-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QXRF2NeYpfWqtzuOdYjsASYTeUGYdzVVQk7xAoObnZ4N+p4Pg+rC/BpAbx5G5pCx 3n/q/r+xnH8B9+gA8aik8w== 0000950131-96-004662.txt : 19960924 0000950131-96-004662.hdr.sgml : 19960924 ACCESSION NUMBER: 0000950131-96-004662 CONFORMED SUBMISSION TYPE: N-4 EL/A PUBLIC DOCUMENT COUNT: 13 FILED AS OF DATE: 19960923 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALLSTATE LIFE OF NEW YORK SEPARATE ACCOUNT A CENTRAL INDEX KEY: 0000948255 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 362608394 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-4 EL/A SEC ACT: 1933 Act SEC FILE NUMBER: 033-65381 FILM NUMBER: 96633118 FILING VALUES: FORM TYPE: N-4 EL/A SEC ACT: 1940 Act SEC FILE NUMBER: 811-07467 FILM NUMBER: 96633119 BUSINESS ADDRESS: STREET 1: ONE ALLSTATE DRIVE STREET 2: P O BOX 9095 CITY: FARMINGTON STATE: NY ZIP: 11738 BUSINESS PHONE: 708-402-7383 MAIL ADDRESS: STREET 1: 3100 SANDERS ROAD STREET 2: J5B CITY: NORTHBROOK STATE: IL ZIP: 60062 N-4 EL/A 1 N-4EL/A FOR ALLSTATE LIFE INSURANCE CO. OF NEW YORK AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 20, 1996 FILE NO. 33-65381 ------------------------------------------------------------------------------ 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. 1 /X/ ----------------------------------------------------------------------------- ALLSTATE LIFE OF NEW YORK SEPARATE ACCOUNT A (EXACT NAME OF REGISTRANT) ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK ONE ALLSTATE DRIVE FARMINGVILLE, NEW YORK 11738 (NAME OF DEPOSITOR) 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 AND COMPLETE ADDRESS OF AGENT FOR SERVICE) COPIES TO: STEPHEN E. ROTH, ESQUIRE JOHN R. HEDRICK, ESQUIRE SUTHERLAND, ASBILL AND BRENNAN ALLSTATE LIFE FINANCIAL SERVICES, INC. 1275 PENNSYLVANIA AVENUE 3100 SANDERS ROAD WASHINGTON, D.C. 20004-2404 NORTHBROOK, IL 60062 Approximate date of proposed public offering: As soon as practicable after the effective date of the Registration Statement. The Registrant has elected pursuant to Rule 24f-2 to register an indefinite number of securities. The requisite $500 24f-2 filing fee was paid at time of initial registration. The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a) may determine. CROSS REFERENCE SHEET Showing Location in Part A (Prospectus) Part B (Statement of Additional Information) and Part C as Required by Form N-4 Item of Form N-4 Prospectus Caption - ---------------- ------------------ Part A: INFORMATION REQUIRED IN A PROSPECTUS 1. Cover Page...................................................... Cover Page 2. Definitions....................................................... Glossary 3. Synopsis Highlights;.................. Summary of Variable Account Expenses 4. Condensed Financial.................................................... --- (a) Chart................................................... Not Applicable (b) MM Yield................................................ Not Applicable (c) Location of Others................................ Financial Statements 5. General................................................................ --- (a) Depositor...................Allstate Life Insurance Company of New York (b) Registrant........................................ The Variable Account (c) Portfolio Company..The Fund Series; AIM Variable Insurance Funds, Inc.; Investment Advisors for the Fund (d) Fund Prospectus.......................... AIM Variable Insurance Funds; (e) Voting Rights............................................ Voting Rights (f) Services.................................... Charges & Other Deductions Contract Maintenance Charge 6. Deductions & Expenses........................... Charges & Other Deductions (a) General..................................... Charges & Other Deductions (b) Sales Load Percent................................... Withdrawal Charge (c) Special Purchase Plans.................................. Not Applicable (d) Commissions.............................. Distribution of the Contracts (e) Expenses -- Registrant ..................... Charges & Other Deductions (f) Fund Expenses.................... Summary of Variable Account Expenses; Expenses of the Funds (g) Organizational Expenses................................. Not Applicable 7. Contracts.............................................................. --- (a) Persons with Rights..... Benefits under the Contract; Payout Start Date for Income Payments; Voting Rights; Assignments;Beneficiary (b)(i) Allocation of Purchase Payments..... Allocation of Purchase Payments (ii) Transfers.................................. Transfers among portfolios (iii) Exchanges............................................. Not Applicable (c) Changes...................................................Modification (d) Inquiries...........................................Customer Inquiries 8. Annuity Period........................Payout Start Date for Income Payments (a) Material Factors.................... Amount of Variable Annuity Income Payments (b) Dates........................... Payout Start Date for Income Payments (c) Frequency, duration & level.Amount of Variable Annuity Income Payments (d) AIR........................ Amount of Variable Annuity Income Payments (e) Minimum.................... Amount of Variable Annuity Income Payments (f) -- Change Options.......................... Transfers among Portfolios -- Transfer........................................................--- 9. Death Benefit..................Death Benefit Payable; Death Benefit Amount; Death Benefit Payment Provisions 10. Purchases & Contract Value..............................................--- (a) Purchases...................................Purchase of the Contracts: Crediting of Initial Purchase Payments (b) Valuation................. Accumulation Units; Accumulation Unit Value (c) Daily Calculation.........Accumulation Units; Accumulation Unit Value; Allocation of Purchase Payments (d) Underwriter..............................Distribution of the Contracts 11. Redemptions.............................................................--- (a) -- By Owners...............................................Withdrawals (b) -- By Annuitant...........................................Income Plans (c) Texas ORP...............................................Not Applicable (d) Lapse...................................................Not Applicable (e) Free Look...................................................Highlights 12. Taxes...................................................Federal Tax Matters 13. Legal Proceedings........................................... Not Applicable 14. SAI Table of Contents.................................SAI Table of Contents Part B: INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION 15. Cover Page.......................................................Cover Page 16. Table of Contents.........................................Table of Contents 17. General Information & History...........................................--- (a) Depositor's Name...........Allstate Life Insurance Company of New York (b) Assets of Sub-account.............................The Variable Account (c) Control of Depositor.......Allstate Life Insurance Company of New York 18. Services................................................................--- (a) Fees & Expenses of Registrant..............Contract Maintenance Charge (b) Management Contract.......................Contract Maintenance Charge; Distribution of the Contracts (c) Custodian............................SAI: Safekeeping of the Variable Account's Assets Independent Public Accountant..................................Experts (d) Assets of Registrant.................SAI: Safekeeping of the Variable Account Assets (e) Affiliated Persons......................................Not Applicable (f) Principal Underwriter....................Distribution of the Contracts 19. Purchase of Securities Being Offered....................................--- (a) Offering...................................SAI: Purchase of Contracts (b) Sales load...............................Distribution of the Contracts 20. Underwriters............................................................--- (a) Principal Underwriter....................Distribution of the Contracts (b) Continuous offering....................... SAI: Purchase of Contracts (c) Commissions..............................Distribution of the Contracts (d) Unaffiliated Underwriters..........................................N/A 21. Calculation of Performance Data......................SAI: Performance Data 22. Annuity Payments............................................Income Payments 23. Financial Statements....................................................--- (a) Financial Statements of Registrant................SAI: Not Applicable (b) Financial Statements of Depositor..............Allstate Life Insurance Company of New York Financial Statements Part C: OTHER INFORMATION 24a. Financial Statements..........................Part C. Financial Statements 24b. Exhibits..................................................Part C. Exhibits 25. Directors and Officers.....................Part C. Directors & Officers of Depositor 26. Persons Controlled By or Under Common Control with Depositor or Registrant.........Part C. Persons Controlled by or Under Common Control with Depositor or Registrant 27. Number of Contract Owners................Part C. Number of Contract Owners 28. Indemnification....................................Part C. Indemnification 29a. Relationship of Principal Underwriter to Other Investment Companies...............Part C. Relationship of Principal Underwriter to Other Investment Companies 29b. Principal Underwriters......................Part C. Principal Underwriters 29c. Compensation of Underwriter..........Part C. Compensation of Allstate Life Financial Services, Inc. 30. Location of Accounts and Records..........Part C. Location of Accounts and Records 31. Management Services............................Part C. Management Services 31. Undertakings..........................................Part C. Undertakings ALLSTATE LIFE OF NEW YORK SEPARATE ACCOUNT A OFFERED BY ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK POST OFFICE BOX 9075 FARMINGVILLE, NEW YORK 11738-9075 1-(800) 692-4682 FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACTS --------------- This prospectus describes the AIM Lifetime Plus Variable Annuity, a group Flexible Premium Deferred Variable Annuity Certificate (hereinafter referred to as "Contract") designed to aid you in long-term financial planning and which can be used for retirement planning. The Contracts are issued by Allstate Life Insurance Company of New York ("Company"), a wholly owned indirect subsidiary of Allstate Insurance Company. The Contracts are issued as group Contracts. A certificate is issued that summarizes the provisions of the group Contract. For convenience, this prospectus refers to both Contracts and certificates as "Contracts." Purchase payments for the Contracts will be allocated to a series of Variable Sub-accounts of the Allstate Life of New York Separate Account A ("Variable Account") and/or to a Fixed Account option(s) funded through the Company's general account. The Variable Sub-accounts invest in shares of AIM Variable Insurance Funds, Inc. (the "Fund Series"). Nine Funds are currently available for investment within the Variable Account: (1) AIM V.I. Capital Appreciation Fund; (2) AIM V.I. Diversified Income Fund; (3) AIM V.I. Global Utilities Fund; (4) AIM V.I. Government Securities Fund; (5) AIM V.I. Growth Fund; (6) AIM V.I. Growth and Income Fund; (7) AIM V.I. International Equity Fund; (8) AIM V.I. Money Market Fund; and (9) AIM V.I. Value Fund. This prospectus presents information you should know before making a decision to invest in the Contract and the available Investment Alternatives. THE CONTRACTS MAY BE DISTRIBUTED THROUGH BROKER-DEALERS WHICH HAVE RELATIONSHIPS WITH BANKS OR OTHER FINANCIAL INSTITUTIONS OR BY EMPLOYEES OF SUCH BANKS; HOWEVER, THE CONTRACTS AND THE INVESTMENTS IN THE FUNDS ARE NOT DEPOSITS, OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY ANY BANK, AND THE FUNDS' SHARES ARE NOT FEDERALLY INSURED OR GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY. INVESTMENT IN THE CONTRACTS INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. THESE CONTRACTS ARE NOT FDIC INSURED. The Company has prepared and filed a Statement of Additional Information dated October , 1996 with the U.S. Securities and Exchange Commission. If you wish to receive the Statement of Additional Information, you may obtain a free copy by calling or writing the Company at the address above. For your convenience, an order form for the Statement of Additional Information may be found on page B-2 of this prospectus. Before ordering, you may wish to review the Table of Contents of the Statement of Additional Information on page B-1 of this prospectus. The Statement of Additional Information has been incorporated by reference into this prospectus. THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED OR PRECEDED BY A CURRENT PROSPECTUS FOR AIM VARIABLE INSURANCE FUNDS, INC. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. PLEASE READ THIS PROSPECTUS CAREFULLY AND RETAIN IT FOR FUTURE REFERENCE The Contract is only available in the State of New York. At least once each Contract year, the Company will send the Owner an annual statement that contains certain information pertinent to the individual Owner's Contract. The annual statement details values and specific Contract data that applies to each particular Contract. The annual statement does not contain financial statements of the Company, although the Company's financial statements are on page F-1 of this prospectus. The Company, however, is subject to the informational requirements of the Securities Exchange Act of 1934 and in accordance therewith files reports and other information with the Securities and Exchange Commission. Reports and other information filed by the Company can be inspected at the public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and are also available by personal computer from the SEC's EDGAR database on the World Wide Web at http://www.sec./gov/edgarhp.htm or through the SEC's web site at http://www.sec.gov. Copies of such material can be obtained from the Public Reference Section of the Commission, Washington, D.C. 20549 at prescribed rates. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO DEALER, SALESMAN, OR OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON.
PAGE ---- GLOSSARY................................................................... 3 HIGHLIGHTS................................................................. 4 SUMMARY OF VARIABLE ACCOUNT EXPENSES....................................... 5 CONDENSED FINANCIAL INFORMATION............................................ 6 YIELD AND TOTAL RETURN DISCLOSURE.......................................... 6 FINANCIAL STATEMENTS....................................................... 7 ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK AND THE VARIABLE ACCOUNT....... 7 Allstate Life Insurance Company of New York............................... 7 The Variable Account...................................................... 7 THE FUND SERIES............................................................ 8 AIM Variable Insurance Funds, Inc......................................... 8 Investment Advisor for the Funds.......................................... 8 FIXED ACCOUNT.............................................................. 9 Example of Interest Crediting During the Guarantee Period................. 9 Withdrawals or Transfers.................................................. 10 Market Value Adjustment................................................... 10 PURCHASE OF THE CONTRACTS.................................................. 10 Purchase Payment Limits................................................... 10 Free-Look Period.......................................................... 11 Crediting of Initial Purchase Payment..................................... 11 Allocation of Purchase Payments........................................... 11 Accumulation Units........................................................ 11 Accumulation Unit Value................................................... 11 Transfers Among Investment Alternatives................................... 11 Dollar Cost Averaging..................................................... 12 Automatic Fund Rebalancing................................................ 12 BENEFITS UNDER THE CONTRACT................................................ 12 Withdrawals............................................................... 12 Income Payments........................................................... 13 Payout Start Date for Income Payments.................................... 13 Variable Account Income Payments......................................... 13 Fixed Amount Income Payments............................................. 13 Income Plans............................................................. 13 DEATH BENEFITS............................................................. 14 Distribution Upon Death Payment Provisions................................ 14 Death Benefit Amount...................................................... 14 CHARGES AND OTHER DEDUCTIONS............................................... 15 Deductions from Purchase Payments......................................... 15 Withdrawal Charge (Contingent Deferred Sales Charge)...................... 15 Contract Maintenance Charge............................................... 15 Administrative Expense Charge............................................. 16
PAGE ---- Mortality and Expense Risk Charge......................................... 16 Taxes..................................................................... 16 Transfer Charges.......................................................... 16 Fund Expenses............................................................. 16 GENERAL MATTERS............................................................ 16 Owner..................................................................... 16 Beneficiary............................................................... 16 Assignments............................................................... 17 Delay of Payments......................................................... 17 Modification.............................................................. 17 Customer Inquiries........................................................ 17 FEDERAL TAX MATTERS........................................................ 17 Introduction.............................................................. 17 Taxation of Annuities in General.......................................... 17 Tax Deferral............................................................. 17 Non-natural Owners....................................................... 17 Diversification Requirements............................................. 18 Ownership Treatment...................................................... 18 Taxation of Partial and Full Withdrawals................................. 18 Taxation of Annuity Payments............................................. 18 Taxation of Annuity Death Benefits....................................... 19 Penalty Tax on Premature Distributions................................... 19 Aggregation of Annuity Contracts......................................... 19 Tax Qualified Contracts.................................................. 19 Restrictions Under Section 403(b) Plans.................................. 19 Income Tax Withholding................................................... 19 DISTRIBUTION OF THE CONTRACTS.............................................. 19 VOTING RIGHTS.............................................................. 20 SELECTED FINANCIAL DATA.................................................... 20 COMPETITION................................................................ 27 EMPLOYEES.................................................................. 27 PROPERTIES................................................................. 27 STATE AND FEDERAL REGULATION............................................... 27 EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY............................ 27 EXECUTIVE COMPENSATION..................................................... 29 LEGAL PROCEEDINGS.......................................................... 30 EXPERTS.................................................................... 30 LEGAL MATTERS.............................................................. 30 FINANCIAL STATEMENTS....................................................... F-1 APPENDIX A--Market Value Adjustment........................................ A-1 STATEMENT OF ADDITIONAL INFORMATION: TABLE OF CONTENTS..................... B-1 ORDER FORM................................................................. B-2
TABLE OF CONTENTS 2 GLOSSARY ACCUMULATION UNIT: A measure of your ownership interest in a Sub-account of the Variable Account prior to the Payout Start Date. Analogous, though not identical, to a share owned in a mutual fund. ACCUMULATION UNIT VALUE: The value of each Accumulation Unit which is calculated each Valuation Date. Each Sub-account of the Variable Account has its own distinct Accumulation Unit Value. Analogous, though not identical, to the share price (net asset value) of a mutual fund. ANNUITANT(S): The person or persons whose life determines the latest Payout Start Date and the amount and duration of any income payments for Income Plan options other than Guaranteed Payments for a Specified Period. Joint annuitants are only permitted in the payout phase. BENEFICIARY(IES): The person(s) to whom any benefits are due when a death benefit is payable and there is no surviving Owner. COMPANY("WE," "US"): Allstate Life Insurance Company of New York. CONTRACT: The Allstate Life Insurance Company of New York Flexible Premium Deferred Variable Annuity Contract, known as the "AIM Lifetime PlusSM Variable Annuity," that is described in this prospectus. CONTRACT ANNIVERSARY: An anniversary of the date that the Contract was issued. CONTRACT VALUE: The value of all amounts accumulated under the Contract prior to the Payout Start Date, equivalent to the Accumulation Units in each Sub- account of the Variable Account multiplied by the respective Accumulation Unit Value, plus the value in the Fixed Account. CONTRACT YEAR: A period of 12 months starting with the issue date or any Contract Anniversary. DEATH BENEFIT ANNIVERSARY: Every seventh Contract Anniversary beginning on the date that the Contract was issued. For example, the issue date, 7th and 14th Contract Anniversaries are the first three Death Benefit Anniversaries. FIXED ACCOUNT: All of the assets of the Company that are not in separate accounts. FIXED SUB-ACCOUNTS: These Sub-accounts are distinguished by Guarantee Period(s) and the dates the period(s) begin. The Fixed Sub-accounts are established when purchase payments are allocated to the Fixed Account; when previous Sub-accounts expire and a new Guarantee Period is selected; and when You transfer an amount to the Fixed Account. GUARANTEE PERIOD: A period of years for which a specified effective annual interest rate is guaranteed by the Company. INCOME PLAN: One of several ways in which a series of payments are made after the Payout Start Date. Income payments are based on the Contract Value adjusted by any applicable Market Value Adjustment and applicable taxes on the Payout Start Date. Income payment amounts may vary based on any Sub-account of the Variable Account and/or may be fixed for the duration of the Income Plan. INVESTMENT ALTERNATIVES: The Sub-accounts of the Variable Account and the Fixed Account. MARKET VALUE ADJUSTMENT: The Market Value Adjustment is the adjustment made to the money distributed from a Sub-account of the Fixed Account, prior to the end of the Guarantee Period, to reflect the impact of changes in interest rates between the time the Sub-account of the Fixed Account was established and the time of distribution. NON-QUALIFIED CONTRACTS: Contracts other than Qualified Contracts. OWNER(S)("YOU"): The person or persons designated as the Owner in the Contract. PAYOUT START DATE: The date on which income payments begin. QUALIFIED CONTRACTS: Contracts issued under plans that qualify for special federal income tax treatment under Sections 401(a), 403(a), 403(b) and 408 of the Internal Revenue Code. VALUATION DATE: Each day that the New York Stock Exchange is open for business. The Valuation Date does not include such Federal and non-Federal holidays as are observed by the New York Stock Exchange. VALUATION PERIOD: The period between successive Valuation Dates, commencing at the close of regular trading on the New York Stock Exchange (which is normally 4:00 pm Eastern Time) and ending as of the close of regular trading on the New York Stock Exchange on the next succeeding Valuation Date. VARIABLE ACCOUNT: Allstate Life of New York Separate Account A, a separate investment account established by the Company to receive and invest purchase payments paid under the Contracts. VARIABLE SUB-ACCOUNT: A portion of the Variable Account invested in shares of a corresponding Fund. The investment performance of each Variable Sub-account is linked directly to the investment performance of its corresponding Fund. 3 HIGHLIGHTS THE CONTRACT This Contract is designed for long-term financial planning and retirement planning. Money can be allocated to any combination of Funds or the Fixed Account. You have access to your funds either through withdrawals of Contract Value or through periodic income payments. You bear the entire investment risk for Contract Values and income payments based upon the Variable Account, because values will vary depending on the investment performance of the Fund(s) you select. See "Accumulation Unit Value," page and "Income Plans," page . You will also bear the investment risk of adverse changes in interest rates in the event amounts are prematurely withdrawn or transferred from Sub- accounts of the Fixed Account. See "Fixed Account," page . FREE-LOOK You may cancel the Contract any time within 10 days after receipt of the Contract and receive a full refund of purchase payments allocated to the Fixed Account. Purchase payments allocated to the Variable Account will be returned after an adjustment to reflect investment gain or loss that occurred from the date of allocation through the date of cancellation, unless a refund of purchase payments is required by state or federal law. See "Free-Look Period," page . HOW TO INVEST Your first purchase payment must be at least $5,000 (for Qualified Contracts, $2,000). Subsequent purchase payments must be at least $500. Purchase payments may also be made pursuant to an Automatic Addition Program. See "Purchase Payment Limits," page . At the time of your application, you will allocate your purchase payment among the Investment Alternatives. The allocation you specify on the application will be effective immediately. All allocations must be in whole percents from 0% to 100% (total allocation equals 100%) or in whole dollars. Allocations may be changed by notifying the Company in writing. See "Allocation of Purchase Payments," page . INVESTMENT ALTERNATIVES The Variable Account invests in shares of AIM Variable Insurance Funds, Inc. (the "Fund Series"). The Fund Series has a total of nine Funds available under the Contract. The Funds include: (1) AIM V.I. Capital Appreciation Fund; (2) AIM V.I. Diversified Income Fund; (3) AIM V.I. Global Utilities Fund; (4) AIM V.I. Government Securities Fund; (5) AIM V.I. Growth Fund; (6) AIM V.I. Growth and Income Fund; (7) AIM V.I. International Equity Fund; (8) AIM V.I. Money Market Fund; and (9) AIM V.I. Value Fund. The assets of each Fund are held separately from the other Funds and each has distinct investment objectives and policies which are described in the accompanying prospectus for the Fund Series. In addition to the Variable Account, Owners can also allocate all or part of their purchase payments to the Fixed Account. See "Fixed Account," on page . TRANSFERS AMONG INVESTMENT ALTERNATIVES Prior to the Payout Start Date, you may transfer amounts among the Investment Alternatives. The Company reserves the right to assess a $10 charge on each transfer in excess of twelve per Contract Year. The Company is presently waiving this charge. Transfers to the Fixed Account must be at least $500. Certain Fixed Account transfers may be restricted. See "Transfers Among Investment Alternatives," page . You may want to enroll in a Dollar Cost Averaging Program or an Automatic Fund Rebalancing Program. See "Dollar Cost Averaging," page , and "Automatic Fund Rebalancing," page . CHARGES AND DEDUCTIONS The costs of the Contract include: a contract maintenance charge ($35 annually), a mortality and expense risk charge (deducted daily, equal on an annual basis to 1.35% of the Contract's daily net assets of the Variable Account), and an administrative expense charge (deducted daily, equal on an annual basis to .10% of the Contract's daily net assets of the Variable Account). The Company reserves the right to assess a transfer charge ($10 on each transfer in excess of twelve per Contract Year). Additional deductions may be made for certain taxes. See "Contract Maintenance Charge," page , "Mortality and Expense Risk Charge," page , "Administrative Expense Charge," page , "Transfer Charges," page , and "Taxes," page . WITHDRAWALS You may withdraw all or part of the Contract Value before the earliest of the Payout Start Date, the death of any Owner or, if the Owner is not a natural person, the death of the Annuitant. No withdrawal charges or Market Value Adjustments will be applied to amounts withdrawn up to 10% of the amount of purchase payments. Amounts withdrawn in excess of the 10% may be subject to a withdrawal charge of 0% to 7% depending on how long purchase payments have been invested in the Contract. Amounts withdrawn from a Sub-account of the Fixed Account, in excess of the 10%, except during the 30 day period after the Guarantee Period expires, will be subject to a Market Value Adjustment. See "Withdrawals," page , "Withdrawals or Transfers," page , and "Taxation of Annuities in General," page . 4 DEATH BENEFIT The Company will pay a death benefit prior to the Payout Start Date on the death of any Owner or, if the Owner is not a natural person, the death of the Annuitant. See "Death Benefit Amount," page . INCOME PAYMENTS You will receive periodic income payments beginning on the Payout Start Date. You may choose among several Income Plans to fit your needs. Income payments may be received for a specified period or for life (either single or joint life), with or without a guaranteed number of payments. You can select income payments that are fixed, variable or a combination of fixed and variable. See "Income Payments," page . SUMMARY OF VARIABLE ACCOUNT EXPENSES The following table illustrates all expenses and fees that you will incur. The expenses and fees set forth in the table are based on charges under the Contracts and on the expenses of the Variable Account and the underlying Fund Series. OWNER TRANSACTION EXPENSES (ALL SUB-ACCOUNTS) Sales Load Imposed on Purchases (as a percentage of purchase payments)..... None Contingent Deferred Sales Charge (as a percentage of purchase payments).... *
APPLICABLE YEAR APPLICABLE SINCE WITHDRAWAL PREMIUM PAYMENT ACCEPTED CHARGE PERCENTAGE ------------------------ ----------------- 1st Year............................................ 7% 2nd Year............................................ 6% 3rd Year............................................ 5% 4th Year............................................ 4% 5th Year............................................ 3% 6th Year............................................ 2% 7th Year............................................ 1% Thereafter.......................................... 0% Transfer Fee ** Annual Contract Fee................................... $35*** Variable Account Annual Expenses (as a percentage of the Contract's average net assets in the Variable Account): Mortality and Expense Risk Charge..................... 1.35% Administrative Expense Charge......................... .10% Total Variable Account Annual Expenses................ 1.45%
- -------- *Each Contract Year up to 10% of the amount of purchase payments may be withdrawn without a contingent deferred sales charge or a Market Value Adjustment. **No charges will be imposed on the first twelve transfers in any Contract Year. The Company reserves the right to assess a $10 charge for each transfer in excess of twelve in any Contract Year, excluding transfers due to dollar cost averaging and automatic fund rebalancing. ***The annual Contract Fee will be waived if total purchase payments as of a Contract Anniversary, or upon a full withdrawal, are $50,000 or if the entire Contract Value is allocated to the Fixed Account. 5 FUND EXPENSES (AS A PERCENTAGE OF FUND ASSETS)
TOTAL FUND MANAGEMENT OTHER ANNUAL FUND FEES EXPENSES EXPENSES ---- ---------- -------- ---------- AIM V.I. Capital Appreciation Fund.............. 0.65% 0.10% 0.75% AIM V.I. Growth and Income Fund................. 0.65% 0.52% 1.17% AIM V.I. Global Utilities Fund (after expense reimbursements)................................ 0.65% 1.03% 1.68% AIM V.I. Diversified Income Fund................ 0.60% 0.28% 0.88% AIM V.I. Government Securities Fund............. 0.50% 0.69% 1.19% AIM V.I. Growth Fund............................ 0.65% 0.19% 0.84% AIM V.I. International Equity Fund.............. 0.75% 0.40% 1.15% AIM V.I. Value Fund............................. 0.65% 0.10% 0.75% AIM V.I. Money Market Fund...................... 0.40% 0.13% 0.53%
EXAMPLE You (the Owner) would pay the following cumulative expenses on a $1,000 investment, assuming a 5% annual return under the following circumstances: If you terminate your Contract or annuitize for a specified period of less than 120 months at the end of the applicable time period:
FUND 1 YEAR 3 YEARS ---- ------ ------- AIM V.I. Capital Appreciation Fund.............................. $78 $109 AIM V.I. Growth and Income Fund................................. $82 $122 AIM V.I. Global Utilities Fund.................................. $87 $137 AIM V.I. Diversified Income Fund................................ $79 $113 AIM V.I. Government Securities Fund............................. $82 $122 AIM V.I. Growth Fund............................................ $79 $112 AIM V.I. International Equity Fund.............................. $82 $121 AIM V.I. Value Fund............................................. $78 $109 AIM V.I. Money Market Fund...................................... $75 $102
If you do not terminate your Contract or if you annuitize for a specified period of 120 months or more at the end of the applicable time period:
FUND 1 YEAR 3 YEARS ---- ------ ------- AIM V.I. Capital Appreciation Fund.............................. $24 $ 73 AIM V.I. Growth and Income Fund................................. $28 $ 86 AIM V.I. Global Utilities Fund.................................. $33 $101 AIM V.I. Diversified Income Fund................................ $25 $ 77 AIM V.I. Government Securities Fund............................. $28 $ 86 AIM V.I. Growth Fund............................................ $25 $ 76 AIM V.I. International Equity Fund.............................. $28 $ 85 AIM V.I. Value Fund............................................. $24 $ 73 AIM V.I. Money Market Fund...................................... $21 $ 66
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSE. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The purpose of the example is to assist you in understanding the various costs and expenses that you will bear directly or indirectly. No deductions were made for premium taxes because New York does not charge premium taxes on annuities. CONDENSED FINANCIAL INFORMATION Condensed financial information for the Allstate Life of New York Separate Account A is not included because, as of the date of this prospectus, the Variable Account had not yet commenced operations and had no assets, liabilities, or income. YIELD AND TOTAL RETURN DISCLOSURE From time to time the Variable Account may advertise the yield and total return investment performance of one or more Sub-accounts. Standardized yield and total return advertisements include charges and expenses attributable to the Contracts. Including these fees has the effect of decreasing the advertised performance of a Sub-account, so that a Sub-account's investment performance will not be directly comparable to that of an ordinary mutual fund. 6 When a Sub-account advertises its standardized total return it will usually be calculated for one year, five years, and ten years or since inception if the Sub-account has not been in existence for such periods. Total return is measured by comparing the value of an investment in the Sub-account at the end of the relevant period to the value of the investment at the beginning of the period. In addition to the standardized total return, the Sub-account may advertise a non-standardized total return. This figure will usually be calculated for one year, five years, and ten years or other periods. Non-standardized total return is measured in the same manner as the standardized total return described above, except that the withdrawal charges under the Contract are not deducted. Therefore, a non-standardized total return for a Sub-account can be higher than a standardized total return for a Sub-account. Certain Sub-accounts may advertise yield in addition to total return. Except in the case of the AIM V.I. Money Market Sub-account, the yield will be computed in the following manner: the net investment income per unit earned during a recent one month period is divided by the unit value on the last day of the period, and then annualized. This figure reflects the recurring charges at the separate account level. The AIM V.I. Money Market Sub-account may advertise, in addition to the total return, either yield or the effective yield. The yield in this case refers to the income generated by an investment in that Sub-account over a seven-day period net of recurring charges at the separate account level. The income is then annualized (i.e., the amount of income generated by the investment during that week is assumed to be generated each week over a 52-week period and is shown as a percentage of the investment). The effective yield is calculated similarly but when annualized, the income earned by an investment in the AIM V.I. Money Market Sub-account is assumed to be reinvested at the end of each seven-day period. The effective yield will be slightly higher than the yield because of the compounding effect of this assumed reinvestment during a 52-week period. The Variable Account may also disclose yield, standard total return, and non- standard total return for periods prior to the date that the Variable Account commenced operations. For periods prior to the date the Variable Account commenced operations, performance information for the Sub-accounts will be calculated based on the performance of the underlying Funds and the assumption that the Sub-accounts were in existence for the same periods as those of the underlying Funds, with a level of charges equal to those currently assessed against the Sub-accounts. Please refer to the Statement of Additional Information for a further description of the method used to calculate a Sub-account's yield and total return. FINANCIAL STATEMENTS The financial statements of Allstate Life Insurance Company of New York begin on page F-1 of the prospectus. The financial statements of Allstate Life of New York Separate Account A are not included because, as of the date of this Prospectus, the Variable Account had not yet commenced operations and had no assets, liabilities, or income. ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK AND THE VARIABLE ACCOUNT ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK The Company was incorporated in 1967 as a stock life insurance company under the laws of New York and was known as "Financial Life Insurance Company" from 1967 to 1978. From 1978 to 1984, the Company was known as "PM Life Insurance Company." Since 1984 the Company has been known as "Allstate Life Insurance Company of New York." The Company's operations consist of one business segment which is the sale of annuities and life insurance. The Company is currently licensed to operate in New York. The Company's home office is located in Farmingville, New York. The Company is an indirect, wholly-owned subsidiary of Allstate Insurance Company ("Allstate") which is a stock property-liability insurance company incorporated under the laws of Illinois. With the exception of directors' qualifying shares, all of the outstanding capital stock of Allstate is owned by The Allstate Corporation ("Corporation"). THE VARIABLE ACCOUNT Established on December 22, 1995, the Allstate Life of New York Separate Account A is a unit investment trust registered with the Securities and Exchange Commission under the Investment Company Act of 1940. However, such registration does not signify that the Commission supervises the management or investment practices or policies of the Variable Account. The investment performance of the Variable Account is entirely independent of both the investment performance of the Company's general account and the performance of any other separate account. The Variable Account has been divided into nine Sub-accounts, each of which invests solely in its corresponding Fund of AIM Variable Insurance Funds, Inc. Additional Variable Sub-accounts may be added at the discretion of the Company. The assets of the Variable Account are held separately from the other assets of the Company. They are not chargeable with liabilities incurred in the Company's other business operations. Accordingly, the income, capital gains and capital losses, realized or unrealized, 7 incurred on the assets of the Variable Account are credited to or charged against the assets of the Variable Account, without regard to the income, capital gains or capital losses arising out of any other business the Company may conduct. The Company's obligations arising under the Contracts are general corporate obligations of the Company. THE FUND SERIES The Variable Account will invest in shares of the AIM Variable Insurance Funds, Inc. (the "Fund Series"). The Fund Series is registered with the Securities and Exchange Commission as an open-end, series, management investment company. Registration of the Fund Series does not involve supervision of its management, investment practices or policies by the Securities and Exchange Commission. The Funds are designed to provide investment vehicles for variable insurance contracts of various insurance companies, in addition to the Variable Account. Shares of the Funds are not deposits, or obligations of, or guaranteed or endorsed by any bank and the shares are not federally insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other agency. AIM VARIABLE INSURANCE FUNDS, INC. AIM Variable Insurance Funds, Inc. offers nine Funds for use with this Contract: (1) AIM V.I. Capital Appreciation Fund; (2) AIM V.I. Diversified Income Fund; (3) AIM V.I. Global Utilities Fund; (4) AIM V.I. Government Securities Fund; (5) AIM V.I. Growth Fund; (6) AIM V.I. Growth and Income Fund; (7) AIM V.I. International Equity Fund; (8) AIM V.I. Money Market Fund; and (9) AIM V.I. Value Fund. Each Fund has different investment objectives and policies and operates as a separate investment fund. The following is a brief description of the investment objectives and programs of the Funds: AIM V.I. CAPITAL APPRECIATION FUND ("CAPITAL APPRECIATION FUND") is a diversified Fund which seeks to provide capital appreciation through investments in common stocks, with emphasis on medium-sized and smaller emerging growth companies. AIM V.I. DIVERSIFIED INCOME FUND ("DIVERSIFIED INCOME FUND") is a diversified Fund which seeks to achieve a high level of current income primarily by investing in a diversified portfolio of foreign and U.S. government and corporate debt securities, including lower rated high yield debt securities (commonly known as "junk bonds"). AIM V.I. GLOBAL UTILITIES FUND ("GLOBAL UTILITIES FUND") is a non-diversified Fund which seeks to achieve a high level of current income and, as a secondary objective, to achieve capital appreciation, by investing primarily in common and preferred stocks of public utility companies (either domestic or foreign). AIM V.I. GOVERNMENT SECURITIES FUND ("GOVERNMENT FUND") is a diversified Fund which seeks to achieve a high level of current income consistent with reasonable concern for safety of principal by investing in debt securities issued, guaranteed or otherwise backed by the U.S. Government. AIM V.I. GROWTH FUND ("GROWTH FUND") is a diversified Fund which seeks to provide growth of capital through investments primarily in common stocks of leading U.S. companies considered by AIM to have strong earnings momentum. AIM V.I. GROWTH AND INCOME FUND ("GROWTH & INCOME FUND") is a diversified Fund which seeks to provide growth of capital, with current income as a secondary objective by investing primarily in dividend paying common stocks which have prospects for both growth of capital and dividend income. AIM V.I. INTERNATIONAL EQUITY FUND ("INTERNATIONAL FUND") is a diversified Fund which seeks to provide long-term growth of capital by investing in international equity securities, the issuers of which are considered by AIM to have strong earnings momentum. AIM V.I. MONEY MARKET FUND ("MONEY MARKET FUND") is a diversified Fund which seeks to provide as high a level of current income as is consistent with the preservation of capital and liquidity by investing in a diversified portfolio of money market instruments. AIM V.I. VALUE FUND ("VALUE FUND") is a diversified Fund which seeks to achieve long-term growth of capital by investing primarily in equity securities judged by AIM to be undervalued relative to the current or projected earnings of the companies issuing the securities, or relative to current market values of assets owned by the companies issuing the securities or relative to the equity markets generally. Income is a secondary objective. INVESTMENT ADVISOR FOR THE FUNDS A I M Advisors, Inc., ("AIM") serves as the investment advisor to each Fund. AIM was organized in 1976 and, together with its affiliates, manages or advises 43 investment company portfolios (including the Funds). AIM is a wholly-owned subsidiary of A I M Management Group Inc., a holding company. AIM manages pursuant to a master investment advisory agreement dated October 18, 1993, as amended April 28, 1994. As of August 30, 1996, total assets advised or managed by AIM and its affiliates were approximately $55 billion. There is no assurance that the Funds will attain their respective stated objectives. Additional information concerning the investment objectives and policies of the Funds can be found in the current prospectus for the Fund Series accompanying this prospectus. 8 You will find more complete information about the Funds, including the risks associated with each Fund, in the accompanying prospectus. You should read the prospectus for the Fund Series in conjunction with this prospectus. THE FUND SERIES PROSPECTUS SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE CONCERNING THE ALLOCATION OF PURCHASE PAYMENTS TO A PARTICULAR VARIABLE SUB-ACCOUNT. FIXED ACCOUNT Purchase payments and transfers allocated to one or more of the Sub-accounts of the Fixed Account become part of the general account of the Company. Each Sub-account offers a separate interest rate Guarantee Period. Guarantee Periods will be offered at the Company's discretion and may range from one to ten years. Presently, the Company offers Guarantee Periods of one, three, five, seven and ten years. The Owner must select the Sub-account(s) in which to allocate each purchase payment and transfer. No less than $500 may be allocated to any one Sub-account. The Company reserves the right to limit the number of additional purchase payments. Please consult with your sales representative for current information. Interest is credited daily to each Sub-account at a rate which compounds to the effective annual interest rate declared for each Sub-account's Guarantee Period that has been selected. The following example illustrates how the Sub-account value for a Sub-account of the Fixed Account would grow given an assumed purchase payment, Guarantee Period, and effective annual interest rate: EXAMPLE OF INTEREST CREDITING DURING THE GUARANTEE PERIOD: Purchase Payment..................................................... $10,000.00 Guarantee Period..................................................... 5 years Effective Annual Rate:............................................... 4.35%
END OF CONTRACT YEAR:
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5 ---------- ---------- ---------- ---------- ---------- Beginning Sub-Account Value $10,000.00 X (1 + Effective Annual Rate) 1.0435 ---------- $10,435.00 Sub-Account Value at end of Contract $10,435.00 year 1 X (1 + Effective Annual Rate) 1.0435 ---------- $10,888.92 Sub-Account Value at end of Contract $10,888.92 year 2 X (1 + Effective Annual Rate) 1.0435 ---------- $11,362.59 Sub-Account Value at end of Contract $11,362.59 year 3 X (1 + Effective Annual Rate) 1.0435 ---------- $11,856.86 Sub-Account Value at end of Contract $11,856.86 year 4 X (1 + Effective Annual Rate) 1.0435 ---------- Sub-Account Value at end of Guarantee Period: $12,372.64 ==========
