tax provision being computed, with
adjustments, as if the Company filed a separate return.
Prior to June 30, 1995, the Corporation was a subsidiary of Sears, Roebuck & Co.
("Sears") and, with its eligible domestic subsidiaries, was included in the
Sears consolidated federal income tax return and federal income tax allocation
agreement. Effective June 30, 1995, the Corporation and Sears entered into a new
tax sharing agreement, which governs their respective rights and obligations
with respect to federal income taxes for all periods during which the
Corporation was a subsidiary of Sears, including the treatment of audits of tax
returns for such periods.
The Internal Revenue Service ("IRS") has completed its review of the Allstate
Group's federal income tax returns through the 1993 tax year. Any adjustments
that may result from IRS examinations of tax returns are not expected to have a
material impact on the financial position, liquidity or results of operations of
the Company.
The components of the deferred income tax assets and liabilities at December 31,
are as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
DEFERRED ASSETS
Life and annuity reserves $ 42,248 $ 41,073
Discontinued operations 366 364
Other postretirement benefits 296 328
Other assets 1,319 2,023
------------- -------------
Total deferred assets 44,229 43,788
DEFERRED LIABILITIES
Deferred policy acquisition costs (25,790) (20,573)
Unrealized net capital gains (16,280) (44,642)
Difference in tax bases of investments (3,194) (1,784)
Prepaid commission expense (682) (790)
Other liabilities (1,360) (1,448)
------------- -------------
Total deferred liabilities (47,306) (69,237)
------------- -------------
Net deferred liability $ (3,077) $ (25,449)
============= =============
</TABLE>
The components of income tax expense for the year ended December 31, are as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Current $ 8,650 $ 13,679 $ 14,874
Deferred 5,990 1,255 (1,578)
-------- -------- --------
Total income tax expense $ 14,640 $ 14,934 $ 13,296
======== ======== ========
</TABLE>
The Company paid income taxes of $12,547, $3,788 and $13,350 in 1999, 1998 and
1997, respectively.
20
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
A reconciliation of the statutory federal income tax rate to the effective
income tax rate on income from operations for the year ended December 31, is as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax rate 35.0% 35.0% 35.0%
State income tax expense 1.6 1.6 2.2
Other (1.1) (1.5) (.3)
----- ----- -----
Effective income tax rate 35.5% 35.1% 36.9%
===== ===== =====
</TABLE>
Prior to January 1, 1984, the Company was entitled to exclude certain amounts
from taxable income and accumulate such amounts in a "policyholder surplus"
account. The balance in this account at December 31, 1999, approximately $389,
will result in federal income taxes payable of $136 if distributed by the
Company. No provision for taxes has been made as the Company has no plan to
distribute amounts from this account. No further additions to the account have
been permitted since the Tax Reform Act of 1984.
10. STATUTORY FINANCIAL INFORMATION
The Company's statutory capital and surplus was $214,738 and $196,416 at
December 31, 1999 and 1998, respectively. The Company's statutory net income was
$18,767, $13,649 and $18,592 for the years ended December 31, 1999, 1998 and
1997, respectively.
PERMITTED STATUTORY ACCOUNTING PRACTICES
The Company prepares its statutory financial statements in accordance with
accounting practices prescribed or permitted by the New York Department of
Insurance. Prescribed statutory accounting practices include a variety of
publications of the National Association of Insurance Commissioners ("NAIC"), as
well as state laws, regulations and general administrative rules. Permitted
statutory accounting practices encompass all accounting practices not so
prescribed. The Company does not follow any permitted statutory accounting
practices that have a significant impact on statutory surplus or statutory net
income.
The NAIC's codification initiative has produced a comprehensive guide of
statutory accounting principles, which the Company will implement in January
2001. The Company's state of domicile, New York, continues to review
codification and existing statutory accounting requirements for desired
revisions to existing state laws and regulations. The requirements are not
expected to have a material impact on the statutory surplus of the Company.
DIVIDENDS
The ability of the Company to pay dividends is dependent on business conditions,
income, cash requirements of the Company and other relevant factors. Under New
York Insurance Law, a notice of intention to distribute any dividend must be
filed with the New York Superintendent of Insurance not less than 30 days prior
to the distribution. Such proposed declaration is subject to the
Superintendent's disapproval.
