UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

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.

Commission file number: 333-100029

ALLSTATE LIFE INSURANCE COMPANY
OF
NEW YORK
(Exact name of registrant as specified in its charter)

Registrant's telephone number, including area code:631/357-8920

        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  ý        No  o

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes  o        No  ý

        As of October 31, 2003,April 30, 2004 the registrant had 100,000 common shares, $25 par value, outstanding, all of which are held by Allstate Life Insurance Company.

ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
INDEX TO QUARTERLY REPORT ON FORM 10-Q
September 30, 2003March 31, 2004

PART I.1. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
CONDENSED STATEMENTS OF OPERATIONS

See notes to condensed financial statements.

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ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
CONDENSED STATEMENTS OF FINANCIAL POSITION

See notes to condensed financial statements.

2

ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
CONDENSED STATEMENTS OF CASH FLOWS

See notes to condensed financial statements.

3

ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)(unaudited)

1.     Basis of Presentation

        The accompanying condensed financial statements include the accounts of Allstate Life Insurance Company of New York (the "Company"), a wholly-ownedwholly 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").

        The condensed financial statements and notes as of September 30, 2003,March 31, 2004, and for the three-month and nine-month periods ended September 30,March 31, 2004 and 2003 and 2002 are unaudited. The condensed financial statements reflect all adjustments (consisting only of normal recurring accruals) which are, in the opinion of management, necessary for the fair presentation of the financial position, results of operations and cash flows for the interim periods. These condensed financial statements and notes should be read in conjunction with the financial statements and notes thereto included in the Allstate Life Insurance Company of New YorkCompany's Annual Report on Form 10-K for the year ended December 31, 2002.2003. The results of operations for the interim periods should not be considered indicative of results to be expected for the full year.

        To conform to the 20032004 and year-end 20022003 presentations, certain amounts in the prior year's condensed financial statements have been reclassified.

        Non-cash investment exchanges and modifications, which primarily reflect refinancings of fixed income securities, totaled $5 million for the nine months ended September 30, 2002. There were no non-cash investment exchanges and modifications for the nine months ended September 30, 2003.

Adopted accounting standard

Statement of Financial Accounting Standards No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities"

        In April 2003, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standard ("SFAS") No. 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities". The statement amends, clarifies and codifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and utilized for hedging activities under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". While this statement applies primarily to certain derivative contracts and embedded derivatives entered into or modified after June 30, 2003, it also codifies conclusions previously reached by the FASB at various dates on certain implementation issues. The impact of adopting the provisions of this statement were not material to the Company's Condensed Statements of Operations or Financial Position.

Pending accounting standards

Statement of Position 03-01

        In July 2003, the American Institute of Certified Public Accountants issued Statement of Position ("SOP") 03-01 entitled03-1, "Accounting and Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration
    Contracts and for Separate Accounts."Accounts" ("SOP 03-1")

        On January 1, 2004, the Company adopted SOP 03-1. The accounting guidance contained in the SOP addresses three areas: separate accounts presentation and valuation, accounting for sales inducements such as bonus interest, and the classification and valuation of certain long duration liabilities. The effective datemajor provisions of the SOP isaffecting the Company require:

•

Establishment of reserves primarily related to death benefit and income benefit guarantees provided under variable annuity contracts;

•

Deferral of sales inducements that meet certain criteria, and amortization using the same method used for fiscal years beginning after December 15, 2003, with earlierdeferred policy acquisition costs ("DAC").

Effects of adoption encouraged.

        Based on management's reviewThe cumulative effect of the change in accounting principle from implementing SOP 03-1 was a loss of $7.6 million, after-tax ($11.7 million, pre-tax). It was comprised of an increase in contractholder funds and reserve for life-contingent contract benefits (primarily for variable annuity contracts) of $942 thousand, pre-tax, and a reduction in DAC and deferred sales inducements ("DSI") of $10.7 million, pre-tax.