TOTAL INTEREST CREDITED IN GUARANTEE PERIOD: $2,372.64 ($12,372.64 -$10,000.00) NOTE: The above illustration assumes no withdrawals of any amount during the entire five year period. A withdrawal charge and a Market Value Adjustment may apply to any amount withdrawn in excess of 10% of the amount of purchase payments. The hypothetical interest rate is for illustrative purposes only and is not intended to predict future interest rates to be declared under the Contract. The Company has no specific formula for determining the rate of interest that it will declare initially or in the future. Such interest rates will be reflective of investment returns available at the time of the determination. In addition, the management of the Company may also consider various other factors in determining interest rates, including regulatory and tax requirements, sales commissions and administrative expenses borne by the Company, general economic trends, and competitive factors. The Company guarantees that the interest rates will never be less that the minimum guaranteed rate shown in the Contract. For current interest rate information, please contact your sales representative or the Company's customer support unit at 1(800) 692-4682. THE MANAGEMENT OF THE COMPANY WILL MAKE THE FINAL DETERMINATION AS TO THE INTEREST RATES TO BE DECLARED. THE COMPANY CAN NEITHER PREDICT NOR GUARANTEE FUTURE INTEREST RATES TO BE DECLARED. Prior to the end of a Guarantee Period, a notice will be mailed to the Owner outlining the options available at the end of a Guarantee Period. During the 30 day period after a Guarantee Period expires the Owner may: 9 . take no action and the Company will automatically renew the Sub-account value to a Guarantee Period of the shortest duration available to be established on the day the previous Guaranteed Period expired; or . notify the Company to apply the Sub-account value to a new Guarantee Period or periods to be established on the day the previous Guarantee Period expired; or . notify the Company to apply the Sub-account value to any Sub-account of the Variable Account on the day we receive the notification; or . receive a portion of the Sub-account value or the entire Sub-account value through a partial or full withdrawal that is not subject to a Market Value Adjustment. In this case, the amount withdrawn will be deemed to have been withdrawn on the day the guarantee period expired. The Automatic Laddering Program allows the Owner to choose, in advance, one renewal Guarantee Period for all renewing Sub-accounts. The Owner can select the Automatic Laddering Program at any time during the accumulation phase, including on the issue date. The Automatic Laddering Program will continue until the Owner gives written notice to the Company. The Company reserves the right to discontinue this Program. For additional information on the Automatic Laddering Program, please call the Company's Customer Support Unit at 1(800)692-4682. WITHDRAWALS OR TRANSFERS With the exception of transfers made automatically through dollar cost averaging, all withdrawals and transfers, paid from a Sub-account of the Fixed Account other than during the 30 day period after a Guarantee Period expires are subject to a Market Value Adjustment. The amount received by the Owner under a withdrawal request equals the amount requested, adjusted by any Market Value Adjustment, less any applicable withdrawal charge, less premium taxes and withholding (if applicable). MARKET VALUE ADJUSTMENT The Market Value Adjustment reflects the relationship between (1) the Treasury Rate for the time remaining in the Guarantee Period at the time of the request for withdrawal or transfer, and (2) the Treasury Rate at the time the Sub-account was established. As such, the Owner bears some investment risk under the Contract. Treasury Rate means the U.S. Treasury Note Constant Maturity yield for the preceding week as reported in Federal Reserve Bulletin Release H.15. Generally, if the Treasury Rate for the Guarantee Period is higher than the applicable current Treasury Rate, then the Market Value Adjustment will result in a higher amount payable to the Owner or transferred. Similarly, if the Treasury Rate at the time the Sub-account was established is lower than the applicable Treasury Rate (interest rate for a period equal to the time remaining in the Sub-account), then the Market Value Adjustment will result in a lower amount payable to the Owner or transferred. For example, assume the Owner purchases a Contract and selects an initial Guarantee Period of five years and the five year Treasury Rate for that duration is 4.75%. Assume that at the end of 3 years, the Owner makes a partial withdrawal. If, at that later time, the current two year Treasury Rate is 4.00%, then the Market Value Adjustment will be positive, which will result in an increase in the amount payable to the Owner. Similarly, if the current two year Treasury Rate is 7.00%, then the Market Value Adjustment will be negative, which will result in a decrease in the amount payable to the Owner. The formula for calculating the Market Value Adjustment is set forth in Appendix A to this prospectus which also contains additional illustrations of the application of the Market Value Adjustment. The Market Value Adjustment will be waived on withdrawals taken to satisfy IRS required minimum distribution rules for this Contract. PURCHASE OF THE CONTRACTS PURCHASE PAYMENT LIMITS Your first purchase payment must be at least $5,000 unless the Contract is a Qualified Contract, in which case the first purchase payment must be at least $2,000. All subsequent purchase payments must be $500 or more and may be made at any time prior to the Payout Start Date. Subsequent purchase payments may also be made from your bank account through Automatic Additions. Under an Automatic Additions Program, the minimum purchase payment for allocation to the Variable Account is $100 and for allocation to the Fixed Account the minimum purchase payment is $500. Please consult with your sales representative for detailed information about Automatic Additions. We reserve the right to limit the amount of purchase payments we will accept. 10 FREE-LOOK PERIOD You may cancel the Contract any time within 10 days after receipt of the Contract and receive a full refund of purchase payments allocated to the Fixed Account. Purchase payments allocated to the Variable Account will be returned after an adjustment to reflect investment gain or loss that occurred from the date of allocation through the date of cancellation unless a refund of purchase payments is required by state or federal law. CREDITING OF INITIAL PURCHASE PAYMENT The initial purchase payment accompanied by a duly completed application will be credited to the Contract within two business days of receipt by us at our home office. If an application is not duly completed, we will credit the purchase payments to the Contract within five business days or return it at that time unless you specifically consent to us holding the purchase payment until the application is complete. We reserve the right to reject any application. Subsequent purchase payments will be credited to the Contract at the close of the Valuation Period in which the purchase payment is received by the Company at its home office. ALLOCATION OF PURCHASE PAYMENTS On the application, you instruct us how to allocate the purchase payment among the Investment Alternatives. Purchase payments may be allocated in whole percents, from 0% to 100% (total allocation equals 100%) to any Investment Alternative. Unless you notify us in writing otherwise, subsequent purchase payments are allocated according to the allocation for the previous purchase payment. ACCUMULATION UNITS Each purchase payment allocated to the Variable Account will be credited to the Contract as Accumulation Units. For example, if a $10,000 purchase payment is credited to the Contract when the Accumulation Unit value equals $10, then 1,000 Accumulation Units would be credited to the Contract. The Variable Account, in turn, purchases shares of the corresponding Fund. ACCUMULATION UNIT VALUE The Accumulation Units in each Sub-account of the Variable Account are valued separately. The value of Accumulation Units will change each Valuation Period according to the investment performance of the shares purchased by each Variable Sub-account and the deduction of certain expenses and charges. The value of an Accumulation Unit in a Variable Sub-account for any Valuation Period equals the value of the Accumulation Unit as of the immediately preceding Valuation Period, multiplied by the Net Investment Factor for that Sub-account for the current Valuation Period. The Net Investment Factor for a Valuation Period is a number representing the change, since the last Valuation Date 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. TRANSFERS AMONG INVESTMENT ALTERNATIVES Prior to the Payout Start Date, you may transfer amounts among Investment Alternatives. The Company reserves the right to assess a $10 charge on each transfer in excess of twelve per Contract Year. The Company is presently waiving this charge. Transfers to or from more than one Investment Alternative on the same day are treated as one transfer. Transfers among Investment Alternatives before the Payout Start Date may be made at any time. See "Withdrawals or Transfers," page for the requirements on transfers from the Fixed Account. After the Payout Start Date, transfers among Sub-accounts of the Variable Account or from a variable amount income payment to a fixed amount income payment may be made only once every six months and may not be made during the first six months following the Payout Start Date. After the Payout Start Date, transfers from a fixed amount income payment are not allowed. Telephone transfer requests will be accepted by the Company if received at 1(800) 692-4682 by 4:00 p.m., Eastern Time. Telephone transfer requests received at any other telephone number or after 4:00 p.m., Eastern Time will not be accepted by the Company. Telephone transfer requests received before 4:00 p.m., Eastern Time are effected at the next computed value. The Company utilizes procedures which the Company believes will provide reasonable assurance that telephone authorized transfers are genuine. Such procedures include taping of telephone conversations with persons purporting to authorize such transfers and requesting identifying information from such persons. Accordingly, the Company disclaims any liability for losses resulting from such transfers by reason of their allegedly not having been properly authorized. However, if the Company does not take reasonable steps to help ensure that such authorizations are valid, the Company may be liable for such losses. The minimum amount that may be transferred into a Sub-account of the Fixed Account is $500. Any transfer from a Sub-account of the Fixed Account at a time other than during the 30 day period after a Guarantee Period expires will be subject to a Market Value Adjustment. If any transfer reduces the value of a Sub-account of the Fixed Account to less than $500, the Company will treat the request as a transfer of the entire Sub-account value. The Company reserves the right to waive transfer restrictions. 11 DOLLAR COST AVERAGING Transfers may be made automatically through Dollar Cost Averaging prior to the Payout Start Date. Dollar Cost Averaging permits the Owner to transfer a specified amount every month from the one year Guarantee Period Sub-account of the Fixed Account or any Sub-account of the Variable Account, to any Sub- account of the Variable Account. Transfers made through Dollar Cost Averaging must be $50 or more. Dollar Cost Averaging cannot be used to transfer amounts to the Fixed Account. Transfers made through Dollar Cost Averaging are not subject to a Market Value Adjustment. In addition, such transfers are not assessed a $10 charge and are not included in the twelve free transfers per Contract Year. 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 the Dollar Cost Averaging program does not assure you of a greater profit from your purchases under the program; nor will it prevent or alleviate losses in a declining market. AUTOMATIC FUND REBALANCING Transfers may be made automatically through Automatic Fund Rebalancing prior to the Payout Start Date. By electing Automatic Fund Rebalancing, all of the money allocated to Sub-accounts of the Variable Account will be rebalanced to the desired allocation on a quarterly basis, determined from the first date that you decide to rebalance. Each quarter, money will be transferred among Sub-accounts of the Variable Account to achieve the desired allocation. The desired allocation will be the allocation initially selected, unless subsequently changed. You may change the allocation at any time by giving us written notice. The new allocation will be effective with the first rebalancing that occurs after we receive the written request. We are not responsible for rebalancing that occurs prior to receipt of the written request. Transfers made through Automatic Fund Rebalancing are not assessed a $10 charge and are not included in the twelve free transfers per Contract Year. Any money allocated to the Fixed Account will not be included in the rebalancing. BENEFITS UNDER THE CONTRACT WITHDRAWALS You may withdraw all or part of the Contract Value at any time prior to the earlier of the death of the Owner (or the Annuitant if the Owner is not a natural person) or the Payout Start Date. The amount available for withdrawal is the Contract Value next computed after the Company receives the request for a withdrawal at its home office, adjusted by any applicable Market Value Adjustment, less any withdrawal charges, contract maintenance charges and any premium taxes. Withdrawals from the Variable Account will be paid within seven days of receipt of the request, subject to postponement in certain circumstances. See "Delay of Payments," page . Money can be withdrawn from the Variable Account or the Fixed Account. To complete the partial withdrawal from the Variable Account, the Company will redeem Accumulation Units in an amount equal to the withdrawal and any applicable withdrawal charge and premium taxes. The Owner must name the Investment Alternative from which the withdrawal is to be made. If none is named, then the withdrawal request is incomplete and cannot be honored. The minimum partial withdrawal is $50. If any withdrawal reduces the value of any Sub-account of the Fixed Account to less than $500, we will treat the request as a withdrawal of the entire Sub-account value. If the Contract Value after a partial withdrawal would be less than $1,000, then the Company will treat the request as one for termination of the Contract and the entire Contract Value, adjusted by any Market Value Adjustment, less any charges and premium taxes, will be paid out. Partial withdrawals may also be taken automatically through Systematic Withdrawals on a monthly, quarterly, semi-annual or annual basis. Systematic Withdrawals of $50 or more may be requested at any time prior to the Payout Start Date. At the Company's discretion, Systematic Withdrawals may not be offered in conjunction with Dollar Cost Averaging or Automatic Fund Rebalancing. Partial and full withdrawals may be subject to income tax and a 10% tax penalty. This tax and penalty are explained in "Federal Tax Matters," on page . After the Payout Start Date, withdrawals are only permitted when payments from the Variable Account are being made that do not involve life contingencies. 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 commuted balance of the remaining variable payments due, less any applicable withdrawal charge. 12 INCOME PAYMENTS PAYOUT START DATE FOR INCOME PAYMENTS The Payout Start Date is the day that income payments will start under the Contract. You may change the Payout Start Date at any time by notifying the Company in writing of the change at least 30 days before the scheduled Payout Start Date. The Payout Start Date must be (a) at least one month after the issue date; and (b) no later than the day the Annuitant reaches age 90. VARIABLE ACCOUNT INCOME PAYMENTS The amount of Variable Account income payments depends upon the investment experience of the Sub-accounts selected by the Owner and any premium taxes, the age and sex of the Annuitant, and the Income Plan chosen. The Company guarantees that the amount of the income payment will not be affected by (1) actual mortality experience and (2) the amount of the Company's administration expenses. The Contracts offered by this prospectus contain income payment tables that provide for different benefit payments to men and women of the same age. Nevertheless, in accordance with the U.S. Supreme Court's decision in ARIZONA GOVERNING COMMITTEE V. NORRIS, in certain employment-related situations, annuity tables that do not vary on the basis of sex will be used. The total income payments received may be more or less than the total purchase payments made because (a) Variable Account income payments vary with the investment results of the underlying Funds, and (b) Annuitants may not live as long as, or may live longer than, expected. The Income Plan option selected will affect the dollar amount of each income payment. For example, if an Income Plan for a Life Income is chosen, the income payments will be greater than income payments under an Income Plan for a Life Income with Guaranteed Payments. If the actual net investment experience of the Variable Account is less than the assumed investment rate, then the dollar amount of the income payments will decrease. The dollar amount of the income payments will stay level if the net investment experience equals the assumed investment rate and the dollar amount of the income payments will increase if the net investment experience exceeds the assumed investment rate. For purposes of the Variable Account income payments, the assumed investment rate is 3 percent. For more detailed information as to how Variable Account income payments are determined see the Statement of Additional Information. FIXED AMOUNT INCOME PAYMENTS Income payment amounts derived from any monies allocated to Sub-accounts of the Fixed Account during the accumulation phase are fixed for the duration of the Income Plan. The fixed amount income payment amount is calculated by applying the portion of the Contract Value in the Fixed Account on the Payout Start Date, adjusted by any Market Value Adjustment and less any applicable premium tax, to the greater of the appropriate value from the income payment table selected or such other value as we are offering at that time. INCOME PLANS The Income Plans include: INCOME PLAN 1--LIFE INCOME WITH GUARANTEED PAYMENTS The Company will make payments for as long as the Annuitant lives. If the Annuitant dies before the selected number of guaranteed payments have been made, the Company will continue to pay the remainder of the guaranteed payments. INCOME PLAN 2--JOINT AND SURVIVOR LIFE INCOME WITH GUARANTEED PAYMENTS The Company will make payments for as long as either the Annuitant or Joint Annuitant, named at the time of Income Plan selection, is living. If both the Annuitant and the Joint Annuitant die before the selected number of guaranteed payments have been made, the Company will continue to pay the remainder of the guaranteed payments. INCOME PLAN 3--GUARANTEED NUMBER OF PAYMENTS The Company will make payments for a specified number of months beginning on the Payout Start Date. These payments do not depend on the Annuitant's life. The number of months guaranteed may be from 60 to 360. The mortality and expense risk charge will be deducted from Variable Account assets supporting these payments even though the Company does not bear any mortality risk. The Owner may change the Income Plan until 30 days before the Payout Start Date. If an Income Plan is chosen which depends on the Annuitant or Joint Annuitant's life, proof of age will be required before income payments begin. Applicable premium taxes will be assessed. In the event that an Income Plan is not selected, the Company will make income payments in accordance with Income Plan 1 with Guaranteed Payments for 120 Months. At the Company's discretion, other Income Plans may be available upon request. The Company 13 currently uses sex-distinct annuity tables. However, if legislation is passed by Congress or the State of New York, the Company reserves the right to use income payment tables which do not distinguish on the basis of sex. Special rules and limitations may apply to certain qualified contracts. If the Contract Value to be applied to an Income Plan is less than $2,000, or if the monthly payments determined under the Income Plan are less than $20, the Company may pay the Contract Value adjusted by any Market Value Adjustment and less any applicable taxes, in a lump sum or change the payment frequency to an interval which results in income payments of at least $20. DEATH BENEFITS DISTRIBUTION UPON DEATH PAYMENT PROVISIONS A distribution upon death may be paid to the Owner determined immediately after the death if, prior to the Payout Start Date: . any Owner dies; or . the Annuitant dies and the Owner is not a natural person. If the Owner eligible to receive a distribution upon death is not a natural person, then the Owner may elect to receive the distribution upon death in one or more distributions. Otherwise, if the Owner is a natural person, the Owner may elect to receive a distribution upon death in one or more distributions or periodic payments through an Income Plan. A death benefit will be paid: 1) if the Owner elects to receive the death benefit in a single payment distributed within 180 days of the date of death; and 2) if the death benefit is paid as of the day the value of the death benefit is determined. Otherwise, the settlement value will be paid. The settlement value is the same amount that would be paid in the event of withdrawal of the Contract Value. The Company will calculate the settlement value at the end of the Valuation Period coinciding with 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 distribution upon death must be distributed within five years after the date of death unless an Income Plan is selected or a surviving spouse continues the Contract in accordance with the following sections: Payments from the Income Plan must begin within one year of the date of death and must be payable throughout: . the life of the Owner; or . a period not to exceed the life expectancy of the Owner; or . the life of the Owner with payments guaranteed for a period not to exceed the life expectancy of the Owner. If the surviving spouse of the deceased Owner is the new 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 Company will only permit the Contract to 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. DEATH BENEFIT AMOUNT Prior to the Payout Start Date, the death benefit is equal to the greatest of: (a) the Contract Value on the date the Company determines the death benefit; or (b) the amount that would have been payable in the event of a full withdrawal of the Contract Value on the date the Company determines the death benefit; or (c) the Contract Value on the Death Benefit Anniversary immediately preceding the date we determine the death benefit adjusted by any purchase payments, withdrawals and charges made between such Death Benefit Anniversary and the date we determine the death benefit; or (d) the greatest of the anniversary values as of the date we determine the death benefit. The 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 partial withdrawals 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 attained age 75 or 5 years after the date the Contract was established, if later. The value of the death benefit will be determined at the end of the Valuation Period during which the Company receives a complete request for payment of the death benefit, which includes due proof of death. The Company will not settle any death claim until it receives due proof of death. 14 CHARGES AND OTHER DEDUCTIONS DEDUCTIONS FROM PURCHASE PAYMENTS No deductions are made from purchase payments. Therefore, the full amount of every purchase payment is invested in the Investment Alternative(s). WITHDRAWAL CHARGE (CONTINGENT DEFERRED SALES CHARGE) You may withdraw the Contract Value at any time before the earliest of the Payout Start Date, the death of any Owner or, if the Owner is not a natural person, the death of the Annuitant. There are no withdrawal charges on amounts withdrawn up to 10% of the amount of purchase payments. Amounts withdrawn in excess of this may be subject to a withdrawal charge. Amounts not subject to a withdrawal charge and not withdrawn in a Contract Year are not carried over to later Contract Years. Withdrawal charges, if applicable, will be deducted from the amount paid. For purposes of calculating the amount of the withdrawal charge, withdrawals are assumed to come from purchase payments first, beginning with the oldest payment. Withdrawals made after all purchase payments have been withdrawn, will not be subject to a withdrawal charge. For partial withdrawals, the Contract Value will be adjusted to reflect the amount of payment received by the Owner, any withdrawal charge, any applicable taxes and any Market Value Adjustment. Withdrawals in excess of the preferred withdrawal amount will be subject to a withdrawal charge as set forth below:
APPLICABLE YEAR APPLICABLE SINCE WITHDRAWAL PREMIUM PAYMENT ACCEPTED CHARGE PERCENTAGE ------------------------ ----------------- 1st Year.............................................. 7% 2nd Year.............................................. 6% 3rd Year.............................................. 5% 4th Year.............................................. 4% 5th Year.............................................. 3% 6th Year.............................................. 2% 7th Year.............................................. 1% Thereafter............................................ 0%
Withdrawal charges will be used to pay sales commissions and other promotional or distribution expenses associated with the marketing of the Contracts. The Company does not anticipate that the withdrawal charges will cover all distribution expenses in connection with the Contract. In addition, federal and state income tax may be withheld from withdrawal amounts. Certain terminations may also be subject to a federal tax penalty. See "Federal Tax Matters," page . The Company reserves the right to waive the withdrawal charge with respect to Contracts issued to employees and registered representatives of any broker- dealer that has entered into a sales agreement with Allstate Life Financial Services, Inc. ("ALFS") to sell the Contracts and all wholesalers and their employees that are under agreement with ALFS to wholesale the Contract. The withdrawal charge will also be waived on withdrawals taken to satisfy IRS required minimum distribution rules for this Contract. CONTRACT MAINTENANCE CHARGE A contract maintenance charge is deducted annually from the Contract Value to reimburse the Company for its actual costs in maintaining each Contract and the Variable Account. The Company guarantees that the amount of this charge will not exceed $35 per Contract Year over the life of the Contract. This charge will be waived if the total purchase payments are $50,000 or more on a Contract Anniversary or if all money is allocated to the Fixed Account on the Contract Anniversary. Maintenance costs include but are not limited to expenses incurred in billing and collecting purchase payments; keeping records; processing death claims, cash withdrawals, and policy changes; proxy statements; calculating Accumulation Unit and Annuity Unit values; and issuing reports to Owners and regulatory agencies. The Company does not expect to realize a profit from this charge. On each Contract Anniversary prior to the payout start date, the contract maintenance charge will be deducted from Sub-accounts of the Variable Account in the same proportion that the Owner's value in each bears to the total value in all Sub-accounts of the Variable Account. After the Payout Start Date, a pro rata share of the annual contract maintenance charge will be deducted from each income payment. For example, 1/12 of the $35, or $2.92, will be deducted if there are twelve income payments during the Contract Year. A full contract maintenance charge will be deducted if the Contract is terminated on any date other than a Contract Anniversary. 15 ADMINISTRATIVE EXPENSE CHARGE The Company will deduct an administrative expense charge which is equal, on an annual basis, to .10% of the daily net assets you have allocated to the Sub- accounts of the Variable Account. This charge is designed to cover actual administrative expenses which exceed the revenues from the contract maintenance charge. The Company does not intend to profit from this charge. The Company believes that the administrative expense charge and contract maintenance charge have been set at a level that will recover no more than the actual costs associated with administering the Contracts. There is no necessary relationship between the amount of administrative charge imposed on a given Contract and the amount of expenses that may be attributable to that Contract. MORTALITY AND EXPENSE RISK CHARGE The Company will deduct a mortality and expense risk charge which is equal, on an annual basis, to 1.35% of the daily net assets you have allocated to the Sub-accounts of the Variable Account. The Company estimates that .95% is attributable to the assumption of mortality risks and .40% is attributable to the assumption of expense risks. The Company guarantees that the amount of this charge will not increase over the life of the Contract. The mortality risk arises from the Company's guarantee to cover all death benefits and to make income payments in accordance with the Income Plan selected and the Income Payment Tables. The expense risk arises from the possibility that the contract maintenance and administrative expense charge, both of which are guaranteed not to increase, will be insufficient to cover actual administrative expenses. If the mortality and expense risk charge is insufficient to cover the Company's mortality costs and excess expenses, the Company will bear the loss. If the charge is more than sufficient, the Company will retain the balance as profit. The Company currently expects a profit from this charge. Any such profit, as well as any other profit realized by the Company and held in its general account (which supports insurance and annuity obligations), would be available for any proper corporate purpose, including, but not limited to, payment of distribution expenses. TAXES The Company will deduct applicable state premium taxes or other similar policyholder taxes relative to the Contract (collectively referred to as "premium taxes") either at the Payout Start Date, or when a total withdrawal occurs. The Company reserves the right to deduct premium taxes from the purchase payments. Currently, no deductions are made because New York does not charge premium taxes on annuities. At the Payout Start Date, the charge for applicable premium taxes will be deducted from each Investment Alternative in the proportion that the Owner's value in the Investment Alternative bears to the total Contract Value. TRANSFER CHARGES The Company reserves the right to assess a $10 charge on each transfer in excess of twelve per Contract Year, excluding transfers through Dollar Cost Averaging and Automatic Fund Rebalancing. The Company is presently waiving this charge. FUND EXPENSES A complete description of the expenses and deductions from the Funds is found in the prospectus for the Fund Series. This prospectus is accompanied by the prospectus for the Fund Series. GENERAL MATTERS OWNER The Owner has the sole right to exercise all rights and privileges under the Contract, except as otherwise provided in the Contract. The Contract cannot be jointly owned by both a non-natural person and a natural person. BENEFICIARY Subject to the terms of any irrevocable Beneficiary designation, the Owner may change the Beneficiary at any time by notifying the Company in writing. Any change will be effective at the time it is signed by the Owner, whether or not the Annuitant is living when the change is received by the Company. The Company will not, however, be liable as to any payment or settlement made prior to receiving the written notice. Unless otherwise provided in the Beneficiary designation, if a Beneficiary predeceases the Owner and there are no other surviving beneficiaries, the new Beneficiary will be: the Owner's spouse if living; otherwise, the Owner's children, equally, if living; otherwise, the Owner's estate. Multiple Beneficiaries may be named. Unless otherwise provided in the Beneficiary designation, if more than one Beneficiary survives the Owner, the surviving Beneficiaries will share equally in any amounts due. 16 ASSIGNMENTS The Company will not honor an assignment of an interest in a Contract as collateral or security for a loan. Otherwise, the Owner may assign benefits under the Contract prior to the Payout Start Date. No Beneficiary may assign benefits under the Contract until they are due. No assignment will bind the Company unless it is signed by the Owner and filed with the Company. The Company is not responsible for the validity of an 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. DELAY OF PAYMENTS Payment of any amounts due from the Variable Account under the Contract will occur within seven days, unless: 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 Securities and Exchange Commission; or 3. The Securities and Exchange Commission permits delay for the protection of the Owners. Payments or transfers from the Fixed Account may be delayed for up to 6 months. MODIFICATION The Company may not modify the Contract without the consent of the Owner except to make the Contract meet the requirements of the Investment Company Act of 1940, or to make the Contract comply with any changes in the Internal Revenue Code or to make any changes required by the Code or by any other applicable law. CUSTOMER INQUIRIES The Owner or any persons interested in the Contract may make inquiries regarding the Contract by calling or writing your representative or the Company at: ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK POST OFFICE BOX 9075 FARMINGVILLE, NEW YORK 11738-9075 1-(800)692-4682 FEDERAL TAX MATTERS INTRODUCTION THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE. THE COMPANY MAKES NO GUARANTEE REGARDING THE TAX TREATMENT OF ANY CONTRACT OR TRANSACTION INVOLVING A CONTRACT. Federal, state, local and other tax consequences of ownership or receipt of distributions under an annuity contract depend on the individual circumstances of each person. If you are concerned about any tax consequences with regard to your individual circumstances, you should consult a competent tax adviser. TAXATION OF ANNUITIES IN GENERAL TAX DEFERRAL Generally, an annuity contract owner is not taxed on increases in the Contract Value until a distribution occurs. This rule applies only where (1) the owner is a natural person, (2) the investments of the Variable Account are "adequately diversified" in accordance with Treasury Department Regulations, and (3) the issuing insurance company, instead of the annuity owner, is considered the owner for federal income tax purposes of any separate account assets funding the contract. 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 and the income on such contracts is taxed as ordinary income received or accrued by the owner during the taxable year. There are several exceptions to the general rule for contracts owned by non-natural persons which are discussed in the Statement of Additional Information. 17 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" in accordance with the standards provided in the Treasury regulations. If the investments in the Variable Account are not adequately diversified, then the Contract will not be treated as an annuity contract for federal income tax purposes and the Owner will be taxed on the excess of the Contract Value over the investment in the Contract. Although the Company does not have control over the Funds or their investments, the Company expects the Funds to meet the diversification requirements. OWNERSHIP TREATMENT In connection with the issuance of the regulations on the adequate diversification standards, the Department of the Treasury announced that the regulations do not provide guidance concerning the extent to which contract owners may direct their investments among Sub-accounts of a variable account. The Internal Revenue Service has previously stated in published rulings that a variable contract owner will be considered the owner of separate account assets if the owner possesses 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, Treasury announced that guidance would be issued in the future regarding the extent that owners could direct their investments among Sub-accounts without being treated as owners of the underlying assets of the Variable Account. As of the date of this prospectus, no such guidance has been issued. The ownership rights under this contract are similar to, but different in certain respects from, those described by the Service in rulings in which it was determined that contract owners were not owners of separate account assets. For example, the owner of this contract has the choice of more investment options to which to allocate premiums and contract values, and may be able to transfer among investment options more frequently than in such rulings. These differences could result in the contract owner being treated as the owner of the assets of the Variable Account. In those circumstances, income and gains from the Variable Account assets would be includible in the Contract Owners' gross income. In addition, the Company does not know what standards will be set forth in the regulations or rulings which the Treasury Department has stated it expects to issue. It is possible that Treasury's position, when announced, may adversely affect the tax treatment of existing contracts. The Company, therefore, reserves the right to modify the Contract as necessary to attempt to prevent the Owner from being considered the federal tax owner of the assets of the Variable Account. However, the Company makes no guarantee that such modification to the contract will be successful. DELAYED MATURITY DATES If the contract's scheduled maturity date is at a time when the annuitant has reached an advanced age, e.g., past age 85, it is possible that the contract would not be treated as an annuity. In that event, the income and gains under the contract could be currently includible in the owner's income. TAXATION OF PARTIAL AND FULL WITHDRAWALS In the case of a partial withdrawal under a non-qualified contract, amounts received are taxable to the extent the contract value before the withdrawal exceeds the investment in the contract. The investment in the contract is the gross premium or other consideration paid for the contract reduced by any amounts previously received from the contract to the extent such amounts were properly excluded from the owner's gross income. In the case of a partial withdrawal under a qualified contract, the portion of the payment that bears the same ratio to the total payment that the investment in the contract (i.e., nondeductible IRA contributions, after tax contributions to qualified plans) bears to the contract value, can be excluded from income. In the case of a full withdrawal under a non-qualified contract or a qualified contract, the amount received will be taxable only to the extent it exceeds the investment in the contract. If an individual transfers an annuity contract without full and adequate consideration to a person other than the individual's spouse (or to a former spouse incident to a divorce), the owner will be taxed on the difference between the contract value and the investment in the contract at the time of transfer. Other than in the case of certain qualified contracts, any amount received as a loan under a contract, and any assignment or pledge (or agreement to assign or pledge) of the contract value is treated as a withdrawal of such amount or portion. The contract provides a death benefit that in certain circumstances may exceed the greater of the payments and the contract value. As described elsewhere in the prospectus, the Company imposes certain charges with respect to the death benefit. It is possible that some portion of those charges could be treated for federal tax purposes as a partial withdrawal from the contract. TAXATION OF ANNUITY PAYMENTS Generally, the rule for income taxation of payments received from an annuity contract provides for the return of the owner's investment in the contract in equal tax-free amounts over the payment period. The balance of each payment received is taxable. In the case of 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. In the case of fixed annuity payments, the amount excluded from income is determined by multiplying the payment by the ratio of the investment in the contract (adjusted for any refund feature or period certain) to the total expected value of annuity payments for the term of the contract. Once the total amount of the investment in the contract is excluded using these ratios, the annuity payments will be fully taxable. If annuity payments cease because of the death of the annuitant before the total 18 amount of the investment in the contract is recovered, the unrecovered amount generally will be allowed as a deduction to the Owner for the last taxable year. TAXATION OF ANNUITY DEATH BENEFITS Amounts may be distributed from an annuity contract because of the death of an owner or annuitant. Generally, such amounts are includible in income as follows: (1) if distributed in a lump sum, the amounts are taxed in the same manner as a full withdrawal or (2) if distributed under an annuity option, the amounts are taxed in the same manner as an annuity payment. PENALTY TAX ON PREMATURE DISTRIBUTIONS There is a 10% penalty tax on the taxable amount of any premature distribution from a non-qualified annuity contract. The penalty tax generally applies to any distribution made prior to the owner attaining age 59 1/2. However, there should be no penalty tax on distributions to owners (1) made on or after the owner attains age 59 1/2; (2) made as a result of the owner's death or disability; (3) made in substantially equal periodic payments over life or life expectancy; (4) made under an immediate annuity; or (5) attributable to an investment in the contract before August 14, 1982. Similar rules apply for distributions under certain qualified contracts. A competent tax advisor should be consulted to determine if any other exceptions to the penalty apply to your specific circumstances. AGGREGATION OF ANNUITY CONTRACTS All non-qualified deferred annuity contracts issued by the Company (or its affiliates) to the same owner during any calendar year will be aggregated and treated as one annuity contract for purposes of determining the taxable amount of a distribution. TAX QUALIFIED CONTRACTS Annuity contracts may be used as investments with certain tax qualified plans such as: (1) Individual Retirement Annuities under Section 408(b) of the Code; (2) Simplified Employee Pension Plans under Section 408(k) of the Code; (3) Tax Sheltered Annuities under Section 403(b) of the Code; (4) Corporate and Self Employed Pension and Profit Sharing Plans; and (5) State and Local Government and Tax-Exempt Organization Deferred Compensation Plans. In the case of certain tax 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 Code provides for tax-deferred retirement savings plans for employees of certain non-profit and educational organizations. In accordance with the requirements of Section 403(b), any annuity contract used for a 403(b) plan must provide that distributions attributable to salary reduction contributions made after 12/31/88, and all earnings on salary reduction contributions, may be made only after the employee attains age 59 1/2, separates from service, dies, becomes disabled or on account of hardship (earnings on salary reduction contributions may not be distributed on the account of hardship). These limitations do not apply to withdrawals where the Company is directed to transfer some or all of the contract value to another Section 403(b) plans. INCOME TAX WITHHOLDING The Company is required to withhold federal income tax at a rate of 20% on all "eligible rollover distributions" unless an individual elects to make a "direct rollover" of such amounts to another qualified plan or Individual Retirement Account or Annuity (IRA). Eligible rollover distributions generally include all distributions from qualified contracts, excluding IRAs, with the exception of (1) required minimum distributions, or (2) a series of substantially equal periodic payments made over a period of at least 10 years, or the life (joint lives) of the participant (and beneficiary). For any distributions from non-qualified annuity contracts, or distributions from qualified contracts which are not considered eligible rollover distributions, the Company may be required to withhold federal and state income taxes unless the recipient elects not to have taxes withheld and properly notifies the Company of such election. DISTRIBUTION OF THE CONTRACTS Allstate Life Financial Services, Inc. ("ALFS"), 3100 Sanders Road, Northbrook Illinois, an indirect wholly owned subsidiary of Allstate Insurance Company, acts as the principal underwriter of the Contracts. ALFS is registered as a broker-dealer under the Securities Exchange Act of 1934 and became a member of the National Association of Securities Dealers, Inc. on June 30, 1993. Contracts are sold by registered representatives of broker-dealers or bank employees who are licensed insurance agents appointed by the Company, either individually or through an incorporated insurance agency. Contracts may be sold by representatives or employees of banks which may be acting as broker- dealers without separate registration under the Securities Exchange Act of 1934, pursuant to legal and regulatory exceptions. Commissions paid may vary, but in aggregate are not anticipated to exceed 6.75% of any purchase payment. In addition, under certain circumstances, certain sellers of the Contracts may be paid persistency bonuses which will take into account, among other things, the length of time purchase payments have been held under a Contract, and the amount of purchase payments. A persistency bonus is not expected to exceed .25%, on an annual basis, of the purchase payments considered in connection with the bonus. These commissions are 19 intended to cover distribution expenses. In addition, sale of the Contract may count toward incentive program awards for the registered representative. All Commissions are paid by the Company and not by the separate account. The underwriting agreement with ALFS provides for indemnification of ALFS by the Company for liability to Owners arising out of services rendered or Contracts issued. VOTING RIGHTS The Owner or anyone with a voting interest in the Sub-account of the Variable Account may instruct the Company on how to vote at shareholder meetings of the Fund Series. The Company will solicit and cast each vote according to the procedures set up by the Fund Series and to the extent required by law. The Company reserves the right to vote the eligible shares in its own right, if subsequently permitted by the Investment Company Act of 1940, its regulations or interpretations thereof. Fund shares as to which no timely instructions are received will be voted in proportion to the voting instructions which are received with respect to all Contracts participating in that Sub-account. Voting instructions to abstain on any item to be voted upon will be applied on a pro-rata basis to reduce the votes eligible to be cast. Before the Payout Start Date, the Owner holds the voting interest in the Sub-account of the Variable Account (The number of votes for the Owner will be determined by dividing the Contract Value attributable to a Sub-account by the net asset value per share of the applicable eligible Fund.) After the Payout Start Date, the person receiving income payments has the voting interest. After the Payout Start Date, the votes decrease as income payments are made and as the reserves for the Contract decrease. That person's number of votes will be determined by dividing the reserve for such Contract allocated to the applicable Sub-account by the net asset value per share of the corresponding eligible Fund. SELECTED FINANCIAL DATA The following selected financial data for the Company should be read in conjunction with the financial statements and notes thereto included in this prospectus beginning on page F-1. ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK SELECTED FINANCIAL DATA ($ IN THOUSANDS)
YEAR-END FINANCIAL DATA 1995 1994 1993 1992 1991 - ----------------------- ---------- ---------- ---------- ---------- -------- For The Years Ended December 31: Revenues................. $ 250,854 $ 186,249 $ 227,445 $ 203,890 $186,955 Income from Continuing Operations.............. 19,522 18,221 13,163 12,225 15,996 Net Income............... 19,522 18,221 13,163 12,225 15,996 As of December 31: Total Assets............ 1,842,969 1,449,993 1,410,895 1,162,763 943,871
In 1992, the Company adopted the provisions of Statement of Financial Accounting Standards ("SFAS") No. 106, "Employers' Accounting for Postretirement Benefits Other than Pensions," which resulted in a charge against 1992 earnings of $623 thousand on an after tax basis. Effective December 31, 1993, the Company adopted SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities", which requires that investments classified as available for sale be carried at fair value. The net effect of adoption of this statement increased shareholder's equity at December 31, 1993 by $25,391 and did not have a material impact on net income. (See note 3 to the Financial Statements.)
