-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PGunBXCTpfdCCz66GU0P95Gculw/UuEOyNN5viMWEvPzUCo+rYe9mQZVLkITpDr7 wyN0X7JlDo5ZOMdKjlTbxg== /in/edgar/work/20000814/0000945094-00-000339/0000945094-00-000339.txt : 20000921 0000945094-00-000339.hdr.sgml : 20000921 ACCESSION NUMBER: 0000945094-00-000339 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALLSTATE LIFE INSURANCE CO OF NEW YORK CENTRAL INDEX KEY: 0000839759 STANDARD INDUSTRIAL CLASSIFICATION: [ ] IRS NUMBER: 362608394 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-47245 FILM NUMBER: 696118 BUSINESS ADDRESS: STREET 1: ONE ALLSTATE DR STREET 2: PO BOX 9095 CITY: FARMINGVILLE STATE: NY ZIP: 11738 BUSINESS PHONE: 5164515300 MAIL ADDRESS: STREET 1: ONE ALLSTATE DR STREET 2: PO BOX 9095 CITY: FARMINGVILLE STATE: NY ZIP: 11738 10-Q 1 0001.txt FORM 10-Q FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 The registrant meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this Form with the reduced disclosure format. [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: June 30, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number: 33-47245 33-65355 ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK (Exact name of registrant as specified in its charter) NEW YORK 35-2608394 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) One Allstate Drive Farmingville, New York 11738 (Address of principal executive offices)(Zip Code) 800/256-9392 (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, 2000; there were 100,000 shares of common capital stock outstanding, par value $25 per share all of which shares are held by Allstate Life Insurance Company. PART I - FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS Statements of Financial Position June 30, 2000(Unaudited) and December 31, 1999.................. 3 Statements of Operations Three Months Ended June 30, 2000 and and June 30, 1999 and Six Months Ended June 30, 2000 and June 30, 1999 (Unaudited).... 4 Statements of Cash Flows Six Months Ended June 30, 2000 and June 30, 1999 (Unaudited)................................. 5 Notes to Financial Statements................................... 6 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.................... 10 Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK*..................................................N/A PART II - OTHER INFORMATION Item 1. LEGAL PROCEEDINGS..................................................17 Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS*........................N/A Item 3. DEFAULTS UPON SENIOR SECURITIES*..................................N/A Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS*..............N/A Item 5. OTHER INFORMATION..................................................17 Item 6. EXHIBITS AND REPORTS ON FORM 8-K...................................17 SIGNATURE PAGE...............................................................18 *Omitted pursuant to General Instruction H(2) of Form 10-Q. 2 ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK STATEMENTS OF FINANCIAL POSITION
June 30, December 31, 2000 1999 ----------------- ----------------- ----------------- ----------------- (Unaudited) ($ in thousands, except par value data) Assets Investments Fixed income securities, at fair value (amortized cost $2,082,876 and $1,858,216) $ 2,165,497 $ 1,912,545 Mortgage loans 191,055 166,997 Policy loans 31,521 31,109 Short-term 12,360 46,037 ------- ------ Total investments 2,400,433 2,156,688 Cash 2,724 1,135 Deferred policy acquisition costs 128,968 106,932 Accrued investment income 26,936 25,712 Reinsurance recoverables, net 1,530 1,949 Other assets 9,398 7,803 Separate Accounts 497,624 443,705 -------- -------- Total assets $ 3,067,613 $ 2,743,924 =========== =========== Liabilities Reserve for life-contingent contract benefits $ 1,189,803 $ 1,098,016 Contractholder funds 1,016,504 839,157 Current income taxes payable 12,980 10,132 Deferred income taxes 2,666 3,077 Other liabilities and accrued expenses 35,533 41,218 Payable to affiliates, net 2,056 4,731 Separate Accounts 497,624 443,705 -------- -------- Total liabilities 2,757,166 2,440,036 --------- --------- Commitments and Contingent Liabilities (Note 3) Shareholder's equity Common stock, $25 par value, 100,000 shares authorized, issued and outstanding 2,500 2,500 Additional capital paid-in 45,787 45,787 Retained income 241,207 225,367 Accumulated other comprehensive income: Unrealized net capital gains 20,953 30,234 ------ ------ Total accumulated other comprehensive income 20,953 30,234 ------ ------ Total shareholder's equity 310,447 303,888 ------- ------- Total liabilities and shareholder's equity $ 3,067,613 $ 2,743,924 =========== =========== See notes to financial statements.
