AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 14, 2000
- ------------------------------------------------------------------------------
FILE NOS. 333-94785
811-07467
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / /
PRE-EFFECTIVE AMENDMENT NO. 1 /X/
AND/OR
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940
AMENDMENT NO. 11 /X/
ALLSTATE LIFE OF NEW YORK SEPARATE ACCOUNT A
(Exact Name of Registrant)
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
(Name of Depositor)
ONE ALLSTATE DRIVE
P.O. BOX 9095
FARMINGVILLE, NEW YORK 11738
516/451-5300
(Address and Telephone Number of Depositor's Principal Offices)
MICHAEL J. VELOTTA
VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
3100 SANDERS ROAD
NORTHBROOK, ILLINOIS 60062
847-402-2400
(Name, Address and Telephone Number of Agent for Service)
COPIES TO:
RICHARD T. CHOI, ESQUIRE TERRY R. YOUNG, ESQUIRE
FREEDMAN, LEVY, KROLL & SIMONDS ALLSTATE LIFE FINANCIAL SERVICES, INC.
1050 CONNECTICUT AVENUE, N.W. 3100 SANDERS ROAD
SUITE 825 NORTHBROOK, IL 60062
WASHINGTON, D.C. 20036-5366
Approximate date of proposed public offering: As soon as practicable after the
effective date of the registration statement.
Title of Securities Being Registered: Units of Interest in the Allstate Life of
New York Separate Account A under deferred variable annuity contracts.
<PAGE>
ALLSTATE CUSTOM PORTFOLIO VARIABLE ANNUITY
Allstate Life Insurance Company Prospectus dated February __, 2000
of New York
P.O. Box 94038, Palatine, IL 60094-4038
Telephone Number: 1-800-692-4682
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>
<CAPTION>
<S> <C>
AIM Variable Insurance Funds, Inc.: Oppenheimer Variable Account Funds:
AIM V.I. Capital Appreciation Fund Oppenheimer VA Main Street Growth & Income Fund
AIM V.I. Balanced Fund Oppenheimer VA Aggressive Growth Fund
AIM V.I. Growth Fund Oppenheimer VA Strategic Bond Fund
AIM V.I. International Equity Fund The Dreyfus Socially Responsible Growth Fund, Inc.:
AIM V.I. Value Fund Dreyfus Socially Responsible Growth Fund
AIM V.I. Government Securities Fund Dreyfus Stock Index Fund:
AIM V.I. High Yield Fund Dreyfus Stock Index Fund
Fidelity Variable Insurance Products Fund (VIP): Dreyfus Variable Investment Fund:
Fidelity VIP Equity Income Portfolio Dreyfus VI Capital Appreciation Portfolio
Fidelity VIP Overseas Portfolio Wells Fargo Variable Trust:
Fidelity VIP Growth Portfolio Wells Fargo VT Equity Income Fund
Fidelity Variable Insurance Products Fund II (VIP II): Wells Fargo VT Asset Allocation Fund
Fidelity VIP II Contrafund Portfolio Wells Fargo VT Growth Fund
Fidelity Variable Insurance Products Fund III (VIP III): Delaware Group Premium Fund, Inc.:
Fidelity VIP III Growth Opportunities Portfolio Delaware GP Small Cap Value Series
Templeton Variable Products Series Fund: Delaware GP Trend Series
Templeton Asset Allocation Fund - Class 2 HSBC Variable Insurance Funds:
Templeton International Fund - Class 2 HSBC VI Fixed Income Fund
HSBC VI Growth & Income Fund
HSBC VI Cash Management Fund
</TABLE>
We (Allstate New York) have filed a Statement of Additional Information, dated
February __, 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 __ of this prospectus. For a free copy, please write or
call us at the address or telephone number above, or go to the SEC's Web site
(http://www.sec.gov). You can find other information and documents about us,
including documents that are legally part of this prospectus, at the SEC's Web
site.
The Securities and Exchange Commission has not approved
or disapproved the securities described in this
prospectus, nor has it passed on the accuracy or the
adequacy of this prospectus. Anyone who tells you
otherwise is committing a federal crime.
The Contracts may be distributed through broker-dealers
that have relationships with banks or other
IMPORTANT financial institutions or by employees of such banks.
NOTICES 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.
<PAGE>
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
Page
<S> <C> <C>
Important Terms........................................
Overview The Contract at a Glance...............................
How the Contract Works.................................
Expense Table..........................................
Financial Information..................................
The Contract...........................................
Purchases..............................................
Contract Features Contract Value.........................................
Investment Alternatives................................
The Variable Sub-Accounts.....................
The Fixed Account ............................
Transfers.....................................
Expenses..............................................
Access To Your Money...................................
Income Payments........................................
Death Benefits.........................................
More Information:
Allstate New York.............................
The Variable Account..........................
The Portfolios................................
Other Information The Contract .................................
Qualified Plans ..............................
Legal Matters.................................
Year 2000.....................................
Taxes..................................................
Annual Reports and Other Documents.....................
Performance Information................................
Appendix A - Illustration of a Market Value Adjustment
Appendix B - Withdrawal Adjustment Example ............
Statement of Additional Information Table of Contents..
</TABLE>
<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.
Page
Accumulation Phase.......................................
Accumulation Unit .......................................
Accumulation Unit Value .................................
Allstate New York ("We").................................
Anniversary Values.......................................
Annuitant................................................
Automatic Additions Program .............................
Automatic Portfolio Rebalancing Program..................
Beneficiary .............................................
Cancellation Period .....................................
*Contract ................................................
Contract Anniversary.....................................
Contract Owner ("You") ..................................
Contract Value ..........................................
Contract Year...........................................
Death Benefit Anniversary ...............................
Dollar Cost Averaging Program............................
Due Proof of Death.......................................
Fixed Account............................................
Guarantee Periods ......................................
Income Plan .............................................
Investment Alternatives .................................
Issue Date ..............................................
Market Value Adjustment .................................
Payout Phase.............................................
Payout Start Date .......................................
Portfolios ..............................................
Preferred Withdrawal Amount..............................
Qualified Contracts .....................................
Right to Cancel .........................................
SEC......................................................
Settlement Value .......................................
Systematic Withdrawal Program ...........................
Treasury Rate ...........................................
Valuation Date...........................................
Variable Account ........................................
Variable Sub-Account ....................................
* 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.
<PAGE>
THE CONTRACT AT A GLANCE
- -------------------------------------------------------------------------------
The following is a snapshot of the Contract. Please read the remainder of this
prospectus for more information.
---------------------------------- -----------------------------------------
Flexible Payments
You can purchase a Contract with as little
as $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 ("Cancellation
Period"). Upon cancellation we will return
your purchase payments adjusted to the
extent federal or state law permits to
reflect the investment experience of any
amounts allocated to the Variable Account.
---------------------------------- -----------------------------------------
---------------------------------- -----------------------------------------
Expenses You will bear the following expenses:
o Total Variable Account annual fees equal
to 1.25% of average daily net Assets
o Annual contract maintenance charge of
$30 (with certain exceptions)
o Withdrawal charges ranging from 0% to 7%
of payment withdrawn (with certain
exceptions)
o Transfer fee of $10 after 12th transfer
in any Contract Year (fee currently
waived)
o 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:
o the Fixed Account (which credits
interest at rates we guarantee), and
o 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.
---------------------------------- -----------------------------------------
<PAGE>
----------------------------------- ----------------------------------------
Special Services For your convenience, we offer
these special services:
o Automatic Portfolio Rebalancing
Program
o Automatic Additions Program
o Dollar Cost Averaging Program
o Systematic Withdrawal Program
----------------------------------- ----------------------------------------
----------------------------------- ----------------------------------------
Income Payments You can choose fixed income
payments, variable income payments, or a
combination of the two. You can receive
your income payments in one of the
following ways:
o life income with guaranteed payments
o a joint and survivor life income with
guaranteed payments
o guaranteed payments for a specified
period (5 to 30 years)
----------------------------------- ----------------------------------------
----------------------------------- ----------------------------------------
Death Benefits If you die before the Payout
Start Date, we will pay the death benefit
described in the Contract.
----------------------------------- ----------------------------------------
----------------------------------- ----------------------------------------
Transfers Before the Payout Start Date, you may
transfer your Contract value ("Contract
Value") among the investment alternatives,
with certain restrictions. 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.
In general, you must withdraw at least $50
at a time. 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.
----------------------------------- ----------------------------------------
<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 __. 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.
<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%
Total Variable Account Annual Expenses.......1.25%
------------------------------------------------------------------------
<PAGE>
----------------------------------------------------------------------------
PORTFOLIO ANNUAL EXPENSES
(as a percentage of Portfolio average daily net assets)(1)
<TABLE>
<CAPTION>
Total Annual
Management 12b-1Fee Other Expenses Portfolio Expenses
Fee (after any fee (after any fee (after any fee
(after any fee waivers waivers or waivers or waivers or
Portfolio or reductions) reductions) reductions) reductions)
<S> <C> <C> <C> <C>
AIM Variable Insurance Funds, Inc.:
AIM V.I. Capital Appreciation Fund 0.62% 0.05% 0.67%
AIM V.I. Balanced Fund(2) 0.00% 1.18% 1.18%
AIM V.I. Growth Fund 0.64% 0.08% 0.72%
AIM V.I. International Equity Fund 0.75% 0.16% 0.91%
AIM V.I. Value Fund 0.61% 0.05% 0.66%
AIM V.I. Government Securities Fund 0.50% 0.26% 0.76%
AIM V.I. High Yield Fund(2) 0.00% 1.13% 1.13%
Fidelity Variable Insurance Products Fund (VIP):
Fidelity VIP Equity Income Portfolio(3) 0.49% 0.08% 0.57%
Fidelity VIP Overseas Portfolio(3) 0.74% 0.15% 0.89%
Fidelity VIP Growth Portfolio(3) 0.59% 0.07% 0.66%
Fidelity Variable Insurance Products Fund II (VIP II):
Fidelity VIP II Contrafund Portfolio(3) 0.59% 0.07% 0.66%
Fidelity Variable Insurance Products Fund III (VIP III):
Fidelity VIP III Growth Opportunities Portfolio 0.59% 0.11% 0.70%
Templeton Variable Products Series Fund:
Templeton Asset Allocation Fund - Class 2 0.70% 0.25% 0.08% 1.03%
Templeton International Fund - Class 2 0.79% 0.25% 0.07% 1.11%
Oppenheimer Variable Account Funds:
Oppenheimer VA Main Street Growth & Income Fund 0.74% 0.05% 0.79%
Oppenheimer VA Aggressive Growth Fund 0.69% 0.02% 0.71%
Oppenheimer VA Strategic Bond Fund 0.74% 0.06% 0.80%
The Dreyfus Socially Responsible Growth Fund, Inc.:
Dreyfus Socially Responsible Growth Fund 0.75% 0.05% 0.80%
Dreyfus Stock Index Fund, Inc.:
Dreyfus Stock Index Fund 0.25% 0.01% 0.26%
Dreyfus Variable Investment Fund:
Dreyfus VI Capital Appreciation Portfolio 0.75% 0.06% 0.81%
Wells Fargo Variable Trust:
Wells Fargo VT Equity Income Fund(4) 0.38% 0.62% 1.00%
Wells Fargo VT Asset Allocation Fund(4) 0.42% 0.58% 1.00%
Wells Fargo VT Growth Fund(4) 0.32% 0.68% 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% 0.10% 0.85%
HSBC Variable Insurance Funds:
HSBC VI Fixed Income Fund(5) 0.00% 1.15% 1.15%
HSBC VI Growth & Income Fund(5) 0.33% 0.82% 1.15%
HSBC VI Cash Management Fund(5) 0.00% 0.93% 0.93%
</TABLE>
Footnotes
(1) Figures shown in the table are for the year ended December 31, 1998.
(2) Absent voluntary reductions and reimbursements for certain Portfolios,
management 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>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Management Total Annual
Portfolio Fees Other Expenses Portfolio Expenses
- --------------------------------------------------- ------------------------ ------------------- ----------------------
<S> <C> <C> <C>
AIM V.I. Balanced Fund 0.75% 2.08% 2.83%
------------------------------------------------- ------------------------ ------------------- ----------------------
AIM V.I. High Yield Fund 0.63% 1.87% 2.50%
------------------------------------------------- ------------------------ ------------------- ----------------------
(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 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 0.58% for VIP Equity Income, 0.91% for VIP Overseas, 0.68%
for VIP Growth, and 0.70% for VIP II Contrafund.
(4) Absent voluntary reductions and reimbursements for certain Portfolios,
management fees, other expenses, and total Portfolio annual expenses
expressed as a percentage of average net assets of the Portfolios would
have been as follows:
- ------------------------------------------------------------------------------------------------------------------------
Management Total Annual
Portfolio Fees Other Expenses Portfolio Expenses
- ------------------------------------------------------------------------------------------------------------------------
Wells Fargo VT Equity Income Fund 0.55% 0.62% 1.17%
-------------------------------------------------- --------------------- -------------------- -------------------
Wells Fargo VT Asset Allocation Fund 0.55% 0.58% 1.13%
-------------------------------------------------- --------------------- -------------------- -------------------
Wells Fargo VT Growth Fund 0.55% 0.68% 1.23%
-------------------------------------------------- --------------------- -------------------- -------------------
(5) Investors will be notified 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. Absent voluntary reductions
and reimbursements for certain Portfolios, management fees, other expenses,
and total Portfolio annual expenses expressed as a percentage of average
net assets of the Portfolios would have been as follows:
- ------------------------------------------------------------------------------------------------------------------------
Management Total Annual
Portfolio Fees Other Expenses Portfolio Expenses
- ------------------------------------------------------------------------------------------------------------------------
HSBC VI Fixed Income Fund 0.55% 2.16% 2.71%
-------------------------------------------------- --------------------- -------------------- --------------------
HSBC VI Growth & Income Fund 0.55% 0.93% 1.48%
-------------------------------------------------- --------------------- -------------------- --------------------
HSBC VI Cash Management Fund 0.35% 1.51% 1.86%
-------------------------------------------------- --------------------- -------------------- --------------------
</TABLE>
<PAGE>
EXAMPLE 1
The example below shows the dollar amount of expenses that you would bear
directly or indirectly if you:
o invested $1,000 in a Variable Sub-Account,
o earned a 5% annual return on your investment, and
o surrendered your Contract, or began receiving income payments for a
specified period of less than 120 months, at the end of each time period.
The example 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, Inc.:
AIM V.I. Capital Appreciation $ 80 $105 $134 $233
AIM V.I. Balanced $ 85 $121 $160 $286
AIM V.I. Growth $ 80 $107 $136 $238
AIM V.I. International Equity $ 82 $113 $146 $258
AIM V.I. Value $ 80 $105 $133 $231
AIM V.I. Government Securities $ 81 $108 $138 $242
AIM V.I. High Yield $ 85 $120 $157 $280
Fidelity Variable Insurance Products Fund (VIP):
Fidelity VIP Equity Income $ 79 $102 $128 $222
Fidelity VIP Overseas $ 82 $112 $145 $256
Fidelity VIP Growth $ 80 $105 $133 $231
Fidelity Variable Insurance Products Fund II (VIP II):
Fidelity VIP II Contrafund $ 80 $105 $133 $231
Fidelity Variable Insurance Products Fund III (VIP III):
Fidelity VIP III Growth Opportunities $ 80 $106 $135 $236
Templeton Variable Products Series Fund:
Templeton Asset Allocation - Class 2 $ 84 $117 $152 $270
Templeton International - Class 2 $ 84 $119 $156 $278
Oppenheimer Variable Account Funds:
Oppenheimer VA Main Street Growth & Income $ 81 $109 $140 $245
Oppenheimer VA Aggressive Growth $ 80 $107 $136 $237
Oppenheimer VA Strategic Bond $ 81 $110 $140 $246
The Dreyfus Socially Responsible Growth Fund, Inc.:
Dreyfus Socially Responsible Growth $ 81 $110 $140 $246
Dreyfus Stock Index Fund:
Dreyfus Stock Index $ 76 $ 93 $112 $188
Dreyfus Variable Investment Fund:
Dreyfus VI Capital Appreciation $ 81 $110 $141 $247
Wells Fargo Variable Trust:
Wells Fargo VT Equity Income $ 83 $116 $151 $267
Wells Fargo VT Asset Allocation $ 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 $ 82 $111 $143 $252
HSBC Variable Insurance Funds:
HSBC VI Fixed Income $101 $168 $236 $429
HSBC VI Growth & Income $ 88 $130 $175 $316
HSBC VI Cash Management $ 92 $142 $194 $352
</TABLE>
<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, Inc.:
AIM V.I. Capital Appreciation $ 20 $ 63 $108 $233
AIM V.I. Balanced $ 26 $ 79 $134 $286
AIM V.I. Growth $ 21 $ 65 $111 $238
AIM V.I. International Equity $ 23 $ 70 $121 $258
AIM V.I. Value $ 20 $ 63 $108 $231
AIM V.I. Government Securities $ 21 $ 66 $113 $242
AIM V.I. High Yield $ 25 $ 77 $132 $280
Fidelity Variable Insurance Products Fund (VIP):
Fidelity VIP Equity Income $ 19 $ 60 $103 $222
Fidelity VIP Overseas $ 23 $ 70 $119 $256
Fidelity VIP Growth $ 20 $ 63 $108 $231
Fidelity Variable Insurance Products Fund II (VIP II):
Fidelity VIP II Contrafund $ 20 $ 63 $108 $231
Fidelity Variable Insurance Products Fund III (VIP III):
Fidelity VIP III Growth Opportunities $ 21 $ 64 $110 $236
Templeton Variable Products Series Fund:
Templeton Asset Allocation - Class 2 $ 24 $ 74 $127 $270
Templeton International - Class 2 $ 25 $ 77 $131 $278
Oppenheimer Variable Account Funds:
Oppenheimer VA Main Street Growth & Income $ 22 $ 67 $114 $245
Oppenheimer VA Aggressive Growth $ 21 $ 64 $110 $237
Oppenheimer VA Strategic Bond $ 22 $ 67 $115 $246
The Dreyfus Socially Responsible Growth Fund, Inc.:
Dreyfus Socially Responsible Growth $ 22 $ 67 $115 $246
Dreyfus Stock Index Fund:
Dreyfus Stock Index $ 16 $ 50 $ 86 $188
Dreyfus Variable Investment Fund:
Dreyfus VI Capital Appreciation $ 22 $ 67 $115 $247
Wells Fargo Variable Trust:
Wells Fargo VT Equity Income $ 24 $ 73 $125 $267
Wells Fargo VT Asset Allocation $ 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 $ 69 $117 $252
HSBC Variable Insurance Funds:
HSBC VI Fixed Income $ 41 $125 $210 $429
HSBC VI Growth & Income $ 29 $ 88 $150 $316
HSBC VI Cash Management $ 33 $ 99 $169 $352
</TABLE>
Please remember that you are looking at examples and not a representation of
past or future expenses. 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.
<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 first
offered as of the date of this Prospectus. The financial statements of Allstate
New York and the Variable Account as of December 31, 1998 and 1997 and for the
two years ended December 31, 1998, appear in the Statement of Additional
Information. Unaudited financial statements of the Variable Account and Allstate
New York as of an for the period ended September 30, 1999 also appear in the
Statement of Additional Information.
<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):
o the investment alternatives during the Accumulation and Payout Phases,
o the amount and timing of your purchase payments and withdrawals,
o the programs you want to use to invest or withdraw money,
o the income payment plan you want to use to receive retirement income,
o the Annuitant (either yourself or someone else) on whose life the income
payments will be based,
o the Beneficiary or Beneficiaries who will receive the benefits that the
Contract provides when the last surviving Contract owner or Annuitant dies,
and
o 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.
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 __.
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 or
after the Payout Start Date.
If the Annuitant dies prior to the Payout Start Date, the new Annuitant will be:
o the youngest Contract owner, otherwise
o 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:
o your spouse or, if he or she is no longer alive,
o your surviving children equally, or if you have no surviving children,
o your estate.
If more than one Beneficiary survives you (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 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.
<PAGE>
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 $25 ($500 for allocation
to the Fixed Account) by automatically transferring amounts from your bank
account. Please consult with your sales representative for detailed information.
ALLOCATION OF PURCHASE PAYMENTS
At the time you apply for a Contract, you must decide how to allocate your
purchase 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 servicing 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 at P.O. Box 94038, Palatine, Illinois, 60094.
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 p.m.
Eastern Time (3 p.m. Central Time). If we receive your purchase payment after 3
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. You may
return it by delivering it or mailing it to us. If you exercise this "Right to
Cancel," the Contract terminates and we will pay you the full amount of your
purchase payments allocated to the Fixed Account. We will return your purchase
payments allocated to the Variable Account after an adjustment to the extent
federal or state law permits to reflect investment gain or loss that occurred
from the date of allocation through the date of cancellation. If your Contract
is qualified under Section 408 of the Internal Revenue Code, we will refund the
greater of any purchase payments or the Contract Value.
<PAGE>
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:
o changes in the share price of the Portfolio in which the Variable
Sub-Account invests, and
o 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 prospectus for the Portfolios that accompanies 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.
<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>
- ------------------------------------------------------------------------------------------------------- -----------------------
<S> <C> <C>
Portfolio: Each Portfolio Seeks Investment Adviser:
- ------------------------------------------------------------------------------------------------------- -----------------------
AIM V.I. Capital Appreciation Fund Growth of capital
A I M Advisors, Inc.
- ------------------------------------------------------------------------------------------------------- -----------------------
AIM V.I. Balanced Fund As high a total return as possible,
consistent with preservation of capital
- -------------------------------------------------------------------------------------------------------
AIM V.I. Growth Fund Growth of capital
- ------------------------------------------------------------------------------------------------------- -----------------------
AIM V.I. International Equity Fund Long-term growth of capital
- ------------------------------------------------------------------------------------------------------- -----------------------
AIM V.I. Value Fund Long-term 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. High Yield Fund A high level of current income
- ------------------------------------------------------------------------------------------------------- -----------------------
Fidelity VIP Equity Income Portfolio Reasonable income
Fidelity Management
& Research Company
- ------------------------------------------------------------------------------------------------------- -----------------------
Fidelity VIP Overseas Portfolio Long-term growth of capital
- ------------------------------------------------------------------------------------------------------- -----------------------
Fidelity VIP Growth Portfolio Capital appreciation
- ------------------------------------------------------------------------------------------------------- -----------------------
Fidelity VIP II Contrafund Portfolio Long-term capital appreciation
- ------------------------------------------------------------------------------------------------------- -----------------------
Fidelity VIP III Growth Opportunities Portfolio Capital growth
- ------------------------------------------------------------------------------------------------------- -----------------------
Templeton Asset Allocation Fund - Class 2 High total return Templeton Investment
Counsel, Inc.
- ------------------------------------------------------------------------------------------------------- -----------------------
Templeton International Fund - Class 2 Long-term capital growth
- ------------------------------------------------------------------------------------------------------- -----------------------
Oppenheimer VA Main Street Growth & Income High total return, which includes growth in the
Fund value of its shares as well as current income OppenheimerFunds, Inc.
- ------------------------------------------------------------------------------------------------------- -----------------------
Oppenheimer VA Aggressive Growth Fund Capital appreciation
- ------------------------------------------------------------------------------------------------------- -----------------------
Oppenheimer VA Strategic Bond Fund A high level of current income
- ------------------------------------------------------------------------------------------------------- -----------------------
Dreyfus Socially Responsible Growth Fund Capital growth and, secondarily, current income
The Dreyfus Corporation
- ------------------------------------------------------------------------------------------------------- -----------------------
Dreyfus Stock Index Fund To match the total returns of the Standard
& Poor's 500 Composite Stock Index
- ------------------------------------------------------------------------------------------------------- -----------------------
Dreyfus VI Capital Appreciation Portfolio Long-term capital growth consistent with the
preservation of capital; current income is a
secondary goal.
- ------------------------------------------------------------------------------------------------------- -----------------------
Wells Fargo VT Equity Income Fund Long-term capital appreciation and above-average
dividend income. Wells Fargo Bank, N.A.
- ------------------------------------------------------------------------------------------------------- -----------------------
Wells Fargo VT Asset Allocation Fund Long-term total return, consistent with
reasonable risk.
- ------------------------------------------------------------------------------------------------------- -----------------------
Wells Fargo VT Growth Fund Long-term capital appreciation
- ------------------------------------------------------------------------------------------------------- -----------------------
Delaware GP Small Cap Value Series Capital appreciation Delaware Management
Company
- ------------------------------------------------------------------------------------------------------- -----------------------
Delaware GP Trend Series Long-term capital appreciation
- ------------------------------------------------------------------------------------------------------- -----------------------
HSBC VI Fixed Income Fund High current income consistent with
appreciation of capital HSBC Asset
Management Americas Inc.
- ------------------------------------------------------------------------------------------------------ -----------------------
HSBC VI Growth & Income Fund Long-term growth of capital and current income
- ------------------------------------------------------------------------------------------------------- -----------------------
HSBC VI Cash Management Fund As high a level of current income as is consistent
with preservation of capital and liquidity
- ------------------------------------------------------------------------------------------------------- -----------------------
</TABLE>
Amounts you allocate to Variable Sub-Accounts may grow in value, decline in
value, or grow less than you expect, depending on the investment performance of
the 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.
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. 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:
Purchase Payment..............................$10,000
Guarantee Period..............................5 years
Annual Interest Rate........................... 4.50%
<TABLE>
<CAPTION>
END OF CONTRACT YEAR
<S> <C> <C> <C> <C> <C>
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
Beginning Contract Value $10,000.00
X (1 + Annual Interest Rate) X 1.045
$10,450.00
Contract Value at end of Contract Year $10,450.00
X (1 + Annual Interest Rate) X 1.045
$10,920.25
Contract Value at end of Contract Year $10,920.25
X (1 + Annual Interest Rate) X 1.045
$11,411.66
Contract Value at end of Contract Year $11,411.66
X (1 + Annual Interest Rate) X 1.045
$11,925.19
Contract Value at end of Contract Year $11,925.19
X (1 + Annual InterestRate) X 1.045
$12,461.82
Total Interest Credited During Guarantee Period = $2,461.82 ($12,461.82-$10,000)
</TABLE>
This example assumes no withdrawals during the entire 5 year Guarantee Period.
If you were to make a partial 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 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 unit 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). 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:
o within the Preferred Withdrawal Amount as described on page __, or
o 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.
<PAGE>
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 Program or Automatic Fund 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
on any Valuation Date using the Accumulation Unit Values for that Date. We will
process requests completed after 4:00 p.m. on any Valuation Date using the
Accumulation Unit Values for the next Valuation Date. The Contract permits us to
defer transfers from the Fixed Account 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. In the event that the New York Stock
Exchange closes early, i.e., before 4:00 p.m. Eastern Time, or in the event that
the Exchange closes early for a period of time but then reopens for trading on
the same day, we will process telephone transfer requests as of the close of the
Exchange on that particular day. We will not accept telephone requests received
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 automatically rebalance the Contract Value in each Variable
Sub-Account and return it to the desired percentage allocations.
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.
<PAGE>
EXPENSES
- -------------------------------------------------------------------------------
As a Contract owner, you will bear, directly or indirectly, the charges and
expenses described below.
CONTRACT MAINTENANCE CHARGE
During the Accumulation Phase, on each Contract Anniversary, we will deduct a
$30 contract maintenance charge from your 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:
o total purchase payments equal $50,000 or more, or
o 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 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 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 __. 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:
o multiplying the percentage corresponding to the number of complete years
since we received the purchase payment being withdrawn, times
o 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. Thus, for tax purposes, earnings are considered to come out first,
which means you pay taxes on the earnings portion of your withdrawal.
We do not apply a withdrawal charge in the following situations:
o on the Payout Start Date (a withdrawal charge may apply if you elect to
receive income payments for a specified period of less than 120 months);
o the death of the Contract owner (Annuitant if Contract owner is not a
natural person);
o withdrawals taken to satisfy IRS minimum distribution rules for the
Contract; and
o 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 ___ above. 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. Withdrawals also are available under limited circumstances on
or after the Payout Start Date. See "Income Plans" on page __.
The amount payable upon withdrawal is the Contract Value next computed after we
receive the request for a withdrawal at our 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, income tax withholding, and premium taxes.
<PAGE>
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:
o fixed income payments;
o variable income payments; or
o a combination of the two.
The three Income Plans are:
Income Plan 1 -- Life Income with Guaranteed Payments. Under this plan,
we make periodic income payments for at least as long as the Annuitant
lives. If the Annuitant dies before we have made all of the guaranteed
income payments, we will continue to pay the remainder of the
guaranteed income payments as required by the Contract.
Income Plan 2 -- Joint and Survivor Life Income with Guaranteed
Payments. Under this plan, we make periodic income payments for at
least as long as either the Annuitant or the joint Annuitant 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 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 the Variable Account portion of the income
payments at any time and receive a lump sum equal to the present value of the
remaining variable payments due. A withdrawal charge may apply. We deduct
applicable premium taxes from the Contract Value at the Payout Start Date.
We may make other Income Plans available. You may obtain information about them
by writing or calling us.
You 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:
o 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
o reduce the frequency of your payments so that each payment will be at least
$20.