QUARTERLY FINANCIAL DATA 1996 1995 - ------------------------ --------- --------- For The Quarters Ended June 30: Revenues.................................................. $ 56,667 $ 59,766 Net Income................................................ 5,313 4,434 As of June 30: Total Assets............................................. 1,793,492 1,577,384
20 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL The following highlights significant factors influencing results of operations and financial position. Allstate Life Insurance Company of New York ("the Company"), which is wholly owned by a wholly-owned subsidiary ("Parent") of Allstate Insurance Company ("Allstate"), markets life insurance and group and individual annuities in the state of New York, with products consisting predominately of structured settlement annuities sold through independent brokers. The Company also utilizes Allstate agencies and direct marketing to distribute its traditional and universal life and accident and disability insurance products. Additionally, flexible premium deferred variable annuity contracts and certain single and flexible premium annuities are marketed to individuals through the account executives of Dean Witter Reynolds Inc. RESULTS OF OPERATIONS
1995 1994 1993 ---------- ---------- ---------- ($ IN THOUSANDS) Statutory premiums and deposits.............. $ 216,361 $ 153,000 $ 226,993 ========== ========== ========== Invested assets (1).......................... 1,335,854 1,184,024 1,148,709 Separate Account assets (2).................. 220,141 175,918 145,866 ---------- ---------- ---------- Invested assets, including Separate Account assets...................................... 1,555,995 1,359,942 1,294,575 ========== ========== ========== Premium income and contract charges.......... 148,316 88,560 126,913 Net investment income........................ 104,384 96,911 95,956 Policy benefits.............................. 198,055 137,434 175,676 Operating expenses........................... 23,366 20,205 31,894 Early retirement program..................... 1,210 ---------- ---------- ---------- Income from operations....................... 31,279 26,622 15,299 Income tax on operations..................... 10,557 8,907 5,110 ---------- ---------- ---------- Net operating income......................... 20,722 17,715 10,189 Realized capital gains and losses, after tax. (1,200) 506 2,974 ---------- ---------- ---------- Net income................................... $ 19,522 $ 18,221 $ 13,163 ========== ========== ==========
- -------- (1) Fixed income securities included in invested assets are carried at amortized cost in the table above and at fair value in the statements of financial position. (2) Separate Accounts are included at fair value. STATUTORY PREMIUMS AND DEPOSITS Statutory premiums, which include premiums and deposits for all products, increased $63.4 million or 41.4% in 1995 from 1994. The increase is primarily due to growth in sales of individual annuities, which comprised 77.3% of statutory premiums and deposits in 1995. Increased sales of structured settlement annuities in 1995 were partially offset by a decrease in the sales of variable annuities. In 1994, statutory premiums decreased 32.6% from 1993 levels. The decrease was due primarily to lower sales of structured settlement annuities. PREMIUM INCOME, CONTRACT CHARGES AND PROVISION FOR POLICY BENEFITS Premium income and contract charges under generally accepted accounting principles ("GAAP") increased 67.5% in 1995 and decreased 30.2% in 1994. Under GAAP, revenues exclude deposits on most annuities and premiums on universal life insurance policies. The changes in premium and contract charges in 1995 and 1994 reflect fluctuations primarily in the level of sales of structured settlement annuities sold with life contingencies. Policy benefits increased $60.6 million, or 44.1% during 1995, and decreased $38.2 million or 21.8% in 1994. These changes also reflect fluctuations primarily in the level of sales of structured settlement annuities with life contingencies. NET INVESTMENT INCOME Pre-tax net investment income increased 7.7% in 1995 and was essentially unchanged in 1994. The increase in 1995 was related to the 12.8% or $151.8 million increase in invested assets resulting primarily from growth in new business, partially offset by surrenders and other benefits paid. 21 OPERATING EXPENSES Operating expenses increased by $2.0 million, or 9.1%, resulting from an increase in amortization of deferred acquisition costs, partially offset by the costs of an early retirement program recorded in 1994. The decrease of $10.5 million, or 32.9%, in 1994 operating expense is attributable to a decrease in amortization of deferred acquisition costs, which were higher in 1993 as a result of annuity contract surrenders. In 1994, an after tax charge of $0.8 million related to the cost of an early retirement program offered to certain home office employees was recorded. The program provides one year of salary continuation and related benefits during the salary continuation period, and an enhanced retirement benefit. NET OPERATING INCOME Net operating income increased 17.0% in 1995 from 1994, which in turn increased 73.9% from 1993. The increase in net operating income in 1995 was primarily due to higher margins and growth in revenues. The increase in 1994 over 1993 was primarily due to a decrease in operating expenses. REALIZED CAPITAL GAINS AND LOSSES Net realized capital losses were reported in 1995 as compared to net realized capital gains in 1994. Capital losses in 1995 were realized primarily from writedowns of mortgage loans, partially offset by gains on sales of fixed income securities. Realized capital gains in 1994 decreased from gains realized in 1993. While the Company experienced lower asset writedowns in 1994, realized capital gains from sales of securities and bond calls were also significantly lower than the prior year. Realized capital gains in 1993 included the effect of sales related to repositioning a portion of the investment portfolio to improve the matching of assets with related liabilities. FINANCIAL POSITION INVESTMENTS The Company follows an investment strategy that combines the goals of safety, stability, liquidity, growth and total return. It seeks to balance preservation of principal with after-tax yield while maintaining portfolio diversification. The composition of the portfolio is the result of various interrelated investment considerations including protection of principal, appreciation potential, tax consequences, and yield, as well as asset/liability management issues such as cash flow and duration matching. To achieve an economic balance between assets and liabilities, the investment portfolios are segmented by type of insurance product. The composition of the investment portfolio at December 31, 1995 is presented in the table below (see Notes 2 and 6 to the financial statements for investment accounting policies and additional information).
PERCENT ($ IN THOUSANDS) TO TOTAL ---------------- -------- Fixed income securities Privately placed corporate bonds..................... $ 466,208 30.2% U.S. government and agencies......................... 435,555 28.3 Publicly traded corporate bonds...................... 258,829 16.8 Mortgage-backed securities........................... 225,560 14.6 State and municipal.................................. 38,741 2.5 ---------- ----- Total fixed income securities....................... $1,424,893 92.4 Mortgage loans........................................ 86,394 5.6 Policy loans.......................................... 22,785 1.5 Short-term and other.................................. 7,257 .5 ---------- ----- Total............................................... $1,541,329 100.0% ========== =====
FIXED INCOME SECURITIES The Company generally holds its fixed income securities for the long term, but has classified all of these securities at December 31, 1995, as "available for sale" which are carried in the statement of financial position at fair value, to allow maximum flexibility in portfolio management. At December 31, 1995, net unrealized capital gains on the fixed income securities portfolio totaled $205.5 million compared to an unrealized capital loss of $11.5 million as of December 31, 1994. The significant change in the unrealized gain/loss position is primarily attributable to declining interest rates. As of December 31, 1995, the fixed income securities portfolio included $466.2 million or 30.2% of the portfolio invested in privately placed corporate obligations, stated at fair value. Compared to public securities, private placements generally afford the advantages of higher yields, improved cash flow predictability through pro-rata sinking funds on many bonds, and a combination of 22 covenant and call protection features designed to better protect the holder against losses resulting from credit deterioration, reinvestment risk, and losses resulting from fluctuations in interest rates. The relative disadvantages of private placements include the fact that the securities are generally less liquid than public securities and that access to information regarding privately placed securities is generally more restricted than for public securities. The Company determines the fair value of privately placed fixed income securities based on discounted cash flows using current interest rates for similar securities. At December 31, 1995 the Company had $225.6 million or 14.6% of the portfolio invested in mortgage-backed securities ("MBS"). These securities provide higher-than-average credit quality and liquidity. The Company mitigates credit risk primarily by purchasing securities with underlying collateral that is guaranteed by U.S. government entities. MBS are subject to risks associated with repayment of principal, which may result in the securities having a different actual maturity and yield than anticipated at the time of purchase. Securities that have an amortized cost greater than par value, will incur a decrease in yield if mortgages repay faster than expected. Those securities that have an amortized cost lower than par value generate an increase in yield if mortgages repay faster than expected. The degree to which a security is susceptible to changes in yield is influenced by the difference between its amortized cost and par value, the relative sensitivity to repayment of the underlying mortgages backing the securities in a changing interest rate environment, and the repayment priority of the securities in the overall securitization structure. The Company attempts to limit repayment risk by purchasing MBS whose cost does not significantly exceed par value, and with repayment protection to provide a more certain cash flow to the Company. At December 31, 1995, the amortized cost of the MBS portfolio was below par value by $8.1 million. The Company closely monitors its fixed income portfolio for declines in value that are other than temporary. Securities are placed on non-accrual status when they are in default or when the receipt of interest payments is in doubt. The total pretax provisions for losses attributable to fixed income securities for 1995, 1994 and 1993 were $2.4, $0.6 and $1.2 million, respectively. The Company monitors the quality of its fixed income portfolio, in part, by categorizing certain investments as problem, restructured or potential problem. Problem fixed income securities as securities in default with respect to principal and/or interest and/or securities issued by companies that went into bankruptcy subsequent to acquisition of the security. Restructured fixed income securities have modified terms and conditions that were not at current market rates or terms at the time of the restructuring. Potential problem fixed income securities are current with respect to contractual principal and/or interest, but because of other facts and circumstances, management has serious doubts regarding the borrower's ability to pay future interest and principal, which causes management to believe these securities may be classified as problem or restructured in the future. There were no problem and potential problem fixed income investments as of December 31, 1995, compared to $7.0 million of potential problem fixed income securities at December 31, 1994. The $7.0 million of potential problem fixed income securities at December 31, 1994 related to a single security and has been removed from the potential problem category due to its improved status. FINANCIAL FUTURES CONTRACTS As part of its asset/liability management, the Company generally utilizes futures contracts to hedge its interest rate risk related to anticipatory investment purchases as well as to enhance asset/liability management. The Company does not hold or issue these instruments for trading purposes. At December 31, 1995, the Company had $22.9 million in notional amount of futures contracts outstanding, all of which mature within one year. MORTGAGE LOANS The Company's $86.4 million investment in mortgage loans at December 31, 1995 is comprised primarily of loans secured by first mortgages on developed, commercial real estate. Geographical and property type diversification are key considerations used to manage the Company's mortgage loan risk. The Company closely monitors its commercial mortgage loan portfolio on a loan-by-loan basis. Loans with an estimated collateral value less than the loan's balance, as well as loans with other characteristics indicative of a higher than normal credit risk, are reviewed by financial and investment management for purposes of establishing valuation allowances and placing loans on non-accrual status. The underlying collateral values are based upon discounted property cash flow projections, which are updated at least annually or as conditions change. The total pretax provisions for loan losses were $2.2, $0.7 and $1.2 million, during 1995, 1994 and 1993, respectively. The Company defines problem commercial mortgage loans as loans that are in foreclosure, loans for which a principal or interest payment is over 60 days past due, or are current with respect to interest payments, but considered in substance foreclosed. Restructured commercial loans have modified terms and conditions that were not at prevailing market rates or terms at the time of the restructuring. Potential problem commercial mortgage loans are current with respect to interest payments, or less than 60 days delinquent as to contractual principal and interest payments, but because of other facts and circumstances, management has serious doubts regarding the borrower's ability to pay future interest and principal which causes management to believe these loans may be classified as problem or restructured in the future. 23 At December 31, 1995 and December 31, 1994 total problem, restructured and potential problem loans, net of valuation allowances, were $9.6 million and $8.4 million, respectively. The net carrying value of impaired loans (see Note 6 of the financial statements) at December 31, 1995 was $9.6 million. All problem, restructured and potential problem loans were considered to be impaired at December 31, 1995. SEPARATE ACCOUNTS Separate Account balances increased 25.1% from $175.9 million at December 31, 1994 to $220.1 million at December 31, 1995 due to sales of flexible premium deferred variable annuity contracts, transfers from fixed annuities to variable annuities and favorable investment performance of the Separate Accounts, partially offset by surrenders. RESERVE FOR LIFE INSURANCE POLICY BENEFITS The reserve for life insurance policy benefits increased 33.4% to $838.7 million at December 31, 1995, resulting primarily from the sales of structured settlement annuities with life contingencies. LIQUIDITY AND CAPITAL RESOURCES The Company's principal source of funds consists primarily of premiums and annuity deposits and collections of principal and income from the investment portfolio. The Company generates substantial positive cash flows from operating activities. The major use of these funds are policyholder claims and benefits, contract maturities, surrenders and other operating costs. FINANCIAL RATINGS AND STRENGTH Liquidity for life insurance companies is measured by their ability to pay contractual benefits, pay operating expenses and fund investment commitments. Independent insurance industry rating organizations rate life insurance companies based on their overall performance and ability to meet their policyholder obligations over a long period of time. Such ratings are directed toward the protection of policyholders, not investors. Claims-paying ability ratings at December 31, 1995 assigned to the Company include AA+ and A+(g) from Standard & Poor's and A.M. Best, respectively. In addition, Moody's assigned the Company an Aa3 financial stability rating at December 31, 1995. The National Association of Insurance Commissioners ("NAIC") has a standard for assessing the solvency of insurance companies, which is referred to as "risk-based capital" ("RBC"). The requirement consists of a formula for determining each insurer's RBC and a model law specifying regulatory actions if an insurer's RBC falls below specified levels. The RBC formula for life insurance companies establishes capital requirements relating to insurance risk, business risk, asset risk and interest rate risk. At December 31, 1995, RBC for the Company was significantly above levels which would require regulatory action. 24 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE QUARTER ENDED JUNE 30, 1996 GENERAL The following highlights significant factors influencing results of operations and changes in financial position of Allstate Life Insurance Company of New York (the "Company"). It should be read in conjunction with the discussion and analysis and financial statements thereto found under Items 7 and 8 of Part II of the Allstate Life Insurance Company of New York Annual Report on Form 10-K. The Company, which is wholly owned by a wholly-owned subsidiary ("Parent") of Allstate Insurance Company ("Allstate"), markets life insurance and group and individual annuities in the state of New York, with products consisting predominately of structured settlement annuities sold through independent brokers. The Company also utilizes Allstate agencies and direct marketing to distribute its traditional and universal life and accident and disability insurance products. Certain single and flexible premium annuities are marketed to individuals through the account executives of Dean Witter Reynolds Inc. The Company issues flexible premium deferred variable annuity contracts, also sold through the account executives of Dean Witter Reynolds Inc., the assets and liabilities of which are legally segregated and reflected in the accompanying statements of financial position as the assets and liabilities of the Separate Accounts. Separate Account assets and liabilities are carried at fair value in the statements of financial position. Investment income and realized gains and losses of the Separate Account investments accrue directly to the contractholders (net of fees) and, therefore are not included in the Company's statements of operations. RESULTS OF OPERATIONS
THREE MONTHS SIX MONTHS ENDED JUNE 30, ENDED JUNE 30, --------------------- ---------------------- 1996 1995 1996 1995 ---------- ---------- ---------- ----------- ($ IN THOUSANDS) ($ IN THOUSANDS) Statutory premiums and deposits. $ 44,541 $ 47,465 $ 89,359 $ 118,751 ========== ========== ========== =========== Invested assets (1)............. $1,396,589 $1,259,751 $1,396,589 $ 1,259,751 Separate Account assets......... 238,347 195,438 238,347 195,438 ---------- ---------- ---------- ----------- Invested assets, including Separate Account assets........ $1,634,936 $1,455,189 $1,634,936 $ 1,455,189 ========== ========== ========== =========== Premium income and contract charges........................ $ 28,417 $ 34,829 $ 57,221 $ 86,445 Net investment income........... 27,830 25,455 55,424 50,682 Policy benefits................. 42,372 46,864 85,389 109,771 Operating expenses.............. 5,759 6,276 11,379 12,177 Income from operations.......... 8,116 7,144 15,877 15,179 Income tax on operations........ 3,076 2,374 5,867 5,098 ---------- ---------- ---------- ----------- Net operating income............ 5,040 4,770 10,010 10,081 ---------- ---------- ---------- ----------- Realized capital gains and losses, after tax.............. 273 (336) 228 (1,386) ---------- ---------- ---------- ----------- Net income...................... $ 5,313 $ 4,434 $ 10,238 $ 8,695 ========== ========== ========== ===========
- -------- (1) Fixed income securities are included in invested assets at amortized cost in the table above and are carried at fair value in the statements of financial position. Separate Accounts are included at fair value in both the table above and the statements of financial position. STATUTORY PREMIUMS AND DEPOSITS Statutory premiums, which include premiums and deposits for all products, decreased $2.9 million, or 6.2% for the second quarter of 1996 from $47.5 million for the same period in 1995. For the first six months of 1996, statutory premiums decreased $29.4 million or 24.8% from $118.8 million for the same period in 1995. The decreases for both periods are due primarily to lower sales of structured settlement annuities, partially offset by increases in sales of variable annuity and life products. PREMIUM INCOME, CONTRACT CHARGES AND PROVISION FOR POLICY BENEFITS Premium income and contract charges under generally accepted accounting principles ("GAAP") decreased 18.4% for the three-month period ended June 30, 1996 and decreased 33.8% for the first six months of 1996 from the same periods in 1995. Under GAAP, revenues exclude deposits on most annuities and premiums on universal life insurance policies. The decrease in premium and contract charges in 1996 is primarily the result of lower sales of structured settlement annuities with life contingencies. Policy benefits decreased $4.5 million, or 9.6% during the second quarter of 1996, and decreased $24.4 million, or 22.2% for the six months ended June 30, 25 1996, also reflecting the decreased sales of structured settlement annuities with life contingencies, partially offset by higher mortality costs resulting from growth in the life insurance block of business. NET INVESTMENT INCOME Pre-tax net investment income increased 9.3% in the second quarter of 1996 and 9.4% for the six months ended June 30, 1996, compared to the same periods in 1995. The increases were primarily related to the 10.9% or $136.8 million increase in invested assets. The overall portfolio yield declined slightly, as proceeds from calls and maturities as well as new premiums and deposits were invested in securities yielding less than the average portfolio rate. OPERATING EXPENSES Operating expenses decreased by $517 thousand, or 8.2%, in the second quarter of 1996 and $798 thousand, or 6.6%, for the six months ended June 30, 1996, compared to the same periods in 1995. The decrease is primarily attributable to reduced acquisition costs due to lower sales of structured settlement annuities. First quarter 1995 operating expenses reflected a one-time $303 thousand benefit related to a reduced rate of amortization of deferred policy acquisition costs, due to favorable universal life insurance persistency. NET OPERATING INCOME Net operating income increased by 5.7% in the second quarter of 1996, compared to the same period in 1995. The increase for the quarter is primarily attributable to higher mortality margins and reduced operating expenses. Net operating income for the first six months of 1996 remained essentially unchanged as compared to the same period in 1995, since 1995 included the nonrecurring benefit attributable to the amortization of deferred acquisition costs as described above. REALIZED CAPITAL GAINS AND LOSSES Net realized after-tax capital gains were $273 thousand and $228 thousand for the three- and six-month periods ending June 30, 1996, compared to net realized after-tax losses of $336 thousand and $1.4 million for the comparable periods in 1995. The increases in capital gains are primarily attributable to lower commercial mortgage loan losses in 1996. INVESTMENTS FIXED INCOME SECURITIES The Company monitors the quality of its fixed income portfolio, in part, by categorizing certain investments as problem, restructured or potential problem investments. Problem fixed income securities are securities in default with respect to principal and/or interest and/or securities issued by companies that went into bankruptcy subsequent to acquisition of the security. Restructured fixed income securities have modified terms and conditions that were not at current market rates or terms at the time of the restructuring. Potential problem fixed income securities are current with respect to contractual principal and/or interest, but because of other facts and circumstances, management has serious doubts regarding the borrower's ability to pay future interest and principal, which causes management to believe these securities may be classified as problem or restructured in the future. At June 30, 1996, problem, restructured and potential problem fixed income securities were $3.8 million. There were no problem, restructured, and potential problem fixed income securities at December 31, 1995. MORTGAGE LOANS The Company monitors the quality of its mortgage loans by categorizing certain loans as problem, restructured or potential problem. Problem commercial mortgage loans are loans that are in foreclosure, loans for which a principal or interest payment is over 60 days past due, or are current with respect to interest payments, but considered in-substance foreclosed. Restructured commercial mortgage loans have modified terms and conditions that were not at current market rates or terms at the time of the restructuring. Potential problem commercial mortgage loans are current with respect to interest payments, or less than 60 days delinquent as to contractual principal and/or interest payments, but because of other facts and circumstances, management has serious doubts regarding the borrower's ability to pay future interest and principal which causes management to believe these loans may be classified as problem or restructured in the future. Total problem, restructured and potential problem loans, net of valuation allowances, were $6.5 million and $9.6 million at June 30, 1996 and December 31, 1995, respectively. The total pre-tax provision for loan losses was $104 thousand and $2.2 million for the six months ended June 30, 1996 and 1995, respectively. The carrying value of impaired loans was $4.4 million and $9.6 million as of June 30, 1996 and December 31, 1995, respectively. LIQUIDITY AND CAPITAL RESOURCES The Company's principal source of funds consists primarily of premiums and annuity deposits and collections of principal and income from the investment portfolio. The Company generates substantial positive cash flows from operating activities. The major uses of these funds are policyholder claims and benefits, acquisition of investments, contract maturities, surrenders and other operating costs. 26 COMPETITION The Company is engaged in a business that is highly competitive because of the large number of stock and mutual life insurance companies and other entities competing in the sale of insurance and annuities. There are approximately 2,000 stock, mutual and other types of insurers in business in the United States. Several independent rating agencies regularly evaluate life insurer's claims-paying ability, quality of investments and overall stability. A.M. Best Company assigns A+g (Superior) to the Company. A.M. Under Best's rating policy and procedure, the Company is assigned the Best's rating of its parent Company, and is based on the consolidated performance of the parent and its subsidiary. Standard & Poor's Insurance Rating Services assigns AA+ (Excellent) to the Company and Moody's assigns an Aa3 (Excellent) financial stability rating to the Company. These ratings do not relate to the investment performance of the Variable Account. EMPLOYEES As of December 31, 1995, the Company had approximately 80 employees at its home office in Farmingville, New York who work primarily on the Company's matters. PROPERTIES The Company occupies office space in Farmingville, New York which is owned by its parent company. STATE AND FEDERAL REGULATION The insurance business of the Company is subject to comprehensive and detailed regulation and supervision in the State of New York. The laws of New York establish a supervisory agency with broad administrative powers with respect to licensing to transact business, overseeing trade practices, licensing agents, approving policy forms, establishing reserve requirements, fixing maximum interest rates on life insurance policy loans and minimum rates for accumulation of surrender values, prescribing the form and content of required financial statements and regulating the type and amounts of investments permitted. Each insurance company is required to file detailed annual reports with the supervisory agency and its operations and accounts are subject to examination by such agency at regular intervals. Under insurance guaranty fund law, for the State of New York, insurers doing business therein can be assessed up to prescribed limits for contract owner losses incurred as a result of company insolvencies. The amount of any future assessments on the Company under these laws cannot be reasonably estimated. These laws do provide, however, that an assessment may be excused or deferred if it would threaten an insurer's own financial strength. In addition, the State of New York regulates affiliated groups of insurers, such as the Company and its affiliates, under insurance holding company legislation. Under such laws, intercompany transfers of assets and dividend payments from insurance subsidiaries may be subject to prior notice or approval, depending on the size of such transfers and payments in relation to the financial positions of the companies. Although the federal government generally does not directly regulate the business of insurance, federal initiatives often have an impact on the business in a variety of ways. Current and proposed federal measures which may significantly affect the insurance business include employee benefit regulation, controls on medical care costs, removal of barriers preventing banks from engaging in the securities and insurance business, tax law changes affecting the taxation of insurance companies, the tax treatment of insurance products and its impact on the relative desirability of various personal investment vehicles, and proposed legislation to prohibit the use of gender in determining insurance and pension rates and benefits. EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY The directors and executive officers are listed below, together with information as to their ages, dates of election and principal business occupations during the last five years (if other than their present business occupations). LOUIS G. LOWER, II, 50, Chairman of the Board and President (1992)* He is also President and Chairman of the Board of Directors of Allstate Life Insurance Company, Northbrook Life Insurance Company, Glenbrook Life and Annuity Company, Glenbrook Life Insurance Company, and The Northbrook Corporation; Chairman of the Board of Directors and Chief Executive Officer of Surety Life Insurance Company and Lincoln Benefit Life Company; Chairman of the Board of Directors of Allstate Settlement Corporation; Director and Senior Vice President of Allstate Insurance Company; Vice President of the Allstate Foundation; and Director of Allstate Life Financial Services, Inc., Allstate Indemnity Company, Allstate Property and Casualty Insurance Company, Deerbrook Insurance Company, Northbrook Indemnity Company, Northbrook National Insurance Company, Northbrook Property and Casualty Insurance Company, Allstate International, Inc. and Saison Life Insurance Company, Ltd. Prior to 1990, he was Executive Vice President of Allstate Life Insurance Company. From 1992 to 1995, in addition to his position as Chairman of the Board, he was also President of the Company. 27 MICHAEL J. VELOTTA, 50, Vice President, Secretary, General Counsel, and Director (1993)* He is also Vice President, Secretary, General Counsel and Director of Allstate Life Insurance Company, Northbrook Life Insurance Company, Glenbrook Life Insurance Company and Glenbrook Life and Annuity Company; Secretary and Director of Allstate Settlement Corporation, Allstate Life Financial Services, Inc. and The Northbrook Corporation; and Director of Surety Life Insurance Company and Lincoln Benefit Life Company. Prior to 1993, he was Vice President and Assistant General Counsel of Allstate Insurance Company. SHARMAINE M. MILLER, 42, Director and Chief Administrative Officer (1996)* Prior to 1996, she was a Department manager for Allstate Insurance Company. PETER H. HECKMAN, 50, Vice President (1992)* He is also Vice President and Director of Allstate Life Insurance Company, Northbrook Life Insurance Company, Glenbrook Life Insurance Company, Allstate Settlement Corporation and Glenbrook Life and Annuity Company; Vice President and Controller of The Northbrook Corporation; and Director of Surety Life Insurance Company and Lincoln Benefit Life Company. Prior to 1992, he was Vice President and Director of Allstate Life Insurance Company, Northbrook Life Insurance Company, Glenbrook Life Insurance Company and Glenbrook Life and Annuity Company. TIMOTHY H. PLOHG, 49, Vice President and Director (1995)* Timothy H. Plohg is also Vice President and Director of Allstate Life Insurance Company. Prior to 1995, he was Vice President of the ALSC; Assistant Vice President Sales, Regional Vice President. KEVIN R. SLAWIN, 39, Vice President and Director, (1996).* He is also currently a Director of Allstate Life Financial Services, Inc., Vice President and Director of Allstate Life Insurance Company, Glenbrook Life and Annuity Company, Allstate Settlement Corporation; Director of Laughlin Group Holdings, Inc. and Northbrook Life Insurance Company, Vice President of the Northbrook Corporation and Assistant Treasurer of the Allstate Corporation and Forestview Mortgage Insurance Company. From 1995 to 1996 he served in various capacities within the Allstate Corporation. Prior to 1995, he was Assistant Treasurer and Director for Sears Roebuck and Company. MARCIA D. ALAZRAKI, 54, Director (1993)* Marcia D. Alazraki is an attorney practicing with the firm of Simpson, Thacher & Bartlett, New York, New York. Prior to 1991, she practiced with the firm of Shea & Gould, New York, New York. JOSEPH F. CARLINO, 78, Director (1983)* Joseph F. Carlino is a self-employed practicing attorney in Mineola, New York. CLEVELAND JOHNSON, JR., 60, Director (1983)* Cleveland Johnson, Jr. is currently a Business Development Advocate for the Town of Islip, Division of Economic Development. Previously he was a Vice President with State University of New York in Farmingdale, New York. PHILLIP E. LAWSON, 42, Director (1994)* Phillip E. Lawson is also a Regional Vice President of Allstate Insurance Company. Prior to 1990, he was a Director of Allstate Insurance Company. GERARD F. MCDERMOTT, 49, Director (1995)* Gerard F. McDermott is also a Regional Vice president of Allstate Insurance Company. Prior to 1992, he held various management positions. JOSEPH P. MCFADDEN, 56, Director (1992)* Joseph P. McFadden is also a Territorial Vice President of Allstate Insurance Company. Prior to 1992, he was a Claim Vice President of Allstate Insurance Company. JOHN R. RABEN, JR., 50, Director (1988)* John R. Raben, Jr. is a Vice President & Municipal Bond/Public Finance Liaison with J.P. Morgan Securities, Inc. THEODORE A. SCHNELL, 47, Assistant Vice President and Director (1995)* Theodore A. Schnell is also Assistant Treasurer of Glenbrook Life & Annuity Company, Glenbrook Life Insurance Company and Allstate Life Insurance Company. SALLY A. SLACKE, 62, Director (1983)* Sally A. Slacke is also President of Slacke Test Boring, Inc. 28 CASEY J. SYLLA, 52, Chief Investment Officer (1995)* Casey J. Sylla is also Director of Allstate Insurance Company, Allstate Indemnity Company, Allstate Property and Casualty Insurance Company, Deerbrook Insurance Company, First Assurance Company, Northbrook Indemnity Company, Northbrook National Insurance Company, Northbrook Property and Casualty Insurance Company. He is also Chief Investment Officer of Glenbrook Life and Annuity Company, Allstate Settlement Corporation, The Northbrook Corporation, Allstate Insurance Company, Allstate Indemnity Company, Allstate Property and Casualty, Deerbrook Insurance Company, First Assurance Company, Northbrook Indemnity Company, Northbrook National Insurance Company, Northbrook Property and Casualty Insurance Company. Prior to 1995, he was Senior Vice President and Executive Officer Investments for Northwestern Mutual Life Insurance Company. BARRY S. PAUL, 40, Assistant Vice President and Controller (1992)* He is also Assistant Vice President and Controller of Allstate Life Insurance Company, Northbrook Life Insurance Company, Glenbrook Life and Annuity Company and Glenbrook Life Insurance Company. Prior to 1992, he was Assistant Vice President of Allstate Life Insurance Company and Northbrook Life Insurance Company. JAMES P. ZILS, 44, Treasurer (1995)* James P. Zils is also Treasurer of Allstate Life Financial Services, Inc., Allstate Settlement Corporation, Allstate Life Insurance Company, Glenbrook Life and Annuity Company, Glenbrook Life Insurance Company, Northbrook Life Insurance Company, The Northbrook Corporation. He is Treasurer and Vice President of AEI Group, Inc., Allstate International Inc., Allstate Motor Club, Inc., Direct Marketing Center, Inc., Enterprises Services Corporation, The Allstate Foundation, Forestview Mortgage Insurance Company, Allstate Indemnity Company, Allstate Property and Casualty, Deerbrook Insurance Company, First Assurance Company, Northbrook Indemnity Company, Northbrook National Insurance Company, Northbrook Property and Casualty Insurance Company. Prior to 1995 he was Vice President of Allstate Life Insurance Company. Prior to 1993 he held various management positions. - -------- *Date elected/appointed to current office. EXECUTIVE COMPENSATION Executive officers of the Company also serve as officers of its parent company and receive no compensation directly from the Company. Some of the officers also serve as officers of other companies affiliated with the Company. Allocations have been made as to each individual's time devoted to his or her duties as an executive officer of the Company. However, no officer's compensation allocated to the Company exceeded $100,000 in 1994. The allocated cash compensation of all officers of the Company as a group for services rendered in all capacities to the Company during 1994 totaled $9,216.31. Directors of the Company receive no compensation in addition to their compensation as employees of the Company. SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION ------------------------------------ ANNUAL COMPENSATION AWARDS PAYOUTS ---------------------- ------------ ---------- (A) (B) (C) (D) (E) (F) (G) (H) (I) SECURITIES OTHER ANNUAL RESTRICTED UNDERLYING LTIP ALL OTHER NAME AND PRINCIPAL SALARY BONUS COMPENSATION STOCK OPTIONS/SARS PAYOUTS COMPENSATION POSITION YEAR ($) ($) ($) AWARD(S) (#) ($) ($) - ------------------ ---- -------- -------- ------------ ---------- ------------ -------- ------------ Louis G. Lower, II...... 1995 $416,000 $266,175 $17,044 $199,890 N/A $411,122 $5,250(1) President and Chairman of the Board of Directors 1994 $389,050 $ 26,950 $25,889 $170,660 N/A 0 $1,890(1) 1993 $374,200 $294,683 $52,443 $318,625 N/A $ 13,451 $6,296(1) James J. Brazda(2)...... 1995 $115,870 $ 27,808 $ 175 0 N/A 0 $5,761(3) Chief Administrative Officer and Director 1994 $108,195 $ 21,707 0 $ 16,935 N/A 0 $1,608(3)
- -------- (1) Amount received by Mr. Lower which represents the value allocated to his account from employer contributions under The Profit Sharing Fund and to its predecessor, The Savings and Profit Sharing Fund of Sears employees. (2) Mr. Brazda no longer serves in this capacity for Allstate Life Insurance Company of New York. (3) Amount received by Mr. Brazda which represents the value allocated to his account from employer contributions under The Profit Sharing Fund and to its predecessor, The Savings and Profit Sharing Fund of Sears employees. Shares of the Company are not directly owned by any director or officer of the Company. The percentage of shares of The Allstate Corporation beneficially owned by any director, and by all directors and officers of the Company as a group, does not exceed one percent of the class outstanding. 29 LEGAL PROCEEDINGS 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. Management, after consultation with legal counsel, does not anticipate the ultimate liability arising from such pending or threatened litigation to have a material effect on the financial condition of the Company. EXPERTS The financial statements of the Company as of December 31, 1995 and 1994 and for each of the three years in the period ended December 31, 1995 and the related financial statement schedules included in this prospectus have been audited by Deloitte & Touche LLP, Two Prudential Plaza, 180 North Stetson Avenue, Chicago, Illinois, 60601-6779, independent auditors, as stated in their report appearing herein, and are included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. LEGAL MATTERS Sutherland, Asbill and Brennan, of Washington, D.C., has provided advice on certain legal matters relating to the federal securities laws applicable to the issue and sale of the Contracts. All matters of New York law pertaining to the Contracts, including the validity of the Contracts and the Company's right to issue such Contracts under New York insurance law, have been passed upon by Michael J. Velotta, General Counsel of the Company. 30 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 as of December 31, 1995 and 1994, and the related Statements of Operations, Shareholder's Equity and Cash Flows for each of the three years in the period ended December 31, 1995. 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 Allstate Life Insurance Company of New York as of December 31, 1995 and 1994, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1995 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. As discussed in Note 3 to the financial statements, in 1993 the Company changed its method of accounting for investments in fixed income securities. /s/ Deloitte & Touche LLP Chicago, Illinois March 1, 1996 F-1 ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK STATEMENTS OF FINANCIAL POSITION
DECEMBER 31, --------------------- 1995 1994 ---------- ---------- ($ IN THOUSANDS) Assets Investments Fixed income securities Available for sale, at fair value (amortized cost $1,219,418 and $468,518)............................ $1,424,893 $ 457,018 Held to maturity, at amortized cost (fair value $583,000)........................................... 601,359 Mortgage loans........................................ 86,394 86,435 Policy loans.......................................... 22,785 20,500 Short-term............................................ 7,257 7,212 ---------- ---------- Total investments................................... 1,541,329 1,172,524 Deferred acquisition costs............................. 53,944 50,699 Accrued investment income.............................. 18,828 16,518 Reinsurance recoverable................................ 3,331 10,365 Deferred income taxes.................................. 17,443 Cash................................................... 1,472 1,763 Other assets........................................... 3,924 4,763 Separate Accounts...................................... 220,141 175,918 ---------- ---------- Total assets........................................ $1,842,969 $1,449,993 ========== ========== Liabilities Reserve for life insurance policy benefits............. $ 838,739 $ 626,316 Contractholder funds................................... 499,548 483,812 Deferred income taxes.................................. 23,659 Other liabilities and accrued expenses................. 8,950 13,304 Net payable to affiliates.............................. 1,865 1,402 Separate Accounts...................................... 220,141 175,918 ---------- ---------- Total liabilities................................... 1,592,902 1,300,752 ---------- ---------- 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 Unrealized net capital gains (losses).................. 74,413 (6,891) Retained income........................................ 127,867 108,345 ---------- ---------- Total shareholder's equity.......................... 250,067 149,241 ---------- ---------- Total liabilities and shareholder's equity.......... $1,842,969 $1,449,993 ========== ==========
See notes to financial statements. F-2 ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, --------------------------- 1995 1994 1993 -------- -------- -------- ($ IN THOUSANDS) Revenues Premium income (net of reinsurance ceded of $2,147, $2,198 and $4,929)....................... $126,713 $ 70,070 $110,051 Contract charges.................................. 21,603 18,490 16,862 Net investment income............................. 104,384 96,911 95,956 Realized capital (losses) gains................... (1,846) 778 4,576 -------- -------- -------- 250,854 186,249 227,445 -------- -------- -------- Costs and expenses Provision for policy benefits (net of reinsurance recoveries of $1,581, $1,860 and $1,773)......... 198,055 137,434 175,676 Amortization of deferred acquisition costs ....... 5,502 3,875 10,319 Operating costs and expenses...................... 17,864 16,330 21,575 Early retirement program.......................... 1,210 -------- -------- -------- 221,421 158,849 207,570 -------- -------- -------- Income before income taxes......................... 29,433 27,400 19,875 Income tax expense................................. 9,911 9,179 6,712 -------- -------- -------- Net income......................................... $ 19,522 $ 18,221 $ 13,163 ======== ======== ========
STATEMENTS OF SHAREHOLDER'S EQUITY
UNREALIZED NET ADDITIONAL CAPITAL COMMON CAPITAL GAINS RETAINED STOCK PAID-IN (LOSSES) INCOME TOTAL ------- ---------- ---------- -------- -------- ($ IN THOUSANDS) Balance, December 31, 1992.... $ 2,000 $45,787 -- $ 76,961 $124,748 Net income................... 13,163 13,163 Change in unrealized net capital gains and losses.... $25,391 25,391 ------- ------- ------- -------- -------- Balance, December 31, 1993.... 2,000 45,787 25,391 90,124 163,302 Net income................... 18,221 18,221 Change in unrealized net capital gains and losses.... (32,282) (32,282) ------- ------- ------- -------- -------- Balance, December 31, 1994.... 2,000 45,787 (6,891) 108,345 149,241 Net income................... 19,522 19,522 Change in unrealized net capital gains and losses.... 81,304 81,304 ------- ------- ------- -------- -------- Balance, December 31, 1995.... $ 2,000 $45,787 $74,413 $127,867 $250,067 ======= ======= ======= ======== ========