        The SOP requires consideration of a range of potential results to estimate the most significant impact tocost of variable annuity death benefits and income benefits, which generally necessitates the Company isuse of stochastic modeling techniques. To maintain consistency with the provision of the SOP that requiresassumptions used in the establishment of reserves for variable annuity guarantees, the Company utilized the results of this stochastic modeling to estimate expected gross profits, which form the basis for determining the amortization of DAC and DSI. This new modeling approach resulted in a lower estimate of expected gross profits, and therefore resulted in a write-down of DAC and DSI.

        In 2004, DSI and related amortization is classified within the Condensed Statements of Financial Position and Operations as other assets and interest credited to contractholder funds, respectively. The amounts are provided below.

Liabilities for contract guarantees

        The Company offers various guarantees to variable contractholders including a return of no less than (a) total deposits made on the contract less any customer withdrawals, (b) total deposits made on the contract less any customer withdrawals plus a minimum return or (c) the highest contract value on a specified anniversary date minus any customer withdrawals following the contract anniversary. These guarantees include benefits that are payable in the event of death, upon annuitization, or at specified dates during the accumulation period.

        The table below presents information regarding the Company's variable contracts with guarantees. The Company's variable annuity contracts may offer more than one type of guarantee in each contract; therefore, the sum of amounts listed exceeds the total account balances of variable annuity contracts' separate accounts with guarantees.

(1)

Defined as the current guaranteed minimum death benefit in excess of the current account balance at the balance sheet date.

(2)

Defined as the present value of the minimum guaranteed annuity payments determined in accordance with the terms of the contract in excess of the current account balance.

(3)

Defined as the present value of the guaranteed minimum accumulation balance in excess of the current account balance.

        Account balances of variable contracts' separate accounts with guarantees were invested as follows:

        The following summarizes the liabilities for guarantees:

(1)

GMAB are considered to be derivatives under Financial Accounting Standards Board Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities, and are recognized at fair value with changes in fair value recognized as contract benefits.

(2)

For GMAB, incurred guaranteed benefits incorporate all changes in fair value other than amounts resulting from paid guaranteed benefits.

(3)

Included in the total reserve balance are reserves for variable annuity death benefits of $894 thousand, variable annuity income benefits of $12 thousand and other guarantees of $51 thousand.

        The liability for death and income benefit guarantees is established equal to a benefit ratio multiplied by the cumulative contract charges earned, plus accrued interest less contract benefit payments. The benefit ratio is calculated as the estimated present value of all expected contract benefits divided by the present value of all

expected contract charges. For guarantees in additionthe event of death, benefits represent the current guaranteed minimum death payments in excess of the current account balance. For guarantees at annuitization, benefits represent the present value of the minimum guaranteed annuity benefits in excess of the current account balance.

        Projected benefits and contract charges used in determining the liability for guarantees are developed using models and stochastic scenarios that are also used in the development of estimated expected gross profits. Underlying assumptions for the liability related to income benefits include assumed future annuitization elections based on factors such as the extent of benefit to the accountpotential annuitant, eligibility conditions and the annuitant's attained age.

        The liability for guarantees will be re-evaluated periodically, and adjustments will be made to the liability balance forthrough a charge or credit to contract benefits.

Deferred sales inducements

        Costs related to sales inducements offered on sales to new customers, principally on investment contracts and contract features that provide guaranteed deathprimarily in the form of additional credits to the customer's account value or enhancements to interest credited for a specified period, which are beyond amounts currently being credited to existing contracts, are deferred and recorded as other insurance benefitsassets. All other sales inducements are expensed as incurred and guaranteed income benefits. This liability will be determined based on models that involve numerous estimates and subjective judgments, including those regarding expected market rates of return and volatility, contract surrender rates and mortality experience. The Company does not currently recognize these liabilities. The Company is currently evaluating the provisions of the statement. The Company plansincluded in interest credited to adopt the provisions of the statement no later than January 1, 2004. The effect of adoption may have a material impactcontractholder funds on the Condensed Statements of Operations. However,DSI is amortized to income using the amounts may vary based on marketsame methodology and assumptions as DAC, and included in interest credited to contractholder funds. DSI is periodically reviewed for recoverability and written down when necessary.

