As filed with the Securities and Exchange Commission on April 13, 2004
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FILE NO. 333-112233
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
ALLSTATE LIFE INSURANCE COMPANY
(Exact Name of Registrant)
ILLINOIS 36-2554642
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
3100 SANDERS ROAD
NORTHBROOK, ILLINOIS 60062
847/402-5000
(Address and Phone Number of Principal Executive Office)
MICHAEL J. VELOTTA
SENIOR VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
ALLSTATE LIFE INSURANCE COMPANY
3100 SANDERS ROAD, SUITE J5B
NORTHBROOK, ILLINOIS 60062
847/402-5000
(Name, Complete Address and Telephone Number of Agent for Service)
COPIES TO:
RICHARD T. CHOI, ESQUIRE LISETTE WILLEMSEN, ESQUIRE
FOLEY & LARDNER LLP ALLSTATE LIFE INSURANCE COMPANY
3000 K STREET, NW SUITE 500 3100 SANDERS ROAD, SUITE J5B
WASHINGTON, D.C. 20007 NORTHBROOK, IL 60062
Approximate date of commencement of proposed sale to the public: The annuity
contracts and interests thereunder covered by this registration statement are to
be issued promptly and from time to time after the effective date of this
registration statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: /X/
ALLSTATE/(R)/ CHOICERATE ANNUITY
ALLSTATE LIFE INSURANCE COMPANY
544 LAKEVIEW PARKWAY, SUITE 300
VERNON HILLS, IL 60061
TELEPHONE NUMBER: 1-800-203-0068
PROSPECTUS DATED MAY 1, 2004
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Allstate Life Insurance Company ("ALLSTATE LIFE") is offering the ChoiceRate
Annuity, a group and individual single premium deferred annuity contract
("CONTRACT"). This prospectus contains information about the Contract that you
should know before investing. Please keep it for future reference.
The Contract is available through Allstate Distributors, L.L.C., the principal
underwriter for the Contract.
THE SECURITIES AND EXCHANGE COMMISSION ("SEC") HAS NOT
APPROVED OR DISAPPROVED THE SECURITIES DESCRIBED IN THIS
PROSPECTUS, NOR HAS IT PASSED ON THE ACCURACY OR THE
ADEQUACY OF THIS PROSPECTUS. ANYONE WHO TELLS YOU OTHERWISE
IS COMMITTING A FEDERAL CRIME.
IMPORTANT THE CONTRACTS MAY BE DISTRIBUTED THROUGH BROKER-DEALERS
THAT HAVE RELATIONSHIPS WITH BANKS OR OTHER FINANCIAL
NOTICES INSTITUTIONS OR BY EMPLOYEES OF SUCH BANKS. HOWEVER, THE
CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
BY SUCH INSTITUTIONS OR ANY FEDERAL REGULATORY AGENCY.
INVESTMENT IN THE CONTRACTS INVOLVES INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL.
THE CONTRACTS ARE NOT FDIC INSURED.
1 PROSPECTUS
TABLE OF CONTENTS
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PAGE
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OVERVIEW
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Important Terms 3
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The Contract At A Glance 4
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How the Contract Works 5
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CONTRACT FEATURES
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The Contract 6
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Purchases and Contract Value 7
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Guarantee Periods 8
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Expenses 11
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Access To Your Money 13
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Income Payments 14
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Death Proceeds 15
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PAGE
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OTHER INFORMATION
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More Information: 17
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Allstate Life 17
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The Contract 17
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Non-Qualified Annuities Held Within a Qualified Plan 17
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Legal Matters 18
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Taxes 19
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Annual Reports and Other Documents 25
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Annual Statements 25
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Appendix A - Market Value Adjustment 26
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2 PROSPECTUS
IMPORTANT TERMS
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This prospectus uses a number of important terms with which you may not be
familiar. The index below identifies the page that describes each term. The
first use of each term in this prospectus appears in highlighted text.
PAGE
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Accumulation Phase 5
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Adjusted Withdrawal Request Amount 10
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Allstate Life ("We") 1
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Annuitant 6
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Beneficiary 6
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Bonus Rate 8
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Bonus Rate Specified Amount 8
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*Contract 1
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Contract Owner ("You") 5
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Contract Value 4
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Contract Year 10
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Death Proceeds 4
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Due Proof
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Due Proof of Death 14
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Enhanced First Year Rate 8
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Free Withdrawal Amount 10
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PAGE
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Gross Withdrawal 8
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Guarantee Period Account
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Guarantee Period Account Value 7
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Income Plans 13
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Issue Date 5
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Market Value Adjustment 4
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Net Withdrawal 7
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New Account Start Date 8
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Payout Phase 5
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Payout Start Date 5
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Tax Qualified Contracts
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Trial Examination Period 4
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SEC 1
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Systematic Withdrawal Program 12
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Unemployment Compensation
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Window Period 4
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Withdrawal Request Amount 12
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*In certain states the Contract is only available as a group Contract. In
these states we issued you a certificate that represents your ownership and
summarizes the provisions of the group Contract. References to "Contract" in
this prospectus include certificates unless the context requires otherwise.
3 PROSPECTUS
THE CONTRACT AT A GLANCE
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The following is a snapshot of the Contract. Please read the remainder of this
prospectus for more information.
PURCHASE PAYMENT You can purchase a Contract with as little as $10,000.
We reserve the right to accept a lesser purchase
payment amount for the Contract. We may limit the
amount of the purchase payment to a maximum of
$1,000,000. You cannot make any additional purchase
payments at any time.
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TRIAL EXAMINATION You may cancel your Contract within 20 days of receipt
PERIOD or any longer period as your state may require ("TRIAL
EXAMINATION PERIOD"). Upon cancellation, we will return
your purchase payment less any withdrawals to you. See
"Trial Examination Period" for details.
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EXPENSES You will bear the following expenses:
.Withdrawal charges ranging from 0%-7% of amounts
withdrawn (with certain exceptions).
.A MARKET VALUE ADJUSTMENT (which can be positive or
negative) for withdrawals except those taken during
the 45 day window period ("WINDOW PERIOD") following
the end of a Guarantee Period.
. State premium tax (if your state imposes one).
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SYSTEMATIC WITHDRAWAL You may choose to receive systematic withdrawal
PROGRAM payments on a monthly, quarterly, semi-annual, or
annual basis.
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INCOME PAYMENTS The Contract offers three income payment plans:
.life income with or without guaranteed payment
period;
.a joint and survivor life income with or without
guaranteed payment period; or
. guaranteed payment period (5 to 50 years)
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DEATH PROCEEDS If you or the ANNUITANT (if the Contract Owner is a
non-living person) dies before the PAYOUT START DATE,
we will pay benefits as described in the Contract.
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WITHDRAWALS You may withdraw some or all of your Contract value
("CONTRACT VALUE") at any time prior to the Payout
Start Date. A withdrawal charge and/or a Market Value
Adjustment may apply. For federal income tax purposes,
distributions or withdrawals taken prior to the Payout
Start Date are generally considered to come from the
earnings in the Contract first. If the Contract is
tax-qualified, generally all withdrawals are treated as
distributions of earnings. Withdrawals of earnings are
taxed as ordinary income and, if taken prior to age 59
1/2, may be subject to an additional 10% federal tax
penalty.
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4 PROSPECTUS
HOW THE CONTRACT WORKS
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The Contract basically works in two ways.
First, the Contract can help you (we assume you are the "CONTRACT OWNER") save
for retirement because you can invest in the Contract and generally pay no
federal income taxes on any earnings until you withdraw them. You do this during
what we call the "ACCUMULATION PHASE" of the Contract. The Accumulation Phase
begins on the date we issue your Contract (we call that date the "ISSUE DATE")
and continues until the "PAYOUT START DATE," which is the date we apply your
money to provide income payments. During the Accumulation Phase, you may
allocate your purchase payment to any combination of the Guarantee Periods. You
will earn a fixed rate of interest that we declare periodically.
Second, the Contract can help you plan for retirement because you can use it to
receive retirement income for life and/ or for a pre-set number of years by
selecting one of the income payment options (we call these "INCOME PLANS")
described on page 13. You receive income payments during what we call the
"PAYOUT PHASE" of the Contract, which begins on the Payout Start Date and
continues until we make the last income payment required by the Income Plan you
select. During the Payout Phase we guarantee the amount of your payments, which
will remain fixed. The amount of money you accumulate under your Contract during
the Accumulation Phase and apply to an Income Plan will determine the amount of
your income payments during the Payout Phase.
The timeline below illustrates how you might use your Contract.
Issue Payout Start
Date Accumulation Phase Date Payout Phase
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You buy You save for retirement You elect to receive You can receive Or you can receive
a Contract income payments income payments income payments
for a set period for life
As the Contract Owner, you exercise all of the rights and privileges provided by
the Contract. If you die, any surviving Contract Owner or, if none, the
BENEFICIARY will exercise the rights and privileges provided by the Contract.
See "The Contract." In addition, if you die before the Payout Start Date we will
pay DEATH PROCEEDS to any surviving Contract Owner or, if there is none, to your
Beneficiary. (See "Death Proceeds.")
Please call us at 1-800-203-0068 if you have any questions about how the
Contract works.
5 PROSPECTUS
THE CONTRACT
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CONTRACT OWNER
The Allstate/(R)/ ChoiceRate Annuity is a contract between you, the Contract
Owner, and Allstate Life, a life insurance company. As the Contract Owner, you
may exercise all of the rights and privileges provided to you by the Contract.
That means it is up to you to select or change (to the extent permitted):
.. the amount and timing of your withdrawals,
.. the programs you want to use to withdraw money,
.. the income payment plan you want to use to receive retirement income,
.. the Annuitant (either yourself or someone else) on whose life the income
payments will be based,
.. the Beneficiary or Beneficiaries who will receive the benefits that the
Contract provides when the last surviving Contract Owner dies, and
.. any other rights that the Contract provides.
If you die, any surviving Contract Owner or, if none, the Beneficiary may
exercise the rights and privileges provided to them by the Contract. If the sole
surviving Contract Owner dies after the Payout Start Date, the Beneficiary will
receive any guaranteed income payments scheduled to continue.
The Contract cannot be jointly owned by both a non-living person and a living
person. The age of the oldest Contract Owner cannot exceed 90 as of the date
we receive the completed application.
The Contract can also be purchased as an IRA or TSA (also known as a 403(b)).
The endorsements required to qualify these annuities under the Internal Revenue
Code of 1986, as amended, ("Code") may limit or modify your rights and
privileges under the Contract.
Except for certain qualified contracts, you may change the Contract Owner at any
time by written notice in a form satisfactory to us. Until we receive your
written notice to change the Contract Owner, we are entitled to rely on the most
recent information in our files. We will provide a change of ownership form to
be signed by you and filed with us. Once we accept your change request, any
change will be effective on the date you sign the written request. We will not
be liable for any payment we make or other action we take before accepting any
written request from you. Accordingly, if you wish to change the Contract Owner,
you should deliver your written request to us promptly. Changing ownership of
this Contract may cause adverse tax consequences and may not be allowed under
qualified plans. Please consult with a competent tax advisor prior to making a
request for a change of Contract Owner.
ANNUITANT
The Annuitant is the individual whose life determines the amount and duration of
income payments (other than under Income Plans with guaranteed payments for a
specified period). The Contract requires that there be an Annuitant at all times
during the Accumulation Phase and on the Payout Start Date. The Annuitant must
be a living person. The Annuitant may not be older than 90 as of the date we
receive the completed application.