See notes to financial statements. F-3 ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, ------------------------------ 1995 1994 1993 -------- --------- --------- ($ IN THOUSANDS) Cash flows from operating activities: Net income.................................... $ 19,522 $ 18,221 $ 13,163 Adjustments to reconcile net income to net cash from operating activities: Realized capital losses (gains).............. 1,846 (778) (4,576) Depreciation, amortization and other non-cash items....................................... (22,348) (18,969) (14,618) Interest credited to contractholder funds.... 26,924 27,233 26,476 Increase in reserve for policy benefits and contractholder funds........................ 103,513 55,233 101,348 Increase in deferred acquisition costs....... (5,537) (6,850) (2,396) Increase in accrued investment income........ (2,497) (102) (114) Change in deferred income taxes.............. (2,674) (5,993) 7,564 Changes in other operating assets and liabilities................................. 3,894 (18,082) (3,609) -------- --------- --------- Net cash from operating activities.......... 122,643 49,913 123,238 -------- --------- --------- Cash flows from investing activities: Proceeds from sales Fixed income securities available for sale... 13,526 49,903 Fixed income securities...................... 46,496 Investment collections Fixed income securities available for sale... 30,871 54,796 Fixed income securities held to maturity..... 3,067 17,186 Fixed income securities...................... 153,518 Mortgage loans............................... 6,499 9,744 2,382 Investment purchases Fixed income securities available for sale... (142,205) (137,684) Fixed income securities held to maturity..... (32,046) (38,709) Fixed income securities...................... (282,979) Mortgage loans............................... (9,864) (10,132) (15,642) Change in short-term investments, net......... (45) 41,528 4,254 Change in policy loans, net................... (859) (2,133) 84 -------- --------- --------- Net cash from investing activities.......... (131,056) (15,501) (91,887) -------- --------- --------- Cash flows from financing activities: Contractholder fund deposits.................. 76,534 57,468 84,024 Contractholder fund withdrawals............... (68,412) (92,574) (115,698) -------- --------- --------- Net cash from financing activities.......... 8,122 (35,106) (31,674) -------- --------- --------- Net decrease in cash........................... (291) (694) (323) Cash at beginning of year...................... 1,763 2,457 2,780 -------- --------- --------- Cash at end of year............................ $ 1,472 $ 1,763 $ 2,457 ======== ========= =========
See notes to financial statements. F-4 ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK NOTES TO FINANCIAL STATEMENTS ($ IN THOUSANDS) 1.ORGANIZATION AND NATURE OF OPERATIONS Allstate Life Insurance Company of New York (the "Company") is wholly owned by a wholly-owned subsidiary ("Parent") of Allstate Insurance Company ("Allstate"), a wholly-owned subsidiary of The Allstate Corporation (the "Corporation"). On June 30, 1995, Sears, Roebuck and Co. ("Sears") distributed its 80.3% ownership in the Corporation to Sears common shareholders through a tax-free dividend (the "Distribution"). The Company markets life insurance and group and individual annuities in the state of New York, with products consisting predominately of structured settlement annuities sold through independent brokers. The Company also utilizes Allstate agencies and direct marketing to distribute its traditional and universal life and accident and disability insurance products. Additionally, flexible premium deferred variable annuity contracts and certain single and flexible premium annuities are marketed to individuals through the account executives of Dean Witter Reynolds, Inc. ("Dean Witter") (Note 4). 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. The fixed income securities supporting these obligations have been selected to meet the anticipated cash flow requirements of the related liabilities: however, in a low interest rate environment, funds from maturing investments may be reinvested at substantially lower interest rates than those which prevailed when the funds were previously invested. In addition, single and flexible premium annuity contracts issued by the Company are subject to discretionary withdrawal or surrender by the contractholder, subject to applicable surrender charges. The Company utilizes various modeling techniques in managing the relationship between assets and liabilities and employs strategies to minimize the Company's exposure to interest rate risk and to maintain investments which are sufficiently liquid to meet obligations to contractholders in various interest rate scenarios. The Company monitors economic and regulatory developments which have the potential to impact its business. Currently, there is proposed legislation which would permit banks greater participation in securities businesses, which could eventually present an increased level of competition for sales of the Company's annuity contracts. Furthermore, the federal government may enact changes which could possibly eliminate the tax-advantaged nature of annuities or eliminate consumers' need for tax deferral, thereby reducing the incentive for customers to purchase the Company's products. While it is not possible to predict the outcome of such issues with certainty, management evaluates the likelihood of various outcomes and develops strategies, as appropriate, to respond to such challenges. To conform with the 1995 presentation, certain items in the prior year's financial statements and notes have been reclassified. 2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES LIFE INSURANCE ACCOUNTING The Company writes traditional life, accident and disability insurance. The Company also writes long-duration insurance contracts with terms that are not fixed and guaranteed, including single premium life insurance contracts, which are considered universal life-type contracts. The Company also sells long- duration contracts that do not involve significant risk of policyholder mortality or morbidity (principally single and flexible premium fixed and variable annuities and structured settlement annuities when sold without life contingencies), which are considered investment contracts. Limited payment contracts (policies with premiums paid over a period shorter than the contract period) primarily consist of group annuities and structured settlement annuities, when sold with life contingencies. Premiums for traditional life insurance 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 contracts 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 balances. Gross premiums in excess of the net premium on limited payment contracts are deferred and recognized over the contract period. The reserve for life insurance policy benefits, which relates to traditional life, group annuities and structured settlement annuities with life contingencies, and accident and disability insurance, is computed on the basis of assumptions as to future investment yields, mortality, morbidity, terminations and expenses. These assumptions, which for traditional life are applied using the net level premium method, include provisions for adverse deviation and generally vary by such characteristics as plan, year of issue and policy duration. Reserve interest rates ranged from 6.2% to 9.5% during 1995. To the extent that unrealized gains on available for sale 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. F-5 ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK NOTES TO FINANCIAL STATEMENTS ($ IN THOUSANDS) 2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Contractholder funds arise from the issuance of individual contracts that include an investment component, including most annuities and universal life- type contracts. Payments received are recorded as interest-bearing liabilities. Contractholder funds are equal to deposits received and interest accrued to the benefit of the contractholder less withdrawals, mortality charges, and administrative expenses. Credited interest rates on contractholder funds ranged from 3.0% to 6.8% for those contracts with fixed interest rates and from 3.6% to 8.5% for those with flexible rates during 1995. Certain costs of acquiring insurance business, principally agents' compensation, premium taxes, certain underwriting costs and direct mail solicitation expenses, are deferred and amortized to income. For traditional life, limited payment contracts and accident and disability, these costs are amortized in proportion to the estimated revenues on such business. For universal life-type 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. SEPARATE ACCOUNTS The Company issues flexible premium deferred variable annuity contracts, 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. Assets and liabilities of the Separate Accounts represent funds of Allstate Life of New York Variable Annuity Account and Allstate Life of New York Variable Annuity Account II ("Separate Accounts"), unit investment trusts registered with the Securities and Exchange Commission. The assets and liabilities 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 accompanying statements of operations. Revenues to the Company from the Separate Accounts consist of contract maintenance fees, administration fees and mortality and expense risk charges. INVESTMENTS Fixed income securities include bonds and mortgage-backed securities. Fixed income securities which may be sold prior to their contractual maturity ("available for sale") are carried at fair value. The difference between amortized cost and fair value, net of deferred income taxes, certain deferred acquisition costs and reserves for life insurance policy benefits, is reflected as a component of shareholder's equity. Fixed income securities which the Company has both the ability and positive intent to hold to maturity ("held to maturity") are carried at amortized cost. Provisions are made to write down the value of fixed income securities for declines in value 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 future market conditions and other factors. While the Company believes its mortgage loans were carried at appropriate levels at December 31, 1995, further allowances may be required if market conditions or other circumstances surrounding the loans change. Short-term investments are carried at cost which approximates fair value. Policy loans are carried at the unpaid principal balances. Investment income consists primarily of interest, which is recognized on an accrual basis. Interest income on mortgage-backed securities is determined on the effective yield method, based on 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 designates financial futures contracts as hedges of fixed income securities and anticipated transactions when certain criteria are met. These criteria require financial futures contracts to reduce the interest rate risk associated with designated assets or F-6 ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK NOTES TO FINANCIAL STATEMENTS ($ IN THOUSANDS) 2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) anticipated transactions. In addition, at the inception of the hedge and throughout the hedge period, high correlation between changes in the market value of the financial future contract and the fair value of, or interest income or expense associated with, the hedged item must exist. The Company only hedges those anticipated transactions that are probable of occurrence and whose significant terms and expected characteristics can be identified. When the hedged item is an existing asset, gains and losses on financial futures contracts are deferred as an adjustment to the amortized cost basis of the hedged item and are reported net of tax in shareholder's equity. When the hedged item is an anticipated transaction, gains and losses on financial futures contracts are deferred as other liabilities and accrued expenses. Once the anticipated transaction occurs, the deferred gains or losses are considered part of the amortized cost basis of the hedged asset. Accordingly, they are recognized in net investment income over the life of the hedged asset or are included in the recognition of gain or loss from disposition of that asset. Initial margin deposits are reported in short-term investments. Fees and commissions on financial futures contracts are deferred as an adjustment to the amortized cost basis of the hedged item. If, subsequent to entering into a hedge transaction, the financial futures contract becomes ineffective (including if the hedged item is sold or otherwise extinguished), the Company terminates the contract position. Gains and losses on these terminations are reported in realized capital gains (losses) in the period they occur. The Company may also terminate financial futures contracts as a result of other events or circumstances. Gains and losses on these terminations are reported in shareholder's equity, consistent with the accounting for the hedged item. 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. REINSURANCE Certain premiums and policy benefits are ceded and reflected net of such cessions in the statements of operations. Reinsurance recoverable and the related reserves for policy benefits are reported separately in the statements of financial position. Reinsurance ceded arrangements do not discharge the Company as the primary insurer. INCOME TAXES The income tax provision is calculated under the liability method. Deferred tax assets and liabilities are recorded based on the difference between the financial statement and tax bases of assets and liabilities and the enacted tax rates. The principal assets and liabilities giving rise to such differences are insurance reserves and deferred policy acquisition costs. Deferred income taxes also arise from unrealized capital gains or losses on fixed income securities carried at fair value. USE OF ESTIMATES The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. 3.ACCOUNTING CHANGES Effective January 1, 1995, the Company adopted SFAS No. 114, "Accounting by Creditors for Impairment of a Loan" and SFAS No. 118, "Accounting by Creditors for Impairment of a Loan-Income Recognition and Disclosures." SFAS No. 114 defines impaired loans as loans in which it is probable that a creditor will be unable to collect all amounts contractually due under the terms of a loan agreement and requires that impaired loans be measured based on the present value of expected future cash flows discounted at the loan's effective interest rate, at the loan's observable market price, or at the fair value of the collateral. SFAS No. 118 amends SFAS No. 114 to allow a creditor to use existing methods for recognizing interest income on impaired loans. The adoption of these statements did not have a material impact on net income or financial position. F-7 ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK NOTES TO FINANCIAL STATEMENTS ($ IN THOUSANDS) 3.ACCOUNTING CHANGES (CONTINUED) Effective December 31, 1993, the Company adopted SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities," which requires that investments classified as available for sale be carried at fair value. Previously, fixed income securities classified as available for sale were carried at the lower of amortized cost or fair value, determined in the aggregate. Unrealized holding gains and losses are reflected as a separate component of shareholder's equity, net of deferred income taxes, certain life deferred acquisition costs and reserves for life insurance policy benefits. The net effect of adoption of this statement increased shareholder's equity at December 31, 1993 by $25,391 and did not have a material impact on net income. 4.RELATED PARTY TRANSACTIONS REINSURANCE The Company cedes business to the Parent under reinsurance treaties. Premiums and policy benefits ceded totaled $1,259 and $278 in 1995, $1,181 and $1,877 in 1994, and $4,109 and $1,288 in 1993. Included in the reinsurance recoverable at December 31, 1995 and 1994 are amounts due from the Parent of $1,212 and $1,120, respectively. STRUCTURED SETTLEMENT ANNUITIES Allstate, through an affiliate, purchased $11,243, $7,568 and $24,778 of structured settlement annuities from the Company in 1995, 1994 and 1993, respectively. Included in premium income are $4,164, $1,221 and $7,170, for 1995, 1994 and 1993, respectively, for the amounts related to structured settlement annuities with life contingencies. Additionally, the provision for policy benefits was increased by approximately 94% of such premium received in each of these years. BUSINESS OPERATIONS The Company utilizes services and business facilities owned or leased, and operated by Allstate in conducting its business activities. The Company reimburses Allstate for the operating expenses incurred by Allstate on its behalf. The cost to the Company is determined by various allocation methods and is primarily related to the level of the services provided. Expenses allocated to the Company were $21,288, $17,320 and $16,313 in 1995, 1994 and 1993, respectively. A portion of these expenses related to the acquisition of insurance business is deferred and amortized over the policy period. DEAN WITTER Dean Witter is the primary distributor of the Company's single and flexible premium annuities. Dean Witter is also the distributor of flexible premium deferred variable annuity contracts and the investment manager for the Dean Witter Variable Investment Series, the fund in which the assets of the Separate Accounts are invested. Additionally, Dean Witter loans funds to an affiliate of the Parent under the terms of a strategic alliance. 5.INCOME TAXES A consolidated federal income tax return will be filed by the Parent and its life insurance subsidiaries, including the Company. Tax liabilities and benefits realized by the consolidated group are allocated as generated by the respective subsidiaries, whether or not such benefits generated by the subsidiaries would be available on a separate return basis. The Corporation and its domestic subsidiaries, including the Company, (the "Allstate Group"), will be eligible to file a consolidated tax return beginning in the year 2000. Prior to the Distribution, 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"). As a member of the Sears Tax Group, the Corporation was jointly and severally liable for the consolidated income tax liability of the Sears Tax Group. 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 Allstate Group in the consolidated federal income tax return. Effectively, this resulted in the Company's annual income tax provision being computed as if the Company filed a separate return, except that items such as net operating losses, capital losses, or similar items, which might not be immediately recognizable in a separate return, were allocated according to the Tax Sharing Agreement and reflected in the Company's provision to the extent that such items reduced the Sears Tax Group's federal tax liability. F-8 ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK NOTES TO FINANCIAL STATEMENTS ($ IN THOUSANDS) 5.INCOME TAXES (CONTINUED) The Allstate Group and Sears Group have entered into an agreement which governs their respective rights and obligations with respect to federal income taxes for all periods prior to the Distribution ("Consolidated Tax Years"). The agreement provides that all Consolidated Tax Years will continue to be governed by the Tax Sharing Agreement with respect to the Company's federal income tax liability and taxes payable to or recoverable from the Sears Group. The components of the deferred income tax assets and liabilities at December 31, 1995 and 1994 are as follows:
1995 1994 -------- -------- Deferred assets Reserve for policy benefits................................ $ 25,562 $ 21,447 Difference in tax bases of investments..................... 1,536 1,708 Loss on disposal of discontinued operations................ 376 378 Reserve for postretirement benefits........................ 496 446 Unrealized loss on fixed income securities................. 3,711 Other assets............................................... 1,701 2,402 -------- -------- Total deferred assets..................................... 29,671 30,092 -------- -------- Deferred liabilities Unrealized gain on fixed income securities................. (40,069) Policy acquisition costs................................... (12,655) (12,116) Prepaid commission expense................................. (578) (520) Other liabilities.......................................... (28) (13) -------- -------- Total deferred liabilities................................ (53,330) (12,649) -------- -------- Net deferred (liability) asset............................ $(23,659) $ 17,443 ======== ========
The components of income tax expense are as follows:
YEAR ENDED DECEMBER 31, ------------------------- 1995 1994 1993 ------- ------- ------- Current.............................................. $12,589 $15,172 $12,821 Deferred............................................. (2,678) (5,993) (6,109) ------- ------- ------- Income tax expense.................................. $ 9,911 $ 9,179 $ 6,712 ======= ======= =======
The Company paid income taxes of $11,000, $27,682 and $13,079 in 1995, 1994 and 1993, respectively to the Parent under the Tax Sharing Agreement. Additionally, the Company had income taxes payable to the Parent of $1,729 and $141 at December 31, 1995 and 1994, respectively. 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, 1995 of approximately $389 will result in taxes payable of $136 if distributed to the Company's shareholder. The Company has no plan to distribute amounts from the policyholder surplus account, and no further additions to the account are allowed by the Tax Reform Act of 1984. 6.INVESTMENTS In 1995, the Company transferred its held to maturity fixed income securities portfolio, with an amortized cost of $644,005 to the available for sale fixed income portfolio. The fair value of these fixed income securities was $726,820, resulting in an increase to shareholder's equity of $82,815 after adjustment for deferred income taxes, certain deferred acquisition costs and reserves for life insurance policy benefits. While the Company's investment philosophy has not changed, management chose to transfer these fixed income securities to available for sale to maximize the Company's flexibility in responding to changes in market conditions. F-9 ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK NOTES TO FINANCIAL STATEMENTS ($ IN THOUSANDS) 6.INVESTMENTS (CONTINUED) FAIR VALUES The amortized cost, fair value and gross unrealized gains and losses for fixed income securities are as follows:
GROSS UNREALIZED AMORTIZED ---------------- DECEMBER 31, 1995 COST GAINS LOSSES FAIR VALUE - ----------------- ---------- -------- ------- ---------- Available for sale U.S. government and agencies............ $ 336,331 $ 99,750 $ 526 $ 435,555 State and municipal..................... 36,002 2,831 92 38,741 Corporate............................... 633,731 92,073 767 725,037 Mortgage-backed securities.............. $ 213,354 12,370 164 225,560 ---------- -------- ------- ---------- Total available for sale............... $1,219,418 $207,024 $ 1,549 $1,424,893 ========== ======== ======= ========== GROSS UNREALIZED AMORTIZED ---------------- DECEMBER 31, 1994 COST GAINS LOSSES FAIR VALUE - ----------------- ---------- -------- ------- ---------- Available for sale U.S. government and agencies............ $ 28,621 $ 299 $ 825 $ 28,095 State and municipal..................... 33,939 303 1,024 33,218 Corporate............................... 221,740 3,871 6,748 218,863 Mortgage-backed securities.............. 184,218 1,188 8,564 176,842 ---------- -------- ------- ---------- Total available for sale............... $ 468,518 $ 5,661 $17,161 $ 457,018 ========== ======== ======= ========== Held to maturity U.S. government and agencies............ $ 267,521 $ 5,203 $24,723 $ 248,001 Corporate............................... 328,194 8,462 7,377 329,279 Mortgage-backed securities.............. 5,644 92 16 5,720 ---------- -------- ------- ---------- Total held to maturity................. $ 601,359 $ 13,757 $32,116 $ 583,000 ========== ======== ======= ==========
SCHEDULED MATURITIES The scheduled maturities for fixed income securities at December 31, 1995 are as follows:
AMORTIZED COST FAIR VALUE -------------- ---------- Due in one year or less.............................. $ 21,352 $ 21,841 Due after one year through five years................ 78,391 83,922 Due after five years through ten years............... 165,998 182,739 Due after ten years.................................. 740,323 910,831 ---------- ---------- 1,006,064 1,199,333 Mortgage-backed securities........................... 213,354 225,560 ---------- ---------- Total............................................... $1,219,418 $1,424,893 ========== ==========
Actual maturities may differ from those scheduled as a result of prepayments by the issuers. UNREALIZED NET CAPITAL GAINS AND LOSSES Unrealized net capital gains and losses on fixed income securities available for sale included in shareholder's equity at December 31, 1995 are as follows:
AMORTIZED UNREALIZED NET COST FAIR VALUE GAINS/(LOSSES) ---------- ---------- -------------- Fixed income securities available for sale..................................... $1,219,418 $1,424,893 $205,475 ========== ========== Reserves for life insurance policy benefits................................. (89,600) Deferred income taxes..................... (40,068) Deferred acquisition costs................ (1,394) -------- Total.................................... $ 74,413 ========
F-10 ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK NOTES TO FINANCIAL STATEMENTS ($ IN THOUSANDS) 6.INVESTMENTS (CONTINUED) The change in unrealized net capital gains and losses for fixed income securities is as follows:
YEAR ENDED DECEMBER 31, ------------------ 1995 1994 -------- -------- Fixed income securities available for sale.................. $216,975 $(52,740) Reserves for life insurance policy benefits................. (89,600) Deferred income taxes....................................... (43,779) 17,382 Deferred acquisition costs.................................. (2,292) 3,076 -------- -------- Change in unrealized net capital gains and losses.......... $ 81,304 $(32,282) ======== ========
INVESTMENT INCOME Investment income by type of investment is as follows:
YEAR ENDED DECEMBER 31, ------------------------ 1995 1994 1993 -------- ------- ------- Fixed income securities............................... $ 95,212 $88,149 $87,524 Mortgage loans........................................ 7,999 8,092 7,435 Policy loans.......................................... 1,309 1,153 1,017 Short-term............................................ 1,435 1,093 1,385 -------- ------- ------- Investment income, before expense..................... 105,955 98,487 97,361 Investment expense.................................... 1,571 1,576 1,405 -------- ------- ------- Net investment income................................. $104,384 $96,911 $95,956 ======== ======= =======
REALIZED CAPITAL GAINS AND LOSSES Realized capital gains and losses on investments are as follows:
YEAR ENDED DECEMBER 31, ------------------------ 1995 1994 1993 ------- ------ ------- Fixed income securities............................... $ 422 $1,570 $ 5,657 Mortgage loans........................................ (2,268) (792) (1,081) ------- ------ ------- Realized capital (losses) gains...................... (1,846) 778 4,576 Income tax (benefit) expense......................... (646) 272 1,602 ------- ------ ------- Realized capital (losses) gains...................... $(1,200) $ 506 $ 2,974 ======= ====== =======
PROCEEDS FROM SALES OF FIXED INCOME SECURITIES The proceeds from sales of investments in fixed income securities, excluding calls, and related gross realized gains and losses are as follows:
YEAR ENDED DECEMBER 31, ------------------------- 1995 1994 1993 ------- ------- ------- Proceeds............................................. $13,526 $49,903 $46,496 ------- ------- ------- Gross realized gains................................. $ 172 $ 1,743 $ 1,780 Gross realized losses................................ (105) (973) (30) ------- ------- ------- Net realized gains.................................. $ 67 $ 770 $ 1,750 ======= ======= =======
INVESTMENT LOSS PROVISIONS AND VALUATION RESERVES Pretax provisions for investment losses, principally relating to other than temporary declines in value on fixed income securities, and valuation allowances on mortgage loans were $2,448, $627 and $1,200 in 1995, 1994 and 1993, respectively. F-11 ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK NOTES TO FINANCIAL STATEMENTS ($ IN THOUSANDS) 6.INVESTMENTS (CONTINUED) 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 components of impaired loans at December 31, 1995 are as follows: Net carrying value of impaired loans with valuation allowances......... $ 9,353 Less: valuation allowances............................................. (1,934) Without valuation allowances........................................... 2,228 ------- Total................................................................. $ 9,647 =======
All impaired loans were measured at the fair value of the collateral at December 31, 1995. Activity in the valuation allowance for all mortgage loans for the year ended December 31, 1995 is summarized as follows: Balance at January 1.................................................... $1,179 Additions.............................................................. 1,930 Direct write-downs..................................................... (1,157) ------ Balance at December 31.................................................. $1,952 ======
Interest income is recognized on a cash basis for impaired loans carried at the fair value of collateral, beginning at the time of impairment. For other impaired loans, interest is accrued based on the net carrying value. The Company recognized interest income of $1,398 on impaired loans during the period, of which $1,193 was received in cash. The average recorded investment in impaired loans during the period was $8,900. INVESTMENT CONCENTRATION AND OTHER INVESTMENT INFORMATION The Company maintains a diversified portfolio of municipal bonds. The largest concentrations in the portfolio are presented below. Except for the following, holdings in no other state exceed 5.0% of the carrying value of the portfolio at December 31, 1995.
1995 1994 ---- ---- Ohio................................................................ 26.8% 26.9% California.......................................................... 23.1 23.0 Illinois............................................................ 19.7 22.0 Maryland............................................................ 7.6 9.0 Maine............................................................... 5.7 5.9 New York............................................................ 5.3 6.1 Minnesota........................................................... 5.2 --
The Company's mortgage loans are collateralized primarily by a variety of commercial real estate property types, located throughout the United States. Substantially all of the commercial mortgage loans are non-recourse to the borrower. The three states with the largest portion of the commercial mortgage loan portfolio are as listed below. Holdings in no other state exceed 5.0% of the portfolio at December 31: (% of commercial mortgage portfolio carrying value)
1995 1994 ---- ---- California.......................................................... 56.7% 58.5% Illinois............................................................ 22.9 16.3 New York............................................................ 11.1 10.9
F-12 ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK NOTES TO FINANCIAL STATEMENTS ($ IN THOUSANDS) 6.INVESTMENTS (CONTINUED) The types of properties collateralizing the mortgage loans are as follows: (% of commercial mortgage portfolio carrying value)
1995 1994 ----- ----- Retail............................................................ 39.5% 31.4% Warehouse......................................................... 32.1 36.8 Office............................................................ 16.0 19.3 Industrial........................................................ 6.9 7.1 Apartment......................................................... 4.5 4.4 Other............................................................. 1.0 1.0 ----- ----- 100.0% 100.0% ===== =====
At December 31, 1995, fixed income securities with a carrying value of $1,988 were on deposit with regulatory authorities as required by law. During 1995, the Company held one fixed income security which exceeded 10% of shareholder's equity, the State of Israel Government Loan Trust, with a fair value of $83,980. This security, issued through the United States Agency for International Development, is secured by the credit of the United States government and is backed by government guaranteed loans to Israel. 7.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. 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. As a number of the Company's significant assets, including deferred acquisition costs and deferred income taxes, and liabilities, including traditional and universal life-type life insurance reserves, are not considered financial instruments, the disclosures that follow do not reflect the fair value of the Company as a whole. FINANCIAL ASSETS
CARRYING AT DECEMBER 31, 1995 VALUE FAIR VALUE - -------------------- ---------- ---------- Fixed income securities.................................. $1,424,893 $1,424,893 Mortgage loans........................................... 86,394 89,517 Short-term investments................................... 7,257 7,257 Policy loans............................................. 22,785 22,785 Accrued investment income................................ 18,828 18,828 Cash..................................................... 1,472 1,472 Other financial assets................................... 7,169 7,169 Separate Accounts........................................ 220,141 220,141 CARRYING AT DECEMBER 31, 1994 VALUE FAIR VALUE - -------------------- ---------- ---------- Fixed income securities.................................. $1,058,377 $1,040,018 Mortgage loans........................................... 86,435 80,785 Short-term investments................................... 7,212 7,212 Policy loans............................................. 20,500 20,500 Accrued investment income................................ 16,518 16,518 Cash..................................................... 1,763 1,763 Other financial assets................................... 4,763 4,763 Separate Accounts........................................ 175,918 175,918
Carrying value and fair value include the effects of derivative financial instruments where applicable. F-13 ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK NOTES TO FINANCIAL STATEMENTS ($ IN THOUSANDS) 7.FINANCIAL INSTRUMENTS (CONTINUED) Fair value 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 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 fair value of policy loans is estimated at book value since the loan may be repaid at any time. Accrued investment income and other financial assets are valued at their carrying value as they are short-term in nature. Assets of the Separate Accounts are carried in the statements of financial position at fair value. FINANCIAL LIABILITIES The Company had the following financial liabilities:
CARRYING FAIR AT DECEMBER 31, 1995 VALUE VALUE - -------------------- -------- -------- Contractholder funds on investment contracts.................. $366,481 $392,111 Other financial liabilities................................... 5,383 5,383 Separate Accounts............................................. 220,141 220,141 CARRYING FAIR AT DECEMBER 31, 1994 VALUE VALUE - -------------------- -------- -------- Contractholder funds on investment contracts.................. $368,780 $362,221 Other financial liabilities................................... 7,725 7,725 Separate Accounts............................................. 175,918 175,918
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 charge. The fair value of immediate annuities and annuities without life contingencies with fixed terms are estimated using discounted cash flow calculations based on interest rates currently offered for contracts with similar terms and durations. Other financial liabilities are generally valued at their carrying value due to their short-term nature. Separate Accounts liabilities are carried at the fair value of the underlying assets. DERIVATIVE FINANCIAL INSTRUMENTS The Company uses financial futures contracts to reduce its exposure to interest rate risk on its invested assets, as well as to improve asset/liability management. The Company does not hold or issue these instruments for trading purposes. The following table summarizes the contract or notional amount and carrying value of the Company's financial futures contracts:
CONTRACT/NOTIONAL CARRYING VALUE AT DECEMBER 31, 1995 AMOUNT ASSET/(LIABILITY) - -------------------- ----------------- ---------------- Financial futures........................... $22,900 $576 CONTRACT/NOTIONAL CARRYING VALUE AT DECEMBER 31, 1994 AMOUNT ASSET/(LIABILITY) - -------------------- ----------------- ---------------- Financial futures........................... $20,700 $(65)
The contract or notional amounts are used to calculate the exchange of contractual payments under the agreements and are not representative of the potential gain or loss on these agreements. Financial futures contracts are commitments to either purchase or sell designated financial instruments at a future date for a specified price or yield. They may be settled in cash or through delivery. As part of its asset/liability management, the Company generally utilizes futures contracts to hedge its interest rate risk related to anticipatory investment purchases. Hedges of anticipatory transactions pertain to identified transactions which are probable to occur and are generally completed within ninety days. Futures contracts have limited off-balance-sheet credit exposure as they are executed on organized exchanges and require security deposits, as well as the daily cash settlement of margins. F-14 ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK NOTES TO FINANCIAL STATEMENTS ($ IN THOUSANDS) 7.FINANCIAL INSTRUMENTS (CONTINUED) Market risk is the risk that future changes in market conditions may cause an instrument to become less valuable or more costly to settle. Market risk exists for the financial futures contracts that the Company currently holds. The Company mitigates this risk through established risk limits set by senior management. In addition, the change in the value of the Company's financial futures contracts are generally offset by the change in the value of certain on-balance-sheet items or anticipated transactions. OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS Commitments to extend new mortgage loans are agreements to lend to a customer 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. At December 31, 1994, the Company had $3,075 in mortgage loan commitments which had a fair value of $31. No such commitments existed at December 31, 1995. 8.BENEFIT PLANS PENSION PLANS Defined benefit pension plans, sponsored by Allstate, cover all 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. Allstate'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 income were $446, $344 and $340 for the pension plans in 1995, 1994 and 1993, respectively. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS Allstate provides certain health care and life insurance benefits for retired employees. Generally, qualified employees may become eligible for these benefits if they retire in accordance with Allstate's established retirement policy and are continuously insured under Allstate's group plans or other approved plans for 10 or more years prior to retirement. Allstate shares the cost of the retiree medical benefits with retirees based on years of service, with the Company's share being subject to a 5% limit on annual medical cost inflation after retirement. Allstate's postretirement benefit plans currently are not funded. Allstate has the right to modify or terminate these plans. PROFIT SHARING FUND Employees of Allstate and its domestic subsidiaries are also eligible to become members of the Savings and Profit Sharing Fund of Allstate Employees ("Allstate Plan"). Allstate contributions are based on 6% of consolidated income, as defined, with Allstate contributions limited to 70% of eligible deposits. The Allstate Plan includes an Employee Stock Ownership Plan ("Allstate ESOP") to pre-fund a portion of the Company's anticipated contribution through 2004. The Allstate Plan and the Allstate ESOP split from The Savings and Profit Sharing Fund of Sears Employees, which included a leveraged employee stock ownership plan ("Sears ESOP") feature, on June 30, 1995, the date of the Distribution. Fifty percent of the unallocated shares of the Sears ESOP and 50% of the amount of the Sears ESOP debt (payable to Sears) were transferred to the Allstate Plan. In connection with this transfer, Allstate paid Sears $327 million, an amount equal to 50% of the Sears ESOP debt. Concurrently, Allstate received a note from the Allstate ESOP for a like principal amount with interest rate and maturity identical to the debt obligation transferred from the Sears ESOP. Allstate will make contributions to the Allstate ESOP annually in the amount necessary to allow the Allstate ESOP to fund interest and principal payments. The Company's contribution to The Savings and Profit Sharing Fund of Allstate Employees was $141 in 1995. The costs to the Company prior to the Distribution and the split from the Savings and Profit Sharing Fund of Sears Employees were $123 and $176 in 1994 and 1993, respectively. EARLY RETIREMENT PROGRAM During 1994, Allstate offered a voluntary early retirement incentive program to eligible home office employees. The Company's portion of the total cost of the program of $1,210 was charged to 1994 income. F-15 ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK NOTES TO FINANCIAL STATEMENTS ($ IN THOUSANDS) 9.STATUTORY FINANCIAL INFORMATION The following tables reconcile net income and shareholder's equity as reported herein in conformity with generally accepted accounting principles with statutory net income and capital and surplus, determined in accordance with statutory accounting practices prescribed or permitted by insurance regulatory authorities:
NET INCOME ------------------------- YEAR ENDED DECEMBER 31, 1995 1994 1993 - ----------------------- ------- ------- ------- Balance per generally accepted accounting principles......................................... $19,522 $18,221 $13,163 Deferred acquisition costs......................... (5,537) (6,849) (2,397) Income taxes....................................... (3,109) (8,337) (6,074) Non-admitted assets and statutory reserves......... 12,786 6,900 20,157 Other postretirement and postemployment benefits... 71 105 (54) Other.............................................. (533) 901 1,236 ------- ------- ------- Balance per statutory accounting practices.......... $23,200 $10,941 $26,031 ======= ======= =======
SHAREHOLDER'S EQUITY DECEMBER 31, ------------------ 1995 1994 -------- -------- Balance per generally accepted accounting principles........ $250,067 $149,241 Deferred acquisition costs................................. (53,944) (50,699) Income taxes............................................... 20,839 (17,443) Unrealized net capital gains (losses)...................... (114,500) 11,500 Non-admitted assets and statutory reserves................. 43,624 31,074 Other postretirement and postemployment benefits........... 1,058 1,036 Other...................................................... 1,153 106 -------- -------- Balance per statutory accounting practices.................. $148,297 $124,815 ======== ========
PERMITTED STATUTORY ACCOUNTING PRACTICES The Company prepares its statutory financial statements in accordance with accounting principles and practices prescribed or permitted by the New York state insurance department. Prescribed statutory accounting principles include a variety of publications of the National Association of Insurance Commissioners, as well as state laws, regulations and general administrative rules. Permitted statutory accounting practices encompass all accounting practices not so prescribed. The Company does not follow any permitted statutory accounting practices that have a material effect on statutory surplus or risk-based capital. DIVIDENDS The ability of the Company to pay dividends is dependent, in part, on business conditions, income, cash requirements of the Company and other relevant factors and is subject to New York Insurance Regulations. Under New York Insurance Law, a notice of intention to distribute any dividend must be filed with the New York Superintendent of Insurance not less than 30 days prior to the distribution. Such proposed declaration is subject to the Superintendent's disapproval. F-16 ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK SCHEDULE IV--REINSURANCE ($ IN THOUSANDS)
GROSS NET YEAR ENDED DECEMBER 31, 1995 AMOUNT CEDED AMOUNT - ---------------------------- ---------- ---------- ---------- Life insurance in force....................... $8,513,295 $ 398,025 $8,115,270 ========== ========== ========== Premiums and contract charges: Life and annuities........................... $ 146,732 $ 1,246 $ 145,486 Accident and health.......................... 3,731 901 2,830 ---------- ---------- ---------- $ 150,463 $ 2,147 $ 148,316 ========== ========== ========== GROSS NET YEAR ENDED DECEMBER 31, 1994 AMOUNT CEDED AMOUNT - ---------------------------- ---------- ---------- ---------- Life insurance in force....................... $7,598,374 $ 321,623 $7,276,751 ========== ========== ========== Premiums and contract charges: Life and annuities........................... $ 87,562 $ 1,193 $ 86,369 Accident and health.......................... 3,276 1,005 2,271 ---------- ---------- ---------- $ 90,838 $ 2,198 $ 88,640 ========== ========== ========== GROSS NET YEAR ENDED DECEMBER 31, 1993 AMOUNT CEDED AMOUNT - ---------------------------- ---------- ---------- ---------- Life insurance in force....................... $6,853,083 $1,746,724 $5,106,359 ========== ========== ========== Premiums and contract charges: Life and annuities........................... $ 128,816 $ 4,122 $ 124,694 Accident and health.......................... 3,026 807 2,219 ---------- ---------- ---------- $ 131,842 $ 4,929 $ 126,913 ========== ========== ==========
SCHEDULE V--VALUATION AND QUALIFYING ACCOUNTS ($ IN THOUSANDS)
BALANCE AT CHARGED TO BALANCE BEGINNING COSTS AND AT END DESCRIPTION OF PERIOD EXPENSES DEDUCTION OF PERIOD - ----------- ---------- ---------- --------- --------- Year Ended December 31, 1995 Allowance for estimated losses on mortgage loans..................... $1,179 $2,170 $1,397 $1,952 Year Ended December 31, 1994 Allowance for estimated losses on mortgage loans..................... $2,297 $ 667 $1,785 $1,179 Year Ended December 31, 1993 Allowance for estimated losses on mortgage loans..................... $2,531 $1,225 $1,459 $2,297
F-17 ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK FINANCIAL STATEMENTS FOR THE QUARTER ENDED JUNE 30, 1996 ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK STATEMENTS OF FINANCIAL POSITION ($ IN THOUSANDS)
