-----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, Ag7v7sWxpisCL4PzjMtJ/1NXtU0mQlZh4u84e+JOnhIPIoHUPVead9JVxbobJSLB BRR6HduVz1OP71TVupUkLQ== 0000945094-99-000212.txt : 19990517 0000945094-99-000212.hdr.sgml : 19990517 ACCESSION NUMBER: 0000945094-99-000212 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990514 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTHBROOK LIFE INSURANCE CO CENTRAL INDEX KEY: 0000716791 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 363001527 STATE OF INCORPORATION: IL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-39268 FILM NUMBER: 99624479 BUSINESS ADDRESS: STREET 1: 3100 SANDERS RD CITY: NORTHBROOK STATE: IL ZIP: 60062 BUSINESS PHONE: 7084025000 MAIL ADDRESS: STREET 1: 3100 SANDERS RD CITY: NORTHBROOK STATE: IL ZIP: 60062 10-Q 1 FORM 10-Q FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 The registrant meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this Form with the reduced disclosure format. [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: March 31, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number: 33-50884 33-84480 33-90272 33-35412 333-25057 002-82511 NORTHBROOK LIFE INSURANCE COMPANY (Exact name of registrant as specified in its charter) ILLINOIS 35-300152 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 3100 Sanders Road Northbrook, Illinois 60062 (Address of principal executive offices)(Zip Code) 847/402-2400 (Registrant's telephone number, including area code) Not Applicable (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes../X/.. No Indicate the number of shares of each of the issuer's classes of common stock, as of March 31, 1999; there were 25,000 shares of common capital stock outstanding, par value $100 per share all of which shares are held by Allstate Life Insurance Company. PART I - FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS Statements of Financial Position March 31, 1999(Unaudited) and December 31, 1998.................. 3 Statements of Operations Three Months Ended March 31, 1999 and March 31, 1998 (Unaudited)....................................... 4 Statements of Cash Flows Three Months Ended March 31, 1999 and March 31, 1998 (Unaudited)................................. 5 Notes to Financial Statements.................................... 6 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS..................... 9 Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK*..................................................N/A PART II - OTHER INFORMATION Item 1. LEGAL PROCEEDINGS..................................................14 Item 2. CHANGES IN SECURITIES*............................................N/A Item 3. DEFAULTS UPON SENIOR SECURITIES*..................................N/A Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS*..............N/A Item 5. OTHER INFORMATION..................................................14 Item 6. EXHIBITS AND REPORTS ON FORM 8-K...................................15 SIGNATURE PAGE...............................................................16 *Omitted pursuant to General Instruction H(2) of Form 10-Q. -2-
NORTHBROOK LIFE INSURANCE COMPANY STATEMENTS OF FINANCIAL POSITION MARCH 31, DECEMBER 31, 1999 1998 ------------- ------------- ($ in thousands) (UNAUDITED) ASSETS Investments Fixed income securities at fair value (amortized cost $83,779 and $81,156) $ 86,761 $ 86,336 Short-term 4,486 5,083 ------------- ------------- Total investments 91,247 91,419 Reinsurance recoverable from Allstate Life Insurance Company 2,107,850 2,148,091 Other assets 7,495 8,206 Separate Accounts 7,218,185 7,031,083 ------------- ------------- TOTAL ASSETS $ 9,424,777 $ 9,278,799 ============= ============= LIABILITIES Reserve for life-contingent contract benefits 145,061 145,055 Contractholder funds 1,962,893 2,003,122 Current income taxes payable 2,526 1,830 Deferred income taxes 2,508 3,316 Payable to affiliates, net 6,006 6,586 Separate Accounts 7,218,185 7,031,083 ------------- ------------- TOTAL LIABILITIES 9,337,179 9,190,992 ------------- ------------- COMMITMENTS AND CONTINGENT LIABILITIES (NOTE 4) SHAREHOLDER'S EQUITY Common stock, $100 par value, 25,000 shares authorized, issued and outstanding 2,500 2,500 Additional capital paid-in 56,600 56,600 Retained income 26,560 25,340 Accumulated other comprehensive income: Unrealized net capital gains 1,938 3,367 ------------- ------------- TOTAL ACCUMULATED OTHER COMPREHENSIVE INCOME 1,938 3,367 ------------- ------------- TOTAL SHAREHOLDER'S EQUITY 87,598 87,807 ------------- ------------- TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $ 9,424,777 $ 9,278,799 ============= ============= See notes to financial statements.
3 NORTHBROOK LIFE INSURANCE COMPANY STATEMENTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, ------------------------ ($ in thousands) 1999 1998 ---------- ---------- (UNAUDITED) REVENUES Net investment income $ 1,487 $ 1,425 Realized capital gains and losses 389 -- ---------- ---------- INCOME BEFORE INCOME TAX EXPENSE 1,876 1,425 Income tax expense 656 496 ---------- ---------- NET INCOME $ 1,220 $ 929 ========== ========== See notes to financial statements. 4 NORTHBROOK LIFE INSURANCE COMPANY STATEMENTS OF CASH FLOWS THREE MONTHS ENDED MARCH 31, -------------------- ($ in thousands) 1999 1998 --------- -------- (UNAUDITED) CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 1,220 $ 929 Adjustments to reconcile net income to net cash provided by operating activities Depreciation, amortization and other non-cash items 187 153 Realized capital gains and losses (389) -- Changes in: Life-contingent contract benefits and contractholder funds 18 (80) Income taxes payable 657 (155) Other operating assets and liabilities (93) 577 -------- -------- Net cash provided by operating activities 1,600 1,424 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Fixed income securities Proceeds from sales 4,044 -- Investment collections 2,177 3,515 Investment purchases (8,430) (6,556) Change in short-term investments, net 609 2,695 -------- -------- Net cash used in investing activities (1,600) (346) -------- -------- NET INCREASE IN CASH -- 1,078 CASH AT THE BEGINNING OF PERIOD -- -- -------- -------- CASH AT END OF PERIOD $ -- $ 1,078 ======== ======== See notes to financial statements. 5 NORTHBROOK LIFE INSURANCE COMPANY NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF PRESENTATION The accompanying financial statements include the accounts of Northbrook Life Insurance Company (the "Company"), a wholly owned subsidiary of Allstate Life Insurance Company ("ALIC"), which is wholly owned by Allstate Insurance Company ("AIC"), a wholly owned subsidiary of The Allstate Corporation (the "Corporation"). These financial statements have been prepared in conformity with generally accepted accounting principles. The financial statements and notes as of March 31, 1999 and for the three month periods ended March 31, 1999 and 1998 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 and notes should be read in conjunction with the financial statements and notes thereto included in the Northbrook Life Insurance Company Annual Report on Form 10K for 1998. The results of operations for the interim periods should not be considered indicative of results to be expected for the full year. Effective January 1, 1999, the Company adopted Statement of Position ("SOP") 97-3, "Accounting by Insurance and Other Enterprises for Insurance-Related Assessments." The SOP provides guidance concerning when to recognize a liability for insurance-related assessments and how those liabilities should be measured. Specifically, insurance-related assessments should be recognized as liabilities when all of the following criteria have been met: 1) an assessment has been imposed or it is probable that an assessment will be imposed, 2) the event obligating an entity to pay an assessment has occurred and 3) the amount of the assessment can be reasonably estimated. The adoption of this statement was immaterial to the Company's results of operations and financial position. To conform with the 1999 presentation, certain amounts in the prior years' financial statements and notes have been reclassified. 2. REINSURANCE The Company has reinsurance agreements whereby substantially all premiums, contract charges, credited interest, policy benefits and certain expenses are ceded to ALIC and reflected net of such reinsurance in the statements of operations. The amounts shown in the Company's statements of operations relate to the investment of those assets of the Company that are not transferred under reinsurance agreements. Reinsurance recoverable and the related reserve for life-contingent contract benefits and contractholder funds are reported separately in the statements of financial position. The Company continues to have primary liability as the direct insurer for risks reinsured. 6 NORTHBROOK LIFE INSURANCE COMPANY NOTES TO FINANCIAL STATEMENTS (UNAUDITED)(cont'd) Investment income earned on the assets which support contractholder funds and the reserve for life-contingent contract benefits is not included in the Company's financial statements as those assets are owned and managed under the terms of reinsurance agreements. The following amounts were ceded to ALIC under reinsurance agreements. THREE MONTHS ENDED MARCH 31, ------------------- ($ in thousands) 1999 1998 -------- -------- Premiums $ 840 $ 366 Contract charges 27,478 23,708 Credited interest, policy benefits, and expenses 55,494 52,663 3. COMPREHENSIVE INCOME The components of other comprehensive income on a pretax and after-tax basis for the three months ended March 31, are as follows:
($ in thousands) 1999 1998 ---------------------------------- ---------------------------------- AFTER- AFTER- PRETAX TAX TAX PRETAX TAX TAX ------ --- --- ------ --- --- Unrealized capital gains and losses: ------------------------------- Unrealized holding losses arising during the period $ (1,809) $ 633 $ (1,176) $ (106) $ 37 $ (69) Less: reclassification adjust- ment for realized net capital gains included in net income 389 (136) 253 - - - ---------- --------- ----------- ---------- -------- ---------- Unrealized net capital losses (2,198) 769 (1,429) (106) 37 (69) ---------- --------- ----------- ---------- -------- ---------- Other comprehensive loss $ (2,198) $ 769 (1,429) $ (106) $ 37 (69) ========== ========= ----------- ========== ======== ---------- Net income 1,220 929 ----------- ---------- Comprehensive (loss) income $ (209) $ 860 ========== ==========