RISK-BASED CAPITAL
The NAIC has a standard for assessing the solvency of insurance companies, which
is referred to as risk-based capital ("RBC"). The requirement consists of a
formula for determining each insurer's RBC and a model law specifying regulatory
actions if an insurer's RBC falls below specified levels. The RBC formula for
life insurance companies establishes capital requirements relating to insurance,
business, asset and
21
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
interest rate risks. At December 31, 1999, RBC for the Company was significantly
above a level that would require regulatory action.
11. BENEFIT PLANS
PENSION PLANS
Defined benefit pension plans, sponsored by AIC, cover domestic full-time
employees and certain part-time employees. Benefits under the pension plans are
based upon the employee's length of service, average annual compensation and
estimated social security retirement benefits. AIC's funding policy for the
pension plans is to make annual contributions in accordance with accepted
actuarial cost methods. The (benefit) and cost to the Company included in net
income was $(263), $382 and $597 for the pension plans in 1999, 1998 and 1997,
respectively.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
AIC also provides certain health care and life insurance benefits for retired
employees. Qualified employees may become eligible for these benefits if they
retire in accordance with AIC's established retirement policy and are
continuously insured under AIC's group plans or other approved plans for ten or
more years prior to retirement. AIC shares the cost of the retiree medical
benefits with retirees based on years of service, with AIC's share being subject
to a 5% limit on annual medical cost inflation after retirement. AIC's
postretirement benefit plans currently are not funded. AIC has the right to
modify or terminate these plans.
PROFIT SHARING FUND
Employees of the Corporation and its domestic subsidiaries, including the
Company are also eligible to become members of The Savings and Profit Sharing
Fund of Allstate Employees ("Allstate Plan"). The Corporation's contributions
are based on the Corporation's matching obligation and performance.
The Company paid $176, $567, $164 in 1999, 1998 and 1997, respectively for
profit sharing.
12. OTHER COMPREHENSIVE INCOME
The components of other comprehensive income on a pretax and after-tax basis for
the year ended December 31, are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------------------------------ ----------------------------- ------------------------------
AFTER- AFTER- AFTER-
PRETAX TAX TAX PRETAX TAX TAX PRETAX TAX TAX
------ --- ------ ------ --- ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
UNREALIZED CAPITAL GAINS
AND LOSSES:
Unrealized holding
(losses) gains arising
during the period $(83,241) $ 29,134 $(54,107) $ 33,218 $(11,626) $ 21,592 $ 43,686 $(15,290) $ 28,396
Less: reclassification
adjustments (2,207) 772 (1,435) 4,869 (1,704) 3,165 1,183 (414) 769
-------- -------- -------- -------- -------- -------- -------- -------- --------
Unrealized net capital
(losses) gains (81,034) 28,362 (52,672) 28,349 (9,922) 18,427 42,503 (14,876) 27,627
-------- -------- -------- -------- -------- -------- -------- -------- --------
Other comprehensive
(loss) income $(81,034) $ 28,362 $(52,672) $ 28,349 $ (9,922) $ 18,427 $ 42,503 $(14,876) $ 27,627
======== ======== ========= ======== ======== ======== ======== ======== ========
</TABLE>
22
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
13. COMMITMENTS AND CONTINGENT LIABILITIES
REGULATIONS AND LEGAL PROCEEDINGS
The Company's business is subject to the effect of a changing social, economic
and regulatory environment. Public and regulatory initiatives have varied and
have included employee benefit regulation, controls on medical care costs,
removal of barriers preventing banks from engaging in the securities and
insurance business, tax law changes affecting the taxation of insurance
companies, the tax treatment of insurance products and its impact on the
relative desirability of various personal investment vehicles, and proposed
legislation to prohibit the use of gender in determining insurance rates and
benefits. The ultimate changes and eventual effects, if any, of these
initiatives are uncertain.