You initially designate an Annuitant in your application. You (or the youngest
Contract Owner if there is more than one) will be the Annuitant unless a
different person is named. If the Contract Owner is a living person, you may
change the Annuitant at any time prior to the Payout Start Date in a form
satisfactory to us.
Once we accept your change request, any change will be effective on the date you
sign the written request. We are not liable for any payment we make or other
action we take before accepting any written request from you.
If you select Income Plan 2, you may designate a joint Annuitant, who is a
second person on whose life income payments depend. A joint Annuitant
designation is effective only on the Payout Start Date and remains effective
thereafter.
BENEFICIARY
You may name one or more primary and contingent Beneficiaries when you apply for
a Contract. The primary Beneficiary is the person who may, in accordance with
the terms of the Contract, elect to receive the Death Proceeds or become the new
Contract Owner pursuant to the Contract if the sole surviving Contract Owner
dies before the Payout Start Date. If the sole surviving Contract Owner dies on
or after the Payout Start Date, the primary Beneficiary will receive any
guaranteed income payments scheduled to continue. A contingent Beneficiary is
the person selected by the Contract Owner who will exercise the rights of the
primary Beneficiary if all named primary Beneficiaries die before the death of
the sole surviving Contract Owner.
You may change or add Beneficiaries at any time, unless you have designated an
irrevocable Beneficiary. We will provide a change of Beneficiary request form
to be signed by you and filed with us. Until we receive your written request to
change a Beneficiary, we are entitled to rely on the most recent Beneficiary
information in our files. Once we accept your change request, any change will be
effective on the date you sign the written request. We are not liable for any
payment we make or other action we take before accepting any written request
from you. Accordingly, if you wish to change your Beneficiary, you should
deliver your written notice to us promptly.
If you did not name a Beneficiary or, unless otherwise provided in the
Beneficiary designation, if no named Beneficiary is living when the sole
surviving Contract Owner dies, the new Beneficiary will be:
.. your spouse, or if he or she is no longer alive,
6 PROSPECTUS
.. your surviving children equally, or if you have no surviving children,
.. your estate.
Children, as used in this prospectus, are natural and adopted children only,
either minor or adult.
If more than one Beneficiary survives you, we will divide the Death Proceeds
among the surviving Beneficiaries according to your most recent written
instructions. If you have not given us written instructions in a form
satisfactory to us, we will pay the Death Proceeds in equal amounts to the
surviving Beneficiaries. If there is more than one Beneficiary in a class
(e.g., more than one primary Beneficiary) and one of the Beneficiaries
predeceases the Contract Owner, the remaining Beneficiaries in that class will
divide the deceased Beneficiary's share in proportion to the original share of
the remaining Beneficiaries.
For purposes of the Contract, in determining whether a living person, including
a Contract Owner, primary Beneficiary, contingent Beneficiary, or Annuitant
("Living Person A") has survived another living person, including a Contract
Owner, primary Beneficiary, contingent Beneficiary, or Annuitant ("Living Person
B"), Living Person A must survive Living Person B by at least 24 hours.
Otherwise, Living Person A will be conclusively deemed to have predeceased
Living Person B.
MODIFICATION OF THE CONTRACT
Only an Allstate Life officer may authorize a change in or waive any provision
of the Contract. Any change or waiver must be in writing. None of our agents has
the authority to change or waive the provisions of the Contract. We may not
change the terms of the Contract without your consent, except to conform the
Contract to applicable law or changes in the law or except as otherwise
permitted in the Contract. If a provision of the Contract is inconsistent with
state law, we will follow state law.
ASSIGNMENT
No Contract Owner has a right to assign any interest in a Contract as collateral
or security for a loan, and we will not honor an assignment of an interest in a
Contract as collateral or security for a loan. However, you may otherwise assign
periodic income payments under the Contract prior to the Payout Start Date. No
Beneficiary may assign benefits under the Contract until they are due. We will
not be bound by any assignment until you sign and file it with us. We are not
responsible for the validity of any assignment. Federal law prohibits or
restricts the assignment of benefits under many types of retirement plans and
the terms of such plans may themselves contain restrictions on assignments. An
assignment may also result in taxes or tax penalties. YOU SHOULD CONSULT WITH AN
ATTORNEY BEFORE TRYING TO ASSIGN YOUR CONTRACT.
PURCHASES AND CONTRACT VALUE
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PURCHASE PAYMENT
Your purchase payment must be at least $10,000. No additional purchase payments
may be made to the Contract at any time. We reserve the right to accept a lesser
initial purchase payment amount. The maximum amount of the purchase payment we
will accept for the Contract without our prior approval is $1,000,000. We
reserve the right to reject any application.
Your purchase payment becomes part of our general account, which supports our
insurance and annuity obligations. The general account consists of our general
assets other than those in segregated asset accounts. We have sole discretion to
invest the assets of the general account, subject to applicable law. You do not
share in the investment experience of the general account.
ALLOCATION OF PURCHASE PAYMENT
At the time you apply for a Contract, you must decide how to allocate your
purchase payment amount among the Guarantee Periods. A Guarantee Period is a
period of years during which you will earn a guaranteed interest rate on your
money.
We will apply your purchase payment to the Guarantee Period you select within 7
days of the receipt of the payment and required information.
CONTRACT VALUE AND GUARANTEE PERIOD ACCOUNT VALUE
Your Contract Value at any time during the Accumulation Phase is equal to the
sum of all Guarantee Period Account Values. Each Guarantee Period Account Value
is equal to the amount of the purchase payment allocated to a Guarantee Period
Account;
.. plus credited interest to the GUARANTEE PERIOD ACCOUNT;
.. less withdrawals of the purchase payment and/or less withdrawals of interest
from that Guarantee Period Account; and
.. if any such withdrawal is a NET WITHDRAWAL (see "Access to Your Money"),
. any applicable withdrawal charge and taxes imposed for such withdrawal also
will be deducted from each applicable Guarantee Period Account; and
. the withdrawal will be subject to a Market Value Adjustment, which may
decrease or increase the Guarantee Period Account Value.
Under a GROSS WITHDRAWAL, adjustments will be made to your WITHDRAWAL REQUEST
AMOUNT rather than the remaining Guarantee Period Account Value, for withdrawal
charges, taxes and Market Value Adjustments.
7 PROSPECTUS
RIGHT TO CANCEL
You may cancel your Contract within the Trial Examination Period, which is the
20-day period following receipt of your Contract, or such longer period that
your state may require. You may cancel the Contract by delivering it or mailing
it to us. If you exercise this right to cancel, the Contract terminates and we
will return the purchase payment less any withdrawals to you. If your contract
is qualified under Code Section 408(b), we will refund the greater of any
purchase payments or the Contract Value.
GUARANTEE PERIODS
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You may allocate your purchase payment to a specific Guarantee Period Account or
you may divide your purchase payment among multiple Guarantee Period Accounts.
Your Guarantee Period Account Value allocated to a Guarantee Period Account will
earn interest at a specified rate that we guarantee. Currently we offer
Guarantee Periods of 5, 7 and 10 years in length. In the future, we may offer
Guarantee Periods of different lengths ranging from 1 to 10 years or stop
offering some Guarantee Periods. We reserve the right to offer additional
Guarantee Periods, or to limit the Guarantee Periods available in the future. A
new Guarantee Period Account is established when:
.. you allocate your original purchase payment; and
.. the Guarantee Period Account Value of an expiring Guarantee Period Account is
applied to establish a new Guarantee Period Account.
Each Guarantee Period Account is identified by the date the Guarantee Period
Account was established and the term length of the Guarantee Period Account.
INTEREST RATES
We will tell you what interest rates we are offering at a particular time. We
will not change the interest rate that we credit to a Guarantee Period Account
until it expires (except when an Enhanced First Year Rate applies as described
below). The interest rates we quote will fluctuate from time to time and will
vary depending upon the date a Guarantee Period Account begins. We have no
specific formula for determining the annualized effective interest rate that we
will declare initially or in the future. We will set interest rates based on
investment returns available at the time of the determination. In addition, we
may consider various other factors in determining interest rates including
regulatory and tax requirements, sales commissions and administrative expenses,
general economic trends, and competitive factors. We determine the interest
rates to be declared in our sole discretion. We can neither predict nor
guarantee what those rates will be in the future. For current interest rate
information, please contact your financial representative or Allstate Life at
1-800-203-0068.
BONUS RATE. From time to time we may offer an increase in the annualized
effective interest rate ("BONUS RATE") that we will apply to a new Guarantee
Period Account. For the Bonus Rate to apply, your Contract Value must equal or
exceed a specified amount ("BONUS RATE SPECIFIED AMOUNT") on the date the
Guarantee Period Account is established and on the day after:
.. the Trial Examination Period ends; or
.. the Window Period ends.
Once the Trial Examination Period or the Window Period ends (as applicable), we
will apply the Bonus Rate retroactively from the beginning of the applicable
Guarantee Period.
The Bonus Rate that applies to a new Guarantee Period Account will not change
until the Guarantee Period Account expires. Bonus Rates and Bonus Rate Specified
Amounts will fluctuate from time to time and will vary depending upon the date a
Guarantee Period Account begins.
We declare Bonus Rates and Bonus Rate Specified Amounts in our sole discretion.
We can neither predict nor guarantee what those Bonus Rates or Bonus Rate
Specified Amounts will be, or whether we will declare Bonus Rates in the future.
For current Bonus Rate and Bonus Rate Specified Amount information, please
contact your financial representative or Allstate Life at 1-800-203-0068.
ENHANCED FIRST YEAR RATE. From time to time, we may offer a higher annualized
effective rate that applies only during the first year of a new Guarantee Period
Account ("ENHANCED FIRST YEAR RATE").
We will apply any Enhanced First Year Rate from the beginning of the applicable
Guarantee Period. At the end of the first year of the Guarantee Period, we will
credit interest for the remainder of the Guarantee Period at the lower
annualized effective interest rate we declared at the beginning of the Guarantee
Period.
Eligibility for an Enhanced First Year Rate may depend on your Issue Date, and
Enhanced First Year Rates may be available only for Guarantee Periods of certain
lengths. The Enhanced First Year Rate may vary depending upon your Issue Date,
and the date a Guarantee Period begins. The annualized effective interest rate
we declare for a Guarantee Period offering an Enhanced First Year Rate may be
lower than the annualized effective interest rate we may declare for Guarantee
Periods that do not have an Enhanced First Year Rate.
We may declare an Enhanced First Year Rate in our sole discretion. We can
neither predict nor guarantee what an
8 PROSPECTUS
Enhanced First Year Rate will be or whether we will declare an Enhanced First
Year Rate in the future. For current information on Enhanced First Year Rates,
please contact your financial representative or Allstate Life at 1-800-203-0068.
HOW WE CREDIT INTEREST
We will credit interest to your purchase payment beginning on the Issue Date.
The interest credited to the initial Guarantee Period Account(s) will depend on
the annualized effective interest rate we declared when your purchase payment
was allocated to such Guarantee Period Account(s). Interest will be credited to
a renewed Guarantee Period Account at the annualized effective interest rate
declared by us at our discretion, from the day immediately following the day the
prior Guarantee Period Account expires ("NEW ACCOUNT START DATE"). Interest will
be credited daily at a rate which compounds over each year to such annualized
effective interest rate. Your annualized effective interest rate includes Bonus
Rates and/or Enhanced First Year Rates, if applicable.