VARIABLE INCOME PAYMENTS
The amount of your variable income payments depends upon the investment results
of the Variable Sub-Accounts you select, the premium taxes you pay, the age and
sex of the Annuitant, and the Income Plan you choose. We guarantee that the
payments will not be affected by (a) actual mortality experience 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.
<PAGE>
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.
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:
(a) = the withdrawal amount,
(b) = the Contract Value immediately prior to the withdrawal, and
(c) = the value of the applicable death benefit alternative immediately prior
to the withdrawal.
See Appendix 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:
o a certified copy of a death certificate; or
o a certified copy of a decree of a court of competent jurisdiction as to a
finding of death; or
o 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. 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 death benefit either in one or more distributions, or by periodic
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:
o the life of the Contract owner; or
o a period not to exceed the life expectancy of the Contract owner; or
o 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.
<PAGE>
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 servicing 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.
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. Allstate Life Financial Services, Inc. ("ALFS"), located at 3100
Sanders Road, Northbrook, Illinois 60062-7154, serves as distributor 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. In some states, 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.
Administration. We have primary responsibility for all administration of the
Contracts and the Variable Account. We provide the following administrative
services, among others:
o issuance of the Contracts; o maintenance of Contract owner records; o Contract
owner services; o calculation of unit values; o maintenance of the Variable
Account; and o preparation of Contract owner reports.
We will send you Contract statements and transaction confirmations at least
annually. 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, risk management, and
policy and contract administration. Since many of Allstate New York's older
computer software programs recognize only the last two digits of the year in any
date, some software may fail to operate properly in or after the year 1999, if
the software is not reprogrammed or replaced, ("Year 2000 Issue"). Allstate New
York believes that many of its counterparties and suppliers also have Year 2000
Issues which could affect Allstate New York. In 1995, Allstate Insurance Company
commenced a plan intended to mitigate and/or prevent the adverse effects of Year
2000 Issues. These strategies include normal development and enhancement of new
and existing systems, upgrades to operating systems already covered by
maintenance agreements and modifications to existing systems to make them Year
2000 compliant. The plan also includes Allstate New York actively working with
its major external counterparties and suppliers to assess their compliance
efforts and Allstate New York's exposure to them. Allstate New York presently
believes that it will resolve the Year 2000 Issue in a timely manner, and the
financial impact will not materially affect its results of operations, liquidity
or financial position. Year 2000 costs are and will be expensed as incurred.
<PAGE>
TAXES
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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 income. "Qualified distributions" are any distributions
made more than 5 taxable years after the taxable year of the first contribution
to any Roth IRA and which are:
o made on or after the date the individual attains age 59 1/2,
o made to a beneficiary after the Contract owner's death,
o attributable to the Contract owner being disabled, or
o for a first time home purchase (first time home purchases are subject to a
lifetime limit of $10,000).
If you transfer a non-Qualified Contract without full and adequate consideration
to a person other than your spouse (or to a former spouse incident to a
divorce), you will be taxed on the difference between the Contract Value and the
investment in the Contract at the time of transfer. Except for certain Qualified
Contracts, any amount you receive as a loan under a Contract, and any assignment
or pledge (or agreement to assign or pledge) of the Contract Value is treated as
a withdrawal of such amount or portion.
Taxation of Annuity Payments. Generally, the rule for income taxation of annuity
payments received from a non-Qualified Contract provides for the return of your
investment in the Contract in equal tax-free amounts over the payment period.
The balance of each payment received is taxable. For fixed annuity payments, the
amount excluded from income is determined by multiplying the payment by the
ratio of the investment in the Contract (adjusted for any refund feature or
period certain) to the total expected value of annuity payments for the term of
the contract. If you elect variable annuity payments, the amount excluded from
taxable income is determined by dividing the investment in the Contract by the
total number of expected payments. The annuity payments will be fully taxable
after the total amount of the investment in the Contract is excluded using these
ratios. If you die, and annuity payments cease before the total amount of the
investment in the Contract is recovered, the unrecovered amount will be allowed
as a deduction for your last taxable year.
Taxation of Annuity Death Benefits. Death of a Contract owner, or death of the
Annuitant if the Contract is owned by a non-natural person, will cause a
distribution of death benefits from a Contract. Generally, such amounts are
included in income as follows:
1) if distributed in a lump sum, the amounts are taxed in the same manner
as a full withdrawal, or
2) if distributed under an annuity option, the amounts are taxed in the
same manner as an annuity payment. Please see the Statement of
Additional Information for more detail on distribution at death
requirements.
Penalty Tax on Premature Distributions. A 10% penalty tax applies to the taxable
amount of any premature distribution from a non-Qualified Contract. The penalty
tax generally applies to any distribution made prior to the date you attain age
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:
o Individual Retirement Annuities or Accounts (IRAs) under Section 408 of the
Code;
o Roth IRAs under Section 408A of the Code;
o Simplified Employee Pension Plans under Section 408(k) of the Code;
o Savings Incentive Match Plans for Employees (SIMPLE) Plans under Section
408(p) of the Code;
o Tax Sheltered Annuities under Section 403(b) of the Code;
o Corporate and Self Employed Pension and Profit Sharing Plans; and
o State and Local Government and Tax-Exempt Organization Deferred
Compensation Plans.
Allstate New York reserves the right to limit the availability of the Contract
for use with any of the qualified plans listed above. In the case of certain
qualified plans, the terms of the plans may govern the right to benefits,
regardless of the terms of the Contract.
Restrictions Under Section 403(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
o attains age 59 1/2,
o separates from service,
o dies,
o becomes disabled, or
2) on account of hardship (earnings on salary reduction contributions may
not be distributed on account of hardship).
These limitations do not apply to withdrawals where Allstate New York is
directed to transfer some or all of the Contract Value to another 403(b) plan.
INCOME TAX WITHHOLDING
Allstate New York is required to withhold federal income tax at a rate of 20% on
all "eligible rollover distributions" unless you elect to make a "direct
rollover" of such amounts to an IRA or eligible retirement plan. Eligible
rollover distributions generally include all distributions from Qualified
Contracts, excluding IRAs, with the exception of:
1) required minimum distributions, or
2) a series of substantially equal periodic payments made over a period
of at least 10 years, or,
3) over the life (joint lives) of the participant (and beneficiary).
Allstate New York may be required to withhold federal and state income taxes on
any distributions from non-Qualified Contracts or Qualified Contracts that are
not eligible rollover distributions, unless you notify us of your election to
not have taxes withheld.
<PAGE>
ANNUAL REPORTS AND OTHER DOCUMENTS
- -------------------------------------------------------------------------------
Allstate New York's annual report on Form 10-K for the year ended December 31,
1998 and its Form 10-Q reports for the quarters ended March 31, 1999, June 30,
1999 and September 30, 1999 are incorporated herein by reference, which means
that they are 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).
<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.
<PAGE>
APPENDIX A
MARKET VALUE ADJUSTMENT
The Market Value Adjustment is based on the following:
I = the Treasury Rate for a maturity equal to the 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.
<PAGE>
EXAMPLES OF MARKET VALUE ADJUSTMENT
<TABLE>
<CAPTION>
<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
NOTE: These examples assume that premium taxes are not applicable.
EXAMPLE 1: (Assumes declining 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 = 4.2%
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>
<PAGE>
EXAMPLE 2: (Assumes rising interest rates)
<TABLE>
<CAPTION>
<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 = 4.8%
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) = - $53.52
Step 4. Calculate the Withdrawal Charge: .05 X (10,000.00 - 1,500 - 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>
<PAGE>
APPENDIX B
WITHDRAWAL ADJUSTMENT EXAMPLE
Issue Date: January 1, 1999
Initial Purchase Payment: $50,000
<TABLE>
<CAPTION>
Death Benefit Amount
Contract Contract Death
Value Before Transaction Value Benefit Greatest
Occurrence Amount After Anniversary Anniversary
Date Type of Occurrence Occurrence Value Value
<S> <C> <C> <C> <C> <C> <C>
1/1/99 Issue Date - $50,000 $50,000 $50,000 $50,000
1/1/00 Contract Anniversary $55,000 - $55,000 $50,000 $55,000
7/1/00 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>
<CAPTION>
<S> <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)]*(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)]*(d) $13,750
Adjusted Death Benefit $41,250
This example represents the proportional reduction applicable in all contracts.
</TABLE>
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
Description Page
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......................................................
-----------------------------------------------
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.
[back cover]
<PAGE>
ALLSTATE CUSTOM PORTFOLIO VARIABLE ANNUITY
<TABLE>
<CAPTION>
<S> <C>
Allstate Life Insurance Company of New York Statement of Additional Information
Allstate Life of New York Separate Account A dated February __, 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 February __, 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.
<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, Allstate Life Financial Services, 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.
TAX-FREE EXCHANGES (1035 EXCHANGES, ROLLOVERS AND TRANSFERS)
We accept purchase payments that are the proceeds of a Contract in a transaction
qualifying for a tax-free exchange under Section 1035 of the Internal Revenue
Code ("Code"). Except as required by federal law in calculating the basis of the
Contract, we do not differentiate between Section 1035 purchase payments and
non-Section 1035 purchase payments.
We also accept "rollovers" and transfers from Contracts qualifying as
tax-sheltered annuities ("TSAs"), individual retirement annuities or accounts
("IRAs"), or any other Qualified Contract that is eligible to "rollover" into an
IRA. We differentiate among non-Qualified Contracts, TSAs, IRAs and other
Qualified Contracts to the extent necessary to comply with federal tax laws. For
example, we restrict the assignment, transfer, or pledge of TSAs and IRAs so the
Contracts will continue to qualify for special tax treatment. A Contract owner
contemplating any such exchange, rollover or transfer of a Contract should
contact a competent tax adviser with respect to the potential effects of such a
transaction.
<PAGE>
PERFORMANCE INFORMATION
- -------------------------------------------------------------------------------
From time to time we may advertise the "standardized," "non-standardized," and
"adjusted historical" total returns of the Variable Sub-Accounts, as described
below. Please remember that past performance is not an estimate or guarantee of
future performance and does not necessarily represent the actual experience of
amounts invested by a particular Contract owner.
STANDARDIZED TOTAL RETURNS
A Variable Sub-Account's standardized total return represents the average annual
total return of that Sub-Account over a particular period. We compute
standardized total return by finding the annual percentage rate that, when
compounded annually, will accumulate a hypothetical $1,000 purchase payment to
the redeemable value at the end of the one, five or ten year period, or for a
period from the date of commencement of the Variable Sub-Account's operations,
if shorter than any of the foregoing. We use the following formula prescribed by
the SEC for computing standardized total return:
1000(1 + T)n = ERV
where:
T = average annual total return
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of 1, 5, or 10 year
periods or shorter period
n = number of years in the period
1000 = hypothetical $1,000 investment
When factoring in the withdrawal charge assessed upon redemption, we exclude the
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) the 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 Equity Income,
Fidelity VIP Growth, Fidelity VIP Overseas, Fidelity VIP II Contrafund, Fidelity
VIP III Growth Opportunities, Templeton Asset Allocation - Class 2, Templeton
International - Class 2, Oppenheimer VA Aggressive Growth, Oppenheimer VA Main
Street Growth & Income, Oppenheimer VA Strategic Bond, Dreyfus Socially
Responsible Growth, Dreyfus Stock Index, Dreyfus VI Capital 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, including the withdrawal charge and
contract maintenance charge described above.
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
<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.
NON-STANDARDIZED TOTAL RETURNS
From time to time, we also may quote average annual total returns that do not
reflect the withdrawal charge. We calculate these "non-standardized total
returns" in exactly the same way as the standardized total returns described
above, except that we replace the ending redeemable value of the hypothetical
account for the period with an ending redeemable value for the period that does
not take into account any charges on amounts surrendered.
In addition, we may advertise the total return over different periods of time by
means of aggregate, average, year-by-year or other types of total return
figures. Such calculations would not reflect deductions for withdrawal charges
which may be imposed on the Contracts which, if reflected, would reduce the
performance quoted. The formula for computing such total return quotations
involves a per unit change calculation. This calculation is based on the
Accumulation Unit Value at the end of the defined period divided by the
Accumulation Unit Value at the beginning of such period, minus 1. The periods
included in such advertisements are "year-to-date" (prior calendar year end to
the day of the advertisement); "year to most recent quarter" (prior calendar
year end to the end of the most recent quarter); "the prior calendar year"; "
'n' most recent Calendar Years"; and "Inception (commencement of the
Sub-account's operation) to date" (day of the advertisement).
The non-standardized total returns for the Variable Sub-Accounts for the periods
ended December 31, 1999 are set out below. 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 Equity Income,
Fidelity VIP Growth, Fidelity VIP Overseas, Fidelity VIP II Contrafund, Fidelity
VIP III Growth Opportunities, Templeton Asset Allocation - Class 2, Templeton
International - Class 2, Oppenheimer VA Aggressive Growth, Oppenheimer VA Main
Street Growth & Income, Oppenheimer VA Strategic Bond, Dreyfus Socially
Responsible Growth, Dreyfus Stock Index, Dreyfus VI Capital 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.
Performance figures for periods prior to the availability of the Contracts
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, excluding any charges imposed on amounts surrendered.
<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>
* The inception date of each Variable Sub-Account appears under "Standardized
Total Returns," above.
**Standardized total returns for the AIM V.I. Balanced and High Yield Variable
Sub-Accounts are not annualized.
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, which 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
Corresponding Portfolio
Variable Sub-Account
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 Equity Income October 9, 1986
Fidelity VIP Growth October 9, 1986
Fidelity VIP Overseas January 28, 1987
Fidelity VIP II Contrafund January 3, 1995
Fidelity VIP III Growth Opportunities January 3, 1995
Templeton Asset Allocation - Class 2 August 24, 1988
Templeton International - Class 2 May 1, 1992
Oppenheimer VA Aggressive Growth August 15, 1986
Oppenheimer VA Main Street Growth & Income July 5, 1995
Oppenheimer VA Strategic Bond May 3, 1993
Dreyfus Socially Responsible Growth October 7, 1993
Dreyfus Stock Index September 29, 1989
Dreyfus VI Capital 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
<TABLE>
<CAPTION>
10 Years or
Since Inception of
Variable Sub-Account One Year Five Years 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 Equity Income -1.01% 14.89% 12.00%
Fidelity VIP Growth 29.72% 24.26% 16.66%
Fidelity VIP Overseas 34.88% 15.52% 8.77%
Fidelity VIP II Contrafund 16.70% N/A 24.44%
Fidelity VIP III Growth Opportunities -5.02% N/A 17.86%
Templeton Asset Allocation - Class 2 15.03% 15.14% 11.27%
Templeton International - Class 2 15.71% 15.26% 13.79%
Oppenheimer VA Aggressive Growth 75.31% 27.85% 18.76%
Oppenheimer VA Main Street Growth & Income 14.18% N/A 23.92%
Oppenheimer VA Strategic Bond -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 VI Capital 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 62.32% 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
The Contract must be returned to us prior to any settlement. We must receive due
proof of the Contract owner(s) death (or Annuitant's death if there is a
non-natural Contract owner) before we will settle a death claim.
SAFEKEEPING OF THE VARIABLE ACCOUNT'S ASSETS
We hold title to the assets of the Variable Account. We keep the assets
physically segregated and separate and apart from our general corporate assets.
We maintain records of all purchases and redemptions of the 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.
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, 1998 and for each of the three years in the period
ended December 31, 1998 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, 1998 and for
the periods ended December 31, 1998 and December 31, 1997 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, 1998 and for
the periods ended December 31, 1998 and 1997, the financial statements and
related financial statement schedules of Allstate New York as of December 31,
1998 and for each of the three years in the period ended December 31, 1998 and
the accompanying Independent Auditors' Report appear in the pages that follow.
The financial statements of the Variable Account and Allstate New York as of and
for the periods ended September 30, 1999 also appear on the pages that follow
and are unaudited. 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>
ALLSTATE LIFE OF NEW YORK SEPARATE ACCOUNT A
Financial Statements as of December 31, 1998
and for the periods ended December 31, 1998
and December 31, 1997, and
Independent Auditors' Report
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholder of
Allstate Life Insurance Company of New York:
We have audited the accompanying statements of net assets of each of the
sub-accounts ("portfolios" for purposes of this report) that comprise Allstate
Life of New York Separate Account A (the "Account"), a Separate Account of
Allstate Life Insurance Company of New York, an affiliate of The Allstate
Corporation, as of December 31, 1998, and the related statements of operations
and changes in net assets for the years ended December 31, 1998 and December 31,
1997 of the Capital Appreciation, Diversified Income, Global Utilities,
Government Securities, Growth, Growth and Income, International Equity, Money
Market, and Value portfolios of the AIM Variable Insurance Funds, Inc. that
comprise the Account. These financial statements are the responsibility of the
Account's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned at December 31, 1998. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of each of the portfolios that comprise the
Account as of December 31, 1998, and the results of their operations for the
year then ended and the changes in their net assets for each of the two years in
the period then ended, of each of the portfolios comprising the Account, in
conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Chicago, Illinois
March 18, 1999
F-2
<PAGE>
ALLSTATE LIFE OF NEW YORK SEPARATE ACCOUNT A
STATEMENTS OF NET ASSETS
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
($ and shares in thousands)
ASSETS
Investments in the AIM Variable Insurance Funds, Inc. Portfolios:
Capital Appreciation, 171 shares (cost $3,829) $ 4,305
Diversified Income, 161 shares (cost $1,824) 1,765
Global Utilities, 23 shares (cost $364) 395
Government Securities, 320 shares (cost $3,576) 3,573
Growth, 169 shares (cost $3,615) 4,187
Growth and Income, 278 shares (cost $5,421) 6,604
International Equity, 100 shares (cost $1,818) 1,964
Money Market, 968 shares (cost $968) 968
Value, 272 shares (cost $6,060) 7,152
--------------
Total assets 30,913
LIABILITIES
Payable to Allstate Life Insurance Company of New York:
Accrued contract maintenance charges 8
--------------
Net assets $ 30,905
==============
See notes to financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
ALLSTATE LIFE OF NEW YORK SEPARATE ACCOUNT A
STATEMENTS OF OPERATIONS
- ----------------------------------------------------------------------------------------------------------------------------------
($ in thousands)
AIM Variable Insurance Funds, Inc. Portfolios
---------------------------------------------------------------------------------------
For the Year Ended December 31, 1998
---------------------------------------------------------------------------------------
Capital Diversi- Globa Govt. Growth Inter-
Appreci- fied Utili- Securi- and national Money
ation Income ties ties Growth Income Equity Market Value
------- ------ ------- ------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ 115 $ 114 $ 8 $ 95 $ 264 $ 89 $ 16 $ 38 $ 327
Charges from Allstate Life Insurance
Company of New York:
Mortality and expense risk (45) (18) (3) (15) (36) (62) (21) (10) (61)
Administrative expense (4) (1) -- (1) (3) (5) (2) (1) (4)
------- ------- ------- ------- ------- ------- ------- ------- -------
Net investment income (loss) 66 95 5 79 225 22 (7) 27 262
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of
investments:
Proceeds from sales 574 233 124 551 243 395 227 352 342
Cost of investments sold 573 225 125 442 214 377 222 352 310
------- ------- ------- ------- ------- ------- ------- ------- -------
Net realized gains (losses) 1 8 (1) 109 29 18 5 -- 32
Change in unrealized gains (losses) 458 (86) 24 (23) 542 1,076 166 -- 1,022
------- ------- ------- ------- ------- ------- ------- ------- -------
Net gains (losses) on investments 459 (78) 23 86 571 1,094 171 -- 1,054
------- ------- ------- ------- ------- ------- ------- ------- -------
CHANGE IN NET ASSETS RESULTING
FROM OPERATIONS $ 525 $ 17 $ 28 $ 165 $ 796 $ 1,116 $ 164 $ 27 $ 1,316
======= ======= ======= ======= ======= ======= ======= ======= =======
<FN>
See notes to financial statements
</FN>
</TABLE>
F-4
<PAGE>
<TABLE>
<CAPTION>
ALLSTATE LIFE OF NEW YORK SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------------------------------------------------------
($ in thousands)
AIM Variable Insurance Funds, Inc. Portfolios
---------------------------------------------------------------------------------------
For the Year Ended December 31, 1998
---------------------------------------------------------------------------------------
Capital Diversi- Globa Govt. Growth Inter-
Appreci- fied Utili- Securi- and national Money
ation Income ties ties Growth Income Equity Market Value
------- ------ ------- ------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 66 $ 95 $ 5 $ 79 $ 225 $ 22 $ (7) $ 27 $ 262
Net realized gains (losses) 1 8 (1) 109 29 18 5 -- 32
Change in unrealized gains (losses) 458 (86) 24 (23) 542 1,076 166 -- 1,022
------- ------- ------- ------- ------- ------- ------- ------ -------
Change in net assets resulting from
operations 525 17 28 165 796 1,116 164 27 1,316
FROM CAPITAL TRANSACTIONS
Deposits 2,056 1,223 357 2,725 2,076 3,227 716 510 3,273
Benefit payments (30) (33) (5) -- (7) (82) (7) (37) (7)
Payments on termination (115) (38) (4) (9) (100) (162) (33) (16) (104)
Contract maintenance charges (2) -- -- (1) (1) (2) (1) -- (3)
Transfers among the portfolios and with
the Fixed Account - net (183) (99) (94) 268 31 76 42 32 236
------- ------- ------- ------- ------- ------- ------- ------ -------
Change in net assets resulting from
capital transactions 1,726 1,053 254 2,983 1,999 3,057 717 489 3,395
------- ------- ------- ------- ------- ------- ------- ------ -------
INCREASE IN NET ASSETS 2,251 1,070 282 3,148 2,795 4,173 881 516 4,711
NET ASSETS AT BEGINNING OF YEAR 2,053 695 113 424 1,391 2,429 1,082 452 2,439
------- ------- ------- ------- ------- ------- ------- ------ -------
NET ASSETS AT END OF YEAR $ 4,304 $ 1,765 $ 395 $ 3,572 $ 4,186 $ 6,602 $ 1,963 $ 968 $ 7,150
======= ======= ======= ======= ======= ======= ======= ======= =======
<FN>
See notes to financial statements.
</FN>
</TABLE>
F-5
<PAGE>
<TABLE>
<CAPTION>
ALLSTATE LIFE OF NEW YORK SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------------------------------------------------------
($ and units in thousands, except value per unit)
AIM Variable Insurance Funds, Inc. Portfolios
--------------------------------------------------------------------------------------
For the Year Ended December 31, 1997
--------------------------------------------------------------------------------------
Capital Diversi- Global Govt. Growth Inter-
Appreci- fied Utili- Securi- and national Money
ation Income ties ties Growth Income Equity Market Value
------- ------ ------- ------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ 12 $ (3) $ -- $ (3) $ 39 $ (10) $ 13 $ 10 $ 67
Net realized gains 1 -- -- -- 1 3 1 -- 2
Change in unrealized gains (losses) 17 30 7 20 31 106 (22) -- 70
------- ------- ------- ------- ------- ------- ------- ------- -------
Change in net assets resulting from
operations 30 27 7 17 71 99 (8) 10 139
FROM CAPITAL TRANSACTIONS
Deposits 1,832 570 106 406 1,279 2,277 988 694 2,294
Benefit payments -- -- -- -- -- (49) -- (75) (49)
Payments on termination (10) (5) -- -- (11) (20) (2) (16) (19)
Contract maintenance charges -- -- -- -- -- (1) -- -- (1)
Transfers among the portfolios and with
the Fixed Account - net 113 53 -- 1 25 60 39 (206) 9
------- ------- ------- ------- ------- ------- ------- ------- -------
Change in net assets resulting from
capital transactions 1,935 618 106 407 1,293 2,267 1,025 397 2,234
------- ------- ------- ------- ------- ------- ------- ------- -------
INCREASE IN NET ASSETS 1,965 645 113 424 1,364 2,366 1,017 407 2,373
NET ASSETS AT BEGINNING OF YEAR 88 50 -- -- 27 63 65 45 66
------- ------- ------- ------- ------- ------- ------- ------- -------
NET ASSETS AT END OF YEAR $ 2,053 $ 695 $ 113 $ 424 $ 1,391 $ 2,429 $ 1,082 $ 452 $ 2,439
======= ======= ======= ======= ======= ======= ======= ======= =======
Net asset value per unit at end of year $ 12.74 $ 11.79 $ 13.52 $ 10.83 $ 14.34 $ 14.50 $ 12.60 $ 10.74 $ 13.52
======= ======= ======= ======= ======= ======= ======= ======= =======
Units outstanding at end of year 161 59 8 39 97 168 86 42 180
======= ======= ======= ======= ======= ======= ======= ======= =======
<FN>
See notes to financial statements.
</FN>
</TABLE>
F-6
<PAGE>
ALLSTATE LIFE OF NEW YORK SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS
TWO YEARS ENDED DECEMBER 31, 1998
- --------------------------------------------------------------------------------
1. ORGANIZATION
Allstate Life of New York Separate Account A (the "Account"), a unit
investment trust registered with the Securities and Exchange Commission
under the Investment Company Act of 1940, is a Separate Account of Allstate
Life Insurance Company of New York ("ALNY"). The assets of the Account are
legally segregated from those of ALNY. ALNY is wholly owned by Allstate
Life Insurance Company, a wholly owned subsidiary of Allstate Insurance
Company, which is wholly owned by The Allstate Corporation.
ALNY issues certain annuity contracts, the deposits of which are invested
at the direction of the contractholder in the sub-accounts ("portfolios"
for purposes of this report) that comprise the Account. Contractholders
bear all investment risk for amounts allocated to the Account. The
portfolios invest in the AIM Variable Insurance Funds, Inc. (the "Fund").
ALNY provides insurance and administrative services to the contractholders
for a fee.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Valuation of Investments - Investments consist of shares of the Fund and
are stated at fair value based on quoted market prices at December 31,
1998.
Investment Income - Investment income consists of dividends declared by the
Fund and is recognized on the date of record.
Realized Gains and Losses - Realized gains and losses represent the
difference between the proceeds from sales of portfolio shares by the
Account and the cost of such shares, which is determined on a weighted
average basis.
Federal Income Taxes - The Account intends to qualify as a segregated asset
account as defined in the Internal Revenue Code ("Code"). As such, the
operations of the Account are included with and taxed as a part of ALNY.
ALNY is taxed as a life insurance company under the Code. No federal income
taxes are payable by the Account in 1998 as the Account did not generate
taxable income.
3. CONTRACT CHARGES
ALNY assumes mortality and expense risks related to the operations of the
Account and deducts charges daily at a rate equal to 1.35% per annum of the
daily net assets of the Account. ALNY guarantees that the amount of this
charge will not increase over the life of the contract.
ALNY deducts administrative expense charges daily at a rate equal to .10%
per annum of the daily net assets of the Account.
If aggregate deposits are less than $50,000, ALNY will deduct an annual
maintenance fee of $35 on each contract anniversary.
4. FINANCIAL INSTRUMENTS
The investments of the Account are carried at fair value, based upon quoted
market prices. Accrued contract maintenance charges are of a short-term
nature. It is assumed that their carrying value approximates fair value.
F-7
<PAGE>
<TABLE>
<CAPTION>
5. UNITS ISSUED AND REDEEMED
(Units in whole amounts) Unit activity during 1998
-------------------------
Units Units Accumulation
Outstanding Outstanding Unit Value
December 31, Units Units December 31, December 31,
1997 Issued Redeemed 1998 1998
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Investments in the AIM Variable
Insurance Funds, Inc. Portfolio:
Capital Appreciation 161,013 184,864 (58,541) 287,336 $ 14.98
Diversified Income 58,958 110,754 (23,068) 146,644 12.03
Global Utilities 8,276 32,920 (15,778) 25,418 15.52
Government Securities 39,009 329,878 (66,904) 301,983 11.83
Growth 97,039 150,194 (26,402) 220,831 18.95
Growth and Income 167,625 228,614 (34,349) 361,890 18.24
International Equity 85,934 69,780 (18,816) 136,898 14.34
Money Market 42,128 76,593 (31,711) 87,010 11.13
Value 180,440 251,601 (26,795) 405,246 17.64
<FN>
Units relating to accrued contract maintenance charges are included in units
redeemed.
</FN>
</TABLE>
F-8
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE BOARD OF DIRECTORS AND SHAREHOLDER OF ALLSTATE LIFE INSURANCE COMPANY OF
NEW YORK:
We have audited the accompanying Statements of Financial Position of Allstate
Life Insurance Company of New York (the "Company", an affiliate of The Allstate
Corporation) as of December 31, 1998 and 1997, and the related Statements of
Operations and Comprehensive Income, Shareholder's Equity and Cash Flows for
each of the three years in the period ended December 31, 1998. Our audits also
included Schedule IV - Reinsurance and Schedule V-Valuation and Qualifying
Accounts. These financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial statement schedules based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 1998 and
1997, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 1998 in conformity with generally
accepted accounting principles. Also, in our opinion, Schedule IV - Reinsurance,
and Schedule V - Valuation and Qualifying Accounts, when considered in relation
to the basic financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein.