7 NORTHBROOK LIFE INSURANCE COMPANY NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (cont'd) 4. REGULATION AND LEGAL PROCEEDINGS The Company is subject to the effects of a changing social, economic and regulatory environment. Public and regulatory initiatives have varied and have included efforts to adversely influence and restrict premium rates, restrict the Company's ability to cancel policies, impose underwriting standards and expand overall regulation. The ultimate changes and eventual effects, if any, of these initiatives are uncertain. Various other legal and regulatory actions are currently pending that involve the Company and specific aspects of its conduct of business. In the opinion of management, the ultimate liability, if any, in one or more of these actions in excess of amounts currently reserved is not expected to have a material effect on the results of operations, liquidity or financial position of the Company. 8 NORTHBROOK LIFE INSURANCE COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion highlights significant factors influencing results of operations and changes in financial position of Northbrook Life Insurance Company (the "Company"). It should be read in conjunction with the financial statements and related notes thereto found under items 7 and 8 of Part II of the Northbrook Life Insurance Company Annual Report on Form 10-K for the year ended December 31, 1998. The Company, a wholly owned subsidiary of Allstate Life Insurance Company ("ALIC"), which is wholly owned by Allstate Insurance Company ("AIC"), a wholly owned subsidiary of The Allstate Corporation (the "Corporation"), markets savings products and life insurance products through Dean Witter Reynolds Inc., a wholly owned subsidiary of Morgan Stanley Dean Witter. Savings products consist of fixed annuity products, including indexed, market value adjusted and structured settlement annuities, as well as variable annuities. Life insurance includes universal life and variable life products. The Company re-domesticated its operations from Illinois to Arizona in 1998. The Company has identified itself as a single segment entity. The assets and liabilities related to flexible premium deferred variable annuity contracts and variable life policies are legally segregated and reflected as Separate Account assets and liabilities and are carried at fair value in the statements of financial position. Investment income and realized gains and losses of the Separate Accounts accrue directly to the contractholders (net of fees) and, therefore, are not included in the Company's statements of operations. RESULTS OF OPERATIONS ($ in thousands) THREE MONTHS ENDED MARCH 31, 1999 1998 --------- --------- Net investment income $ 1,487 $ 1,425 ============= ============= Realized capital gains and losses, after-tax $ 253 $ - ============= ============= Net income $ 1,220 $ 929 ============= ============= Investments $ 91,247 $ 79,712 ============= ============= The Company has reinsurance agreements under which substantially all contract and policy related transactions are transferred to ALIC. The Company's results of operations include only net investment income and realized capital gains and losses earned on the assets of the Company that are not transferred under reinsurance agreements. Net income for the first quarter of 1999 was $1.2 million compared to $929 thousand for the first quarter of 1998. The increase in net income was primarily due to an increase in realized capital gains from the sale of mortgage-backed securities. 9 NORTHBROOK LIFE INSURANCE COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (cont'd) Pretax net investment income for the three month period ended March 31, 1999 was $1.5 million compared to $1.4 million for the same period last year as investment income on higher investment balances were partially offset by lower portfolio yields and higher investment expenses. Lower investment yields are due, in part, to the investment of proceeds from calls and maturities and the investment of positive cash flows from operations in securities yielding less than the average portfolio rate. In relatively low interest rate environments, funds from maturing investments may be reinvested at interest rates lower than those which prevailed when the funds were previously invested, resulting in lower investment yields. FINANCIAL POSITION ($ in thousands) MARCH 31, DECEMBER 31, 1999 1998 ------------- ------------- Fixed income securities (1) $ 86,761 $ 86,336 Short-term investments 4,486 5,083 ------------- ------------- Total investments $ 91,247 $ 91,419 ============= ============= Reinsurance recoverable from ALIC $ 2,107,850 $ 2,148,091 ============= ============= Separate Account assets and liabilities $ 7,218,185 $ 7,031,083 ============= ============= Reserve for life-contingent contract benefits $ 145,061 $ 145,055 ============= ============= Contractholder funds $ 1,962,893 $ 2,003,122 ============= ============= (1) Fixed income securities are carried at fair value. Amortized cost for these securities was $83,779 and $81,156 at March 31, 1999 and December 31, 1998, respectively. Total investments were to $91.2 million at March 31, 1999 compared to $91.4 million at December 31, 1998. Positive cash flows generated from operations were more than offset by a decrease in unrealized net capital gains on fixed income securities. At March 31, 1999, unrealized net capital gains on the fixed income securities were $3.0 million compared to $5.2 million at December 31, 1998. At March 31, 1999, all of the Company's fixed income securities portfolio is rated investment grade, which is defined by the Company as a security having a National Association of Insurance Commissioners ("NAIC") rating of 1 or 2, a Moody's rating of Aaa, Aa, A or Baa, or a comparable Company internal rating. During the three months ended March 31, 1999, contractholder funds and reinsurance recoverable for ALIC decreased by $40.2 million. Deposits and interest credited to contractholders was more than offset by fixed annuity surrenders and withdrawals. Reinsurance recoverable from ALIC relates to contract benefit obligations ceded to ALIC. Separate Account assets and liabilities increased $187.1 million to $7.2 billion at March 31, 1999. The increases were primarily attributable to sales of variable annuity contracts and favorable investment performance of the Separate Account investment portfolios, partially offset by surrenders and withdrawals. 10 NORTHBROOK LIFE INSURANCE COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (cont'd) LIQUIDITY AND CAPITAL RESOURCES Under the terms of reinsurance agreements, substantially all premiums and deposits, excluding those relating to Separate Accounts, are transferred to ALIC, which maintains the investment portfolio supporting the Company's products. Substantially all payments of policyholder claims, benefits, contract maturities, contract surrenders and withdrawals and certain operating costs are also reimbursed by ALIC under the terms of the reinsurance agreements. The Company continues to have primary liability as a direct insurer for risks reinsured. The Company's ability to meet liquidity demands is dependant on ALIC's ability to meet those demands. ALIC's claims-paying ability was rated Aa2, AA+ and A+ by Moody's, Standard and Poor's and A.M. Best, respectively, at March 31, 1999. The primary sources for the remainder of the Company's funds are collection of principal and interest from the investment portfolio and capital contributions from ALIC. The primary uses for the remainder of the Company's funds are to purchase investments and pay costs associated with the maintenance of the Company's investment portfolio. YEAR 2000 The Company is dependent upon certain services provided for it by the Corporation including computer-related systems, and systems and equipment that are not typically thought of as computer-related (referred to as "non-IT"). For this reason, the Company is reliant upon the Corporation for the establishment and maintenance of its computer-related systems and non-IT. The Corporation is heavily dependent upon complex computer systems for all phases of its operations, including customer service, insurance processing, underwriting, loss reserving, investments and other enterprise systems. Since many of the Corporation's older computer software programs recognize only the last two digits of the year in any date, some software may fail to operate properly in or after the year 1999, if the software is not reprogrammed, remediated, or replaced ("Year 2000"). Also, many systems and equipment that are not typically thought of as computer-related (referred to as "non-IT") contain embedded hardware or software that may have a Year 2000 sensitive component. The Corporation believes that many of its counterparties and suppliers also have Year 2000 issues and non-IT issues which could affect the Corporation. In 1995, the Corporation commenced a plan consisting of four phases which are intended to mitigate and/or prevent the adverse affects of the Year 2000 issues on its systems: 1) inventory and assessment of affected systems and equipment, 2) remediation and compliance of systems and equipment through strategies that include the replacement or enhancement of existing systems, upgrades to operating systems already covered by maintenance agreements and modifications to existing systems to make them Year 2000 compliant, 3) testing of systems using clock-forward testing for both current and future dates and for dates which trigger specific processing, and 4) contingency planning which will address possible adverse scenarios and the potential financial impact to the Corporation's results of operations, liquidity or financial position. The Corporation believes that the first three steps of this plan, assessment, remediation and testing, including clock-forward testing which is being performed on the Corporation's systems and non-IT, are mostly complete for the Corporation's critical systems. The Corporation is relying on remediation techniques for its midrange and personal computer environments, and certain mainframe applications. 