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conditions. Adoption is not expected to have a material impact on        DSI activity for the Company's Condensed Statements of Financial Position.three months ended March 31, 2004 was as follows:

ProposedPending accounting standard

Emerging Issues Task Force Topic No. 03-01

        The Emerging Issues Task Force ("EITF") discussed Topic No. 03-01, "The Meaning of Other-Than-Temporary Impairment and Its Application to
    Certain Investments", ("EITF No. 03-01")

        In March 2004, the Emerging Issues Task Force ("EITF") reached a final consensus on EITF No. 03-01, which attempts to define other-than-temporary impairment and highlight its application to investment securities accountedis effective for under both SFASreporting periods beginning after June 15, 2004. EITF No. 115, "Accounting for Certain Investments in Debt and Equity Securities" and Accounting Principles Board ("APB") Opinion No. 18, "The Equity Method of Accounting for Investments in Common Stocks." The current issue summary, which has yet to be finalized, proposes03-01 requires that if, at the evaluation date,when the fair value of an investment security is less than its carrying value then an impairment exists for which a determination must be made as to whether thatthe impairment is other-than-temporary. If it is determined that an impairment is other-than-temporary, then anAn impairment loss should be recognized equal to the difference between the investment's carrying value and its fair value atwhen an impairment is other-than-temporary. The EITF No. 03-01 impairment model applies to all investment securities accounted for under Statement of Financial Accounting Standard ("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity Securities" and to investment securities accounted for under the cost method to the extent an impairment indicator exists or the reporting date. In recent deliberations,entity has estimated the EITF discussed different models to assess whether impairment is other-than-temporaryfair value of the investment security in connection with SFAS No. 107, "Disclosures about Fair Value of Financial Instruments". The disclosures required for different types of investments (e.g. SFAS 115 marketable equityinvestment securities SFAS 115 debt securities, and equity andaccounted for under the cost method investments subjectare effective for annual periods for fiscal years ending after June 15, 2004. The adoption of EITF No. 03-01 is not expected to APB Opinion No. 18). Due to the uncertainty of the final model or models that may be adopted, the estimated impact toresult in a material change in the Company's Condensed Statements of Operations andor Financial Position is presently not determinable.Position.

2.     Other Investments

        In 2004, the Company entered into interest rate cap agreements that are used to reduce exposure to rising interest rates relative to certain annuity contracts. The Company has also entered into foreign currency swap agreements that are used to manage the foreign currency risk associated with certain existing assets. Both are used for asset-liability management.

        In exchange for a premium, interest rate cap agreements provide the holder with the right to receive at a future date, the amount, if any, by which a specified market interest rate exceeds the fixed cap rate applied to a notional amount. Hedge accounting is not applied to these derivative contracts. The fair values of the instruments are reported as other investments and the related gains and losses from the changes in fair value and the accrued periodic settlements are recognized in realized capital gains and losses.

        Under cash flow hedge accounting, the Company designates its foreign currency swap agreements as cash flow hedges when the hedging instrument is highly effective in offsetting the exposure of variations in cash flows for the hedged risk that could affect net income. The Company's cash flow exposure is associated with an existing asset. The fair value of the instruments is reported as other liabilities and accrued expenses and the changes in fair value of the instruments are reported in accumulated other comprehensive income on the Condensed Statements of Financial Position. Amounts are reclassified to net investment income or realized capital gains and losses as the hedge transaction affects net income. Accrued periodic settlements on instruments used in cash flow hedges are reported in net investment income.

3.     Reinsurance

        The Company purchases reinsurance to limit aggregate and single losses on large risks. The Company follows a comprehensive evaluation process involving credit scoring and capacity to select reinsurers. The Company continues to have primary liability as the direct insurer for risks reinsured. Estimating amounts of reinsurance recoverable is impacted by the uncertainties involved in the establishment of loss reserves. Failure of reinsurers to honor their obligations could result in losses to the Company. The Company cedes a portion of the mortality risk on certain term life policies with a pool of non-affiliated reinsurers. Additionally, the Company has a reinsurance agreement through which it primarily cedes re-investment related risk on its structured settlement annuities to ALIC. Under the terms of the agreement, the Company pays a premium to ALIC that varies with the aggregate structured settlement annuity reserve balance. In return, ALIC guarantees that the yield on the portion of the Company's investment portfolio that supports structured settlement annuity liabilities will not fall below contractually determined rates.