From time to time the Company is involved in pending and threatened litigation
in the normal course of its business in which claims for monetary damages are
asserted. In the opinion of management, the ultimate liability, if any, arising
from such pending or threatened litigation is not expected to have a material
effect on the results of operations, liquidity or financial position of the
Company.
GUARANTY FUNDS
Under state insurance guaranty fund laws, insurers doing business in a state can
be assessed, up to prescribed limits, for certain obligations of insolvent
insurance companies to policyholders and claimants. The Company's expense
related to these funds have been immaterial.
MARKETING AND COMPLIANCE ISSUES
Companies operating in the insurance and financial services markets have come
under the scrutiny of regulators with respect to market conduct and compliance
issues. Under certain circumstances, companies have been held responsible for
providing incomplete or misleading sales materials and for replacing existing
policies with policies that were less advantageous to the policyholder. The
Company monitors its sales materials and enforces compliance procedures to
mitigate any exposure to potential litigation. The Company is a member of the
Insurance Marketplace Standards Association, an organization which advocates
ethical market conduct.
23
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
SCHEDULE IV--REINSURANCE
($ IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS NET
YEAR ENDED DECEMBER 31, 1999 AMOUNT CEDED AMOUNT
---------------------------- ------ ----- ------
<S> <C> <C> <C>
Life insurance in force $ 14,140,049 $ 1,066,993 $ 13,073,056
============ =========== ============
Premiums and contract charges:
Life and annuities $ 99,760 $ 3,397 $ 96,363
Accident and health 6,867 856 6,011
------------ ----------- ------------
$ 106,627 $ 4,253 $ 102,374
============ =========== ============
</TABLE>
<TABLE>
<CAPTION>
GROSS NET
YEAR ENDED DECEMBER 31, 1998 AMOUNT CEDED AMOUNT
---------------------------- ------ ----- ------
<S> <C> <C> <C>
Life insurance in force $ 12,656,826 $ 857,500 $ 11,799,326
============ ========= ============
Premiums and contract charges:
Life and annuities $ 116,455 $ 2,318 $ 114,137
Accident and health 5,801 886 4,915
------------ --------- ------------
$ 122,256 $ 3,204 $ 119,052
============ ========= ============
</TABLE>
<TABLE>
<CAPTION>
GROSS NET
YEAR ENDED DECEMBER 31, 1997 AMOUNT CEDED AMOUNT
---------------------------- ------ ----- ------
<S> <C> <C> <C>
Life insurance in force $ 11,339,990 $ 721,040 $ 10,618,950
============ ========= ============
Premiums and contract charges:
Life and annuities $ 116,167 $ 2,185 $ 113,982
Accident and health 5,883 902 4,981
------------ --------- ------------
$ 122,050 $ 3,087 $ 118,963
============ ========= ============
</TABLE>
24
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
SCHEDULE V--VALUATION AND QUALIFYING ACCOUNTS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
OF PERIOD EXPENSES DEDUCTIONS PERIOD
--------- -------- ---------- ------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1999
Allowance for estimated losses
on mortgage loans $ 600 $ - $ - $ 600
============ ============ ============ ============
YEAR ENDED DECEMBER 31, 1998
Allowance for estimated losses
on mortgage loans $ 486 $ 114 $ - $ 600
============ ============ ============ ============
YEAR ENDED DECEMBER 31, 1997
Allowance for estimated losses
on mortgage loans $ 225 $ 261 $ - $ 486
============ ============ ============ ============
</TABLE>
25
<PAGE>
---------------------------------------------
ALLSTATE LIFE OF NEW
YORK SEPARATE
ACCOUNT A
FINANCIAL STATEMENTS AS OF DECEMBER 31, 1999
AND FOR THE PERIODS ENDED DECEMBER 31, 1999
AND DECEMBER 31, 1998 AND INDEPENDENT
AUDITORS' REPORT
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholder of
Allstate Life Insurance Company of New York:
We have audited the accompanying statement of net assets of Allstate Life of
New York Separate Account A as of December 31, 1999 (including the assets of
each of the individual sub-accounts which comprise the Account as disclosed