3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK STATEMENTS OF OPERATIONS
Three Months Ended Six Months Ended June 30, June 30, ---------------------------------- ------------------------------------- ---------------------------------- ------------------------------------- ($ in thousands) 2000 1999 2000 1999 --------------- ----------------- ----------------- ----------------- ---------------------------------- ------------------------------------- (Unaudited) (Unaudited) Revenues Premiums $ 14,852 $ 9,521 $ 42,432 $ 31,565 Contract charges 10,318 9,813 21,140 19,020 Net investment income 43,924 36,447 84,490 72,007 Realized capital losses (2,211) (1,101) (2,911) (748) -------- ------- -------- -------- 66,883 54,680 145,151 121,844 -------- ------- -------- -------- Costs and expenses Contract benefits 45,680 37,733 105,200 86,213 Amortization of deferred policy acquisition costs 2,942 2,647 5,475 4,826 Operating costs and expenses 4,306 5,201 10,806 11,342 -------- ------ -------- -------- 52,928 45,581 121,481 102,381 -------- ------- -------- -------- Income from operations before income tax expense 13,955 9,099 23,670 19,463 Income tax expense 4,470 3,234 7,830 6,913 -------- ------ -------- -------- Net income $ 9,485 $ 5,865 $ 15,840 $ 12,550 ======== ======= ======== ========
See notes to financial statements. 4 ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK STATEMENTS OF CASH FLOWS
Six Months Ended June 30, ---------------------------------------- ---------------------------------------- ($ in thousands) 2000 1999 ------------------ ------------------ ---------------------------------------- (Unaudited) Cash flows from operating activities Net income $ 15,840 $ 12,550 Adjustments to reconcile net income to net cash provided by operating activities: Amortization and other non-cash items (21,223) (18,264) Realized capital gains and losses 2,911 748 Interest credited to contractholder funds 20,162 15,107 Changes in: Life-contingent contract benefits and contractholder funds 31,741 22,241 Deferred policy acquisition costs (22,036) (6,023) Income taxes payable 2,848 6,219 Other operating assets and liabilities (2,111) (69) -------- -------- Net cash provided by operating activities 28,132 32,509 -------- -------- Cash flows from investing activities Proceeds from sales of fixed income securities 94,583 65,333 Investment collections Fixed income securities 21,727 6,259 Mortgage loans 6,179 3,742 Investment purchases Fixed income securities (324,537) (173,670) Mortgage loans (30,333) (21,803) Change in short-term investments, net 31,589 39,549 Change in policy loans, net (412) (772) -------- -------- Net cash used in investing activities (201,204) (81,362) -------- -------- Cash flows from financing activities Contractholder fund deposits 235,462 76,906 Contractholder fund withdrawals (60,801) (30,470) -------- -------- Net cash provided by financing activities 174,661 46,436 -------- -------- Net increase (decrease) in cash 1,589 (2,417) Cash at the beginning of period 1,135 3,117 -------- -------- Cash at end of period $ 2,724 $ 700 ======== ======== See notes to financial statements.