JUNE 30, DECEMBER 31, 1996 1995 ----------- ------------ (UNAUDITED) Assets Investments Fixed income securities available for sale, at fair value (amortized cost $1,257,814 and $1,219,418)... $1,323,712 $1,424,893 Mortgage loans...................................... 83,403 86,394 Policy loans........................................ 23,920 22,785 Short-term.......................................... 31,452 7,257 ---------- ---------- Total investments.................................. 1,462,487 1,541,329 ---------- ---------- Deferred acquisition costs........................... 58,127 53,944 Accrued investment income............................ 19,047 18,828 Reinsurance recoverable.............................. 3,009 3,331 Deferred income taxes................................ 6,306 Cash................................................. 1,957 1,472 Other assets......................................... 4,212 3,924 Separate Accounts.................................... 238,347 220,141 ---------- ---------- Total assets....................................... $1,793,492 $1,842,969 ========== ========== Liabilities Reserve for life insurance policy benefits........... $ 824,929 $ 838,739 Contractholder funds................................. 509,737 499,548 Deferred income taxes................................ 23,659 Other liabilities and accrued expenses............... 8,957 8,950 Net payable to affiliates............................ 1,057 1,865 Separate Accounts.................................... 238,347 220,141 ---------- ---------- Total liabilities.................................. 1,583,027 1,592,902 ---------- ---------- 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 Unrealized net capital gains......................... 24,573 74,413 Retained income...................................... 138,105 127,867 ---------- ---------- Total shareholder's equity......................... 210,465 250,067 ---------- ---------- Total liabilities and shareholder's equity......... $1,793,492 $1,842,969 ========== ==========
See notes to financial statements. F-18 ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK STATEMENTS OF OPERATIONS ($ IN THOUSANDS)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, --------------- ----------------- 1996 1995 1996 1995 ------- ------- -------- -------- (UNAUDITED) (UNAUDITED) Revenues Premium income (net of reinsurance ceded of $610 and $560; $1,194 and $1,066)..... $21,813 $29,285 $ 44,916 $ 76,607 Contract charges.......................... 6,604 5,544 12,305 9,838 Net investment income..................... 27,830 25,455 55,424 50,682 Realized capital gains and (losses)....... 420 (518) 351 (2,133) ------- ------- -------- -------- 56,667 59,766 112,996 134,994 ------- ------- -------- -------- Costs and expenses Provision for policy benefits (net of reinsurance recoveries of $1,305 and $(135); $2,170 and $178)................. 42,372 46,865 85,389 109,771 Amortization of deferred acquisition costs.................................... 1,818 813 2,965 1,760 Operating costs and expenses.............. 3,941 5,462 8,414 10,417 ------- ------- -------- -------- 48,131 53,140 96,768 121,948 ------- ------- -------- -------- Income before income taxes................. 8,536 6,626 16,228 13,046 Income tax expense......................... 3,223 2,192 5,990 4,351 ------- ------- -------- -------- Net income................................. $ 5,313 $ 4,434 $ 10,238 $ 8,695 ======= ======= ======== ========
See notes to financial statements. F-19 ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK STATEMENTS OF CASH FLOWS ($ IN THOUSANDS)
SIX MONTHS ENDED JUNE 30, ---------------- 1996 1995 ------- ------- (UNAUDITED) Cash flows from operating activities Net income.................................................. $10,238 $ 8,695 Adjustments to reconcile net income to net cash provided by operating activities Realized capital (gains) and losses........................ (351) 2,133 Depreciation, amortization and other noncash items......... (12,571) (10,647) Interest credited to contractholder funds.................. 11,326 12,999 Increase in reserve for policy benefits and contractholder funds..................................................... 38,824 67,050 Increase in deferred policy acquisition costs.............. (3,083) (3,265) Increase in accrued investment income...................... (219) (343) Change in deferred income taxes............................ (3,128) (3,298) Changes in other operating assets and liabilities.......... 75 1,004 ------- ------- Net cash provided by operating activities................. 41,111 74,328 ------- ------- Cash flows from investing activities Proceeds from sales Fixed income securities available for sale................. 6,097 Investment collections Fixed income securities available for sale................. 38,404 14,931 Fixed income securities held to maturity................... 2,864 Mortgage loans............................................. 3,360 2,475 Investment purchases Fixed income securities available for sale................. (65,089) (57,638) Fixed income securities held to maturity................... (21,273) Mortgage loans............................................. (2,895) Change in short-term investments, net........................ (24,195) (10,639) Change in other investments, net............................. (1,135) (937) ------- ------- Net cash used in investing activities..................... (48,655) (67,015) ------- ------- Cash flows from financing activities Contractholder fund deposits................................ 31,615 39,709 Contractholder fund withdrawals............................. (23,586) (47,081) ------- ------- Net cash provided by (used in) financing activities....... 8,029 (7,372) ------- ------- Net increase (decrease) in cash.............................. 485 (59) Cash at beginning of period.................................. 1,472 1,763 ------- ------- Cash at end of period........................................ $ 1,957 $ 1,704 ======= =======
See notes to financial statements. F-20 ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK NOTES TO FINANCIAL STATEMENTS (UNAUDITED) ($ IN THOUSANDS) 1.BASIS OF PRESENTATION Allstate Life Insurance Company of New York (the "Company") is wholly owned by a wholly-owned subsidiary ("Parent") of Allstate Insurance Company ("Allstate"), a wholly-owned subsidiary of The Allstate Corporation (the "Corporation"). The statements of financial position as of June 30, 1996, the statements of operations for the three-month and six-month periods ended June 30, 1996 and 1995, and the statements of cash flows for the six-month periods then ended are unaudited. The interim financial statements reflect all adjustments (consisting only of normal recurring accruals) which are, in the opinion of management, necessary for the fair presentation of the financial position, results of operations and cash flows for the interim periods. The financial statements 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 10K for 1995. The results of operations for the interim periods should not be considered indicative of results to be expected for the full year. To conform with the 1996 presentation, certain items in the prior year's financial statements have been reclassified. F-21 APPENDIX A MARKET VALUE ADJUSTMENT The Market Value Adjustment is based on the following: I = the Treasury Rate for a maturity equal to the Sub-account's Guarantee Period for the week preceding the establishment of the Sub-account. N = the number of whole and partial years from the date we receive the withdrawal, or death benefit request, or from the Payout Start Date to the end of the Sub-account's Guarantee Period. J = the Treasury Rate for a maturity of length N for the week preceding the receipt of the withdrawal request, death benefit request, 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 Any transfer, withdrawal in excess of the preferred withdrawal amount, or death benefit paid from a Sub-account of the Fixed Account will be multiplied by the Market Value Adjustment factor to determine the Market Value Adjustment. ILLUSTRATION EXAMPLE OF MARKET VALUE ADJUSTMENT Purchase Payment: $10,000 Guarantee Period: 5 Years Guaranteed Interest Rate: 4.35% 5 Year Treasury Rate at the time the Sub-account is established: 5.55% Full Withdrawal: End of Contract Year 3
NOTE: THIS ILLUSTRATION ASSUMES THAT PREMIUM TAXES WERE NOT APPLICABLE. EXAMPLE 1: (ASSUMES DECLINING INTEREST RATES) Step 1: Calculate Account Value at End of Contract Year 3: =10,000.00 X (1.0435)/3/ = $11,362.59 Step 2: Calculate the Preferred Withdrawal Amount: =10% X (10,000.00) = $1,000.00 Step 3: Calculate the Market Value Adjustment: I = 5.55% J = 5.05% N = 730 days = 2 ----- 365 days Market Value Adjustment Factor: .9 X (I-J) X N = .9 X (.0555-.0505) X 2 = .009 Market Value Adjustment = Factor X Amount Subject to Market Value Adjustment: = .009 X (11,362.59 - 1,000) = $93.26 Step 4: Calculate the Withdrawal Charge: = .05 X (10,000.00 - 1,000.00 + $93.26) = $454.66 Step 5: Calculate The Amount Received by Customers as a Result of a Full Withdrawal at the end of Contract Year 3: = 11,362.59 - 454.66 + 93.26 = $11,001.19 A-1 EXAMPLE 2: (ASSUMES RISING INTEREST RATES) Step 1: Calculate Account Value at End of Contract Year 3: = 10,000.00 X (1.0435)/3/ = $11,362.59 Step 2: Calculate the Preferred Withdrawal Amount = 10% X (10,000.00) = $1,000.00 Step 3: Calculate the Market Value Adjustment: I = 5.55% J = 6.05% N = 730 days = 2 ----- 365 days Market Value Adjustment Factor: .9 X (I-J) X N = .9 X (.0555-.0605) X (2) = -.009 Market Value Adjustment = Factor X Amount Subject to Market Value Adjustment: = -.009 X ($11,362.59 - 1,000) = -93.26 Step 4: Calculate the Withdrawal Charge: = .05 X (10,000.00 - 1,000.00-93.26) = $445.34 Step 5: Calculate The Net Withdrawal Value at End of Contract Year 3: = 11,362.59 - 445.34 - 93.26 = $10,823.99 A-2 STATEMENT OF ADDITIONAL INFORMATION: TABLE OF CONTENTS
PAGE ---- ADDITIONS, DELETIONS OR SUBSTITUTIONS OF INVESTMENTS....................... 3 REINVESTMENT............................................................... 3 THE CONTRACT............................................................... 4 Purchase of Contracts..................................................... 4 Performance Data.......................................................... 4 Tax-free Exchanges (1035 Exchanges, Rollovers and Transfers).............. 5 Premium Taxes............................................................. 6 Tax Reserves.............................................................. 6 INCOME PAYMENTS............................................................ 6 Calculation of Variable Annuity Unit Values............................... 6 GENERAL MATTERS............................................................ 7 Incontestability.......................................................... 7 Settlements............................................................... 7 Safekeeping of the Variable Account's Assets.............................. 7 FEDERAL TAX MATTERS........................................................ 7 Introduction.............................................................. 7 Taxation of Allstate Life Insurance Company of New York................... 8 Exceptions to the Non-Natural Owner Rule.................................. 8 IRS Required Distribution at Death Rules.................................. 8 Qualified Plans........................................................... 9 Types of Qualified Plans.................................................. 9 VARIABLE ACCOUNT FINANCIAL STATEMENTS...................................... 11
B-1 ORDER FORM Please send me a copy of the most recent Statement of Additional Information for the Allstate Life of New York Separate Account A. - ---------------------- ------------------------------------------------------ (Date) (Name) ------------------------------------------------------ (Street Address) ------------------------------------------------------ (City) (State) (Zip Code) Send to: Allstate Life Insurance Company of New York Post Office Box 9075 Farmingville, New York 11738-9075 Attention: VA Customer Service Unit B-2 STATEMENT OF ADDITIONAL INFORMATION ALLSTATE LIFE OF NEW YORK SEPARATE ACCOUNT A OFFERED BY ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK POST OFFICE BOX 9075 FARMINGVILLE, NEW YORK 11738-9075 1-(800) 692-4682 GROUP FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACTS This Statement of Additional Information supplements the information in the prospectus for the Group Flexible Premium Deferred Variable Annuity Contract offered by Allstate life Insurance Company of New York ("Company"), an indirect wholly owned subsidiary of Allstate Insurance Company. The Contract is primarily designed to aid individuals in long-term financial planning and it can be used for retirement planning regardless of whether the plan qualifies for special federal income tax treatment. The prospectus may be obtained from Allstate Life Insurance Company of New York by writing or calling the address or telephone number listed above. THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND SHOULD BE READ ONLY IN CONJUNCTION WITH THE PROSPECTUS FOR THE CONTRACT. The prospectus, dated October , 1996, has been filed with the United States Securities and Exchange Commission. Dated October , 1996 STATEMENT OF ADDITIONAL INFORMATION: TABLE OF CONTENTS
PAGE ---- ADDITIONS, DELETIONS OR SUBSTITUTIONS OF INVESTMENTS................ 3 REINVESTMENT........................................................ 3 THE CONTRACT........................................................ 4 Purchase of Contracts............................................. 4 Performance Data.................................................. 4 Tax-free Exchanges (1035 Exchanges, Rollovers and Transfers)...... 5 Premium Taxes..................................................... 6 Tax Reserves...................................................... 6 INCOME PAYMENTS..................................................... 6 Calculation of Variable Annuity Unit Values....................... 6 GENERAL MATTERS..................................................... 7 Incontestability.................................................. 7 Settlements....................................................... 7 Safekeeping of the Variable Account's Assets...................... 7 FEDERAL TAX MATTERS................................................. 7 Introduction...................................................... 7 Taxation of Allstate Life Insurance Company of New York........... 8 Exceptions to the Non-Natural Owner Rule.......................... 8 IRS Required Distribution at Death Rules.......................... 8 Qualified Plans................................................... 9 Types of Qualified Plans.......................................... 9 VARIABLE ACCOUNT FINANCIAL STATEMENTS...............................11
2 ADDITIONS, DELETIONS OR SUBSTITUTIONS OF INVESTMENTS The Company retains the right, subject to any applicable law, to make additions to, deletions from or substitutions for the Fund shares held by any Sub-account of the Variable Account. The Company reserves the right to eliminate the shares of any of the Funds and to substitute shares of another Fund of the Fund Series, or of another open-end, registered investment company, if the shares of the Fund are no longer available for investment, or if, in the Company's judgment, investment in any Fund would become inappropriate in view of the purposes of the Variable Account. Substitutions of shares attributable to an Owner's interest in a Sub-account will not be made until the Owner has been notified of the change, and until the Securities and Exchange Commission has approved the change, to the extent such notification and approval is required by the Investment Company Act of 1940. 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 Owners. The Company may also establish additional Sub-accounts or series of Sub- accounts of the Variable Account. Each additional Sub-account would purchase shares in a new Fund of the Fund Series or in another mutual fund. New Sub- accounts may be established when, in the sole discretion of the Company, marketing needs or investment conditions warrant. Any new Sub-accounts offered in conjunction with the Contract will be made available to existing Owners on a basis to be determined by the Company. The Company may also eliminate one or more Sub-accounts if, in its sole discretion, marketing, tax or investment conditions so warrant. In the event of any such substitution or change, the Company may, by appropriate endorsement, make such changes in the Contract as may be necessary or appropriate to reflect such substitution or change. If deemed to be in the best interests of persons having voting rights under the policies, the Variable Account may be operated as a management company under the Investment Company Act of 1940 or it may be deregistered under such Act in the event such registration is no longer required. REINVESTMENT All dividends and capital gains distributions from the Funds are automatically reinvested in shares of the distributing Fund at their net asset value. THE CONTRACT PURCHASE OF THE CONTRACTS The Contracts are offered to the public through brokers as well as banks licensed under the federal securities laws and state insurance laws. The Contracts are distributed through the principal underwriter for the Variable Account, Allstate Life Financial Services, Inc., an affiliate of Allstate Life Insurance Company of New York. The offering of the Contracts is continuous and the Company does not anticipate discontinuing 3 the offering of the Contracts. However, the Company reserves the right to discontinue the offering of the Contracts. PERFORMANCE DATA From time to time the Variable Account may publish advertisements containing performance data relating to its Sub-accounts. The performance data for the Sub-accounts (other than for the AIM V.I. Money Market Sub-account) will always be accompanied by total return quotations. Performance figures used by the Variable Account are based on actual historical performance of its Sub- accounts for specified periods, and the figures are not intended to indicate future performance. The Variable Account may also disclose yield, standard total return, and non-standard total return for periods prior to the date that the Variable Account commenced operations. For periods prior to the date the Variable Account commenced operations, performance information for the Sub- accounts will be calculated based on the performance of the underlying Funds and the assumption that the Sub-accounts were in existence for the same periods as those of the underlying Funds, with a level of charges equal to those currently assessed against the Sub-accounts. A Sub-account's "average annual total return" represents an annualization of the Sub-account's total return over a particular period and is computed by finding the annual percentage rate which, 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 Sub-account's operations, if shorter than any of the foregoing. The average annual total return is obtained by dividing the ending redeemable value, after deductions for any withdrawal charges or contract maintenance charges imposed on the Contracts by the Variable Account, by the initial hypothetical $1,000 purchase payment, taking the "n"th root of the quotient (where "n" is the number of years in the period) and subtracting 1 from the result. The withdrawal charges assessed upon redemption are computed as follows: the preferred withdrawal amount is not assessed a withdrawal charge. Withdrawal charges are charged on the amount of redemption equal to the purchase payment, reduced by the amount of the preferred withdrawal amount, if any. The remaining amount of the redemption, if any, is not assessed a withdrawal charge. The withdrawal charge schedule specifies rates based on the number of complete years since each purchase payment was made. The contract maintenance charge ($35 per contract) used in the total return calculation is normally prorated using the following method: The total amount of annual Contract fees collected during the year is divided by the total average net assets of all the Sub-accounts. The resulting percentage is then multiplied by the ending Contract Value. In addition, the Variable Account 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 by the Variable Account 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). 4 From time to time, sales literature or advertisements may also quote average annual total returns for periods prior to the date the Variable Account commenced operations. Such performance information for the Sub-account will be calculated based on the performance of the Portfolios and the assumption that the Sub-accounts were in existence for the same periods as those indicated for the Portfolios, with the level of Contract charges currently in effect. Such average annual return information for the Sub-account (including deduction of the Surrender Charge) is as follows:
For the Period Subaccount and Date of For the 1-Year For the 5-Year from Inception Inception of Period Ended Period Ended of the Portfolio Corresponding Portfolio 6/30/96 6/30/96 to 6/30/96 - ----------------------- -------------- -------------- ---------------- AIM V.I. Capital Appreciation Fund*......... 15.88% N/A 19.13% AIM V.I. Diversified Income Fund*........... 2.25% N/A 3.89% AIM V.I. Global Utilities Fund**............ 10.42% N/A 8.21% AIM V.I. Government Securities Fund*........ -3.52% N/A 1.26% AIM V.I. Growth Fund*....................... 11.97% N/A 12.83% AIM V.I. Growth and Income Fund**........... 14.62% N/A 15.72% AIM V.I. International Equity Fund*......... 15.07% N/A 12.27% AIM V.I. Value Fund*........................ 8.98% N/A 16.13% AIM V.I. Money Market Fund*................. N/A N/A N/A
- --------------------- * Portfolio inception date of May 5, 1993 **Portfolio inception date of May 2, 1994 OTHER TOTAL RETURNS From time to time, sales literature or advertisements may also quote average annual total returns that do not reflect the Surrender Charge. These are calculated in exactly the same way as the average annual total returns desribed above, except that the ending redeemable value of the hypothetical account for the period is replaced with an ending value for the period that does not take into account any charges on amounts surrendered. Sales literature or advertisments may also quote such average annual total returns for periods prior to the date the Variable Account commenced operations, calculated based on the performance of the Portfolios and the assumption that the Sub-accounts were in existence for the same periods as those indicated for the Portfolios, with the level of Contract charges currently in effect except for the Surrender Charge. Such average annual total return information for the Sub-accounts (not including the deduction of the Surrender Charge) is as follows:
Subaccount and Date of For the 1-Year For the 5-Year from Inception Inception of Period Ended Period Ended of the Portfolio Corresponding Portfolio 6/30/96 6/30/96 to 6/30/96 ----------------------- -------------- -------------- ---------------- AIM V.I. Capital Appreciation Fund*........ 21.40% N/A 20.01% AIM V.I. Diversified Income Fund*.......... 7.76% N/A 5.08%
5
AIM V.I. Global Utilities Fund**............ 15.93% N/A 10.25% AIM V.I. Government Securities Fund*........ 2.00% N/A 2.51% AIM V.I. Growth Fund*....................... 17.48% N/A 13.83% AIM V.I. Growth and Income Fund**........... 20.14% N/A 17.60% AIM V.I. International Equity Fund*......... 20.59% N/A 13.27% AIM V.I. Value Fund*........................ 14.49% N/A 17.06% AIM V.I. Money Market Fund*................. N/A N/A N/A
- --------------------- * Portfolio inception date of May 5, 1993 **Portfolio inception date of May 2, 1994 The Variable Account may also advertise the performance of the Sub-accounts relative to certain performance rankings and indexes compiled by independent organizations, such as: (a) Lipper Analytical Services, Inc.; (b) the Standard & Poor's 500 Composite Stock Price Index ("S & P 500"); (c) A.M. Best Company; (d) Bank Rate Monitor; and (e) Morningstar. TAX-FREE EXCHANGES (1035 EXCHANGES, ROLLOVERS AND TRANSFERS) The Company accepts purchase payments which are the proceeds of a Contract in a transaction qualifying for a tax-free exchange under Section 1035 of the Internal Revenue Code. Except as required by federal law in calculating the basis of the Contract, the Company does not differentiate between Section 1035 purchase payments and non-Section 1035 purchase payments. The Company also accepts "rollovers" and transfers from Contracts qualifying as tax-sheltered annuities ("TSAs"), individual retirement annuities or accounts ("IRAs"), or any other Qualified Contract which is eligible to "rollover" into an IRA. The Company differentiates among Non-Qualified Contracts, TSAs, IRAs and other Qualified Contracts to the extent necessary to comply with federal tax laws. For example, the Company restricts the assignment, transfer or pledge of TSAs and IRAs so the Contracts will continue to qualify for special tax treatment. An 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. TAX RESERVES Company does not establish capital gains tax reserves for the Sub-account nor deduct charges for tax reserves because the Company believes that capital gains attributable to the Variable Account will not be taxable. However, the Company reserves the right to deduct charges to establish tax reserves for potential taxes on realized or unrealized capital gains. INCOME PAYMENTS CALCULATION OF VARIABLE ANNUITY UNIT VALUES 6 The amount of the first income payment is calculated by applying the Contract Value allocated to each Variable Sub-account less any applicable premium tax charge deducted at this time, to the income payment tables in the Contract. The first variable annuity income payment is divided by the Sub- account's then current annuity unit value to determine the number of annuity units upon which later income payments will be based. Variable annuity income payments after the first will be equal to the sum of the number of annuity units determined in this manner for each Sub-account times the then current annuity unit value for each respective Sub-account. Annuity units in each variable Sub-account are valued separately and annuity unit values will depend upon the investment experience of the particular portfolios in which the Sub-account invests. The value of the annuity unit for each variable Sub-account at the end of any Valuation Period is calculated by: (a) multiplying the annuity unit Value at the end of the immediately preceding Valuation Period by the Sub-accounts's net investment factor during the period; and then (b) dividing the product by the sum of 1.0 plus the assumed investment rate for the 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 annuity income payment, and is at an effective annual rate which is disclosed in the Contract. The amount of the first income payment paid under an income plan is determined using the interest rate and mortality table disclosed in the Contract. Due to judicial or legislative developments regarding the use of tables which do not differentiate on the basis of sex, different annuity tables may be used. GENERAL MATTERS INCONTESTABILITY The Contract will not be contested after it is issued. SETTLEMENTS Due proof of the Owner(s) death (or Annuitant's death if there is a non- natural Owner) must be received prior to settlement of a death claim. SAFEKEEPING OF THE VARIABLE ACCOUNT'S ASSETS The Company holds title to the assets of the Variable Account. The assets are kept physically segregated and held separate and apart from the Company's general corporate assets. Records are maintained of all purchases and redemptions of the Fund shares held by each of the variable Sub-accounts. The Fund does not issue certificates and, therefore, the Company holds the Account's assets in open account in lieu of stock certificates. See the Fund's prospectus for a more complete description of the custodian of the Fund. FEDERAL TAX MATTERS 7 INTRODUCTION THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE. THE COMPANY MAKES NO GUARANTEE REGARDING THE TAX TREATMENT OF ANY CONTRACT OR TRANSACTION INVOLVING A CONTRACT. Federal, state, local and other tax consequences of ownership or receipt of distributions under an annuity contract depend on the individual circumstances of each person. If you are concerned about any tax consequences with regard to your individual circumstances, you should consult a competent tax adviser. TAXATION OF ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK The Company 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 the Company, and its operations form a part of the Company, it will not be taxed separately as a "Regulated Investment Company" under Subchapter M of the Code. Investment income and realized capital gains are automatically applied to increase reserves under the contract. Under existing federal income tax law, the Company believes that the Variable Account investment income and realized net capital gains will not be taxed to the extent that such income and gains are applied to increase the reserves under the contract. Accordingly, the Company does not anticipate that it will incur any federal income tax liability attributable to the Variable Account, and therefore the Company does not intend to make provisions for any such taxes. However, if changes in the federal tax laws or interpretations thereof result in the Company being taxed on income or gains attributable to the Variable Account, then the Company may impose a charge against the Variable Account (with respect to some or all contracts) in order to set aside provisions to pay such taxes. EXCEPTIONS TO THE NON-NATURAL OWNER RULE There are several exceptions to the general rule that 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 8 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; and (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. QUALIFIED PLANS This annuity contract may be used with several types of qualified plans. The tax rules applicable to participants in such qualified plans vary according to the type of plan and the terms and conditions of the plan itself. Adverse tax consequences may result from excess contributions, premature distributions, distributions that do not conform to specified commencement and minimum distribution rules, excess distributions and in other circumstances. Owners and participants under the plan and annuitants and beneficiaries under the contract may be subject to the terms and conditions of the plan regardless of the terms of the contract. TYPES OF QUALIFIED PLANS INDIVIDUAL RETIREMENT ANNUITIES Section 408 of the Code permits eligible individuals to contribute to an individual retirement program known as an Individual Retirement Annuity. Individual Retirement Annuities are subject to limitations on the amount that can be contributed and on the time when distributions may commence. Certain distributions from other types of qualified plans may be "rolled over" on a tax- deferred basis into an Individual Retirement Annuity. IRAs generally may not provide life insurance, but they 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. 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 IRAs generally may not provide life insurance, but they 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 9 violating the prohibition on investment in life insurance contracts with the result that the contract would not be viewed as satisfying the requirements of the IRS. TAX SHELTERED ANNUITIES Section 403(b) of the Code permits public school employees and employees of certain types of tax-exempt organizations (specified in Section 501(c)(3) of the Code) to have their employers purchase annuity contracts for them, and subject to certain limitations, to exclude the purchase payments from the employees' gross income. An annuity contract used for a Section 403(b) plan must provide that distributions attributable to salary reduction contributions made after 12/31/88, and all earnings on salary reduction contributions, may be made only after the employee attains age 59 1/2, separates from service, dies, becomes disabled or on the account of hardship (earnings on salary reduction contributions may not be distributed for hardship). These limitations do not apply to withdrawals where the Company is directed to transfer some or all of the contract value to another Section 403(b) plan. Purchasers of the contracts for such purposes should seek competent advice as to eligibility, limitations on permissible amounts of purchase payments and other tax consequences associated with the contracts. In particular, purchasers should consider that 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 such death benefit could be characterized as an incidental death benefit. If the death benefit were so characterized, this could result in currently taxable income to purchasers. In addition, there are limitations on the amount of incidental death benefits that may be provided under a tax-sheltered annuity. Even if the death benefit under the contract were characterized as an incidental death benefit, it is unlikely to violate those limits unless the purchaser also purchases a life insurance contract as part of his or her tax-sheltered annuity 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. 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 such death benefit could be characterized as an incidental death benefit. There are limitations on the amount of incidental benefits that may be provided under pension and profit currently taxable income to participants. Employers intending to use the contract in connection with such plans should seek competent advice. 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. Under these plans, contributions made for the benefit of the employees will not be includible in the employees' gross income until distribution from the plan. However, under a Section 457 plan all the compensation deferred under the plan must remain solely the 10 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. VARIABLE ACCOUNT FINANCIAL STATEMENTS The financial statements of Allstate Life of New York Separate Account A are not included herein because, as of the date hereof, the Variable Account had not yet commenced operations, had no assets or liabilities and received no income. The financial statements of the Variable Account will be audited on an annual basis once the Variable Account commences operations. 11 PART C OTHER INFORMATION 24A. FINANCIAL STATEMENTS PART A: Allstate Life Insurance Company of New York Financial Statements and Financial Statement Schedules will be filed by pre-effective amendment. The financial statements of Allstate Life Insurance Company of New York Separate Account A are not included herein because, as of the date hereof, the Variable Account had not yet commenced operations, had no assets or liabilities and received no income. The financial statements of the Variable Account will be audited on an annual basis once the Variable Account commences operations. 24B. EXHIBITS The following exhibits: The following exhibits correspond to those required by paragraph (b) of item 24 as to exhibits in Form N-4: (1) Form of Resolution of the Board of Directors of Allstate Life Insurance Company of New York authorizing establishment of the Allstate Life Insurance Company of New York Separate Account A* (2) Not applicable (3) Form of Underwriting Agreement (4) Contract (5) Application for a Contract (6) (a) Certificate of Incorporation of Allstate Life Insurance Company of New York (b) By-laws of Allstate Life Insurance Company of New York (7) Not Applicable (8) Form of Participation Agreement (9) Opinion and Consent of Michael J. Velotta, Vice President, Secretary and General Counsel of Allstate Life Insurance Company of New York. (10) (a) Consent of Accountants (b) Consent of Attorneys (11) Not applicable (12) Not applicable (13) Schedule of Computation of Performance Quotation (99) Powers of Attorney. - -------------- * Previously filed and incorporated by reference in Registrant's N-4 registration statement dated December 26, 1995 (33-65381). DIRECTORS AND OFFICERS OF THE DEPOSITOR Name and Principal Position and Office With Depositor Business Address of the Trust - ---------------- ------------ *Louis G. Lower, II Chairman of the Board & President *Michael J. Velotta Vice President, Secretary, General Counsel & Director **Sharmiane M. Miller Administrative Officer & Director *Karen C. Gardner Vice President *Peter H. Heckman Vice President *Thomas A. McAvity, Jr. Vice President *Timothy H. Plohg Vice President & Director *Kevin R. Slawin Vice President & Director **Marcia D. Alazraki Director **Joseph F. Carlino Director **Cleveland Johnson, Jr. Director **Phillip E. Lawson Director **Gerard F. McDermott Director **Joseph P. McFadden Director **John R. Raben, Jr. Director **Sally A. Slacke Director *James P. Zils Treasurer *Casey J. Sylla Chief Investment Officer *Richard L. Baker Assistant Vice President *Dorothy E. Even Assistant Vice President *Marla G. Friedman Assistant Vice President *Judith P. Greffin Assistant Vice President *John R. Hunter Assistant Vice President *Brenda D. Sneed Assistant Vice President *Mark A. Bishop Assistant Treasurer *Barbara S. Brown Assistant Treasurer *David M. Crew Assistant Treasurer *Anthony D. Frook Assistant Treasurer *Stephanie L. Holowach Assistant Treasurer *Peter S. Horos Assistant Treasurer *Thomas C. Jensen Assistant Treasurer *Robert T. Jostes Assistant Treasurer *Emma M. Klaidjian Assistant Secretary *Paul N. Kierig Assistant Secretary & Assistant General Counsel *Kenneth S. Klimala Assistant Treasurer *Steven M. Laude Assistant Treasurer *Mary J. McGinn Assistant Secretary *Barry S. Paul Assistant Vice President and Controller *Robert N. Roeters Assistant Vice President *Theodore A. Schnell Assistant Vice President and Director *Mark D. Senkpiel Assistant Treasurer *Steven E. Shebik Assistant Treasurer *C. Nelson Strom Assistant Vice President & Corporate Actuary *William F. Wein Assistant Treasurer *Patricia A. Wilson Assistant Vice President *The principal business address of the foregoing officers and directors is Allstate Plaza, Northbrook, IL 60062 **The principal business address of the foregoing officers and directors is One Allstate Drive, Farmingville, New York 11738 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH DEPOSITOR OR REGISTRANT See 10-K Commission File #1-11840, The Allstate Corporation. 27. NUMBER OF CONTRACT OWNERS Not Applicable 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 such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. 29a. RELATIONSHIP OF PRINCIPAL UNDERWRITER TO OTHER INVESTMENT COMPANIES - Glenbrook Life and Annuity Company Separate Account A - Glenbrook Life and Annuity Company Variable Annuity Account - Glenbrook Life Multi-Manager Variable Account 29b. PRINCIPAL UNDERWRITER Name and Principal Business Allstate Life Financial Address Of Each Such Person Services, Inc. ("ALFS") --------------------------------------------------------------------------- Louis G. Lower, II Director Kevin R. Slawin Director Michael J. Velotta Director & Secretary Robert J. Kelly President & Chief Executive Officer Diane Bellas Vice President & Controller Andrea J. Schur Vice President Brent H. Hamann Vice President James P. Zils Treasurer John R. Hedrick General Counsel & Assistant Secretary Lisa A. Burnell Assistant Vice President & Compliance Officer Robert N. Roeters Assistant Vice President Emma M. Kalaidjian Assistant Secretary Paul N. Kierig Assistant Secretary Steven E. Shebik Assistant Treasurer The principal address of ALFS is 3100 Sanders Road, Northbrook, Illinois 29c. 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, Farmington, New York, 11783. 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 promises to file a post-effective amendment to this 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 application to purchase a contract offered by the prospectus, a space that an applicant can check to request a statement of Additional Information or a post card or similar written communication affixed to or included in the Prospectus 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 The Company 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 ("ACLI") and that the provisions of paragraphs 1-4 of the no-action letter have been complied with. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, and the Investment Company Act of 1940, the registrant, Allstate Life Insurance Company of New York Separate Account A, has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, and its seal to be hereunto affixed and attested, all in the Township of Northfield, State of Illinois, on the 20th day of September, 1996. ALLSTATE LIFE OF NEW YORK SEPARATE ACCOUNT A (Registrant) ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK (Depositor) (SEAL) ATTEST /s/BRENDA D. SNEED BY: /s/MICHAEL J. VELOTTA ------------------------ ----------------------------- Brenda D. Sneed Michael J. Velotta Assistant Vice President Vice President, Secretary and General Counsel Pursuant to the Requirements of the Securities Act of 1933 and the Investment Company Act of 1940, This Registration Statement has been signed below by the following Directors and Officers of Allstate Life Insurance Company of New York on this 20th day of September, 1996. */LOUIS G. LOWER, II Chairman of the Board and President - --------------------- (Principal Executive Officer) Louis G. Lower, II /s/MICHAEL J. VELOTTA Director, Vice President, Secretary and - --------------------- General Counsel Michael J. Velotta */SHARMAINE M. MILLER Director and Chief Administrative Officer - --------------------- Sharmaine M. Miller */PETER H. HECKMAN Vice President - --------------------- Peter H. Heckman */KAREN C. GARDNER Vice President - --------------------- Karen C. Gardner /THOMAS A. McAVITY, JR. Vice President - --------------------- Thomas A. McAvity, Jr. */TIMOTHY H. PLOHG Director and Vice President - --------------------- Timothy H. Plohg */KEVIN R. SLAWIN Director and Vice President - --------------------- Kevin R. Slawin */MARCIA D. ALAZRAKI Director - ------------------------ Marcia D. Alazraki */JOSEPH F. CARLINO Director - ------------------------ Joseph F. Carlino */CLEVELAND JOHNSON, JR. Director - ------------------------ Cleveland Johnson, Jr. */PHILLIP E. LAWSON Director - ------------------------ Phillip E. Lawson */GERARD F. MCDERMOTT Director - ------------------------ Gerard F. McDermott */JOSEPH P. MCFADDEN Director - ------------------------ Joseph P. McFadden */JOHN R. RABEN, JR. Director - ------------------------ John R. Raben, Jr. */SALLY A. SLACKE Director - ------------------------ Sally A. Slacke */THEODORE A. SCHNELL Director - ------------------------ Theodore A. Schnell */JAMES P. ZILS Treasurer - ------------------------ James P. Zils */CASEY J. SYLLA Chief Investment Officer - ------------------------ Casey J. Sylla */BARRY S. PAUL Assistant Vice President and Controller - ------------------------ Barry S. Paul */ By Michael J. Velotta, Pursuant to Power of Attorney EX-99.3 2 UNDERWRITING AGREEMENT 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 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 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 (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 (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 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 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 (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 Attachment A UNDERWRITING AGREEMENT ---------------------- "CONTRACTS" FORM # - ----------- ------ Flexible Premium Deferred Variable Annuity Group Certificate NYLU349 9 Attachment B UNDERWRITING AGREEMENT ---------------------- COMPENSATION - -------------------------------------------------------------------- 10 EX-99.4 3 CONTRACT Flexible Premium Deferred Variable Annuity Certificate ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK, A Stock Company Home Office: One Allstate Drive, Farmingville, New York 11783 This Certificate is issued to customers of insurance agencies or broker/dealers that sell AIM mutual funds according to the terms of Master Policy number 64900005 issued by Allstate Life Insurance Company of New York to A I M Management Group, Inc. A I M Management Group, Inc. is called the Master Policyholder. This Certificate is issued in the state of New York and is governed by New York law. Throughout this Certificate, "you" and "your" refer to the Certificate owner(s). "We", "us" and "our" refer to Allstate Life Insurance Company of New York. CERTIFICATE SUMMARY This flexible premium deferred variable annuity provides a cash withdrawal benefit and a death benefit during the Accumulation Phase and periodic income payments beginning on the Payout Start Date during the Payout Phase. The dollar amount of income payments or other values provided by this Certificate, when based on the investment experience of the Variable Account, varies to reflect the performance of the Variable Account. The smallest annual rate of net investment return on the Variable Account assets required to keep Variable Account income payments from decreasing is 3%. An annualized Certificate Maintenance Charge of $35 and 1.45% per year (assessed daily) will be deducted in equal parts from Variable Account. For amounts in the Fixed Account, the withdrawal benefit, transfers to other sub-accounts and any periodic income payments may be subject to a Market Value Adjustment which may result in an upward or downward adjustment of the amount distributed. For amounts in the Fixed Account, the death benefit may be subject to a positive Market Value Adjustment when the cash surrender value is greater than the Certificate Value. This Certificate and Master Policy do not pay dividends. The tax status of this Certificate as it applies to the owner should be reviewed each year. PLEASE READ YOUR CERTIFICATE CAREFULLY. This is a legal contract between the Certificate owner(s) and Allstate Life Insurance Company of New York. Return Privilege If you are not satisfied with this Certificate for any reason, you may return it to us or our agent within 10 days after you receive it. We will refund any purchase payments allocated to the Variable Account, adjusted to reflect investment gain or loss from the date of allocation to the date of cancellation, plus any purchase payments allocated to the Fixed Account. If this Certificate is qualified under Section 408 of the Internal Revenue Code, we will refund the greater of any purchase payments or the Certificate Value. If you have any questions about your Allstate Life Insurance Company of New York variable annuity, please contact us at (800) 692-4682. /s/ Michael J. Velotta /s/ Louis G. Lower, II Michael J. Velotta Louis G. Lower, II Secretary Chief Executive Officer Page 1
- -------------------------------------------------------------------------- TABLE OF CONTENTS - -------------------------------------------------------------------------- THE PERSONS INVOLVED.................................................. 4 ACCUMULATION PHASE.................................................... 5 PAYOUT PHASE.......................................................... 11 INCOME PAYMENT TABLES................................................. 13 GENERAL PROVISIONS.................................................... 14