11 NORTHBROOK LIFE INSURANCE COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (cont'd) Certain other processing systems are planned to be remediated by the middle of 1999, and the implementation and rollout of the remediated personal computer environment will continue through the third quarter of 1999. Some systems and non-IT related to discontinued or non-critical functions of the Corporation are planned to be abandoned by the end of 1999. The Corporation is currently in the process of developing contingency plans in the event that the systems supporting key processes are not Year 2000 compliant in or after the year 1999. Management believes these contingency plans should be completed by mid-1999 with testing of these plans conducted throughout the second half of 1999. Management has also begun to identify and model the impacts of the most reasonably likely worst case scenarios. Until these plans are complete, management is unable to determine an estimate of the most reasonably likely worst case scenario due to issues relating to the Year 2000. In addition, the Corporation is actively working with its major external counterparties and suppliers to assess their compliance efforts and the Corporation's exposure to both their Year 2000 issues and non-IT issues. This assessment has included the solicitation of external counterparties and suppliers, evaluating responses received and testing third party interfaces and interactions to determine compliance. Currently the Corporation has solicited and has received responses from the majority of its counterparties and suppliers. These responses generally state that they believe they will be Year 2000 compliant and that no transactions will be affected. However, certain vendors are also in ongoing assessment and testing of their products whereby they are currently unable to identify all potential problems in certain products which are used by the Corporation. The Corporation believes that these vendors will make no statements regarding their Year 2000 readiness other than to publish declarations addressing specific compliance issues identified with their products. The Corporation has begun to work with these key vendors and is developing procedures in order to stay aware of any compliance issues encountered by these vendors. The Corporation has also decided to test certain interfaces and interactions to gain additional assurance on third party compliance. If key vendors are unable to meet the Year 2000 requirement, the Corporation is preparing contingency plans that will allow the Corporation to continue to sell its products and to service its customers. Management believes these contingency plans should be completed by mid-1999. The Corporation currently does not have sufficient information to determine whether or not all of its external counterparties and suppliers will be Year 2000 ready. The Corporation may be exposed to the risk that the issuers of investments in its portfolio will be adversely impacted by Year 2000 issues. The Corporation assesses the impact which Year 2000 issues have on the Corporation's investments as part of due diligence for proposed new investments and in its ongoing review of all current portfolio holdings. Any recommended actions with respect to individual investments are determined by taking into account the potential impact of Year 2000 on the issuer. The Corporation currently does not have sufficient information to determine the impacts of such exposures on their results of operations, liquidity or financial position. 12 NORTHBROOK LIFE INSURANCE COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (cont'd) The Corporation presently believes that it will resolve the Year 2000 issue in a timely manner. Year 2000 costs are expensed as incurred, therefore, the majority of the expenses related to this project have been incurred as of March 31, 1999. The Corporation estimates that approximately $125 million in costs will be incurred between the years 1995 and 2000. These amounts include costs directly related to fixing Year 2000 issues, such as modifying software and hiring Year 2000 solution providers, as well as costs incurred to replace certain non-compliant systems which would not have been otherwise replaced. A portion of these costs will be incurred by the Company on a pro rata basis of usage of the computer-related systems and non-IT, as compared to the usage of all entities which share these services with the Corporation. These amounts are not expected to be material to the results of operations of the Company. FORWARD-LOOKING STATEMENTS The statements contained in this Management's Discussion and Analysis that are not historical information are forward-looking statements that are based on management's estimates, assumptions and projections. The Private Securities Litigation Reform Act of 1995 provides a safe harbor under The Securities Act of 1933 and The Securities Exchange Act of 1934 for forward-looking statements. 13 PART II - OTHER INFORMATION Item 1. LEGAL PROCEEDINGS The Company and its Board of Directors know of no material legal proceedings pending to which the Company is a party or which would materially affect the Company. 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. Item 5. OTHER INFORMATION Not applicable. Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits required by Item 601 of Regulation S-K (2) None (3)(i) Amended and Restated Articles of Incorporation and Articles of Redomestication of Northbrook Life Insurance Company (Incorporated herein by reference to the Company's Form 10-K Annual Report for the year ended December 31, 1998) (3)(ii) Amended and Restated By-laws of Northbrook Life Insurance Company (Incorporated herein by reference to the Company's Form 10-K Annual Report for the year ended December 31, 1998) (4) None (10)(a) Reinsurance Agreement between Northbrook Life Insurance Company and Allstate Life Insurance Company (Incorporated herein by reference to the Company's Form S-1 Registration Statement (File No. 033-84480) dated April 1, 1997) (10)(b) Amendment No. 1 to the Reinsurance Agreement between Northbrook Life Insurance Company and Allstate Life Insurance Company, dated June 6, 1991 (10)(c) Amendment No. 2 to the Reinsurance Agreement between Northbrook Life Insurance Company and Allstate Life Insurance Company, dated September 28, 1993 (10)(d) Amendment No. 3 to the Reinsurance Agreement between Northbrook Life Insurance Company and allstate Life Insurance Company, dated February 23, 1995 (10)(e) Amendment No. 4 to the Reinsurance Agreement between Northbrook Life Insurance Company and Alstate Life Insurance Company, dated June 12, 1995 (10)(f) Amendment No. 5 to the Reinsurance Agreement between Northbrook Life Insurance Company and Allstate Life Insurance Company, dated January 26, 1996 (10)(g) Amendment No. 6 to the Reinsurance Agreement between Northbrook Life Insurance Company and Allstate Life Insurance Company, dated January 15, 1997 (10)(h) Amendment No. 7 to the Reinsurance Agreement between Northbrook Life Insurance Company and Allstate Life Insurance Company, dated October 22, 1998 (10)(i) Modified Coinsurance Agreement between Northbrook Life Insurance Company and Allstate Life Insurance Company, dated October 20, 1987 (10)(j) Amendment No. 1 to the Modified Coinsurance Agreement between Northbrook Life Insurance Company and Allstate Life Insurance Company, dated June 6, 1991 (10)(k) Amendment No. 2 to the Modified Coinsurance Agreement between Northbrook Life Insurance Company and Allstate Life Insurance Company, dated June 8, 1995 (10)(l) Amendment No. 3 to the Modified Coinsurance Agreement between Northbrook Life Insurance Company and Allstate Life Insurance Company, dated February 23, 1995 (10)(m) Amendment No. 4 to the Modified Coinsurance Agreement between Northbrook Life Insurance Company and Allstate Life Insurance Company, January 26, 1996 14 (10)(n) Amendment No. 5 to the Modified Coinsurance Agreement between Northbrook Life Insurance Company and Allstate Life Insurance Company, dated January 15, 1997 (10)(o) Amendment No. 6 to the Modified Coinsurance Agreement between Northbrook Life Insurance Company and Allstate Life Insurance Company, dated October 22, 1998 (11) Not Required (15) None (18) None (19) None (22) None (23) Not required (24) None (27) Financial Data Schedule (b) Reports on 8-K No reports on Form 8-K were filed during the first quarter of 1999. 