        Amounts recoverable from reinsurers are estimated based upon assumptions consistent with those used in establishing the liabilities related to the underlying reinsured contracts. No single reinsurer had a material obligation to the Company nor is the Company's business substantially dependent upon any reinsurance contract.        The effects of reinsurance on premiums and contract charges are as follows:

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        The effects of reinsurance on contract benefits are as follows:

        Excluded from the table above are premiums ceded to ALIC of $647$671 thousand $602and $634 thousand $1.9 million and $1.8 million for the three months ended March 31, 2004 and nine month periods ended September 30, 2003, and 2002, respectively, under the terms of the structured settlement annuity reinsurance agreement described above.agreement. These premiums are recorded as investment expense and reflected in Net investment income in the Condensed Statements of Operations.

3.     Regulation, Legal Proceedingsrealized capital gains and Guaranteeslosses.

Regulation

        The Company is subject to changing social, economic and regulatory conditions. State and federal regulatory initiatives and proceedings have varied and have included efforts to remove barriers preventing banks from engaging in the securities and insurance businesses, to change tax laws affecting the taxation of insurance companies and the tax treatment of either insurance products or competing non-insurance products that may impact the relative desirability of various personal investment products and to expand overall regulation. The ultimate changes and eventual effects, if any, of these initiatives are uncertain.

Legal proceedings

        Legal proceedings involving Allstate agencies and AIC may impact the Company, even when the Company is not directly involved because the Company sells its products through a variety of distribution channels including Allstate agencies. Consequently, information about the more significant of these proceedings is provided below.

        AIC is defending various lawsuits involving worker classification issues. These lawsuits include a number of putative class actions and one certified class action challenging the overtime exemption claimed by AIC under the Fair Labor Standards Act or state wage and hour laws. These class actions mirror similar lawsuits filed recently against other carriers in the industry and other employers. Another lawsuit involves the worker classification of staff working in agencies. In this putative class action, plaintiffs seek damages under the Employee Retirement Income Security Act ("ERISA") and the Racketeer Influenced and Corrupt Organizations Act alleging that agency secretaries were terminated as employees by AIC and rehired by agencies through outside staffing vendors for the purpose of avoiding the payment of employee benefits. A putative nationwide class action filed by former employee agents also includes a worker classification issue; these agents are challenging certain amendments to the Agents Pension Plan and are seeking to have exclusive agent independent contractors treated as employees for benefit purposes. AIC has been vigorously defending these and various other worker classification lawsuits. The outcome of these disputes is currently uncertain.

        AIC is also defending certain matters relating to its agency program reorganization announced in 1999. These matters include an investigation by the U.S. Department of Labor and a lawsuit filed in December 2001 by the U.S. Equal Employment Opportunity Commission ("EEOC") with respect to allegations of retaliation under the Age Discrimination in Employment Act, the Americans with Disabilities Act and Title VII of the Civil Rights Act of 1964. A putative nationwide class action has also been filed by

6

former employee agents alleging various violations of ERISA, breach of contract4.     Guarantees and age discrimination. AIC has been vigorously defending these lawsuits and other matters related to its agency program reorganization. In addition, AIC is defending certain matters relating to its life agency program reorganization announced in 2000. These matters include an investigation by the EEOC with respect to allegations of age discrimination and retaliation. AIC is cooperating fully with the agency investigation and will continue to vigorously defend these and other claims related to the life agency program reorganization. The outcome of these disputes is currently uncertain.

        Various other legal and regulatory actions are currently pending that involve the Company and specific aspects of its conduct of business. Like other members of the insurance industry, the Company is the potential target of an increasing number of class action lawsuits and other types of litigation, some of which involve claims for substantial and/or indeterminate amounts (including punitive and treble damages) and the outcomes of which are unpredictable. This litigation is based on a variety of issues including insurance and claim settlement practices. However, at this time, based on their present status, it is the opinion of management that the ultimate liability, if any, in one or more of these other 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.Contingent Liabilities

Guarantees

        In the normal course of business, the Company provides standard indemnifications to counterparties in contracts in connection with numerous transactions, including indemnifications for breaches of representations and warranties, taxes and certain other liabilities, such as third party lawsuits. The indemnification clauses are often standard contractual terms and were entered into in the normal course of business based on an assessment that the risk of loss would be remote. The terms of the indemnifications vary in duration and nature. In many cases, the maximum obligation is not explicitly stated and the contingencies triggering the obligation to indemnify have not occurred and are not expected to occur. Because the obligated amounts of the indemnifications are not explicitly stated in many cases, the maximum amount of the obligation under such indemnifications is not determinable. Historically, the Company has not made any material payments pursuant to these obligations.