Page 2 ANNUITY DATA
CERTIFICATE NUMBER:................................................... 444444444 ISSUE DATE:........................................................ JULY 1, 1995 INITIAL PURCHASE PAYMENT:............................................ $10,000.00 INITIAL ALLOCATION OF PURCHASE PAYMENT: RATE ALLOCATED GUARANTEED GUARANTEED AMOUNT (%) INTEREST RATE THROUGH --------- ------------- ---------- VARIABLE SUB-ACCOUNTS AIM V.I. CAPITAL APPRECIATION FUND 5% AIM V.I. DIVERSIFIED INCOME FUND 5% AIM V.I. GLOBAL UTILITIES FUND 5% AIM V.I. GOVERNMENT SECURITIES FUND 5% AIM V.I. GROWTH FUND 5% AIM V.I. GROWTH AND INCOME FUND 5% AIM V.I. INTERNATIONAL EQUITY FUND 5% AIM V.I. MONEY MARKET FUND 5% AIM V.I. VALUE FUND 10% FIXED ACCOUNT 1 YEAR GUARANTEE PERIOD 10% 5.00% 06/30/1995 3 YEAR GUARANTEE PERIOD 10% 6.40% 06/30/1997 5 YEAR GUARANTEE PERIOD 10% 7.00% 06/30/1999 7 YEAR GUARANTEE PERIOD 10% 7.20% 06/30/2001 10 YEAR GUARANTEE PERIOD 10% 7.35% 06/30/2004
MINIMUM GUARANTEED RATE FOR FIXED ACCOUNT:................................ 3.00% PAYOUT START DATE:................................................. JULY 1, 2050 OWNER:................................................................. JOHN DOE ....................................................................... JANE DOE ANNUITANT:............................................................. JOHN DOE AGE AT ISSUE:................................................................ 35 SEX:...................................................................... MALE RELATIONSHIP BENEFICIARY TO OWNER PERCENTAGE - ----------- ------------ ---------- JANE DOE WIFE 100% NYDP349 - -------------------------------------------------------------------------------- THE PERSONS INVOLVED - -------------------------------------------------------------------------------- OWNER. The person named at the time of application is the owner of this Certificate unless subsequently changed. As owner, you will receive any periodic income payments, unless you have directed us to pay them to someone else. You may exercise all rights stated in this Certificate, subject to the rights of any irrevocable beneficiary. You may change the owner or beneficiary at any time. If the owner is a natural person, you may change the annuitant prior to the Payout Start Date. Once we have received a satisfactory written request for an owner, beneficiary or annuitant change, the change will take effect as of the date you signed it. We are not liable for any payment we make or other action we take before receiving any written request for a change from you. You may not assign an interest in this Certificate as collateral or security for a loan. However, you may assign periodic income payments under this Certificate prior to the Payout Start Date. We are bound by an assignment only if it is signed by the assignor and filed with us. We are not responsible for the validity of an assignment. If the sole surviving owner dies prior to the Payout Start Date, the beneficiary becomes the new owner. If the sole surviving owner dies after the Payout Start Date, the beneficiary becomes the new owner and will receive any subsequent guaranteed income payments. If more than one person is designated as owner: owner as used in this certificate refers to all people named as owners, unless otherwise indicated; any request to exercise ownership rights must be signed by all owners; and on the death of any person who is an owner, the surviving person(s) named as owner will continue as owner. ANNUITANT. The annuitant is the person named on the Annuity Data Page, but may be changed by the owner, as described above. The annuitant must be a natural person. If the annuitant dies prior to the Payout Start Date, the new annuitant will be: the youngest owner; otherwise, the youngest beneficiary. BENEFICIARY. The beneficiary is the person(s) named on the Annuity Data Page, but may be changed by the owner, as described above. We will determine the beneficiary from the most recent written request we have received from you. If you do not name a beneficiary or if the beneficiary named is no longer living, the beneficiary will be: your spouse if living; otherwise your children equally if living; otherwise your estate. The beneficiary may become the owner under the circumstances described above. The beneficiary may assign benefits under the Certificate, as described above, once they are payable to the beneficiary. We are bound by an assignment only if it is signed by the assignor and filed with us. We are not responsible for the validity of an assignment. 4 - -------------------------------------------------------------------------------- ACCUMULATION PHASE - -------------------------------------------------------------------------------- ACCUMULATION PHASE DEFINED. The "Accumulation Phase" is the first of two phases during your Certificate. The Accumulation Phase begins on the issue date stated on the Annuity Data Page. This phase will continue until the Payout Start Date unless the Certificate is terminated before that date. CERTIFICATE YEAR. The one year period beginning on the issue date and on each anniversary of the issue date. PURCHASE PAYMENTS. You may make subsequent purchase payments during the Accumulation Phase. The number of purchase payments is unlimited. The minimum subsequent purchase payment amount is $500. We reserve the right to reduce the minimum purchase payment. We may limit the maximum amount of purchase payments we will accept. We will invest the purchase payments in the Investment Alternatives you select. You may allocate any portion of your purchase payment in whole percents from 0% to 100% or in exact dollar amounts to any of the Investment Alternatives. The total allocation must equal 100%. For each purchase payment, the minimum amount that may be allocated to the Fixed Account is $500. The allocation of the initial purchase payment is shown on the Annuity Data Page. Allocation of each subsequent purchase payment will be the same as for the most recent purchase payment unless you change the allocation. You may change the allocation of subsequent purchase payments at any time, without charge, simply by giving us written notice. Any change will be effective at the time we receive the notice. INVESTMENT ALTERNATIVES. Investment Alternatives are the Sub-accounts of the Variable Account and the Sub-accounts of the Fixed Account shown on the Annuity Data Page. VARIABLE ACCOUNT. The "Variable Account" for this Certificate is the Allstate Life of New York Separate Account A. This account is a separate investment account to which we allocate assets contributed under this and certain other certificates. These assets will not be charged with liabilities arising from any other business we may have. VARIABLE SUB-ACCOUNTS. The Variable Account is divided into Sub-accounts. Each Sub-account invests solely in the shares of the mutual fund underlying that Sub- account. FIXED ACCOUNT. The Fixed Account is divided into Sub-accounts. A Sub-account is identified by the Guarantee Period and the date the Guarantee Period begins. You create a Sub-account when: you make a purchase payment; or you select a new Guarantee Period after the prior Sub-account expires; or you transfer an amount from an existing Sub-account of the Variable Account or the Fixed Account. A Sub-account continues until the end of the Guarantee Period. You must select the Guarantee Period for all purchase payments and transfers allocated to the Fixed Account. If you do not select a Guarantee Period for a purchase payment or transfer, we will assign the shortest Guarantee Period available under the Certificate for such payment or transfer. Guarantee Periods are offered at our discretion and may range from one to ten years. We may change the Guarantee Periods available for future purchase payments or transfers allocated to the Fixed Account. Page 5 We will mail you a notice prior to the expiration of each Sub-account outlining the options available at the end of a Guarantee Period. During the 30 day period after a Guarantee Period expires you may: take no action and we will automatically renew the Sub-account value to a Guarantee Period of the shortest duration available to be established on the day the previous Guarantee Period expired; or notify us to apply the Sub-account value to a new Guarantee Period(s) to be established on the day the previous Guarantee Period expired; or notify us to apply the Sub-account value to any Sub-account of the Variable Account on the day we receive the notification; or receive a portion of the Sub-account value or the entire Sub-account value through a partial or full withdrawal that is not subject to a Market Value Adjustment. In this case, the amount withdrawn will be deemed to have been withdrawn on the day the Guarantee Period expired. The minimum amount that can be allocated to a new Sub-account is $500. CREDITING INTEREST. We credit interest daily to money allocated to the Fixed Account at a rate which compounds over one year to the interest rate we guaranteed when the money was allocated. We will credit interest to the initial purchase payment from the issue date. We will credit interest to subsequent purchase payments from the date we receive them. We will credit interest to transfers from the date the transfer is made. The interest rates will never be less than the minimum guaranteed rate shown on the Annuity Data Page. TRANSFERS. Prior to the Payout Start Date, you may transfer amounts between Investment Alternatives. You may make 12 transfers per Certificate Year without charge. Each transfer after the 12th transfer in any Certificate Year may be assessed a $10 transfer fee. Transfers are subject to the following restrictions. The minimum amount that may be transferred into a Sub-account of the Fixed Account is $500. Any transfer from a Sub-account of the Fixed Account at a time other than during the 30 day period after a Guarantee Period expires will be subject to a Market Value Adjustment. If any transfer reduces the value of a Sub-account of the Fixed Account to less than $500, we will treat the request as a transfer of the entire Sub- account value. We reserve the right to waive the transfer fees and restrictions contained in this Certificate. CERTIFICATE VALUE. Your "Certificate Value" is equal to the sum of: the number of Accumulation Units you hold in each Sub-account of the Variable Account multiplied by the Accumulation Unit Value for that Sub- account on the most recent Valuation Date; plus the sum of Sub-account values in the Fixed Account. ACCUMULATION UNITS AND ACCUMULATION UNIT VALUE. Amounts which you allocate to a Sub-account of the Variable Account are used to purchase Accumulation Units in that Sub-account. The Accumulation Unit Value for each Sub-account at the end of any Valuation Period is calculated by multiplying the Accumulation Unit Value at the end of the immediately preceding Valuation Period by the Sub-account's Net Investment Factor for the Valuation Period. The Accumulation Unit Values may go up or down. Additions or transfers to a Sub-account of the Variable Account will increase the number of Accumulation Units for that Sub-account. Withdrawals or transfers from a Sub-account of the Variable Account will decrease the number of Accumulation Units for that Sub-account. Page 6 VALUATION PERIOD AND VALUATION DATE. A "Valuation Period" is the time interval between the closing of the New York Stock Exchange on consecutive Valuation Dates. A "Valuation Date" is any date the New York Stock Exchange is open for trading. NET INVESTMENT FACTOR. For each Sub-account of the Variable Account, the "Net Investment Factor" for a Valuation Period is (A) divided by (B), minus (C) where: (A) is the sum of: (1) the net asset value per share of the mutual fund underlying the 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 mutual fund underlying the Sub-account during the current Valuation Period. (B) is the net asset value per share of the mutual fund underlying the Sub- account determined as of the end of the immediately preceding Valuation Period. (C) is the sum of the annualized Administrative Expense Charge and the annualized Mortality and Expense Risk Charge divided by 365 and then multiplied by the number of calendar days in the current Valuation Period. CHARGES. The charges for this Certificate include Administrative Expense Charges, Mortality and Expense Risk Charges, Certificate Maintenance Charges, transfer charges, and taxes. If withdrawals are made, the Certificate may also be subject to Withdrawal Charges and Market Value Adjustments. ADMINISTRATIVE EXPENSE CHARGE. The annualized Administrative Expense Charge will never be greater than 0.10%. (See Net Investment Factor for a description of how this charge is applied.) MORTALITY AND EXPENSE RISK CHARGE. The annualized Mortality and Expense Risk Charge will never be greater than 1.35%. (See Net Investment Factor for a description of how this charge is applied.) Our actual mortality and expense experience will not adversely affect the dollar amount of variable benefits or other contractual payments or values under this Certificate. CERTIFICATE MAINTENANCE CHARGE. Prior to the Payout Start Date, a Certificate Maintenance Charge will be deducted from your Certificate Value on each certificate anniversary. The charge will be deducted on a pro-rata basis from each Sub-account of the Variable Account in the proportion that your value in each bears to your total value in all Sub-accounts of the Variable Account. A full Certificate Maintenance Charge will be deducted if the Certificate is terminated on any date other than a certificate anniversary. After the Payout Start Date the Certificate Maintenance Charge will be deducted in equal parts from each income payment. The annualized charge will never be greater than $35 per certificate year. The Certificate Maintenance Charge will be waived if total purchase payments are $50,000 or more or if all money is allocated to the Fixed Account on the certificate anniversary. TAXES. Any premium tax or income tax withholding relating to this Certificate may be deducted from purchase payments or the Certificate Value when the tax is incurred or at a later time. WITHDRAWAL. You have the right to withdraw part or all of your Certificate Value at any time during the Accumulation Phase. A withdrawal must be at least $50. If any withdrawal reduces the value of any Sub-account of the Fixed Account to less than $500, we will treat the request as a withdrawal of the entire Sub- account value. If any withdrawal reduces the Certificate Value to less than $1,000, we will treat the request as a withdrawal of the entire Certificate Value. If you withdraw the entire Certificate Value, the Certificate will terminate. You must specify the Investment Alternative(s) from which you wish to make a withdrawal. When you make a withdrawal, your Certificate Value will be reduced by the amount paid to you and any applicable Withdrawal Charge, Market Value Adjustment, and taxes. Any Withdrawal Charge will be waived on withdrawals taken to satisfy IRS minimum distribution rules. Page 7 PREFERRED WITHDRAWAL AMOUNT. Each Certificate Year the Preferred Withdrawal Amount is equal to 10% of the amount of purchase payments. Each Certificate Year you may withdraw the Preferred Withdrawal Amount without any Withdrawal Charge or Market Value Adjustment. Each Certificate Year begins on the anniversary of the date the Certificate was established. Any Preferred Withdrawal Amount which is not withdrawn in a year may not be carried over to increase the Preferred Withdrawal Amount in a subsequent year. WITHDRAWAL CHARGE. Withdrawals in excess of the Preferred Withdrawal Amount will be subject to a Withdrawal Charge as follows: Payment Year: 1 2 3 4 5 6 7 8 and Later Percentage: 7% 6% 5% 4% 3% 2% 1% 0% To determine the Withdrawal Charge, we assume that purchase payments are withdrawn first, beginning with the oldest payment. When all purchase payments have been withdrawn, additional withdrawals will not be assessed a Withdrawal Charge. For each purchase payment withdrawal, the "Payment Year" in the table is measured from the date we received the purchase payment. The Withdrawal Charge is determined by: multiplying the percentage corresponding to the Payment Year, times that part of each purchase payment withdrawal that is in excess of the Preferred Withdrawal Amount, adjusted by a Market Value Adjustment. MARKET VALUE ADJUSTMENT. Withdrawals in excess of the Preferred Withdrawal Amount, transfers, and amounts applied to an income plan from a Sub-account of the Fixed Account other than during the 30 day period after a Guarantee Period expires are subject to a Market Value Adjustment. A Market Value Adjustment is an increase or decrease in the amount reflecting changes in the level of interest rates since the Sub-account was established. As used in this provision, "Treasury Rate" means the U. S. Treasury Note Constant Maturity yield as reported in Federal Reserve Bulletin Release H.15. The Market Value Adjustment is based on the following: I = the Treasury Rate for a maturity equal to the Sub-account's Guarantee Period for the week preceding the establishment of the Sub-account; 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 Sub-account's Guarantee Period; J = the Treasury Rate for a maturity of N years for the week preceding the receipt of the withdrawal request, transfer request, death benefit request, or Income Payment request. If a Note with a maturity of N years is not available, a weighted average will be used. If N is one year or less, J will be the 1-year Treasury Rate. An adjustment factor is determined from the following formula: .9 x (I - J) x N The amount subject to a Market Value Adjustment that is deducted from a Sub- account of the Fixed Account is multiplied by the adjustment factor to determine the amount of the Market Value Adjustment. The amount deducted from the Sub- account includes the transfer amount or the amount we pay you, income tax we withhold for you, the Withdrawal Charge, any applicable premium tax charge, and the Market Value Adjustment. Any Market Value Adjustment will be waived on withdrawals taken to satisfy IRS minimum distribution rules. Page 8 DEATH OF OWNER OR ANNUITANT. A benefit may be paid to the owner determined immediately after the death if, prior to the Payout Start Date: any owner dies; or the annuitant dies and the owner is not a natural person. If the owner eligible to receive a benefit is not a natural person, the owner may elect to receive the benefit in one or more distributions. Otherwise, if the owner is a natural person, the owner may elect to receive a benefit either in one or more distributions or by periodic payments through an Income Plan. A Death Benefit will be paid: 1) if the 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. In any event, the entire value of the certificate must be distributed within five (5) years after the date of death unless an Income Plan is elected or a surviving spouse continues the certificate in accordance with the following provisions. Payments from the Income Plan must begin within one year of the date of death and must be payable throughout: the life of the owner; or a period not to exceed the life expectancy of the owner; or the life of the owner with payments guaranteed for a period not to exceed the life expectancy of the owner. If the surviving spouse of the deceased owner is the new owner, then the spouse may elect one of the options listed above or may continue the Certificate in the Accumulation Phase as if the death had not occurred. If the Certificate 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. DEATH BENEFIT. Prior to the Payout Start Date, the death benefit is equal to the greatest of: Certificate Value on the date we determine the death benefit; or the amount that would have been payable in the event of a full withdrawal of the Certificate Value on the date we determine the death benefit; or the Certificate Value on the Death Benefit Anniversary immediately preceding the date we determine the death benefit adjusted by any purchase payments, withdrawals and charges made between such Death Benefit Anniversary and the date we determine the death benefit. The first Death Benefit Anniversary is the issue date. Subsequent Death Benefit Anniversaries are those certificate anniversaries that are multiples of 7 Certificate Years, beginning with the 7th certificate anniversary. For example, the issue date, 7th, and 14th certificate anniversaries are the first three Death Benefit Anniversaries; or the greatest of the Anniversary Values as of the date we determine the death benefit. The Anniversary Value is equal to the Certificate Value on a Certificate Anniversary, increased by purchase payments made since that anniversary and reduced by the amount of any partial withdrawals since that anniversary. Anniversary values will be calculated for each Certificate anniversary prior to the earlier of: a. the date we determine the death benefit, or b. the oldest owner's or the annuitant's, if the owner is not a natural person, attained age 75 or 5 years after the date the Certificate was established, if later. Page 9 We will determine the value of the death benefit as of the end of the Valuation Period during which we receive a complete request for payment of the death benefit. A complete request includes due proof of death. The Death Benefit will never be greater than the maximum death benefit allowed by any non-forfeiture laws which govern the Certificate. SETTLEMENT VALUE. The Settlement Value is the same amount that would be paid in the event of withdrawal of the Certificate Value. We will calculate the Settlement Value at the end of the Valuation Period coinciding with the requested distribution date for payment or on the mandatory distribution date of 5 years after the date of death. Page 10 - ------------------------------------------------------------------------------- PAYOUT PHASE - ------------------------------------------------------------------------------- PAYOUT PHASE DEFINED. The "Payout Phase" is the second of the two phases during your Certificate. During this phase the Certificate Value adjusted by any Market Value Adjustment and less any applicable taxes is applied to the Income Plan you choose and is paid out as provided in that plan. The Payout Phase begins on the Payout Start Date. It continues until we make the last payment as provided by the Income Plan chosen. PAYOUT START DATE. The "Payout Start Date" is the date the Certificate Value adjusted by any Market Value Adjustment and less any applicable taxes is applied to an Income Plan. The anticipated Payout Start Date is shown on the Annuity Data Page. You may change the Payout Start Date by writing to us at least 30 days prior to this date. The Payout Start Date must be on or before the annuitant's 90th birthday. INCOME PLANS. An "Income Plan" is a series of payments on a scheduled basis to you or to another person designated by you. The Certificate Value on the Payout Start Date adjusted by any Market Value Adjustment and less any applicable taxes, will be applied to your Income Plan choice from the following list: 1. LIFE INCOME WITH GUARANTEED PAYMENTS. We will make payments for as long as the annuitant lives. If the annuitant dies before the selected number of guaranteed payments have been made, we will continue to pay the remainder of the guaranteed payments. 2. JOINT AND SURVIVOR LIFE INCOME WITH GUARANTEED PAYMENTS. We will make payments for as long as either the annuitant or joint annuitant, named at the time of Income Plan selection, lives. If both the annuitant and the joint annuitant die before the selected number of guaranteed payments have been made, we will continue to pay the remainder of the guaranteed payments. 3. GUARANTEED NUMBER OF PAYMENTS. We will make payments for a specified number of months beginning on the Payout Start Date. These payments do not depend on the annuitant's life. The number of months guaranteed may be from 60 to 360. We reserve the right to make available other Income Plans. INCOME PAYMENTS. Income payment amounts may vary based on any Sub-account of the Variable Account and/or may be fixed for the duration of the Income Plan. The method of calculating the initial payment is different for the two accounts. The Certificate Maintenance Charge will be deducted in equal payments from each income payment. The Certificate Maintenance Charge will be waived if total Purchase Payments are $50,000 or more. VARIABLE AMOUNT INCOME PAYMENTS. The initial income payment based upon the Variable Account is calculated by applying the portion of the Certificate Value in the Variable Account on the Payout Start Date, less any applicable premium tax, to the appropriate value from the Income Payment Table selected. Subsequent income payments will vary depending upon the changes in the Annuity Unit Values for the Sub-accounts upon which the income payments are based. The portion of the initial income payment based upon a particular Variable Sub- account is determined by applying the amount of the Certificate Value in that Sub-account on the Payout Start Date, less any applicable premium tax, to the appropriate value from the Income Payment Table. This portion of the initial income payment is divided by the Annuity Unit Value on the Payout Start Date for that Variable Sub-account to determine the number of Annuity Units from that Sub-account which will be used to determine subsequent income payments. Unless Annuity Transfers are made between Sub-accounts, each subsequent income payment from that Sub-account will be that number of Annuity Units times the Annuity Unit Value for the Sub-account for the Valuation Date on which the income payment is made. ANNUITY UNIT VALUE. The Annuity Unit Value for each Sub-account of the Variable Account at the end of any Valuation Period is calculated by: multiplying the Annuity Unit Value at the end of the immediately preceding Valuation Period by the Sub-account's Net Investment Factor during the period; and then Page 11 dividing the result by 1.000 plus the assumed investment rate for the period. The assumed investment rate is an effective annual rate of 3%. FIXED AMOUNT INCOME PAYMENTS. The income payment amount derived from any monies allocated to Sub-accounts of the Fixed Account during the Accumulation Phase are fixed for the duration of the Income Plan. The Fixed Amount Income Payment is calculated by applying the portion of the Certificate Value in the Fixed Account on the Payout Start Date, adjusted by any Market Value Adjustment and less any applicable premium tax, to the greater of the appropriate value from the Income Payment Table selected or such other value as we are offering at that time. ANNUITY TRANSFERS. After the Payout Start Date, no transfers may be made from the Fixed Amount Income Payment. Transfers between Sub-accounts of the Variable Account, or from the Variable Amount Income Payment to the Fixed Amount Income Payment may not be made for six months after the Payout Start Date. Annuity Transfers may be made once every six months thereafter. PAYOUT TERMS AND CONDITIONS. The income payments are subject to the following terms and conditions: If the Certificate Value is less than $2,000, or not enough to provide an initial payment of at least $20, we reserve the right to: change the payment frequency to make the payment at least $20; or terminate the Certificate and pay you the Certificate Value adjusted by any Market Value Adjustment and less any applicable taxes in a lump sum. If we do not receive a written choice of an Income Plan from you at least 30 days before the Payout Start Date, the Income Plan will be life income with guaranteed payments for 120 months. If you choose an Income Plan which depends on any person's life, we may require: proof of age and sex before income payments begin; and proof that the annuitant or joint annuitant is still alive before we make each payment. After the Payout Start Date, the Income Plan cannot be changed and withdrawals cannot be made unless income payments are being made from the Variable Account under Income Plan 3. You may terminate the income payments being made from the Variable Account under Income Plan 3 at any time and withdraw their value, subject to Withdrawal Charges. If any owner dies during the Payout Phase, the remaining income payments will be paid to the successor owner as scheduled. Page 12 - ------------------------------------------------------------------------------- INCOME PAYMENT TABLES - ------------------------------------------------------------------------------- The initial income payment will be at least the amount based on the adjusted age of the annuitant(s) and the tables below, less any federal income taxes which are withheld. The adjusted age is the actual age on the Payout Start Date reduced by one year for each six full years between January 1, 1983 and the Payout Start Date. Income payments for ages and guaranteed payment periods not shown below will be determined on a basis consistent with that used to determine those that are shown. The Income Payment Tables are based on 3.0% interest and the 1983a Annuity Mortality Tables.
Income Plan 1 - Life Income with Guaranteed Payments for 120 Months ================================================================================================= Monthly Income Payment for each $1,000 Applied to this Income Plan - ------------------------------------------------------------------------------------------------- Annuitant's Annuitant's Annuitant's Age Male Female Age Male Female Age Male Female - ------------------------------------------------------------------------------------------------- 35 $3.43 $3.25 49 $4.15 $3.82 63 $5.52 $4.97 36 3.47 3.28 50 4.22 3.88 64 5.66 5.09 37 3.51 3.31 51 4.29 3.94 65 5.80 5.22 38 3.55 3.34 52 4.37 4.01 66 5.95 5.35 39 3.60 3.38 53 4.45 4.07 67 6.11 5.49 40 3.64 3.41 54 4.53 4.14 68 6.27 5.64 41 3.69 3.45 55 4.62 4.22 69 6.44 5.80 42 3.74 3.49 56 4.71 4.29 70 6.61 5.96 43 3.79 3.53 57 4.81 4.38 71 6.78 6.13 44 3.84 3.58 58 4.92 4.46 72 6.96 6.31 45 3.90 3.62 59 5.02 4.55 73 7.13 6.50 46 3.96 3.67 60 5.14 4.65 74 7.31 6.69 47 4.02 3.72 61 5.26 4.75 75 7.49 6.88 48 4.08 3.77 62 5.39 4.86 ================================================================================================= Income Plan 2 - Joint and Survivor Life Income with Guaranteed Payments for 120 Months ================================================================================================= Monthly Income Payment for each $1,000 Applied to this Income Plan - ------------------------------------------------------------------------------------------------- Female Annuitant's Age Male ------------------------------------------------------------------------------ Annuitant's 35 40 45 50 55 60 65 70 75 Age - ------------------------------------------------------------------------------------------------- 35 $3.09 $3.16 $3.23 $3.28 $3.32 $3.36 $3.39 $3.40 $3.42 40 3.13 3.22 3.31 3.39 3.46 3.51 3.56 3.59 3.61 45 3.17 3.28 3.39 3.50 3.60 3.69 3.76 3.81 3.85 50 3.19 3.32 3.45 3.60 3.74 3.87 3.98 4.07 4.14 55 3.21 3.35 3.51 3.68 3.87 4.06 4.23 4.37 4.48 60 3.23 3.37 3.55 3.75 3.98 4.23 4.47 4.70 4.88 65 3.24 3.39 3.57 3.80 4.07 4.37 4.71 5.04 5.34 70 3.24 3.40 3.59 3.83 4.13 4.48 4.90 5.36 5.81 75 3.25 3.41 3.61 3.86 4.17 4.56 5.04 5.61 6.22 =================================================================================================
Page 13 INCOME PLAN 3 - GUARANTEED NUMBER OF PAYMENTS - ------------------------------------------------------
- ------------------------------------------------------ Monthly Income Payment for each Specified Period $1,000 Applied to this Income Plan - ------------------------------------------------------ 10 Years $9.61 11 Years 8.86 12 Years 8.24 13 Years 7.71 14 Years 7.26 15 Years 6.87 16 Years 6.53 17 Years 6.23 18 Years 5.96 19 Years 5.73 20 Years 5.51 ======================================================
- -------------------------------------------------------------------------------- GENERAL PROVISIONS - -------------------------------------------------------------------------------- THE ENTIRE CONTRACT. The entire contract consists of the Master Policy, the Master Policy application, and any written enrollments, any endorsements, and any riders. All statements made in written enrollments are representations and not warranties. No statement will be used by us in defense of a claim or to void the Certificate unless it is included in a written enrollment. Only our officers may, in order to conform to any state or federal law, change the Master Policy or Certificate or waive a right or requirement. No other individual may do this. MASTER POLICY. The Master Policy may be amended by us, terminated by us, or terminated by the Master Policyholder without the consent of any other person. No termination completed after the issue date of this Certificate will adversely affect your rights under this Certificate. Nothing in the Master Policy will invalidate or impair any rights of Certificateholders. We may not modify this Certificate without your consent, except to make it comply with any changes in the Internal Revenue Code or as required by any other applicable law. INCONTESTABILITY. We will not contest the validity of this Certificate after the issue date. MISSTATEMENT OF AGE OR SEX. If any age or sex has been misstated, we will pay the amounts which would have been paid at the correct age and sex. If we find the misstatement of age or sex after the income payments begin, we will: pay all amounts underpaid including interest; or stop payments until the total payments are equal to the corrected amount. For purposes of the Misstatement of Age or Sex provision, interest will be calculated at an effective annual rate of 6%. ANNUAL STATEMENT. At least once a year, prior to the Payout Start Date, we will send you a statement containing Certificate Value information. We will provide you with Certificate Value information at any time upon request. The information presented will comply with any applicable law. SETTLEMENTS. We may require that this Certificate be returned to us prior to any settlement. We must receive due proof of death of the owner or annuitant prior to settlement of a death claim. Due proof of death is one of the following: a certified copy of a death certificate; or a certified copy of a decree of a court of competent jurisdiction as to a finding of death; or 14 any other proof acceptable to us. Any full withdrawal or death benefit under this Certificate will not be less than the minimum benefits required by any statute of the state in which the Certificate is delivered. DEFERMENT OF PAYMENTS. We will pay any amounts due from the Variable Account under this Certificate within seven days, unless: the New York Stock Exchange is closed for other than usual weekends or holidays, or trading on such Exchange is restricted; an emergency exists as defined by the Securities and Exchange Commission; or the Securities and Exchange Commission permits delay for the protection of Certificate holders. We reserve the right to postpone payments or transfers from the Fixed Account for up to six months. If we elect to postpone payments or transfers from the Fixed Account for more than 10 working days, we will pay interest as required by applicable law. Any interest would be payable from the date the withdrawal request is received by us to the date the payment or transfer is made. VARIABLE ACCOUNT MODIFICATIONS. We reserve the right, subject to applicable law, to make additions to, deletions from, or substitutions for the mutual fund shares underlying the Sub-accounts of the Variable Account. We will not substitute any shares attributable to your interest in a Sub-account of the Variable Account without notice to you and prior approval of the Securities and Exchange Commission, to the extent required by the Investment Company Act of 1940. We reserve the right to establish additional Sub-accounts of the Variable Account, each of which would invest in shares of another mutual fund. You may then instruct us to allocate purchase payments or transfers to such Sub- accounts, subject to any terms set by us or the mutual fund. In the event of any such substitution or change, we may, by endorsement, make such changes as may be necessary or appropriate to reflect such substitution or change. If we deem it to be in the best interests of persons having voting rights under the certificates, the Variable Account may be operated as a management company under the Investment Company Act of 1940 or it may be deregistered under such Act in the event such registration is no longer required. Page 15 EX-99.5 4 APPLICATION FOR A CONTRACT AIM LIFETIME PLUS/(SM)/ VARIABLE ANNUITY Issued by: Allstate Life Insurance Company of New York . PO Box 9075 . Farmingville, NY 11738-9075 . Telephone 800-692-4682 FAX 516-451-5405 Overnight mail to: Allstate Life Insurance Company of New York . 1 Allstate Drive . Farmingville, NY 11738 ................................................................................ 1 Owner(s) 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 Name _______________________ [_]M [_]F Birthdate __/__/__ Leave blank if Address ____________________________________________________ Annuitant is Street City State Zip same as sole Owner Soc. Sec. No. ____________ Relationship to Owner __________ ................................................................................ 3 Beneficiary(ies) Name_____________ Relationship to Owner______ Percentage____ Name_____________ Relationship to Owner______ Percentage____ Leave blank if Spouse of sole Owner ................................................................................ 4 Purchase Initial Purchase Payment $__________ Payment/ Peace of Mind Option* [_]Yes [_]No Plan Options Investment Allocation (whole % only, no fractions) (choose one) [_]3yr [_]5yr [_]7yr [_]10yr AIM V.I. FUNDS [_]Capital Appreciation Fund ______% [_]Diversified Income Fund ______% [_]Global Utilities Fund ______% [_]Government Securities Fund ______% [_]Growth Fund ______% [_]Growth and Income Fund ______% [_]International Equity Fund ______% [_]Money Market Fund ______% [_]Value Fund ______% Allocate the remainder to any variable funds by %. Fixed Account [_]1 Year Guarantee Period ______% [_]3 Year Guarantee Period ______% [_]5 Year Guarantee Period ______% [_]7 Year Guarantee Period ______% [_]10 Year Guarantee Period ______% TOTAL 100% *The "Peace of Mind" strategy allows a portion of an investment to be placed in a fixed account which grows back to the principal, assuming no withdrawals are taken. ................................................................................ 5 Replacement Will this annuity replace or change any existing annuity Information or life insurance? [_]Yes [_]No (If Yes, complete the following.) Company __________________________ Policy No. ______________ Cost basis amount ________________ Policy Date _____________ ................................................................................ 6 Tax Qualified [_]Yes [_]No (If Yes, complete the following.) Plan [_]Custodial IRA [_]IRA Rollover [_]IRA/Year of Contribution [_]IRA Transfer [_]Other _______________________ ................................................................................ 7 Signature(s) If Allstate Life Insurance Company of New York ("Allstate") declines this application, Allstate will have no liability except to return the purchase payments. 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 Will the annuity applied for replace or change any Only 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. EX-99.6A 5 CERTIFICATE OF INCORPORATION CERTIFICATE OF AMENDMENT OF THE RESTATED CERTIFICATE OF INCORPORATION ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK UNDER SECTION 1206 OF THE BUSINESS INSURANCE LAW AND SECTION 805 OF THE BUSINESS CORPORATION LAW The undersigned, being the Chairman of the Board and President and Vice President, Secretary and General Counsel of Allstate Life Insurance Company of New York, do hereby certify and set forth: (1) The name of the Corporation s Allstate Life Insurance Company of New York. The Corporation was previously named PM Life Insurance Company. The name under which the Corporation was originally incorporated was Financial Life Insurance Company. (2) The Certificate of Incorporation of the Corporation was filed with the State of New York Insurance Department on January 25, 1967. The Certificate of Incorporation was restated (pursuant to Section 1206 of the Insurance Law and Section 807 of the Business Corporation Law) on May 16, 1978. (3) The Restated Certificate of Incorporation of Allstate Life Insurance Company of New York is hereby amended, pursuant to Section 801(b) (14) of the Business Corporation Law, to provide for a change in gender and Director requirements to read as follows: "Article 'FIFTH', designating the number of Directors of the Corporation, is amended to read as follows: "FIFTH: The number of Directors of this Corporation shall not be less than thirteen nor more than fifteen in number, and shall be determined by or under the By-Laws. As used in this paragraph, 'number of Directors' means the total number of Directors which the Corporation would have if there were no vacancies. Directors shall be elected at each annual meeting of shareholders and each Director so elected shall hold office until the next annual meeting of shareholders and until his or her successor is elected and qualified or until his or her earlier death, resignation or removal. In the event that the number of Directors duly elected and serving shall be less than thirteen, the Corporation shall not for that reason be dissolved, but the vacancy or vacancies shall be filled as provided in Article SEVENTH hereof. Each Director shall be at least twenty-one years of age. At all times a majority of the Directors shall be citizens and residents of the United States and not less than three of the Directors shall be residents of New York. The Directors need not be shareholders of the Corporation. Not less than one-third of the Directors of the Corporation shall be persons who are not officers or employees of the Corporation or of any entity controlling, controlled by, or under common control with such Corporation and who are not beneficial owners of a controlling interest in the voting stock of such Corporation." (4) The manner in which this change to the Restated Certificate of Incorporation was authorized was, pursuant to the Business Corporation Law Section 614, by the holder of all outstanding shares of the Corporation entitled to vote thereon. This Special Shareholders meeting was held September 7, 1995. IN WITNESS WHEREOF the undersigned has executed and signed this Certificate and affirmed it as true this 3rd day of November, 1995. /s/LOUIS G. LOWER, II ----------------------------- LOUIS G. LOWER, II Chairman of the Board and President /s/MICHAEL J. VELOTTA - ---------------------- MICHAEL J. VELOTTA Vice President, Secretary and General Counsel Sworn to before me this 3rd day of November, 1995 /s/CHRISTA ROSE FRONCZAK - ----------------------------- Notary Public (SEAL) CERTIFICATION ------------- I, PAUL N. KIERIG, Assistant Secretary of Allstate Life Insurance Company of New York, a New York corporation, hereby certify that the following are true, complete and correct copies of resolutions concerning the amendment of the Restated Certificate of Incorporation, adopted at a meeting of the Board of Directors of the corporation held on June 20, 1994, and a resolution adopted by written consent of the Shareholders of the corporation, effective September 1, 1994, and that they are now in full force and effect: RESTATED CERTIFICATE OF INCORPORATION - AMENDMENT (Board of Directors) - ------------------------------------------------- BE IT RESOLVED, That the following amendment to the Restated Certificate of Incorporation for Allstate Life Insurance Company of New York, which provides for a change in the location of the principal office, be submitted to the Shareholders for approval: Article "SECOND", designating the principal office of the Corporation, is amended to read as follows: SECOND: The principal office of the Corporation shall be located in Farmingville, County of Suffolk, State of New York RESTATED CERTIFICATE OF INCORPORATION - AMENDMENT - (Shareholders) - ------------------------------------------------- Upon motion duly made, seconded and unanimously carried, the recommendation made by the Board of Directors at the Annual Board of Directors Meeting held on June 20, 1994, concerning the change of address for Allstate Life Insurance Company of New York, is hereby adopted. IN WITNESS WHEREOF, I have hereunto set my hand and caused the seal of the Corporation to be affixed this 27th day of September, 1994. /s/PAUL N. KIERIG ------------------------- Paul N. Kierig Assistant Secretary (Corporate Seal) [THIS PAGE INTENTIONALLY LEFT BLANK] EX-99.6B 6 BY-LAWS [LETTERHEAD OF STATE OF NEW YORK INSURANCE DEPARTMENT] AMENDED BY-LAWS of ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK of Huntington Station, New York IS HEREBY APPROVED January 18, 1995 pursuant to Section 1210 of the New York Insurance Law. EDWARD J. MUHL Acting Superintendent of Insurance By /s/ Robert A. Ginnelly ------------------------------- Special Deputy Superintendent CERTIFICATION ------------- I, PAUL N. KIERIG, Assistant Secretary of Allstate Life Insurance Company of New York, a New York corporation, hereby certify that the following is a true, complete and correct copy of a resolution concerning the amendment of Article VI, Section 1 of the By-Laws of the corporation, adopted at a meeting of the Board of Directors held on June 20, 1994, and that it is now in full force and effect: BY-LAWS AMENDMENT - ----------------- BE IT RESOLVED, That Article VI, Section 1, of the By-Laws are amended to read as follows: ARTICLE VI ---------- MISCELLANEOUS ------------- Section 1 - --------- (a) As used in this Section: (1) "acted properly" as to any person shall mean that such person (A) acted in good faith; (B) acted in a manner which he or she reasonably believed to be in or not opposed to the best interests of the corporation; and (C) with respect to any criminal action or proceeding, had no reasonable cause to believe that his or her conduct was unlawful. The termination of any proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act properly. (ii) "covered person" shall mean an Indemnitee (as defined below) or an Employee Indemnitee (as defined below). (iii) "Employee Indemnitee" shall mean any non-officer employee of the corporation (but not a non-officer employee of a subsidiary of the corporation). 