/s/ Deloitte & Touche LLP
Chicago, Illinois
February 19, 1999
F-9
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF FINANCIAL POSITION
December 31,
------------
($ in thousands) 1998 1997
---- ----
ASSETS
Investments
Fixed income securities, at fair value
(amortized cost $1,648,972 and $1,510,110) $1,966,067 $1,756,257
Mortgage loans 145,095 114,627
Short-term 76,127 9,513
Policy loans 29,620 27,600
---------- ----------
Total investments 2,216,909 1,907,997
Deferred acquisition costs 87,830 71,946
Accrued investment income 22,685 21,725
Reinsurance recoverables 2,210 1,726
Cash 3,117 393
Other assets 9,887 6,167
Separate Accounts 366,247 308,595
---------- ----------
TOTAL ASSETS $2,708,885 $2,318,549
========== ==========
LIABILITIES
Reserve for life-contingent contract benefits $1,208,104 $1,084,409
Contractholder funds 703,264 607,474
Current income taxes payable 14,029 1,419
Deferred income taxes 25,449 16,990
Other liabilities and accrued expenses 23,463 10,985
Payable to affiliates, net 38,835 5,267
Separate Accounts 366,247 308,595
---------- ----------
TOTAL LIABILITIES 2,379,391 2,035,139
---------- ----------
COMMITMENTS AND CONTINGENT LIABILITIES (NOTE 10)
SHAREHOLDER'S EQUITY
Common stock, $25 par value, 80,000 shares
authorized, issued and outstanding 2,000 2,000
Additional capital paid-in 45,787 45,787
Retained income 198,801 171,144
Accumulated other comprehensive income:
Unrealized net capital gains 82,906 64,479
---------- ----------
Total accumulated other comprehensive income 82,906 64,479
---------- ----------
TOTAL SHAREHOLDER'S EQUITY 329,494 283,410
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $2,708,885 $2,318,549
========== ==========
See notes to financial statements.
F-10
<PAGE>
<TABLE>
<CAPTION>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
Year Ended December 31,
-----------------------
($ in thousands) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
REVENUES
Premiums and contract charges (net of reinsurance
ceded of $3,204, $3,087 and $2,273) $ 119,052 $ 118,963 $ 117,106
Net investment income 134,413 124,887 112,862
Realized capital gains and losses 4,697 701 (1,581)
--------- --------- ---------
258,162 244,551 228,387
--------- --------- ---------
COSTS AND EXPENSES
Contract benefits (net of reinsurance recoveries
of $997, $1,985 and $2,827) 183,839 179,872 172,772
Amortization of deferred acquisition costs 7,029 5,023 6,512
Operating costs and expenses 24,703 23,644 16,874
--------- --------- ---------
215,571 208,539 196,158
--------- --------- ---------
INCOME FROM OPERATIONS BEFORE INCOME TAX EXPENSE 42,591 36,012 32,229
Income tax expense 14,934 13,296 11,668
--------- --------- ---------
NET INCOME 27,657 22,716 20,561
--------- --------- ---------
OTHER COMPREHENSIVE INCOME
Change in unrealized net capital gains and losses 18,427 27,627 (37,561)
--------- --------- ---------
COMPREHENSIVE INCOME $ 46,084 $ 50,343 $ (17,000)
========= ========= =========
<FN>
See notes to financial statements.
</FN>
</TABLE>
F-11
<PAGE>
<TABLE>
<CAPTION>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF SHAREHOLDER'S EQUITY
December 31,
------------
($ in thousands) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
COMMON STOCK $ 2,000 $ 2,000 $ 2,000
--------- --------- ---------
ADDITIONAL CAPITAL PAID-IN 45,787 45,787 45,787
--------- --------- ---------
RETAINED INCOME
Balance, beginning of year 171,144 148,428 127,867
Net income 27,657 22,716 20,561
--------- --------- ---------
Balance, end of year 198,801 171,144 148,428
--------- --------- ---------
ACCUMULATED OTHER COMPREHENSIVE INCOME
Balance, beginning of year 64,479 36,852 74,413
Change in unrealized net capital gains and losses 18,427 27,627 (37,561)
--------- --------- ---------
Balance, end of year 82,906 64,479 36,852
--------- --------- ---------
Total shareholder's equity $ 329,494 $ 283,410 $ 233,067
========= ========= =========
<FN>
See notes to financial statements.
</FN>
</TABLE>
F-12
<PAGE>
<TABLE>
<CAPTION>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF CASH FLOWS
Year Ended December 31,
-----------------------
($ in thousands) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 27,657 $ 22,716 $ 20,561
Adjustments to reconcile net income to net
cash provided by operating activities
Amortization and other non-cash items (34,890) (31,112) (26,172)
Realized capital gains and losses (4,697) (701) 1,581
Interest credited to contractholder funds 41,200 31,667 25,817
Changes in:
Life-contingent contract benefits
and contractholder funds 53,343 68,114 75,217
Deferred acquisition costs (16,693) (10,781) (6,859)
Accrued investment income (960) (1,404) (1,493)
Income taxes payable 13,865 (158) 1,986
Other operating assets and liabilities (15,014) 9,949 (5,963)
--------- --------- ---------
Net cash provided by operating activities 63,811 88,290 84,675
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of fixed income securities 65,281 15,723 28,454
Investment collections
Fixed income securities 159,648 120,061 72,751
Mortgage loans 5,855 5,365 12,508
Investment purchases
Fixed income securities (292,444) (236,984) (236,252)
Mortgage loans (24,252) (35,200) (10,325)
Change in short-term investments, net (55,846) 16,342 (18,598)
Change in policy loans, net (2,020) (2,241) (2,574)
--------- --------- ---------
Net cash used in investing activities (143,778) (116,934) (154,036)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Contractholder fund deposits 137,473 79,384 115,420
Contractholder fund withdrawals (54,782) (51,374) (46,504)
--------- --------- ---------
Net cash provided by financing activities 82,691 28,010 68,916
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH 2,724 (634) (445)
CASH AT BEGINNING OF YEAR 393 1,027 1,472
--------- --------- ---------
CASH AT END OF YEAR $ 3,117 $ 393 $ 1,027
========= ========= =========
<FN>
See notes to financial statements.
</FN>
</TABLE>
F-13
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
1. GENERAL
BASIS OF PRESENTATION
The accompanying financial statements include the accounts of Allstate Life
Insurance Company of New York (the "Company"), a wholly owned subsidiary of
Allstate Life Insurance Company ("ALIC"), which is wholly owned by Allstate
Insurance Company ("AIC"), a wholly owned subsidiary of The Allstate Corporation
(the "Corporation"). These financial statements have been prepared in conformity
with generally accepted accounting principles.
To conform with the 1998 presentation, certain amounts in the prior years'
financial statements and notes have been reclassified.
NATURE OF OPERATIONS
The Company markets a broad line of life insurance and savings products in the
State of New York. Life insurance includes traditional products such as whole
life and term life insurance, as well as universal life and other
interest-sensitive life products. Savings products include deferred annuities,
such as variable annuities and fixed rate single and flexible premium annuities,
and immediate annuities such as structured settlement annuities. The Company
distributes its products using a combination of Allstate agents, which include
life specialists as well as banks, independent insurance agents, brokers and
direct marketing.
Structured settlement annuity contracts issued by the Company are long-term in
nature and involve fixed guarantees relating to the amount and timing of benefit
payments. Annuity contracts and life insurance policies issued by the Company
are subject to discretionary withdrawal or surrender by customers, subject to
applicable surrender charges. In low interest rate environments, funds from
maturing investments, particularly those supporting long-term structured
settlement annuity obligations, may be reinvested at substantially lower
interest rates than those which prevailed when the funds were previously
invested.
The Company monitors economic and regulatory developments which have the
potential to impact its business. There continues to be proposed federal and
state regulation and legislation that, if passed, would allow banks greater
participation in the securities and insurance businesses. Such events would
present an increased level of competition for sales of the Company's products.
Furthermore, the market for deferred annuities and interest-sensitive life
insurance is enhanced by the tax incentives available under current law. Any
legislative changes which lessen these incentives are likely to negatively
impact the demand for these products.
Additionally, traditional demutualizations of mutual insurance companies and
enacted and pending state legislation to permit mutual insurance companies to
convert to a hybrid structure known as a mutual holding company could have a
number of significant effects on the Company by (1) increasing industry
competition through consolidation caused by mergers and acquisitions related to
the new corporate form of business; and (2) increasing competition in capital
markets.
Although the Company currently benefits from agreements with financial services
entities who market and distribute its products, change in control of these
non-affliliated entities with which the Company has alliances could have a
detrimental effect on the Company's sales.
F-14
<PAGE>
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENTS
Fixed income securities include bonds and mortgage-backed and asset-backed
securities. All fixed income securities are carried at fair value and may be
sold prior to their contractual maturity ("available for sale"). The difference
between amortized cost and fair value, net of deferred income taxes, certain
deferred acquisition costs, and reserves for life and annuity policy benefits,
is reflected as a component of shareholder's equity. Provisions are recognized
for declines in the value of fixed income securities that are other than
temporary. Such writedowns are included in realized capital gains and losses.
Mortgage loans are carried at outstanding principal balance, net of unamortized
premium or discount and valuation allowances. Valuation allowances are
established for impaired loans when it is probable that contractual principal
and interest will not be collected. Valuation allowances for impaired loans
reduce the carrying value to the fair value of the collateral or the present
value of the loan's expected future repayment cash flows discounted at the
loan's original effective interest rate. Valuation allowances on loans not
considered to be impaired are established based on consideration of the
underlying collateral, borrower financial strength, current and expected market
conditions, and other factors.
Short-term investments are carried at cost or amortized cost which approximates
fair value, and includes collateral received in connection with securities
lending activities. Policy loans are carried at the unpaid principal balances.
Investment income consists primarily of interest and dividends on short-term
investments. Interest is recognized on an accrual basis and dividends are
recorded at the ex-dividend date. Interest income on mortgage-backed and
asset-backed securities is determined on the effective yield method, based on
estimated principal repayments. Accrual of income is suspended for fixed income
securities and mortgage loans that are in default or when the receipt of
interest payments is in doubt. Realized capital gains and losses are determined
on a specific identification basis.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company utilizes futures contracts which are derivative financial
instruments. When futures contracts meet specific criteria they may be
designated as accounting hedges and accounted for on either a fair value or
deferral basis, depending upon the nature of the hedge strategy and the method
used to account for the hedged item. Derivatives that are not designated as
accounting hedges are accounted for on a fair value basis.
If, subsequent to entering into a hedge transaction, the futures contract
becomes ineffective (including if the the occurrence of a hedged anticipatory
transaction is no longer probable), the Company terminates the derivative
position. Gains and losses on these terminations are reported in realized
capital gains and losses in the period they occur. The Company may also
terminate derivatives as a result of other events or circumstances. Gains and
losses on these terminations are either deferred and amortized over the
remaining life of either the hedge or the hedged item, whichever is shorter, or
are reported in shareholder's equity, consistent with the accounting for the
hedged item. Futures contracts must reduce the primary market risk exposure on
an enterprise or transaction basis in conjunction with the hedge strategy; be
designated as a hedge at the inception of the transaction; and be highly
correlated with the fair value of, or interest income or expense associated
with, the hedged item at inception and throughout the hedge period.
DEFERRAL ACCOUNTING Under deferral accounting, gains and losses on futures
contracts are deferred on the statement of financial position and recognized in
earnings in conjunction with earnings on the hedged item. The Company accounts
for interest rate futures contracts as hedges using deferral accounting for
anticipatory investment purchases and sales when the criteria for futures
(discussed above) are met. In addition, anticipated transactions must be
probable of occurrence and their significant terms and characteristics
identified.
F-15
<PAGE>
Changes in fair values of these types of derivatives are initially deferred as
other liabilities and accrued expenses. Once the anticipated transaction occurs,
the deferred gains or losses are considered part of the cost basis of the asset
and reported net of tax in shareholder's equity or recognized as a gain or loss
from disposition of the asset, as appropriate. The Company reports initial
margin deposits on futures in short-term investments. Fees and commissions paid
on these derivatives are also deferred as an adjustment to the carrying value of
the hedged item.
RECOGNITION OF PREMIUM REVENUES AND CONTRACT CHARGES
Premiums for traditional life insurance and certain life-contingent annuities
are recognized as revenue when due. Accident and disability premiums are earned
on a pro rata basis over the policy period. Revenues on universal life-type
insurance policies are comprised of contract charges and fees, and are
recognized when assessed against the policyholder account balance. Revenues on
investment contracts include contract charges and fees for contract
administration and surrenders. These revenues are recognized when levied against
the contract balance. Gross premium in excess of the net premium on limited
payment contracts are deferred and recognized over the contract period.
REINSURANCE
The Company has reinsurance agreements whereby certain premiums and contract
benefits are ceded and reflected net of such reinsurance in the statements of
operations and comprehensive income. Reinsurance recoverable and the related
reserves for life-contingent contract benefits and contractholder funds are
reported separately in the statements of financial position. The Company
continues to have primary liability as the direct insurer for risks reinsured.
DEFERRED ACQUISITION COSTS
Certain costs of acquiring life and annuity business, principally agents'
remuneration, premium taxes, certain underwriting costs and direct mail
solicitation expenses are deferred and amortized to income. For traditional life
insurance, limited payment contracts and accident and disability insurance,
these costs are amortized in proportion to the estimated revenues on such
business. For universal life-type policies and investment contracts, the costs
are amortized in relation to the present value of estimated gross profits on
such business. Changes in the amount or timing of estimated gross profits will
result in adjustments in the cumulative amortization of these costs. To the
extent that unrealized gains or losses on fixed income securities carried at
fair value would result in an adjustment of deferred acquisition costs had those
gains or losses actually been realized, the related unamortized deferred
acquisition costs are recorded as a reduction of the unrealized gains or losses
included in shareholder's equity.
INCOME TAXES
The income tax provision is calculated under the liability method and presented
net of reinsurance. Deferred tax assets and liabilities are recorded based on
the difference between the financial statement and tax bases of assets and
liabilities at the enacted tax rates. The principal assets and liabilities
giving rise to such differences are insurance reserves and deferred acquisition
costs. Deferred income taxes also arise from unrealized capital gains and losses
on fixed income securities carried at fair value.
SEPARATE ACCOUNTS
The Company issues flexible premium deferred variable annuities, the assets and
liabilities of which are legally segregated and reflected in the accompanying
statements of financial position as assets and liabilities of the Separate
Accounts. The Company's Separate Accounts consist of: Allstate Life of New York
Variable Annuity Account, Allstate Life of New York Variable Annuity Account II
and Allstate Life of New York Separate Account A. Each of the Separate Accounts
are unit investment trusts registered with the Securities and Exchange
Commission.
F-16
<PAGE>
Assets of the Separate Accounts are carried at fair value. Investment income and
realized capital gains and losses of the Separate Accounts accrue directly to
the contractholders and, therefore, are not included in the Company's statements
of operations and comprehensive income. Revenues to the Company from the
Separate Accounts consist of contract maintenance fees, administration fees and
mortality and expense risk charges.
RESERVES FOR LIFE-CONTINGENT CONTRACT BENEFITS
The reserve for life-contingent contract benefits, which relates to traditional
life insurance, group retirement annuities and structured settlement annuities
with life contingencies, disability insurance and accident insurance, is
computed on the basis of assumptions as to future investment yields, mortality,
morbidity, terminations and expenses. These assumptions, which for traditional
life insurance are applied using the net level premium method, include
provisions for adverse deviation and generally vary by such characteristics as
type of coverage, year of issue and policy duration. Reserve interest rates
ranged from 4.0% to 11.0% during 1998. To the extent that unrealized gains on
fixed income securities would result in a premium deficiency had those gains
actually been realized, the related increase in reserves is recorded as a
reduction of the unrealized gains included in shareholder's equity.
CONTRACTHOLDER FUNDS
Contractholder funds arise from the issuance of individual or group policies and
contracts that include an investment component, including most fixed annuities
and universal life policies. Payments received are recorded as interest-bearing
liabilities. Contractholder funds are equal to deposits received and interest
credited to the benefit of the contractholder less withdrawals, mortality
charges and administrative expenses. During 1998, credited interest rates on
contractholder funds ranged from 3.46% to 11.00% for those contracts with fixed
interest rates and from 3.50% to 7.75% for those with flexible rates.
OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS
Commitments to extend mortgage loans have only off-balance-sheet risk because
their contractual amounts are not recorded in the Company's statements of
financial position.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
NEW ACCOUNTING STANDARDS
In 1998, the Company adopted Statement of Financial Accounting Standards
("SFAS") No. 125, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishment of Liabilities" under the guidance of SFAS No. 127 "Deferral
of the Effective Date of Certain Provisions of FASB Statement No. 125". As a
result, the Company has recorded an asset and corresponding liability
representing the collateral received in connection with the Company's securities
lending program.
In 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive Income."
Comprehensive income is a measurement of certain changes in shareholder's equity
that result from transactions and other economic events other than transactions
with shareholders. For the Company, these consist of changes in unrealized gains
and losses on the investment portfolio (See Note 9).
In 1998, the Company adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." SFAS 131 redefines how segments are
determined and requires additional segment disclosures for both annual and
interim financial reporting. The Company has identified itself as a single
operating segment.
F-17
<PAGE>
PENDING ACCOUNTING STANDARDS
In December 1997, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position ("SOP")
97-3, "Accounting by Insurance and Other Enterprises for Insurance-related
Assessments." The SOP is required to be adopted in 1999. The SOP provides
guidance concerning when to recognize a liability for insurance-related
assessments and how those liabilities should be measured. Specifically,
insurance-related assessments should be recognized as liabilities when all of
the following criteria have been met: 1) an assessment has been imposed or it is
probable that an assessment will be imposed, 2) the event obligating an entity
to pay an assessment has occurred and 3) the amount of the assessment can be
reasonably estimated. The Company is currently evaluating the effects of this
SOP on its accounting for insurance-related assessments. Certain information
required for compliance is not currently available and therefore the Company is
studying alternatives for estimating the accrual. In addition, industry groups
are working to improve the information available. Adoption of this standard is
not expected to be material to the results of operations or financial position
of the Company.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133
replaces existing pronouncements and practices with a single, integrated
accounting framework for derivatives and hedging activities. The requirements
are effective for fiscal years beginning after June 15, 1999. Earlier
application is encouraged but is only permitted as of the beginning of any
fiscal quarter after issuance. This statement requires that all derivatives be
recognized on the balance sheet at fair value. Derivatives that are not hedges
must be adjusted to fair value through income. If the derivative is a hedge,
depending on the nature of the hedge, changes in the fair value of derivatives
will either be offset against the change in fair value of the hedged assets,
liabilities, or firm commitments through earnings or recognized in other
comprehensive income until the hedged item is recognized in earnings.
Additionally, the change in fair value of a derivative which is not effective as
a hedge will be immediately recognized in earnings. The Company expects to adopt
SFAS No. 133 as of January 1, 2000. Based on existing interpretations of the
requirements of SFAS No. 133, the impact of adoption is not expected to be
material to the results of operations or financial position of the Company.
3. RELATED PARTY TRANSACTIONS
REINSURANCE
The Company has reinsurance agreements with ALIC in order to limit aggregate and
single exposure on large risks. A portion of the Company's premiums and policy
benefits are ceded to ALIC and reflected net of such reinsurance in the
statements of operations and comprehensive income. Reinsurance recoverable and
the related reserve for life-contingent contract benefits and contractholder
funds are reported separately in the statements of financial position. The
Company continues to have primary liability as the direct insurer for risks
reinsured.
F-18
<PAGE>
The following amounts were ceded to the ALIC under reinsurance agreements.
YEAR ENDED DECEMBER 31,
-----------------------
($ in thousands) 1998 1997 1996
---- ---- ----
Premiums $ 2,519 $ 2,171 $ 1,383
Policy benefits 315 327 1,662
Included in the reinsurance recoverable at December 31, 1998 and 1997 are
amounts due from the ALIC of $532 and $342, respectively.
STRUCTURED SETTLEMENT ANNUITIES
AIC, through an affiliate, purchased $12,747, $12,766 and $15,610 of structured
settlement annuities from the Company in 1998, 1997 and 1996, respectively. Of
these amounts, $5,152, $3,468 and $8,517 relate to structured settlement
annuities with life contingencies and are included in premium income in 1998,
1997 and 1996, respectively. Additionally, the reserve for life-contingent
contract benefits was increased by approximately 94% of such premium received in
each of these years.
BUSINESS OPERATIONS
The Company utilizes services performed by AIC and ALIC and business facilities
owned or leased, and operated by AIC in conducting its business activities. The
Company reimburses AIC and ALIC for the operating expenses incurred on behalf of
the Company. The cost to the Company is determined by various allocation methods
and is primarily related to the level of services provided. Operating expenses,
including compensation and retirement and other benefit programs, allocated to
the Company were $32,326, $27,632 and $23,134 in 1998, 1997 and 1996,
respectively. A portion of these expenses relate to the acquisition of life and
annuity business which are deferred and amortized over the contract period.
4. INVESTMENTS
FAIR VALUES
The amortized cost, gross unrealized gains and losses, and fair value for fixed
income securities are as follows:
<TABLE>
<CAPTION>
AMORTIZED GROSS UNREALIZED FAIR
COST GAINS LOSSES VALUE
---- ----- ------ -----
<S> <C> <C> <C> <C>
AT DECEMBER 31, 1998
U.S. government and agencies $ 443,930 $ 179,455 $ (1) $ 623,384
Municipal 31,617 2,922 (19) 34,520
Corporate 848,289 121,202 (899) 968,592
Mortgage-backed securities 291,520 14,294 (700) 305,114
Asset-backed securities 33,616 869 (28) 34,457
---------- ---------- ---------- ----------
Total fixed income securities $1,648,972 $ 318,742 $ (1,647) $1,966,067
========== ========== ========== ==========
AT DECEMBER 31, 1997
U.S. government and agencies $ 416,203 $ 126,824 $ (212) $ 542,815
Municipal 35,382 2,449 (22) 37,809
Corporate 803,935 103,700 (479) 907,156
Mortgage-backed securities 215,465 13,442 (166) 228,741
Asset-backed securities 39,125 642 (31) 39,736
---------- ---------- ---------- ----------
Total fixed income securities $1,510,110 $ 247,057 $ (910) $1,756,257
========== ========== ========== ==========
</TABLE>
F-19
<PAGE>
SCHEDULED MATURITIES
The scheduled maturities for fixed income securities are as follows at December
31, 1998:
AMORTIZED FAIR
COST VALUE
---- -----
Due in one year or less $ 14,903 $ 15,087
Due after one year through five years 79,333 84,372
Due after five years through ten years 227,770 250,208
Due after ten years 1,001,830 1,276,829
---------- ----------
1,323,836 1,626,496
Mortgage- and asset-backed securities 325,136 339,571
---------- ----------
Total $1,648,972 $1,966,067
========== ==========
Actual maturities may differ from those scheduled as a result of prepayments by
the issuers.
NET INVESTMENT INCOME
YEAR ENDED DECEMBER, 31 1998 1997 1996
---- ---- ----
Fixed income securities $124,100 $116,763 $104,583
Mortgage loans 10,309 7,896 7,113
Other 2,940 2,200 2,942
-------- -------- --------
Investment income, before expense 137,349 126,859 114,638
Investment expense 2,936 1,972 1,776
-------- -------- --------
Net investment income $134,413 $124,887 $112,862
======== ======== ========
REALIZED CAPITAL GAINS AND LOSSES
YEAR ENDED DECEMBER 31, 1998 1997 1996
---- ---- ----
Fixed income securities $ 4,755 $ 955 $(1,522)
Mortgage loans (65) (221) (59)
Other 7 (33) --
------- ------- -------
Realized capital gains and losses 4,697 701 (1,581)
Income tax 1,644 245 (553)
------- ------- -------
Realized capital gains and losses, after tax $ 3,053 $ 456 $(1,028)
======= ======= =======
Excluding calls and prepayments, gross gains of $2,905, $471 and $480 and gross
losses of $164, $105 and $2,308 were realized on sales of fixed income
securities during 1998, 1997 and 1996, respectively.
F-20
<PAGE>
UNREALIZED NET CAPITAL GAINS
Unrealized net capital gains on fixed income securities included in
shareholder's equity at December 31, 1998 are as follows:
<TABLE>
<CAPTION>
COST/ GROSS UNREALIZED UNREALIZED
AMORTIZED COST FAIR VALUE GAINS LOSSES NET GAINS
-------------- ---------- ----- ------ ---------
<S> <C> <C> <C> <C> <C>
Fixed income securities $ 1,648,972 $ 1,966,067 $ 318,742 $ (1,647) $ 317,095
=========== =========== =========== ===========
Reserve for life-contingent
contract benefits (187,706)
Deferred income taxes (44,642)
Deferred acquisition costs
and other (1,841)
-----------
Unrealized net capital gains $ 82,906
===========
</TABLE>
<TABLE>
<CAPTION>
CHANGE IN UNREALIZED NET CAPITAL GAINS
YEAR ENDED DECEMBER 31, 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Fixed income securities $ 70,948 $ 123,519 $ (82,847)
Reserves for life contingent-contract benefits (42,251) (80,155) 24,300
Deferred income taxes (9,922) (14,876) 20,224
Deferred acquisition costs and other (348) (861) 762
--------- --------- ---------
Increase (decrease) in unrealized net
capital gains $ 18,427 $ 27,627 $ (37,561)
========= ========= =========
</TABLE>
INVESTMENT LOSS PROVISIONS AND VALUATION ALLOWANCES
Pretax provisions for investment losses, principally relating to other than
temporary declines in value of fixed income securities and valuation allowances
on mortgage loans were $114, $261 and $208 in 1998, 1997 and 1996, respectively.
MORTGAGE LOAN IMPAIRMENT
A mortgage loan is impaired when it is probable that the Company will be unable
to collect all amounts due according to the contractual terms of the loan
agreement.
The Company had no impaired loans at December 31, 1998, 1997 and 1996.
Interest income is recognized on a cash basis for impaired loans carried at the
fair value of the collateral, beginning at the time of impairment. For other
impaired loans, interest is accrued based on the net carrying value. There were
no impaired loans during 1998 and 1997. In 1996, the Company recognized interest
income of $281 on impaired loans, which was received in cash during the year.
The average recorded investment in impaired loans was $5,154 during 1996.
Valuation allowances for mortgage loans at December 31, 1998, 1997 and 1996 were
$600, $486 and $225, respectively. There were no direct write-downs of mortgage
loan valuation allowances for the years ended December 31, 1998 and 1997. For
the year ended December 31, 1996, direct write-downs of mortgage loan valuation
allowances were $1,431. Net (reductions) additions to the mortgage loan
valuation allowances were $114, $261 and $(296) for the years ended December 31,
1998, 1997 and 1996, respectively.
F-21
<PAGE>
INVESTMENT CONCENTRATION FOR MUNICIPAL BOND AND COMMERCIAL MORTGAGE PORTFOLIOS
AND OTHER INVESTMENT INFORMATION
The Company maintains a diversified portfolio of municipal bonds. The largest
concentrations in the portfolio are presented below. Except for the following,
holdings in no other state exceeded 5% of the portfolio at December 31, 1998 and
1997:
(% of municipal bond portfolio carrying value) 1998 1997
---- ----
Ohio 30.2% 28.4%
Illinois 21.1 19.8
California 17.4 22.7
Maryland 8.2 8.0
Minnesota 5.9 5.5
New York 5.7 5.4
Maine 5.3 5.6
The Company's mortgage loans are collateralized by a variety of commercial real
estate property types located throughout the United States. Substantially all of
the commercial mortgage loans are non-recourse to the borrower. The states with
the largest portion of the commercial mortgage loan portfolio are listed below.
Except for the following, holdings in no other state exceeded 5% of the
portfolio at December 31, 1998 and 1997:
(% of commercial mortgage portfolio carrying value) 1998 1997
---- ----
California 41.9% 47.7%
New York 26.3 30.5
Illinois 15.8 15.3
New Jersey 6.9 -
Pennsylvania 6.2 3.3
The types of properties collateralizing the commercial mortgage loans at
December 31, are as follows:
(% of commercial mortgage portfolio carrying value) 1998 1997
---- ----
Retail 39.5% 38.8%
Warehouse 19.2 25.4
Apartment complex 18.5 14.9
Office buildings 11.7 15.3
Industrial 5.5 4.9
Other 5.6 .7
------ ------
100.0% 100.0%
===== =====
F-22
<PAGE>
The contractual maturities of the commercial mortgage loan portfolio as of
December 31, 1998, for loans that were not in foreclosure are as follows:
NUMBER OF LOANS CARRYING VALUE PERCENT
--------------- -------------- -------
1999 1 $ 2,832 2.0%
2000 4 7,762 5.3
2001 5 7,066 4.9
2002 2 6,154 4.2
Thereafter 31 121,281 83.6
-------- -------- --------
Total 43 $145,095 100.0%
======== ======== ========
In 1998, there were no commercial mortgage loans which were contractually due.
SECURITIES ON DEPOSIT
At December 31, 1998, fixed income securities with a carrying value of $2,109
were on deposit with regulatory authorities as required by law.