5 ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THREE MONTH AND SIX MONTH PERIODS ENDED JUNE 30, 2000 AND 1999 1. Basis of Presentation The accompanying financial statements include the accounts of Allstate Life Insurance Company of New York (the "Company"), a wholly owned subsidiary of Allstate Life Insurance Company ("ALIC"), which is wholly owned by Allstate Insurance Company ("AIC"), a wholly owned subsidiary of The Allstate Corporation (the "Corporation"). These financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. The financial statements and notes as of June 30, 2000, and for the six month periods ended June 30, 2000 and 1999, are unaudited. The financial statements reflect all adjustments (consisting only of normal recurring accruals) which are, in the opinion of management, necessary for the fair presentation of the financial position, results of operations and cash flows for the interim periods. The financial statements and notes should be read in conjunction with the financial statements and notes thereto included in the Allstate Life Insurance Company of New York Annual Report on Form 10-K for 1999. The results of operations for the interim periods should not be considered indicative of results to be expected for the full year. 2. Comprehensive Income The components of other comprehensive income on a pretax and after-tax basis are as follows:
Three Months Ended June 30, ($ in thousands) 2000 1999 ------------------------------------ -------------------------------------- After- After- Pretax Tax tax Pretax Tax tax --------------------------------------------------------------------------- Unrealized capital gains and losses: Unrealized holding gains (losses) arising during the period $ (29,731) $10,406 $ (19,325) $ (11,605) $ 4,061 $ (7,544) Less: reclassification adjustments (2,122) 743 ( 1,379) (1,087) 380 (707) --------- ------- --------- --------- ------- -------- Other comprehensive income (loss) $ (27,609) $ 9,663 (17,946) $ (10,518) $ 3,681 (6,837) ========= ======= ========= ======= Net income 9,485 5,865 --------- -------- Comprehensive income (loss) $ (8,461) $ (972) ========= ========
6 ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THREE MONTH AND SIX MONTH PERIODS ENDED JUNE 30, 2000 AND 1999 2. Comprehensive Income (continued)
Six Months Ended June 30, ($ in thousands) 2000 1999 ------------------------------------ --------------------------------------- After- After- Pretax Tax tax Pretax Tax tax ---------------------------------------------------------------------------- Unrealized capital gains and losses: Unrealized holding gains (losses) arising during the period $(17,036) $ 5,963 $(11,073) $ (51,842) $ 18,145 $ (33,697) Less: reclassification adjustments (2,757) 965 (1,792) (733) 257 (476) -------- ------- -------- --------- -------- --------- Other comprehensive income (loss) $(14,279) $ 4,998 (9,281) $ (51,109) $ 17,888 (33,221) ======== ======= ========= ======== Net income 15,840 12,550 -------- --------- Comprehensive income (loss) $ 6,559 $ (20,671) ======== =========
3. Regulation and Legal Proceedings The Company's business is subject to the effects of a changing social, economic and regulatory environment. Recent public and regulatory initiatives have varied and have included employee benefit regulations, removal of barriers preventing banks from engaging in the securities and insurance business, tax law changes affecting the taxation of insurance companies and the tax treatment of insurance products and its impact on the relative desirability of various personal investment vehicles. The ultimate changes and eventual effects, if any, of these initiatives are uncertain. In the normal course of its business, the Company is involved in pending and threatened litigation and regulatory actions in which claims for monetary damages are asserted. At this time, based on their present status, it is in the opinion of management, that the ultimate liability, if any, in one or more of these actions in excess of amounts currently reserved is not expected to have a material effect on the results of operations, liquidity or financial position of the Company. 7 ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THREE MONTH AND SIX MONTH PERIODS ENDED JUNE 30, 2000 AND 1999 4. Reinsurance The Company has reinsurance agreements with ALIC in order to limit aggregate and single exposure on large risks. A portion of the Company's premiums, policy benefits and certain costs and expenses are ceded to ALIC and reflected net of such reinsurance in the statements of operations and comprehensive income. Reinsurance recoverables and the related reserve for life-contingent contract benefits and contractholder funds are reported separately in the statements of financial position. The Company continues to have primary liability as the direct insurer for risks reinsured. The following amounts were ceded to ALIC under reinsurance agreements.
