FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number: 33-47245
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
(Exact name of registrant as specified in its charter)
NEW YORK 36-2608394
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Allstate Drive
P.O. Box 9095
Farmingville, New York 11738
(Address of principal executive offices)
(Zip Code)
516/451-5300
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes../X/.. No
Indicate the number of shares of each of the issuer's classes of common
stock, as of June 30, 1996; there were 80,000 shares of common capital stock
outstanding, par value $25 per share all of which shares are held by Allstate
Life Insurance Company.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Statements of Financial Position As Of
June 30, 1996 (Unaudited) and December 31, 1995 3
Statements of Operations
Three Months Ended June 30, 1996
and June 30, 1995 (Unaudited)
Six Months Ended June 30, 1996
and June 30, 1995 (Unaudited) 4
Statements of Cash Flows
Six Months Ended June 30, 1996
and June 30, 1995(Unaudited) 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
Signature Page
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF FINANCIAL POSITION
June 30, December 31,
($ in thousands) 1996 1995
(Unaudited)
Assets
Investments
Fixed income securities available for
sale, at fair value (amortized cost
$1,257,814 and $1,219,418) $1,323,712 $1,424,893
Mortgage loans 83,403 86,394
Policy loans 23,920 22,785
Short-term 31,452 7,257
Total investments 1,462,487 1,541,329
Deferred acquisition costs 58,127 53,944
Accrued investment income 19,047 18,828
Reinsurance recoverable 3,009 3,331
Deferred income taxes 6,306
Cash 1,957 1,472
Other assets 4,212 3,924
Separate Accounts 238,347 220,141
Total assets $1,793,492 $1,842,969
Liabilities
Reserve for life insurance policy benefits $ 824,929 $ 838,739
Contractholder funds 509,737 499,548
Deferred income taxes 23,659
Other liabilities and accrued expenses 8,957 8,950
Net payable to affiliates 1,057 1,865
Separate Accounts 238,347 220,141
Total liabilities 1,583,027 1,592,902
Shareholder's equity
Common stock, $25 par value, 80,000 shares
authorized, issued and outstanding 2,000 2,000
Additional capital paid-in 45,787 45,787
Unrealized net capital gains 24,573 74,413
Retained income 138,105 127,867
Total shareholder's equity 210,465 250,067
Total liabilities and shareholder's equity $1,793,492 $1,842,969
See notes to financial statements.
3
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF OPERATIONS
Three Months Ended Six Months Ended
June 30, June 30,
($ in thousands) 1996 1995 1996 1995
(Unaudited) (Unaudited)
Revenues
Premium income
(net of reinsurance ceded
of $610 and $560; $1,194
and $1,066) $21,813 $29,285 $ 44,916 $ 76,607
Contract charges 6,604 5,544 12,305 9,838
Net investment income 27,830 25,455 55,424 50,682
Realized capital gains
and (losses) 420 (518) 351 (2,133)
56,667 59,766 112,996 134,994
Costs and expenses
Provision for policy benefits
(net of reinsurance
recoveries of $1,305 and
$(135); $2,170 and $178) 42,372 46,865 85,389 109,771
Amortization of deferred
acquisition costs 1,818 813 2,965 1,760
Operating costs and
expenses 3,941 5,462 8,414 10,417
48,131 53,140 96,768 121,948
Income before income taxes 8,536 6,626 16,228 13,046
Income tax expense 3,223 2,192 5,990 4,351
Net income $ 5,313 $ 4,434 $10,238 $ 8,695
See notes to financial statements.