        In addition, the Company indemnifies its directors, officers and other individuals serving at the request of the Company as a director or officer to the extent provided in its charter and by-laws. Since these indemnifications are generally not subject to limitation with respect to duration or amount, the Company does not believe that it is possible to determine the maximum potential amount due under these indemnifications.

        The aggregate liability balance related to all guarantees was not material as of September 30, 2003.March 31, 2004.

7Regulation

        The Company is subject to changing social, economic and regulatory conditions. Recent state and federal regulatory initiatives and proceedings have included efforts to remove barriers preventing banks from engaging in the securities and insurance businesses, change tax laws affecting the taxation of insurance companies and the tax treatment of insurance products or competing non-insurance products that may impact the relative desirability of various personal investment products and otherwise expand overall regulation of insurance products and the insurance industry. The ultimate changes and eventual effects of these initiatives on the Company's business, if any, are uncertain.

Legal proceedings

        Legal proceedings involving Allstate agencies and AIC may impact the Company, even when the Company is not directly involved, because the Company sells its products through a variety of distribution channels including Allstate agencies. Consequently, information about the more significant of these proceedings is provided below.

        AIC is defending various lawsuits involving worker classification issues. These lawsuits include a number of putative class actions and one certified class action challenging the overtime exemption claimed by AIC under the Fair Labor Standards Act or state wage and hour laws. Plaintiffs seek monetary relief, such as penalties and liquidated damages, and non-monetary relief, such as injunctive relief and an accounting. These class actions mirror similar lawsuits filed recently against other carriers in the industry and other employers. A putative nationwide class action filed by former employee agents also includes a worker classification issue; these agents are challenging certain amendments to the Agents Pension Plan and are seeking to have exclusive agent independent contractors treated as employees for benefit purposes. AIC has been vigorously defending these and various other worker classification lawsuits. The outcome of these disputes is currently uncertain.

        AIC is also defending certain matters relating to its agency program reorganization announced in 1999. These matters include an investigation by the U.S. Department of Labor, a lawsuit filed in December 2001 by the U.S. Equal Employment Opportunity Commission ("EEOC") alleging retaliation under federal civil rights laws and a class action filed in August 2001 by former employee agents alleging retaliation and age discrimination under the Age Discrimination in Employment Act, breach of contract and ERISA violations.    In April 2004, the U.S. Department of Labor notified AIC that it has closed its investigation and contemplates no further action on this matter at this time. In March 2004, in the EEOC and class action lawsuits, the trial court issued a memorandum and order that, among other things, certified classes of agents, including a mandatory class of agents who had signed a release for purposes of effecting the court's declaratory judgment that the release is voidable at the option of the release signer. The court also ordered that an agent who voids

the release must return to AIC "any and all benefits received by the [agent] in exchange for signing the release." The court also "concluded that, on the undisputed facts of record, there is no basis for claims of age discrimination." The EEOC and plaintiffs have asked the court to clarify and/or reconsider its memorandum and order. The case otherwise remains pending. A putative nationwide class action has also been filed by former employee agents alleging various violations of ERISA. This matter was dismissed with prejudice in March 2004 by the trial court but may still be subject to further proceedings, which may include appeals. In these matters, plaintiffs seek compensatory and punitive damages, and equitable relief. AIC has been vigorously defending these lawsuits and other matters related to its agency program reorganization. In addition, AIC is defending certain matters relating to its life agency program reorganization announced in 2000. These matters include an investigation by the EEOC with respect to allegations of age discrimination and retaliation. AIC is cooperating fully with the agency investigation and will continue to vigorously defend these and other claims related to the life agency program reorganization. The outcome of these disputes is currently uncertain.