Three months ended Six months ended June 30, June 30, ------------------------------ ---------------------------------- ($ in thousands) 2000 1999 2000 1999 ---------------- ------------- ---------------- ----------------- Premiums $ 1,015 $ 793 $ 2,164 $ 1,745 Contract benefits 179 37 403 67 Certain costs and expenses 1 - 2 - The Company also purchases reinsurance from non-affiliates. The following table summarizes amounts that were ceded to third parties under reinsurance agreements. Three months ended Six months ended June 30, June 30, ------------------------------ ---------------------------------- ($ in thousands) 2000 1999 2000 1999 ---------------- ------------- ---------------- ----------------- Premiums $ 227 $ 210 $ 448 $ 422 Contract benefits (296) 72 (147) 612 Certain costs and expenses 36 34 70 95
8 ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THREE MONTH AND SIX MONTH PERIODS ENDED JUNE 30, 2000 AND 1999 The following discussion 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 financial statements and related notes thereto found under Part I. Item 1 contained herein and with the discussion, analysis, financial statements and notes thereto in Part I. Item 1 and Part II. Items 7 and 8 of the Allstate Life Insurance Company of New York Annual Report on Form 10-K for the year ended December 31, 1999. The Company, a wholly owned subsidiary of Allstate Life Insurance Company ("ALIC"), which is a wholly owned subsidiary of Allstate Insurance Company ("AIC"), a wholly owned subsidiary of The Allstate Corporation (the "Corporation"), markets life insurance and savings products in the state of New York through a combination of exclusive agencies, securities firms, banks, specialized brokers and direct response marketing. Life insurance products consist of traditional products, including term and whole life, interest-sensitive life and immediate annuities with life contingencies. Savings products include deferred annuities and immediate annuities without life contingencies. Deferred annuities include fixed rate, market value adjusted and variable annuities. The Company has identified itself as a single segment entity. The assets and liabilities related to variable annuity and variable life contracts are legally segregated and reflected as Separate Accounts. The assets of the Separate Accounts are carried at fair value. Separate Accounts liabilities represent the contractholder's claim to the related assets and are carried at the fair value of the assets. In the event that the asset value of certain contractholder accounts are projected to be below the value guaranteed by the Company, a liability is established through a charge to earnings. Investment income and realized capital gains and losses of the Separate Accounts accrue directly to the contractholders and therefore, are not included in the Company's statements of operations. 9 ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THREE MONTH AND SIX MONTH PERIODS ENDED JUNE 30, 2000 AND 1999 Financial Highlights
Three months Ended Six months Ended June 30, June 30, -------------------------------------- --------------------------------- ($ in thousands) 2000 1999 2000 1999 ------------------ ---------------- -------------- --------------- Statutory premiums and deposits $ 156,376 $ 64,084 $ 350,525 $ 127,006 =========== =========== =========== =========== Investments $ 2,400,433 $ 2,129,120 $ 2,400,433 $ 2,129,120 Separate Account assets 497,624 402,137 497,624 402,137 ----------- ----------- ----------- ----------- Investments, including Separate Account assets $ 2,898,057 $ 2,531,257 $ 2,898,057 $ 2,531,257 =========== =========== =========== =========== GAAP Premiums $ 14,852 $ 9,521 $ 42,432 $ 31,565 Contract charges 10,318 9,813 21,140 19,020 Net investment income 43,924 36,447 84,490 72,007 Contract benefits 45,680 37,733 105,200 86,213 Amortization and Operating costs and expenses 7,248 7,848 16,281 16,168 ----------- ----------- ----------- ----------- Operating income before tax 16,166 10,200 26,581 20,211 Income tax expense 5,244 3,619 8,849 7,175 ----------- ----------- ----------- ----------- Operating income (1) 10,922 6,581 17,732 13,036 Realized capital losses, net of tax (1,437) (716) (1,892) (486) ----------- ----------- ----------- ----------- Net income $ 9,485 $ 5,865 $ 15,840 $ 12,550 =========== =========== =========== ===========
[FN] (1) The supplemental operating information presented above allows for a more complete analysis of results of operations. The net effects of realized capital gains and losses have been excluded due to the volatility between periods and because such data is often excluded when evaluating the overall financial performance of insurers. Operating income should not be considered as a substitute for any GAAP measure of performance. Our method of calculating operating income may be different from the method used by other companies and therefore comparability may be limited. 10 ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THREE MONTH AND SIX MONTH PERIODS ENDED JUNE 30, 2000 AND 1999 Statutory premiums and deposits Statutory premiums and deposits, which include premiums and deposits for all products, are used to analyze sales trends. The following table summarizes statutory premiums and deposits by product line.