2 (iv) "expenses" shall include attorneys' fees and expenses and any attorneys' fees and expenses of establishing a right to indemnification under this Section. (v) "Indemnitee" shall mean any person who is or was (A) A director or officer of the corporation and/or any subsidiary; (B) a trustee or a fiduciary under any employee pension, profit sharing, welfare or similar plan or trust of the corporation and/or any subsidiary; or (C) serving at the request of the corporation as a director or officer of or in a similar capacity in another corporation, partnership, joint venture, trust or other enterprise (which shall, for the purpose of this Section be deemed to include not- for-profit or for-profit entities of any type), whether acting in such capacity or in any other capacity including, without limitation, as a trustee or fiduciary under any employee pension, profit sharing, welfare or similar plan or trust. (vi) "proceeding" shall mean any threatened, pending or completed action or proceeding, whether civil or criminal, and whether judicial, legislative or administrative and shall include investigative action by any person or body. (vii) "subsidiary" shall mean a corporation, 50% or more of the shares of which at the time outstanding having voting power for the election of directors are owned directly or indirectly by the corporation or by one or more subsidiaries or by the corporation and one or more subsidiaries. (b) The corporation shall indemnify any Indemnitee to the fullest extent permitted under law (as the same now or hereafter exists), who was or is a party or is threatened to be made a party to any proceeding by reason of the fact that such person is or was an Indemnitee, against liabilities, expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her. (c) The corporation shall indemnify any Employee Indemnitee who was or is a party or is threatened to be made a party to any proceeding (other than an action by or in the right of the corporation) by reason of the fact that such person is or was an employee, against liabilities, expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with such proceeding, if such person acted properly. (d) The corporation shall indemnify any Employee Indemnitee who was or is a party or is threatened to be made a party to any proceeding by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person is or was an employee, against amounts paid in settlement and against expenses actually and reasonably incurred by him or her in connection with the defense or settlement of such proceeding, if he or she acted properly, except that 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 his or her duty to the corporation, unless and only to the extent that the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such court shall deem proper. (e) Expenses incurred in defending a proceeding shall be paid by the corporation to or on behalf of a covered person in advance of the final disposition of such proceeding if the corporation shall have received an undertaking by or on behalf of such person to repay such amounts, unless it shall ultimately be determined that he or she is entitled to be indemnified by the corporation as authorized in this Section. (f) Any indemnification or advance under this Section (unless ordered by a court) shall be made by the corporation only as authorized in the specific proceeding upon a determination that indemnification or advancement to a covered person is proper in the circumstances. Such determination shall be made: (i) by the Board of Directors, by a majority vote of a quorum consisting of directors who were not made parties to such proceeding, or (ii) if such a quorum is not obtainable, or, even if obtainable and a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, of (iii) in the absence of a determination made under (i) or (ii), by the shareholders. (g) The corporation shall indemnify or advance funds to any indemnitee described in (a)(v)(C), above, only after such person shall have sought indemnification or any advance from the corporation, partnership, joint venture, trust or other enterprise in which he or she was serving at the corporation's request, shall have failed to receive such indemnification or advance, and shall have assigned irrevocably to the corporation any right to receive indemnification which he or she might be entitled to assert against such other corporation, partnership, joint venture, trust or other enterprise. (h) The indemnification provided to a covered person by this Section: (i) shall not be deemed exclusive of any other rights to which such person may be entitled by law or under any articles of incorporation, by-law, agreement, vote of shareholders or disinterested directors or otherwise; (ii) shall inure to the benefit of the legal representatives of such person or his or her estate, whether such representatives are court appointed or otherwise designated, and to the benefit of the heirs of such person; and (iii) shall be a contract right between the corporation and each such preson who serves in any such capacity at any time while this Section 1 of Article VI is in effect, and any repeal or modification of this Section shall not affect any rights or obligations then existing with respect to any state of facts or any proceedings then existing. (i) The indemnification and advances provided to a covered person by this Section shall extend to and include claims for such payments arising out of any proceeding commenced or based on actions of such person taken prior to the effective date of this Section; provided that payment of such claims had not been agreed to or denied by the corporation at the effective date. (j) The corporation shall have the power to purchase and maintain insurance on behalf of any covered person against any liability asserted against him or her and incurred by him or her as a covered person or arising out of his or her status as such, whether or not the corporation would have the power to indemnify him or her against such liability under the provisions of this Section. The corporation shall also have power to purchase and maintain insurance to indemnify the corporation for any obligation which it may incur as a result of the indemnification of covered persons under the provisions of this Section. (k) No payment of indenmification or advance shall be made unless a notice has been filed with the Superintendent of Insurance pursuant to Section 1216 of the New York Insurance law at least 30 days prior to such payment. (l) If any provision of this Section is contrary to the law of New York with respect to indemnification of an agent of the corporation, such provision is hereby amended to conform to the limitations of such law. (m) The invalidity or unenforceability of any provision in this Section shall not affect the validity or enforceability of the remaining provisions of this Section. IN WITNESS WHEREOF, I have hereunto set my hand and caused the seal of the Corporation to be affixed this 27th day of September, 1994. /s/ Paul N. Klerig -------------------------- Paul N. Klerig Assistant Secretary (Corporate Seal) CERTIFICATION ------------- I, MICHAEL J. VELOTTA, Secretary of ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK, hereby certify that the following is a true, complete and correct copy of a Resolution amending Article VI, Section 5, of the By-Laws of Allstate Life Insurance Company of New York, as adopted at an Annual Meeting of the Board of Directors held on June 6, 1989, and that this Resolution is in full force and effect: BY-LAW AMENDMENT - ---------------- BE IT RESOLVED, That Article VI, Section 5, of the By-Laws of the Corporation is hereby amended to read as follows: The compensation of the principal officers of the Company shall be fixed from time to time by the Board of Directors. In addition, the Company shall make no agreement with any of its officers, agents or salaried employees that will extend beyond a period of twenty-four months from the date of such agreement. All pensions payable to a salaried officer or employee, or to a former salaried officer or employee, at the time of his retirement by reason of age or disability and all life insurance benefits payable at his death shall be pursuant to the terms of an employee benefit and retirement plan adopted by the Board of Directors. IN WITNESS WHEREOF, I have hereunto set my hand and caused the seal of the Corporation to be affixed this 19th day of July, 1993. /s/Michael J. Velotta ----------------------------- Michael J. Velotta Secretary (Corporate Seal) ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK ------------------------------------------- BY-LAWS ------- Amended June 6, 1989 -------------------- AMENDED BY-LAWS OF ------------------ ALLSTATE LIFE INSURANCE COMPANY ------------------------------- OF NEW YORK ----------- ARTICLE I --------- DIRECTORS --------- Section 1 The property, business and affairs of the Company shall be managed and controlled by a Board of Directors composed of fifteen members. The number of Directors may be changed by amendment of these By-Laws, as provided by Article VI, Section 4. However, the number of Directors shall not be less than thirteen nor more than fifteen, and no decrease in the number of Directors shall shorten the term of any incumbent Director. The Directors shall be elected, pursuant to notice under Section 12 of this Article, at each annual meeting of the shareholders of the Company for a term of one year. Each Director shall hold office for the term for which he was elected and until the election and qualification of his successor. At all times, a majority of Directors shall be citizens and residents of the United States and not less than three Directors shall be residents of New York. Further, the Directors who are officers or salaried employees of the company shall at all times be less than a majority of the Board of Directors. Section 2 In the event of a vacancy occurring in the Board of Directors, the shareholders of the Company shall, by a majority vote at a special meeting called for that purpose or at the next annual meeting of shareholders, elect a director to fill such vacancy, who shall hold office during the unexpired portion of the term of the director whose place he was elected to fill. Any Director elected pursuant to this section of the By-Laws shall not take office nor exercise the duties thereof until ten days after written notice of election is filed with the Superintendent of Insurance. Section 3 The Board of Directors may declare dividends payable out of the surplus funds of the Company when warranted by law, however, no dividend shall be declared until after 30 days written notice to the Superintendent of Insurance. Section 4 The Board of Directors shall elect all the general officers of the Company hereafter provided and may prescribe additional descriptive titles for any such officers. The Board of Directors may from time to time appoint Assistant Vice Presidents, Assistant Secretaries, Assistant Treasurers and other officers of the Company. 1 The Board of Directors may prescribe the duties, and fix the compensation as provided by Article VI, Section 5 of these By-Laws, of any elected or appointed officer and may require from any officer security for his faithful service and for his proper accounting for monies and property from time to time in his possession. All officers of the Company shall hold office at the will of the Board of Directors. Section 5 The Board of Directors shall designate in what bank or banks the funds of the Company shall be deposited and the person or persons who may sign, on behalf of the Company, checks or drafts against such deposits. Such designations may also be made by such person or persons as shall be appointed for that purpose by the Board of Directors. Section 6 The Board of Directors shall have the power to make rules and regulations not inconsistent with the laws of this State, the Articles of Incorporation of the Company, or these By-Laws, for the conduct of its own meetings and the management of the affairs of the Company. Section 7 The Board of Directors may authorize payment of compensation to directors for their services as directors, and fix the amount thereof. Section 8 The Board of Directors shall have the power to appoint committees and to grant them powers not inconsistent with the laws of this State, the Articles of Incorporation of the Company, or these By-Laws. Section 9 An annual meeting of the Board of Directors shall be held each year immediately after the adjournment of the annual meeting of the shareholders. Other meetings of the Board of Directors may be held at such time, and such place (within or without the state of New York), as the Board of Directors may determine or when called by the Chairman of the Board or by a majority of the Board of Directors. Notice of every meeting of the Directors other than the stated annual meeting shall be given by letter or telegraph sent to each Director at his business address, not less than three days previous to the meeting. Any Director may, in writing, waive notice of any meeting, and the presence of a Director at any meeting shall be considered a waiver by him of notice of such meeting, except as otherwise provided by law. Any one or more members of the Board, or any Committee thereof, may participate in a meeting of the Board or such Committee by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time. Participation by such means shall constitute presence in person at the meeting. 2 Section 10 A majority of the whole Board of Directors shall constitute a quorum for the transaction of business, but if at any meeting of the Board of Directors there shall be less than a quorum present, a majority of those present may adjourn the meeting, from time to time, until a quorum shall have been obtained. Section 11 Any action required or permitted to be taken at any meeting of the Board of Directors, or of any Committee thereof, may be taken without a meeting if all members of the Board or such Committee, as the case may be, consent thereto in writing. Such writing or writings shall be filed with the minutes of proceedings of the Board or such Committee. Section 12 No election of Directors pursuant to Section 1 of this Article shall be valid unless a notice of election shall have been filed with the Superintendent of Insurance at least 10 days prior to such election. Section 13 The minutes of any meeting held pursuant to Section 9 of these By-Laws and a record of any action taken pursuant to Section 11 of these By-Laws shall be filed with the Department of Insurance within 30 days of the date of the meeting or action taken in lieu of a meeting. If the minutes as finally approved at a subsequent meeting differ from the minutes filed with the Department of Insurance, the corrected minutes shall be forwarded to the Department and the difference shall be summarized in a covering letter. Section 14 Any or all of the Directors may be removed at any time, either for or without cause, by vote of the shareholders or, for cause, by vote of a majority of the Directors then in office. Any vacancy in the Board caused by the removal of a Director by vote of the shareholders may be filled by the shareholders entitled to vote for the election of the Director so removed, in the manner provided in Section 2 of this article. If the removal of a Director is requested by the Superintendent of Insurance, the Chairman shall immediately call a special meeting of Directors to respond to the request of the Superintendent of Insurance. ARTICLE II ---------- OFFICERS -------- Section 1 The general officers of the Company shall consist of a Chairman of the Board, President, two or more Vice Presidents, a Secretary and a Treasurer, who shall be elected annually by the Board of Directors at the stated annual meeting held upon adjournment of the annual shareholders' meeting, and if not elected at such meeting, such officers may be elected at any meeting of the Board of Directors held thereafter. Such officers shall be elected by a majority of the Directors, and shall hold office for one year and until their respective successors are elected and qualified, subject to removal 3 at will by the Board of Directors. In case of a vacancy in any of the general offices of the Company, such vacancy may be filled by the vote of a majority of the Board of Directors. Any two of the aforesaid offices may be filled by the same person, with the exception of the offices of President and Vice President, or President and Secretary. Section 2 The Chairman of the Board shall preside at all meetings of the shareholders and of the Board of Directors. He shall be the Chief Executive Officer of the Company, shall have general and active management of the business of the Company subject to the supervision of the Board of Directors, and shall see that all orders and resolutions of the Board of Directors are carried into effect. He shall also perform such other duties as shall be prescribed from time to time by the Board of Directors. Section 3 The President shall have general administrative control and supervision over the operations of the Company subject to the supervision of the Chairman of the Board. He shall, in the absence or inability of the Chairman of the Board, perform the duties and exercise the powers of the Chairman of the Board. He shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the corporation. He shall also perform such other duties as may properly belong to his office or as shall be prescribed from time to time by the Chairman of the Board or by the Board of Directors. Section 4 Each Vice President shall have such powers and shall perform such duties as may be assigned to him by the Chairman of the Board, or by the President, or by the Board of Directors. In the absence or in the case of the inability of the Chairman of the Board and the President to act, the Board of Directors may designate which one of the Vice Presidents shall be the acting Chief Executive Officer of the Company during such absence or inability, whereupon such acting Chief Executive Officer shall have all the powers and perform all of the duties incident to the office of Chairman during the absence or inability of the Chairman and President to act. Section 5 The Secretary shall keep the minutes of all meetings of the Board of Directors, and of all meetings of the shareholders, in books provided by Company for such purpose. He shall attend to the giving of all notices of meetings of the Board of Directors or shareholders. He may sign with the Chairman of the Board, the President or a Vice President in the name of the Company when authorized by the Board of Directors so to do, all contracts and other instruments requiring the seal of the Company and may affix the seal thereof. He shall, in general, perform all of the duties which are incident to the office of Secretary and such other duties as the Board of Directors or Chairman of the Board may from time to time prescribe. 4 Section 6 The Treasurer shall deposit the monies of the Company in the Company's name in depositories designated by the Board of Directors, or by such person or persons as shall be appointed for that purpose by the Board of Directors. He shall, in general, perform all of the duties which are incident to the office of Treasurer and such other duties as the Board of Directors or Chairman of the Board may from time to time prescribe. The Board of Directors may, in its discretion, require him to give bond for the faithful discharge of his duties. ARTICLE III ----------- SHAREHOLDERS' MEETINGS ---------------------- Section 1 The annual meeting of the shareholders shall be held at the principal office of the Company in the State of New York, or at such other location within or without the State of New York as may be set forth in the notice of call, on the fourth Tuesday in February of each year, except when such day shall be a legal holiday, in which case the meeting shall be held on the next succeeding business day. The Chairman of the Board of Directors may at any time call a special meeting of the shareholders, and the Chairman of the Board shall call such special meeting when requested, in writing, so to do by the owners of not less than one-fifth of the outstanding shares of the Company. Section 2 Notice of every meeting of the shareholders shall be given by mailing notice thereof at least 10 days, but no more than 50 days before such meeting to all the shareholders at their respective post office addresses last furnished by them, respectively, to the Company. Notice of a special meeting shall also state the purpose for which the meeting is called. The shareholders may waive notice of any such meeting, in writing, and the presence of a shareholder, either in person or by proxy, shall be considered a waiver of notice, except as otherwise provided by law. Section 3 The presence at such meeting in person or by proxy of shareholders of the Company representing at least fifty-one percent of the then outstanding shares of the Company shall be necessary to constitute a quorum for the purpose of transacting business, except as otherwise provided by law, but a smaller number may adjourn the meeting from time to time until a quorum shall be obtained. Each shareholder shall be entitled to cast one vote in person or by proxy for each share of stock of the Company held and of record in his or her name on the books of the Company. Section 4 A shareholder may vote at any meeting of the shareholders either in person or by proxy duly constituted in writing. No special form of proxy shall be necessary, however, no proxy shall be valid after eleven months from its date unless otherwise provided in the proxy. 5 ARTICLE IV ---------- SHARES ------ Section 1 Share certificates shall be signed by the President or a Vice President and countersigned by the Secretary, shall be sealed with the corporate seal of the Company, and shall be registered upon the Share Register of the Company. Each certificate shall express on its face the name of the Company, the number of the certificate, the number of shares for which it is issued, the name of the person to whom it is issued, the par value of each of the said shares, and the amount actually received by the Company for each share represented by said certificate. Section 2 Transfers of shares of the Company shall be made only on the books of the Company by the holder thereof in person or by his attorney duly authorized, in writing, and upon the surrender of the certificates or certificate for the share transfer, upon which surrender and transfer new certificates will be issued. However, no transfer shall be made until ten days after notice of such transfer shall have been given to the Superintendent of Insurance. The Board of Directors may, by resolution, close the share transfer books of the Company for a period not exceeding ten days before the holding of any annual or special meeting of the shareholders. The Board of Directors may, by resolution, also close the transfer books of the Company for a period not exceeding ten days before the payment of any dividends which may be declared upon the shares of the Company. ARTICLE V --------- Section 1 All policies of insurance issued by this Company shall be signed, either manually or by facsimile, by the President and the Secretary or by such other officer or officers as the President may designate, and shall be countersigned by a duly licensed resident agent where so required by law or regulation. ARTICLE VI ---------- MISCELLANEOUS ------------- Section 1 --------- (a) As used in this Article: (i) "acted properly" as to any person shall mean that such person (A) acted in good faith; (B) acted in a manner not clearly opposed to any written policy of the corporation or in a manner which he reasonably believed to be in the best interests of the corporation; and 6 (C) with respect to any criminal action or proceeding, had no reasonable cause to believe that his conduct was unlawful. The termination of any proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act properly. (ii) "agent" shall mean any person who is or was (A) a director, officer or employee of the corporation and/or any subsidiary; (B) a trustee or a fiduciary under any employee pension, profit sharing, welfare or similar plan or trust of the corporation and/or any subsidiary; (C) serving at the request of the corporation as a director, officer and/or employee of or in a similar capacity in another corporation, partnership, joint venture, trust or other enterprise, (which shall, for the purpose of this Article be deemed to include not-for-profit or for-profit entities of any type), whether acting in such capacity or in any other capacity including, without limitation, as a trustee or fiduciary under any employee pension, profit sharing, welfare or similar plan or trust. (iii) "expense" shall include attorneys' fees and any expenses of establishing a right to indemnification under this Article. (iv) "proceeding" shall mean any threatened, pending or completed action or proceeding, whether civil or criminal, and whether judicial, legislative or administrative and shall include investigative action by any person or body. (v) "subsidiary" shall mean a corporation, 50% or more of the shares of which at the time outstanding having voting power for the election of directors, is owned directly or indirectly by the corporation or by one or more subsidiaries or by the corporation and one or more subsidiaries. (b) The corporation shall indemnify any person who was or is party or is threatened to be made a part to any proceeding (other than an action by or in the right of the corporation) by reason of the fact that such person is or was an agent against expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such proceeding if such person acted properly. 7 (c) The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any proceeding by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person is or was an agent against amounts paid in settlement and against expenses actually and reasonably incurred by him in connection with the defense or settlement of such proceeding if he acted properly, except that 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 his duty to the corporation (as further specified by Article 7 of the New York Business Corporation Act) unless and only to the extent that the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such court shall deem proper. (d) Expenses incurred in defending a proceeding shall be paid by the corporation to or on behalf of an agent in advance of the final disposition of such proceeding if (i) there is a reasonable basis to believe that such agent may be entitled to indemnification under this Article; (ii) such advance payments would not result in undue financial hardship to the corporation; and (iii) the corporation shall have received an undertaking by or on behalf of such agent to repay such amount unless it shall ultimately be determined that he is entitled to be indemnified by the corporation as authorized in this Article. (e) Any indemnification or advance under paragraphs (b), (c) or (d) of this Article (unless ordered by a court) shall be made by the corporation only as authorized in the specific proceeding upon a determination that indemnification or advancement to such person is proper in the circumstances. Such determination shall be made (i) by the Board of Directors, by a majority vote of a quorum consisting of directors who were not made parties to such proceeding, or (ii) if such a quorum is not obtainable, or, even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (iii) if a quorum of disinterested directors is not obtainable or if a majority of the disinterested directors so directs by the shareholders. 8 (f) The corporation shall indemnify or advance funds to any person described in Section (a) (ii) (c) only after such person shall have sought indemnification or an advance from the corporation, partnership, joint venture, trust or other enterprise in which he was serving at the corporation's request, shall have failed to receive such indemnification or advance and shall have assigned irrevocably to the corporation any right to receive indemnification which he might be entitled to assert against such other corporation, partnership, joint venture, trust or other enterprise. (g) The indemnification provided to an agent by this Article (i) shall not be deemed exclusive of any other rights to which such agent may be entitled by law or under any articles of incorporation, by-law, agreement, vote of shareholders or disinterested directors or otherwise; and (ii) shall inure to the benefit of the legal representatives of such agent or his estate, whether such representatives are court-appointed or otherwise designated, and to the benefit of the heirs of such agent. (h) The indemnification and advances provided to an agent by this Article shall extend to and include claims for such payments arising out of any proceeding commenced or based on actions of an agent taken prior to the effective date of this Article; provided that payment of such claims had not been agreed to or denied by the corporation at the effective date. (i) The corporation shall have power to purchase and maintain insurance on behalf of any agent against any liability asserted against him and incurred by him as agent or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under the provisions of this Article. The corporation shall also have power to purchase and maintain insurance to indemnify the corporation for any obligation which it may incur as a result of the indemnification of agents under the provisions of this Article. (j) No payment of indemnification or advances shall be made unless a notice has been filed with the Superintendent of Insurance pursuant to Section 62-a of the New York Insurance Law at least 30 days prior to such payment. (k) The invalidity or unenforceability of any provision in this Article shall not affect the validity or enforceability of the remaining provisions of this Article. (l) If any provision of this Section is contrary to the law of New York with respect to indemnification of an agent of the corporation, such provision is hereby amended to conform to the limitations of such law. 9 Section 2 The fiscal year of the Company shall begin in each year of the first day of January and end on the thirty-first day of December following. Section 3 The common seal of the Company shall be circular in form and shall contain the name of the Company and the words: "CORPORATE SEAL" and "NEW YORK." An impression of the Company's seal is affixed hereto. Section 4 Except to the extent otherwise required by law, the books and records of the Company shall be kept at such place or places within or without the State of New York as may be determined from time to time by the Board of Directors. Section 5 The compensation of the principal officers of the Company shall be fixed from time to time by the Board of Directors. In addition, the Company shall make no agreement with any of its officers, agents or salaried employees that will extend beyond a period of twenty four months from the date of such agreement. All pensions payable to a salaried officer or employee, or to a former salaried officer or employee, at the time of his retirement by reason of age or disability and all life insurance benefits payable at his death shall be pursuant to the terms of an employee benefit and retirement plan adopted by the Board of Directors. Section 6 These By-Laws may be amended or repealed by the vote of majority of the Directors present at any meeting at which a quorum is present. If any by-law regulating an impending election of Directors is adopted, amended or repealed by the Board of Directors, there shall be set forth in the notice of the next meeting of shareholders for the election of Directors the by-law so adopted, amended or repealed, together with a concise statement of the changes made. 10 EX-99.8 7 FORM OF PARTICIPATION AGREEMENT PARTICIPATION AGREEMENT BY AND AMONG AIM VARIABLE INSURANCE FUNDS, INC., A I M DISTRIBUTORS, INC., ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK, ON BEHALF OF ITSELF AND ITS SEPARATE ACCOUNTS AND ALLSTATE LIFE FINANCIAL SERVICES, INC. TABLE OF CONTENTS -----------------
DESCRIPTION - ----------- Section 1. Available Funds................................................... 2 1.1 Availability................................................... 2 1.2 Addition, Deletion or Modification of Funds.................... 3 1.3 No Sales to the General Public................................. 3 Section 2. Processing Transactions........................................... 3 2.1 Timely Pricing and Orders...................................... 3 2.2 Timely Payments................................................ 4 2.3 Applicable Price............................................... 4 2.4 Dividends and Distributions.................................... 4 2.5 Book Entry..................................................... 5 Section 3. Costs and Expenses................................................ 5 3.1 General......................................................... 5 3.2 Parties To Cooperate............................................ 5 Section 4. Legal Compliance.................................................. 5 4.1 Tax Laws....................................................... 5 4.2 Insurance and Certain Other Laws............................... 8 4.3 Securities Laws................................................ 8 4.4 Notice of Certain Proceedings and Other Circumstances.......... 9 4.5 ALNY or the Underwriter To Provide Documents; Information About AVIF.....................................................10 4.6 AVIF or AIM To Provide Documents; Information About ALNY and the Underwriter............................................11 Section 5. Mixed and Shared Funding..........................................12 5.1 General........................................................12 5.2 Disinterested Directors........................................12 5.3 Monitoring for Material Irreconcilable Conflicts...............13 5.4 Conflict Remedies..............................................14 5.5 Notice to ALNY.................................................15 5.6 Information Requested by Board of Directors....................15 5.7 Compliance with SEC Rules......................................15 5.8 Requirements for Other Insurance Companies.....................16 Section 6. Termination.......................................................16
i
6.1 Events of Termination...............................................16 6.2 Notice Requirement for Termination..................................17 6.3 Funds To Remain Available...........................................18 6.4 Survival of Warranties and Indemnifications.........................18 6.5 Continuance of Agreement for Certain Purposes.......................18 Section 7. Parties To Cooperate Respecting Termination.......................18 Section 8. Assignment........................................................19 Section 9. Notices...........................................................19 Section 10. Voting Procedures.................................................20 Section 11. Foreign Tax Credits...............................................20 Section 12. Indemnification...................................................21 12.1 Of AVIF and AIM by ALNY and the Underwriter.....................21 12.2 Of ALNY and the Underwriter by AVIF and AIM.....................23 12.3 Effect of Notice................................................25 12.4 Successors......................................................26 Section 13. Applicable Law....................................................26 Section 14. Execution in Counterparts.........................................26 Section 15. Severability......................................................26 Section 16. Rights Cumulative.................................................26 Section 17. Headings..........................................................26 SCHEDULE A....................................................................28 SCHEDULE B....................................................................29 SCHEDULE C....................................................................30
ii PARTICIPATION AGREEMENT THIS AGREEMENT, made and entered into as of the ____ day of _________, 1995 ("Agreement"), by and among AIM Variable Insurance Funds, Inc., a Maryland corporation ("AVIF"); A I M Distributors, Inc., a Delaware corporation ("AIM"); Allstate Life Insurance Company of New York, a New York life insurance company ("ALNY"), on behalf of itself and each of 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., a Delaware corporation and the principal underwriter of the Contracts and Policies referred to below ("Underwriter") (collectively, the "Parties"). WITNESSETH THAT: WHEREAS, AVIF 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, AVIF currently consists of nine separate 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 WHEREAS, AVIF 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 "AVIF" includes reference to each Fund, to the extent the context requires) available for purchase by the Accounts; and WHEREAS, AIM 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, AIM currently serves as the distributor for the Shares; and WHEREAS, ALNY will be the issuer of certain variable annuity contracts ("Contracts") and/or variable life insurance policies ("Policies") as set forth on Schedule A hereto, as the Parties hereto may amend from time to time, which Contracts and Policies (hereinafter collectively, the "Policies"), if required by applicable law, will be registered under the 1933 Act; and 1 WHEREAS, the Accounts 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, ALNY 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 Policies will be registered as securities under the 1933 Act (or exempt therefrom); and WHEREAS, to the extent permitted by applicable insurance laws and regulations, ALNY intends to purchase Shares in one or more of the Funds on behalf of the Accounts to fund the Policies provided, that AVIF implements Mixed and Shared Funding, described below, pursuant to an exemptive order from the SEC or otherwise; and WHEREAS, the Underwriter is a broker-dealer registered with the SEC under the 1934 Act and a member in good standing of the NASD; and WHEREAS, the Underwriter intends to enter into Selling Group Agreements with entities that may legally sell the Policies (the "Selling Group Members"); 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. ------------ AVIF will make Shares of each Fund available to ALNY 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 AVIF 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 deemed in the best interests of the shareholders of such Fund. 2 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 Policies, 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, AVIF, 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. ------------------------------ AVIF represents and warrants that no Shares of any Fund have been or will be sold to the general public. SECTION 2. PROCESSING TRANSACTIONS ----------------------------------- 2.1 TIMELY PRICING AND ORDERS. ------------------------- (a) AVIF or its designated agent will use its best efforts to provide ALNY with the net asset value per Share for each Fund by 6:00 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) AVIF calculates the Fund's net asset value. (b) ALNY will use the data provided by AVIF 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. ALNY will perform such Account processing the same Business Day, and will place corresponding orders to purchase or redeem Shares with AVIF by 9 a.m. Central time the following Business Day; provided, however, that AVIF shall provide additional time to ALNY in the event that AVIF is unable to meet the 6:00 p.m. time stated in paragraph (a) immediately above. Such additional time shall be equal to the additional time that AVIF takes to make the net asset values available to ALNY. (c) Each order to purchase or redeem Shares will separately describe the amount of Shares of each Fund to be purchased, redeemed or exchanged and will not be netted; provided, however, with respect to payment of the purchase price by ALNY and of redemption proceeds by AVIF, ALNY and AVIF shall net purchase and redemption orders with respect to each Fund and shall transmit one net payment per Fund in accordance with Section 2.2, below. Each order to purchase or redeem Shares shall also specify whether the order results from purchase payments, surrenders, 3 partial withdrawals, routine withdrawals of charges, or requests for other transactions under Policies (collectively, "Policy transactions"). (d) If AVIF provides materially incorrect Share net asset value information, ALNY shall be entitled to an adjustment to the number of Shares purchased or redeemed to reflect the correct net asset value per Share. 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 ALNY. Materiality and reprocessing cost reimbursement shall be determined in accordance with standards established by the parties as provided in Schedule B, attached hereto and incorporated herein. 2.2 TIMELY PAYMENTS. ALNY will wire payment for net purchases to a custodial account designated by AVIF by 1:00 p.m. Central Time on the same day as the order for Shares is placed, to the extent practicable. AVIF will wire payment for net redemptions to an account designated by ALNY by 1:00 p.m. Central Time on the same day as the Order is placed, to the extent practicable, but in any event within five calendar days after the date the order is placed in order to enable ALNY to pay redemption proceeds within the time specified in Section 22(e) of the 1940 Act or such shorter period of time as may be required by law. 2.3 APPLICABLE PRICE. (a) Share purchase and redemption orders that result from Policy transactions and that ALNY 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 AVIF or its designated agent of the orders. For purposes of this Section 2.3(a), ALNY shall be the designated agent of AVIF for receipt of orders relating to Policy transactions on each Business Day and receipt by such designated agent shall constitute receipt by AVIF; provided, that AVIF receives notice of such orders by 9 a.m. Central time on the next following Business Day or such later time computed in accordance with Section 2.1(b) hereof. (b) All other Share purchases and redemptions by ALNY will be effected at the net asset values of the appropriate Funds next computed after receipt by AVIF or its designated agent of the order therefor, and such orders will be irrevocable. 2.4 DIVIDENDS AND DISTRIBUTIONS. AVIF will furnish notice promptly to ALNY of any income dividends or capital gain distributions payable on the Shares of any Fund. ALNY hereby elects to reinvest all dividends and 4 capital gains distributions in additional Shares of the corresponding Fund at the ex-dividend date net asset values until ALNY otherwise notifies AVIF 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. ALNY 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 AVIF Shares will be by book entry only. Stock certificates will not be issued to ALNY. Shares ordered from AVIF will be recorded in an appropriate title for ALNY, on behalf of its Account. SECTION 3. COSTS AND EXPENSES ------------------------------ 3.1 GENERAL. ------- Except as otherwise specifically provided in Schedule C, attached hereto and made a part hereof, each Party will 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 AVIF and the Accounts. SECTION 4. LEGAL COMPLIANCE ---------------------------- 4.1 TAX LAWS. -------- (a) AVIF represents and warrants that each Fund is currently qualified and will continue to qualify as a regulated investment company ("RIC") under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). AVIF will notify ALNY 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. 5 (b) AVIF represents that it will comply and maintain each Fund's compliance with the diversification requirements set forth in Section 817(h) of the Code and Section 1.817-5(b) of the regulations under the Code. AVIF will notify ALNY 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. (c) ALNY agrees that if the Internal Revenue Service ("IRS") asserts in writing in connection with any governmental audit or review of ALNY or, to ALNY's knowledge, of any Policy owner, annuitant or participant under the Policies (collectively, "Participants"), that any Fund has failed to comply with the diversification requirements of section 817(h) of the Code or ALNY otherwise becomes aware of any facts that could give rise to any claim against AVIF or its affiliates as a result of such a failure or alleged failure to so comply with section 817(h) (hereinafter respectively referred to in this paragraph (c) as "failure" or "alleged failure"): (i) ALNY shall promptly notify AVIF of such assertion or potential claim; (ii) ALNY shall consult with AVIF as to how to minimize any liability that may arise as a result of such failure or alleged failure; (iii) ALNY shall use its best efforts to minimize any liability of AVIF or its affiliates resulting from such failure, including, without limitation, demonstrating, pursuant to Treasury Regulations Section 1.817-5(a)(2), to the Commissioner of the IRS that such failure was inadvertent, provided that ALNY shall not be required to make any such demonstration of inadvertence unless AVIF represents or provides an opinion of counsel, which representation or opinion shall be reasonably satisfactory to ALNY, to the effect that a reasonable basis exists for making such a demonstration; (iv) ALNY shall permit AVIF, its affiliates and their legal and accounting advisors to attend, advise and otherwise assist ALNY (which assistance ALNY shall consider and/or accept in good faith) with respect to any conferences, settlement discussions or other administrative or judicial proceeding or contests (including judicial appeals thereof) with the IRS, any Participant or any other claimant regarding any claims that could give rise to liability to AVIF or its affiliates as a result of such a failure or alleged failure, provided that ALNY shall control, in good faith, the conduct of such conferences, discussions, proceedings, or contests or appeals thereof; (v) any written materials to be submitted by ALNY to the IRS, any Participant or any other claimant in connection with any of the foregoing proceedings or contests (including, without limitation, any such materials to be submitted to the IRS pursuant to Treasury Regulations Section 1.817- 5(a)(2)), (a) shall be provided by ALNY to AVIF (together with any supporting information or analysis) at least ten (10) business days, or such shorter period to which the Parties hereto may from time to time agree, prior to the day on which such proposed materials are to be submitted and (b) shall not be submitted by ALNY to any such 6 person without the express written consent of AVIF which shall not be unreasonably withheld; (vi) ALNY shall provide AVIF or its affiliates and their accounting and legal advisors with such cooperation as AVIF shall reasonably request (including, without limitation, by providing AVIF and its accounting and legal advisors with copies of any relevant books and records (or portions thereof) of ALNY that may be reasonably requested by or on behalf of AVIF and that ALNY is permitted to provide in accordance with applicable law) in order to facilitate review by AVIF or its advisors of any written submissions provided to it pursuant to the preceding clause or its assessment of the validity or amount of any claim against its arising from such a failure or alleged failure; (vii) ALNY shall not with respect to any claim of the IRS or any Participant that would give rise to a claim against AVIF or its affiliates (a) compromise or settle any claim, (b) accept any adjustment on audit, or (c) forego any allowable administrative or judicial appeals, without the express written consent of AVIF or its affiliates, which shall not be unreasonably withheld, provided that ALNY shall not be required, after exhausting all administrative remedies, to appeal any adverse IRS or judicial decision unless AVIF or its affiliates shall have provided an opinion of counsel approved by ALNY, which approval shall not be unreasonably withheld, to the effect that a reasonable basis exists for taking such appeal (or, in the case of an appeal to the United States Supreme Court, that ALNY should be more likely than not to prevail on such appeal), and provided further that each Party shall bear one-half of the expenses of any judicial appeal; and (viii) AVIF and its affiliates shall have no liability as a result of such failure or alleged failure if ALNY fails to comply with any of the foregoing clauses (i) through (vii), and such failure could be shown to have materially contributed to the liability. Should AVIF or any of its affiliates refuse to give its written consent to any compromise or settlement of any claim or liability hereunder, ALNY may, in its discretion, authorize AVIF or its affiliates to act in the name of ALNY in, and to control the conduct of, such conferences, discussions, proceedings, contests or appeals and all administrative or judicial appeals thereof, and in that event AVIF or its affiliates shall bear the fees and expenses associated with the conduct of the proceedings that it is so authorized to control; provided that in no event shall ALNY have liability resulting from AVIF's refusal to accept the proposed settlement or compromise with respect to any failure caused by AVIF. As used in this Agreement, the term "affiliates" shall have the same meaning as "affiliated person" as defined in Section 2(a)(3) of the 1940 Act. (d) ALNY represents and warrants that the Policies currently are and at all times will be treated as annuity, endowment, or life insurance contracts under applicable provisions of the Code. ALNY will notify AVIF immediately upon having a reasonable basis for believing that any of the Policies have ceased to be so treated or that they might not be so treated in the future, 7 provided that such notice shall be kept confidential during the period of ALNY's investigation of any such circumstances to the extent permitted by applicable law. (e) ALNY represents and warrants that each Account is and at all times will be a "segregated asset account" and that interests in each Account are offered exclusively through the purchase of or transfer into a "variable contract," within the meaning of such terms under Section 817 of the Code and the regulations thereunder. ALNY will notify AVIF immediately upon having a reasonable basis for believing that such requirements have ceased to be met or that they might not be met in the future. 