15 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized, on the 14th day of May 1999. NORTHBROOK LIFE INSURANCE COMPANY --------------------------------- (Registrant) /s/ LOUIS G. LOWER, II CHAIRMAN OF THE BOARD OF DIRECTORS - ------------------------ AND CHIEF EXECUTIVE OFFICER LOUIS G. LOWER, II (Principal Executive Officer) /s/ KEITH A. HAUSCHILDT ASSISTANT VICE PRESIDENT AND CONTROLLER - ------------------------ (Chief Accounting Officer) KEITH A. HAUSCHILDT 16 Exhibit Index Exhibit No. Exhibit (10)(b) Amendment No. 1 to the Reinsurance Agreement between Northbrook Life Insurance Company and Allstate Life Insurance Company, dated June 6, 1991 (10)(c) Amendment No. 2 to the Reinsurance Agreement between Northbrook Life Insurance Company and Allstate Life Insurance Company, dated September 28, 1993 (10)(d) Amendment No. 3 to the Reinsurance Agreement between Northbrook Life Insurance Company and allstate Life Insurance Company, dated February 23, 1995 (10)(e) Amendment No. 4 to the Reinsurance Agreement between Northbrook Life Insurance Company and Alstate Life Insurance Company, dated June 12, 1995 (10)(f) Amendment No. 5 to the Reinsurance Agreement between Northbrook Life Insurance Company and Allstate Life Insurance Company, dated January 26, 1996 (10)(g) Amendment No. 6 to the Reinsurance Agreement between Northbrook Life Insurance Company and Allstate Life Insurance Company, dated January 15, 1997 (10)(h) Amendment No. 7 to the Reinsurance Agreement between Northbrook Life Insurance Company and Allstate Life Insurance Company, dated October 22, 1998 (10)(i) Modified Coinsurance Agreement between Northbrook Life Insurance Company and Allstate Life Insurance Company, dated October 20, 1987 (10)(j) Amendment No. 1 to the Modified Coinsurance Agreement between Northbrook Life Insurance Company and Allstate Life Insurance Company, dated June 4, 1991 (10)(k) Amendment No. 2 to the Modified Coinsurance Agreement between Northbrook Life Insurance Company and Allstate Life Insurance Company, dated June 8, 1995 (10)(l) Amendment No. 3 to the Modified Coinsurance Agreement between Northbrook Life Insurance Company and Allstate Life Insurance Company, dated February 23, 1995 (10)(m) Amendment No. 4 to the Modified Coinsurance Agreement between Northbrook Life Insurance Company and Allstate Life Insurance Company, January 26, 1996 (10)(n) Amendment No. 5 to the Modified Coinsurance Agreement between Northbrook Life Insurance Company and Allstate Life Insurance Company, dated January 15, 1997 (10)(o) Amendment No. 6 to the Modified Coinsurance Agreement between Northbrook Life Insurance Company and Allstate Life Insurance Company, dated October 22, 1998 (27) Financial Data Scehdule EX-10 2 MATERIAL AGREEMENTS (10)(b) AMENDMENT NO. 1 to the REINSURANCE AGREEMENT between the NORTHBROOK LIFE INSURANCE COMPANY, Northbrook, Illinois (hereinafter "NORTHBROOK") and ALLSTATE LIFE INSURANCE COMPANY, Northbrook, Illinois (hereinafter "ALLSTATE") IT IS HEREBY AGREED that the Reinsurance Agreement effective December 31, 1987 between NORTHBROOK and ALLSTATE (hereinafter "Coinsurance Agreement"), is amended as follows: 1. Article II, paragraphs 1(a) and 3 of the Coinsurance Agreement are amended as set out below: 1. Net benefits are defined as follows: (a) For an application received, or a policy issued directly by NORTHBROOK and reinsured under this Agreement, net benefits are the actual amounts payable by NORTHBROOK to the policyholder, less any amounts payable to NORTHBROOK by another reinsurer with respect to the policy. These payments include death benefits, endowment benefits, annuity benefits, disability benefits, benefits under accident and health policies, surrender benefits, and payments on supplementary contracts with and without life contingencies. 3. With respect to applications received, or policies issued directly or reinsured by NORTHBROOK, after the Effective Date of this Agreement, ALLSTATE's liability for net benefits will begin simultaneously with that of NORTHBROOK and will include any liability NORTHBROOK may incur as a result of a Temporary Insurance Agreement or Conditional Receipt issued in conjunction with a policy subject to this Agreement. 2. Article IV of the Coinsurance Agreement, is deleted, and replaced with new Article IV set our below: ARTICLE IV SETTLEMENTS 1. While this Agreement is in effect, NORTHBROOK shall pay to ALLSTATE no less frequently than weekly, with respect to eligible policies under this Agreement, a reinsurance premium equal to (or the accounting equivalent of) the sum of Items (a), (b) and (c) below, less the sum of Items (d) and (e) below, as applicable for the period since the date of NORTHBROOK's last payment to ALLSTATE. (a) Gross premiums (direct and reinsurance assumed) collected by NORTHBROOK. (b) Reserves transferred from a NORTHBROOK Separate Account to the NORTHBROOK General Account. (c) Policy loan repayments collected by NORTHBROOK with respect to the policies ceded under this Agreement. (d) Gross premiums refunded by NORTHBROOK to policyholders. (e) Reserves transferred from the NORTHBROOK General Account to the NORTHBROOK Separate Account. 2. While this Agreement is in effect, ALLSTATE shall pay to NORTHBROOK no less frequently than weekly a benefit and expense allowance equal to (or the accounting equivalent of) the sum of Items (a), (b), (c), (d) and (e) below, as applicable for the period since the date of ALLSTATE's last payment to NORTHBROOK. (a) Net benefits (as defined in Article II) paid by NORTHBROOK with respect to the policies ceded under this Agreement. (b) Commissions and other sales compensation incurred by NORTHBROOK with respect to the policies ceded under this Agreement. (c) General insurance expenses incurred by NORTHBROOK with respect to the policies ceded under this Agreement. (d) Insurance taxes, licenses and fees (excluding Federal Income Tax) incurred by NORTHBROOK with respect to the policies ceded under this Agreement. (e) Policy loan distributions to policyholders incurred by NORTHBROOK with respect to the policies ceded under this Agreement. This Amendment shall be effective as of September 1, 1990. IN WITNESS WHEREOF, the parties to the Coinsurance Agreement have caused their respective officers to execute this Amendment on the dates shown below. NORTHBROOK LIFE INSURANCE COMPANY By /s/ Marla Friedman Title Vice President Date June 6, 1991 ALLSTATE LIFE INSURANCE COMPANY By /s/ Barry S. Paul Title Assistant Vice President & Corporate Actuary Date June 4, 1991 (10)(c) AMENDMENT No. 2 to the REINSURANCE AGREEMENT between NORTHBROOK LIFE INSURANCE COMPANY, Northbrook, Illinois (hereinafter "NORTHBROOK") and ALLSTATE LIFE INSURANCE COMPANY, Northbrook, Illinois (hereinafter "ALLSTATE") IT IS HEREBY AGREED that the 100% Coinsurance Reinsurance Agreement effective December 31, 1987, between NORTHBROOK and ALLSTATE is amended as follows: 1. A new Article VIII is added, to read as follows: Article VIII CONVERSION TO FUNDS WITHHELD (a) Effective on the date and at the time of transfer of all or substantially all Assets to NORTHBROOK pursuant to Section 6(f) of the Security and Trust Agreement among the parties hereto, Dean Witter Reynolds, Inc., and Harris Trust and Savings Bank, the reinsurance hereunder provided shall convert from an automatic coinsurance basis to a funds withheld basis. The delivery to the Trustee of the Instructions for Release to Beneficiary, as provided in Section 6(f) of the Security and Trust Agreement, shall operate as notice to NORTHBROOK and ALLSTATE of such conversion. NORTHBROOK shall hold all assets received pursuant to such transfer, including subsequent additions and investment income, under the Funds Withheld provisions of this Article. (b) In the event of a conversion, as provided in Section (a) of this Article VIII, from an automatic coinsurance to a funds withheld basis, Article IV, Monthly Settlements, as amended by Amendment No. 1 to this Reinsurance Agreement, shall be automatically modified to operate as follows: (i) In addition to the settlements described in Article IV, which shall continue, NORTHBROOK shall pay to ALLSTATE no less frequently than weekly the net investment income, including all realized capital gains and losses, earned on the assets held in accordance with Section (a) of this Article VIII. (ii) Notwithstanding the requirements of Article IV and Section (b) (i) of this Article VIII, NORTHBROOK shall withhold from ALLSTATE and hold an amount not greater than the sum A, B and C below, such sum hereafter referred to as the "Funds Withheld." A. an amount equal to the net statutory reserves in respect of the business reinsured; B. an amount equal to the Interest Maintenance Reserve related to the Assets held in trust in accordance with Section (a) of this Article VIII; C. an amount not greater at any time than 20% of the net statutory reserves with respect to the business reinsured, equal to the accumulation, if positive, of the amounts due ALLSTATE from NORTHBROOK less the amounts due NORTHBROOK from ALLSTATE, beginning from the date Assets are transferred to NORTHBROOK pursuant to Section 6(f) of the Security and Trust Agreement. (iii)The net periodic settlements described in Article IV shall be adjusted to provide for Funds Withheld by reducing the amount paid to ALLSTATE by any increase in the Funds Withheld for the settlement period or increasing the amount paid ALLSTATE by any decrease in the Funds Withheld. (c) Notwithstanding any of the foregoing provisions of this Article VIII, NORTHBROOK shall at all times have the right to use any Assets in its possession for the payment of benefits due and owing under policies issued by NORTHBROOK. 2. This Reinsurance Agreement is amended further by renumbering current Article VIII to be Article IX, and each subsequent Article is renumbered consecutively from such new Article IX. 3. This Reinsurance Agreement is amend further by deleting current Article XII, entitled DURATION OF AGREEMENT, and inserting, in its place, the following: Article XIII DURATION OF AGREEMENT This Agreement will be effective as of December 31, 1987, and shall remain in force so long as any policies issued by NORTHBROOK through Dean Witter Reynolds, Inc., pursuant to various General Agent's Agreements, remain in force. 4. This Reinsurance Agreement is amended further by adding an Article XIV, to read as follows: Article XIV ENTIRE AGREEMENT This Reinsurance Agreement, together with all amendments thereto and the Security and Trust Agreement to which ALLSTATE and NORTHBROOK are parties dated as of September 1, 1993, constitutes the entire agreement between ALLSTATE and NORTHBROOK with respect to the subject matter hereof, and there are no written or oral understandings, agreements, conditions, or qualifications to the terms and conditions of this Reinsurance Agreement which are not fully expressed herein and in such Security and Trust Agreement. IN WITNESS HEREOF, the parties to this Agreement have caused this Amendment No. 2 to be duly executed in duplicate by their respective officers on the date shown below. NORTHBROOK LIFE INSURANCE COMPANY, of Northbrook, Illinois By: /s/ Marla G. Friedman Marla G. Friedman Title: Vice President Date: September 28, 1993 ALLSTATE LIFE INSURANCE COMPANY, of Northbrook, Illinois By: /s/ Peter H. Heckman Peter H. Heckman Title: Vice President Date: September 28, 1993 (10)(d) AMENDMENT NO. 3 to the REINSURANCE AGREEMENT between NORTHBROOK LIFE INSURANCE COMPANY, Northbrook, Illinois (hereinafter "Northbrook") and ALLSTATE LIFE INSURANCE COMPANY, Northbrook, Illinois (hereinafter "Allstate") It Is Hereby Agreed, that the Coinsurance Agreement effective December 31, 1987 between NORTHBROOK and ALLSTATE (hereafter "Agreement"), is amended as follows: 1.) Schedule A, Eligible and Ineligible Policies, is hereby amended by deleting said Schedule in its entirety, and replacing it with the following new Schedule A: Schedule A ELIGIBLE AND INELIGIBLE POLICIES 1. This Agreement covers all eligible policies in force in NORTHBROOK (or no longer in force but with remaining liability to NORTHBROOK) on the Effective Date of this Agreement, all eligible policies issued directly by NORTHBROOK after the Effective Date of this Agreement, and all reinsurance accepted by NORTHBROOK before and after the Effective Date of this Agreement. 