Three months Ended Six months Ended June 30, June 30, --------------------------------------- ------------------------------ ($ in thousands) 2000 1999 2000 1999 ------------------- ---------------- ------------- ------------- Life Products Interest-sensitive $ 12,801 $ 12,227 $ 26,208 $ 24,355 Traditional 4,891 4,151 8,099 7,386 Other 1,769 1,433 3,488 2,772 --------- -------- -------- -------- Total life products $ 19,461 $ 17,811 $ 37,795 $ 34,513 --------- -------- -------- -------- Annuity Products Fixed $ 56,483 $ 28,123 $179,307 $ 65,458 Variable 80,432 18,151 133,423 27,035 --------- -------- -------- -------- Total $ 156,376 $ 64,085 $350,525 $127,006 ========= ======== ======== ========
Statutory premiums and deposits increased $92.3 million or 144.0% for the second quarter of 2000 compared with the same period last year, and $223.5 million or 176.0% for the first six months of 2000 compared with the same period last year. The increases were primarily due to higher variable and fixed annuity sales. Increases in variable annuities were primarily driven by $87.6 million of sales from the new Putnam Allstate Advisor variable annuity product that was launched in New York in January 2000. The increase in fixed annuity sales was primarily due to new distribution outlets in the banking distribution channel. 11 GAAP premiums and contract charges Under accounting principles generally accepted in the United States of America ("GAAP"), premiums represent revenue generated from traditional life products with significant mortality risks. Revenues for interest-sensitive life insurance and fixed and variable annuity contracts, for which deposits are treated as liabilities, are reflected as contract charges. Immediate annuities may be purchased with a life contingency whereby mortality risk is a significant factor. For this reason the GAAP revenues generated on these contracts are recognized as premiums. The following table summarizes GAAP premiums and contract charges.
Three Months Ended Six Months Ended June 30, June 30, ----------------------------------- ------------------------------ ($ in thousands) 2000 1999 2000 1999 --------------- --------------- ------------ -------------- Premiums Traditional life $ 4,891 $ 4,151 $ 8,099 $ 7,386 Immediate annuities with life contingencies 8,197 3,953 30,840 21,243 Other 1,764 1,417 3,493 2,936 -------- -------- -------- -------- Total premiums $ 14,852 $ 9,521 $ 42,432 $ 31,565 -------- -------- -------- -------- Contract charges Interest-sensitive life $ 7,757 $ 7,307 $ 15,816 $ 14,774 Variable annuities 2,041 1,939 4,062 3,331 Other 520 567 1,262 915 -------- -------- -------- -------- Total contract charges $ 10,318 $ 9,813 $ 21,140 $ 19,020 -------- -------- -------- -------- Total premiums and contract charges $ 25,170 $ 19,334 $ 63,572 $ 50,585 ======== ======== ======== ========
Total premiums for the three month and six month period ended June 30, 2000 increased 56.0% to $14.9 million and 34.4% to $42.4 million, respectively, compared with the same periods last year due to higher sales of immediate annuities with life contingencies. Contract charges for the three month and six month periods ended June 30, 2000 increased 5.2% to $10.3 million and 11.2% to $21.1 million, respectively, compared with the same period last year. The increases in both periods were primarily due to higher interest-sensitive life contract charges which were the result of growth in interest-sensitive life policies in force, increased charges on immediate annuities without life contingencies due to higher sales, and increased variable annuity deposits. Operating income Operating income for the three month and six month periods ended June 30, 2000 increased 66.0% to $10.9 million and 36.0% to $17.7 million, respectively, compared with the same period last year. Increases in net investment income, premiums, and contract charges were partially offset by higher contract benefits. 12 ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THREE MONTH AND SIX MONTH PERIODS ENDED JUNE 30, 2000 AND 1999 Net investment income Net investment income for the three month and six month periods ended June 30, 2000 increased 20.5% to $43.9 million and 17.3% to $84.5 million, respectively, compared with the same period last year due to higher investment balances resulting from increased sales in both periods. Realized capital gains and losses Realized capital losses, after-tax, were $1.4 million for the second quarter of 2000 compared to $716 thousand for the second quarter of 1999. Realized capital losses, after tax, were $1.9 million for the six months ended June 30, 2000 compared to $486 thousand for the same period last year. Period to period fluctuations in realized capital losses are largely the result of timing of sales decisions reflecting management's decision on positioning the portfolio, as well as assessments of individual securities and overall market conditions. Investments The composition of the investment portfolio at June 30, 2000 is presented in the table below: Percent ($ in thousands) to total -------- Fixed income securities (1) $2,165,497 90.2 Mortgage loans 191,055 8.0 Policy loans 31,521 1.3 Short-term 12,360 0.5 -------- ------- Total $2,400,433 100.0% ========== ======= [FN] (1) Fixed income securities are carried at fair value. Amortized cost for these securities was $2,082,876 at June 30, 2000. Total investments were $2.4 billion at June 30, 2000 compared to $2.16 billion at December 31, 1999. The increase was due to positive cash flows generated from operations and increases in unrealized gains on fixed income securities. At June 30, 2000, unrealized capital gains on the fixed income securities portfolio were $82.6 million compared to $54.3 million at December 31, 1999. At June 30, 2000, substantially all of the Company's fixed income securities portfolio is rated investment grade, which is defined by the Company as a security having a National Association of Insurance Commissioners ("NAIC") rating of 1 or 2, a Moody's rating of Aaa, A, Aa, Baa or a comparable Company internal rating. Separate Accounts Separate Accounts assets and liabilities increased 12.2% to $497.6 million at June 30, 2000 from the December 31, 1999 balance. The increases were primarily attributable to sales of variable annuity contracts partially offset by surrenders and withdrawals. 