        Various other legal and regulatory actions are currently pending that involve the Company and specific aspects of its conduct of business. Like other members of the insurance industry, the Company is the target of an increasing number of lawsuits, some of which involve claims for substantial and/or indeterminate amounts. This litigation is based on a variety of issues including insurance and claim settlement practices. The outcome of these disputes is currently unpredictable. However, at this time, based on their present status, it is the opinion of management that the ultimate liability, if any, in one or more of these other 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.

4.5.     Other Comprehensive Income

        The components of other comprehensive income on a pretax and after-tax basis are as follows:

5.     Disposition of operations

        During the third quarter of 2003, the Company announced its intention to exit the Direct Response distribution business. Based on its decision to sell the business, the Company has recorded an estimated loss on the disposition of $4.3 million ($2.7 million, after-tax).

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INDEPENDENT ACCOUNTANTS' REVIEW REPORT

To the Board of Directors and Shareholder of
Allstate Life Insurance Company of New York:

        We have reviewed the accompanying condensed statement of financial position of Allstate Life Insurance Company of New York (the "Company", an affiliate of The Allstate Corporation) as of September 30, 2003,March 31, 2004, and the related condensed statements of operations for the three-month and nine-month periods ended September 30, 2003 and 2002 and the condensed statements of cash flows for the nine-monththree-month periods ended September 30, 2003March 31, 2004 and 2002.2003. These interim financial statements are the responsibility of the Company's management.

        We conducted our reviewsreview in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and of making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States of America, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

        Based on our reviews,review, we are not aware of any material modifications that should be made to such condensed financial statements for them to be in conformity with accounting principles generally accepted in the United States of America.

        We have previously audited, in accordance with auditing standards generally accepted in the United States of America, the statement of financial position of Allstate Life Insurance Company of New York as of December 31, 2002,2003, and the related statements of operations and comprehensive income, shareholder's equity, and cash flows for the year then ended, not presented herein. In our report dated February 5, 2003,4, 2004, we expressed an unqualified opinion on those financial statements. In our opinion, the information set forth in the accompanying condensed statement of financial position as of December 31, 20022003 is fairly stated, in all material respects, in relation to the statement of financial position from which it has been derived.

/s/ Deloitte & Touche LLP

Chicago, Illinois
November 13, 2003May 7, 2004

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Item 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THREE-MONTH AND NINE-MONTH PERIODS ENDED SEPTEMBER 30,MARCH 31, 2004 AND 2003 AND 2002

OVERVIEW

The following discussion highlights significant factors influencing financial position and results of operations and changes in financial position of Allstate Life Insurance Company of New York (the(referred to in this document as "we", "our", "us" or the "Company"). It should be read in conjunction with the condensed financial statements and notes thereto found under Part I. Item 1. contained herein, and with the discussion, analysis, financial statements and notes thereto in Part I. Item 1. and Part II. Item 7. and Item 8. of the Allstate Life Insurance Company of New York Annual Report on Form 10-K for 2002.2003. We operate as a single segment entity, based on the manner in which financial information is used internally to evaluate performance and determine the allocation of resources.

        To conform to the 20032004 and year-end 20022003 presentation, certain prior year amounts have been reclassified.

Management has identified the Company as a single segment entity.

RESULTS OF OPERATIONS

        Summarized financial data is presented in the following table.

(1)

Realized capital gains and losses are reconciled in the table on page 16.

REVENUES

        Total revenues increased 23.4% in the third quarter of 2003 compared to the third quarter of 2002, due to higher Net investment income and lower net realized capital losses. Total revenues rose 4.3% in the first nine months of 2003 compared to the first nine months of 2002. The increase was due to higher Net investment income, increased Contract charges and lower net realized capital losses partially offset by decreased Premiums from immediate annuities with life contingencies.

10

OPERATIONS

Premiums included in the Condensed Statements of Operations, represent premiumsrevenues generated from traditional life, immediate annuities with life contingencies and other insurance products that have significant mortality or morbidity risk.