2. An eligible policy is defined as any policy whose reserve is invested, in whole or in part, in the NORTHBROOK general account, except for those policies described in paragraph 3, below; provided, however, that the portion of any such policy which is not so invested is not covered under this Agreement. 3. No policy which is registered with the Securities and Exchange Commission and which is sold to a pension plan as the term "pension plan" is defined under the Employee Retirement Income Security Act of 1974, including, but not limited to, pension plans qualified under Sections 401(a), 401(k), and 403(b) of the Internal Revenue Code, shall be considered an eligible policy under this Agreement. 2.) This Amendment shall be effective February 1, 1995. Except as amended hereby, the Agreement shall remain unchanged. IN WITNESS HEREOF, the parties to the Agreement have caused this Amendment to be duly executed in duplicate by their respective officers on the dates shown below. NORTHBROOK LIFE INSURANCE COMPANY ALLSTATE LIFE INSURANCE COMPANY By: /s/ M. Friedman By: /s/ Michael J. Velotta Title: VP Title: VP, General Counsel & Secy Date: February 28, 1995 Date: February 23, 1995 (10)(e) AMENDMENT #4 TO THE REINSURANCE AGREEMENT BETWEEN NORTHBROOK LIFE INSURANCE COMPANY, NORTHBROOK, ILLINOIS (HEREINAFTER "NORTHBROOK") AND ALLSTATE LIFE INSURANCE COMPANY, NORTHBROOK, ILLINOIS (HEREINAFTER "ALLSTATE") WHEREAS, NORTHBROOK and ALLSTATE entered into a Coinsurance Agreement (hereinafter "Agreement"), having an effective date of December 31, 1987; and, WHEREAS, the California Insurance Department has determined that various changes to the Agreement are required under California insurance law; and WHEREAS, NORTHBROOK and ALLSTATE desire to amend the Agreement with respect to coverage issued to California residents to meet the California requirements; NOW, THEREFORE, the Agreement is hereby amended with respect to California residents, as follows: 1.) Article VII, "Insolvency", hereby amended by deleting said Article in its entirety, and replacing it with the following new Article VII: Article VII INSOLVENCY 1. The portion of any risk or obligation assumed by Allstate, when such portion is ascertained, shall be payable on demand of Northbrook at the same time as Northbrook shall pay its net retained portion of such risk or obligation, and the reinsurance shall be payable by Allstate on the basis of the liability of Northbrook under the contract or contracts reinsured under this Agreement without diminution because of the insolvency of Northbrook. In the event of insolvency and the appointment of a conservator, liquidator or statutory successor of Northbrook, such portion shall be payable to such conservator, liquidator or statutory successor immediately upon demand, on the basis of claims allowed against Northbrook by any court of competent jurisdiction or, by any conservator, liquidator, or statutory successor of Northbrook having authority to allow such claims, without diminution because of such insolvency or because such conservator, liquidator or statutory successor has failed to pay all or a portion of any claims. Payment by Allstate as above set forth shall be made directly to Northbrook or its conservator, liquidator or statutory successor. 2. Further, in the event of the insolvency of Northbrook, the liquidator, receiver or statutory successor of the insolvent Northbrook shall give written notice to Allstate of the pendency of an obligation of the insolvent Northbrook on any policy reinsured, whereupon Allstate may investigate such claim and interpose at its own expense, in the proceeding where such claim is to be adjudicated, any defense or defenses which it may deem available to Northbrook or its liquidator or statutory successor. The expense thus incurred by Allstate shall be chargeable, subject to court approval, against the insolvent Northbrook as part of the expenses of liquidation to the extent of a proportionate share of the benefit which may accrue to Northbrook solely as a result of the defense undertaken by Allstate. 2.) Article X, Arbitration, shall be amended to include the following language at the end of that article: The decision of the Arbitrators shall be handed down within 45 days of the date on which the arbitration is concluded. 3.) Article XII, Parties to the Agreement, shall be deleted in its entirety and shall be replaced with the following language: This Agreement shall be effective as of December 31, 1987, and will be unlimited as to its duration; provided, however, it may be terminated with respect to the reinsurance of new business by either party giving the other party ninety (90) days prior written notice of termination to the other party. 4.) Article VII, paragraph 1(c) as amended in Amendment No. 2 shall be deleted in its entirety and shall be replaced with the following language: (c) Notwithstanding any of the foregoing provisions of this Article VII, NORTHBROOK shall at all times have the right to use any Assets in its possession for the payment of benefits due and owing under policies issued by NORTHBROOK. Provided, however, NORTHBROOK will not use any such Assets to satisfy any liabilities under the Northbrook Separate Account. 5.) In addition, a new Article XIII is added to the Agreement, as follows: Article XIII OFFSET All monies due Northbrook or Allstate under this Agreement shall be offset against each other dollar for dollar. 6.) Further, a new Article XIV is added to the agreement, as follows: Article XIV ENTIRE AGREEMENT This Agreement constitutes the entire contract between ALLSTATE and NORTHBROOK. No variation, modification or changes to this Agreement shall be binding unless in writing and signed by an officer of each party. This amendment shall be effective June 12, 1995. Except as amended hereby, the Agreement shall remain unchanged. IN WITNESS HEREOF, the parties to the Agreement have caused this Amendment to be duly executed in duplicate by their respective officers on the dates shown below. Northbrook Life Insurance Company By /s/ Sarah R. Donahue Title First Vice President Date June 12, 1995 Allstate Life Insurance Company By /s/ John R. Hunter Title AVP Date June 12, 1995 (10)(f) Amendment Number 5 To the Reinsurance Agreement Effective December 31, 1987 between Northbrook Life Insurance Company (hereinafter called ANorthbrook@) and Allstate Life Insurance Company (hereinafter called AAllstate@) It Is Hereby Agreed, that the Reinsurance Agreement effective December 31, 1987 between NORTHBROOK and ALLSTATE (hereafter AAgreement@), is amended as provided below: 1. Effective January 1, 1995, Article IV is hereby amended by adding the following new sub-paragraph 3: 3. ALLSTATE shall pay to NORTHBROOK, no less frequently than annually, any taxes incurred by NORTHBROOK as a result of Section 848 of the Internal Revenue Code which concerns capitalization of policy acquisition costs. 2. Effective January 1, 1993, Article IV is hereby amended by adding the following new sub-paragraph 4: 4. ALLSTATE and NORTHBROOK agree to an election under Treasury Regulations 1-848-2(g)(8), as follows: a) For each taxable year under this Agreement, the party with net positive consideration, as defined in the regulations promulgated under Treasury Code Section 848, will capitalize specified policy acquisition expenses with respect to this Agreement without regard to the general deductions limitation of Section 848(c)(1); (b) NORTHBROOK and ALLSTATE agree to exchange information pertaining to the amount of net consideration for all reinsurance agreements in force between them to ensure consistency for purposes of computing specified policy acquisition expenses. NORTHBROOK and ALLSTATE shall agree on the amount of such net consideration for each taxable year no later than the May 1 following the end of such year. (c) This election shall be effective for 1993 and for all subsequent taxable years for which this Agreement remains in effect. Except as amended hereby, the Agreement shall remain unchanged. IN WITNESS HEREOF, the parties to the Agreement have caused this Amendment to be duly executed in duplicate by their respective officers on the dates shown below. NORTHBROOK LIFE INSURANCE COMPANY ALLSTATE LIFE INSURANCE COMPANY By: Sarah R. Donahue By: C. Nelson Strom Title: Vice President Title: Assistant Vice President Date: January 26, 1996 Date: January 26, 1996 (10)(g) Amendment No. 6 to the Reinsurance Agreement between Northbrook Life Insurance Company, Northbrook, Illinois (hereinafter ANorthbrook@) and Allstate Life Insurance Company, Northbrook, Illinois (hereinafter AAllstate@) It Is Hereby Agreed, that the Coinsurance Agreement effective December 31, 1987 between NORTHBROOK and ALLSTATE (hereafter AAgreement@), is amended as follows: 1.) Schedule A, Eligible and Ineligible Policies, is hereby amended by deleting said Schedule in its entirety, and replacing it with the following new Schedule A: Schedule A ELIGIBLE AND INELIGIBLE POLICIES 1. This Agreement covers all eligible policies in force in NORTHBROOK (or no longer in force but with remaining liability to NORTHBROOK) on the Effective Date of this Agreement, all eligible policies issued directly by NORTHBROOK after the Effective Date of this Agreement, and all reinsurance accepted by NORTHBROOK before and after the Effective Date of this Agreement. 2. An eligible policy is defined as any policy whose reserve is invested, in whole or in part, in the NORTHBROOK general account, provided, however, that the portion of any such policy which is not so invested is not covered under this Agreement. 