13 ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THREE MONTH AND SIX MONTH PERIODS ENDED JUNE 30, 2000 AND 1999 Liquidity and Capital Resources The Company's principal sources of funds are the receipt of premiums and deposits, collections of principal, interest and dividends from the investment portfolio. The primary uses of these funds are to purchase investments and pay policyholder claims, benefits, contract maturities, contract surrenders and withdrawals and operating costs. The maturity structure of the Company's fixed income securities, which represent 90.2% of the Company's total investments, is managed to meet the anticipated cash flow requirements of the underlying liabilities. A portion of the Company's diversified product portfolio, primarily fixed deferred annuity and interest-sensitive life insurance products, is subject to discretionary surrender and withdrawal by contractholders. Total surrenders and withdrawals for the three month and six month periods ended June 30, 2000 were $34.9 million and $44.4 million compared with $23.3 million and $25.4 million for the same periods last year. As the Company's interest-sensitive life policies and annuity contracts in-force grow and age, the dollar amount of surrenders and withdrawals will likely increase. While the overall amount of surrenders may increase in the future, a significant increase in the level of surrenders relative to total contractholder account balances is not anticipated. Pending Accounting Standards In June 1999, the Financial Accounting Standards Board delayed the effective date of Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS 133 replaces existing pronouncements and practices with a single, integrated accounting framework for derivatives and hedging activities. This statement requires that all derivatives be recognized on the balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value through income. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of derivatives will either be offset against the change in the fair value of the hedged assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. Additionally, the change in fair value of a derivative that is not effective as a hedge will be immediately recognized in earnings. The delay was effected through the issuance of SFAS No. 137, which extends the SFAS No. 133 requirements to fiscal years beginning after June 15, 2000. In June 2000, the FASB issued SFAS No. 138, which amends the accounting and reporting standards of SFAS 133 for certain derivative instruments and certain hedging activities. As such, the Company expects to adopt the provisions of SFAS No. 133 and SFAS 138 as of January 1, 2001. The impact of these statements is dependent upon the Company's derivative positions and market conditions existing at the date of adoption. Based on existing interpretations of the requirements of SFAS No. 133 as amended, the impact at adoption is not expected to be material to the results of operations or financial position of the Company. 14 ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THREE MONTH AND SIX MONTH PERIODS ENDED JUNE 30, 2000 AND 1999 Forward-looking Statements The statements contained in this Management's Discussion and Analysis that are not historical information are forward-looking statements that are based on management's estimates, assumptions and projections. The Private Securities Litigation Reform Act of 1995 provides a safe harbor under The Securities Act of 1933 and The Securities Exchange Act of 1934 for forward-looking statements. Forward looking statements do not relate strictly to historical or current facts and may be identified by their use of words like "plans," "expects," "will," "anticipates," "estimates," "intends," "believes," "likely," and other words with similar meanings. These statements may address, among other things, our strategy for growth, product development, regulatory approvals, market position, expenses, financial results and reserves. Forward-looking statements are based on management's current expectations and assumptions. We assume no obligation to update any forward-looking statements as a result of new information or future events or developments. If the expectations or assumptions underlying our forward-looking statements prove inaccurate or if risks or uncertainties arise, actual results could differ materially from those communicated in our forward-looking statements. In addition to the normal risks of business, the Company is subject to significant risk factors, including those listed below which apply to it as an insurance business. o Changes in market interest rates can have adverse effects on the Company's investment portfolio, investment income and product sales. Increases in market interest rates have an adverse impact on the value of the investment portfolio by decreasing unrealized capital gains on fixed income securities. In