The following example illustrates how a $10,000 purchase payment would grow, if
allocated to a 5 year Guarantee Period, crediting a hypothetical 4.50%
annualized effective interest rate:
Purchase Payment ................................................... $10,000
Guarantee Period ................................................... 5 Years
Annualized Effective Interest Rate ................................. 4.50%
END OF CONTRACT YEAR
YEAR 1 YEAR 2 YEAR 3 YEAR 4 YEAR 5
---------- ---------- ---------- ---------- ------------
Beginning Contract
Value................ $10,000.00
^ (1 ^ Annual
Interest Rate) 1.045
----------
$10,450.00
Contract Value at end
of Contract Year..... $10,450.00
^ (1 ^ Annual
Interest 1.045
----------
$10,920.25
Contract Value at end
of Contract Year..... $10,920.25
^ (1 ^ Annual
Interest Rate) 1.045
----------
$11,411.66
Contract Value at end
of Contract Year..... $11,411.66
^ (1 ^ Annual
Interest Rate) 1.045
----------
$11,925.19
Contract Value at end
of Contract Year..... $11,925.19
^ (1 ^ Annual
Interest Rate) 1.045
-----------
$12,461.82
The example above assumes no withdrawals were made during the entire 5 year
period. If you were to make a partial withdrawal, you may be required to pay a
withdrawal charge (see "Withdrawal Charge"). In addition, the amount withdrawn
may be increased or decreased by a Market Value Adjustment that reflects changes
in interest rates since the time you invested the amount withdrawn (see "Market
Value Adjustment"). The hypothetical annualized effective interest rate is for
illustrative purposes only and is not intended to predict future interest rates
to be declared under the Contract. Actual interest rates declared for any given
Guarantee Period may be more or less than shown above.
RENEWALS. Before the end of each Guarantee Period Account, we will mail you a
notice informing you of the options available to you for the expiring Guarantee
Period Account. During the Window Period, you may either:
1) apply the Guarantee Period Account Value to new Guarantee Period Account(s).
The new Guarantee Period Account will begin on the New Account Start Date at
the annualized effective interest rate we declared for the new Guarantee
Period; or
2) withdraw all or a portion of your money in the expiring Guarantee Period
Account without incurring a withdrawal charge or a Market Value Adjustment.
If we do not receive an election from you within the Window Period, a new
Guarantee Period Account of the same duration as the previous Guarantee Period
Account is automatically established at the annualized effective interest rate
declared for the new Guarantee Period Account. If a Guarantee Period Account of
the same duration is no longer offered, then we will allocate the amount in the
expiring Guarantee Period Account to a new Guarantee Period Account with the
next shortest duration then offered.
If you choose to make a withdrawal from an expiring Guarantee Period Account
during the Window Period and:
1) we receive your request to make a withdrawal on or before the New Account
Start Date, then the
9 PROSPECTUS
withdrawal will be deemed to have occurred on the New Account Start Date; or
2) we receive your request to make a withdrawal during the Window Period, then
the withdrawal will be made on the day we process your withdrawal request and
the amount withdrawn will earn interest, at the rate we declared for a
Guarantee Period Account of the same term length as the expiring Guarantee
Period Account, for the period beginning on the New Account Start Date and
ending on the day your withdrawal is processed.
Any remaining balance not withdrawn will earn interest for the term of the new
Guarantee Period Account at the annualized effective interest rate declared for
such account.
MARKET VALUE ADJUSTMENT
Withdrawals, unless expressly exempted, may be subject to a Market Value
Adjustment.
We will not apply the Market Value Adjustment to:
.. withdrawals you make to satisfy IRS minimum distribution rules for the
Contract;
.. withdrawals made within the FREE WITHDRAWAL AMOUNT, described under "Expenses"
below;
.. withdrawals made during the Window Period, as described in Renewals, above;
.. amounts paid during the Payout Phase; or
.. amounts paid as Death Proceeds in a lump sum.
We apply the Market Value Adjustment to reflect changes in interest rates from
the date a Guarantee Period Account was established to the time you make the
withdrawal.
We calculate the Market Value Adjustment by comparing the U.S. Treasury Rate
Constant Maturity Yield ("Treasury Rate") for a maturity equal to the term
length of the Guarantee Period Account for the week prior to the date the
Guarantee Period Account begins to the Treasury Rate for a maturity equal to the
term length of that Guarantee Period Account for the week prior to the date we
receive your withdrawal request.
The Market Value Adjustment may be positive or negative, depending on changes in
the Treasury Rate. As a result, you bear the investment risk associated with
changes in the Treasury Rate. If the Treasury Rate increases significantly from
the time the Guarantee Period Account began, the Market Value Adjustment, any
applicable withdrawal charge, premium taxes, and income tax withholding (if
applicable) could reduce the amount you receive upon full withdrawal of your
Contract Value to an amount that is less than your original purchase payment or
less than the beginning value of your Guarantee Period Account.
Generally, if the Treasury Rate at the beginning of the Guarantee Period Account
is lower than the current Treasury Rate upon withdrawal, then the Market Value
Adjustment will result in a lower amount payable to you. Conversely, if the
Treasury Rate at the beginning of the Guarantee Period Account is higher than
the current Treasury Rate, then the Market Value Adjustment will result in a
higher amount payable to you.
For example, assume that you purchase a Contract and the Treasury Rate on the
day you purchase the Contract is 4.50%. Assume that at the end of 3 years, you
make a partial withdrawal in excess of the Free Withdrawal Amount. If, at that
later time, the Treasury Rate is 4.00%, then the Market Value Adjustment will be
positive, which will result in an increase in the amount payable to you.
Conversely, if the Treasury Rate is 5.00%, then the Market Value Adjustment will
be negative, which will result in a decrease in the amount payable to you.
The Market Value Adjustment also depends upon the amount of time remaining prior
to the expiration of the current Guarantee Period Account. The formula for
calculating Market Value Adjustments is set forth in Appendix A to this
prospectus, which also contains additional examples of the application of the
Market Value Adjustment.
For a Gross Withdrawal the Market Value Adjustment equals a market value
adjustment factor multiplied by the amount by which your Withdrawal Request
Amount exceeds the Free Withdrawal Amount for the Guarantee Period Account.
For a Net Withdrawal, the Market Value Adjustment is calculated such that you
receive the full Withdrawal Request Amount. The calculation of the Market Value
Adjustment takes into consideration your Withdrawal Request Amount, the Free
Withdrawal Amount, withdrawal charges, and taxes.
See below for definitions of "Gross Withdrawal", "Withdrawal Request Amount",
"Free Withdrawal Amount", "Net Withdrawal", and "Withdrawal Charges".
10 PROSPECTUS
EXPENSES
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As a Contract Owner, you will bear the charges and expenses described below.
WITHDRAWAL CHARGE
We may assess a withdrawal charge on withdrawals from the Contract during the
Accumulation Phase. However, each Contract Year ("CONTRACT YEAR"), which we
measure from the Issue Date and each ("Contract anniversary"), you may withdraw
up to the "FREE WITHDRAWAL AMOUNT" without paying a withdrawal charge. The Free
Withdrawal Amount for a Guarantee Period Account in a Contract Year is equal to
10% of the Guarantee Period Account Value immediately before you make the first
withdrawal from any Guarantee Period Account in that Contract Year. Unused
portions of this 10% Free Withdrawal Amount are not carried forward to future
Contract Years.
The withdrawal charge is as follows:
NUMBER OF COMPLETE CONTRACT WITHDRAWAL
YEARS SINCE ISSUE DATE: CHARGE
0 7%
1 7%
2 7%
3 6%
4 6%
5 5%
6 4%
7 3%
8 2%
9 1%
10+ 0%
The withdrawal charge is determined by multiplying the withdrawal charge
percentage corresponding to the number of complete Contract Years in the table
above by the amount of each Withdrawal Request Amount (for a "Gross Withdrawal")
or "ADJUSTED WITHDRAWAL REQUEST AMOUNT" (for a "Net Withdrawal") that exceeds
the Free Withdrawal Amount for the applicable Guarantee Period Account.
We will deduct applicable withdrawal charges from the amount of your withdrawal
request and/or the Guarantee Period Account Value. See Access to Your Money for
more details.
For federal income tax purposes, earnings under your Contract are considered to
come out first. This means you pay taxes on your withdrawal to the extent of any
earnings in the Contract.
We do not apply a withdrawal charge in the following situations:
.. withdrawals taken during the 45 day Window Period, see "Access to Your Money";
.. withdrawals taken to satisfy IRS minimum distribution rules for the Contract;
.. withdrawals that qualify for a waiver (see below).
We use the amounts obtained from the withdrawal charge to recover the cost of
sales commissions and other promotional or distribution expenses associated with
marketing the Contracts.
Withdrawals may be subject to income tax withholding and penalties, and Market
Value Adjustments. You should consult your own tax counsel or other tax advisers
regarding any withdrawals.
CONFINEMENT WAIVER. We will waive the withdrawal charge on any applicable
withdrawal taken under your Contract if the following conditions are satisfied:
.. you are or the Annuitant is, if the Contract Owner is not a living person,
first confined to a long term care facility or a hospital for at least 90
consecutive days. You or the Annuitant must enter the long term care facility
or hospital at least 30 days after the Issue Date,
.. we receive your request for withdrawal and written proof of the stay no later
than 90 days following the end of your or the Annuitant's (as applicable) stay
at the long term care facility or hospital, and
.. a physician must have prescribed the stay and the stay must be medically
necessary (as defined in the Contract).
TERMINAL ILLNESS WAIVER. Only once during the term of the Contract, we will
waive the withdrawal charge on any applicable withdrawal taken under your
Contract if:
.. you are or the Annuitant is, if the Contract Owner is not a living person,
first diagnosed by a physician as having a terminal illness at least 30 days
after the Issue Date, and
.. you provide adequate proof of diagnosis to us before or at the time you
request the withdrawal.
Terminal Illness is a condition which is expected to result in death within one
year from the date of onset for 80% of the diagnosed cases.
At our expense, we may require a second physician's opinion, and if the first
and second physicians disagree, we may require a third opinion. We will honor a
consensus of any two of the three physicians.
UNEMPLOYMENT WAIVER. Only once during the term of the Contract, we will waive
the withdrawal charge on one partial or a full withdrawal taken under your
Contract, if you meet the following requirements:
.. you or the Annuitant, if the Contract Owner is not a living person, become
unemployed at least one year after the Issue Date,
11 PROSPECTUS
.. you or the Annuitant (as applicable) receive(s) Unemployment Compensation for
at least 30 days as a result of that unemployment, and
.. you or the Annuitant (as applicable) claim(s) this benefit within 180 days of
your or the Annuitant's initial receipt of Unemployment Compensation.
Before we will waive any withdrawal charges, you must give us Due Proof prior
to, or at the time of, the withdrawal request, that you or the Annuitant have
been unemployed and have been granted Unemployment Compensation for at least 30
consecutive days.
"UNEMPLOYMENT COMPENSATION" means unemployment compensation received from a unit
of state or federal government in the U.S. "DUE PROOF" includes, but is not
limited to, a legible photocopy of an unemployment compensation payment that
meets the above described criteria with regard to dates and a signed letter from
you stating that the Owner or Annuitant meets the above described criteria.
Please refer to your Contract for more detailed information about the terms and
conditions of these waivers.
The laws of your state may limit the availability of these waivers and also may
change certain terms and/or benefits available under the waivers. You should
consult your Contract for further details on these variations. Even if you do
not pay a withdrawal charge because of these waivers, a Market Value Adjustment
may apply and you still may be required to pay taxes or tax penalties on the
amount withdrawn. You should consult your tax advisor to determine the effect of
a withdrawal on your taxes.