2.) This Amendment shall be effective December 30, 1996. Except as amended hereby, the Agreement shall remain unchanged. IN WITNESS HEREOF, the parties to the Agreement have caused this Amendment to be duly executed in duplicate by their respective officers on the dates shown below. NORTHBROOK LIFE INSURANCE COMPANY ALLSTATE LIFE INSURANCE COMPANY By: Sarah R. Donahue By: C. Nelson Strom Title: Assistant Vice President Title: Assistant Vice President and Corporate Actuary Date: January 15, 1997 Date: January 15, 1997 (10)(h) Amendment Number 7 To the Reinsurance Agreement Effective December 31, 1987 between Northbrook Life Insurance Company (hereinafter called ANorthbrook@) and Allstate Life Insurance Company (hereinafter called AAllstate@) WHEREAS, NORTHBROOK and ALLSTATE entered into a Reinsurance Agreement effective December 31, 1987 (hereinafter "Agreement"); and WHEREAS, the parties now believe that the Agreement does not accurately reflect their existing practices relating to settlements for certain tax benefits and liabilities; WHEREAS, the parties desire to amend the Agreement to reflect the existing practices with respect to such tax settlements; NOW, THEREFORE, IT IS HEREBY AGREED, that the Agreement is amended as provided below. 1.) Article IV, paragraph 2, is amended by replacing subparagraph (d) with a new subparagraph (d) as follows: (d) Insurance taxes, licenses and fees (excluding Federal Income Tax that is not related to the contracts reinsured under this Agreement), incurred by NORTHBROOK with respect to the contracts reinsured under this Agreement. 2.) Article IV is further amended by adding a new paragraph 3, as follows: 3. No less frequently than quarterly, ALLSTATE will calculate the amount of federal and state income tax liabilities incurred by NORTHBROOK for the quarter related to the contracts reinsured under this Agreement, and the amount of federal and state income tax benefits earned by NORTHBROOK for the quarter related to the contracts reinsured under this Agreement. If tax liabilities exceed tax benefits, the difference, plus a gross-up for additional federal and state income taxes, will be paid by ALLSTATE to NORTHBROOK. If tax benefits exceed tax liabilities, the difference, plus a gross-up for additional federal and state income taxes, will be paid by NORTHBROOK to ALLSTATE. Except as amended hereby, the Agreement shall remain unchanged. IN WITNESS HEREOF, the parties to the Agreement have caused this Amendment to be duly executed in duplicate by their respective officers on the dates shown below. NORTHBROOK LIFE INSURANCE COMPANY ALLSTATE LIFE INSURANCE COMPANY By: Sarah R. Donahue By: C. Nelson Strom Title: Assistant Vice President Title: AVP Date: October 22, 1998 Date: October 22, 1998 (10)(i) REINSURANCE AGREEMENT between NORTHBROOK LIFE INSURANCE COMPANY, NORTHBROOK, ILLINOIS (hereinafter "NORTHBROOK") and ALLSTATE LIFE INSURANCE COMPANY, NORTHBROOK, ILLINOIS (hereinafter "ALLSTATE") Article I BASIS of REINSURANCE 1. ALLSTATE will indemnify and NORTHBROOK will automatically reinsure with ALLSTATE, according to the terms and conditions hereof, the net liability for contracts in force (or no longer in force but with remaining liability) on the Effective Date and contracts directly issued subsequent to the Effective Date by NORTHBROOK on the contracts listed in Schedule A. 2. The indemnity reinsurance provided hereunder shall be on a modified coinsurance basis. NORTHBROOK shall retain, maintain, and own all assets held in relation to the Reserve, as defined in Article III. 3. In no event will reinsurance under this Agreement be in force with respect to a contract of NORTHBROOK unless such contract is in force. Article II LIABILITY of ALLSTATE The liability of ALLSTATE with respect to any contract reinsured hereunder will begin simultaneously with that of NORTHBROOK, but not prior to the Effective Date of this Agreement. ALLSTATE's liability with respect to any contract reinsured hereunder will terminate on the date NORTHBROOK's liability on such contract terminates or the date this Agreement is terminated, whichever is earliest. However, termination of this Agreement will not terminate ALLSTATE's liability for benefit payments incurred prior to the date of termination. Article III INITIAL CONSIDERATION 1. On the Effective Date of this Agreement, NORTHBROOK will pay ALLSTATE an initial consideration which shall be equal to (or the accounting equivalent of) one hundred (100) percent of the Reserve, as defined in Paragraph 2 of this Article III, as of the Effective Date of this Agreement, with respect to the contracts reinsured hereunder. 2. For the purpose of this Agreement, the term "Reserve" will be the total liability for the reinsured contracts corresponding to the sum of the amounts on page 3, line 18 of NORTHBROOK's Statutory Separate Account (excluding Variable Life) Statement and page 3, line 12 of NORTHBROOK's Statutory Variable Life Separate Account Statement. Article IV MONTHLY SETTLEMENTS 1. Within thirty (30) days following the end of each calendar month in which this Agreement is in effect, NORTHBROOK shall pay to ALLSTATE, with respect to contracts reinsured under this Agreement, a reinsurance premium equal to (or the accounting equivalent of) the sum of Items (a) and (b) below less the sum of Items (c), (d) and (e) below. (a) Gross premiums (direct and reinsurance assumed) collected by NORTHBROOK during the month. (b) Reserves transferred from the NORTHBROOK General Account to a NORTHBROOK Separate Account during the month. (c) Gross premiums refunded by NORTHBROOK during the month to policyholders. (d) Reserves transferred from a NORTHBROOK Separate Account to the NORTHBROOK General Account during the month. (e) Reinsurance premiums paid by NORTHBROOK during the month to reinsurers other than ALLSTATE. 2. Within thirty (30) days following the end of each calendar month in which this Agreement is in effect, ALLSTATE shall pay to NORTHBROOK a benefit and expense allowance equal to (or the accounting equivalent of) the sum of Items (a), (b), (c) and (d) below. (a) Net benefits (as defined in Paragraph 3 of this Article IV) paid by NORTHBROOK during the month with respect to the contracts reinsured under this Agreement. (b) Commissions and other sales compensation incurred by NORTHBROOK during the month with respect to the contracts reinsured under this Agreement. (c) General insurance expenses incurred by NORTHBROOK during the month with respect to the contracts reinsured under this Agreement. (d) Insurance taxes, licenses and fees (excluding Federal Income Tax) incurred by NORTHBROOK during the month with respect to the contracts reinsured under this Agreement. 3. Net Benefits are defined as follows: (a) For a contract issued directly by NORTHBROOK and reinsured under this Agreement, net benefits are the actual amounts payable by NORTHBROOK to the policyholder, less any amounts payable to NORTHBROOK by another reinsurer with respect to the contract. These payments include death benefits, endowment benefits, annuity benefits, disability benefits, benefits under A & H policies, surrender benefits and payments on supplementary contracts with and without life contingencies. (b) For contracts reinsured by NORTHBROOK and retroceded under this Agreement, net benefits are the actual amounts payable by NORTHBROOK to the ceding company with respect to the contract reinsured by NORTHBROOK. These payments will include commissions and expense allowances on reinsurance accepted. Article V MONTHLY RESERVE ADJUSTMENTS 1. Simultaneously with the payment of the initial consideration described in Article III, Paragraph I, ALLSTATE will pay to NORTHBROOK an initial reserve adjustment in an amount that is equal to the Reserve on the Effective Date of this Agreement with respect to the contracts reinsured hereunder. 2. Within thirty (30) days following the end of each calendar month in which this Agreement is in effect, a reserve adjustment equal to (or the accounting equivalent of) the amount defined below shall be paid. Let: RC= The Reserve change from the end of the prior accounting period to the end of the current accounting period for the reinsured contracts corresponding to the sum of the amounts on page 4, lines 9, 10, 10A and 11 of NORTHBROOK's Statutory Separate Account (excluding Variable Life) Statement and page 4, lines 14 and 15 of NORTHBROOK's Statutory Variable Life Separate Account Statement. NII= The net investment income corresponding to the sum of the amounts on page 4, line 2 of NORTHBROOK's Statutory Separate Account (excluding Variable Life) Statement and page 4, lines 4 and 5 of NORTHBROOK's Statutory Variable Life Separate Account Statement. If RC is greater than NII then a reserve adjustment of RC-NII is payable by ALLSTATE to NORTHBROOK. If NII is greater than RC, then a reserve adjustment of NII-RC is payable by NORTHBROOK to ALLSTATE. Article VI STATEMENT REFERENCES All references in this Agreement are to the 1986 NAIC Statutory General and Separate Account Statements of NORTHBROOK, as filed with the Illinois Insurance Department. Appropriate adjustments will be made for changes, if any, in the NAIC Statutory General and Separate Account Statements on or after the Effective Date. Article VII OVERSIGHTS ALLSTATE shall be bound as NORTHBROOK is bound, and it is expressly understood and agreed that if failure to reinsure or failure to comply with any terms of this Agreement is shown to be unintentional and the result of misunderstanding or oversight on the part of either NORTHBROOK or ALLSTATE, both NORTHBROOK and ALLSTATE shall be restored to the positions they would have occupied had no such error or oversight occurred. Article VIII INSPECTION OF RECORDS NORTHBROOK and ALLSTATE shall have the right, at any reasonable time, to examine at the office of the other, any books, documents, reports or records which pertain in any way to the contracts reinsured under this Agreement. Article IX INSOLVENCY 1. In the event of the insolvency of NORTHBROOK, reinsurance hereunder is payable by ALLSTATE on the basis of its liability hereunder without diminution because of the insolvency of NORTHBROOK. 