in Note 1), and the related statements of operations for the period then
ended and the statements of changes in net assets for each of the periods in
the two year period then ended for each of the individual sub-accounts which
comprise the Account. These financial statements are the responsibility of
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
Our procedures included confirmation of securities owned at December 31, 1999
by correspondence with the account custodians. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Allstate Life of New York Separate
Account A as of December 31, 1999 (including the assets of each of the
individual sub-accounts which comprise the Account), and the results of
operations for each of the individual sub-accounts for the period then ended
and the changes in their net assets for each of the periods in the two year
period then ended in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Chicago, Illinois
March 27, 2000
<PAGE>
ALLSTATE LIFE OF NEW YORK SEPARATE ACCOUNT A
<TABLE>
<CAPTION>
STATEMENT OF NET ASSETS
DECEMBER 31, 1999
------------------------------------------------------------------------------------------------
<S> <C>
ASSETS
Allocation to Sub-Accounts investing in the AIM Variable Insurance Funds, Inc.:
Aggressive Growth, 12,432 shares (cost $158,759) $ 177,153
Balanced Fund, 6,444 shares (cost $79,572) 84,024
Capital Appreciation, 255,543 shares (cost $6,215,783) 9,092,204
Capital Development, 3,871 shares (cost $40,870) 46,028
Diversified Income, 262,808 shares (cost $2,884,027) 2,643,852
Global Utilities, 55,043 shares (cost $987,756) 1,254,971
Government Securities, 114,229 shares (cost $1,272,606) 1,214,257
Growth, 300,263 shares (cost $7,319,062) 9,683,482
Growth and Income, 493,077 shares (cost $11,214,069) 15,576,292
High Yield, 1,933 shares (cost $17,487) 17,433
International Equity, 165,155 shares (cost $3,272,322) 4,837,388
Money Market, 1,578,022 shares (cost $1,578,022) 1,578,022
Value, 665,744 shares (cost $17,789,516) 22,302,412
--------------
Total Assets 68,507,518
LIABILITIES
Payable to Allstate Life Insurance Company of New York:
Accrued contract maintenance charges 19,014
--------------
Net Assets $ 68,488,504
==============
</TABLE>
See notes to financial statements.
2
<PAGE>
ALLSTATE LIFE OF NEW YORK SEPARATE ACCOUNT A
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
----------------------------------------------------------------------------------------------------------------------------------
AIM Variable Insurance Funds, Inc. Sub-Accounts
---------------------------------------------------------------------------
For the Period Ended December 31, 1999
---------------------------------------------------------------------------
Aggressive Capital Capital Diversified
Growth (a) Balanced (a) Appreciation Development (a) Income
---------- ------------ ------------ --------------- -------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ - $ 1,095 $ 188,516 $ - $ 164,843
Charges from Allstate Life Insurance Company
of New York
Mortality and expense risk (143) (119) (76,212) (56) (28,287)
Administrative expense (11) (9) (5,645) (4) (2,095)
---------- ------------ ------------ --------------- -------------
Net investment income (loss) (154) 967 106,659 (60) 134,461
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of investments:
Proceeds from sales 123 189 324,982 55 476,703
Cost of investments sold 117 182 276,808 52 493,648
---------- ------------ ------------ --------------- -------------
Net realized gains (losses) 6 7 48,174 3 (16,945)
---------- ------------ ------------ --------------- -------------
Change in unrealized gains (losses) 18,394 4,451 2,401,290 5,157 (181,607)
---------- ------------ ------------ --------------- -------------
Net gains (losses) on investments 18,400 4,458 2,449,464 5,160 (198,552)
---------- ------------ ------------ --------------- -------------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $ 18,246 $ 5,425 $2,556,123 $ 5,100 $ (64,091)
========== ============ ============ =============== =============
</TABLE>
(a) For the Period Beginning October 25, 1999 and Ended December 31, 1999
See notes to financial statements.