PREMIUM TAXES
Some states and other governmental entities (e.g., municipalities) charge
premium taxes or similar taxes. We are responsible for paying these taxes and
will deduct them from your Contract Value. Some of these taxes are due when the
Contract is issued, others are due when income payments begin or upon surrender.
Our current practice is not to charge anyone for these taxes until income
payments begin or when a total withdrawal occurs, including payment upon death.
We may discontinue this practice sometime in the future, and deduct premium
taxes from the purchase payments. Premium taxes generally range from 0% to 4%,
depending on the state or other governmental entity (as applicable).
At the Payout Start Date, we deduct the charge for any applicable premium taxes
from the total Contract Value before applying the Contract Value to an Income
Plan.
12 PROSPECTUS
ACCESS TO YOUR MONEY
- --------------------------------------------------------------------------------
You can withdraw some or all of your money at any time prior to the Payout Start
Date. You may not make any withdrawals or surrender your Contract once the
Payout Phase has begun.
The minimum you may withdraw is $250. If the amount you withdraw reduces the
Contract Value to less than $1,000, we may treat the withdrawal request as a
request to surrender the Contract.
The amount you receive may be reduced by a withdrawal charge, income tax
withholding and any premium taxes. The amount you receive may also be increased
or reduced by a Market Value Adjustment. If you request a total withdrawal, we
may require that you return your Contract to us.
When you make a withdrawal, you must specify whether you choose to make a Gross
Withdrawal or a Net Withdrawal.
Under a Gross Withdrawal, applicable Market Value Adjustments, withdrawal
charges and taxes are calculated based upon the amount of your withdrawal
request ("WITHDRAWAL REQUEST AMOUNT"). Withdrawal charges, taxes, and negative
Market Value Adjustments are deducted from your Withdrawal Request Amount and
will decrease the amount you receive. Positive Market Value Adjustments will not
be added to your Guarantee Period Account Value, but rather will be included in
the withdrawal payment you receive.
Under a Net Withdrawal, Market Value Adjustments and deductions for applicable
withdrawal charges and taxes are made to your Guarantee Period Account Value and
are calculated such that you receive the Withdrawal Request Amount. In making
these calculations, we determine an adjusted Withdrawal Request Amount
("Adjusted Withdrawal Request Amount"), which is the amount that after
applicable Market Value Adjustments and deductions for applicable withdrawal
charges and taxes, results in your full Withdrawal Request Amount.
If you do not specify whether your withdrawal is a Gross Withdrawal or a Net
Withdrawal, it will be deemed to be a Gross Withdrawal. A withdrawal of the
entire Contract Value will always be a Gross Withdrawal.
For a Gross Withdrawal, the Free Withdrawal Amount in a Contract Year is reduced
by the Withdrawal Request Amount, and for a Net Withdrawal, the Free Withdrawal
Amount in a Contract Year is reduced by the Adjusted Withdrawal Request Amount.
You must also specify the Guarantee Period Account(s) from which you wish to
make a withdrawal. If you do not specify the Guarantee Period Accounts from
which you wish to make a withdrawal, we will withdraw funds from any Guarantee
Period Account(s) that is in a Window Period. If the combined Guarantee Period
Account Values from all such Guarantee Period Accounts are not sufficient to
fund your withdrawal, we will then withdraw funds from Guarantee Period Accounts
that are not in a Window Period. The amount we withdraw from each Guarantee
Period Account will be in the proportion that the Guarantee Period Account Value
of that Guarantee Period Account bears to the total Guarantee Period Account
Value of all Guarantee Period Accounts not in a Window Period.
For Contracts issued in certain states if you withdraw the entire Contract
Value, the amount that we will pay you will never be less than 90% of the
purchase payment, less any prior withdrawals, accumulated at the minimum
interest rate required to be credited under the relevant nonforfeiture law of
such respective states. For additional information concerning these states,
please contact your financial representative or Allstate Life at 1-800-203-0068.
For federal income tax purposes, distributions taken prior to the Payout Start
Date are generally considered to come from the earnings in the Contract first.
If the Contract is tax-qualified, generally all withdrawals are treated as
distributions of earnings. Withdrawals of earnings are taxed as ordinary income
and, if taken prior to age 59 1/2, may be subject to an additional 10% federal
tax penalty.
SYSTEMATIC WITHDRAWAL PROGRAM
You may choose to receive systematic withdrawal payments on a monthly,
quarterly, semi-annual, or annual basis at any time prior to the Payout Start
Date. The minimum amount of each systematic withdrawal is $50. We will deposit
systematic withdrawal payments into a designated account. Please consult with
your financial representative for details.
We may modify or suspend the SYSTEMATIC WITHDRAWAL PROGRAM and charge a
processing fee for the service. If we modify or suspend the Systematic
Withdrawal Program, existing systematic withdrawal payments will not be
affected.
POSTPONEMENT OF PAYMENTS
We may defer payment of withdrawals for up to 6 months from the date we receive
your withdrawal request. If we delay payment for 30 days or more, we will pay
interest as required by law.
MINIMUM CONTRACT VALUE
If the amount you withdraw reduces your Contract Value to less than $1,000, we
may treat it as a request to withdraw your entire Contract Value. Your Contract
will terminate if you withdraw all of your Contract Value. We will, however, ask
you to confirm your withdrawal request before terminating your Contract. Before
terminating any Contract whose value has been reduced by withdrawals to less
than $1,000, we will inform you in
13 PROSPECTUS
writing of our intention to terminate your Contract and give you at least 30
days in which to modify your withdrawal request to maintain your Contract's
value to the contractual minimum of $1,000. If we terminate your Contract, we
will distribute to you its Contract Value, adjusted by any Market Value
Adjustments, withdrawal charges and applicable taxes.
INCOME PAYMENTS
- --------------------------------------------------------------------------------
PAYOUT START DATE
The Payout Start Date is the day that we apply your Contract Value, less any
applicable taxes, to an Income Plan. The Payout Start Date must be:
.. at least 30 days after the Issue Date; and
.. no later than the Annuitant's 90th birthday, or
.. the 10th Contract anniversary, if later.
You may change the Payout Start Date at any time by notifying us in writing of
the change at least 30 days before the scheduled Payout Start Date. Absent a
change, we will use the Payout Start Date stated in your Contract.
INCOME PLANS
An Income Plan is a series of scheduled payments to you or someone you
designate. You may choose only one Income Plan. You may choose and change your
choice of Income Plan until 30 days before the Payout Start Date. If you do not
select an Income Plan, we will make income payments in accordance with Income
Plan 1 with guaranteed payments for 10 years. After the Payout Start Date, you
may not make withdrawals or change your choice of Income Plan.
A portion of each payment will be considered taxable and the remaining portion
will be a non-taxable return of your investment in the Contract, which is also
called the "basis". Once the investment in the Contract is depleted, all
remaining payments will be fully taxable. If the Contract is tax-qualified,
generally, all payments will be fully taxable. Taxable payments taken prior to
age 59 1/2, may be subject to an additional 10% federal tax penalty.
The three Income Plans available under the Contract are:
INCOME PLAN 1 - LIFE INCOME WITH AND WITHOUT GUARANTEED NUMBER OF PAYMENTS.
Under this plan, we make periodic income payments for at least as long as the
Annuitant lives. If the Annuitant dies in the Payout Phase, we will continue to
pay income payments until the guaranteed number of payments has been paid. The
number of months guaranteed ("Guaranteed Payment Period") may range from 0 to
360 months. If you choose 0 months, payments will continue only as long as the
Annuitant lives. If the Annuitant is age 90 or older as of the Payout Start
Date, the Guaranteed Payment Period may range from 60 to 360 months.
INCOME PLAN 2 - JOINT AND SURVIVOR LIFE INCOME WITH AND WITHOUT GUARANTEED
NUMBER OF PAYMENTS. Under this plan, we make periodic income payments for at
least as long as either the Annuitant or the joint Annuitant, named at the time
the Income Plan was selected, lives. If both the Annuitant and joint Annuitant
die in the Payout Phase, we will continue to pay the income payments until the
guaranteed number of payments has been paid. The Guaranteed Payment Period may
range from 0 to 360 months. If you choose 0 months, payments will continue only
as long as the Annuitant or joint Annuitant lives. If either the Annuitant or
joint Annuitant is age 90 or older as of the Payout Start Date, the Guaranteed
Payment Period may range from 60 to 360 months.
INCOME PLAN 3 - GUARANTEED NUMBER OF PAYMENTS. Under this plan, we make periodic
income payments for the period you have chosen. These payments do not depend on
the Annuitant's life. The shortest number of months guaranteed is 60 (120 if the
Payout Start Date occurs before the third Contract anniversary). The longest
number of months guaranteed is 360 or the number of months between the Payout
Start Date and the date that the Annuitant reaches age 100, if greater. In no
event may the number of months guaranteed exceed 600.
The length of any Guaranteed Payment Period under your selected Income Plan
generally will affect the dollar amount of each income payment. As a general
rule, longer guarantee periods result in lower income payments, all other things
being equal. For example, if you choose an Income Plan with payments that depend
on the life of the Annuitant but with no minimum specified period for guaranteed
payments, the income payments generally will be greater than the income payments
made under the same Income Plan with a minimum specified period for guaranteed
payments. As a general rule, plans with a joint Annuitant also will result in
lower income payments. Income plans may vary from state to state.
We may make other Income Plans available, including ones that you and we agree
upon. You may obtain information about them by writing or calling us.
If the Contract Owner dies after the Payout Start Date, the new Contract Owner
will be the surviving Contract Owner. If there is no surviving Contract Owner,
the new Contract Owner will be the Beneficiary(ies). Any remaining income
payments will be paid to the new Contract Owner as scheduled.
If you choose Income Plan 1 or 2, or, if available, another Income Plan with
payments that continue for the life of the Annuitant or joint Annuitant, we will
require proof of age and sex of the Annuitant or joint Annuitant before starting
income payments, and may require proof that the Annuitant or joint Annuitant are
alive before we make
14 PROSPECTUS
each payment. Please note that under such Income Plans, if you elect to take no
guaranteed payments, it is possible that the payee could receive no income
payments if the Annuitant and any joint Annuitant both die before the first
income payment, or only one income payment if they die before the second income
payment, and so on.
We will apply your Contract Value less any applicable premium tax, to your
Income Plan on the Payout Start Date. For Contracts issued in certain states the
amount that we will apply to an Income Plan will never be less than 90% of the
purchase payment, less any prior withdrawals, accumulated at the minimum
interest rate required to be credited under the relevant nonforfeiture law of
such respective states. For additional information concerning these states,
please contact your financial representative or Allstate Life at 1-800-203-0068.
If the amount available to apply under an Income Plan is less than $3,000, or if
your initial monthly payment would be less than $20, and state law permits, we
reserve the right to:
.. reduce the frequency of your payments so that each payment will be at least
$20; or
.. terminate the Contract and pay you the Contract Value less any applicable
taxes, in a lump sum instead of the periodic payments you have chosen.
INCOME PAYMENTS
Subject to your Income Plan selection, we may guarantee income payment amounts
for the duration of the Income Plan. We calculate income payments by:
1. determining your Contract Value as of the Payout Start Date;
2. deducting any applicable premium tax; and
3. applying the resulting amount to the greater of:
(a) the appropriate value from the income payment table in your Contract; or
(b) such other value as we are offering at that time.
We may defer making fixed income payments for a period of up to six months or
such shorter time state law may require. If we defer such payments for 30 days
or more, we will pay interest as required by law from the date we receive the
withdrawal request to the date we make payment.