2. Further, in the event of the insolvency of NORTHBROOK, the liquidator, receiver or statutory successor of the insolvent NORTHBROOK shall give written notice to ALLSTATE of the pendency of any obligation of the insolvent NORTHBROOK on any policy reinsured, whereupon ALLSTATE may investigate such claim and interpose at its own expense, in the proceeding where such claim is to be adjudicated, any defense or defenses which it may deem available to NORTHBROOK or its liquidator or statutory successor. The expense thus incurred by ALLSTATE shall be chargeable, subject to court approval, against the insolvent NORTHBROOK as part of the expenses of liquidation to the extent of a proportionate share of the benefit which may accrue to NORTHBROOK solely as a result of the defense undertaken by ALLSTATE. 3. All moneys due NORTHBROOK or ALLSTATE under this Agreement shall be offset against each other, dollar for dollar, regardless of any insolvency of either party. Article X ARBITRATION Any dispute arising with respect to this Agreement which is not settled by mutual agreement of the parties shall be referred to arbitration. Within twenty (20) days from receipt of written notice from one party that an arbitrator has been appointed, the other party shall also name an arbitrator. The two arbitrators shall choose a third arbitrator and shall forthwith notify the contracting parties of such choice. Each arbitrator shall be a present or former officer of a life insurance company and should have no present or past affiliation with this Agreement or with either party. The arbitrators shall consider this Agreement as an honorable engagement rather than merely as a legal obligation, and shall be relieved of all judicial formalities. The decision of the arbitrators shall be final and binding upon the parties hereto. Each party shall bear the expenses of its own arbitrator and shall jointly and equally bear the expenses of the third arbitrator and of the arbitration. Any such arbitration shall take place at the Home Office of NORTHBROOK, unless some other location is mutually agreed upon. Article XI PARTIES TO AGREEMENT This Agreement is solely between NORTHBROOK and ALLSTATE. The acceptance of reinsurance hereunder shall not create any right or legal relation whatever between ALLSTATE and any party in interest under any contract of NORTHBROOK reinsured hereunder. NORTHBROOK shall be and remain solely liable to any insured, contract owner, or beneficiary under any contract reinsured hereunder. This Agreement will be effective as of December 31, 1987, and will be unlimited as to its duration; provided, however, it may be terminated with respect to the reinsurance of new business by either party giving the other party sixty (60) days prior written notice of termination to the other party. IN WITNESS HEREOF, the parties to this Agreement have caused it to be duly executed in duplicate by their respective officers on the dates shown below. NORTHBROOK LIFE INSURANCE COMPANY of Northbrook, Illinois By /s/ James D. Clements Title Assistant Vice President, Assistant Secretary and General Counsel Date October 20, 1987 ALLSTATE LIFE INSURANCE COMPANY of Northbrook, Illinois By /s/ Joseph Haas Title Vice President and Controller Date October 20, 1987 REINSURANCE AGREEMENT between NORTHBROOK LIFE INSURANCE COMPANY, NORTHBROOK, ILLINOIS (hereinafter "NORTHBROOK") and ALLSTATE LIFE INSURANCE COMPANY, NORTHBROOK, ILLINOIS (hereinafter "ALLSTATE") SCHEDULE A CONTRACTS SUBJECT TO REINSURANCE UNDER THIS TREATY Any contract whose reserve is invested, in whole or in part, in any account designated as a NORTHBROOK Separate Account shall be reinsured under this Agreement; provided, however, that the portion of any such contract which is not so invested is not covered under this Agreement. (10)(j) Amendment # 1 to the Reinsurance Agreement between Northbrook Life Insurance Company, Northbrook, Illinois (hereinafter "Northbrook") and Allstate Life Insurance Company, Northbrook, Illinois (hereinafter "Allstate") IT IS HEREBY AGREED, that the Reinsurance Agreement effective December 31, 1987 between NORTHBROOK and ALLSTATE (hereinafter "Modified Coinsurance Agreement"), amended as follows: 1. Article IV, paragraphs 1 and 2 of the Modified Coinsurance Agreemen, are deleted, and replaced with new paragraphs 1 and 2 set out below: 1. While this agreement is in effect, NORTHBROOK shall pay to ALLSTATE on a daily basis, with respect to eligible policies reinsured under this Agreement, a reinsurance premium equal to (or the accounting equivalent of) the sum of Items (a) and (b) below less the sum of Items (c) and (d)below. (a) Gross premiums (direct and reinsurance assumed) collected by NORTHBROOK. (b) Reserves transferred from the NORTHBROOK General Account to a NORTHBROOK Separate Account. (c) Gross premiums refunded by NORTHBROOK to policyholders. (d) Reserves transferred from a NORTHBROOK Separate Account to the NORTHBROOK General Account during the month. 2. While this Agreement is in effect, ALLSTATE shall pay to NORTHBROOK on a daily basis a benefit and expense allowance equal to (or the accounting equivalent of) the sum of Items (a), (b), (c) and (d) below. (a) Net benefits (as defined in Paragraph 3 of this Article IV) paid by NORTHBROOK with respect to the contracts reinsured under this Agreement. (b) Commissions and other sales compensation incurred by NORTHBROOK during the month with respect to the contracts reinsured under this Agreement. (c) General insurance expenses incurred by NORTHBROOK during the month with respect to the contracts reinsured under this Agreement. (d) Insurance taxes, licenses and fees (excluding Federal Income Tax) incurred by NORTHBROOK during the month with respect to the contracts reinsured under this Agreement. 2. Article IV is further amended by addidng new sub-paragraph 4 set out below: 4. ALLSTATE shall pay to NORTHBROOK, no less frequently than annually, any taxes incurred by NORTHBROOK as a result of Section 848 of the Internal Revenue Code which concerns capitalization of policy acquisition costs. 3. Article V, paragraph 2, is deleted, and replaced with the folowing new paragraph 2: 2. While this Agreement is in effect, on a daily basis a reserve adjustment equal to (or the accounting equivalent of) the amount defined below shall be paid. Let: RC= The Reserve change from the end of the prior accounting period to the end of the current accounting period for the reinsured contracts corresponding to the sum of the amounts on page 4, lines 10, 11, 12 and 13 of NORTHBROOK's Statutory Separate Account (excluding Variable Life) Statement. NII= The net investment income corresponding to the sum of the amounts on page 4, line 2 of NORTHBROOK's Statutory Separate Account (excluding Variable Life) Statement, minus interest income on NORTHBROOK's capital investment. If RC is greater than NII then a reserve adjustment of RC-NII is payable by ALLSTATE to NORTHBROOK. If NII is greater than RC, then a reserve adjustment of NII-RC is payable by NORTHBROOK to ALLSTATE. This Amendment shall be effective as of September 1, 1990. In Witness Whereof, the parties to the Agreement have caused this Amendment to be duly executed in duplicate by their respective officers on the dates shown below. NORTHBROOK LIFE INSURANCE COMPANY ALLSTATE LIFE INSURANCE COMPANY By: Marla Friedman By: Barry S. Paul Title: Vice President Title: Assistant Vice President and Corporate Actuary Date: June 6, 1991 Date: June 4, 1991 (10)(k) Amendment # 2 to the Reinsurance Agreement between Northbrook Life Insurance Company, Northbrook, Illinois (hereinafter "Northbrook") and Allstate Life Insurance Company, Northbrook, Illinois (hereinafter "Allstate") Whereas, Northbrook and Allstate entered into a Modified Coinsurance Agreement (hereinafter "Agreement") having an effective date of December 31, 1987; and, Whereas, the California Insurance Department has determined that various changes to the Agreement are required under California insurance law; and, Whereas, Northbrook and Allstate desire to amend the Agreement with respect to coverage issued to California residents to meet the California requirements; Now Therefore, the Agreement is hereby amended with respect to California residents, as follows; 1.) Article IX, "Insolvency", is hereby amended by deleting said Article in its entirety, and replacing it with the following new Article IX. Article IX INSOLVENCY 1. The portion of any risk or obligation assumed by Allstate, when such portion is ascertained, shall be payable on demand of Northbrook at the same time as Northbrook shall pay its net retained portion of such risk or obligation, and the reinsurance shall be payable by Allstate on the basis of the liability of Northbrook under the contract or contracts reinsured under this Agreement without diminution because of the insolvency of Northbrook. In the event of insolvency and the appointment of a conservator, liquidator or statutory successor of Northbrook, such portion shall be payable to such conservator, liquidator or statutory successor immediately upon demand, on the basis of claims allowed against Northbrook by any court of competent jurisdiction or, by any conservator, liquidator, or statutory successor of Northbrook having authority to allow such claims, without diminution because of such insolvency or because such conservator, liquidator or statutory successor has failed to pay all or a portion of any claims. Payments by Allstate as above set forth shall be made directly to Northbrook or its conservator, liquidator or statutory successor. 2. Further, in the event of the insolvency of Northbrook, the liquidator, receiver or statutory successor of the insolvent Northbrook shall give written notice to Allstate of the pendency of an obligation of the insolvent Northbrook on any policy reinsured, whereupon Allstate may investigate such claim and interpose at its own expense, in the proceeding where such claim is to be adjudicated, any defense or defenses which it may deem available to Northbrook or its liquidator or statutory successor. The expense thus incurred by Allstate shall be chargeable, subject to court approval, against the insolvent Northbrook as part of the expenses of liquidation to the extent of a proportionate share of the benefit which may accrue to Northbrook solely as a result of the defense undertaken by Allstate 2.) Article X, Arbitration, shall be amended to include the following language at the end of that article: The decision of the Arbitrators shall be handed down within 45 days of the date on which the arbitration is concluded. 