5. FINANCIAL INSTRUMENTS
In the normal course of business, the Company invests in various financial
assets, incurs various financial liabilities and enters into agreements
involving derivative financial instruments and other off-balance-sheet financial
instruments. The fair value estimates of financial instruments presented below
are not necessarily indicative of the amounts the Company might pay or receive
in actual market transactions. Potential taxes and other transaction costs have
not been considered in estimating fair value. The disclosures that follow do not
reflect the fair value of the Company as a whole since a number of the Company's
significant assets (including deferred acquisition costs and reinsurance
recoverables) and liabilities (including traditional life and universal
life-type insurance reserves and deferred income taxes) are not considered
financial instruments and are not carried at fair value. Other assets and
liabilities considered financial instruments such as accrued investment income
and cash are generally of a short-term nature. Their carrying values are assumed
to approximate fair value.
FINANCIAL ASSETS
The carrying value and fair value of financial assets at December 31, are as
follows:
1998 1997
---- ----
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
----- ----- ----- -----
Fixed income securities $1,966,067 $1,966,067 $1,756,257 $1,756,257
Mortgage loans 145,095 154,872 114,627 120,849
Short-term investments 76,127 76,127 9,513 9,513
Policy loans 29,620 29,620 27,600 27,600
Separate Accounts 366,247 366,247 308,595 308,595
Carrying value and fair value include the effects of derivative financial
instruments where applicable.
F-23
<PAGE>
Fair values for fixed income securities are based on quoted market prices where
available. Non-quoted securities are valued based on discounted cash flows using
current interest rates for similar securities. Mortgage loans are valued based
on discounted contractual cash flows. Discount rates are selected using current
rates at which similar loans would be made to borrowers with similar
characteristics, using similar properties as collateral. Loans that exceed 100%
loan-to-value are valued at the estimated fair value of the underlying
collateral. Short-term investments are highly liquid investments with maturities
of less than one year whose carrying value approximates fair value.
The carrying value of policy loans approximates its fair value. Separate
Accounts assets are carried in the statements of financial position at fair
value based on quoted market prices.
FINANCIAL LIABILITIES
The carrying value and fair value of financial liabilities at December 31, are
as follows:
1998 1997
---- ----
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
----- ----- ----- -----
Contractholder funds on
investment contracts $512,239 $518,448 $437,449 $466,136
Separate Accounts 366,247 366,247 308,595 308,595
The fair value of contractholder funds on investment contracts is based on the
terms of the underlying contracts. Reserves on investment contracts with no
stated maturities (single premium and flexible premium deferred annuities) are
valued at the account balance less surrender charges. The fair value of
immediate annuities and annuities without life contingencies with fixed terms is
estimated using discounted cash flow calculations based on interest rates
currently offered for contracts with similar terms and durations. Separate
Accounts liabilities are carried at the fair value of the underlying assets.
DERIVATIVE FINANCIAL INSTRUMENTS
The only derivative financial instruments used by the Company are interest rate
futures contracts. The Company primarily uses this derivative financial
instrument to reduce its exposure to market risk, specifically interest rate
risk, in conjunction with asset/liability management. The Company does not hold
or issue these instruments for trading purposes.
The following table summarizes the contract amount, credit exposure, fair value
and carrying value of the Company's derivative financial instruments:
CARRYING
VALUE
CONTRACT CREDIT FAIR ASSETS/
AMOUNT EXPOSURE VALUE (LIABILITIES)
------ -------- ----- -------------
AT DECEMBER 31, 1998
- --------------------
Financial futures contracts $15,000 $ -- $ (15) $ (223)
AT DECEMBER 31, 1997
- --------------------
Financial futures contracts $29,800 $ -- $ (153) $ (810)
Carrying value is representative of deferred gains and losses.
F-24
<PAGE>
The contract amounts are used to calculate the exchange of contractual payments
under the agreements and are not representative of the potential for gain or
loss on these agreements.
Credit exposure represents the Company's potential loss if all of the
counterparties failed to perform under the contractual terms of the contracts
and all collateral, if any, became worthless. This exposure is measured by the
fair value of contracts with a positive fair value at the reporting date. The
Company manages its exposure to credit risk primarily by establishing risk
control limits. To date, the Company has not incurred any losses on derivative
financial instruments due to counterparty nonperformance.
Fair value is the estimated amount that the Company would receive (pay) to
terminate or assign the contracts at the reporting date, thereby taking into
account the current unrealized gains or losses of open contracts. Dealer and
exchange quotes are used to value the Company's derivatives.
Financial futures are commitments to either purchase or sell designated
financial instruments at a future date for a specified price or yield. They may
be settled in cash or through delivery. As part of its asset/liability
management, the Company generally utilizes futures contracts to manage its
market risk related to anticipatory investment purchases and sales, as well as
other risk management purposes. Futures used as hedges of anticipatory
transactions pertain to identified transactions which are probable to occur and
are generally completed within 90 days. Futures contracts have limited
off-balance-sheet credit risk as they are executed on organized exchanges and
require security deposits, as well as the daily cash settlement of margins.
Market risk is the risk that the Company will incur losses due to adverse
changes in market rates and prices. Market risk exists for all of the derivative
financial instruments that the Company currently holds, as these instruments may
become less valuable due to adverse changes in market conditions. The Company
mitigates this risk through established risk control limits set by senior
management. In addition, the change in the value of the Company's derivative
financial instruments designated as hedges are generally offset by the change in
the value of the related assets and liabilities.
OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS
Commitments to extend mortgage loans are agreements to lend to a borrower
provided there is no violation of any condition established in the contract. The
Company enters these agreements to commit to future loan fundings at a
predetermined interest rate. Commitments generally have fixed expiration dates
or other termination clauses. Commitments to extend mortgage loans, which are
secured by the underlying properties, are valued based on estimates of fees
charged by other institutions to make similar commitments to similar borrowers.
The Company had no mortgage loan commitments at December 31, 1998. At December
31, 1997 the Company had $18,000 in mortgage loan commitments which had a fair
value of $180.
F-25
<PAGE>
6. INCOME TAXES
The Company joins the Corporation and its other eligible domestic subsidiaries
(the "Allstate Group") in the filing of a consolidated federal income tax return
and is party to a federal income tax allocation agreement (the "Allstate Tax
Sharing Agreement"). Under the Allstate Tax Sharing Agreement, the Company pays
to or receives from the Corporation the amount, if any, by which the Allstate
Group's federal income tax liability is affected by virtue of inclusion of the
Company in the consolidated federal income tax return. Effectively, this results
in the Company's annual income tax provision being computed, with adjustments,
as if the Company filed a separate return.
Prior to Sears, Roebuck and Co.'s ("Sears") distribution ("Sears distribution")
on June 30, 1995 of its 80.3% ownership in the Corporation to Sears
shareholders, the Allstate Group joined with Sears and its domestic business
units (the "Sears Group") in the filing of a consolidated federal income tax
return (the "Sears Tax Group") and were parties to a federal income tax
allocation agreement (the "Tax Sharing Agreement"). Under the Tax Sharing
Agreement, the Company, through the Corporation, paid to or received from the
Sears Group the amount, if any, by which the Sears Tax Group's federal income
tax liability was affected by virtue of inclusion of the Company in the
consolidated federal income tax return.
As a result of the Sears distribution, the Allstate Group was no longer included
in the Sears Tax Group, and the Tax Sharing Agreement was terminated.
Accordingly, the Allstate Group and Sears Group entered into a new tax sharing
agreement, which adopts many of the principles of the Tax Sharing Agreement and
governs their respective rights and obligations with respect to federal income
taxes for all periods prior to the Sears distribution, including the treatment
of audits of tax returns for such periods.
The Internal Revenue Service ("IRS") has completed its review of the Allstate
Group's federal income tax returns through the 1993 tax year. Any adjustments
that may result from IRS examinations of tax returns are not expected to have a
material impact on the financial position, liquidity or results of operations of
the Company.
The components of the deferred income tax assets and liabilities at December 31,
are as follows:
1998 1997
---- ----
DEFERRED ASSETS
Life and annuity reserves $ 41,073 $ 34,084
Difference in tax bases of investments -- 742
Discontinued operations 364 364
Other postretirement benefits 328 352
Other assets 2,023 255
-------- --------
Total deferred assets 43,788 35,797
-------- --------
DEFERRED LIABILITIES
Unrealized net capital gains (44,642) (34,720)
Deferred acquisition costs (20,573) (15,821)
Difference in tax bases of investments (1,784) --
Prepaid commission expense (790) (792)
Other liabilities (1,448) (1,454)
-------- --------
Total deferred liabilities (69,237) (52,787)
-------- --------
Net deferred liability $(25,449) $(16,990)
======== ========
F-26
<PAGE>
Although realization is not assured, management believes it is more likely than
not that the deferred tax assets will be realized based on the assumptions that
certain levels of income will be achieved.
The components of income tax expense for the year ended December 31, are as
follows:
1998 1997 1996
-------- -------- --------
Current $ 13,679 $ 14,874 $ 11,411
Deferred 1,255 (1,578) 257
-------- -------- --------
Total income tax expense $ 14,934 $ 13,296 $ 11,668
======== ======== ========
The Company paid income taxes of $3,788, $13,350 and $11,968 in 1998, 1997 and
1996, respectively. The Company had a current income tax liability of $14,029
and $1,419 at December 31, 1998 and 1997, respectively.
A reconciliation of the statutory federal income tax rate to the effective
income tax rate on income from operations for the year ended December 31, is as
follows:
1998 1997 1996
------ ------ ------
Statutory federal income tax rate 35.0% 35.0% 35.0%
State income tax expense 1.6 2.2 2.4
Other (1.5) (.3) (1.2)
------ ------ ------
Effective income tax rate 35.1% 36.9% 36.2%
====== ====== ======
Prior to January 1, 1984, the Company was entitled to exclude certain amounts
from taxable income and accumulate such amounts in a "policyholder surplus"
account. The balance in this account at December 31, 1998, approximately $389,
will result in federal income taxes payable of $136 if distributed by the
Company. No provision for taxes has been made as the Company has no plan to
distribute amounts from this account. No further additions to the account have
been permitted since the Tax Reform Act of 1984.
7. STATUTORY FINANCIAL INFORMATION
PERMITTED STATUTORY ACCOUNTING PRACTICES
The Company prepares its statutory financial statements in accordance with
accounting principles and practices prescribed or permitted by the New York
Department of Insurance. Prescribed statutory accounting practices include a
variety of publications of the National Association of Insurance Commissioners
("NAIC"), as well as state laws, regulations and general administrative rules.
Permitted statutory accounting practices encompass all accounting practices not
so prescribed. The Company does not follow any permitted statutory accounting
practices that have a significant impact on statutory surplus or statutory net
income.
The NAIC's codification initiative has produced a comprehensive guide of revised
statutory accounting principles. While the NAIC has approved a January 1, 2001
implementation date for the newly developed guidance, companies must adhere to
the implementation date adopted by their state of domicile. The Company's state
of domicile, New York, is continuing its comparison of codification and current
statutory accounting requirements to determine necessary revisions to existing
state laws and regulations. The requirements are not expected to have a material
impact on the statutory surplus of the Company.
F-27
<PAGE>
DIVIDENDS
The ability of the Company to pay dividends is dependent on business conditions,
income, cash requirements of the Company and other relevant factors. Under New
York Insurance Law, a notice of intention to distribute any dividend must be
filed with the New York Superintendent of Insurance not less than 30 days prior
to the distribution. Such proposed declaration is subject to the
Superintendent's disapproval.
8. BENEFIT PLANS
PENSION PLANS
Defined benefit pension plans, sponsored by the Corporation, cover domestic
full-time employees and certain part-time employees. Benefits under the pension
plans are based upon the employee's length of service, average annual
compensation and estimated social security retirement benefits. The
Corporation's funding policy for the pension plans is to make annual
contributions in accordance with accepted actuarial cost methods. The costs to
the Company included in net income were $382, $597 and $490 for the pension
plans in 1998, 1997 and 1996, respectively.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Corporation also provides certain health care and life insurance benefits
for retired employees. Qualified employees may become eligible for these
benefits if they retire in accordance with the Corporation's established
retirement policy and are continuously insured under the Corporation's group
plans or other approved plans for ten or more years prior to retirement. The
Corporation shares the cost of the retiree medical benefits with retirees based
on years of service, with the Corporation's share being subject to a 5% limit on
annual medical cost inflation after retirement. The Corporation's postretirement
benefit plans currently are not funded. The Corporation has the right to modify
or terminate these plans.
PROFIT SHARING FUND
Employees of the Corporation and its domestic subsidiaries are also eligible to
become members of The Savings and Profit Sharing Fund of Allstate Employees
("Allstate Plan"). The Corporation's contributions are based on the
Corporation's matching obligation and performance.
The Company's contribution to the Allstate Plan was $567, $164 and $111 in 1998,
1997 and 1996, respectively.
F-28
<PAGE>
9. OTHER COMPREHENSIVE INCOME
The components of other comprehensive income on a pretax and after-tax basis for
the year ended December 31, are as follows:
<TABLE>
1998 1997 1996
------------------------------- ------------------------------------------------------------------
After- After- After-
Pretax Tax tax Pretax Tax tax Pretax Tax tax
------ --- --- ------ --- --- ------ --- ---
Unrealized capital gains
and losses:
- --------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unrealized holding gains
(losses) arising during
the period $75,817 $(26,536) $49,281 $ 124,702 $(43,645) $ 81,057 $(86,096) $ 30,133 $(55,963)
Adjustments to unrealized
capital gains and losses
arising during the period:
Deferred acquisition costs (348) 122 (226) (861) 301 (560) 762 (267) 495
Reserve for life insurance
policy benefits (42,251) 14,788 (27,463) (80,155) 28,054 (52,101) 24,300 (8,505) 15,795
------- -------- ------- --------- -------- -------- -------- -------- --------
Net unrealized holding
gains arising during the
period 33,218 (11,626) 21,592 43,686 (15,290) 28,396 (61,034) 21,361 (39,673)
------- -------- ------- --------- -------- -------- -------- -------- --------
Less: reclassification
adjustment for realized
net capital gains included
in net income 4,869 (1,704) 3,165 1,183 (414) 769 (3,249) 1,137 (2,112)
------- -------- ------- --------- -------- -------- -------- -------- --------
Unrealized net capital
gains (losses) 28,349 (9,922) 18,427 42,503 (14,876) 27,627 (57,785) 20,224 (37,561)
------- -------- ------- --------- -------- -------- -------- -------- --------
OTHER COMPREHENSIVE
INCOME $28,349 $ (9,922) $18,427 $ 42,503 $(14,876) $ 27,627 $(57,785) $ 20,224 $(37,561)
======= ======== ======= ========= ======== ======== ======== ======== ========
</TABLE>
10. COMMITMENTS AND CONTINGENT LIABILITIES
REGULATIONS AND LEGAL PROCEEDINGS
The Company's business is subject to the effect of a changing social, economic
and regulatory environment. Public and regulatory initiatives have varied and
have included employee benefit regulation, controls on medical care costs,
removal of barriers preventing banks from engaging in the securities and
insurance business, tax law changes affecting the taxation of insurance
companies, the tax treatment of insurance products and its impact on the
relative desirability of various personal investment vehicles, and proposed
legislation to prohibit the use of gender in determining insurance rates and
benefits. The ultimate changes and eventual effects, if any, of these
initiatives are uncertain.
From time to time the Company is involved in pending and threatened litigation
in the normal course of its business in which claims for monetary damages are
asserted. In the opinion of management, the ultimate liability, if any, arising
from such pending or threatened litigation is not expected to have a material
effect on the results of operations, liquidity or financial position of the
Company.
F-29
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
SCHEDULE IV--REINSURANCE
($ in thousands)
GROSS NET
YEAR ENDED DECEMBER 31, 1998 AMOUNT CEDED AMOUNT
- ---------------------------- ------ ----- ------
Life insurance in force $12,656,826 $ 857,500 $11,799,326
=========== =========== ===========
Premiums and contract charges:
Life and annuities $ 116,678 $ 2,541 $ 114,137
Accident and health 5,578 663 4,915
----------- ----------- -----------
$ 122,256 $ 3,204 $ 119,052
=========== =========== ===========
GROSS NET
YEAR ENDED DECEMBER 31, 1997 AMOUNT CEDED AMOUNT
- ---------------------------- ------ ----- ------
Life insurance in force $11,339,990 $ 721,040 $10,618,950
=========== =========== ===========
Premiums and contract charges:
Life and annuities $ 116,167 $ 2,185 $ 113,982
Accident and health 5,883 902 4,981
----------- ----------- -----------
$ 122,050 $ 3,087 $ 118,963
=========== =========== ===========
GROSS NET
YEAR ENDED DECEMBER 31, 1996 AMOUNT CEDED AMOUNT
- ---------------------------- ------ ----- ------
Life insurance in force $ 9,962,300 $ 553,628 $ 9,408,672
=========== =========== ===========
Premiums and contract charges:
Life and annuities $ 114,296 $ 1,398 $ 112,898
Accident and health 5,083 875 4,208
----------- ----------- -----------
$ 119,379 $ 2,273 $ 117,106
=========== =========== ===========
F-30
<PAGE>
<TABLE>
<CAPTION>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
SCHEDULE V--VALUATION AND QUALIFYING ACCOUNTS
($ in thousands)
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
OF PERIOD EXPENSES DEDUCTIONS PERIOD
--------- -------- ---------- ------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1998
- ----------------------------
Allowance for estimated losses
on mortgage loans $ 486 $ 114 $ - $ 600
============ ============ ============ ============
YEAR ENDED DECEMBER 31, 1997
- ----------------------------
Allowance for estimated losses
on mortgage loans $ 225 $ 261 $ - $ 486
============ ============ ============ ============
YEAR ENDED DECEMBER 31, 1996
- ----------------------------
Allowance for estimated losses
on mortgage loans $ 1,952 $ (296) $ 1,431 $ 225
============ ============ ============ ============
</TABLE>
F-31
<PAGE>
ALLSTATE LIFE OF NEW YORK SEPARATE ACCOUNT A
FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 1999
(unaudited)
<PAGE>
<TABLE>
<CAPTION>
ALLSTATE LIFE OF NEW YORK SEPARATE ACCOUNT A
STATEMENT OF NET ASSETS
September 30, 1999
- --------------------------------------------------------------------------------------------------------
(unaudited)
<S> <C>
ASSETS
Allocation to Sub-Accounts investing in the AIM Variable Insurance Funds, Inc.:
Capital Appreciation, 234,394 shares (cost $5,524,240) $ 6,291,130
Diversified Income, 233,413 shares (cost $2,586,488) 2,497,524
Global Utilities, 48,852 shares (cost $844,756) 899,856
Government Securities, 172,071 shares (cost $1,921,416) 1,897,943
Growth, 260,910 shares (cost $6,117,965) 7,141,106
Growth and Income, 434,796 shares (cost $9,569,076) 11,243,829
International Equity, 148,528 shares (cost $2,813,370) 3,184,447
Money Market, 1,518,289 shares (cost $1,518,289) 1,518,289
Value, 567,592 shares (cost $14,677,368) 16,437,465
------------------
Total Assets 51,111,589
LIABILITIES
Payable to Allstate Life Insurance Company of New York:
Accrued contract maintenance charges 14,729
------------------
Net Assets $ 51,096,860
==================
</TABLE>
See notes to financial statements
2
<PAGE>
<TABLE>
<CAPTION>
ALLSTATE LIFE OF NEW YORK SEPARATE ACCOUNT A
STATEMENTS OF OPERATIONS
- -----------------------------------------------------------------------------------------------------------------
(unaudited)
AIM Variable Insurance Funds, Inc. Sub-Accounts
--------------------------------------------------------------------
For the Nine Months Ended September 30, 1999
--------------------------------------------------------------------
Capital Diversified Global Government
Appreciation Income Utilities Securities Growth
----------- ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ - $ - $ - $ - $ -
Charges from Allstate Life Insurance Company:
of New York
Mortality and expense risk (50,929) (19,586) (5,942) (27,184) (54,944)
Administrative expense (3,772) (1,451) (440) (2,014) (4,070)
----------- ------------ ------------ ----------- -----------
Net investment income (loss) (54,701) (21,037) (6,382) (29,198) (59,014)
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of investments:
Proceeds from sales 135,739 328,134 78,167 2,002,538 219,395
Cost of investments sold 128,686 338,962 70,930 2,132,604 198,369
----------- ------------ ------------ ----------- -----------
Net realized gains (losses) 7,053 (10,828) 7,237 (130,066) 21,026
----------- ------------ ------------ ----------- -----------
Change in unrealized gains (losses) 291,759 (30,396) 23,953 (19,311) 451,102
----------- ------------ ------------ ----------- -----------
Net gains (losses) on investments 298,812 (41,224) 31,190 (149,377) 472,128
----------- ------------ ------------ ----------- -----------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $ 244,111 $ (62,261) $ 24,808 $ (178,575) $ 413,114
=========== ============ ============ =========== ===========
</TABLE>
See notes to financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
ALLSTATE LIFE OF NEW YORK SEPARATE ACCOUNT A
STATEMENTS OF OPERATIONS
- ----------------------------------------------------------------------------------------------------
(unaudited)
AIM Variable Insurance Funds, Inc. Sub-Accounts
------------------------------------------------------
For the Nine Months Ended September 30, 1999
------------------------------------------------------
Growth and International Money
Income Equity Market Value
----------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends $ - $ - $ 40,384 $ -
Charges from Allstate Life Insurance Company:
of New York
Mortality and expense risk (87,617) (24,167) (12,311) (108,944)
Administrative expense (6,490) (1,790) (912) (8,070)
----------- ------------ ------------ -----------
Net investment income (loss) (94,107) (25,957) 27,161 (117,014)
REALIZED AND UNREALIZED GAINS
(LOSSES) ON INVESTMENTS
Realized gains (losses) from sales of investments:
Proceeds from sales 328,635 130,636 243,291 242,116
Cost of investments sold 263,594 120,919 243,291 214,182
----------- ------------ ------------ -----------
Net realized gains (losses) 65,041 9,717 - 27,934
----------- ------------ ------------ -----------
Change in unrealized gains (losses) 490,792 225,562 - 667,107
----------- ------------ ------------ -----------
Net gains (losses) on investments 555,833 235,279 - 695,041
----------- ------------ ------------ -----------
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS $ 461,726 $ 209,322 $ 27,161 $ 578,027
=========== ============ ============ ===========
</TABLE>
See notes to financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
ALLSTATE LIFE OF NEW YORK SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
For the Nine Months Ended September 30, 1999
- -----------------------------------------------------------------------------------------------------------------------------------
(unaudited)
AIM Variable Insurance Funds, Inc. Sub-Accounts
-----------------------------------------------------------------------------
Capital Diversified Global Government
Appreciation Income Utilities Securities Growth
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ (54,701) $ (21,037) $ (6,382) $ (29,198) $ (59,014)
Net realized gains (losses) 7,053 (10,828) 7,237 (130,066) 21,026
Change in unrealized gains (losses) 291,759 (30,396) 23,953 (19,311) 451,102
-------------- -------------- -------------- -------------- --------------
Change in net assets resulting from operations 244,111 (62,261) 24,808 (178,575) 413,114
-------------- -------------- -------------- -------------- --------------
FROM CAPITAL TRANSACTIONS
Deposits 1,470,908 975,385 540,379 558,978 2,356,996
Benefit payments (7,042) - - - -
Payments on termination (155,912) (124,328) (12,782) (394,522) (246,175)
Contract maintenance charges (1,967) (646) (271) 145 (2,202)
Transfers among the sub-accounts
and with the Fixed Account - net 435,084 (56,168) (47,041) (1,660,806) 431,788
-------------- -------------- -------------- -------------- --------------
Change in net assets resulting
from capital transactions 1,741,071 794,243 480,285 (1,496,205) 2,540,407
-------------- -------------- -------------- -------------- --------------
INCREASE (DECREASE) IN NET ASSETS 1,985,182 731,982 505,093 (1,674,780) 2,953,521
NET ASSETS AT BEGINNING OF PERIOD 4,304,136 1,764,822 394,504 3,572,174 4,185,527
-------------- -------------- -------------- -------------- --------------
NET ASSETS AT END OF PERIOD $ 6,289,318 $ 2,496,804 $ 899,597 $ 1,897,394 $ 7,139,048
============== ============== ============== ============== ==============
</TABLE>
See notes to financial statements.
5
<PAGE>
<TABLE>
<CAPTION>
ALLSTATE LIFE OF NEW YORK SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
For the Nine Months Ended September 30, 1999
- --------------------------------------------------------------------------------------------------------------------------
(unaudited)
AIM Variable Insurance Funds, Inc. Sub-Accounts
-------------------------------------------------------------------
Growth and International Money
Income Equity Market Value
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
FROM OPERATIONS
Net investment income (loss) $ (94,107) $ (25,957) $ 27,161 $ (117,014)
Net realized gains (losses) 65,041 9,717 - 27,934
Change in unrealized gains (losses) 490,792 225,562 - 667,107
-------------- -------------- -------------- --------------
Change in net assets resulting from operations 461,726 209,322 27,161 578,027
-------------- -------------- -------------- --------------
FROM CAPITAL TRANSACTIONS
Deposits 4,071,293 731,642 578,144 8,582,680
Benefit payments (18,572) (8,963) - (16,566)
Payments on termination (225,697) (66,211) (44,175) (417,261)
Contract maintenance charges (3,391) (738) (414) (4,928)
Transfers among the sub-accounts
and with the Fixed Account - net 353,186 355,353 (10,917) 560,699
-------------- -------------- -------------- --------------
Change in net assets resulting
from capital transactions 4,176,819 1,011,083 522,638 8,704,624
-------------- -------------- -------------- --------------
INCREASE (DECREASE) IN NET ASSETS 4,638,545 1,220,405 549,799 9,282,651
NET ASSETS AT BEGINNING OF PERIOD 6,602,044 1,963,126 968,052 7,150,077
-------------- -------------- -------------- --------------
NET ASSETS AT END OF PERIOD $ 11,240,589 $ 3,183,531 $ 1,517,851 $ 16,432,728
============== ============== ============== ==============
</TABLE>
<PAGE>
ALLSTATE LIFE OF NEW YORK SEPARATE ACCOUNT A
Notes to Financial Statements
(unaudited)
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.
These financial statements and notes as of September 30, 1999 and for the
nine-month period ended September 30, 1999 are unaudited. The financial
statements reflect all adjustments (consisting only of normal recurring
accruals) which are, in the opinion of management, necessary for the fair
presentation of the financial position, results of operations and changes
in net assets for the interim period. These financial statements and notes
should be read in conjunction with the Allstate Life of New York Separate
Account A financial statements and notes for the period ended December 31,
1998 included in the Registration Statement on Form N-4 for the Account.
The results of operations for the interim periods should not be considered
indicative of results to be expected for the full year.
<TABLE>
<CAPTION>
2. UNITS OUTSTANDING AND ACCUMULATION UNIT VALUE
(Units in whole amounts)
Accumulation
Units Outstanding Unit Value
September 30, 1999 September 30, 1999
------------------- ------------------
<S> <C> <C>
Investments in the AIM Variable Insurance Funds, Inc.
Capital Appreciation 398,502 15.78
Diversified Income 214,435 11.64
Global Utilities 55,220 16.29
Government Securities 169,001 11.23
Growth 345,008 20.69
Growth and Income 572,044 19.65
International Equity 205,370 15.50
Money Market 133,426 11.38
Value 853,397 19.26
</TABLE>
See notes to financial statements.