Contract charges are revenues generated from interest-sensitive life products, variable annuities, fixed annuities and other investment products for which deposits are classified as Contractholdercontractholder funds or Separate Accounts liabilities.separate accounts liabilities on the Condensed Statements of Financial Position. Contract charges are assessed against thesethe contractholder account values for maintenance, administration, cost of insurance and surrender prior to the contractually specified dates. As a result, changes in Contractholdercontractholder funds and Separate Accountsseparate accounts liabilities are considered in the evaluation of growth and as indicators of future levels of revenues.

        The following table summarizes premiums and contract charges by product.

11

        The following table summarizes Premiumspremiums and contract charges by distribution channel.

        Total Premiumspremiums increased 5.2%2.0% to $14.2$16.7 million in the thirdfirst quarter of 2003 from $13.5 million in2004 compared to the third quartersame period of 2002, due to an2003. The increase in saleswas primarily the result of immediate annuities with life contingencies. Sales ofincreased premiums on immediate annuities with life contingencies fluctuate due to consumer preference as well as market and competitive conditions, which drivepartially offset by decreased premiums resulting from the level and mixdisposal of immediate annuities sold with or without life contingencies.the majority of our direct response distribution business.

        Total        Contract charges were $12.7increased 8.6% to $14.1 million in the thirdfirst quarter of 20032004 compared to $12.9 million in the third quartersame period of 2002. Higher fixed annuity2003. The increase was primarily due to higher contract charges were more than offset by a decline inon variable annuities and interest-sensitive life insurance contract charges. The variable annuity daily averageas a result of overall higher account values during the thirdfirst quarter of 2003 were lower than the daily average account values during the third quarter of 2002, as poor equity market performance during the prior year and surrenders offset increases from new business and market appreciation since March of 2003.

        For the first nine months of 2003, Premiums and Contract charges decreased 20.1%2004 compared to the first nine months of 2002. The decrease is due to decreased sales of immediate annuities with life contingencies resulting from competitive market conditions and lower variable annuity contract charges from lower average account values, partially offset by slightly higher traditional life insurance premiums, and higher contract charges related to interest-sensitive life insurance and fixed annuities.prior period.

        Contractholder funds included in the Condensed Statements of Financial Position represent interest-bearing liabilities arising from the sale of individual products, such as interest-sensitive life and fixed annuities. The balance of the Contractholdercontractholder funds is equal to the cumulative deposits received and interest credited to the contractholder less cumulative contract maturities, benefits, surrenders, withdrawals and contract charges for mortality or administrative expenses.

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        The following table shows the changes in Contractholdercontractholder funds.

(1)

The fixed portionincrease in contractholder funds due to the adoption of SOP 03-1 primarily reflects the establishment of reserves for certain liabilities that are primarily related to death benefit and income benefit guarantees provided under variable annuity deposits are included in Fixed annuities.contracts and the reclassification of deferred sales inducements from contractholder funds to other assets.

        The increase in Contractholder funds of $138.4 million for the three months ended September 30, 2003 compared to the $260.1 million increase during the same period in 2002 is the result of fixed annuity deposits in both periods partially offset by a decrease in new deposits to the fixed portion of variable annuities. Deposits for the fixed portion of variable annuities included in Contractholder funds decreased $107.9 millionincreased 23.3% in the thirdfirst quarter of 20032004 compared to the same period of 2003, and average contractholder funds, after reflecting the impact of adopting SOP 03-1, increased 29.1% due to significant increases in 2002.fixed annuity deposits. Fixed annuity deposits increased 35.5% primarily due to competitive pricing.

        ForBenefits and withdrawals increased 27.4% in the first nine monthsquarter of 2003, the change in Contractholder funds2004 compared to the first nine monthssame period of 2002 reflects trends consistent with those2003. Benefits and withdrawals for 2004 represent 1.8% of the three months ended September 30. Decreased deposits into variable annuity fixed account investment options and slightly higherbeginning of period contractholder funds balance, comparable to 2003. Actual surrenders and maturities were offset by fixed annuity deposits and increased interest-sensitive life deposits from new business.withdrawals compare favorably to our pricing assumptions.