CERTAIN EMPLOYEE BENEFIT PLANS
The Contract offered by this prospectus contains income payment tables that
provide for different payments to men and women of the same age, except in
states that require unisex tables. We reserve the right to use income payment
tables that do not distinguish on the basis of sex, to the extent permitted by
law. In certain employment-related situations, employers are required by law to
use the same income payment tables for men and women. Accordingly, if the
Contract is to be used in connection with an employment-related retirement or
benefit plan and we do not offer unisex annuity tables in your state, you should
consult with legal counsel as to whether the purchase of a Contract is
appropriate.
DEATH PROCEEDS
- --------------------------------------------------------------------------------
Under certain conditions, described below, we will pay a death settlement
("DEATH PROCEEDS") for your Contract on the death of the Contract Owner or the
death of the Annuitant (if the Contract Owner is a non-living person) if the
death occurs prior to the Payout Start Date. If the Contract Owner or Annuitant
(if the Contract Owner is a non-living person) dies after the Payout Start Date,
we will pay remaining income payments as described in the "Payout Phase" section
of your Contract. See "Income Payments" above, for more details.
The Contract offers Death Proceeds prior to the Payout Start Date on the earlier
of:
1. the death of any Contract Owner; or
2. the death of the Annuitant, if the Contract Owner is a non-living person.
We will pay the Death Proceeds to the new Contract Owner as determined
immediately after the death. The new Contract Owner will be the surviving
Contract Owner(s) or, if there are none, the Beneficiary(ies).
A claim for settlement of the Death Proceeds must include Due Proof of Death. We
will accept the following documentation as "DUE PROOF OF DEATH":
.. a certified copy of a death certificate;
.. a certified copy of a decree of a court of competent jurisdiction as to the
finding of death; or
.. any other proof acceptable to us.
Prior to the Payout Start Date, the Death Proceeds are equal to the Contract
Value.
We will calculate the value of the Death Proceeds as of the date we receive the
first complete request for settlement of the Death Proceeds from any Owner.
For Contracts issued in certain states the amount of the Death Proceeds that we
will pay you will never be less than 90% of the purchase payment, less any prior
withdrawals, accumulated at the minimum interest rate required to be credited
under the relevant nonforfeiture law of such respective states. For additional
information concerning these states, please contact your financial
representative or Allstate Life at 1-800-203-0068.
DEATH PROCEEDS PAYMENTS
DEATH OF CONTRACT OWNER. If any Contract Owner dies before the Payout Start
Date, the new Contract Owner will be the surviving Contract Owner. If there is
no
15 PROSPECTUS
surviving Contract Owner, the new Contract Owner will be the Beneficiary(ies) as
described in the Beneficiary provision.
If there is more than one new Contract Owner taking a share of the Death
Proceeds each new Contract Owner will be treated as a separate and independent
Contract Owner of his or her respective share of the Death Proceeds. Each new
Contract Owner will exercise all rights related to his or her share of the Death
Proceeds, including the sole right to elect one of the Option(s) below for his
or her respective share. Each new Contract Owner may designate a
Beneficiary(ies) for his or her respective share, but that designated
Beneficiary(ies) will be restricted to the Option chosen by the original new
Contract Owner.
The Options available to the new Contract Owner will be determined by the
applicable Category described below in which the new Contract Owner is defined.
An Option will be deemed to have been chosen on the day we receive written
notification in a form satisfactory to us.
CATEGORY 1. If your spouse is the sole new Contract Owner of the entire
Contract, the Contract will continue in the Accumulation Phase, unless your
spouse chooses from Options A, B, or C, described below.
If you also were the Annuitant, then your spouse will be the new Annuitant
unless he or she names a new Annuitant, as described in the Annuitant provision,
above. Your spouse may make a single withdrawal of any amount within one year of
the date of your death without incurring a withdrawal charge; however the amount
withdrawn may be subject to a Market Value Adjustment.
CATEGORY 2. If the new Contract Owner is a living person who is not your spouse,
or if there are multiple living new Contract Owners, the new Contract Owner(s)
must (each) choose from Options A, B or C, described below. If a new Contract
Owner does not choose one of these Options, Option A will apply for such new
Contract Owner.
CATEGORY 3. If the new Contract Owner is a corporation, trust or other
non-living person, the new Contract Owner must choose between Options A or C,
described below. If the new Contract Owner does not choose either of these
Options, Option A will apply.
The following Death of Contract Owner Options are available, as applicable:
OPTION A.
The new Contract Owner may elect to receive the Contract Value payable within 5
years of the date of your death. Withdrawal charges will be waived for any
withdrawals made during this 5 year period; however the amounts withdrawn may be
subject to Market Value Adjustments.
If the new Contract Owner dies prior to the end of the 5 year period and before
the complete liquidation of the Contract Value, then the new Contract Owner's
Beneficiary(ies) will receive the remaining Contract Value. This amount must be
fully withdrawn within 5 years of the date of your death.
OPTION B.
The new Contract Owner may elect, within 11 months of the date of your death, to
receive the Death Proceeds paid out under one of the Income Plans described in
the Income Payments section, subject to the following conditions:
Income payments must begin within one year of your date of death. Income
payments must be payable:
(i) Over the life of the new Contract Owner; or
(ii) for a guaranteed payment period of at least 5 years, but not to exceed
the life expectancy of the new Contract Owner; or
(iii) over the life of the new Contract Owner with a guaranteed payment
period of at least 5 years, but not to exceed the life expectancy of the new
Contract Owner.
OPTION C.
The new Contract Owner may elect to receive the Death Proceeds in a lump sum.
Death Proceeds received under this Option in a lump sum are not subject to a
Market Value Adjustment.
All ownership rights subject to the conditions described in this provision or
any restrictions previously placed upon the Beneficiary, will be available to
the new Contract Owner from the date of your death until the date on which the
Death Proceeds are paid.
We reserve the right to offer additional Death of Contract Owner Options.
If the Contract Owner dies after the Payout Start Date, refer to the Income
Payments section.
DEATH OF ANNUITANT. If the Annuitant who is also the Contract Owner dies before
the Payout Start Date, the Death of Contract Owner provision, described above
will apply. If the Annuitant who is not also the Contract Owner dies before the
Payout Start Date, the Options available to the Contract Owner will be
determined by the applicable Category described below in which the Contract
Owner is defined.
CATEGORY 1. If the Contract Owner is a living person, the Contract will continue
in the Accumulation Phase with a new Annuitant. The new Annuitant will be:
.. A person you name by written request subject to the conditions described in
the Annuitant provision on page 6; otherwise,
.. The youngest Contract Owner; otherwise,
.. The youngest Beneficiary.
CATEGORY 2. If the Contract Owner is a corporation, trust or other non-living
person, the Contract Owner must
16 PROSPECTUS
receive the Contract Value payable within 5 years of the Annuitant's date of
death. Withdrawal charges will be waived for any withdrawals made during this 5
year period; however the amounts withdrawn may be subject to Market Value
Adjustments.
All ownership rights provided by the Contract will be available to the Contract
Owner from the date of the Annuitant's death until the date on which the Death
Proceeds are paid.
We reserve the right to offer additional Death of Annuitant Options.
MORE INFORMATION
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ALLSTATE LIFE
Allstate Life is the issuer of the Contract. Allstate Life was organized in 1957
as a stock life insurance company under the laws of the state of Illinois.
Allstate Life is a wholly owned subsidiary of Allstate Insurance Company, a
stock property-liability insurance company organized under the laws of the state
of Illinois. All of the capital stock issued and outstanding of Allstate
Insurance Company is owned by The Allstate Corporation.
Allstate Life is licensed to operate in the District of Columbia, Puerto Rico,
and all jurisdictions except the state of New York. We intend to offer the
Contract in those jurisdictions in which we are licensed. Our home office is
located at 3100 Sanders Road, Northbrook, Illinois, 60062.
THE CONTRACT
DISTRIBUTION. Allstate Distributors, L.L.C. ("Allstate Distributors"), a wholly
owned subsidiary of Allstate Life, will serve as principal underwriter of the
Contracts. Allstate Distributors is a registered broker dealer under the
Securities and Exchange Act of 1934, as amended, ("Exchange Act") and a member
of NASD. Contracts are sold by registered representatives of unaffiliated
broker-dealers or bank employees who are licensed insurance agents appointed by
Allstate Life, either individually or through an incorporated insurance agency
and have entered into a selling agreement with Allstate Distributors to sell the
Contract.
We will pay commissions to broker-dealers who sell the contracts. Commissions
paid may vary, but we estimate that the total commissions paid on all Contract
sales will not exceed 8% of all purchase payments. These commissions are
intended to cover distribution expenses. Sometimes, we also pay the
broker-dealer a persistency bonus in addition to the standard commissions. A
persistency bonus is not expected to exceed 1.00%, on an annual basis, of the
Contract Values considered in connection with the bonus. In some states,
Contracts may be sold by representatives or employees of banks which may be
acting as broker-dealers without separate registration under the Exchange Act,
pursuant to legal and regulatory exceptions.
Allstate Life may pay Allstate Distributors a commission for distribution of the
Contracts. The underwriting agreement with Allstate Distributors provides that
we will reimburse Allstate Distributors for any liability to Contract Owners
arising out of services rendered or Contracts issued.
This prospectus does not constitute an offering in any jurisdiction in which
such offering may not lawfully be made. We do not authorize anyone to provide
any information or representations regarding the offering described in this
prospectus other than as contained in this prospectus.
ADMINISTRATION. We have primary responsibility for all administration of the
Contracts. We provide the following administrative services, among others:
.. issuance of the Contracts;
.. maintenance of Contract Owner records;
.. Contract Owner services; and
.. preparation of Contract Owner reports.
You should notify us promptly in writing of any address change. You should read
your statements and confirmations carefully and verify their accuracy. You
should contact us promptly if you have a question about a periodic statement. We
will investigate all complaints and make any necessary adjustments
retroactively, but you must notify us of a potential error within a reasonable
time after the date of the questioned statement. If you wait too long, we
reserve the right to make the adjustment as of the date that we receive notice
of the potential error.
We also will provide you with additional periodic and other reports, information
and prospectuses as may be required by federal securities laws.
NON-QUALIFIED ANNUITIES HELD WITHIN A QUALIFIED PLAN
If you use the Contract within an employer sponsored qualified retirement plan,
the plan may impose different or additional conditions or limitations on
withdrawals, waivers of withdrawal charges, death benefits, Payout Start Dates,
income payments, and other Contract features. In addition, adverse tax
consequences may result if qualified plan limits on distributions and other
conditions are not met. Please consult your qualified plan administrator for
more information. Allstate Life no longer issues deferred annuities to employer
sponsored qualified retirement plans.
17 PROSPECTUS
LEGAL MATTERS
Foley & Lardner LLP, Washington D.C., has advised Allstate Life on certain
federal securities law matters. All matters of state law pertaining to the
Contracts, including the validity of the Contracts and Allstate Life's right to
issue such Contracts under applicable state insurance law, have been passed upon
by Michael J. Velotta, General Counsel of Allstate Life.
18 PROSPECTUS
TAXES
- --------------------------------------------------------------------------------
THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE. ALLSTATE
LIFE MAKES NO GUARANTEE REGARDING THE TAX TREATMENT OF ANY CONTRACT OR
TRANSACTION INVOLVING A CONTRACT.
Federal, state, local and other tax consequences of ownership or receipt of
distributions under an annuity contract depend on your individual circumstances.
If you are concerned about any tax consequences with regard to your individual
circumstances, you should consult a competent tax adviser.