6
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 1999
(UNAUDITED)
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF FINANCIAL POSITION
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- ------------
($ in thousands, except par value data) (UNAUDITED)
ASSETS
Investments
Fixed income securities, at fair value
(amortized cost $1,787,423 and $1,648,972) .... $1,899,766 $1,966,067
Mortgage loans ................................... 163,144 145,095
Short-term ....................................... 27,766 76,127
Policy loans ..................................... 30,561 29,620
---------- ----------
Total investments .......................... 2,121,237 2,216,909
Deferred acquisition costs .......................... 99,180 87,830
Accrued investment income ........................... 22,655 22,685
Reinsurance recoverables ............................ 2,093 2,210
Receivable from affiliates, net ..................... 5,530 --
Cash ................................................ 1,140 3,117
Other assets ........................................ 7,152 9,887
Separate Accounts ................................... 389,675 366,247
---------- ----------
TOTAL ASSETS ............................... $2,648,662 $2,708,885
========== ==========
LIABILITIES
Reserve for life-contingent contract benefits ....... $1,129,003 $1,208,104
Contractholder funds ................................ 769,248 703,264
Current income taxes payable ........................ 20,158 14,029
Deferred income taxes ............................... 5,150 25,449
Other liabilities and accrued expenses .............. 30,720 23,463
Payable to affiliates, net .......................... -- 38,835
Separate Accounts ................................... 389,675 366,247
---------- ----------
TOTAL LIABILITIES .......................... 2,343,954 2,379,391
---------- ----------
COMMITMENTS AND CONTINGENT LIABILITIES (NOTE 3)
SHAREHOLDER'S EQUITY
Common stock, $25 par value, 80,000 shares
authorized, issued and outstanding ............ 2,000 2,000
Additional capital paid-in .......................... 45,787 45,787
Retained income ..................................... 216,914 198,801
Accumulated other comprehensive income:
Unrealized net capital gains .................... 40,007 82,906
---------- ----------
TOTAL ACCUMULATED OTHER COMPREHENSIVE INCOME 40,007 82,906
---------- ----------
TOTAL SHAREHOLDER'S EQUITY ................. 304,708 329,494
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY . $2,648,662 $2,708,885
========== ==========
See notes to financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------- ----------------------
($ in thousands) 1999 1998 1999 1998
----------- --------- --------- ---------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES
Premiums and contract charges (net of reinsurance
ceded of $909 and $903; $3,076 and $2,660) .. $ 26,442 $ 28,166 $ 77,027 $ 87,838
Net investment income ........................... 37,771 33,758 109,778 100,018
Realized capital gains and losses ............... (812) 53 (1,560) 4,157
--------- --------- --------- ---------
63,401 61,977 185,245 192,013
--------- --------- --------- ---------
COSTS AND EXPENSES
Contract benefits (net of reinsurance recoveries
of $309 and $1,245; $1,091 and $1,748) ....... 47,347 46,744 133,560 135,565
Amortization of deferred acquisition costs ...... 2,352 1,562 7,178 5,767
Operating costs and expenses .................... 5,068 5,261 16,410 17,426
--------- --------- --------- ---------
54,767 53,567 157,148 158,758
--------- --------- --------- ---------
INCOME FROM OPERATIONS BEFORE
INCOME TAX EXPENSE ........................... 8,634 8,410 28,097 33,255
Income tax expense .............................. 3,071 2,883 9,984 11,746
--------- --------- --------- ---------
NET INCOME ...................................... $ 5,563 $ 5,527 $ 18,113 $ 21,509
========= ========= ========= =========
</TABLE>
See notes to financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
($ in thousands) 1999 1998
--------- ---------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ............................................. $ 18,113 $ 21,509
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization and other non-cash items ........... (28,229) (26,588)
Realized capital gains and losses ............... 1,560 (4,157)
Interest credited to contractholder funds ....... 22,805 27,537
Changes in:
Reserve for life-contingent contract benefits
and contractholder funds ................ 34,045 41,875
Deferred acquisition costs .................. (9,169) (8,605)
Accrued investment income ................... 30 1,167
Income taxes payable ........................ 8,929 6,858
Other operating assets and liabilities ...... (10,859) (15,245)
--------- ---------
Net cash provided by operating activities 37,225 44,351
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of fixed income securities ......... 141,505 65,274
Investment collections
Fixed income securities ......................... 14,685 92,221
Mortgage loans .................................. 6,264 4,888
Investments purchases
Fixed income securities ......................... (291,312) (248,209)
Mortgage loans .................................. (26,730) (14,312)
Change in short-term investments, net .................. 50,722 (977)
Change in policy loans, net ............................ (941) (1,159)
--------- ---------
Net cash used in investing activities ... (105,807) (102,274)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Contractholder fund deposits ........................... 115,288 100,721
Contractholder fund withdrawals ........................ (48,683) (43,191)
--------- ---------
Net cash provided by financing activities 66,605 57,530
--------- ---------
NET INCREASE (DECREASE) IN CASH ........................ (1,977) (393)
CASH AT THE BEGINNING OF PERIOD ........................ 3,117 393
--------- ---------
CASH AT END OF PERIOD .................................. $ 1,140 $ --
========= =========
</TABLE>
See notes to financial statements.
5
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. 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.
The financial statements and notes as of September 30, 1999 and for the
three month and nine month periods ended September 30, 1999 and 1998 are
unaudited. The financial statements reflect all adjustments (consisting
only of normal recurring accruals) which are, in the opinion of
management, necessary for the fair presentation of the financial position,
results of operations and cash flows for the interim periods. These
financial statements and notes should be read in conjunction with the
financial statements and notes thereto included in the Allstate Life
Insurance Company of New York Annual Report on Form 10-K for 1998. The
results of operations for the interim periods should not be considered
indicative of results to be expected for the full year.
Effective January 1, 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. The adoption of this statement had
an immaterial impact to the Company's results of operations and financial
position.
In July 1999, the Financial Accounting Standards Board ("FASB") delayed
the effective date of Statement of Financial Accounting Standard ("SFAS")
No. 133, "Accounting for Derivative Instruments and Hedging Activities",
which replaces existing pronouncements and practices with a single,
integrated accounting framework for derivatives and hedging activities.
The delay was effected through the issuance of SFAS No. 137, which extends
the effective date of the SFAS No. 133 requirements to fiscal years
beginning after June 15, 2000. As such, the Company plans to adopt the
provisions of SFAS No. 133 as of January 1, 2001. Based on existing
interpretations of the requirements of SFAS No. 133, the impact of
adoption is not expected to be material to the results of operations or
financial position of the Company.
To conform with the 1999 presentation, certain amounts in the prior years'
financial statements and notes have been reclassified.
6
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
2. COMPREHENSIVE INCOME
The components of other comprehensive income on a pretax and after-tax
basis are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------
($ in thousands) 1999 1998
---------------------------------------- ------------------------------------
AFTER- AFTER-
PRETAX TAX TAX PRETAX TAX TAX
------ --- --- ------ --- ---
<S> <C> <C> <C> <C> <C> <C>
Unrealized capital gains and losses:
Unrealized holding (losses)gains
arising during the period $ (44,903) $ 15,716 $ (29,187) $ 86,267 $(30,193) $ 56,074
Adjustments to unrealized
capital gains and losses
arising during the period:
Deferred acquisition costs 185 (65) 120 (2,956) 1,034 (1,922)
Reserves for life insurance
policy benefits 28,992 (10,147) 18,845 (48,180) 16,863 (31,317)
--------- --------- --------- -------- -------- --------
Net unrealized holding
(losses) gains arising
during the period (15,726) 5,504 (10,222) 35,131 (12,296) 22,835
Less: reclassification
adjustment for realized
net capital (losses) gains
included in net income (837) 293 (544) 47 (16) 31
--------- --------- -------- --------- -------- --------
Other comprehensive
(loss) income $ (14,889) $ 5,211 (9,678) $ 35,084 $(12,280) 22,804
========= ========= ========= ========
Net income 5,563 5,527
-------- -------
Comprehensive
(loss) income $ (4,115) $ 28,331
======== ========
</TABLE>
7
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
2. COMPREHENSIVE INCOME (CONTINUED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------
($ in thousands) 1999 1998
---------------------------------------- ------------------------------------
AFTER- AFTER-
PRETAX TAX TAX PRETAX TAX TAX
------ --- --- ------ --- ---
<S> <C> <C> <C> <C> <C> <C>
Unrealized capital gains and losses:
Unrealized holding (losses)gains
arising during the period $(206,351) $ 72,223 $(134,128) $ 130,276 $(45,596) $ 84,680
Adjustments to unrealized
capital gains and losses
arising during the period:
Deferred acquisition costs 2,182 (764) 1,418 (3,066) 1,072 (1,994)
Reserves for life insurance
policy benefits 136,572 (47,800) 88,772 (73,283) 25,649 (47,634)
--------- --------- --------- -------- -------- --------
Net unrealized holding
(losses) gains arising
during the period (67,597) 23,659 (43,938) 53,927 (18,875) 35,052
Less: reclassification
adjustment for realized
net capital (losses) gains
included in net income (1,599) 560 (1,039) 4,215 (1,475) 2,740
--------- --------- -------- --------- -------- --------
Other comprehensive
(loss) income $ (65,998) $ 23,099 (42,899) $ 49,712 $(17,400) 32,312
========= ========= ========= ========
Net income 18,113 21,509
-------- --------
Comprehensive
(loss) income $(24,786) $ 53,821
======== ========
</TABLE>
8
<PAGE>
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
3. COMMITMENTS AND CONTINGENT LIABILITIES
REGULATION AND LEGAL PROCEEDINGS
The Company is subject to the effects of a changing social, economic and
regulatory environment. Public and regulatory initiatives have varied and
have included employee benefit regulations, 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.
Various other legal and regulatory actions are currently pending that
involve the Company and specific aspects of its conduct of business. In
the opinion of management, the ultimate liability, if any, in one or more
of these actions in excess of amounts currently reserved is not expected
to have a material effect on the results of operations, liquidity or
financial position of the Company.
9
<PAGE>
PART C
OTHER INFORMATION
24A. FINANCIAL STATEMENTS
Allstate Life Insurance Company of New York Financial Statements and Financial
Statement Schedules and Allstate Life of New York Separate Account A Financial
Statements are included in Part B of this Registration Statement.
24B. EXHIBITS
Unless otherwise indicated, the following exhibits, which correspond to those
required by Item 24(b) of Form N-4, are filed herewith:
(1) Form of Resolution of the Board of Directors of Allstate Life Insurance
Company of New York authorizing establishment of the Allstate Life of New
York Separate Account A (Incorporated herein by reference to Post-Effective
Amendment No. 3 to Registrant's Registration Statement (File No. 033-65381)
dated April 30, 1999.)
(2) Not Applicable
(3) Form of Underwriting Agreement among Allstate Life Insurance Company of New
York and Allstate Life Financial Services, Inc.
(4) Form of Contract for the Allstate Custom Portfolio Variable Annuity, a
group flexible premium deferred variable annuity contract (Previously filed
in the initial filing of this Registration Statement (File No. 333-94785)
dated January 14, 2000.)
(5) Form of Application for Allstate Custom Portfolio Variable Annuity.
(6) (a) Restated Certificate of Incorporation of Allstate Life Insurance
Company of New York (Previously filed in Depositor's Form 10-K dated
March 30, 1999 and incorporated herein by reference.)
(b) Amended By-laws of Allstate Life Insurance Company of New York
(Previously filed in Depositor's Form 10-K dated March 30, 1999 and
incorporated herein by reference.)
(7) Not applicable
(8) Form of Participation Agreement for Allstate Custom Portfolio Variable
Annuity.
(9) Opinion and Consent of Michael J. Velotta, Vice President, Secretary and
General Counsel of Allstate Life Insurance Company of New York (Previously
filed in the initial filing of this Registration Statement (File No.
333-94785) dated January 14, 2000.)
(10) (a) Independent Auditors' Consent
(b) Consent of Freedman, Levy, Kroll & Simonds
(11) Not applicable
(12) Not applicable
(13) Schedule of Computation of Performance Quotations
(14) Not applicable
(99) (a) Power of Attorney for Kevin R. Slawin (Incorporated herein by reference
to Pre-Effective Amendment No. 1 to Registrant's Form N-4 Registration
Statement (File Number 033-65381) dated September 20, 1996.)
(b) Power of Attorney for Thomas J. Wilson, Michael J. Velotta, Marcia D.
Alazraki, Cleveland Johnson, Jr., John R. Raben, Jr., and Sally A.
Slacke (Incorporated herein by reference to Post-Effective Amendment No. 3
to Registrant's Form N-4 Registration Statement (File Number 033-65381)
dated April 30, 1999.)
(c) Power of Attorney for Samuel L. Pilch (Incorporated herein by reference
to Post-Effective Amendment No. 4 to Registrant's Form N-4 Registration
Statement (File Number 033-65381) dated November 12, 1999.)
(d) Power of Attorney for Vincent A. Fusco filed herewith.
<PAGE>
25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
<TABLE>
<CAPTION>
<S> <C>
NAME AND PRINCIPAL POSITION AND OFFICE WITH
BUSINESS ADDRESS* DEPOSITOR OF THE ACCOUNT
Thomas J. Wilson, II Director and President
Michael J. Velotta Director, Vice President, Secretary and General Counsel
Marcia D. Alazraki Director
Marla G. Friedman Director and Vice President
Vincent A. Fusco Director and Chief Operations Officer
Cleveland Johnson, Jr. Director
Kenneth R. O'Brien Director
John R. Raben, Jr. Director
Sally A. Slacke Director
Kevin R. Slawin Director and Vice President
Patricia W. Wilson Director and Assistant Vice President
Karen C. Gardner Vice President
Samuel H. Pilch Controller
Casey J. Sylla Chief Investment Officer
James P. Zils Treasurer
Sharmaine M. Miller Chief Administrative Officer
Richard L. Baker Assistant Vice President
D. Steven Boger Assistant Vice President
Patricia A. Coffey Assistant Vice President
Adrian B. Corbiere Assistant Vice President
Dorothy E. Even Assistant Vice President
John M. Goense Assistant Vice President
Judith P. Greffin Assistant Vice President
Keith A. Hauschildt Assistant Vice President
Ronald Johnson Assistant Vice President
Charles D. Mires Assistant Vice President
Barry S. Paul Assistant Vice President
C. Nelson Strom Assistant Vice President and Corporate Actuary
Timothy N. Vander Pas Assistant Vice President
David A. Walsh Assistant Vice President
Joanne M. Derrig Assistant Secretary and Assistant General Counsel
Emma M. Kalaidjian Assistant Secretary
Paul N. Kierig Assistant Secretary
Mary J. McGinn Assistant Secretary
Ralph A. Bergholtz Assistant Treasurer
Mark A. Bishop Assistant Treasurer
Robert B. Bodett Assistant Treasurer
Barbara S. Brown Assistant Treasurer
Rhonda Hoops Assistant Treasurer
Peter S. Horos Assistant Treasurer
Thomas C. Jensen Assistant Treasurer
Kathleen A. Knudson Assistant Treasurer
David L. Kocourek Assistant Treasurer
Daniel C. Leimbach Assistant Treasurer
Beth K. Marder Assistant Treasurer
Jeffrey A. Mazer Assistant Treasurer
Ronald A. Mendel Assistant Treasurer
Stephen J. Stone Assistant Treasurer
R. Steven Taylor Assistant Treasurer
Louise J. Walton Assistant Treasurer
Jerry D. Zinkula Assistant Treasurer
</TABLE>
*The principal business address of Mr. Fusco is One Allstate Drive, P.O. Box
9095, Farmingville, New York 11738. The principal business address of the other
foregoing officers and directors is 3100 Sanders Road, Northbrook, Illinois
60062.
<PAGE>
26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH DEPOSITOR OR REGISTRANT
Incorporated herein by reference to Annual Report on Form 10-K, filed by the
Allstate Corporation on March 26, 1999 (File No. 1-11840).
27. NUMBER OF CONTRACT OWNERS
As of the date of the filing of this amended Registration Statement, the
offering of the Allstate Custom Portfolio Variable Annuity Contract had not
commenced.
28. INDEMNIFICATION
The by-laws of both Allstate Life Insurance Company of New York (Depositor) and
Allstate Life Financial Services, Inc. (Distributor), provide for the
indemnification of its Directors, Officers and Controlling Persons, against
expenses, judgments, fines and amounts paid in settlement as incurred by such
person, if such person acted properly. No indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable for negligence or misconduct in the performance of a duty
to the company, unless a court determines such person is entitled to such
indemnity.
Insofar as indemnification for liability arising out of the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than payment by the registrant of expenses incurred by a
director, officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of is counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
<PAGE>
29A. RELATIONSHIP OF PRINCIPAL UNDERWRITER TO OTHER INVESTMENT COMPANIES
(a) Registrant's principal underwriter is also the principal underwriter with
respect to the following investment companies:
Allstate Financial Advisors Separate Account 1
Allstate Life Insurance Company Separate Account A
Glenbrook Life Multi-Manager Variable Account
Glenbrook Life and Annuity Company Separate Account A
Glenbrook Life AIM Variable Life Separate Account A
Glenbrook Life and Annuity Company Variable Annuity Account
Glenbrook Life Variable Life Separate Account A
Glenbrook Life Variable Life Separate Account B
Glenbrook Life Scudder Variable Account (A)
Glenbrook Life Discover Variable Account A
(b) The directors and officers of the principal underwriter are:
<TABLE>
<CAPTION>
Name and Principal Business Positions and Offices with Underwriter
Address** of Each Such Person
- ----------------------------- ----------------------
<S> <C>
Thomas J. Wilson, II Director
Kevin R. Slawin Director
Michael J. Velotta Director and Secretary
John R. Hunter President and Chief Executive Officer
Janet M. Albers Vice President and Controller
Brent H. Hamann Vice President
Andrea J. Schur Vice President
Terry R. Young General Counsel and Assistant Secretary
James P. Zils Treasurer
Lisa A. Burnell Assistant Vice President and Compliance Officer
Joanne M. Derrig Assistant Secretary and Assistant General Counsel
Emma M. Kalaidjian Assistant Secretary
Gregory C. Sernett Assistant Secretary
Barry S. Paul Assistant Treasurer
</TABLE>
** The principal address of Allstate Life Financial Services, Inc. is 3100
Sanders Road, Northbrook, Illinois.
(c) Compensation of Allstate Life Financial Services, Inc.
None
30. LOCATION OF ACCOUNTS AND RECORDS
The Depositor, Allstate Life Insurance Company of New York, is located at One
Allstate Drive, P.O. Box 9095, Farmingville, New York 11738.
The Underwriter, Allstate Life Financial Services, Inc. is located at 3100
Sanders Road, Northbrook, Illinois 60062.
Each company maintains those accounts and records required to be maintained
pursuant to Section 31(a) of the Investment Company Act and the rules
promulgated thereunder.
31. MANAGEMENT SERVICES
None
32. UNDERTAKINGS
The Registrant undertakes to file a post-effective amendment to the Registration
Statement as frequently as is necessary to ensure that the audited financial
statements in the Registration statement are never more than 16 months old for
so long as payments under the variable annuity contracts may be accepted.
Registrant furthermore agrees to include either, as part of any prospectus or
application to purchase a contract offered by the prospectus, a toll-free number
(1-800-692-4682) that an applicant can call to request a Statement of Additional
Information or a post card or similar written communication that the applicant
can remove to send for a Statement of Additional Information. Finally, the
Registrant agrees to deliver any Statement of Additional Information and any
Financial Statements required to be made available under this Form N-4 promptly
upon written or oral request.
33. REPRESENTATIONS PURSUANT TO SECTION 403(B) OF THE INTERNAL
REVENUE CODE
Allstate Life Insurance Company of New York represents that it is relying upon a
November 28, 1988 Securities and Exchange Commission no-action letter issued to
the American Council of Life Insurance and that the provisions of paragraphs 1-4
of the no-action letter have been complied with.
34. REPRESENTATION REGARDING CONTRACT EXPENSES
Allstate Life Insurance Company of New York represents that the fees and charges
deducted under the Flexible Premium Deferred Variable Annuity Contracts hereby
registered by this Registration Statement, in the aggregate, are reasonable in
relation to the services rendered, the expenses expected to be incurred, and the
risks assumed by Allstate Life Insurance Company of New York.
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant, Allstate Life of New York Separate Account A, has caused
this amended Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, and its seal to be hereunto affixed and
attested, all in the Township of Northfield, State of Illinois, on the 14th day
of February, 2000.
ALLSTATE LIFE OF NEW YORK SEPARATE ACCOUNT A
(REGISTRANT)
BY: ALLSTATE LIFE INSURANCE COMPANY OF
NEW YORK
(DEPOSITOR)
(SEAL)
By: /s/ MICHAEL J. VELOTTA
-------------------------------------
Michael J. Velotta
Vice President, Secretary and
General Counsel
As required by the Securities Act of 1933, this amended Registration Statement
has been duly signed below by the following Directors and Officers of Allstate
Life Insurance Company of New York on the 14th day of February, 2000.
*/THOMAS J. WILSON, II President and Director
- ----------------------- (Principal Executive Officer)
Thomas J. Wilson, II
**/VINCENT A. FUSCO Director and Chief Operations Officer
- -----------------------------
Vincent A. Fusco
/s/MICHAEL J. VELOTTA Vice President, Secretary, General
- ------------------------ Counsel and Director
Michael J. Velotta
*/KEVIN R. SLAWIN Vice President and Director
- ------------------- (Principal Financial Officer)
Kevin R. Slawin
*/SAMUEL J. PILCH Controller
- ----------------------- (Principal Accounting Officer)
Samuel H. Pilch
*/MARCIA D. ALAZRAKI Director
- ---------------------
Marcia D. Alazraki
*/CLEVELAND JOHNSON, JR. Director
- -------------------------
Cleveland Johnson, Jr.
*/JOHN R. RABEN, JR. Director
- ----------------------
John R. Raben, Jr.
*/SALLY A. SLACKE Director
- ----------------------
Sally A. Slacke
*/ By Michael J. Velotta, pursuant to Powers of Attorney previously filed.
**/ By Michael J. Velotta, pursuant to Power of Attorney filed herewith.
<PAGE>
Exhibit Index
Exhibit 3 Form of Underwriting Agreement
Exhibit 5 Form of Application
Exhibit 8 Form of Participation Agreement
Exhibit 10(a) Consent of Independent Auditors
Exhibit 10(b) Consent of Freedman, Levy, Kroll & Simonds
Exhibit 13 Schedule of Computation of Performance Quotations
Exhibit 99(d) Power of Attorney for Vincent A. Fusco
UNDERWRITING AGREEMENT
----------------------
THIS AGREEMENT, is entered into on this day of __________________________,
1996, by and among ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK ("Allstate Life
of New York" or "Company"), a life insurance company organized under the laws of
the State of New York, and ALLSTATE LIFE FINANCIAL SERVICES, INC., ("Principal
Underwriter"), a corporation organized under the laws of the state of Delaware.
RECITALS
WHEREAS, Company proposes to issue to the public certain flexible premium
deferred variable annuity contracts identified in the Attachment A
("Contracts"); and
WHEREAS, the Separate Account is registered with the Securities and
Exchange Commission ("Commission") as a unit investment trust under the
Investment Company Act of 1940 (File No. 811-07467); and
WHEREAS, the Contracts to be issued by Company are registered with the
Commission under the Securities Act of 1933 and the Investment Company Act of
1940 (File No. 033-65355, 033-65381) for offer and sale to the public and
otherwise are in compliance with all applicable laws; and
WHEREAS, Principal Underwriter, a broker-dealer registered under the
Securities Exchange Act of 1934 and a member of the National Association of
Securities Dealers, Inc. ("NASD"), proposes to act as principal underwriter on
an agency (best efforts) basis in the marketing and distribution of said
Contracts; and
WHEREAS, Company desires to obtain the services of Principal Underwriter as
an underwriter and distributor of said Contracts issued by Company;
NOW THEREFORE, in consideration of the foregoing, and of the mutual
covenants and conditions set forth herein, and for other good and valuable
consideration, the Company, the Separate Account, and the Principal Underwriter
hereby agree as follows:
1. AUTHORITY AND DUTIES
--------------------
(a) Principal Underwriter will serve as an underwriter and distributor on
an agency basis for the Contracts which will be issued by the Company.
(b) Principal Underwriter will use its best efforts to provide information
and marketing assistance to licensed insurance agents and broker-
dealers on
1
<PAGE>
a continuing basis. However, Principal Underwriter shall be
responsible for compliance with the requirements of state broker-
dealer regulations and the Securities Exchange Act of 1934 as each
applies to Principal Underwriter in connection with its duties as
distributor of said Contracts. Moreover, Principal Underwriter shall
conduct its affairs in accordance with the rules of Fair Practice of
the NASD.
(c) Subject to agreement with the Company, Principal Underwriter may enter
into selling agreements with broker-dealers which are registered under
the Securities Exchange Act of 1934 and authorized by applicable law
or exemptions to sell single payment deferred annuity contracts issued
by Company. Any such contractual arrangement is expressly made subject
to this Agreement, and Principal Underwriter will at all times be
responsible to Company for supervision of compliance with the federal
securities laws regarding distribution of Contracts.
2. WARRANTIES
----------
(a) The Company represents and warrants to Principal Underwriter that:
(i) Registration Statements on Form S-1 for each of the Contracts
identified in Attachment A have been filed with the Commission in
the form previously delivered to Principal Underwriter and that
copies of any and all amendments thereto will be forwarded to
Principal Underwriter at the time that they are filed with
Commission;
(ii) The Registration Statement and any further amendments or
supplements thereto will, when they become effective, conform in
all material respects to the requirements of the Securities Act
of 1933, and the rules and regulations of the Commission under
such Acts, and will not contain any untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading; provided, however, that this representation and
warranty shall not apply to any statement or omission made in
reliance upon and in conformity with information furnished in
writing to Company by Principal Underwriter expressly for use
therein;
(iii)The Company is validly existing as a stock life insurance
company in good standing under the laws of the State of New York,
with power to own its properties and conduct its business as
described in the Prospectus, and has been duly qualified for the
transaction
2
<PAGE>
of business and is in good standing under the laws of each
other jurisdiction in which it owns or leases properties, or
conducts any business;
(iv) Those persons who offer and sell the Contracts are to be
appropriately licensed or appointed to comply with the state
insurance laws;
(v) The performance of this Agreement and the consummation of the
transactions contemplated by this Agreement will not result in
a violation of any of the provisions of or default under any
statute, indenture, mortgage, deed of trust, note agreement or
other agreement or instrument to which Company is a party or by
which Company is bound (including Company's Charter or By-laws
as a stock life insurance company, or any order, rule or
regulation of any court or governmental agency or body having
jurisdiction over Company or any of its properties);
(vi) There is no consent, approval, authorization or order of any
court or governmental agency or body required for the
consummation by Company of the transactions contemplated by
this Agreement, except such as may be required under the
Securities Exchange Act of 1934 or state insurance or
securities laws in connection with the distribution of the
Contracts; and
(vii)There are no material legal or governmental proceedings pending
to which Company is a party or of which any property of Company
is the subject (other than as set forth in the Prospectus
relating to the Contracts, or litigation incident to the kind of
business conducted by the Company) which, if determined adversely
to Company, would individually or in the aggregate have a
material adverse effect on the financial position, surplus or
operations of Company.
(b) Principal Underwriter represents and warrants to Company that:
(i) It is a broker-dealer duly registered with the Commission
pursuant to the Securities Exchange Act of 1934, is a member in
good standing of the NASD, and is in compliance with the
securities laws in those states in which it conducts business as
a broker-dealer;
3
<PAGE>
(ii) As a principal underwriter, it shall permit the offer and sale of
Contracts to the public only by and through persons who are
appropriately licensed under the securities laws and who are
appointed in writing by the Company to be authorized insurance
agents;
(iii)The performance of this Agreement and the consummation of the
transactions herein contemplated will not result in a breach or
violation of any of the terms or provisions of or constitute a
default under any statute, indenture, mortgage, deed of trust,
note agreement or other agreement or instrument to which
Principal Underwriter is a party or by which Principal
Underwriter is bound (including the Certificate of Incorporation
or By-laws of Principal Underwriter or any order, rule or
regulation of any court or governmental agency or body having
jurisdiction over either Principal Underwriter or its property);
and
(iv) To the extent that any statements made in the Registration
Statement, or any amendment or supplement thereto, are made in
reliance upon and in conformity with written information
furnished to Company by Principal Underwriter expressly for use
therein, such statements will, when they become effective or are
filed with the Commission, as the case may be, conform in all
material respects to the requirements of the Securities Act of
1933 and the rules and regulations of the Commission thereunder,
and will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading.
3. BOOKS AND RECORDS
-----------------
(a) Principal Underwriter shall keep, in a manner and form approved by
Company and in accordance with Rules 17a-3 and 17a-4 under the
Securities Exchange Act of 1934, correct records and books of account
as required to be maintained by a registered broker-dealer, acting as
principal underwriter, of all transactions entered into on behalf of
Company with respect to its activities under this Agreement. Principal
Underwriter shall make such records and books of account available for
inspection by the Commission, and Company shall have the right to
inspect, make copies of or take possession of such records and books
of account at any time upon demand.
4
<PAGE>
(b) Subject to applicable Commission or NASD restrictions, Company will
send confirmations of Contract transactions to Contract Owners.
Company will make such confirmations and records of transactions
available to Principal Underwriter upon request.
4. SALES MATERIALS
---------------
(a) After authorization to commence the activities contemplated herein,
Principal Underwriter will utilize the currently effective prospectus
relating to the subject Contracts in connection with its underwriting,
marketing and distribution efforts. As to other types of sales
material, Principal Underwriter hereby agrees and will require any
participating or selling broker-dealers to agree that they will use
only sales materials which have been authorized for use by Company,
which conform to the requirements of federal and state laws and
regulations, and which have been filed where necessary with the
appropriate regulatory authorities, including the NASD.
(b) Principal Underwriter will not distribute any prospectus, sales
literature or any other printed matter or material in the underwriting
and distribution of any Contract if, to the knowledge of Principal
Underwriter, any of the foregoing misstates the duties, obligation or
liabilities of Company or Principal Underwriter.
5. COMPENSATION
------------
Principal Underwriter shall be entitled to such remuneration for its services
and reimbursement for its fees, charges and expenses as will be contained in
such Schedules as attached hereto as Attachment B. Said Schedules may be amended
from time to time at the mutual consent of the undersigned parties.
6. UNDERWRITING TERMS
------------------
(a) Principal Underwriter makes no representations or warranties regarding
the number of Contracts to be sold by licensed broker-dealers and
registered representatives of broker-dealers or the amount to be paid
thereunder. Principal Underwriter does, however, represent that it
will actively engage in its duties under this Agreement on a
continuous basis while there is an effective registration statement
with the Commission.
(b) Principal Underwriter will use its best efforts to ensure that the
Contracts shall be offered for sale by registered broker-dealers and
5
<PAGE>
registered representatives (who are duly licensed as insurance agents)
on the terms described in the currently effective prospectus
describing such Contracts.
(c) It is understood and agreed that Principal Underwriter may render
similar services to other companies in the distribution of other
variable contracts.
(d) The Company will use its best efforts to assure that the Contracts are
continuously registered under the Securities Act of 1933 (and under
any applicable state "blue sky" laws) and to file for approval under
state insurance laws when necessary.