        Separate Accountsaccounts liabilities included in the Condensed Statements of Financial Position, are legally segregated from the Company's general account assets and represent the contractholders' claims to the related Separate Accountslegally segregated separate accounts assets. Separate Accountsaccounts liabilities primarily arise from the sale of variable annuitiesannuity contracts and variable life insurance. The balance of the Separate Accounts liabilities is equal to the cumulative deposits received plus the investment performance of the related assets less the cumulative contract surrenders, withdrawals, net transfers to/from the general account and cumulative contract charges for mortality or administrative expenses.

insurance policies. The following table shows the changes in separate accounts liabilities.

Separate Accounts.

        Increasesaccounts liabilities increased $20.8 million during the first quarter of 2004 compared to a decline of $21.8 million during the same period of 2003 reflecting a significant improvement in Separate Accounts liabilitiesinvestment results and net deposits. The increase in variable annuity net deposits resulted from lower initial deposits on variable annuity contracts being invested in the third quarter and first nine monthsgeneral account investment option due to improved equity market performance. Variable annuity contractholders often allocate a significant portion of 2003 comparedtheir initial variable annuity deposits into a fixed rate investment option. The level of this activity is reflected above in the deposits allocated to the same periods in the prior year were primarily driven by strong equity market performance resulting in improved investment results during both periods and lower transfers intofixed accounts, while all other transfer activity between the fixed account investmentand separate accounts investments options and surrenders.is reflected in net transfers from (to) fixed accounts. The liability for the fixed portion of variable annuity contracts is reflected in contractholder funds.

        Net investment income increased 13.7% in the third quarter and 14.9%11.2% in the first nine monthsquarter of 2003

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2004 compared to the same periodsperiod in the prior year. The increase in both periods was2003, primarily due to the effect of higher portfolio balances resulting from increased positive cash flows from product sales and deposits, partially offset by lower portfolio yields. Higher portfolio balances resulted from the investment of cash flows from operating and financing activities. Investment balances as of March 31, 2004, excluding unrealized net capital gains, increased 19.4% from March 31, 2003. The lower portfolio yields were primarily due to investment purchases of fixed income securities with interest ratesyields lower than the current portfolio average. Investments as

        We reclassified reinsurance premiums paid to ALIC for the stop loss reinsurance agreement entered into in 2002, which meets the accounting definition of September 30, 2003, excluding unrealizeda derivative under Statement of Financial Accounting Standard ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities", from net investment income to realized capital gains and losses so that they are reported consistently with the corresponding fair value adjustments on fixedthis agreement. Net investment income securities,was increased 19.0% from September 30, 2002.by $634 thousand for the three months ended March 31, 2003 as a result.

        Analysis of netNet income analysis is presented in the following table.

(1)

Net investment income includes periodic settlements and accruals on non-hedge derivative instruments, pretax, totaling $7 thousand for the first quarter of 2004. There were no periodic settlements and accruals on non-hedge derivative instruments for the first quarter of 2003.

(2)

Beginning in 2004, amortization of DSI is excluded from contract benefits and interest credited to contractholder funds for purposes of calculating gross margin. Amortization of DSI totaled $7 thousand and $4 thousand, respectively, in the first quarter of 2004. The prior period has not been restated.

Gross margin, a non-GAAP measure, represents premiums, contract charges and net investment income, less contract benefits and interest credited to contractholder funds. We use gross margin as a component of our evaluation of the profitability of our life insurance and financial product portfolio. Additionally, for many of our products, including fixed annuities, variable life and annuities, and interest-sensitive life insurance, the amortization of DAC and DSI is determined based on actual and expected gross margin. Gross margin is comprised of four components that are utilized to further analyze the business; they include the investment margin, mortality margin, and maintenance and surrender charges. We believe gross margin and its components are useful to investors because they allow for the evaluation of income components separately and in the aggregate when reviewing performance. Gross margin, investment margin and mortality margin should not be considered as a substitute for net income and do not reflect the overall profitability of the business. Net income is the GAAP measure that is most directly comparable to these margins. Gross margin is reconciled to GAAP net income in the table above.

        The components of gross margin are reconciled to the corresponding financial statement line items in the following table.