3.) The second paragraph of Article XI, Parties to the Agreement, shall be deleted in its entirety and shall be replaced with the following language: This Agreement shall be effective as of December 31, 1987, and will be unlimited as to its duration; provided, however, it may be terminated with respect to the reinsurance of new business by either party giving the other party ninety (90) days prior written notice of termination to the other party. 4.) In addition, a new Article XII is added to the Agreement, as follows: Article XII OFFSET All monies due Northbrook or Allstate under this Agreement shall be offset against each other dollar for dollar. 5.) Further, a new Article XIII is added to the agreement, as follows: Article XIII ENTIRE AGREEMENT This Agreement constitutes the entire contract between ALLSTATE and NORTHBROOK. No variation, modification or changes to this Agreement shall be binding unless in writing and signed by an officer of each party. 6.) Finally, the definition of "RC" in Article V, paragraph 2, is deleted, and replaced with the following language: RC= The Reserve change from the end of the prior accounting period to the end of the current accounting period for the reinsured contracts corresponding to the sum of the amounts on page 4, lines 10, 11, 12 and 13 of NORTHBROOK's Statutory Separate Account Statement. An accounting period shall be defined as one day. This Amendment shall be effective on June 8, 1995. Except as amended hereby, the Agreement shall remain unchanged. In Witness Hereof, the parties to the Agreement have caused this Amendment to be duly executed in duplicate by their respective officers on the dates shown below. NORTHBROOK LIFE INSURANCE COMPANY ALLSTATE LIFE INSURANCE COMPANY By: Marla Friedman By: Michael J. Velotta Title: Vice President Title: VP, Secretary and General Counsel Date: June 8, 1995 Date: June 8, 1995 (10)(l) Amendment No. 3 to the Reinsurance Agreement between Northbrook Life Insurance Company, Northbrook, Illinois (hereinafter "Northbrook") and Allstate Life Insurance Company, Northbrook, Illinois (hereinafter "Allstate") It Is Hereby Agreed, that the Modified Coinsurance Agreement effective December 31, 1987 between NORTHBROOK and ALLSTATE (hereafter "Agreement"), is amended as follows; 1.) Schedule A, Contacts Subject to Reinsurance Under This Treaty, is hereby amended by deleting said Schedule in its entirety, and replacing it with the following new Schedule A: Schedule A CONTRACTS SUBJECT TO REINSURANCE UNDER THIS TREATY I. Any contract whose reserve is invested, in whole or in part, in any account designated as a NORTHBROOK Separate Account shall be reinsured under this Agreement, provided, however, that the portion of any such contract which is not invested is not covered under this Agreement. II. Any contract registered with the Securities and Exchange Commission which is sold to a pension plan as the term "pension plan" is defined under the Employee Retirement Income and Security Act of 1974, including, but not limited to, pension plans qualified under SS. 401(a), 401(k) and 403 (b) of the Internal Revenue Code. 2.) This Amendment shall be effective February 1, 1995. Except as amended hereby, the Agreement shall remain unchanged. IN WITNESS HEREOF, the parties to the Agreement have caused this Amendment to be duly executed in duplicate by their respective officers on the dates shown below. NORTHBROOK LIFE INSURANCE COMPANY ALLSTATE LIFE INSURANCE COMPANY By: Marla Friedman By: Michael J. Velotta Title: Vice President Title: Vice President, General Counsel and Secretary Date: February 28, 1995 Date: February 23, 1995 (10)(m) Amendment Number 4 To the Reinsurance Agreement Effective December 31, 1987 between Northbrook Life Insurance Company (hereinafter called "Northbrook") and Allstate Life Insurance Company (hereinafter called "Allstate") It Is Hereby Agreed, that the Reinsurance Agreement effective December 31, 1987 between NORTHBROOK and ALLSTATE (hereafter "Agreement"), is amended as provided below: Effective January 1, 1993, Article IV is hereby amended by adding the following new sub-paragraph 5: 5. ALLSTATE and NORTHBROOK agree to an election under Treasury Regulations 1-848-2(g)(8), as follows: a) For each taxable year under this Agreement, the party with net positive consideration, as defined in the regulations promulgated under Treasury Code Section 848, will capitalize specified policy acquisition expenses with respect to this Agreement without regard to the general deductions limitation of Section 848(c)(1); (b) NORTHBROOK and ALLSTATE agree to exchange information pertaining to the amount of net consideration for all reinsurance agreements in force between them to ensure consistency for purposes of computing specified policy acquisition expenses. NORTHBROOK and ALLSTATE shall agree on the amount of such net consideration for each taxable year no later than the May 1 following the end of such year. (c) This election shall be effective for 1993 and for all subsequent taxable years for which this Agreement remains in effect. Except as amended hereby, the Agreement shall remain unchanged. IN WITNESS HEREOF, the parties to the Agreement have caused this Amendment to be duly executed in duplicate by their respective officers on the dates shown below. NORTHBROOK LIFE INSURANCE COMPANY ALLSTATE LIFE INSURANCE COMPANY By: Sarah R. Donahue By: C. Nelson Strom Title: Vice President Title: Assistant Vice President Date: January 26, 1996 Date: January 26, 1996 (10)(n) Amendment No. 5 to the Reinsurance Agreement between Northbrook Life Insurance Company, Northbrook, Illinois (hereinafter "Northbrook") and Allstate Life Insurance Company, Northbrook, Illinois (hereinafter "Allstate") It Is Hereby Agreed, that the Modified Coinsurance Agreement effective December 31, 1987 between NORTHBROOK and ALLSTATE (hereafter "Agreement"), is amended as follows: 1.) Schedule A, Contacts Subject to Reinsurance Under This Treaty, is hereby amended by deleting said Schedule in its entirety, and replacing it with the following new Schedule A: Schedule A CONTRACTS SUBJECT TO REINSURANCE UNDER THIS TREATY Any contract whose reserve is invested, in whole or in part, in any account designated as a NORTHBROOK Separate Account shall be reinsured under this Agreement, provided, however, that the portion of any such contract which is not so invested is not covered under this Agreement. 2.) This Amendment shall be effective December 30, 1996. Except as amended hereby, the Agreement shall remain unchanged. IN WITNESS HEREOF, the parties to the Agreement have caused this Amendment to be duly executed in duplicate by their respective officers on the dates shown below. NORTHBROOK LIFE INSURANCE COMPANY ALLSTATE LIFE INSURANCE COMPANY By: Sarah R. Donahue By: C. Nelson Strom Title: Assistant Vice President Title: Assistant Vice President and Corporate Actuary Date: January 15, 1997 Date: January 15, 1997 (10)(o) Amendment Number 6 To the Reinsurance Agreement Effective December 31, 1987 between Northbrook Life Insurance Company (hereinafter called ANorthbrook@) and Allstate Life Insurance Company (hereinafter called AAllstate@) WHEREAS, NORTHBROOK and ALLSTATE entered into a Reinsurance Agreement effective December 31, 1987 (hereinafter "Agreement"); and WHEREAS, the parties now believe that the Agreement does not accurately reflect their existing practices relating to settlements for certain tax benefits and liabilities; and WHEREAS, the parties desire to amend the Agreement to reflect the existing practices with respect to such tax settlements; NOW, THEREFORE, IT IS HEREBY AGREED, that the Agreement is amended as provided below. 1.) Article IV, paragraph 2, is amended by replacing subparagraph (d) with a new subparagraph (d) as follows: (d) Insurance taxes, licenses and fees (excluding Federal Income Tax that is not related to the contracts reinsured under this Agreement), incurred by NORTHBROOK with respect to the contracts reinsured under this Agreement. 2.) Article IV is further amended by adding a new paragraph 5, as follows: 5. No less frequently than quarterly, ALLSTATE will calculate the amount of federal and state income tax liabilities incurred by NORTHBROOK for the quarter related to the contracts reinsured under this Agreement, and the amount of federal and state income tax benefits earned by NORTHBROOK for the quarter related to the contracts reinsured under this Agreement. If tax liabilities exceed tax benefits, the difference, plus a gross-up for additional federal and state income taxes, will be paid by ALLSTATE to NORTHBROOK. If tax benefits exceed tax liabilities, the difference, plus a gross-up for additional federal and state income taxes, will be paid by NORTHBROOK to ALLSTATE. Except as amended hereby, the Agreement shall remain unchanged. IN WITNESS HEREOF, the parties to the Agreement have caused this Amendment to be duly executed in duplicate by their respective officers on the dates shown below. NORTHBROOK LIFE INSURANCE COMPANY ALLSTATE LIFE INSURANCE COMPANY By: Sarah R. Donahue By: C. Nelson Strom Title: Assistant Vice President Title: AVP Date: October 22, 1998 Date: October 22, 1998 EX-27 3 FDS --
7 THIS SCHEUDLE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM STATEMENTS OF FINANCIAL POSITION AT MARCH 31, 1999; STATEMENTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 1999; AND STATEMENTS OF CASH FLOWS THREE MONTHS ENDED MARCH 31, 1999. 0000716791 NORTHBROOK LIFE INSURANCE COMPANY 1,000 U.S. DOLLARS 3-MOS DEC-31-1999 JAN-01-1999 MAR-31-1999 1 86,761 0 0 0 0 0 91,247 0 2,107,850 0 9,424,777 0 0 145,061 1,962,893 0 0 0 2,500 85,098 9,424,777 0 1,487 389 0 0 0 0 1,876 656 1,220 0 0 0 1,220 0 0 0 0 0 0 0 0 0
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