(e) The Company reserves the right at any time to suspend or limit the
public offering of the subject Contracts upon one day's written notice
to Principal Underwriter.
7. LEGAL AND REGULATORY ACTIONS
----------------------------
(a) The Company agrees to advise Principal Underwriter immediately of:
(i) any request by the Commission for amendment of the Registration
Statement or for additional information relating to the
Contracts;
(ii) the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement relating to the
Contracts or the initiation of any proceedings for that
purpose; and
(iii) the happening of any known material event which makes untrue
any statement made in the Registration Statement relating to
the Contracts or which requires the making of a change therein
in order to make any statement made therein not misleading.
(b) Each of the undersigned parties agrees to notify the other in writing
upon being apprised of the institution of any proceeding,
investigation or hearing involving the offer or sale of the subject
Contracts.
(c) During any legal action or inquiry, Company will furnish to Principal
Underwriter such information with respect the Contracts in such form
and signed by such of its officers as Principal Underwriter may
reasonably request and will warrant that the statements therein
contained when so signed are true and correct.
6
<PAGE>
9. TERMINATION
-----------
(a) This Agreement will terminate automatically upon its assignment.
(b) This Agreement shall terminate without the payment of any penalty by
either party upon sixty (60) days' advance written notice.
(c) This Agreement shall terminate at the option of the Company upon
institution of formal proceedings against Principal Underwriter by the
NASD or by the Commission, or if Principal Underwriter or any
representative thereof at any time:
(i) employs any device, scheme, artifice, statement or omission to
defraud any person;
(ii) fails to account and pay over promptly to the Company money due
it according to the Company's records; or
(iii) violates the conditions of this Agreement.
10. INDEMNIFICATION
---------------
The Company agrees to indemnify Principal Underwriter for any liability that it
may incur to a Contract owner or party-in-interest under a Contract:
(a) arising out of any act or omission in the course of or in connection
with rendering services under this Agreement; or
(b) arising out of the purchase, retention or surrender of a contract;
provided, however, that the Company will not indemnify Principal
Underwriter for any such liability that results from the willful
misfeasance, bad faith or gross negligence of Principal Underwriter or
from the reckless disregard by such Principal Underwriter of its
duties and obligations arising under this Agreement.
11. GENERAL PROVISIONS
------------------
(a) This Agreement shall be subject to the laws of the State of ILLINOIS.
(b) This Agreement, along with any Schedules attached hereto and
incorporated herein by reference, may be amended from time to time by
the mutual agreement and consent of the undersigned parties.
7
<PAGE>
(c) In case any provision in this Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in way be affected or impaired thereby.
IN WITNESS WHEREOF, the undersigned parties have caused this Agreement to
be duly executed, to be effective as of ____________________________, 1996.
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
BY:
---------------------------- ------------------------------
President Date
ALLSTATE LIFE FINANCIAL SERVICES, INC.
BY:
---------------------------- ------------------------------
President & COO Date
8
<PAGE>
Attachment A
UNDERWRITING AGREEMENT
----------------------
"CONTRACTS" FORM #
- ------------ ------
Flexible Premium Deferred Variable Annuity Group Certificate NYLU349
9
<PAGE>
Attachment B
UNDERWRITING AGREEMENT
----------------------
COMPENSATION
- - --------------------------------------------------------------------
10
FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY
Issued by: Allstate Life Insurance Company of New York, Farmingville, NY
Mail check (payable to) and app to: Allstate Life Insurance Company of New York
PO Box 94038 Palatine, IL 60094-4038
Telephone #800-692-4682 FAX 847-402-4361
Sent overnight mail to: Allstate Life Insurance Company of New York
3100 Sanders Road, M4A Northbrook, IL 60062
1. Owners
Name_______________________ / /M / /F Birthdate ___/___/___
Address____________________________________________________
Street City State Zip
Soc. Sec. No. _______________________Phone No. ____________
Name_______________________ / /M / /F Birthdate ___/___/___
Address____________________________________________________
Street City State Zip
Soc. Sec. No. _______________________Phone No. ____________
2. Annuitant
Leave blank if Annuitant is same as sole Owner
Name_______________________ / /M / /F Birthdate ___/___/___
Address____________________________________________________
Street City State Zip
Soc. Sec. No. ____________ Relationship to Owner___________
3. Beneficary(ies)
Leave blank if Spouse of sole Owner
Name _____________________ Relationship to Owner ___________ Percentage_______
Name _____________________ Relationship to Owner ___________ Percentage_______
4. Purchase Payment/Plan Options
Initial Purchase Payment $__________
Investment Allocation (whole % only, no fractions)
AIM V.I. Funds
/ / International Equity Fund _____%
/ / Balanced Fund _____%
/ / Capital Appreciation Fund _____%
/ / Growth Fund _____%
/ / High Yield Fund _____%
/ / Value Fund _____%
/ / Government Securities Fund _____%
Dreyfus
/ / The Dreyfus Socially
Responsible Growth Fund,
Inc. _____%
/ / Dreyfus Stock Index Fund _____%
/ / Capital Appreciation
Portfolio _____%
Fidelity
/ / Equity Income Portfolio _____%
/ / Growth Portfolio _____%
/ / Contrafund Portfolio _____%
/ / Growth Opportunities _____%
/ / Overseas _____%
Franklin Templeton
/ / Templeton Asset Allocation
Fund - Class 2 _____%
/ / Templeton International
Fund - Class 2 _____%
Oppenheimer
/ / Main Street Growth &
Income Fund/VA _____%
/ / Aggressive Growth Fund/VA _____%
/ / Strategic Bond Fund/VA _____%
Wells Fargo
/ / Equity Income Fund _____%
/ / Asset Allocation Fund _____%
/ / Growth Fund _____%
Delaware
/ / Small Cap Value Series _____%
/ / Trend Series _____%
HSBC
/ / HSBC Variable Fixed
Income Fund _____%
/ / HSBC Variable Growth
and Income Fund _____%
/ / HSBC Cash Management
Fund _____%
MVA Fixed Account
/ / 1 Year Guarantee Period _____%
/ / 3 Year Guarantee Period _____%
/ / 5 Year Guarantee Period _____%
/ / 7 Year Guarantee Period _____%
/ / 10 Year Guarantee Period _____%
Total 100%
5. Replacement Information
Will this annuity replace or change any existing annuity or life insurance?
/ / Yes / / No
Company _____________________________ Policy No. ___________________
Cost basis amount ___________________ Policy Date __________________
6. Tax Qualified Plan
/ / Yes / / No. (If Yes, complete the following.) / / Custodial IRA
/ / Traditional IRA or / / Roth IRA / / SEP / / Other ____________
/ / Rollover / / Transfer / / Contribution $ __________ Contribution Year ___
7. Signature(s)
If Allstate Life Insurance Company of New York declines this application, the
Company will have not liability except to return the purchase payment.
I understand that any distribution from a Fixed Account prior to the end of a
rate guarantee period may be subject to a Market Value Adjustment. I
understand that annuity values and income payments based on the investment
experience of a variable account are variable and are not guaranteed as to
dollar amount.
I have received the current prospectus for this variable annuity.
Signed at __________________________________ Date __/__/__
City State
Owner(s) _________________________________________________
8. Agent Use Only
Will the annuity applied for replace or change any existing annuity or life
insurance? / / Yes / / No
Agent Name (Please print) _________________ Phone No. ______________
Agent Signature ___________________________ Soc. Sec. No. __________
Agent GA No. (Joint Business) _____________________________
Client's B/D Acct. No. _______________________ B/D Name ____________
Designation: / / A / / B
Note: Please be advised that a firm designation may override an individual
agent designation. If no designation is given, "A" will be the designation.
NYLR324 Order No.: NYLR324HSBC
PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the ____ day of _____, 2000
("Agreement"), by and among Delaware Group Premium Fund, Inc., a Delaware
corporation ("PREMIUM FUND"); Delaware Investments, a Delaware corporation
("ADVISER"), Allstate Life Insurance Company of New York, a New York corporation
("LIFE COMPANY"), on behalf of itself and its segregated asset accounts listed
in Schedule A hereto, as the parties hereto may amend from time to time (each,
an "Account," and collectively, the "Accounts"); and Allstate Life Financial
Services, Inc., an affiliate of LIFE COMPANY and the principal underwriter of
the Contracts ("UNDERWRITER") (collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, PREMIUM FUND is registered with the Securities and Exchange
Commission ("SEC") as an open-end management investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, PREMIUM FUND currently consists of 2 separate series ("Series"),
shares ("Shares") of each of which are registered under the Securities Act of
1933, as amended (the "1933 Act") and are currently sold to one or more separate
accounts of life insurance companies to fund benefits under variable annuity
contracts and variable life insurance contracts; and
WHEREAS, PREMIUM FUND will make Shares of each Series listed on Schedule A
hereto, as the Parties hereto may amend from time to time (each a "Fund";
reference herein to "PREMIUM FUND" includes reference to each Fund, to the
extent the context requires) available for purchase by the Accounts; and
WHEREAS, LIFE COMPANY will be the issuer of certain variable annuity
contracts and variable life insurance contracts ("Contracts") as set forth on
Schedule A hereto, as the Parties hereto may amend from time to time, interests
under which Contracts, if required by applicable law, will be registered under
the 1933 Act; and
WHEREAS, LIFE COMPANY will fund the Contracts through the Accounts, each of
which may be divided into two or more subaccounts ("Subaccounts"; reference
herein to an "Account" includes reference to each Subaccount thereof to the
extent the context requires); and
WHEREAS, LIFE COMPANY will serve as the depositor of the Accounts, each of
which is registered as a unit investment trust investment company under the 1940
Act (or exempt therefrom), and the security interests deemed to be issued by the
Accounts under the Contracts will be registered as securities under the 1933 Act
(or exempt therefrom); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, LIFE COMPANY intends to purchase Shares in one or more of the Funds
on behalf of the Accounts to fund the Contracts; and
WHEREAS, UNDERWRITER is a broker-dealer registered with the SEC under the
Securities Exchange Act of 1934 ("1934 Act") and a member in good standing of
the National Association of Securities Dealers, Inc. ("NASD"); and
WHEREAS, ADVISER is duly registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and any applicable state securities
laws; and
NOW, THEREFORE, in consideration of the mutual benefits and promises
contained herein, the Parties hereto agree as follows:
Section 1. Available Funds
1.1 Availability.
PREMIUM FUND will make full and fractional Shares of each Fund available to
LIFE COMPANY for purchase and redemption at net asset value and with no sales
charges, subject to the terms and conditions of this Agreement. The Board of
Directors of PREMIUM FUND may refuse to sell Shares of any Fund to any person,
or suspend or terminate the offering of Shares of any Fund if such action is
required by law or by regulatory authorities having jurisdiction or if, in the
sole discretion of the Directors acting in good faith and in light of their
fiduciary duties under federal and any applicable state laws, such action is
necessary in the best interests of the shareholders of such Fund, including
owners, annuitants and beneficiaries under Contracts (collectively "Contract
owners"), as defined herein.
1.2 Addition, Deletion or Modification of Funds.
The Parties hereto may agree, from time to time, to add other Funds to
provide additional funding media for the Contracts, or to delete, combine, or
modify existing Funds, by amending Schedule A hereto. Upon such amendment to
Schedule A, any applicable reference to a Fund, PREMIUM FUND, or its Shares
herein shall include a reference to any such additional Fund. Schedule A, as
amended from time to time, is incorporated herein by reference and is a part
hereof.
1.3 No Sales to the General Public.
PREMIUM FUND represents and warrants that no Shares of any Fund have been
or will be sold to the general public or to any one else for any purpose or
under any circumstances that would preclude LIFE COMPANY from offering, selling,
or administering any Contract as a tax-deferred annuity or life insurance
policy.
Section 2. Processing Transactions
2.1 Timely Pricing and Orders.
(a) PREMIUM FUND or its designated agent will use its best efforts to
provide LIFE COMPANY with the net asset value per Share for each Fund by 5:30
p.m. Central Time on each Business Day. As used herein, "Business Day" shall
mean any day on which (i) the New York Stock Exchange is open for regular
trading, and (ii) PREMIUM FUND calculates the Fund's net asset value, pursuant
to the rules of the SEC.
(b) LIFE COMPANY will use the data provided by PREMIUM FUND each Business
Day pursuant to paragraph (a) immediately above to calculate Account unit values
and to process transactions that receive that same Business Day's Account unit
values. LIFE COMPANY will place corresponding orders to purchase or redeem
Shares with PREMIUM FUND by 9:00 a.m. Central Time the following Business Day;
provided, however, that PREMIUM FUND shall provide additional time to LIFE
COMPANY in the event that PREMIUM FUND is unable to meet the 5:30 p.m. time
stated in paragraph (a) immediately above. Such additional time shall be equal
to the additional time that PREMIUM FUND takes to make the net asset values
available to LIFE COMPANY.
(c) With respect to payment of the purchase price by LIFE COMPANY and of
redemption proceeds by PREMIUM FUND, LIFE COMPANY and PREMIUM FUND shall net
purchase and redemption orders for each Account with respect to each Fund and
shall transmit one net payment per Fund per Account in accordance with Section
2.2, below.
(d) If PREMIUM FUND provides materially incorrect Share net asset value
information, LIFE COMPANY shall be entitled to an adjustment to the number of
Shares purchased or redeemed to reflect the correct net asset value per Share.
Further, PREMIUM FUND and ADVISER will take such other steps as may be necessary
to reimburse and make LIFE COMPANY, its Accounts, and its Contract owners whole
for any loss due to such pricing error. In addition, ADVISER shall reimburse
LIFE COMPANY for LIFE COMPANY's reprocessing costs in the amount of $3.00 per
Contract affected by $10 or more. To the extent that an overstatement of net
asset value per share is detected quickly and LIFE COMPANY has not mailed
redemption checks to Contract owners, LIFE COMPANY and ADVISER agree to examine
the extent of the error to determine the feasibility of reprocessing such
redemption transaction (for purposes of reimbursing the Fund to the extent of
any such overpayment). Any material error in the calculation or reporting of net
asset value per Share, dividend or capital gain information shall be reported
promptly upon discovery to LIFE COMPANY.
2.2 Timely Payments.
LIFE COMPANY will wire payment for net purchases to a custodial account
designated by PREMIUM FUND by 2:00 p.m. Central Time on the same day as the
order for Shares is placed. PREMIUM FUND will wire payment for net redemptions
to an account designated by LIFE COMPANY by 2:00 p.m. Central Time on the same
day as the Order is placed.
2.3 Applicable Price.
(a) Share purchase payments and redemption orders that result from purchase
payments, premium payments, surrenders and other transactions under Contracts
(collectively, "Contract transactions") and that LIFE COMPANY receives prior to
the close of regular trading on the New York Stock Exchange on a Business Day
will be executed at the net asset values of the appropriate Funds next computed
after receipt by PREMIUM FUND or its designated agent of the orders. For
purposes of this Section 2.3(a), LIFE COMPANY shall be the designated agent of
PREMIUM FUND for receipt of orders relating to Contract transactions on each
Business Day and receipt by such designated agent shall constitute receipt by
PREMIUM FUND; provided that PREMIUM FUND receives notice of such orders by 9:00
a.m. Central Time on the next following Business Day or such later time as
computed in accordance with Section 2.1(b) hereof.
(b) All other Share purchases and redemptions by LIFE COMPANY will be
effected at the net asset values of the appropriate Funds next computed after
receipt by PREMIUM FUND or its designated agent of the order therefor.
2.4 Dividends and Distributions.
PREMIUM FUND will furnish notice by wire or telephone (followed by written
confirmation) on or prior to the payment date to LIFE COMPANY of any income
dividends or capital gain distributions payable on the Shares of any Fund. LIFE
COMPANY hereby elects to reinvest all dividends and capital gains distributions
in additional Shares of the corresponding Fund at the ex-dividend date net asset
values until LIFE COMPANY otherwise notifies PREMIUM FUND in writing, it being
agreed by the Parties that the ex-dividend date and the payment date with
respect to any dividend or distribution will be the same Business Day. LIFE
COMPANY reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash.
2.5 Book Entry.
Issuance and transfer of PREMIUM FUND Shares will be by book entry only.
Stock certificates will not be issued to LIFE COMPANY. Shares ordered from
PREMIUM FUND will be recorded in an appropriate title for LIFE COMPANY, on
behalf of its Account.
Section 3. Costs and Expenses
3.1 General.
Except as otherwise specifically provided in Schedule B, attached hereto
and made a part hereof, each Party will bear, or arrange for others to bear, all
expenses incident to its performance under this Agreement.
3.2 Parties To Cooperate.
Each Party agrees to cooperate with the others, as applicable, in arranging
to print, mail and/or deliver, in a timely manner, combined or coordinated
prospectuses or other materials of PREMIUM FUND and the Accounts.
Section 4. Legal Compliance
4.1 Tax Laws.
(a) PREMIUM FUND and ADVISER each represent and warrant that each Fund has
elected to be qualified as a regulated investment company ("RIC") under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"), and
that each Fund will qualify and maintain its qualification as a RIC. PREMIUM
FUND or ADVISER will notify LIFE COMPANY immediately upon having a reasonable
basis for believing that a Fund has ceased to so qualify or that it might not so
qualify in the future.
(b) PREMIUM FUND and ADVISER represent and warrant that each Fund of
PREMIUM FUND does and will meet the diversification requirements of Section 817
(h)(1) of the Code and Treas. Reg. 1.817-5, relating to the diversification
requirements for variable annuity, endowment, or life insurance contracts, as
they may be amended from time to time (and any revenue rulings, revenue
procedures, notices, and other published announcements of the Internal Revenue
Service interpreting these sections), as if those requirements applied directly
to each such Fund. The PREMIUM FUND shall furnish or cause to be furnished at
least annually to LIFE COMPANY a statement signed by [_________________]
certifying that each Fund has continuously met the diversification requirements
of Section 817(h) for the preceding year. PREMIUM FUND and ADVISER each
represent and warrant that no other life insurance companies utilizing PREMIUM
FUND ("Participating Insurance Company") will purchase shares in any Fund for
any purpose or under any circumstances that would preclude LIFE COMPANY from
"looking through" to the investments of each Fund in which it invests, pursuant
to the "look through" rules found in Treasury Regulation 1.817-5. PREMIUM FUND
will notify LIFE COMPANY immediately upon having a reasonable basis for
believing that a Fund has ceased to so comply or that a Fund might not so comply
in the future. In the event of a breach of this Section 4.1(b) by PREMIUM FUND,
it will take all reasonable steps to adequately diversify each Fund so as to
achieve compliance within the grace period afforded by Section 1.817-5 of the
regulations under the Code.
(c) LIFE COMPANY represents and warrants that the Contracts currently are
and will be annuity contracts or life insurance contracts under applicable
provisions of the Code and that it will use its best efforts to maintain such
status; LIFE COMPANY will notify PREMIUM FUND immediately upon having a
reasonable basis for believing that any of the Contracts have ceased to be so
treated or that they might not be treated as such in the future.
4.2 Insurance and Certain Other Laws.
(a) PREMIUM FUND will use its best efforts to comply with any applicable
state insurance laws or regulations, to the extent specifically requested in
writing by LIFE COMPANY, including, the furnishing of information not otherwise
available to LIFE COMPANY that is required by state insurance law to enable LIFE
COMPANY to obtain the authority needed to issue the Contracts in any applicable
state.
(b) LIFE COMPANY represents and warrants that (i) it is an insurance
company duly organized, validly existing and in good standing under the laws of
its state of organization and has full corporate power, authority and legal
right to execute, deliver and perform its duties and comply with its obligations
under this Agreement, (ii) it has legally and validly established each Account
as a segregated asset account under the insurance laws of its state of
organization, and (iii) the Contracts comply in all material respects with all
other applicable federal and state laws and regulations.
(c) PREMIUM FUND represents and warrants that it is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware and has full power, authority, and legal right to execute, deliver, and
perform its duties and comply with its obligations under this Agreement.
(d) ADVISER represents and warrants that it is a Delaware corporation duly
organized, validly existing, and in good standing under the laws of the State of
Delaware and has full power, authority, and legal right to execute, deliver, and
perform its duties and comply with its obligations under this Agreement.
(e) ADVISER represents and warrants that PREMIUM FUND's principal
underwriter is a member in good standing of the NASD and is registered as a
broker-dealer with the SEC. PREMIUM FUND and ADVISER represent that PREMIUM FUND
and the principal underwriter will sell and distribute the Shares in accordance
in all material respects with all applicable state and federal securities laws,
including without limitation the 1933 Act, the 1934 Act, and the 1940 Act.
4.3 Securities Laws.
(a) LIFE COMPANY represents and warrants that (i) interests under each
Account pursuant to the Contracts will be registered under the 1933 Act to the
extent required by the 1933 Act, (ii) the Contracts will be duly authorized for
issuance and sold in compliance with all applicable federal and state laws,
including, without limitation, the 1933 Act, the 1934 Act, the 1940 Act and the
law(s) of LIFE COMPANY's state of organization and domicile, (iii) each Account
is and will remain registered under the 1940 Act, to the extent required by the
1940 Act, (iv) each Account does and will comply in all material respects with
the requirements of the 1940 Act and the rules thereunder, to the extent
required, (v) each Account's 1933 Act registration statement relating to the
Contracts, together with any amendments thereto, will at all times comply in all
material respects with the requirements of the 1933 Act and the rules
thereunder, (vi) LIFE COMPANY will amend the registration statements for its
Contracts under the 1933 Act and for its Accounts under the 1940 Act from time
to time as required to effect the continuous offering of its Contracts or as may
otherwise be required by applicable law, and (vii) each prospectus, statement of
additional information, and supplements thereto (collectively "Prospectus")
describing the Contract and prepared by LIFE COMPANY ("Contract Prospectus")
will at all times comply in all material respects with the requirements of the
1933 Act and the rules thereunder.
(b) PREMIUM FUND represents and warrants that (i) Shares sold pursuant to
this Agreement will be registered under the 1933 Act to the extent required by
the 1933 Act and duly authorized for issuance and sold in compliance with
__________ law and all applicable federal and state laws, (ii) PREMIUM FUND is
and will remain registered under the 1940 Act to the extent required by the 1940
Act, (iii) PREMIUM FUND will amend the registration statement for its Shares
under the 1933 Act and itself under the 1940 Act from time to time as required
to effect the continuous offering of its Shares, (iv) PREMIUM FUND does and will
comply in all material respects with the requirements of the 1940 Act and the
rules thereunder, (v) PREMIUM FUND's 1933 Act registration statement, together
with any amendments thereto, will at all times comply in all material respects
with the requirements of the 1933 Act and rules thereunder, and (vi) each
Prospectus describing a Fund and prepared by PREMIUM FUND or ADVISER ("Fund
Prospectus") will at all times comply in all material respects with the
requirements of the 1933 Act and the rules thereunder.
(c) PREMIUM FUND will at its expense register and qualify the Shares for
sale in accordance with the laws of any state or other jurisdiction if and to
the extent reasonably deemed advisable by PREMIUM FUND.
(d) PREMIUM FUND currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise,
although it reserves the right to make such payments in the future. To the
extent that it decides to finance distribution expenses pursuant to Rule 12b-1,
PREMIUM FUND undertakes to have its Board of Directors, a majority of whom are
not "interested" persons of the Fund, formulate and approve any plan under Rule
12b-1 to finance distribution expenses.
(e) PREMIUM FUND represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities having
access to the funds and/or securities of a Fund are and continue to be at all
times covered by a blanket fidelity bond or similar coverage for the benefit of
a Fund in an amount not less than the minimal coverage as required currently by
Rule 17g-(1) of the 1940 Act or related provisions as may be promulgated from
time to time. The aforesaid bond includes coverage for larceny and embezzlement
and is issued by a reputable bonding company.
(f) ADVISER represents and warrants that the investment advisory or
management fees paid by PREMIUM FUND are and will be legitimate and not
excessive and are derived from an advisory contract which does not result in a
breach of fiduciary duty. ADVISER further represents and warrants that it shall
perform its obligations for PREMIUM FUND (including without limitation managing
the assets of each Fund) in compliance with applicable federal and state laws.
4.4 Notice of Certain Proceedings and Other Circumstances.
(a) PREMIUM FUND or ADVISER will immediately notify LIFE COMPANY of (i) the
issuance by any court or regulatory body of any stop order, cease and desist
order, or other similar order with respect to PREMIUM FUND's registration
statement under the 1933 Act or Fund Prospectus, (ii) any request by the SEC for
any amendment to such registration statement or Fund Prospectus that may affect
the offering of Shares of PREMIUM FUND, (iii) the initiation of any proceedings
for that purpose or for any other purpose relating to the registration or
offering of PREMIUM FUND's Shares, or (iv) any other action or circumstances
that may prevent the lawful offer or sale of Shares of any Fund in any state or
jurisdiction, including, without limitation, any circumstances in which (a) such
Shares are not registered and, in all material respects, issued and sold in
accordance with applicable federal and state law, or (b) such law precludes the
use of such Shares as an underlying investment medium of the Contracts issued or
to be issued by LIFE COMPANY. PREMIUM FUND and ADVISER will make every
reasonable effort to prevent the issuance, with respect to any Fund, of any such
stop order, cease and desist order or similar order and, if any such order is
issued, to obtain the lifting thereof at the earliest possible time.
(b) LIFE COMPANY will immediately notify PREMIUM FUND of (i) the issuance
by any court or regulatory body of any stop order, cease and desist order, or
other similar order with respect to each Account's registration statement under
the 1933 Act relating to the Contracts or each Contract Prospectus, (ii) any
request by the SEC for any amendment to such registration statement or Contract
Prospectus that may affect the offering of Shares of PREMIUM FUND, (iii) the
initiation of any proceedings for that purpose or for any other purpose relating
to the registration or offering of each Account's interests pursuant to the
Contracts, or (iv) any other action or circumstances that may prevent the lawful
offer or sale of said interests in any state or jurisdiction, including, without
limitation, any circumstances in which said interests are not registered and, in
all material respects, issued and sold in accordance with applicable federal and
state law. LIFE COMPANY and UNDERWRITER will make every reasonable effort to
prevent the issuance of any such stop order, cease and desist order or similar
order and, if any such order is issued, to obtain the lifting thereof at the
earliest possible time.
(c) The LIFE COMPANY, UNDERWRITER, PREMIUM FUND AND ADVISER shall also each
promptly inform the other of the results of any examination by the SEC (or other
regulatory authorities) that relates to the Contracts, the PREMIUM FUND or its
Shares, and the party that was the subject of the examination shall provide the
other party with a copy of relevant portions of any "deficiency letter" or other
correspondence or written report regarding any such examination.
4.5 LIFE COMPANY To Provide Documents; Information About PREMIUM FUND.
(a) LIFE COMPANY will provide to PREMIUM FUND or its designated agent at
least one (1) complete copy of all SEC registration statements, Contract
Prospectuses, reports, any preliminary and final voting instruction solicitation
material, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to each Account and the Contracts,
contemporaneously with the filing of such document with the SEC or other
regulatory authorities.
(b) LIFE COMPANY will provide to PREMIUM FUND or its designated agent at
least one (1) complete copy of each piece of sales literature or other
promotional material in which PREMIUM FUND or any of its affiliates is named, at
least three (3) Business Days prior to its dissemination, or such shorter period
as the Parties hereto may, from time to time, agree upon. Such material may be
used unless PREMIUM FUND or ADVISER objects within three (3) Business Days.
PREMIUM FUND hereby designates ADVISER as the entity to receive such sales
literature, until such time as PREMIUM FUND appoints another designated agent by
giving notice to LIFE COMPANY in the manner required by Section 9 hereof.
(c) Neither LIFE COMPANY nor UNDERWRITER will give any information or make
any representations or statements on behalf of or concerning PREMIUM FUND,
ADVISER, or their affiliates in connection with the sale of the Contracts other
than (i) the information or representations contained in the registration
statement, including the Fund Prospectuses contained therein, relating to
Shares, as such registration statement and Fund Prospectuses may be amended from
time to time; or (ii) in reports or proxy materials for PREMIUM FUND; or (iii)
in published reports for PREMIUM FUND that are in the public domain and approved
by PREMIUM FUND for distribution; or (iv) in sales literature or other
promotional material approved by PREMIUM FUND, except with the express written
permission of PREMIUM FUND, ADVISER, any company affiliated with ADVISER or
their respective designees. PREMIUM FUND and ADVISER each agrees to respond or
cause its designees to respond, to any request for approval on a prompt and
timely basis.
(d) LIFE COMPANY shall adopt and implement procedures reasonably designed
to ensure that information concerning PREMIUM FUND, ADVISER and their affiliates
that is intended for use only by brokers or agents selling the Contracts (i.e.,
information that is not intended for distribution to Contract owners) ("broker
only materials") is so used, and neither PREMIUM FUND, ADVISER, nor any of their
affiliates shall be liable for any losses, damages or expenses relating to the
improper use of such broker only materials except as otherwise provided herein.
(e) For the purposes of this Section 4.5, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media, e.g.,
on-line networks such as the Internet or other electronic messages, sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, and any other material
constituting sales literature or advertising under the NASD rules, the 1933 Act
or the 1940 Act.