3
<PAGE>
ALLSTATE LIFE OF NEW YORK SEPARATE ACCOUNT A
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
---------------------------------------------------------------------------------------------------------------------------------
AIM Variable Insurance Funds, Inc. Sub-Accounts
------------------------------------------------------------------------
For the Period Ended December 31, 1999
------------------------------------------------------------------------
Global Government Growth High
Utilities Securities Growth and Income Yield (a)
----------- ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 18,906 $ 43,946 $ 337,039 $ 129,184 $ 399
Charges from Allstate Life Insurance Company
of New York
Mortality and expense risk (9,493) (32,564) (83,130) (132,390) (14)
Administrative expense (703) (2,412) (6,158) (9,807) (1)
----------- ------------ ------------ ------------ -------------
Net investment income (loss) 8,710 8,970 247,751 (13,013) 384
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of investments:
Proceeds from sales 157,147 2,759,791 423,990 458,270 15
Cost of investments sold 137,026 2,894,175 359,129 380,204 15
----------- ------------ ------------ ------------ -------------
Net realized gains (losses) 20,121 (134,384) 64,861 78,066 -
----------- ------------ ------------ ------------ -------------
Change in unrealized gains (losses) 236,069 (54,186) 1,792,381 3,178,263 (54)
----------- ------------ ------------ ------------ -------------
Net gains (losses) on investments 256,190 (188,570) 1,857,242 3,256,329 (54)
----------- ------------ ------------ ------------ -------------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $ 264,900 $ (179,600) $2,104,993 $3,243,316 $ 330
=======-=== ============ ============ ============ =============
</TABLE>
(a) For the Period Beginning October 25, 1999 and Ended December 31, 1999
See notes to financial statements.
4
<PAGE>
ALLSTATE LIFE OF NEW YORK SEPARATE ACCOUNT A
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
-----------------------------------------------------------------------------------------------------------------
AIM Variable Insurance Funds, Inc. Sub-Accounts
---------------------------------------------------------
For the Period Ended December 31, 1999
---------------------------------------------------------
International Money
Equity Market Value
-------------- ------------ -------------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 154,775 $ 61,128 $ 355,310
Charges from Allstate Life Insurance Company
of New York
Mortality and expense risk (37,180) (17,854) (173,801)
Administrative expense (2,754) (1,322) (12,874)
-------------- ------------ -------------
Net investment income (loss) 114,841 41,952 168,635
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of investments:
Proceeds from sales 300,780 1,206,358 530,128
Cost of investments sold 248,263 1,206,358 459,369
-------------- ------------ -------------
Net realized gains (losses) 52,517 - 70,759
-------------- ------------ -------------
Change in unrealized gains (losses) 1,419,551 - 3,419,919
-------------- ------------ -------------
Net gains (losses) on investments 1,472,068 - 3,490,678
-------------- ------------ -------------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $1,586,909 $ 41,952 $ 3,659,313
============== ============ =============
</TABLE>
See notes to financial statements.
5
<PAGE>
ALLSTATE LIFE OF NEW YORK SEPARATE ACCOUNT A
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31,
--------------------------------------------------------------------------------------------------------------------------
AIM Variable Insurance Funds, Inc. Sub-Accounts
-------------------------------------------------------------------------
Aggressive Capital
Growth Balanced Capital Appreciation Development
------------ ------------ ----------------------------- ------------
1999 (a) 1999 (a) 1999 1998 1999 (a)
------------ ------------ ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ (154) $ 967 $ 106,659 $ 66,071 $ (60)
Net realized gains (losses) 6 7 48,174 760 3
Change in unrealized gains (losses) 18,394 4,451 2,401,290 457,939 5,157
------------ ------------ ------------- ------------- ------------
Change in net assets resulting from operations 18,246 5,425 2,556,123 524,770 5,100
------------ ------------ ------------- ------------- ------------
FROM CAPITAL TRANSACTIONS
Deposits 43,819 49,251 2,073,160 2,056,465 17,015
Benefit payments - - (23,548) (29,888) -
Payments on termination - (79) (225,136) (115,473) -
Contract maintenance charges (48) (24) (3,267) (1,759) (12)
Transfers among the sub-accounts
and with the Fixed Account - net 115,087 29,427 408,212 (181,131) 23,912
------------ ------------ ------------- ------------- ------------
Change in net assets resulting
from capital transactions 158,858 78,575 2,229,421 1,728,214 40,915
------------ ------------ ------------- ------------- ------------
INCREASE (DECREASE) IN NET ASSETS 177,104 84,000 4,785,544 2,252,984 46,015
NET ASSETS AT BEGINNING OF PERIOD - - 4,304,137 2,051,153 -
------------ ------------ ------------- ------------- ------------
NET ASSETS AT END OF PERIOD $ 177,104 $ 84,000 $ 9,089,681 $ 4,304,137 $ 46,015
============ ============ ============= ============= ============
</TABLE>
(a) For the Period Beginning October 25, 1999 and Ended December 31, 1999
See notes to financial statements.