4
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
STATEMENTS OF CASH FLOWS
Six Months Ended
June 30,
($ in thousands) 1996 1995
(Unaudited)
Cash flows from operating activities
Net income $ 10,238 $ 8,695
Adjustments to reconcile net income to net
cash provided by operating activities
Realized capital (gains) and losses (351) 2,133
Depreciation, amortization and other
noncash items (12,571) (10,647)
Interest credited to contractholder funds 11,326 12,999
Increase in reserve for policy benefits
and contractholder funds 38,824 67,050
Increase in deferred policy acquisition
costs (3,083) (3,265)
Increase in accrued investment income (219) (343)
Change in deferred income taxes (3,128) (3,298)
Changes in other operating assets and
liabilities 75 1,004
Net cash provided by operating
activities 41,111 74,328
Cash flows from investing activities
Proceeds from sales
Fixed income securities available for sale 6,097
Investment collections
Fixed income securities available for sale 38,404 14,931
Fixed income securities held to maturity 2,864
Mortgage loans 3,360 2,475
Investment purchases
Fixed income securities available for sale (65,089) (57,638)
Fixed income securities held to maturity (21,273)
Mortgage loans (2,895)
Change in short-term investments, net (24,195) (10,639)
Change in other investments, net (1,135) (937)
Net cash used in investing
activities (48,655) (67,015)
Cash flows from financing activities
Contractholder fund deposits 31,615 39,709
Contractholder fund withdrawals (23,586) (47,081)
Net cash provided by (used in)
financing activities 8,029 (7,372)
Net increase (decrease) in cash 485 (59)
Cash at beginning of period 1,472 1,763
Cash at end of period $ 1,957 $ 1,704
See notes to financial statements.
5
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
($ in thousands)
1. Basis of Presentation
Allstate Life Insurance Company of New York (the "Company") is wholly
owned by a wholly-owned subsidiary ("Parent") of Allstate Insurance Company
("Allstate"), a wholly-owned subsidiary of The Allstate Corporation (the
"Corporation").
The statements of financial position as of June 30, 1996, the
statements of operations for the three-month and six-month periods ended
June 30, 1996 and 1995, and the statements of cash flows for the six-month
periods then ended are unaudited. These interim financial statements
reflect all adjustments (consisting only of normal recurring accruals)
which are, in the opinion of management, necessary for the fair
presentation of the financial position, results of operations and cash
flows for the interim periods. The financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Allstate Life Insurance Company of New York Annual Report on Form 10K for
1995. The results of operations for the interim periods should not be
considered indicative of results to be expected for the full year.
To conform with the 1996 presentation, certain items in the prior
year's financial statements have been reclassified.
6
ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL
The following highlights significant factors influencing results of
operations and changes in financial position of Allstate Life Insurance Company
of New York (the "Company"). It should be read in conjunction with the
discussion and analysis and financial statements thereto found under Items 7 and
8 of Part II of the Allstate Life Insurance Company of New York Annual Report on
Form 10-K.
The Company, which is wholly owned by a wholly-owned subsidiary ("Parent")
of Allstate Insurance Company ("Allstate"), markets life insurance and group and
individual annuities in the state of New York, with products consisting
predominately of structured settlement annuities sold through independent
brokers. The Company also utilizes Allstate agencies and direct marketing to
distribute its traditional and universal life and accident and disability
insurance products. Certain single and flexible premium annuities are marketed
to individuals through the account executives of Dean Witter Reynolds Inc. The
Company issues flexible premium deferred variable annuity contracts, also sold
through the account executives of Dean Witter Reynolds Inc., the assets and
liabilities of which are legally segregated and reflected in the accompanying
statements of financial position as the assets and liabilities of the Separate
Accounts.
Separate Account assets and liabilities are carried at fair value in the
statements of financial position. Investment income and realized gains and
losses of the Separate Account investments accrue directly to the
contractholders (net of fees) and, therefore are not included in the Company's
statements of operations.