TAXATION OF ALLSTATE LIFE INSURANCE
COMPANY
Allstate Life is taxed as a life insurance company under Part I of Subchapter L
of the Code.
TAXATION OF FIXED ANNUITIES IN GENERAL
TAX DEFERRAL. Generally, you are not taxed on increases in the Contract Value
until a distribution occurs. This rule applies only where the Owner is a natural
person.
NON-NATURAL OWNERS. Non-natural owners are also referred to as Non Living
Owners in this prospectus. As a general rule, annuity contracts owned by
non-natural persons such as corporations, trusts, or other entities are not
treated as annuity contracts for federal income tax purposes. The income on such
contracts does not enjoy tax deferral and is taxed as ordinary income received
or accrued by the non-natural owner during the taxable year.
EXCEPTIONS TO THE NON-NATURAL OWNER RULE. There are several exceptions to the
general rule that annuity contracts held by a non-natural owner are not treated
as annuity contracts for federal income tax purposes. Contracts will generally
be treated as held by a natural person if the nominal owner is a trust or other
entity which holds the contract as agent for a natural person. However, this
special exception will not apply in the case of an employer who is the nominal
owner of an annuity contract under a non-Qualified deferred compensation
arrangement for its employees. Other exceptions to the non-natural owner rule
are: (1) contracts acquired by an estate of a decedent by reason of the death of
the decedent; (2) certain qualified contracts; (3) contracts purchased by
employers upon the termination of certain qualified plans; (4) certain contracts
used in connection with structured settlement agreements; and (5) immediate
annuity contracts, purchased with a single premium, when the annuity starting
date is no later than a year from purchase of the annuity and substantially
equal periodic payments are made, not less frequently than annually, during the
annuity period.
GRANTOR TRUST OWNED ANNUITY. Contracts owned by a grantor trust are considered
owned by a non-natural owner. Grantor trust owned contracts receive tax
deferral as described in the Exceptions to the Non-Natural Owner Rule section.
In accordance with the Code, upon the death of the annuitant, the death benefit
must be paid. According to your Contract, the Death Benefit is paid to the
surviving Contract Owner. Since the trust will be the surviving Contract Owner
in all cases, the Death Benefit will be payable to the trust notwithstanding any
beneficiary designation on the annuity contract. A trust, including a grantor
trust, has two options for receiving any death benefits: 1) a lump sum payment;
or 2) payment deferred up to five years from date of death.
TAXATION OF PARTIAL AND FULL WITHDRAWALS. If you make a partial withdrawal
under a non-Qualified Contract, amounts received are taxable to the extent the
Contract Value, without regard to surrender charges, exceeds the investment in
the Contract. The investment in the Contract is the gross premium paid for the
contract minus any amounts previously received from the Contract if such amounts
were properly excluded from your gross income. If you make a full withdrawal
under a non-Qualified Contract, the amount received will be taxable only to the
extent it exceeds the investment in the Contract.
You should contact a competent tax advisor about the potential tax consequences
of a Market Value Adjustment, as no definitive guidance exists on the proper tax
treatment of Market Value Adjustments. If you make a full withdrawal under a
non-Qualified Contract or a Qualified Contract, the amount received will be
taxable only to the extent it exceeds the investment in the Contract.
TAXATION OF ANNUITY PAYMENTS. Generally, the rule for income taxation of
annuity payments received from a non-Qualified Contract provides for the return
of your investment in the Contract in equal tax-free amounts over the payment
period. The balance of each payment received is taxable. For fixed annuity
payments, the amount excluded from income is determined by multiplying the
payment by the ratio of the investment in the Contract (adjusted for any refund
feature or period certain) to the total expected value of annuity payments for
the term of the Contract. The annuity payments will be fully taxable after the
total amount of the investment in the Contract is excluded using these ratios.
The federal tax treatment of annuity payments is unclear in some respects. As a
result, if the IRS should provide further guidance, it is possible that the
amount we calculate and report to the IRS as taxable could be different. If you
die, and annuity payments cease before the total amount of the investment in the
Contract is recovered, the unrecovered amount will be allowed as a deduction for
your last taxable year.
WITHDRAWALS AFTER THE PAYOUT START DATE. Federal tax law is unclear regarding
the taxation of any additional withdrawal received after the Payout Start Date.
It is
19 PROSPECTUS
possible that a greater or lesser portion of such a payment could be taxable
than the amount we determine.
DISTRIBUTION AT DEATH RULES. In order to be considered an annuity contract for
federal income tax purposes, the Contract must provide:
.. if any Contract Owner dies on or after the Payout Start Date but before the
entire interest in the Contract has been distributed, the remaining portion of
such interest must be distributed at least as rapidly as under the method of
distribution being used as of the date of the Owner's death;
.. if any Contract Owner dies prior to the Payout Start Date, the entire interest
in the Contract will be distributed within 5 years after the date of the
Owner's death. These requirements are satisfied if any portion of the Contract
Owner's interest that is payable to (or for the benefit of) a designated
Beneficiary is distributed over the life of such Beneficiary (or over a period
not extending beyond the life expectancy of the Beneficiary) and the
distributions begin within 1 year of the Owner's death. If the Contract
Owner's designated Beneficiary is the surviving spouse of the Owner, the
Contract may be continued with the surviving spouse as the new Contract Owner;
.. if the Contract Owner is a non-natural person, then the Annuitant will be
treated as the Contract Owner for purposes of applying the distribution at
death rules. In addition, a change in the Annuitant on a Contract owned by a
non-natural person will be treated as the death of the Contract Owner.
TAXATION OF ANNUITY DEATH BENEFITS. Death Benefit amounts are included in
income as follows:
.. if distributed in a lump sum, the amounts are taxed in the same manner as a
full withdrawal, or
.. if distributed under an Income Plan, the amounts are taxed in the same manner
as annuity payments.
PENALTY TAX ON PREMATURE DISTRIBUTIONS. A 10% penalty tax applies to the
taxable amount of any premature distribution from a non-Qualified Contract. The
penalty tax generally applies to any distribution made prior to the date you
attain age 59 1/2 . However, no penalty tax is incurred on distributions:
.. made on or after the date the Contract Owner attains age 59 1/2;
.. made as a result of the Contract Owner's death or becoming totally disabled;
.. made in substantially equal periodic payments over the Contract Owner's life
or life expectancy, or over the joint lives or joint life expectancies of the
Contract Owner and the Contract beneficiary;
.. made under an immediate annuity; or
.. attributable to investment in the Contract before August 14, 1982.
You should consult a competent tax advisor to determine how these exceptions may
apply to your situation.
SUBSTANTIALLY EQUAL PERIODIC PAYMENTS. With respect to non-Qualified Contracts
using substantially equal periodic payments or immediate annuity payments as an
exception to the penalty tax on premature distributions, any additional
withdrawal or other material modification of the payment stream would violate
the requirement that payments must be substantially equal. Failure to meet this
requirement would mean that the income portion of each payment received prior to
the later of 5 years or the Contract Owner's attaining age 59 1/2 would be
subject to a 10% penalty tax unless another exception to the penalty tax
applied. The tax for the year of the modification is increased by the penalty
tax that would have been imposed without the exception, plus interest for the
years in which the exception was used. A material modification does not include
permitted changes described in published IRS rulings. You should consult a
competent tax advisor prior to creating or modifying a substantially equal
periodic payment stream.
TAX FREE EXCHANGES UNDER INTERNAL REVENUE CODE SECTION 1035. A 1035 exchange is
a tax-free exchange of a non-qualified life insurance contract, endowment
contract or annuity contract into a non-Qualified annuity contract. The contract
owner(s) must be the same on the old and new contract. Basis from the old
contract carries over to the new contract so long as we receive that information
from the relinquishing company. If basis information is never received, we will
assume that all exchanged funds represent earnings and will allocate no cost
basis to them.
PARTIAL EXCHANGES. The IRS has issued a ruling that permits partial exchanges
of annuity contracts. Under this ruling, if you take a withdrawal from a
receiving or relinquishing annuity contract within 24 months of the partial
exchange, then special aggregation rules apply for purposes of determining the
taxable amount of a distribution. The IRS has issued limited guidance on how to
aggregate and report these distributions. The IRS is expected to provide
further guidance, as a result, it is possible that the amount we calculate and
report to the IRS as taxable could be different.
TAXATION OF OWNERSHIP CHANGES. If you transfer a non-Qualified Contract without
full and adequate consideration to a person other than your spouse (or to a
former spouse incident to a divorce), you will be taxed on the difference
between the Contract Value and the investment in the Contract at the time of
transfer. Any assignment or pledge (or agreement to assign or pledge) of the
Contract Value is taxed as a withdrawal of such amount or portion and may also
incur the 10% penalty tax.
AGGREGATION OF ANNUITY CONTRACTS. The Code requires that all non-Qualified
deferred annuity contracts issued by Allstate Life (or its affiliates) to the
same Contract Owner during any calendar year be aggregated
20 PROSPECTUS
and treated as one annuity contract for purposes of determining the taxable
amount of a distribution.
INCOME TAX WITHHOLDING
Generally, Allstate Life is required to withhold federal income tax at a rate of
10% from all non-annuitized distributions. The customer may elect out of
withholding by completing and signing a withholding election form. If no
election is made, we will automatically withhold the required 10% of the taxable
amount. In certain states, if there is federal withholding, then state
withholding is also mandatory.
Allstate Life is required to withhold federal income tax using the wage
withholding rates for all annuitized distributions. The customer may elect out
of withholding by completing and signing a withholding election form. If no
election is made, we will automatically withhold using married with three
exemptions as the default. If no U.S. taxpayer identification number is
provided, we will automatically withhold using single with zero exemptions as
the default. In certain states, if there is federal withholding, then state
withholding is also mandatory.
Election out of withholding is valid only if the customer provides a U.S.
residence address and taxpayer identification number.
Generally, Section 1441 of the Code provides that Allstate Life as a withholding
agent must withhold 30% of the taxable amounts paid to a non-resident alien. A
non-resident alien is someone other than a U.S. citizen or resident alien.
Withholding may be reduced or eliminated if covered by an income tax treaty
between the U.S. and the non-resident alien's country of residence if the payee
provides a U.S. taxpayer identification number on a completed Form W-8BEN. A
U.S. taxpayer identification number is a social security number or an individual
taxpayer identification number ("ITIN"). ITINs are issued by the IRS to
non-resident alien individuals who are not eligible to obtain a social security
number. The U.S. does not have a tax treaty with all countries nor do all tax
treaties provide an exclusion or lower withholding rate for annuities.
TAX QUALIFIED CONTRACTS
The income on tax sheltered annuity (TSA) and IRA investments is tax deferred,
and the income on annuities held by such plans does not receive any additional
tax deferral. You should review the annuity features, including all benefits and
expenses, prior to purchasing an annuity as a TSA or IRA. Tax Qualified
Contracts are contracts purchased as investments as:
.. Individual Retirement Annuities (IRAs) under Section 408(b) of the Code;
.. Roth IRAs under Section 408A of the Code;
.. Simplified Employee Pension (SEP IRA) under Section 408(k) of the Code;
.. Savings Incentive Match Plans for Employees (SIMPLE IRA) under Section 408(p)
of the Code; and
Tax Sheltered Annuities under Section 403(b) of the Code.
Allstate Life reserves the right to limit the availability of the Contract for
use with any of the retirement plans listed above or to modify the Contract to
conform with tax requirements.