6
<PAGE>
ALLSTATE LIFE OF NEW YORK SEPARATE ACCOUNT A
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------------------------------------------
AIM Variable Insurance Funds, Inc. Sub-Accounts
----------------------------------------------------------------------------
Diversified Income Global Utilities Government Securities
------------------------- ------------------------ --------------------------
1999 1998 1999 1998 1999 1998
------------ ------------ ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 134,461 $ 94,730 $ 8,710 $ 4,558 $ 8,970 $ 79,067
Net realized gains (losses) (16,945) 7,969 20,121 (484) (134,384) 109,308
Change in unrealized gains (losses) (181,607) (85,959) 236,069 24,459 (54,186) (23,404)
------------ ------------ ------------ ----------- ------------ ------------
Change in net assets resulting from operations (64,091) 16,740 264,900 28,533 (179,600) 164,971
------------ ------------ ------------ ----------- ------------ ------------
FROM CAPITAL TRANSACTIONS
Deposits 1,187,532 1,222,826 734,901 356,711 635,526 2,725,221
Benefit payments (12,220) (32,778) (3,120) (4,815) (661,198) -
Payments on termination (185,900) (37,509) (82,757) (3,609) (403,351) (8,618)
Contract maintenance charges (810) (491) (463) (223) 317 (913)
Transfers among the sub-accounts
and with the Fixed Account - net (46,215) (98,970) (53,342) (93,970) (1,749,948) 268,867
------------ ------------ ------------ ----------- ------------ ------------
Change in net assets resulting
from capital transactions 942,387 1,053,078 595,219 254,094 (2,178,654) 2,984,557
------------ ------------ ------------ ----------- ------------ ------------
INCREASE (DECREASE) IN NET ASSETS 878,296 1,069,818 860,119 282,627 (2,358,254) 3,149,528
------------ ------------ ------------ ----------- ------------ ------------
NET ASSETS AT BEGINNING OF PERIOD 1,764,822 695,004 394,504 111,877 3,572,174 422,646
------------ ------------ ------------ ----------- ------------ ------------
NET ASSETS AT END OF PERIOD $2,643,118 $1,764,822 $1,254,623 $ 394,504 $1,213,920 $3,572,174
============ ============ ============ =========== ============ ============
</TABLE>
See notes to financial statements.
7
<PAGE>
ALLSTATE LIFE OF NEW YORK SEPARATE ACCOUNT A
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31,
--------------------------------------------------------------------------------------------------------------------
AIM Variable Insurance Funds, Inc. Sub-Accounts
-------------------------------------------------------------------
Growth Growth and Income High Yield
-------------------------- --------------------------- ----------
1999 1998 1999 1998 1999 (a)
------------ ------------ ------------- ------------ ----------
<S> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 247,751 $ 225,339 $ (13,013) $ 21,895 $ 384
Net realized gains (losses) 64,861 29,091 78,066 17,916 -
Change in unrealized gains (losses) 1,792,381 542,074 3,178,263 1,076,360 (54)
------------ ------------ ------------- ------------ ----------
Change in net assets resulting from operations 2,104,993 796,504 3,243,316 1,116,171 330
------------ ------------ ------------- ------------ ----------
FROM CAPITAL TRANSACTIONS
Deposits 3,265,114 2,076,025 5,424,896 3,226,558 17,103
Benefit payments (26,647) (7,214) (46,523) (82,435) -
Payments on termination (298,191) (100,412) (319,041) (161,641) -
Contract maintenance charges (3,399) (1,377) (5,525) (2,399) (5)
Transfers among the sub-accounts
and with the Fixed Account - net 453,397 30,657 672,802 75,882 -
------------ ------------ ------------- ------------ ----------
Change in net assets resulting
from capital transactions 3,390,274 1,997,679 5,726,609 3,055,965 17,098
------------ ------------ ------------- ------------ ----------
INCREASE (DECREASE) IN NET ASSETS 5,495,267 2,794,183 8,969,925 4,172,136 17,428
NET ASSETS AT BEGINNING OF PERIOD 4,185,527 1,391,344 6,602,044 2,429,908 -
------------ ------------ ------------- ------------ ----------
NET ASSETS AT END OF PERIOD $9,680,794 $4,185,527 $15,571,969 $6,602,044 $ 17,428
============ ============ ============= ============ ==========
</TABLE>
(a) For the Period Beginning October 25, 1999 and Ended December 31, 1999
See notes to financial statements.