4.6 PREMIUM FUND To Provide Documents; Information About LIFE COMPANY.
(a) PREMIUM FUND will provide to LIFE COMPANY at least one (1) complete
copy of all SEC registration statements, Fund Prospectuses, reports, any
preliminary and final voting instruction solicitation material, applications for
exemptions, requests for no-action letters, and all amendments to any of the
above, that relate to PREMIUM FUND and the Shares of a Fund, contemporaneously
with the filing of such document with the SEC or other regulatory authorities.
(b) At least annually (or in the case of a Prospectus supplement, when that
supplement is issued) PREMIUM FUND will provide to LIFE COMPANY free of charge
with as many copies of the current Fund Prospectuses as LIFE COMPANY shall
reasonably require for distribution to current and prospective Contract owners.
PREMIUM FUND will provide such copies to LIFE COMPANY in a timely manner so as
to enable LIFE COMPANY or UNDERWRITER, as the case may be, to print and
distribute such materials within the time required by law to be furnished to
Contract owners. If requested by LIFE COMPANY in lieu thereof, PREMIUM FUND or
its designee shall provide such documentation (including a "camera ready" copy
of the Fund Prospectus as set in type or, at the request of LIFE COMPANY, as a
diskette in the form sent to the financial printer) and other assistance as is
reasonably necessary in order for the Parties hereto once each year (or more
frequently if a Fund Prospectus is supplemented or amended) to have the Contract
Prospectus and the Fund Prospectuses printed together in one document; the
expenses of such printing to be apportioned between (a) LIFE COMPANY and (b)
PREMIUM FUND or its designee in proportion to the number of pages of the
Contract and Fund Prospectuses, taking account of other relevant factors
affecting the expense of printing, such as covers, columns, graphs and charts.
The Fund Prospectus shall state that the statement of additional
information ("SAI") for the Shares is available from PREMIUM FUND or its
designee. PREMIUM FUND or its designee, at its expense, shall print and provide
such SAI to LIFE COMPANY for distribution to any current or prospective Contract
owner.
PREMIUM FUND or its designee shall provide LIFE COMPANY free of charge
copies of PREMIUM FUND's proxy materials, reports to shareholders and other
communications to shareholders in such quantity as LIFE COMPANY shall reasonably
require for distribution to Contract owners.
(c) PREMIUM FUND or ADVISER will provide to LIFE COMPANY or its designated
agent at least one (1) complete copy of each piece of sales literature or other
promotional material in which LIFE COMPANY, or any of its respective affiliates
is named, or that refers to the Contracts, at least three (3) Business Days
prior to its use or such shorter period as the Parties hereto may, from time to
time, agree upon. Such material may be used unless LIFE COMPANY objects within
three (3) Business Days. LIFE COMPANY shall receive all such sales literature
until such time as it appoints a designated agent by giving notice to PREMIUM
FUND in the manner required by Section 9 hereof.
(d) Neither PREMIUM FUND nor ADVISER, nor any of their affiliates will give
any information or make any representations or statements on behalf of or
concerning LIFE COMPANY, any Account, or the Contracts other than (i) the
information or representations contained in the registration statement,
including the Contract Prospectus contained therein, as such registration
statement and Contract Prospectus may be amended or supplemented from time to
time; or (ii) in published reports for the Account or the Contracts that are in
the public domain and approved by LIFE COMPANY for distribution; or (iii) in
sales literature or other promotional material approved by LIFE COMPANY or its
affiliates, except with the express written permission of LIFE COMPANY,
UNDERWRITER, or their respective designees. LIFE COMPANY and UNDERWRITER each
agrees to respond or cause their respective designees to respond, to any request
for approval on a prompt and timely basis.
(e) ADVISER shall and shall cause its affiliates (including PREMIUM FUND's
principal underwriter) to adopt and implement procedures reasonably designed to
ensure that information concerning LIFE COMPANY, and its respective affiliates
that is intended for use only by brokers or agents selling the Contracts (i.e.,
information that is not intended for distribution to Contract owners) ("broker
only materials") is so used, and neither LIFE COMPANY, nor any of its respective
affiliates shall be liable for any losses, damages or expenses relating to the
improper use of such broker only materials except as otherwise provided herein.
(f) PREMIUM FUND and ADVISER will provide LIFE COMPANY with as much notice
as is reasonably practicable of any proxy solicitation for any Fund, and of any
material change in PREMIUM FUND's registration statement, particularly any
change that would result in a change to an Account's registration statement or
to a Contract Prospectus. PREMIUM FUND and ADVISER will cooperate with LIFE
COMPANY so as to enable LIFE COMPANY to solicit proxies from Contract owners or
to make changes to any Contract Prospectus or registration statement, in an
orderly manner. PREMIUM FUND and ADVISER will make reasonable efforts to attempt
to have changes affecting Contract prospectuses become effective simultaneously
with the annual updates for such Prospectuses.
(g) For purposes of this Section 4.6, the phrase "sales literature or other
promotional material" includes, but is not limited to, advertisements (such as
material published, or designed for use in, a newspaper, magazine, or other
periodical, radio, television, telephone or tape recording, videotape display,
signs or billboards, motion pictures, or other public media, e.g., on-line
networks such as the Internet or other electronic messages, sales literature
(i.e., any written communication distributed or made generally available to
customers or the public, including brochures, circulars, research reports,
market letters, form letters, seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published article), educational or training
materials or other communications distributed or made generally available to
some or all agents or employees, and any other material constituting sales
literature or advertising under the NASD rules, the 1933 Act or the 1940 Act.
Section 5. Mixed and Shared Funding
5.1 General.
The SEC has granted an order to PREMIUM FUND exempting it from certain
provisions of the 1940 Act and rules thereunder so that PREMIUM FUND may be
available for investment by certain other entities, including, without
limitation, separate accounts funding variable annuity contracts or variable
life insurance contracts, separate accounts of insurance companies unaffiliated
with LIFE COMPANY, and trustees of qualified pension and retirement plans
(collectively, "Mixed and Shared Funding"). The Parties recognize that the SEC
has imposed terms and conditions for such orders that are substantially
identical to many of the provisions of this Section 5. Sections 5.2 through 5.8
below shall apply pursuant to such an exemptive order granted to PREMIUM FUND.
PREMIUM FUND hereby notifies LIFE COMPANY that, in the event that PREMIUM FUND
implements Mixed and Shared Funding, it may be appropriate to include in the
prospectus pursuant to which a Contract is offered disclosure regarding the
potential risks of Mixed and Shared Funding.
5.2 Disinterested Directors.
PREMIUM FUND agrees that its Board of Directors shall at all times consist
of directors a majority of whom (the "Disinterested Directors") are not
interested persons of PREMIUM FUND within the meaning of Section 2(a)(19) of the
1940 Act and the rules thereunder and as modified by any applicable orders of
the SEC, except that if this condition is not met by reason of the death,
disqualification, or bona fide resignation of any director, then the operation
of this condition shall be suspended (a) for a period of forty-five (45) days if
the vacancy or vacancies may be filled by the Board; (b) for a period of sixty
(60) days if a vote of shareholders is required to fill the vacancy or
vacancies; or (c) for such longer period as the SEC may prescribe by order upon
application.
5.3 Monitoring for Material Irreconcilable Conflicts.
PREMIUM FUND agrees that its Board of Directors, constituted with a
majority of disinterested trustees, will monitor for the existence of any
material irreconcilable conflict between the interests of the Contract owners in
all separate accounts of life insurance companies utilizing PREMIUM FUND
("Participating Insurance Companies"), including each Account, and participants
in all qualified retirement and pension plans investing in PREMIUM FUND
("Participating Plans"). LIFE COMPANY agrees to inform the Board of Directors of
PREMIUM FUND of the existence of or any potential for any such material
irreconcilable conflict of which it is aware. The Board shall have the sole
authority to determine if a material irreconcilable conflict exists, and such
determination shall be binding on LIFE COMPANY only if approved in the form of a
resolution by a majority of the Board, or a majority of the disinterested
directors of the Board. The Board will give prompt notice of any such
determination to LIFE COMPANY. The concept of a "material irreconcilable
conflict" is not defined by the 1940 Act or the rules thereunder, but the
Parties recognize that such a conflict may arise for a variety of reasons,
including, without limitation:
(a) an action by any state insurance or other regulatory authority;
(b) a change in applicable federal or state insurance, tax or securities
laws or regulations, or a public ruling, private letter ruling, no-action or
interpretative letter, or any similar action by insurance, tax or securities
regulatory authorities;
(c) an administrative or judicial decision in any relevant proceeding;
(d) the manner in which the investments of any Fund are being managed;
(e) a difference in voting instructions given by variable annuity contract
and variable life insurance contract owners or by contract owners of different
Participating Insurance Companies;
(f) a decision by a Participating Insurance Company, all separate accounts
of life insurance companies utilizing PREMIUM FUND, to disregard the voting
instructions of contract owners; or
(g) a decision by a Participating Plan, participants in all qualified
retirement and pension plans, to disregard the voting instructions of Plan
participants ("Participants").
Consistent with the SEC's requirements in connection with exemptive orders
of the type referred to in Section 5.1 hereof, LIFE COMPANY will assist the
Board of Directors in carrying out its responsibilities by providing the Board
of Directors with all information reasonably necessary for the Board of
Directors to consider any issue raised, including information as to a decision
by LIFE COMPANY to disregard voting instructions of Contract owners. LIFE
COMPANY's responsibilities in connection with the foregoing shall be carried out
with a view only to the interests of Contract owners.
5.4 Conflict Remedies.
(a) It is agreed that if it is determined by a majority of the members of
the Board of Directors or a majority of the Disinterested Directors that a
material irreconcilable conflict exists, LIFE COMPANY will, if it is a
Participating Insurance Company for which a material irreconcilable conflict is
relevant, at its own expense and to the extent reasonably practicable (as
determined by a majority of the Disinterested Directors), take whatever steps
are necessary to remedy or eliminate the material irreconcilable conflict, which
steps may include, but are not limited to:
(i) withdrawing the assets allocable to some or all of the Accounts
from PREMIUM FUND or any Fund and reinvesting such assets in a different
investment medium, including another Fund of PREMIUM FUND, or submitting
the question whether such segregation should be implemented to a vote of
all affected Contract owners and, as appropriate, segregating the assets of
any particular group (e.g., annuity Contract owners, life insurance
Contract owners or all Contract owners) that votes in favor of such
segregation, or offering to the affected Contract owners the option of
making such a change; and
(ii) establishing a new registered investment company of the type
defined as a "management company" in Section 4(3) of the 1940 Act or a new
separate account that is operated as a management company.
(b) If the material irreconcilable conflict arises because of LIFE
COMPANY's decision to disregard Contract owner voting instructions and that
decision represents a minority position or would preclude a majority vote, LIFE
COMPANY may be required, at PREMIUM FUND's election, to withdraw each Account's
investment in PREMIUM FUND or any Fund. No charge or penalty will be imposed as
a result of such withdrawal. Any such withdrawal must take place within six (6)
months after PREMIUM FUND gives notice to LIFE COMPANY that this provision is
being implemented, or such longer time as may be necessary to obtain appropriate
regulatory approvals to make such withdrawal, and until such withdrawal PREMIUM
FUND shall continue to accept and implement orders by LIFE COMPANY for the
purchase and redemption of Shares of PREMIUM FUND.
(c) If a material irreconcilable conflict arises because a particular state
insurance regulator's decision applicable to LIFE COMPANY conflicts with the
majority of other state regulators, then LIFE COMPANY will withdraw each
Account's investment in PREMIUM FUND within six (6) months after PREMIUM FUND's
Board of Directors informs LIFE COMPANY that it has determined that such
decision has created a material irreconcilable conflict, or such longer time as
may be necessary to obtain appropriate regulatory approvals to make such
withdrawal, and until such withdrawal PREMIUM FUND shall continue to accept and
implement orders by LIFE COMPANY for the purchase and redemption of Shares of
PREMIUM FUND. No charge or penalty will be imposed as a result of such
withdrawal.
(d) LIFE COMPANY agrees that any remedial action taken by it in
resolving any material irreconcilable conflict will be carried out at its
expense and with a view only to the interests of Contract owners.
(e) For purposes hereof, a majority of the Disinterested Directors will
determine whether or not any proposed action adequately remedies any material
irreconcilable conflict. In no event, however, will PREMIUM FUND or any of its
affiliates be required to establish a new funding medium for any Contracts. LIFE
COMPANY will not be required by the terms hereof to establish a new funding
medium for any Contracts if an offer to do so has been declined by vote of a
majority of Contract owners materially adversely affected by the material
irreconcilable conflict.
5.5 Notice to LIFE COMPANY.
PREMIUM FUND will promptly make known in writing to LIFE COMPANY the Board
of Directors' determination of the existence of a material irreconcilable
conflict, a description of the facts that give rise to such conflict and the
implications of such conflict.
5.6 Information Requested by Board of Directors.
LIFE COMPANY and PREMIUM FUND (or ADVISER) will at least annually submit to
the Board of Directors of PREMIUM FUND such reports, materials or data as the
Board of Directors may reasonably request so that the Board of Directors may
fully carry out the obligations imposed upon it by the provisions hereof or any
exemptive order granted by the SEC to permit Mixed and Shared Funding, and said
reports, materials and data will be submitted at any reasonable time deemed
appropriate by the Board of Directors. All reports received by the Board of
Directors of potential or existing conflicts, and all Board of Directors actions
with regard to determining the existence of a conflict, notifying Participating
Insurance Companies and Participating Plans of a conflict, and determining
whether any proposed action adequately remedies a conflict, will be properly
recorded in the minutes of the Board of Directors or other appropriate records,
and such minutes or other records will be made available to the SEC upon
request.
5.7 Compliance with SEC Rules.
If, at any time during which PREMIUM FUND is serving as an investment
medium for variable life insurance contracts, 1940 Act Rules 6e-3(T) or, if
applicable, 6e-2 are amended or Rule 6e-3 is adopted to provide exemptive relief
with respect to Mixed and Shared Funding, PREMIUM FUND agrees that it will
comply with the terms and conditions thereof and that the terms of this Section
5 shall be deemed modified if and only to the extent required in order also to
comply with the terms and conditions of such exemptive relief that is afforded
by any of said rules that are applicable.
5.8 Other Requirements.
PREMIUM FUND will require that each Participating Insurance Company and
Participating Plan enter into an agreement with PREMIUM FUND that contains in
substance the same provisions as are set forth in Sections 4.1(a), 4.1(b),
4.1(c), 4.3(a), 4.4(b), 4.5(a), 5, and 10 of this Agreement.
Section 6. Termination
6.1 Events of Termination.
Subject to Section 6.4 below, this Agreement will terminate as to a Fund:
(a) at the option of any Party, with or without cause with respect to the
Fund, upon 90 days' advance written notice to the other Parties, or, if later,
upon receipt of any required exemptive relief from the SEC, unless otherwise
agreed to in writing by the Parties; or
(b) at the option of Life Company or UNDERWRITER as to any Fund upon
written notice to the other Parties, to the extent that the Shares of that Fund
are not reasonably available to meet the requirements of the Contracts or are
not appropriate funding vehicles for the Contracts, as determined by Life
Company. Prompt notice of the election to terminate for such cause and an
explanation of such cause shall be furnished to PREMIUM FUND by Life Company; or
(c) at the option of PREMIUM FUND or ADVISER upon written notice to the
other Parties upon institution of formal proceedings against LIFE COMPANY or
UNDERWRITER by the NASD, the SEC, any state insurance regulator or any other
regulatory body regarding LIFE COMPANY's obligations under this Agreement or
related to the sale of the Contracts, the operation of each Account, or the
purchase of Shares, if, in each case, PREMIUM FUND reasonably determines that
such proceedings, or the facts on which such proceedings would be based, have a
material likelihood of imposing material adverse consequences on the Fund with
respect to which the Agreement is to be terminated; or
(d) at the option of LIFE COMPANY upon written notice to the other Parties
upon institution of formal proceedings against PREMIUM FUND or ADVISER by the
NASD, the SEC, or any state insurance regulator or any other regulatory body
regarding PREMIUM FUND's or ADVISER's obligations under this Agreement or
related to the operation or management of PREMIUM FUND or the purchase of
PREMIUM FUND Shares, if, in each case, LIFE COMPANY reasonably determines that
such proceedings, or the facts on which such proceedings would be based, have a
material likelihood of imposing material adverse consequences on LIFE COMPANY,
or the Subaccount corresponding to the Fund with respect to which the Agreement
is to be terminated; or
(e) at the option of LIFE COMPANY upon written notice to the other Parties
following receipt of any necessary regulatory approvals and/or the vote of the
Contract owners having an interest in the Accounts (or any subaccounts) to
substitute the shares of another investment company for the corresponding Fund's
Shares in accordance with the terms of the Contracts for which those Fund Shares
had been selected to serve as the underlying investment media.
(f) at the option of any Party in the event that (i) the Fund's Shares are
not registered and, in all material respects, issued and sold in accordance with
any applicable federal or state law, or (ii) such law precludes the use of such
Shares as an underlying investment medium of the Contracts issued or to be
issued by LIFE COMPANY; or
(g) upon termination of the corresponding Subaccount's investment in the
Fund pursuant to Section 5 hereof; or
(h) at the option of LIFE COMPANY if the Fund ceases to qualify as a RIC
under Subchapter M of the Code or under successor or similar provisions, or if
LIFE COMPANY reasonably believes that the Fund may fail to so qualify; or
(i) at the option of LIFE COMPANY if the Fund fails to comply with Section
817(h) of the Code or with successor or similar provisions, or if LIFE COMPANY
reasonably believes that the Fund may fail to so comply; or
(j) by either PREMIUM FUND or ADVISER by written notice to LIFE COMPANY, if
either one or both of PREMIUM FUND or ADVISER respectively, shall determine, in
their sole judgment exercised in good faith, that LIFE COMPANY has suffered a
material adverse change in its business, operations, financial condition, or
prospects since the date of this Agreement or is the subject of material adverse
publicity, if such change or publicity poses a material risk of damage to any
Fund; or
(k) by LIFE COMPANY or UNDERWRITER by written notice to PREMIUM FUND and
ADVISER, if LIFE COMPANY or UNDERWRITER shall determine, in its sole judgment
exercised in good faith, that PREMIUM FUND or ADVISER has suffered a material
adverse change in this business, operations, financial condition or prospects
since the date of this Agreement or is the subject of material adverse
publicity, if such change or publicity poses a material risk of damage to LIFE
COMPANY or UNDERWRITER or any Contract owners; or
(l) upon another Party's repeated material breach of any provision of this
Agreement by a Party not affiliated with the terminating party or isolated
material breach that is not cured within a reasonable time after notice thereof.
6.2 Notice Requirement for Termination.
No termination of this Agreement will be effective unless and until the
Party terminating this Agreement gives written notice to the other Parties to
this Agreement of its intent to terminate, and such notice shall set forth the
Fund(s), Contracts and, if applicable, the Account(s) as to which the Agreement
is to be terminated and the basis for such termination. Furthermore in the event
that any termination is based upon any provision of Sections 6.1 other than
Section 6.1(a), such written notice shall be given as soon as reasonably
possible, but in any event within ten days after the terminating Party learns of
the event causing termination to be required.
6.3 Funds To Remain Available.
Notwithstanding any termination of this Agreement, PREMIUM FUND will, at
the option of LIFE COMPANY, continue to make available additional Shares of the
Fund pursuant to the terms and conditions of this Agreement, for all Contracts
in effect on the effective date of termination of this Agreement (hereinafter
referred to as "Existing Contracts"). Specifically, without limitation, the
owners of the Existing Contracts will be permitted to reallocate investments in
the Fund (as in effect on such date), redeem investments in the Fund and/or
invest in the Fund upon the making of additional purchase payments under the
Existing Contracts. The Parties agree that this Section 6.3 will not apply to
any terminations under Section 5 and the effect of such terminations will be
governed by Section 5 of this Agreement. This Section 6.3, however, is qualified
and limited by Sections 6.5 and 7 below.
6.4 Survival of Warranties and Indemnifications.
All warranties and indemnifications will survive the termination of this
Agreement.
6.5 Continuance of Agreement for Certain Purposes.
If any Party terminates this Agreement with respect to any Fund, this
Agreement shall nevertheless continue in effect as to any Shares of that Fund
that are outstanding as of the date of such termination (the "Termination
Date"). This continuation shall extend to the date as of which an Account owns
no Shares of the affected Fund.
Section 7. Parties To Cooperate Respecting Termination
The Parties hereto agree to cooperate and give reasonable assistance to one
another in taking all necessary and appropriate steps for the purpose of
ensuring that an Account owns no Shares of a Fund six (6) months after the
Termination Date with respect thereto, or such later date as may be necessary to
obtain any required regulatory approval to effect such result. Such steps may
include combining the affected Account with another Account, substituting other
mutual fund shares for those of the affected Fund, or otherwise terminating
participation by the Contracts in such Fund. If LIFE COMPANY terminates the
Agreement with respect to any Fund for cause, PREMIUM FUND or ADVISER shall pay
the reasonable costs of obtaining all required regulatory approvals for LIFE
COMPANY to substitute the shares of another mutual fund for shares of the
affected Fund(s).
Section 8. Assignment
This Agreement may not be assigned by any Party, except with the written
consent of each other Party.
Section 9. Notices
Notices and communications required or permitted will be given by means
mutually acceptable to the Parties concerned. Each other notice or communication
required or permitted by this Agreement will be given to the following persons
at the following addresses and facsimile numbers, or such other persons,
addresses or facsimile numbers as the Party receiving such notices or
communications may subsequently direct in writing:
Delaware Group Premium Fund, Inc.
Delaware Investments
1818 Market Street
Philadelphia, PA 19103-3682
Attn: Michael Tilson, Assistant Product Manager
Allstate Life Insurance Company of New York
3100 Sanders Road, Ste. N4A
Northbrook, IL 60062
Attn: Craig Whitehead, Senior Vice President and Director
Allstate Life Financial Services, Inc.
3100 Sanders Road
Northbrook, IL 60062
Attn: Craig Whitehead
Section 10. Voting Procedures
Subject to the cost allocation procedures set forth in Section 3 hereof,
LIFE COMPANY will distribute all proxy material furnished by PREMIUM FUND to
Contract owners to whom pass-through voting privileges are required to be
extended and will solicit voting instructions from Contract owners. LIFE COMPANY
will vote Shares in accordance with timely instructions received from Contract
owners. LIFE COMPANY will vote Shares that are (a) not attributable to Contract
owners to whom pass-through voting privileges are extended, or (b) attributable
to Contract owners, but for which no timely instructions have been received, in
the same proportion as Shares for which said instructions have been received
from Contract owners, so long as and to the extent that the SEC continues to
interpret the 1940 Act to require pass through voting privileges for Contract
owners. Neither LIFE COMPANY nor any of its affiliates will in any way recommend
action in connection with or oppose or interfere with the solicitation of
proxies by PREMIUM FUND for the Shares held for such Contract owners. For this
purpose, LIFE COMPANY'S making its own proxy solicitation with respect to the
same matter is not considered to be a recommendation for action in connection
with, or opposition to or interference with, PREMIUM FUND's solicitation, if
LIFE COMPANY does not delay or otherwise impede or interfere with PREMIUM FUND's
solicitation. LIFE COMPANY reserves the right to vote shares held in any Account
in its own right to the extent permitted by law. LIFE COMPANY shall be
responsible for assuring that each of its Accounts holding Shares calculates
voting privileges on matters relating to the Fund in a manner consistent with
that of other Participating Insurance Companies or in the manner required by the
Mixed and Shared Funding exemptive order obtained by PREMIUM FUND; provided,
however, that PREMIUM FUND or ADVISER shall provide LIFE COMPANY and each other
Participating Insurance Company with a written copy of the voting privilege
requirements under the Mixed and Shared Funding Exemptive Order and such other
assistance as may be necessary to facilitate coordination between LIFE COMPANY
and each other Participating Insurance Company in complying with such standards,
and provided further that LIFE COMPANY shall be free to vote Fund shares
attributable to any Account in any manner permitted by applicable law, to the
extent the Mixed and Shared Funding Exemptive Order is superseded by SEC
regulation or administrative practice (including no-action relief). PREMIUM FUND
will notify LIFE COMPANY of any changes of interpretations or amendments to
Mixed and Shared Funding exemptive order it has obtained. PREMIUM FUND will
comply with all provisions of the 1940 Act requiring voting by shareholders, and
in particular, PREMIUM FUND either will provide for annual meetings (except
insofar as the SEC may interpret Section 16 of the 1940 Act not to require such
meetings) or will comply with Section 16(c) of the 1940 Act (although PREMIUM
FUND is not one of the trusts described in Section 16(c) of that Act) as well as
with Sections 16(a) and, if and when applicable, 16(b). Further, PREMIUM FUND
will act in accordance with the SEC's interpretation of the requirements of
Section 16(a) with respect to periodic elections of directors and with whatever
rules the SEC may promulgate with respect thereto.
Section 11. Foreign Tax Credits
PREMIUM FUND agrees to consult in advance with LIFE COMPANY concerning any
decision to elect or not to elect pursuant to Section 853 of the Code to pass
through the benefit of any foreign tax credits to its shareholders.
Section 12. Indemnification
12.1 Of PREMIUM FUND and ADVISER by LIFE COMPANY and UNDERWRITER.
(a) Except to the extent provided in Sections 12.1(b) and 12.1(c), below,
LIFE COMPANY and UNDERWRITER agree to indemnify and hold harmless PREMIUM FUND,
ADVISER, their affiliates, and each person, if any, who controls PREMIUM FUND,
ADVISER, or their affiliates within the meaning of Section 15 of the 1933 Act
and each of their respective directors and officers, (collectively, the
"Indemnified Parties" for purposes of this Section 12.1) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of LIFE COMPANY and UNDERWRITER which consent shall not be
unreasonably withheld) or actions in respect thereof (including, to the extent
reasonable, legal and other expenses), to which the Indemnified Parties may
become subject under any statute, regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or actions are related to
the sale, holding, or acquisition of PREMIUM FUND Shares or the Contracts and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any Account's 1933 Act
registration statement, any Contract Prospectus, the Contracts, or sales
literature or advertising for the Contracts (or any amendment or supplement
to any of the foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading;
provided, that this agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or such alleged statement
or omission was made in reliance upon and in conformity with information
furnished to LIFE COMPANY, UNDERWRITER, or an affiliate or designee
thereof, by or on behalf of PREMIUM FUND or ADVISER, or any of their
respective affiliates, for use in any Account's 1933 Act registration
statement, any Contract Prospectus, the Contracts, or sales literature or
advertising (or any amendment or supplement to any of the foregoing) or
otherwise for use in connection with the sale of Contracts or Shares; or
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations contained in
PREMIUM FUND's 1933 Act registration statement, any Fund Prospectus, sales
literature or advertising, or any amendment or supplement to any of the
foregoing, not supplied for use therein by or on behalf of LIFE COMPANY,
UNDERWRITER or their respective affiliates) made by, or the negligent,
illegal or fraudulent conduct of, LIFE COMPANY, UNDERWRITER or their
respective affiliates or persons under their control in connection with the
sale or distribution of the Contracts or Shares; or
(iii) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in PREMIUM FUND's 1933 Act
registration statement, Fund Prospectus, sales literature or advertising of
PREMIUM FUND, or any amendment or supplement to any of the foregoing, or
the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading if such a statement or omission was made in reliance upon and in
conformity with information furnished to PREMIUM FUND, ADVISER or their
affiliates by or on behalf of LIFE COMPANY, UNDERWRITER or their respective
affiliates; or
(iv) arise as a result of any failure by LIFE COMPANY or UNDERWRITER
to perform the obligations, provide the services and furnish the materials
required of them under the terms of this Agreement, or any material breach
of any representation and/or warranty made by LIFE COMPANY or UNDERWRITER
in this Agreement or arise out of or result from any other material breach
of this Agreement by LIFE COMPANY or UNDERWRITER.
(b) Neither LIFE COMPANY nor UNDERWRITER shall be liable under this Section
12.1 with respect to any losses, claims, damages, liabilities or actions to
which an Indemnified Party would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance by that
Indemnified Party of its duties or by reason of that Indemnified Party's
reckless disregard of obligations or duties (i) under this Agreement, or (ii) to
ADVISER, PREMIUM FUND, or PREMIUM FUND shareholders (including, without
limitation, Contract owners that beneficially own Shares of any Fund).
(c) Neither LIFE COMPANY nor UNDERWRITER shall be liable under this Section
12.1 with respect to any action against an Indemnified Party unless PREMIUM FUND
or ADVISER shall have notified LIFE COMPANY and UNDERWRITER in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the action shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify LIFE COMPANY and
UNDERWRITER of any such action shall not relieve LIFE COMPANY and UNDERWRITER
from any liability which they may have to the Indemnified Party against whom
such action is brought otherwise than on account of this Section 12.1. Except as
otherwise provided herein, in case any such action is brought against an
Indemnified Party, LIFE COMPANY and UNDERWRITER shall be entitled to
participate, at their own expense, in the defense of such action. Unless the
Indemnified Party releases LIFE COMPANY and UNDERWRITER from any further
obligation to it under this Section 12.1, LIFE COMPANY and UNDERWRITER also
shall be entitled to assume the defense thereof, with counsel approved by each
Indemnified Party named in the action, which approval shall not be unreasonably
withheld. After notice from LIFE COMPANY or UNDERWRITER to such Indemnified
Party of LIFE COMPANY's or UNDERWRITER's election to assume the defense thereof,
the Indemnified Party will cooperate fully with LIFE COMPANY and UNDERWRITER and
shall bear the fees and expenses of any additional counsel retained by it, and
neither LIFE COMPANY nor UNDERWRITER will be liable to such Indemnified Party
under this Agreement for any legal or other expenses subsequently incurred by
such Indemnified Party independently in connection with the defense thereof,
other than reasonable costs of investigation.