The tax rules applicable to participants with tax qualified annuities vary
according to the type of contract and the terms and conditions of the
endorsement. Adverse tax consequences may result from certain transactions such
as excess contributions, premature distributions, and, distributions that do not
conform to specified commencement and minimum distribution rules. Allstate
Life can issue an individual retirement annuity on a rollover or transfer of
proceeds from a decedent's IRA, TSA, or employer sponsored retirement plan under
which the decedent's surviving spouse is the beneficiary. Allstate Life does not
offer an individual retirement annuity that can accept a transfer of funds for
any other, non-spousal, beneficiary of a decedent's IRA, TSA, or employer
sponsored retirement plan.
In the case of certain qualified plans, the terms of the plans may govern the
right to benefits, regardless of the terms of the Contract.
TAXATION OF WITHDRAWALS FROM AN INDIVIDUALLY OWNED TAX QUALIFIED CONTRACT. If
you make a partial withdrawal under a Tax Qualified Contract other than a Roth
IRA, the portion of the payment that bears the same ratio to the total payment
that the investment in the Contract (i.e., nondeductible IRA contributions)
bears to the Contract Value, is excluded from your income. We do not keep track
of nondeductible contributions, and all tax reporting of distributions from Tax
Qualified Contracts other than Roth IRAs will indicate that the distribution is
fully taxable.
"Qualified distributions" from Roth IRAs are not included in gross income.
"Qualified distributions" are any distributions made more than five taxable
years after the taxable year of the first contribution to any Roth IRA and which
are:
.. made on or after the date the Contract Owner attains age 59 1/2,
.. made to a beneficiary after the Contract Owner's death,
.. attributable to the Contract Owner being disabled, or
.. made for a first time home purchase (first time home purchases are subject to
a lifetime limit of $10,000).
"Nonqualified distributions" from Roth IRAs are treated as made from
contributions first and are included in gross income only to the extent that
distributions exceed contributions. All tax reporting of distributions from
21 PROSPECTUS
Roth IRAs will indicate that the taxable amount is not determined.
REQUIRED MINIMUM DISTRIBUTIONS. Generally, IRAs (excluding Roth IRAs) and TSAs
require minimum distributions upon reaching age 70 1/2. Failure to withdraw the
required minimum distribution will result in a 50% tax penalty on the shortfall
not withdrawn from the Contract. Not all income plans offered under this annuity
contract satisfy the requirements for minimum distributions. Because these
distributions are required under the Code and the method of calculation is
complex, please see a competent tax advisor.
THE DEATH BENEFIT AND TAX QUALIFIED CONTRACTS. Pursuant to the Code and IRS
regulations, an IRA may not invest in life insurance contracts. However, an IRA
(e.g., traditional IRA, Roth IRA, SEP IRA and SIMPLE IRA) may provide a death
benefit that equals the greater of the purchase payments or the Contract Value.
The Contract offers a death benefit that in certain circumstances may exceed the
greater of the purchase payments or the Contract Value. We believe that the
Death Benefits offered by your Contract do not constitute life insurance under
these regulations.
It is also possible that certain death benefits that offer enhanced earnings
could be characterized as an incidental death benefit. If the death benefit were
so characterized, this could result in current taxable income to a Contract
Owner. In addition, there are limitations on the amount of incidental death
benefits that may be provided under qualified plans, such as in connection with
a 403(b) plan.
PENALTY TAX ON PREMATURE DISTRIBUTIONS FROM TAX QUALIFIED CONTRACTS. A 10%
penalty tax applies to the taxable amount of any premature distribution from a
Tax Qualified Contract. The penalty tax generally applies to any distribution
made prior to the date you attain age 59 1/2. However, no penalty tax is
incurred on distributions:
.. made on or after the date the Contract Owner attains age 59 1/2,
.. made as a result of the Contract Owner's death or total disability,
.. made in substantially equal periodic payments over the Contract Owner's life
or life expectancy, or over the joint lives or joint life expectancies of the
Contract Owner and the Beneficiary,
.. made after separation from service after age 55 (applies only for IRAs),
.. made pursuant to an IRS levy,
.. made for certain medical expenses,
.. made to pay for health insurance premiums while unemployed (applies only for
IRAs),
.. made for qualified higher education expenses (applies only for IRAs), and
.. made for a first time home purchase (up to a $10,000 lifetime limit and
applies only for IRAs).
During the first 2 years of the individual's participation in a SIMPLE IRA,
distributions that are otherwise subject to the premature distribution penalty
will be subject to a 25% penalty tax.
You should consult a competent tax advisor to determine how these exceptions may
apply to your situation.
SUBSTANTIALLY EQUAL PERIODIC PAYMENTS ON TAX QUALIFIED CONTRACTS. With respect
to Tax Qualified Contracts using substantially equal periodic payments as an
exception to the penalty tax on premature distributions, any additional
withdrawal or other material modification of the payment stream would violate
the requirement that payments must be substantially equal. Failure to meet this
requirement would mean that the income portion of each payment received prior to
the later of 5 years or the taxpayer's attaining age 59 1/2 would be subject to
a 10% penalty tax unless another exception to the penalty tax applied. The tax
for the year of the modification is increased by the penalty tax that would have
been imposed without the exception, plus interest for the years in which the
exception was used. A material modification does not include permitted changes
described in published IRS rulings. You should consult a competent tax advisor
prior to creating or modifying a substantially equal periodic payment stream.
INCOME TAX WITHHOLDING ON TAX QUALIFIED CONTRACTS. Generally, Allstate Life is
required to withhold federal income tax at a rate of 10% from all non-annuitized
distributions that are not considered "eligible rollover distributions." The
customer may elect out of withholding by completing and signing a withholding
election form. If no election is made, we will automatically withhold the
required 10% from the taxable amount. In certain states, if there is federal
withholding, then state withholding is also mandatory. Allstate Life is required
to withhold federal income tax at a rate of 20% on all "eligible rollover
distributions" unless you elect to make a "direct rollover" of such amounts to
an IRA or eligible retirement plan. Eligible rollover distributions generally
include all distributions from employer sponsored retirement plans, including
TSAs but excluding IRAs, with the exception of:
.. required minimum distributions, or,
.. a series of substantially equal periodic payments made over a period of at
least 10 years, or,
.. a series of substantially equal periodic payments made over the life (joint
lives) of the participant (and beneficiary), or,
.. hardship distributions.
For all annuitized distributions that are not subject to the 20% withholding
requirement, Allstate Life is required to withhold federal income tax using the
wage withholding rates. The customer may elect out of withholding by
22 PROSPECTUS
completing and signing a withholding election form. If no election is made, we
will automatically withhold using married with three exemptions as the default.
If no U.S. taxpayer identification number is provided, we will automatically
withhold using single with zero exemptions as the default. In certain states,
if there is federal withholding, then state withholding is also mandatory.
Election out of withholding is valid only if the customer provides a U.S.
residence address and taxpayer identification number.
Generally, Section 1441 of the Code provides that Allstate Life as a withholding
agent must withhold 30% of the taxable amounts paid to a non-resident alien. A
non-resident alien is someone other than a U.S. citizen or resident alien.
Withholding may be reduced or eliminated if covered by an income tax treaty
between the U.S. and the non-resident alien's country of residence if the payee
provides a U.S. taxpayer identification number on a completed Form W-8BEN. A
U.S. taxpayer identification number is a social security number or an individual
taxpayer identification number ("ITIN"). ITINs are issued by the IRS to
non-resident alien individuals who are not eligible to obtain a social security
number. The U.S. does not have a tax treaty with all countries nor do all tax
treaties provide an exclusion or lower withholding rate for annuities.
INDIVIDUAL RETIREMENT ANNUITIES. Section 408 of the Code permits eligible
individuals to contribute to an individual retirement program known as an
Individual Retirement Annuity (IRA). Individual Retirement Annuities are subject
to limitations on the amount that can be contributed and on the time when
distributions may commence. Certain distributions from other types of qualified
plans may be "rolled over" on a tax-deferred basis into an Individual Retirement
Annuity.
ROTH INDIVIDUAL RETIREMENT ANNUITIES. Section 408A of the Code permits eligible
individuals to make nondeductible contributions to an individual retirement
program known as a Roth Individual Retirement Annuity. Roth Individual
Retirement Annuities are subject to limitations on the amount that can be
contributed and on the time when distributions may commence.
Subject to certain limitations, a traditional Individual Retirement Account or
Annuity may be converted or "rolled over" to a Roth Individual Retirement
Annuity. The income portion of a conversion or rollover distribution is taxable
currently, but is exempted from the 10% penalty tax on premature distributions.
ANNUITIES HELD BY INDIVIDUAL RETIREMENT ACCOUNTS (COMMONLY KNOWN AS CUSTODIAL
IRAS)
Internal Revenue Code Section 408 permits a custodian or trustee of an
Individual Retirement Account to purchase an annuity as an investment of the
Individual Retirement Account. If an annuity is purchased inside of an
Individual Retirement Account, then the Annuitant must be the same person as the
beneficial owner of the Individual Retirement Account.
Generally, the death benefit of an annuity held in an Individual Retirement
Account must be paid upon the death of the Annuitant. However, in most states,
the Contract permits the custodian or trustee of the Individual Retirement
Account to continue the Contract in the accumulation phase, with the Annuitant's
surviving spouse as the new Annuitant, if the following conditions are met:
1) The custodian or trustee of the Individual Retirement Account is the owner of
the annuity and has the right to the death proceeds otherwise payable under
the annuity contract;
2) The deceased Annuitant was the beneficial owner of the Individual Retirement
Account;
3) We receive a complete request for settlement for the death of the Annuitant;
and
4) The custodian or trustee of the Individual Retirement Account provides us
with a signed certification of the following:
(a) The Annuitant's surviving spouse is the sole beneficiary of the Individual
Retirement Account;
(b) The Annuitant's surviving spouse has elected to continue the Individual
Retirement Account as his or her own Individual Retirement Account; and
(c) The custodian or trustee of the Individual Retirement Account has
continued the Individual Retirement Account pursuant to the surviving spouse's
election.
SIMPLIFIED EMPLOYEE PENSION IRA. Section 408(k) of the Code allows eligible
employers to establish simplified employee pension plans for their employees
using individual retirement annuities. These employers may, within specified
limits, make deductible contributions on behalf of the employees to the
individual retirement annuities. Employers intending to use the Contract in
connection with such plans should seek competent tax advice.
SAVINGS INCENTIVE MATCH PLANS FOR EMPLOYEES (SIMPLE IRA). Section 408(p) of the
Code allow eligible employers with 100 or fewer employees to establish SIMPLE
retirement plans for their employees using individual retirement annuities. In
general, a SIMPLE IRA consists of a salary deferral program for eligible
employees and matching or nonelective contributions made by employers. Employers
intending to purchase the Contract as a SIMPLE IRA should seek competent tax and
legal advice.
TO DETERMINE IF YOU ARE ELIGIBLE TO CONTRIBUTE TO ANY OF THE ABOVE LISTED IRAS
(TRADITIONAL, ROTH, SEP, OR SIMPLE), PLEASE REFER TO IRS PUBLICATION 590 AND
YOUR COMPETENT TAX ADVISOR.
23 PROSPECTUS
TAX SHELTERED ANNUITIES. Section 403(b) of the Code provides tax-deferred
retirement savings plans for employees of certain non-profit and educational
organizations. Under Section 403(b), any contract used for a 403(b) plan must
provide that distributions attributable to salary reduction contributions made
after 12/31/88, and all earnings on salary reduction contributions, may be made
only on or after the date the employee:
.. attains age 59 1/2,
.. severs employment,
.. dies,
.. becomes disabled, or
.. incurs a hardship (earnings on salary reduction contributions may not be
distributed on account of hardship).