8
<PAGE>
ALLSTATE LIFE OF NEW YORK SEPARATE ACCOUNT A
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31,
----------------------------------------------------------------------------------------------------------------------------------
AIM Variable Insurance Funds, Inc. Sub-Accounts
----------------------------------------------------------------------------------
International Equity Money Market Value
-------------------------- ------------------------- ---------------------------
1999 1998 1999 1998 1999 1998
------------ ------------ ------------ ----------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 114,841 $ (7,420) $ 41,952 $ 26,737 $ 168,635 $ 261,042
Net realized gains (losses) 52,517 5,640 - - 70,759 32,103
Change in unrealized gains (losses) 1,419,551 165,760 - - 3,419,919 1,022,492
------------ ------------ ------------ ----------- ------------- ------------
Change in net assets resulting from operations 1,586,909 163,980 41,952 26,737 3,659,313 1,315,637
------------ ------------ ------------ ----------- ------------- ------------
FROM CAPITAL TRANSACTIONS
Deposits 1,110,124 716,187 1,305,204 509,817 11,613,584 3,273,006
Benefit payments (27,341) (6,664) (28,371) (36,887) (57,538) (7,168)
Payments on termination (93,590) (33,261) (413,731) (16,252) (646,773) (103,596)
Contract maintenance charges (1,428) (726) (468) (218) (7,380) (2,602)
Transfers among the sub-accounts
and with the Fixed Account - net 298,246 41,000 (295,054) 32,193 584,939 235,246
------------ ------------ ------------ ----------- ------------- ------------
Change in net assets resulting
from capital transactions 1,286,011 716,536 567,580 488,653 11,486,832 3,394,886
------------ ------------ ------------ ----------- ------------- ------------
INCREASE (DECREASE) IN NET ASSETS 2,872,920 880,516 609,532 515,390 15,146,145 4,710,523
NET ASSETS AT BEGINNING OF PERIOD 1,963,126 1,082,610 968,052 452,662 7,150,077 2,439,554
------------ ------------ ------------ ----------- ------------- ------------
NET ASSETS AT END OF PERIOD $4,836,046 $1,963,126 $1,577,584 $ 968,052 $22,296,222 $7,150,077
============ ============ ============ =========== ============= ============
</TABLE>
See notes to financial statements.
9
<PAGE>
ALLSTATE LIFE OF NEW YORK SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
1. ORGANIZATION
Allstate Life of New York Separate Account A (the "Account"), a unit
investment trust registered with the Securities and Exchange Commission
under the Investment Company Act of 1940, is a Separate Account of
Allstate Life Insurance Company of New York ("Allstate New York"). The
assets of the Account are legally segregated from those of Allstate New
York. Allstate New York is wholly owned by Allstate Life Insurance
Company, a wholly owned subsidiary of Allstate Insurance Company, which is
wholly owned by The Allstate Corporation.
Allstate New York issues two variable annuity contracts, the AIM Lifetime
Plus-SM- ("Lifetime Plus") and the AIM Lifetime Plus-SM-II ("Lifetime Plus
II"), the deposits of which are invested at the direction of the
contractholders in the sub-accounts that comprise the Account. Absent any
contract provisions wherein Allstate New York contractually guarantees
either a minimum return or account value to the beneficiaries of the
contractholders in the form of a death benefit, the contractholders bear
the investment risk that the sub-accounts may not meet their stated
objectives. The sub-accounts invest in the following underlying mutual
fund portfolios of the AIM Variable Insurance Funds, Inc., (the "Funds").