7
RESULTS OF OPERATIONS
Three Months Six Months
Ended June 30, Ended June 30,
1996 1995 1996 1995
($ IN THOUSANDS) ($ IN THOUSANDS)
Statutory premiums and
deposits................... $ 44,541 $ 47,465 $ 89,359 $ 118,751
Invested assets (1).......... $1,396,589 $1,259,751 $1,396,589 $1,259,751
Separate Account
assets..................... 238,347 195,438 238,347 195,438
Invested assets, including
Separate Account assets.... $1,634,936 $1,455,189 $1,634,936 $1,455,189
Premium income and contract
charges.................... $ 28,417 $ 34,829 $ 57,221 $ 86,445
Net investment income........ 27,830 25,455 55,424 50,682
Policy benefits.............. 42,372 46,864 85,389 109,771
Operating expenses........... 5,759 6,276 11,379 12,177
Income from operations....... 8,116 7,144 15,877 15,179
Income tax on operations..... 3,076 2,374 5,867 5,098
Net operating income......... 5,040 4,770 10,010 10,081
Realized capital gains and
losses, after tax.......... 273 (336) 228 (1,386)
Net income................... $ 5,313 $ 4,434 $ 10,238 $ 8,695
(1) Fixed income securities are included in invested assets at amortized cost
in the table above and are carried at fair value in the statements of
financial position. Separate Accounts are included at fair value in both
the table above and the statements of financial position.
STATUTORY PREMIUMS AND DEPOSITS
Statutory premiums, which include premiums and deposits for all products,
decreased $2.9 million, or 6.2% for the second quarter of 1996 from $47.5
million for the same period in 1995. For the first six months of 1996, statutory
premiums decreased $29.4 million or 24.8% from $118.8 million for the same
period in 1995. The decreases for both periods are due primarily to lower sales
of structured settlement annuities, partially offset by increases in sales of
variable annuity and life products.
PREMIUM INCOME, CONTRACT CHARGES AND PROVISION FOR POLICY BENEFITS
Premium income and contract charges under generally accepted accounting
principles ("GAAP") decreased 18.4% for the three-month period ended June 30,
1996 and decreased 33.8% for the first six months of 1996 from the same periods
in 1995. Under GAAP, revenues exclude deposits on most annuities and premiums on
universal life insurance policies. The decrease in premium and contract charges
in 1996 is primarily the result of lower sales of structured settlement
annuities with life contingencies. Policy benefits decreased $4.5 million, or
9.6% during the second quarter of 1996, and decreased $24.4 million, or 22.2%
for the six months ended June 30, 1996, also reflecting the decreased sales of
structured settlement annuities with life contingencies, partially offset by
higher mortality costs resulting from growth in the life insurance block of
business.
NET INVESTMENT INCOME
Pre-tax net investment income increased 9.3% in the second quarter of 1996
and 9.4% for the six months ended June 30, 1996, compared to the same periods in
1995. The increases were primarily related to the 10.9% or $136.8 million
increase in invested assets. The overall portfolio yield declined slightly, as
proceeds from calls and maturities as well as new premiums and deposits were
invested in securities yielding less than the average portfolio rate.
OPERATING EXPENSES
Operating expenses decreased by $517 thousand, or 8.2%, in the second
quarter of 1996 and $798 thousand, or 6.6%, for the six months ended June 30,
1996, compared to the same periods in 1995. The decrease is primarily
attributable to reduced acquisition costs due to lower sales of structured
settlement annuities. First quarter 1995 operating expenses reflected a one-time
$303 thousand benefit related to a reduced rate of amortization of deferred
policy acquisition costs, due to favorable universal life insurance persistency.
8
NET OPERATING INCOME
Net operating income increased by 5.7% in the second quarter of 1996,
compared to the same period in 1995. The increase for the quarter is primarily
attributable to higher mortality margins and reduced operating expenses. Net
operating income for the first six months of 1996 remained essentially unchanged
as compared to the same period in 1995, since 1995 included the nonrecurring
benefit attributable to the amortization of deferred acquisition costs as
described above.
REALIZED CAPITAL GAINS AND LOSSES
Net realized after-tax capital gains were $273 thousand and $228 thousand
for the three- and six-month periods ending June 30, 1996, compared to net
realized after-tax losses of $336 thousand and $1.4 million for the comparable
periods in 1995. The increases in capital gains are primarily attributable to
lower commercial mortgage loan losses in 1996.