12.2 Of LIFE COMPANY and UNDERWRITER by PREMIUM FUND and ADVISER.
(a) Except to the extent provided in Sections 12.2(c) and 12.2(d), below,
PREMIUM FUND and ADVISER agree to indemnify and hold harmless LIFE COMPANY,
UNDERWRITER, their respective affiliates, and each person, if any, who controls
LIFE COMPANY, UNDERWRITER or their respective affiliates within the meaning of
Section 15 of the 1933 Act and each of their respective directors and officers,
(collectively, the "Indemnified Parties" for purposes of this Section 12.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of PREMIUM FUND OR ADVISER which consent
shall not be unreasonably withheld) or actions in respect thereof (including, to
the extent reasonable, legal and other expenses), to which the Indemnified
Parties or Contract owners may become subject under any statute, regulation, at
common law, or otherwise, insofar as such losses, claims, damages, liabilities
or actions are related to the sale, holding or acquisition of the Shares or the
Contracts and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in PREMIUM FUND's 1933 Act
registration statement, any Fund Prospectus or sales literature or
advertising of PREMIUM FUND (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, that
this agreement to indemnify shall not apply as to any Indemnified Party if
such statement or omission or such alleged statement or omission was made
in reliance upon and in conformity with information furnished to PREMIUM
FUND or its affiliates by or on behalf of LIFE COMPANY, UNDERWRITER or
their respective affiliates for use in PREMIUM FUND's 1933 Act registration
statement, any Fund Prospectus, or in sales literature or advertising or
otherwise for use in connection with the sale of Contracts or Shares; or
(any amendment or supplement to any of the foregoing)
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations contained in any
Account's 1933 Act registration statement, any Contract Prospectus, sales
literature or advertising for the Contracts, or any amendment or supplement
to any of the foregoing, not supplied for use therein by or on behalf of
PREMIUM FUND, ADVISER or their affiliates) made by, or the negligent,
illegal or fraudulent conduct of, PREMIUM FUND, ADVISER or their respective
affiliates or persons under their control in connection with the sale or
distribution of Contracts or Shares; or
(iii) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any Account's 1933 Act
registration statement, any Contract Prospectus, sales literature or
advertising covering the Contracts, or any amendment or supplement to any
of the foregoing, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, if such statement or omission was made
in reliance upon and in conformity with information furnished to LIFE
COMPANY, UNDERWRITER or their respective affiliates by or on behalf of
PREMIUM FUND, or ADVISER or their respective affiliates; or
(iv) arise as a result of any failure by PREMIUM FUND or ADVISER to
perform the obligations, provide the services and furnish the materials
required of each under the terms of this Agreement, or any material breach
of any representation and/or warranty made by PREMIUM FUND or ADVISER in
this Agreement or arise out of or result from any other material breach of
this Agreement by PREMIUM FUND or ADVISER.
(b) Except to the extent provided in Sections 12.2(c) and 12.2(d) hereof,
PREMIUM FUND and ADVISER each agree to indemnify and hold harmless the
Indemnified Parties from and against any and all losses, claims, damages,
liabilities (including amounts paid in settlement thereof with, the written
consent of PREMIUM FUND and/or ADVISER) or actions in respect thereof
(including, to the extent reasonable, legal and other expenses) to which the
Indemnified Parties may become subject directly or indirectly under any statute,
at common law or otherwise, insofar as such losses, claims, damages, liabilities
or actions directly or indirectly result from or arise out of the failure of any
Fund to operate as a regulated investment company in compliance with (i)
Subchapter M of the Code and regulations thereunder, or (ii) Section 817(h) of
the Code and regulations thereunder, including, without limitation, any income
taxes and related penalties, rescission charges, liability under state law to
Contract owners asserting liability against LIFE COMPANY pursuant to the
Contracts, the costs of any ruling and closing agreement or other settlement
with the IRS, and the cost of any substitution by LIFE COMPANY of Shares of
another investment company or portfolio for those of any adversely affected Fund
as a funding medium for each Account that LIFE COMPANY reasonably deems
necessary or appropriate as a result of the noncompliance.
(c) Neither PREMIUM FUND nor ADVISER shall be liable under this Section
12.2 with respect to any losses, claims, damages, liabilities or actions to
which an Indemnified Party would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance by that
Indemnified Party of its duties or by reason of such Indemnified Party's
reckless disregard of its obligations and duties (i) under this Agreement, or
(ii) to LIFE COMPANY, UNDERWRITER, each Account or Contract owners.
(d) Neither PREMIUM FUND nor ADVISER shall be liable under this Section
12.2 with respect to any action against an Indemnified Party unless the
Indemnified Party shall have notified PREMIUM FUND and/or ADVISER in writing
within a reasonable time after the summons or other first legal process giving
information of the nature of the action shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify PREMIUM FUND or
ADVISER of any such action shall not relieve PREMIUM FUND or ADVISER from any
liability which it may have to the Indemnified Party against whom such action is
brought otherwise than on account of this Section 12.2. Except as otherwise
provided herein, in case any such action is brought against an Indemnified
Party, PREMIUM FUND and/or ADVISER will be entitled to participate, at its own
expense, in the defense of such action. Unless the Indemnified Party releases
ADVISER and PREMIUM FUND from any further obligation to it under this Section
12.2, PREMIUM FUND and/or ADVISER also shall be entitled to assume the defense
thereof, with counsel approved by each Indemnified Party named in the action,
which approval shall not be unreasonably withheld. After notice from PREMIUM
FUND and/or ADVISER to such Indemnified Party of PREMIUM FUND's or ADVISER's
election to assume the defense thereof, the Indemnified Party will cooperate
fully with PREMIUM FUND and ADVISER and shall bear the fees and expenses of any
additional counsel retained by it, and PREMIUM FUND and ADVISER will not be
liable to such Indemnified Party under this Agreement for any legal or other
expenses subsequently incurred by such Indemnified Party independently in
connection with the defense thereof, other than reasonable costs of
investigation.
12.3 Effect of Notice.
Any notice given by the indemnifying Party to an Indemnified Party referred
to in Sections 12.1(c) or 12.2(d) above of participation in or control of any
action by the indemnifying Party will in no event be deemed to be an admission
by the indemnifying Party of liability, culpability or responsibility, and the
indemnifying Party will remain free to contest liability with respect to the
claim among the Parties or otherwise.
12.4 Successors.
A successor by law of any Party shall be entitled to the benefits of the
indemnification contained in this Section 12.
Section 13. Applicable Law
This Agreement will be construed and the provisions hereof interpreted
under and in accordance with New York law, without regard for that state's
principles of conflict of laws.
Section 14. Execution in Counterparts
This Agreement may be executed simultaneously in two or more counterparts,
each of which taken together will constitute one and the same instrument.
Section 15. Severability
If any provision of this Agreement is held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement will not
be affected thereby.
Section 16. Rights Cumulative
The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, that the Parties are entitled to under federal and state
laws.
Section 17. Headings
The Table of Contents and headings used in this Agreement are for purposes
of reference only and shall not limit or define the meaning of the provisions of
this Agreement.
Section 18. Confidentiality
PREMIUM FUND and ADVISER acknowledge that the identities of the customers
of LIFE COMPANY or any of its affiliates (collectively, the "LIFE COMPANY
Protected Parties" for purposes of this Section 18), information maintained
regarding those customers, and all computer programs and procedures or other
information developed by the LIFE COMPANY Protected Parties or any of their
respective employees or agents in connection with LIFE COMPANY's performance of
its duties under this Agreement are the valuable property of the LIFE COMPANY
Protected Parties. PREMIUM FUND and ADVISER agree that if they come into
possession of any list or compilation of the identities of or other information
about the LIFE COMPANY Protected Parties' customers, or any other information or
property of the LIFE COMPANY Protected Parties, other than such information as
may be independently developed or compiled by PREMIUM FUND or ADVISER from
information supplied to them by the LIFE COMPANY Protected Parties' customers
who also maintain accounts directly with PREMIUM FUND, PREMIUM FUND will hold
such information or property in confidence and refrain from using, disclosing or
distributing any of such information or other property except: (a) with LIFE
COMPANY's prior written consent; or (b) as required by law or judicial process.
LIFE COMPANY and UNDERWRITER acknowledge that the identities of the customers of
PREMIUM FUND or any of its affiliates (collectively, the "PREMIUM FUND Protected
Parties" for purposes of this Section 18), information maintained regarding
those customers, and all computer programs and procedures or other information
developed by the PREMIUM FUND Protected Parties or any of their respective
employees or agents in connection with PREMIUM FUND's performance of its duties
under this Agreement are the valuable property of the PREMIUM FUND Protected
Parties. LIFE COMPANY and UNDERWRITER agree that if they come into possession of
any list or compilation of the identities of or other information about the
PREMIUM FUND Protected Parties' customers or any other information or property
of the PREMIUM FUND Protected Parties, other than such information as may be
independently developed or compiled by LIFE COMPANY or UNDERWRITER from
information supplied to them by the PREMIUM FUND Protected Parties' customers
who also maintain accounts directly with LIFE COMPANY or UNDERWRITER, LIFE
COMPANY and UNDERWRITER will hold such information or property in confidence and
refrain from using, disclosing or distributing any of such information or other
property except: (a) with PREMIUM FUND's prior written consent; or (b) as
required by law or judicial process. Each party acknowledges that any breach of
the agreements in this Section 18 would result in immediate and irreparable harm
to the other parties for which there would be no adequate remedy at law and
agree that in the event of such a breach, the other parties will be entitled to
equitable relief by way of temporary and permanent injunctions, as well as such
other relief as any court of competent jurisdiction deems appropriate.
Section 19. Collateral Agreements
PREMIUM FUND and ADVISER agree that if PREMIUM FUND or ADVISER (or any of
their affiliates) enters into any arrangement whereby another Participating
Insurance Company, as compared with LIFE COMPANY under this Agreement and any
collateral agreements and understandings, (a) bears materially fewer expenses,
(b) has materially fewer obligations, (c) receives materially higher rates of
revenues or fees from PREMIUM FUND, the Fund Underwriter and/or ADVISER, or any
of their affiliates, or (d) otherwise is treated materially more favorably in
any respect, to provide the same to LIFE COMPANY, Underwriter, and their
respective affiliates.
Section 20. Trademarks and Names
(a) Neither LIFE COMPANY nor UNDERWRITER or any of their respective
affiliates, shall use any designation consistency in whole or in part of the
names or marks "_______________________" or any trademark, trade name, service
mark or logo of PREMIUM FUND, ADVISER or any of their respective affiliates, or
any variation of any such trademark, trade name, service mark or logo, without
PREMIUM FUND's or ADVISER's prior written consent. Upon termination of this
Agreement for any reason, LIFE COMPANY and UNDERWRITER shall cease all use of
any such name or mark as soon as reasonably practicable.
(b) Neither PREMIUM FUND nor ADVISER, nor any of their affiliates, shall
use any designation consistency in whole or in part of the names or marks
"Allstate Life Insurance Company of New York" or any trademark, trade name,
service mark or logo relating to LIFE COMPANY, UNDERWRITER or any of their
respective affiliates or any variation of any such trademark, trade name,
service mark or logo without the prior written consent of LIFE COMPANY or
UNDERWRITER. Upon termination of this Agreement for any reason, PREMIUM FUND and
ADVISER shall cease all use of any such name or mark as soon as reasonably
practicable.
Section 21. Parties to Cooperate
Each Party to this Agreement will cooperate with each other Party and all
appropriate governmental authorities (including, without limitation, the SEC,
the NASD and state insurance regulators) and will permit each other and such
authorities reasonable access to its books and records (including copies
thereof) in connection with any investigation or inquiry relating to this
Agreement or the transactions contemplated hereby.
Section 22. Amendments
No provision of this Agreement may be amended or modified in any manner
except by a written agreement executed by all Parties hereto.
Section 23. Waivers
No waiver of, or failure to enforce, any provision of this Agreement by any
Party shall result in any a waiver of any other violation of that or any other
provision of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed in their names and on their behalf by and through their duly authorized
officers signing below.
DELAWARE GROUP PREMIUM FUND, INC.
Attest: ________________________ By:
Name: _______________ Name: ________________
Title _______________ Title: __________
DELAWARE INVESTMENTS
Attest: ________________________ By:
Name: _______________ Name: ________________
Title _______________ Title: __________
ALLSTATE LIFE INSURANCE COMPANY OF
NEW YORK, on behalf of itself and
its separate accounts
Attest: ________________________ By:
Name: ________________________ Name:
Title: ________________________ Title:
ALLSTATE LIFE FINANCIAL SERVICES,INC.
Attest: ________________________ By:
Name: ________________________ Name:
Title: ________________________ Title:
<PAGE>
SCHEDULE A
FUNDS AVAILABLE UNDER THE CONTRACTS
Delaware GP Small Cap Value Series
Delaware GP Trend Series
SEPARATE ACCOUNTS UTILIZING THE FUNDS
Allstate Life of New York Separate Account A
CONTRACTS FUNDED BY THE SEPARATE ACCOUNTS
NYLU446
<PAGE>
<TABLE>
<CAPTION>
Schedule B
EXPENSE ALLOCATIONS
=========================================================== ========================================================
<S> <C>
Life Company PREMIUM FUND / ADVISER
preparing and filing the Account's registration statement preparing and filing the Fund's registration statement
text composition, printing, and mailing of Contract text composition, printing, and mailing of Fund
Prospectuses and supplements Prospectuses and supplements (Adviser or its
affiliates to bear costs related to
materials sent to prospective Contract
owners or existing Contract owners that
do not own Fund Shares)
text composition and printing Contract SAIs text composition and printing Fund
SAIs mailing and distributing Contract SAIs to Contract mailing and distributing
Fund SAIs to Contract owners owners upon request by Contract owners upon request
by Contract owners
text composition, printing, mailing, and distributing text composition, printing, mailing, and distributing
annual and semi-annual reports for Accounts annual and semi-annual reports for Funds (Adviser or
its affiliates to bear costs related
to materials sent to prospective Contract
owners or existing Contract owners that
do not own Fund Shares)
text composition, printing, mailing, distributing, and text composition,
printing, mailing, distributing and tabulation of proxy statements and voting
instruction tabulation of proxy statements and voting instruction solicitation
materials to participants with respect to solicitation materials to participants
with respect to proxies solicited by LIFE COMPANY proxies solicited by PREMIUM
FUND
preparation, printing and distributing sales material and advertising relating
to the Funds (but not including any Fund Prospectus, SAI, or report), insofar as
such materials relate to the Contracts and filing such materials with and
obtaining approval from, the SEC, the NASD, any state insurance regulatory
authority, and any other appropriate regulatory authority, to the extent
required
=========================================================== ========================================================
</TABLE>
Exhibit 10(a)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Pre-Effective Amendment No. 1 to Registration
Statement No. 033-94785 of Allstate Life of New York Separate Account A of
Allstate Life Insurance Company of New York on Form N-4 of our report dated
February 19, 1999 relating to the financial statements and the related financial
statement schedules of Allstate Life Insurance Company of New York, and our
report dated March 18, 1999 relating to the financial statements of Allstate
Life of New York Separate Account A, appearing in the Statement of Additional
Information (which is incorporated by reference in the Prospectus of Allstate
Life of New York Separate Account A of Allstate Life Insurance Company of New
York), which is part of such Registration Statement, and to the reference to us
under the heading "Experts" in such Statement of Additional Information.
Deloitte & Touche LLP
Chicago, Illinois
February 14, 2000
Exhibit 10(b)
Freedman, Levy, Kroll & Simonds
CONSENT OF
FREEDMAN, LEVY, KROLL & SIMONDS
We hereby consent to the reference to our firm under the caption "Legal
Matters" in the prospectus contained in Pre-Effective Amendment No. 1 to the
Form N-4 Registration Statement of Allstate Life of New York Separate Account A
(File No. 333-94785).
/s/ FREEDMAN, LEVY, KROLL & SIMONDS
Washington, D.C.
February 14, 2000
<TABLE>
<CAPTION>
AIM Balanced
25-Oct-99
TO NO. YEARS 0.183
31-Dec-99
<S> <C> <C> <C> <C> <C> <C> <C>
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 25-Oct-99 1000.00 8.755550 114.21327
1 FEE 31-Dec-99 0.666667 10.000000 0.06667 0.07
2 FEE N/A 0 N/A 0.00000 0.06
3 FEE N/A 0 N/A 0.00000 0.05
4 N/A 0 N/A 0.00000 0.04
5 N/A 0 N/A 0.00000 0.03
6 N/A 0 N/A 0.00000 0.02
7 N/A 0 N/A 0.00000 0.01
8 N/A 0 N/A 0.00000 0
9 N/A 0 N/A 0.00000 0
10 N/A 0 N/A 0.00000 0
11 N/A 0 N/A 0.00000 0
12 N/A 0 N/A 0.00000 0
13 N/A 0 N/A 0.00000 0
14 FEE N/A 0 N/A 0.00000 0
15 FEE N/A 0 N/A 0.00000 0
RESULTING VALUE 31-Dec-99 10.000000 114.14660 1141.4660
0.183
FORMULA: 1000*(1+T)= 1141.4660
= 1081.966038
T = 53.64%
R = 8.20%
AIM Capital Appreciation
14-Oct-96
TO NO. YEARS 3.211
31-Dec-99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 14-Oct-96 1000.00 5.507338 181.57593
1 FEE 14-Oct-97 0.666667 6.818908 0.09777 0.07
2 FEE 14-Oct-98 0.666667 5.376785 0.12399 0.06
3 FEE 14-Oct-99 0.666667 7.428627 0.08974 0.05
4 31-Dec-99 0.666667 10.000000 0.06667 0.04
5 N/A 0 N/A 0.00000 0.03
6 N/A 0 N/A 0.00000 0.02
7 N/A 0 N/A 0.00000 0.01
8 N/A 0 N/A 0.00000 0
9 N/A 0 N/A 0.00000 0
10 N/A 0 N/A 0.00000 0
11 N/A 0 N/A 0.00000 0
12 N/A 0 N/A 0.00000 0
13 N/A 0 N/A 0.00000 0
14 FEE N/A 0 N/A 0.00000 0
15 FEE N/A 0 N/A 0.00000 0
RESULTING VALUE 31-Dec-99 10.000000 181.19776 1811.9776
3.211
FORMULA: 1000*(1+T)= 1811.9776
= 1777.977597
T = 19.63%
R = 77.80%
AIM Government Securities
14-Oct-96
TO NO. YEARS 3.211
31-Dec-99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 14-Oct-96 1000.00 8.902148 112.33244
1 FEE 14-Oct-97 0.666667 9.456649 0.07050 0.07
2 FEE 14-Oct-98 0.666667 10.229636 0.06517 0.06
3 FEE 14-Oct-99 0.666667 9.969671 0.06687 0.05
4 31-Dec-99 0.666667 10.000000 0.06667 0.04
5 N/A 0 N/A 0.00000 0.03
6 N/A 0 N/A 0.00000 0.02
7 N/A 0 N/A 0.00000 0.01
8 N/A 0 N/A 0.00000 0
9 N/A 0 N/A 0.00000 0
10 N/A 0 N/A 0.00000 0
11 N/A 0 N/A 0.00000 0
12 N/A 0 N/A 0.00000 0
13 N/A 0 N/A 0.00000 0
14 FEE N/A 0 N/A 0.00000 0
15 FEE N/A 0 N/A 0.00000 0
RESULTING VALUE 31-Dec-99 10.000000 112.06324 1120.6324
3.211
FORMULA: 1000*(1+T)= 1120.6324
= 1086.632359
T = 2.62%
R = 8.66%
AIM Growth
14-Oct-96
TO NO. YEARS 3.211
31-Dec-99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 14-Oct-96 1000.00 4.756751 210.22753
1 FEE 14-Oct-97 0.666667 6.312467 0.10561 0.07
2 FEE 14-Oct-98 0.666667 5.969581 0.11168 0.06
3 FEE 14-Oct-99 0.666667 8.089929 0.08241 0.05
4 31-Dec-99 0.666667 10.000000 0.06667 0.04
5 N/A 0 N/A 0.00000 0.03
6 N/A 0 N/A 0.00000 0.02
7 N/A 0 N/A 0.00000 0.01
8 N/A 0 N/A 0.00000 0
9 N/A 0 N/A 0.00000 0
10 N/A 0 N/A 0.00000 0
11 N/A 0 N/A 0.00000 0
12 N/A 0 N/A 0.00000 0
13 N/A 0 N/A 0.00000 0
14 FEE N/A 0 N/A 0.00000 0
15 FEE N/A 0 N/A 0.00000 0
RESULTING VALUE 31-Dec-99 10.000000 209.86117 2098.6117
3.211
FORMULA: 1040*(1+T)= 2098.6117
= 2064.611651
T = 25.32%
R = 106.46%
AIM High Yield
25-Oct-99
TO NO. YEARS 0.183
31-Dec-99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 25-Oct-99 1000.00 9.478809 105.49849
1 FEE 31-Dec-99 0.666667 10.000000 0.06667 0.07
2 FEE N/A 0 N/A 0.00000 0.06
3 FEE N/A 0 N/A 0.00000 0.05
4 N/A 0 N/A 0.00000 0.04
5 N/A 0 N/A 0.00000 0.03
6 N/A 0 N/A 0.00000 0.02
7 N/A 0 N/A 0.00000 0.01
8 N/A 0 N/A 0.00000 0
9 N/A 0 N/A 0.00000 0
10 N/A 0 N/A 0.00000 0
11 N/A 0 N/A 0.00000 0
12 N/A 0 N/A 0.00000 0
13 N/A 0 N/A 0.00000 0
14 FEE N/A 0 N/A 0.00000 0
15 FEE N/A 0 N/A 0.00000 0
RESULTING VALUE 31-Dec-99 10.000000 105.43182 1054.3182
0.183
FORMULA: 1000*(1+T)= 1054.3182
= 994.8181948
T = -2.79%
R = -0.52%
AIM Value
14-Oct-96
TO NO. YEARS 3.211
31-Dec-99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 14-Oct-96 1000.00 4.877490 205.02349
1 FEE 14-Oct-97 0.666667 6.555847 0.10169 0.07
2 FEE 14-Oct-98 0.666667 6.255693 0.10657 0.06
3 FEE 14-Oct-99 0.666667 8.421760 0.07916 0.05
4 31-Dec-99 0.666667 10.000000 0.06667 0.04
5 N/A 0 N/A 0.00000 0.03
6 N/A 0 N/A 0.00000 0.02
7 N/A 0 N/A 0.00000 0.01
8 N/A 0 N/A 0.00000 0
9 N/A 0 N/A 0.00000 0
10 N/A 0 N/A 0.00000 0
11 N/A 0 N/A 0.00000 0
12 N/A 0 N/A 0.00000 0
13 N/A 0 N/A 0.00000 0
14 FEE N/A 0 N/A 0.00000 0
15 FEE N/A 0 N/A 0.00000 0
RESULTING VALUE 31-Dec-99 10.000000 204.66940 2046.6940
3.211
FORMULA: 1000*(1+T)= 2046.6940
= 2012.693988
T = 24.33%
R = 101.27%
AIM International Equity
14-Oct-96
TO NO. YEARS 3.211
31-Dec-99
TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE SURRENDER CHARGES
0 INIT DEPOSIT 14-Oct-96 1000.00 5.184274 192.89104
1 FEE 14-Oct-97 0.666667 6.313547 0.10559 0.07
2 FEE 14-Oct-98 0.666667 5.767122 0.11560 0.06
3 FEE 14-Oct-99 0.666667 7.343599 0.09078 0.05
4 31-Dec-99 0.666667 10.000000 0.06667 0.04
5 N/A 0 N/A 0.00000 0.03
6 N/A 0 N/A 0.00000 0.02
7 N/A 0 N/A 0.00000 0.01
8 N/A 0 N/A 0.00000 0
9 N/A 0 N/A 0.00000 0
10 N/A 0 N/A 0.00000 0
11 N/A 0 N/A 0.00000 0
12 N/A 0 N/A 0.00000 0
13 N/A 0 N/A 0.00000 0
14 FEE N/A 0 N/A 0.00000 0
15 FEE N/A 0 N/A 0.00000 0
RESULTING VALUE 31-Dec-99 10.000000 192.51240 1925.1240
3.211
FORMULA: 1000*(1+T)= 1925.1240
= 1891.123998
T = 21.95%
R = 89.11%
AIM Capital Appreciation
12/31/98 NO. YEARS 1.000
TO
12/31/99 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 31-Dec-98 1000.00 7.001828 142.81985
FEE 31-Dec-99 0.666667 10.000000 0.06667
RESULTING VALUE 31-Dec-99 10.000000 142.75318 1427.5318
1.000
FORMULA: 1000*(1+T)= 1427.5318 - (0.85 * 1000 * 0.07)
= 1368.0318
T = 36.80%
R = 36.80%
AIM Government Securities
12/31/98 NO. YEARS 1.000
TO
12/31/99 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 31-Dec-98 1000.00 10.260888 97.45745
FEE 31-Dec-99 0.666667 10.000000 0.06667
RESULTING VALUE 31-Dec-99 10.000000 97.39079 973.9079
1.000
FORMULA: 1000*(1+T)= 973.9079 - (0.85 * 1000 * 0.07)
= 914.4079
T = -8.56%
R = -8.56%
AIM Growth
12/31/98 NO. YEARS 1.000
TO
12/31/99 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 31-Dec-98 1000.00 7.487433 133.55712
FEE 31-Dec-99 0.666667 10.000000 0.06667
RESULTING VALUE 31-Dec-99 10.000000 133.49045 1334.9045
1.000
FORMULA: 1000*(1+T)= 1334.9045 - (0.85 * 1000 * 0.07)
= 1275.4045
T = 27.54%
R = 27.54%
AIM Value
12/31/98 NO. YEARS 1.000
TO
12/31/99 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 31-Dec-98 1000.00 7.795113 128.28550
FEE 31-Dec-99 0.666667 10.000000 0.06667
RESULTING VALUE 31-Dec-99 10.000000 128.21884 1282.1884
1.000
FORMULA: 1000*(1+T)= 1282.1884 - (0.85 * 1000 * 0.07)
= 1222.6884
T = 22.27%
R = 22.27%
AIM International Equity
12/31/98 NO. YEARS 1.000
TO
12/31/99 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE
INIT DEPOSIT 31-Dec-98 1000.00 6.530665 153.12376
FEE 31-Dec-99 0.666667 10.000000 0.06667
RESULTING VALUE 31-Dec-99 10.000000 153.05710 1530.5710
1.000
FORMULA: 1000*(1+T)= 1530.5710 - (0.85 * 1000 * 0.07)
= 1471.0710
T = 47.11%
R = 47.11%
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Non-Standardized Calculations
Dates:
Current: 12/31/99
3 Months Ago: 09/30/99
End of Last Year: 12/31/98
One Yr Ago: 12/31/98
Two Yrs Ago: 12/31/97 Non-Standardized Performance
Three Yrs Ago: 12/31/96
Five Yrs Ago: 12/31/94
Ten Yrs Ago: 12/29/89
Inception Inception Today's One Yr Inception One Year YTD
Fund Date AUV AUV AUV Total Average
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AIM Balanced 10/25/99 8.75555 10 N/A 14.21% 106.27% N/A N/A
AIM Capital Appreciation 10/14/96 5.507338 10 7.001828 81.58% 20.40% 42.82% 42.82%
AIM Government Securities 10/14/96 8.902148 10 10.260888 12.33% 3.68% -2.54% -2.54%
AIM Growth 10/14/96 4.756751 10 7.487433 110.23% 26.01% 33.56% 33.56%
AIM High Yield 10/25/99 9.478809 10 N/A 5.50% 33.86% N/A N/A
AIM Value 10/14/96 4.87749 10 7.795113 105.02% 25.03% 28.29% 28.29%
AIM International Equity 10/14/96 5.184274 10 6.530665 92.89% 22.68% 53.12% 53.12%
</TABLE>
Exhibit 99(d)
POWER OF ATTORNEY
With Respect to the Allstate Life Insurance Company of New York Filing on Form
N-4 for the Allstate Life of New York Separate Account A
Know all men by these presents that Vincent A. Fusco, whose signature
appears below, constitutes and appoints Thomas J. Wilson and Michael J. Velotta,
his attorneys-in-fact, with power of substitution, and each of them in any and
all capacities, to sign any registration statements and amendments thereto for
the Form N-4 for the Allstate Life of New York Separate Account A and to file
the same, with exhibits thereto and other documents, in connection therewith,
with the Securities and Exchange Commission, hereby ratifying and confirming all
that each of said attorneys-in-fact, or his substitute or substitutes, may do or
cause to be done by virtue hereof.
Date: February 9, 2000
/s/ VINCENT A. FUSCO
--------------------------
Vincent A. Fusco
Chief Operations Officer