These limitations do not apply to withdrawals where Allstate Life is directed to
transfer some or all of the Contract Value to another 403(b) plan. Generally,
we do not accept Employee Retirement Income Security Act of 1974 (ERISA) funds
in 403(b) contracts.
24 PROSPECTUS
ANNUAL REPORTS AND OTHER DOCUMENTS
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Allstate Life's Annual Report on Form 10-K for the year ended December 31, 2003
is incorporated herein by reference, which means that it is legally a part of
this prospectus.
After the date of this prospectus and before we terminate the offering of the
securities under this prospectus, all documents or reports we file with the SEC
under the Exchange Act are also incorporated herein by reference, which means
that they also legally become a part of this prospectus.
Statements in this prospectus, or in documents that we file later with the SEC
and that legally become a part of this prospectus, may change or supersede
statements in other documents that are legally part of this prospectus.
Accordingly, only the statement that is changed or replaced will legally be a
part of this prospectus.
We file our Exchange Act documents and reports, including our annual and
quarterly reports on Form 10-K and Form 10-Q, electronically on the SEC's
"EDGAR" system using the identifying number CIK No. 0000352736. The SEC
maintains a Web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the SEC.
The address of the site is http:// www.sec.gov. You also can view these
materials at the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. For more information on the operations of the SEC's
Public Reference Room, call 1-800-SEC-0330.
If you have received a copy of this prospectus, and would like a free copy of
any document incorporated herein by reference (other than exhibits not
specifically incorporated by reference into the text of such documents), please
write or call us at 544 Lakeview Parkway, Suite 300, Vernon Hills, Illinois
60061 (telephone: 1-800-203-0068).
ANNUAL STATEMENTS
- --------------------------------------------------------------------------------
At least once a year prior to the Payout Start Date, we will send you a
statement containing information about your Contract Value. For more
information, please contact your financial representative or call our customer
support unit at 1-800-203-0068.
25 PROSPECTUS
APPENDIX A- MARKET VALUE ADJUSTMENT
- --------------------------------------------------------------------------------
The Market Value Adjustment is calculated for each Guarantee Period Account and
based on the following:
I = the Treasury Rate for a maturity equal to the term length of the
Guarantee Period Account for the week preceding the establishment of
the Guarantee Period Account;
J = the Treasury Rate for the same maturity as I, for the week preceding
our receipt of your withdrawal request; and
N = the number of whole and partial years from the date we receive your
request until the end of the relevant Guarantee Period.
Treasury Rate means the U.S. Treasury Note Constant Maturity yield as reported
in Federal Reserve Bulletin Release H.15. If such yields cease to be available
in Federal Reserve Bulletin Release H.15, then we will use an alternate source
for such information in our discretion.
The Market Value Adjustment factor is determined from the following formula:
.9 x [I-(J + .0025)] x N
The Market Value Adjustment equals the adjustment factor multiplied by the
amount withdrawn from a Guarantee Period Account that exceeds the Free
Withdrawal Amount for that account.
EXAMPLES OF MARKET VALUE ADJUSTMENT
$10,000 allocated to the same Guarantee Period
Purchase Payment: Account
Guarantee Period: 5 years
Annualized Effective
Interest Rate: 4.50%
Full Withdrawal: Beginning of Contract Year 5
Contract Value at time of
full surrender $11,925.19
NOTE: These examples assume that premium taxes are not applicable.
EXAMPLE 1: (ASSUMES DECLINING INTEREST RATES)
Step 1: Calculate Contract = $11,925.19
Value at Beginning of Contract
Year 5:
Step 2: Calculate the Amount in FREE WITHDRAWAL AMOUNT (.10 X $11,925.19) =
excess of the Free Withdrawal $1,192.52
Amount: AMOUNT IN EXCESS: $11,925.19 - $1,192.52 =
$10,732.67
Step 3: Calculate the .06 X $10,732.67 = $643.96
Withdrawal Charge:
Step 4: Calculate the Market I = 4.50%
Value Adjustment: J = 4.20%
N = 1 year
Market Value Adjustment Factor: .9 x [I - (J +
.0025)] x N
= .9 X [.045 - (.042 + .0025)] X 1= .00045
Market Value Adjustment = Market Value
Adjustment Factor x Amount Subject To Market
Value Adjustment:
= .00045 X $10,732.67 = $4.83
Step 5: Calculate the amount =$11,925.19 - $643.96 + $4.83 = $11,286.06
received by Contract Owner as
a result of full withdrawal at
the beginning of Contract Year
5:
26 PROSPECTUS
EXAMPLE 2: (ASSUMES RISING INTEREST RATES)
Step 1: Calculate Contract = $11,925.19
Value at Beginning of Contract
Year 5:
Step 2: Calculate the Amount in FREE WITHDRAWAL AMOUNT (.10 X $11,925.19) =
excess of the Free Withdrawal $1,192.52
Amount: AMOUNT IN EXCESS: $11,925.19 - $1,192.52 =
$10,732.67
Step 3: Calculate the = .06 X $10,732.67 = $643.96
Withdrawal Charge:
Step 4: Calculate the Market I = 4.50%
Value Adjustment: J = 4.80%
N = 1 year
Market Value Adjustment Factor: .9 x [I - (J +
.0025)] x N
=.9 X [(.045 - (.048 + .0025)] X 1= -0.00495
Market Value Adjustment = Market Value
Adjustment Factor x Amount Subject To Market
Value Adjustment:
= -.00495 X $10,732.67 = -($53.13)
Step 5: Calculate the amount = $11,925.19 - $643.96 - $53.13 = $11,228.10
received by Contract Owner as
a result of full withdrawal at
the beginning of Contract Year
5:
27 PROSPECTUS
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The By-laws of Allstate Life Insurance Company ("Registrant") provide that
Registrant will indemnify all of its directors, former directors, officers and
former officers, to the fullest extent permitted under law, who were or are a
party or are threatened to be made a party to any proceeding by reason of the
fact that such persons were or are directors or officers of Registrant, against
liabilities, expenses, judgments, fines and amounts paid in settlement actually
and reasonably incurred by them. The indemnity shall not be deemed exclusive of
any other rights to which directors or officers may be entitled by law or under
any articles of incorporation, bylaw, agreement, vote of stockholders or
disinterested directors or otherwise. In addition, the indemnity shall inure to
the benefit of the legal representatives of directors and officers or of their
estates, whether such epresentatives are court appointed or otherwise
designated, and to the benefit of the heirs of such directors and officers. The
indemnity shall extend to and include claims for such payments arising out of
any proceeding commenced or based on actions of such directors and officers
taken prior to the effectiveness of this indemnity; provided that payment of
such claims had not been agreed to or denied by Registrant before such date.
The directors and officers of Registrant have been provided liability insurance
for certain losses arising from claims or charges made against them while acting
in their capacities as directors or officers of Registrant.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
Exhibit No. Description
(1) Underwriting Agreement between Allstate Life Insurance Company and Allstate
Distributors, L.L.C. (Incorporated herein by reference to Pre-Effective
Amendment No. 1 to the Form N-4 Registration Statement of Allstate Life
Insurance Company Separate Account A (File No. 333-31288) dated April 27, 2000.)
(2) None
(4) Form of Single Premium Deferred Annuity Certificate and Application
(Incorporated herein by reference to Registrant's initial Form S-3 Registration
Statement (File No. 333-105208) dated May 13, 2003.)
(5)(a) Opinion and Consent of General Counsel re: Legality. (Incorporated herein
by reference to Pre-Effective Amendment No. 2 to Registrant's Form S-3
Registration Statement (File No. 333-105208) dated July 21, 2003.)
(5)(b) Opinion and Consent of General Counsel re: Legality. (Previously filed in
Registrant's Initial Form S-3 Registration Statement (File No. 333-112233) dated
January 27, 2004.)
(8) None
(11) None
(12) None
(15) None
(23)(a) Independent Auditors' Consent filed herewith.
(b) Consent of Foley & Lardner LLP filed herewith.
(24)(a) Powers of Attorney for Michael J. Velotta, David A. Bird, Margaret G.
Dyer, Marla G. Friedman, Edward M. Liddy, John C. Lounds, J. Kevin McCarthy,
Robert W. Pike, Samuel H. Pilch, Steven E. Shebik, Eric A. Simonson, Thomas J.
Wilson, II and Kevin R. Slawin. (Incorporated herein by reference to Allstate
Life's initial Form S-3 Registration Statement (File No. 333-100068) on
September 25, 2002).
(24)(b) Powers of Attorney for Casey J. Sylla and Danny L. Hale (Incorporated
herein by reference to Registrant's initial Form S-3 Registration Statement
(File No. 333-105208) dated May 13, 2003.)
(25) None
(26) None
(27) Not applicable
(99)(a) Experts filed herewith.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being made, a
post-effective amendment to the registration statement:
(i) to include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof ) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement;
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement; provided,
however, that paragraphs (1)(i) and (1)(ii) do not apply if the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Commission by
Registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in the registration statement.
(2) that, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof;
(3) (a) to remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering,
(3)(b) that, for purposes of determining any liability under the Securities Act
of 1933, each filing if the registrant's annual report pursuant to Section 13(a)
or 15 (d) of the Securities Exchange Act of 1934 that is incorporated by
reference in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant, Allstate Life Insurance Company, pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Registrant certifies
that it has reasonable grounds to believe that it meets all of the requirements
for filing on Form S-3 and has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized in the
Township of Northfield, State of Illinois on the 1st day of April, 2004.
ALLSTATE LIFE INSURANCE COMPANY
(REGISTRANT) By:
/s/MICHAEL J. VELOTTA
---------------------------------------
Michael J. Velotta
Senior Vice President, Secretary
and General Counsel
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed by the following persons in the capacities indicated
and on the 1st day of April, 2004.
*/CASEY J. SYLLA Chairman of the Board, President and
- ------------------- Director (Principal Executive Officer)
Casey J. Sylla
/s/MICHAEL J. VELOTTA Senior Vice President, Secretary,
- --------------------- General Counsel and Director
Michael J. Velotta
*/DAVID A. BIRD Senior Vice President and Director
- ------------------
David A. Bird
*/DANNY L. HALE Director
- -------------------
Danny L. Hale
*/EDWARD M. LIDDY Director
- -----------------
Edward M. Liddy
*/JOHN C. LOUNDS Senior Vice President and Director
- -----------------
John C. Lounds
*/J. KEVIN MCCARTHY Senior Vice President and Director
- -----------------
J. Kevin McCarthy
*/ROBERT W. PIKE Director
- ------------------
Robert W. Pike
*/SAMUEL H. PILCH Group Vice President and Controller
- ----------------- (Principal Accounting Officer)
Samuel H. Pilch
*/STEVEN E. SHEBIK Senior Vice President, Chief Financial
- ------------------ Officer and Director
Steven E. Shebik (Principal Financial Officer)
*/ERIC A. SIMONSON Senior Vice President, Chief Investment
- ------------------ Officer and Director
Eric A. Simonson
*/KEVIN R. SLAWIN Senior Vice President and Director
- ------------------
Kevin R. Slawin
*/THOMAS J. WILSON, II Director
- ------------------
Thomas J. Wilson, II
*/ By Michael J. Velotta, pursuant to Powers of Attorney previously filed or
filed herewith.
EXHIBIT LIST
The following exhibits are filed herewith:
Exhibit No. Description
23(a) Independent Auditors' Consent
23(b) Consent of Foley & Lardner LLP
99(a) Experts