9
INVESTMENTS
FIXED INCOME SECURITIES
The Company monitors the quality of its fixed income portfolio, in part, by
categorizing certain investments as problem, restructured or potential problem
investments. Problem fixed income securities are securities in default with
respect to principal and/or interest and/or securities issued by companies that
went into bankruptcy subsequent to acquisition of the security. Restructured
fixed income securities have modified terms and conditions that were not at
current market rates or terms at the time of the restructuring. Potential
problem fixed income securities are current with respect to contractual
principal and/or interest, but because of other facts and circumstances,
management has serious doubts regarding the borrower's ability to pay future
interest and principal, which causes management to believe these securities may
be classified as problem or restructured in the future. At June 30, 1996,
problem, restructured and potential problem fixed income securities were $3.8
million. There were no problem, restructured, and potential problem fixed income
securities at December 31, 1995.
MORTGAGE LOANS
The Company monitors the quality of its mortgage loans by categorizing
certain loans as problem, restructured or potential problem. Problem commercial
mortgage loans are loans that are in foreclosure, loans for which a principal or
interest payment is over 60 days past due, or are current with respect to
interest payments, but considered in-substance foreclosed. Restructured
commercial mortgage loans have modified terms and conditions that were not at
current market rates or terms at the time of the restructuring. Potential
problem commercial mortgage loans are current with respect to interest payments,
or less than 60 days delinquent as to contractual principal and/or interest
payments, but because of other facts and circumstances, management has serious
doubts regarding the borrower's ability to pay future interest and principal
which causes management to believe these loans may be classified as problem or
restructured in the future. Total problem, restructured and potential problem
loans, net of valuation allowances, were $6.5 million and $9.6 million at June
30, 1996 and December 31, 1995, respectively.
The total pre-tax provision for loan losses was $104 thousand and $2.2
million for the six months ended June 30, 1996 and 1995, respectively. The
carrying value of impaired loans was $4.4 million and $9.6 million as of June
30, 1996 and December 31, 1995, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal source of funds consists primarily of premiums and
annuity deposits and collections of principal and income from the investment
portfolio. The Company generates substantial positive cash flows from operating
activities. The major uses of these funds are policyholder claims and benefits,
acquisition of investments, contract maturities, surrenders and other operating
costs.
10
PART II - Other Information
Item 1. Legal Proceedings
The Company and its Board of Directors know of no material legal
proceedings pending to which the Company is a party or which would materially
affect the Company.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits required by Item 601 of Regulation S-K
(2) None
(3)(i) Articles of Incorporation*
(ii) By-laws*
(4) Allstate Life Insurance Company of New York
Single Premium Deferred Annuity Contract**
(10) Reinsurance Agreement between Allstate Life
Insurance Company of New York and
Allstate Life Insurance Company**
(11) None
(15) None
(18) None
(19) None
(22) None
(23)(a) Consent of Independent Public Accountants***
(b) Consent of Attorneys**
(24) None
(27) Financial Data Schedule
(99) None
(b) Reports on 8-K
No reports on Form 8-K were filed during the second
quarter of 1996.
* Previously filed in Form S-1 Registration Statement No.33-47245
dated April 15, 1992 and incorporated by reference.
** Previously filed in Form S-1 Registration Statement No.33-47245
dated November 13, 1992 and incorporated by reference.
*** Previously filed in Form S-1 Registration Statement No.33-47245
dated April 16, 1996 and incorporated by reference.
11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Allstate Life Insurance Company of New York
(Registrant)
DATE August 13, 1996 /s/ LOUIS G. LOWER, II
---------------------- ----------------------------------
LOUIS G. LOWER, II
CHAIRMAN OF THE BOARD OF DIRECTORS
and PRESIDENT
(Principal Executive Officer)
DATE August 13, 1996 /s/ BARRY S. PAUL
---------------------- ----------------------------------
BARRY S. PAUL
ASSISTANT VICE PRESIDENT
and CONTROLLER
(Chief Accounting Officer)