Aggressive Growth Growth
Balanced Growth and Income
Capital Appreciation High Yield
Capital Development International Equity
Diversified Income Money Market
Global Utilities Value
Government Securities
Allstate New York provides insurance and administrative services to the
contractholders for a fee. Allstate New York also maintains a fixed
account ("Fixed Account"), to which contractholders may direct their
deposits and receive a fixed rate of return. Allstate New York has sole
discretion to invest the assets of the Fixed Account, subject to
applicable law.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
VALUATION OF INVESTMENTS - Investments consist of shares of the Funds,
and are stated at fair value based on quoted market prices at
December 31, 1999.
INVESTMENT INCOME - Investment income consists of dividends declared by
the Funds and is recognized on the ex-dividend date.
REALIZED GAINS AND LOSSES - Realized gains and losses represent the
difference between the proceeds from sales of portfolio shares by the
Account and the cost of such shares, which is determined on a weighted
average basis.
10
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FEDERAL INCOME TAXES - The Account intends to qualify as a segregated
asset account as defined in the Internal Revenue Code ("Code"). As such,
the operations of the Account are included in the tax return of Allstate
New York. Allstate New York is taxed as a life insurance company under the
Code. No federal income taxes are allocable to the Account as the Account
did not generate taxable income.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could differ
from those estimates.
3. EXPENSES
ADMINISTRATIVE EXPENSE CHARGE - Allstate New York deducts administrative
expense charges daily at a rate equal to .10% per annum of the average
daily net assets of the Account for the Lifetime Plus and Lifetime Plus
II. Allstate New York guarantees that the amount of this charge will not
increase over the life of the contract.
CONTRACT MAINTENANCE CHARGE - Allstate New York deducts an annual
maintenance charge of $35 for Lifetime Plus and Lifetime Plus II on each
contract anniversary and guarantees that this charge will not increase
over the life of the contract. This charge will be waived if certain
conditions are met.
MORTALITY AND EXPENSE RISK CHARGE - Allstate New York assumes mortality
and expense risks related to the operations of the Account and deducts
charges daily based on the daily net assets of the Account. The mortality
and expense risk charge covers insurance benefits available with the
contract and certain expenses of the contract. It also covers the risk
that the current charges will not be sufficient in the future to cover the
cost of administering the contract. Allstate New York guarantees that the
amount of this charge will not increase over the life of the contract. At
the contractholder's discretion, additional options, primarily death
benefits, may be purchased for an additional charge.
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<PAGE>
4. UNITS ISSUED AND REDEEMED
<TABLE>
<CAPTION>
(Units in whole amounts) Unit activity during 1999
---------------------------------------------
Accumulation
Units Outstanding Units Units Units Outstanding Unit Value
December 31, 1998 Issued Redeemed December 31, 1999 December 31, 1999
----------------- ------------ ------------ ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Investments in the AIM Variable Insurance
Funds, Inc. Sub-Accounts:
Aggressive Growth - 12,664 (3) 12,661 $ 13.99
Balanced - 6,390 (8) 6,382 13.16
Capital Appreciation 287,336 167,925 (29,513) 425,748 21.35
Capital Development - 3,949 (1) 3,948 11.66
Diversified Income 146,644 128,234 (47,677) 227,201 11.63
Global Utilities 25,418 45,026 (9,036) 61,408 20.43
Government Securities 301,983 79,492 (272,981) 108,494 11.19
Growth 220,831 192,666 (30,283) 383,214 25.26
Growth and Income 361,890 324,260 (41,017) 645,133 24.14
High Yield - 1,751 - 1,751 9.96
International Equity 136,898 105,320 (21,528) 220,690 21.91
Money Market 87,010 167,828 (117,406) 137,432 11.48
Value 405,246 646,140 (64,309) 987,077 22.59
Units relating to accrued contract maintenance charges are included in units redeemed.
</TABLE>
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