4.2 INSURANCE AND CERTAIN OTHER LAWS. -------------------------------- (a) AVIF and AIM will use their best efforts to comply with any applicable state insurance laws or regulations, to the extent specifically requested in writing by ALNY. (b) ALNY represents and warrants that (i) it is an insurance company duly organized, validly existing and in good standing under the laws of the State of Illinois 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 and maintains each Account as a segregated asset account under Section 245.21 of the Illinois Insurance Code and the regulations thereunder, and (iii) the Policies comply in all material respects with all other applicable federal and state laws and regulations. (c) AVIF represents and warrants that it is a corporation duly organized, validly existing, and in good standing under the laws of the State of Maryland and has full power, authority, and legal right to execute, deliver, and perform its duties and comply with its obligations under this Agreement. (d) AIM 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) The Underwriter 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. 8 4.3 SECURITIES LAWS. (a) ALNY and the Underwriter represent and warrant that (i) interests in each Account pursuant to the Policies will be registered under the 1933 Act to the extent required by the 1933 Act, (ii) the Policies 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 Illinois law, (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 Policies, 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) ALNY will amend the registration statement for its Policies under the 1933 Act and for its Accounts under the 1940 Act from time to time as required in order to effect the continuous offering of its Policies or as may otherwise be required by applicable law, and (vii) each Account Prospectus will at all times comply in all material respects with the requirements of the 1933 Act and the rules thereunder. (b) AVIF and AIM represent and warrant 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 Maryland law, (ii) AVIF is and will remain registered under the 1940 Act to the extent required by the 1940 Act, (iii) AVIF will amend the registration statement for its Shares under the 1933 Act and itself under the 1940 Act from time to time as required in order to effect the continuous offering of its Shares, (iv) AVIF does and will comply in all material respects with the requirements of the 1940 Act and the rules thereunder, (v) AVIF'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) AVIF Prospectus will at all times comply in all material respects with the requirements of the 1933 Act and the rules thereunder. (c) AVIF will register and qualify its Shares for sale in accordance with the laws of any state or other jurisdiction if and to the extent reasonably deemed advisable by AVIF. 4.4 NOTICE OF CERTAIN PROCEEDINGS AND OTHER CIRCUMSTANCES. (a) AVIF and/or AIM will immediately notify ALNY 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 AVIF's registration statement under the 1933 Act or AVIF Prospectus, (ii) any request by the SEC for any amendment to such registration statement or AVIF Prospectus, (iii) the initiation of any proceedings for that purpose or for any other purpose relating to the registration or offering of AVIF'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 9 accordance with applicable state and federal law or (b) such law precludes the use of such Shares as an underlying investment medium of the Policies issued or to be issued by ALNY. AVIF 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) ALNY and/or the Underwriter will immediately notify AVIF 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 Policies or each Account Prospectus, (ii) any request by the SEC for any amendment to such registration statement or Account Prospectus, (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 Policies, 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 state and federal law. ALNY 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. 4.5 ALNY OR THE UNDERWRITER TO PROVIDE DOCUMENTS; INFORMATION ABOUT AVIF. (a) ALNY or the Underwriter will provide to AVIF or its designated agent at least one complete copy of all SEC registration statements, Account 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 or the Policies, contemporaneously with the filing of such document with the SEC or other regulatory authorities. (b) The Underwriter will provide to AVIF or its designated agent at least one complete copy of each piece of sales literature or other promotional material not prepared by AVIF or its affiliates, in which AVIF or any of its affiliates is named, at least ten [10] Business Days prior to its use or such shorter period as the Parties hereto may, from time to time, agree upon. No such material shall be used if AVIF or its designated agent objects to such use within ten [10] Business Days after receipt of such material or such shorter period as the Parties hereto may, from time to time, agree upon. AVIF hereby designates its investment adviser as the entity to receive such sales literature, until such time as AVIF appoints another designated agent by giving notice to ALNY in the manner required by Section 9 hereof. (c) Neither ALNY, the Underwriter, nor any of their respective affiliates will give any information or make any representations or statements on behalf of or concerning AVIF or its affiliates in connection with the sale of the Policies other than (i) the information or representations contained in the registration statement, including the AVIF Prospectus contained therein, relating to Shares, as such registration statement and AVIF Prospectus may be amended from time to time; 10 or (ii) in reports or proxy materials for AVIF; or (iii) in sales literature or other promotional material approved by AVIF, except with the express written permission of AVIF. (d) ALNY and the Underwriter shall adopt and implement procedures reasonably designed to ensure that information concerning AVIF and its affiliates that is intended for use only by brokers or agents selling the Policies (i.e., information that is not intended for distribution to Participants or offerees) ("broker only materials") is so used, and neither AVIF nor any of its affiliates shall be liable for any losses, damages or expense relating to the improper use of such broker only materials. 4.6 AVIF OR AIM TO PROVIDE DOCUMENTS; INFORMATION ABOUT ALNY AND THE UNDERWRITER. (a) AVIF will provide to ALNY at least one complete copy of all SEC registration statements, AVIF Prospectuses, reports, any preliminary and final proxy material, applications for exemptions, requests for no-action letters, and all amendments to any of the above, that relate to AVIF or the Shares of a Fund, contemporaneously with the filing of such document with the SEC or other regulatory authorities. (b) AVIF will provide to ALNY or the Underwriter camera ready or computer diskette copies of all AVIF Prospectuses, proxy materials, periodic reports to shareholders and other materials required by law to be sent to Participants who have allocated any Policy value to a Fund. AVIF will provide such copies to ALNY or the Underwriter in a timely manner so as to enable ALNY or the Underwriter, as the case may be, to print and distribute such materials within the time required by law to be furnished to Participants. (c) AIM will provide to ALNY or its designated agent at least one complete copy of each piece of sales literature or other promotional material in which ALNY, the Underwriter or any of their respective affiliates is named, or that refers to the Policies, at least 10 Business Days prior to its use or such shorter period as the Parties hereto may, from time to time, agree upon. No such material shall be used if ALNY or its designated agent objects to such use within 10 Business Days after receipt of such material or such shorter period as the Parties hereto may, from time to time, agree upon. ALNY shall receive all such sales literature until such time as it appoints a designated agent by giving notice to AVIF in the manner required by Section 9 hereof. (d) Neither AVIF nor any of its affiliates will give any information or make any representations or statements on behalf of or concerning ALNY, the Underwriter, each Account, or the Policies other than (i) the information or representations contained in the registration statement, including each Account Prospectus contained therein, relating to the Policies, as such registration statement and Account Prospectus may be amended from time to time; or (ii) in reports or voting instruction materials for each Account; or (iii) in sales literature or other promotional material approved by ALNY or its affiliates, except with the express written permission of ALNY. 11 (e) AIM shall adopt and implement procedures reasonably designed to ensure that information concerning ALNY, the Underwriter, and their respective affiliates that is intended for use only by brokers or agents selling the Policies (i.e., information that is not intended for distribution to Participants or offerees) ("broker only materials") is so used, and neither ALNY, the Underwriter, nor any of their respective affiliates shall be liable for any losses, damages or expense relating to the improper use of such broker only materials. SECTION 5. MIXED AND SHARED FUNDING 5.1 GENERAL. AVIF has applied for an order from the SEC exempting it from certain provisions of the 1940 Act and rules thereunder so that AVIF may be available for investment by certain other entities, including, without limitation, separate accounts funding variable life insurance contracts, separate accounts of insurance companies unaffiliated with ALNY, 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, if and only if AVIF implements Mixed and Shared Funding, pursuant to such an exemptive order or otherwise. AVIF hereby notifies ALNY that, in the event that AVIF implements Mixed and Shared Funding, it may be appropriate to include in the prospectus pursuant to which a Policy is offered disclosure regarding the potential risks of Mixed and Shared Funding. 5.2 DISINTERESTED DIRECTORS. AVIF 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 AVIF 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 45 days if the vacancy or vacancies may be filled by the Board; (b) for a period of 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. 12 5.3 MONITORING FOR MATERIAL IRRECONCILABLE CONFLICTS. AVIF agrees that its Board of Directors will monitor for the existence of any material irreconcilable conflict between the interests of the participants in all separate accounts of life insurance companies utilizing AVIF ("Participating Insurance Companies"), including each Account and participants on all qualified retirement and pension plans investing in AVIF ("Participating Plans"). ALNY agrees to inform the Board of Directors of AVIF of the existence of or any potential for any such material irreconcilable conflict of which it is aware. 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 Participants or by Participants of different Participating Insurance Companies; (f) a decision by a Participating Insurance Company to disregard the voting instructions of Participants; or (g) a decision by a Participating Plan to disregard the voting instructions of Plan participants. Consistent with the SEC's requirements in connection with exemptive orders of the type referred to in Section 5.1 hereof, ALNY 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 ALNY to disregard voting instructions of Participants. 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, ALNY will, if it is a Participating Insurance Company for which a material irreconcilable conflict 13 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 AVIF or any Fund and reinvesting such assets in a different investment medium, including another Fund of AVIF, or submitting the question whether such segregation should be implemented to a vote of all affected Participants and, as appropriate, segregating the assets of any particular group (e.g., annuity Participants, life insurance Participants) that votes in favor of such segregation, or offering to the affected Participants 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 ALNY's decision to disregard Participant voting instructions and that decision represents a minority position or would preclude a majority vote, ALNY may be required, at AVIF's election, to withdraw each Account's investment in AVIF or any Fund. No charge or penalty will be imposed as a result of such withdrawal. Any such withdrawal must take place within six months after AVIF gives notice to ALNY that this provision is being implemented, and until such withdrawal AVIF shall continue to accept and implement orders by ALNY for the purchase and redemption of Shares of AVIF. (c) If a material irreconcilable conflict arises because a particular state insurance regulator's decision applicable to ALNY conflicts with the majority of other state regulators, then ALNY will withdraw each Account's investment in AVIF within six months after AVIF's Board of Directors informs ALNY that it has determined that such decision has created a material irreconcilable conflict (after consideration of the interests of all Participants), and until such withdrawal AVIF shall continue to accept and implement orders by ALNY for the purchase and redemption of Shares of AVIF. (d) ALNY 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 Participants. (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 AVIF or any of its affiliates be required to establish a new funding medium for any Policies. ALNY will not be required by the terms hereof to establish a new funding medium for any Policies if an offer to do so has been declined by vote of a majority of Participants materially adversely affected by the material irreconcilable conflict. 14 5.5 NOTICE TO ALNY. -------------- AVIF will promptly make known in writing to ALNY 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. ------------------------------------------- ALNY and AVIF (or its investment adviser) will at least annually submit to the Board of Directors of AVIF 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 application filed with 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 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 AVIF is serving as an investment medium for variable life insurance Policies, 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, AVIF 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 REQUIREMENTS FOR OTHER INSURANCE COMPANIES. ------------------------------------------ AVIF will require that each Participating Insurance Company enter into an agreement with AVIF that contains in substance the same provisions as are set forth in Sections 4.1(b), 4.1(d), 4.3(a), 4.4(b), 4.5(a), 5, and 10 of this Agreement. 15 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 AVIF or ALNY upon the approval by (i) a majority of the Disinterested Directors or (ii) a majority vote of the Shares of the affected Fund that are held in the corresponding Subaccount of an Account (pursuant to the procedures set forth in Section 10 of this Agreement for voting Shares in accordance with Participant instructions); or (b) at the option of AVIF or AIM upon institution of formal proceedings against ALNY or its affiliates by the NASD, the SEC, any state insurance regulator or any other regulatory body regarding ALNY's obligations under this Agreement or related to the sale of the Policies, the operation of each Account, or the purchase of Shares, if, in each case, AVIF or AIM 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 (c) at the option of ALNY upon institution of formal proceedings against AVIF, its principal underwriter, or its investment adviser by the NASD, the SEC, or any state insurance regulator or any other regulatory body regarding AVIF's obligations under this Agreement or related to the operation or management of AVIF or the purchase of AVIF Shares, if, in each case, ALNY 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 ALNY, or the Subaccount corresponding to the Fund with respect to which the Agreement is to be terminated; or (d) 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 Policies issued or to be issued by ALNY; or (e) upon termination of the corresponding Subaccount's investment in the Fund pursuant to Section 5 hereof; or (f) at the option of ALNY if the Fund ceases to qualify as a RIC under Subchapter M of the Code or under successor or similar provisions, or if ALNY reasonably believes that the Fund may fail to so qualify; (g) at the option of ALNY if the Fund fails to comply with Section 817(h) of the Code or with successor or similar provisions (other than by reason of the failure of the Policies issued by 16 ALNY to qualify as annuity or life insurance contracts under the Code, or the failure of any Account or Policy to meet the definition of "segregated asset account" or "variable contract"; respectively, within the meaning of the Code), or if ALNY reasonably believes that the Fund may fail to so comply; or (h) at the option of AVIF or AIM if the Policies issued by ALNY cease to qualify as annuity contracts or life insurance contracts under the Code (other than by reason of the Fund's noncompliance with Section 817(h) or Subchapter M of the Code) or if interests in an Account under the Policies are not registered, where required, and, in all material respects, are not issued or sold in accordance with any applicable federal or state law; or (i) upon another Party's material breach of any provision of this Agreement. 6.2 NOTICE REQUIREMENT FOR TERMINATION. ---------------------------------- No termination of this Agreement will be effective unless and until the Party terminating this Agreement gives prior written notice to the other Party to this Agreement of its intent to terminate, and such notice shall set forth the basis for such termination. Furthermore: (a) in the event that any termination is based upon the provisions of Section 6.1(a) or 6.1(e) hereof, such prior written notice shall be given at least six (6) months in advance of the effective date of termination unless a shorter time is agreed to by the Parties hereto; (b) in the event that any termination is based upon the provisions of Section 6.1(b) or Section 6.1(c) hereof, such prior written notice shall be given at least ninety (90) days in advance of the effective date of termination unless a shorter time is agreed to by the Parties hereto; and (c) in the event that any termination is based upon the provisions of Section 6.1(d), Section 6.1(f), Section 6.1(g), Section 6.1(h) or Section 6.1(i) hereof, such prior written notice shall be given as soon as possible within twenty-four (24) hours after the terminating Party learns of the event causing termination to be required. 6.3 FUNDS TO REMAIN AVAILABLE. ------------------------- Except (a) as necessary to implement Participant-initiated transactions, (b) as required by state insurance laws or regulations, (c) as required pursuant to Section 5 of this Agreement, or (d) with respect to any Fund as to which this Agreement has terminated pursuant to Section 6.1 hereof, ALNY shall not (i) redeem AVIF Shares attributable to the Policies (as opposed to AVIF Shares attributable to ALNY's assets held in each Account), or (ii) prevent Participants from allocating payments to or transferring amounts from a Fund that was otherwise available under the Policies, 17 until six (6) months after ALNY shall have notified AVIF of its intention to do so and until 36 full calendar months shall have expired from the date on which an Account first invested in any Fund. 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 pursuant to Sections 6.1(b), 6.1(c), 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i) hereof, 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 "Initial Termination Date"). This continuation shall extend to the earlier of the date as of which an Account owns no Shares of the affected Fund or a date (the "Final Termination Date") six (6) months following the Initial Termination Date, except that ALNY may, by written notice shorten said six (6) month period in the case of a termination pursuant to Sections 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i). 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 after the Final Termination Date with respect thereto, or, in the case of a termination pursuant to Section 6.1(a), the termination date specified in the notice of termination. 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 Policies in such Fund. SECTION 8. ASSIGNMENT ---------------------- This Agreement may not be assigned by any Party, except with the written consent of each other Party. 18 SECTION 9. NOTICES ------------------- Notices and communications required or permitted by Section 2 hereof 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: Allstate Life Insurance Company of New York 3100 Sanders Road, Suite J5D Northbrook, Illinois 60062 Facsimile: (708) 402-3781 Attn: Michael Velotta, Esq. Allstate Life Financial Services, Inc. 3100 Sanders Road, Suite J5B Northbrook, Illinois 60062 Facsimile: (708) 402-3781 Attn: John Hedrick, Esq. AIM Variable Insurance Funds, Inc. 11 Greenway Plaza, Suite 1919 Houston, Texas 77046 Facsimile: (713) 993-9185 Attn: Nancy L. Martin, Esq. A I M Distributors, Inc. 11 Greenway Plaza, Suite 1919 Houston, Texas 77046 Facsimile: (713) 993-9185 Attn.: Nancy L. Martin, Esq. SECTION 10. VOTING PROCEDURES ------------------------------ Subject to the cost allocation procedures established pursuant to Section 3.1 hereof, ALNY will distribute all proxy material furnished by AVIF to Participants to whom pass-through voting privileges are required to be extended and will solicit voting instructions from Participants. ALNY will vote Shares in accordance with timely instructions received from Participants. ALNY will vote 19 Shares that are (a) not attributable to Participants to whom pass-through voting privileges are extended, or (b) attributable to Participants, but for which no timely instructions have been received, in the same proportion as Shares for which said instructions have been received from Participants. Neither ALNY nor any of its affiliates will in any way recommend action in connection with or oppose or interfere with the solicitation of proxies for the Shares held for such Participants, except with respect to matters as to which ALNY has the right, under Rule 6e-2 or 6e-3(T) under the 1940 Act, to vote the Shares without regard to voting instructions from Participants. ALNY reserves the right to vote shares held in any Account in its own right, to the extent permitted by law. ALNY shall be responsible for assuring that each of its Accounts holding Shares calculates voting privileges in a manner consistent with that of other Participating Insurance Companies or in the manner required by any Mixed and Shared Funding exemptive order that AVIF may obtain in the future. AVIF will notify ALNY (i) of any changes of interpretations or amendments to any Mixed and Shared Funding exemptive order it obtains in the future and (ii) of any proposal to be submitted to Participants for their approval (prior to any Board of Directors meeting of AVIF at which such proposals are presented). SECTION 11. FOREIGN TAX CREDITS -------------------------------- AVIF agrees to consult in advance with ALNY 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 AVIF AND AIM BY ALNY AND THE UNDERWRITER ------------------------------------------- (a) Except to the extent provided in Sections 12.1(b) and 12.1(c), below, ALNY and the Underwriter each agrees to indemnify and hold harmless AVIF, its affiliates (including AIM) except Participants, and each of their respective directors and officers, and each person, if any, who controls AVIF or its affiliates (including AIM) within the meaning of Section 15 of the 1933 Act (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 ALNY) 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 or acquisition of AVIF's Shares and: 20 (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 Account Prospectus, the Policies, or sales literature or advertising for the Policies (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 ALNY or the Underwriter by or on behalf of AVIF for use in any Account's 1933 Act registration statement, any Account Prospectus, the Policies, or sales literature or advertising or otherwise for use in connection with the sale of Policies or Shares (or any amendment or supplement to any of the foregoing); or (ii) arise out of or as a result of any other statements or representations (other than statements or representations contained in AVIF's 1933 Act registration statement, AVIF Prospectus, sales literature or advertising of AVIF, or any amendment or supplement to any of the foregoing, not supplied for use therein by or on behalf of ALNY or the Underwriter and on which such persons have reasonably relied) or the negligent, illegal or fraudulent conduct of ALNY, the Underwriter or their respective affiliates or persons under their control (including, without limitation, their employees and "Associated Persons," as that term is defined in paragraph (m) of Article I of the NASD's By-Laws), in connection with the sale or distribution of the Policies or Shares; or (iii) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in AVIF's 1933 Act registration statement, AVIF Prospectus, sales literature or advertising of AVIF, 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 AVIF or AIM by or on behalf of ALNY, the Underwriter or their respective affiliates for use in AVIF's 1933 Act registration statement, AVIF Prospectus, sales literature or advertising of AVIF, or any amendment or supplement to any of the foregoing; or (iv) arise as a result of any failure by ALNY or the 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 ALNY or the Underwriter in this Agreement or arise out of or result from any other material breach of this Agreement by ALNY or the Underwriter; or 21 (v) arise as a result of failure by the Policies issued by ALNY to qualify as life insurance, endowment, or annuity contracts under the Code, otherwise than by reason of any Fund's failure to comply with Subchapter M or Section 817(h) of the Code. (b) Neither ALNY nor the 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 AVIF. (c) Neither ALNY nor the Underwriter shall be liable under this Section 12.1 with respect to any action against an Indemnified Party unless AVIF or AIM shall have notified ALNY or the 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 ALNY or the Underwriter of any such action shall not relieve ALNY or the Underwriter from any liability which it may have to the Indemnified Party against whom such action is brought otherwise than on account of this Section 12.1. Except as otherwise provided herein, in case any such action is brought against an Indemnified Party, ALNY or the Underwriter shall be entitled to participate, at its own expense, in the defense of such action and ALNY or the Underwriter also shall be entitled to assume the defense thereof, with counsel approved by the Indemnified Party named in the action, which approval shall not be unreasonably withheld. After notice from ALNY or the Underwriter to such Indemnified Party of its election to assume the defense thereof, the Indemnified Party will cooperate fully with ALNY and shall bear the fees and expenses of any additional counsel retained by it, and ALNY 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. 12.2 OF ALNY AND THE UNDERWRITER BY AVIF AND AIM. (a) Except to the extent provided in Sections 12.2(d), 12.2(e) and 12.2(f), below, to the extent permitted by law, AVIF and/or AIM each agrees to indemnify and hold harmless ALNY, the Underwriter, their respective affiliates, and each of their respective directors and officers, and each person, if any, who controls ALNY, the Underwriter, or their respective affiliates within the meaning of Section 15 of the 1933 Act (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 AVIF and/or AIM) 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 or acquisition of AVIF's Shares and: 22 (i) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in AVIF's 1933 Act registration statement, AVIF Prospectus or sales literature or advertising of AVIF (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 AVIF or its affiliates by or on behalf of ALNY or its affiliates for use in AVIF's 1933 Act registration statement, AVIF Prospectus, or in sales literature or advertising (or any amendment or supplement to any of the foregoing); or (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 Account Prospectus, sales literature or advertising for the Policies, or any amendment or supplement to any of the foregoing, not supplied for use therein by or on behalf of AVIF or its affiliates and on which such persons have reasonably relied) or the negligent, illegal or fraudulent conduct of AVIF, its affiliates or persons under their control (including, without limitation, their employees and "Associated Persons"), in connection with the sale or distribution of AVIF 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 Account Prospectus, sales literature or advertising covering the Policies, 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 ALNY, the Underwriter, or their respective affiliates by AVIF or AIM for use in any Account's 1933 Act registration statement, any Account Prospectus, sales literature or advertising covering the Policies, or any amendment or supplement to any of the foregoing; or (iv) arise as a result of any failure by AVIF or AIM to perform their respective obligations, provide the services (including, but not limited to, the provision of correct net asset value) 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 AVIF or AIM in this Agreement or arise out of or result from any other material breach of this Agreement by AVIF or AIM. 23 (b) Except to the extent provided in Sections 12.2(c), 12.2(d) and 12.2(e) hereof, AVIF agrees 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 AVIF) 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 Participants asserting liability against ALNY or the Underwriter pursuant to the Policies, the costs of any ruling and closing agreement or other settlement with the IRS, and the cost of any substitution by ALNY of Shares of another investment company or portfolio for those of any adversely affected Fund as a funding medium for each Account that ALNY reasonably deems necessary or appropriate as a result of the noncompliance. (c) AVIF shall not 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 ALNY, each Account, the Underwriter or Participants. (d) AVIF shall not be liable under this Section 12.2 with respect to any action against an Indemnified Party unless the Indemnified Party shall have notified AVIF 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 AVIF of any such action shall not relieve AVIF 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, AVIF will be entitled to participate, at its own expense, in the defense of such action and also shall be entitled to assume the defense thereof, with counsel approved by the Indemnified Party named in the action, which approval shall not be unreasonably withheld. After notice from AVIF to such Indemnified Party of AVIF's election to assume the defense thereof, the Indemnified Party will cooperate fully with AVIF and shall bear the fees and expenses of any additional counsel retained by it, and AVIF 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. (e) In no event shall AVIF be liable under the indemnification provisions contained in this Agreement to any individual or entity, including without limitation, ALNY, the Underwriter, or any other Participating Insurance Company or any Participant, with respect to any losses, claims, damages, liabilities or expenses that arise out of or result from (i) a breach of any representation, 24 warranty, and/or covenant made by ALNY or the Underwriter hereunder or by any Participating Insurance Company under an agreement containing substantially similar representations, warranties and covenants; (ii) the failure by ALNY or any Participating Insurance Company to maintain its segregated asset account (which invests in any Fund) as a legally and validly established segregated asset account under applicable state law and as a duly registered unit investment trust under the provisions of the 1940 Act (unless exempt therefrom); or (iii) the failure by ALNY or any Participating Insurance Company to maintain its variable annuity and/or variable life insurance contracts (with respect to which any Fund serves as an underlying funding vehicle) as life insurance, endowment or annuity contracts under applicable provisions of the Code; provided, however, that the limitation of liability contained in this paragraph (e) shall not apply if the breach or failures described in subparagraphs (i), (ii) and (iii), above, by ALNY or any Participating Insurance Company resulted from the failure of AVIF to comply with the requirements of Subchapter M or Section 817(h) of the Code. 12.3 EFFECT OF NOTICE. Any notice given by the indemnifying Party to an Indemnified Party referred to in Section 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 Maryland law, without regard for that state's principles of conflict of laws. 25 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. 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. AIM VARIABLE INSURANCE FUNDS, INC. By -------------------------------- Title ----------------------------- 26 A I M DISTRIBUTORS, INC. By -------------------------------------- Title ----------------------------------- ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK, on behalf of itself and its Separate Accounts as provided in Schedule A By -------------------------------------- Title ----------------------------------- ALLSTATE LIFE FINANCIAL SERVICES, INC. By -------------------------------------- Title ----------------------------------- 27 SCHEDULE A FUNDS AVAILABLE UNDER THE POLICIES AIM Variable Insurance Funds, Inc. AIM V.I. Capital Appreciation Fund AIM V.I. Diversified Income Fund AIM V.I. Global Utilities Fund AIM V.I. Government Securities Fund AIM V.I. Growth Fund AIM V.I. Growth and Income Fund AIM V.I. International Equity Fund AIM V.I. Money Market Fund AIM V.I. Value Fund SEPARATE ACCOUNTS UTILIZING THE FUNDS Allstate Life Insurance Company of New York Separate Account A POLICIES FUNDED BY THE SEPARATE ACCOUNTS Individual and Group Flexible Premium Deferred Variable Annuity Contracts 28 EX-99.9 8 OPINION AND CONSENT ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK LAW AND REGULATION DEPARTMENT 3100 Sanders Road, J5D Northbrook, Illinois 60062 Direct Dial Number 847.402.2400 Facsimile 847.402.4371 Michael J. Velotta Vice President, Secretary and General Counsel September 13, 1996 TO: ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK NORTHBROOK, ILLINOIS 60062 FROM: MICHAEL J. VELOTTA VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL RE: FORM N-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 AND THE INVESTMENT COMPANY ACT OF 1940 FILE NO. 33-65381, 811-07467 With reference to the Registration Statement on Form N-4 filed by Allstate Life Insurance Company of New York with the Securities and Exchange Commission covering the Flexible Premium Deferred Variable Annuity Contracts ("Contracts"), I have examined such documents and such law as I have considered necessary and appropriate, and on the basis of such examination, it is my opinion that: 1. Allstate Life Insurance Company of New York is duly organized and existing under the laws of the State of New York and has been duly authorized to do business and to issue the Contracts by the Director of Insurance of the State of New York. 2. The Contracts covered by the above Registration Statement have been or will be approved and authorized by the Director of Insurance of the State of New York and when issued will be valid, legal and binding obligations of Allstate Life Insurance Company of New York. I hereby consent to the filing of this opinion as an exhibit to the above referenced Registration Statement and to the use of my name under the caption "Legal Matters" in the Statement of Additional Information constituting a part of the Registration Statement. Sincerely, /s/MICHAEL J. VELOTTA --------------------- Michael J. Velotta Vice President, Secretary and General Counsel EX-99.10A 9 INDEPENDENT AUDITORS' CONSENT INDEPENDENT AUDITORS' CONSENT We consent to the use in this Pre-Effective Amendment No. 1 to Registration Statement No. 33-65381 of Allstate Life Insurance Company of New York on Form N-4 of our report dated March 1, 1996 relating to the financial statements and financial statement schedules of Allstate Life Insurance Company of New York, appearing in the Prospectus, which is a part of such Registration Statement, and to the reference to us under the heading "Experts" in such Prospectus. /s/ DELOITTE & TOUCHE LLP Chicago, Illinois September 20, 1996 EX-99.10B 10 CONSENT OF ATTORNEYS [LETTERHEAD OF SUTHERLAND, ASBILL & BRENNAN] September 6, 1996 Allstate Life Insurance Company of New York 3100 Sanders Road Northbrook, IL 60062 Ladies and Gentlemen: We hereby consent to the reference to our name under the caption "Legal Matters" in the prospectus filed as part of Pre-Effective Amendment No. 1 to the Registration Statement on Form N-4 (File No. 33-65381) filed by Allstate Life of New York Separate Account A for certain variable annuity contracts. In giving this consent, we do not admit that we are in the category of persons whose consent is required under Section 7 of the Securities Act of 1933. Very truly yours, SUTHERLAND, ASBILL & BRENNAN By: /s/ Stephen E. Roth -------------------------- Stephen E. Roth EX-99.13 11 SCHEDULE OF COMPUTATION
AIM V.I. CAPITAL APPRECIATION 6/30/95-6/30/96 NO. YEAR 1.000 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE INIT DEPOSIT 30-Jun-95 1000.00 8.993014 111.19743 FEE 28-Jun-96 1.1666667 10.917601 0.10686 RESULTING VALUE 28-Jun-96 10.917601 111.09056 1212.8425 1.000 FORMULA: 1000*(1+T)= 1212.8425 -($1000)*(0.9)*(0.06) = 1158.8425 T = 15.88% R = 15.88% AIM V.I. DIVERSIFIED INCOME 6/30/95-6/30/96 NO. YEAR 1.000 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE INIT DEPOSIT 30-Jun-95 1000.00 9.470229 105.59407 FEE 28-Jun-96 1.1666667 10.205379 0.11432 RESULTING VALUE 28-Jun-96 10.205379 105.47975 1076.4608 1.000 FORMULA: 1000*(1+T)= 1076.4608 -($1000)*(0.9)*(0.06) = 1022.4608 T = 2.25% R = 2.25% AIM V.I. GOVERNMENT SECURITIES 6/30/95-6/30/96 NO. YEAR 1.000 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE INIT DEPOSIT 30-Jun-95 1000.00 9.639614 103.73859 FEE 28-Jun-96 1.1666667 9.832399 0.11866 RESULTING VALUE 28-Jun-96 9.832399 103.61994 1018.8326 1.000 FORMULA: 1000*(1+T)= 1018.8326 -($1000)*(0.9)*(0.06) = 964.8326 T = -3.52% R = -3.52% AIM V.I. GROWTH 6/30/95-6/30/96 NO. YEAR 1.000 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE INIT DEPOSIT 30-Jun-95 1000.00 9.012330 110.95910 FEE 28-Jun-96 1.1666667 10.587857 0.11019 RESULTING VALUE 28-Jun-96 10.587857 110.84891 1173.6524 1.000 FORMULA: 1000*(1+T)= 1173.6524 -($1000)*(0.9)*(0.06) = 1119.6524 T = 11.97% R = 11.97% AIM V.I. GROWTH AND INCOME 6/30/95-6/30/96 NO. YEAR 1.000 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE INIT DEPOSIT 30-Jun-95 1000.00 8.946001 111.78179 FEE 28-Jun-96 1.1666667 10.747666 0.10855 RESULTING VALUE 28-Jun-96 10.747666 111.67324 1200.2267 1.000 FORMULA: 1000*(1+T)= 1200.2267 -($1000)*(0.9)*(0.06) = 1146.2267 T = 14.62% R = 14.62% AIM V.I. INTERNATIONAL EQUITY 6/30/95-6/30/96 NO. YEAR 1.000 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE INIT DEPOSIT 30-Jun-95 1000.00 9.401360 106.36759 FEE 28-Jun-96 1.1666667 11.337146 0.10291 RESULTING VALUE 28-Jun-96 11.337146 106.26468 1204.7382 1.000 FORMULA: 1000*(1+T)= 1204.7382 -($1000)*(0.9)*(0.06) = 1150.7382 T = 15.07% R = 15.07% AIM V.I. GLOBAL UTILITIES 6/30/95-6/30/96 NO. YEAR 1.000 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE INIT DEPOSIT 30-Jun-95 1000.00 9.050919 110.48602 FEE 28-Jun-96 1.1666667 10.493152 0.11118 RESULTING VALUE 28-Jun-96 10.493152 110.37483 1158.1799 1.000 FORMULA: 1000*(1+T)= 1158.1799 -($1000)*(0.9)*(0.06) = 1104.1799 T = 10.42% R = 10.42% AIM V.I. VALUE 6/30/95-6/30/96 NO. YEAR 1.000 TRANSACTION DATE $ VALUE UNIT VALUE NO. UNITS END VALUE INIT DEPOSIT 30-Jun-95 1000.00 8.962818 111.57205 FEE 28-Jun-96 1.1666667 10.261719 0.11369 RESULTING VALUE 28-Jun-96 10.261719 111.45836 1143.7544 1.000 FORMULA: 1000*(1+T)= 1143.7544 -($1000)*(0.9)*(0.06) = 1089.7544 T = 8.98% R = 8.98%
EX-99.15 12 POWERS OF ATTORNEY POWER OF ATTORNEY WITH RESPECT TO THE ALLSTATE LIFE OF NEW YORK SEPARATE ACCOUNT A Know all men by these presents that Sharmaine M. Miller, whose signature appears below, constitutes and appoints Louis G. Lower, II, and Michael J. Velotta, and each of them, her attorneys-in-fact, with power of substitution, and her in any and all capacities, to sign any Form N-4 registration statements and amendments thereto 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. September 16, 1996 ________________________ Date /s/ SHARMAINE M. MILLER ------------------------ Sharmaine M. Miller Chief Administrative Officer and Director Allstate Life Insurance Company of New York POWER OF ATTORNEY WITH RESPECT TO THE ALLSTATE LIFE OF NEW YORK SEPARATE ACCOUNT A Know all men by these presents that Kevin R. Slawin, whose signature appears below, constitutes and appoints Louis G. Lower, II, and Michael J. Velotta, and each of them, his attorneys-in-fact, with power of substitution, and him in any and all capacities, to sign any Form N-4 registration statements and amendments thereto 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. September 18, 1996 ------------------------------- Date /s/ KEVIN R. SLAWIN ------------------------ Kevin R. Slawin Vice President and Director Allstate Life Insurance Company of New York POWER OF ATTORNEY WITH RESPECT TO THE ALLSTATE LIFE OF NEW YORK SEPARATE ACCOUNT A Know all men by these presents that Karen C. Gardner, whose signature appears below, constitutes and appoints Louis G. Lower, II, and Michael J. Velotta, and each of them, her attorneys-in-fact, with power of substitution, and her in any and all capacities, to sign any Form N-4 registration statements and amendments thereto 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. September 18, 1996 ----------------------------------- Date /s/ KAREN C. GARDNER ----------------------------------- Karen C. Gardner Vice President Allstate Life Insurance Company of New York POWER OF ATTORNEY WITH RESPECT TO THE ALLSTATE LIFE OF NEW YORK SEPARATE ACCOUNT A Know all men by these presents that Thomas A. McAvity, Jr., whose signature appears below, constitutes and appoints Louis G. Lower, II, and Michael J. Velotta, and each of them, his attorneys-in-fact, with power of substitution, and him in any and all capacities, to sign any Form N-4 registration statements and amendments thereto 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. September 18, 1996 ------------------------------- Date /s/ THOMAS A. McAVITY, Jr. ------------------------------- Thomas A. McAvity, Jr. Vice President Allstate Life Insurance Company of New York POWER OF ATTORNEY WITH RESPECT TO THE ALLSTATE LIFE OF NEW YORK SEPARATE ACCOUNT A Know all men by these presents that Casey J. Sylla, whose signature appears below, constitutes and appoints Louis G. Lower, II, and Michael J. Velotta, and each of them, his attorneys-in-fact, with power of substitution, and him in any and all capacities, to sign any Form N-4 registration statements and amendments thereto 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. September 18, 1996 -------------------------------- Date /s/ CASEY J. SYLLA -------------------------------- Casey J. Sylla Chief Investment Officer Allstate Life Insurance Company of New York EX-27 13 FINANCIAL DATA SCHEDULE
7 1,000 6-MOS 12-MOS DEC-31-1996 DEC-31-1995 JAN-01-1996 JAN-01-1995 JUN-30-1996 DEC-31-1995 1,323,712 1,424,893 0 0 0 0 0 0 83,403 86,394 0 0 1,462,487 1,541,329 1,957 1,472 3,009 3,331 58,127 53,944 1,793,492 1,842,969 824,929 838,739 0 0 0 0 509,737 499,548 0 0 2,000 2,000 0 0 0 0 208,465 248,067 1,793,492 1,842,969 57,221 148,316 55,424 104,384 351 (1,846) 0 0 85,389 198,055 2,965 5,502 0 0 16,228 29,433 5,990 9,911 10,238 19,522 0 0 0 0 0 0 10,238 19,522 127.98 244.02 127.98 244.02 5,009 3,527 7,738 10,806 62 134 6,614 9,398 215 60 5,980 5,009 0 0
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