addition, increases in market interest rates as compared to rates offered on some of the Company's products could make those products less attractive and therefore decrease sales or increase the level of surrenders on these products. Declining market interest rates could have an adverse impact on the Company's investment income as the Company reinvests proceeds from positive cash flows from operations and maturing and called investments in new investments that could be yielding less than the portfolio's average rate. Additionally, the impact of decreasing Separate Account balances resulting from fluctuating market conditions could cause contract charges realized by the Company to decrease. o In order to meet the anticipated cash flow requirements of its obligations to policyholders, from time to time the Company adjusts the effective duration of the assets and liabilities of the investment portfolio. Those adjustments may have an impact on the value of the investment portfolio and on investment income. o State insurance regulatory authorities require insurance companies to maintain specified levels of statutory capital and surplus. In addition, competitive pressures require the Company to maintain financial strength or claims-paying ability ratings. These restrictions affect the Company's ability to use its capital. o There is uncertainty involved in estimating the availability of reinsurance and the collectibility of reinsurance recoverables. This uncertainty arises from a number of factors, including segregation by the industry generally of reinsurance exposure into separate legal entities. o The Company distributes some of its products under agreements with other financial services entities. Termination of such agreements due to changes in control of these non-affiliated entities could have a detrimental effect on the Company's sales. This risk may be increased due to the recent enactment of the Gramm-Leach-Bliley Act of 1999, which eliminates many federal and state law barriers to affiliations among banks, securities firms, insurers and other financial service providers. 15 ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THREE MONTH AND SIX MONTH PERIODS ENDED JUNE 30, 2000 AND 1999 o A number of enacted and pending legislative measures may lead to increased consolidation and increased competition in the financial services industry. At the federal level, these measures include the recently enacted Gramm-Leach-Bliley Act of 1999, which eliminates many federal and state law barriers to affiliations among banks, securities firms, insurers and other financial service providers. At the state level, these measures include legislation to permit mutual insurance companies to convert to a hybrid structure known as a mutual holding company, thereby allowing insurance companies owned by their policyholders to become stock insurance companies owned (through one or more intermediate holding companies) at least 51% by their policyholders and potentially up to 49% by stockholders. Also several large mutual life insurers have used or are expected to use existing state laws and regulations governing the conversion of mutual insurance companies into stock insurance companies (demutualization). These measures may also increase competition for capital among financial service providers. o Deferred annuities and interest-sensitive life insurance products receive favorable policyholder taxation under current tax laws and regulations. Any legislative or regulatory changes that adversely alter this treatment are likely to negatively affect the demand for these products. o The adoptions of SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended, is not expected to be material to the results of operations of the Company. However, the impact is dependent upon market conditions and our holdings existing at the date of adoption, which for the Company will be January 1, 2001. o Financial strength ratings have become an increasingly important factor in establishing the competitive position of insurance companies and may generally be expected to have an effect on an insurance company's business. On an ongoing basis, rating organizations review the financial performance and condition of insurers. Downgrades in one or more of the ratings of the Company could have a material adverse effect on the Company's business, financial condition and results of operations. 16 PART II - OTHER INFORMATION Item 1. LEGAL PROCEEDINGS The Company and its Board of Directors know of no material legal proceedings pending to which the Company is a party or which would materially affect the Company. The Company is involved in pending and threatened litigation in the normal course of its business in which claims for monetary damages are asserted. Management, after consultation with legal counsel, does not anticipate the ultimate liability arising from such pending or threatened litigation to have a material effect on the financial condition of the Company. Item 5. OTHER INFORMATION Not applicable. Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits required by Item 601 of Regulation S-K (2) None (3)(i) Restated Certificate of Incorporation of Allstate Life Insurance Company of New York (Incorporated herein by reference to the Company's Form 10-K Annual Report for the year ended December 31, 1998) (3)(ii) Amended By-laws of Allstate Life Insurance Company of New York (Incorporated herein by reference to the Company's Form 10-K Annual Report for the year ended December 31, 1998) (4) None (10) None (11) Not Required (15) None (18) None (19) None (22) None (23) Not required (24) None (27) Financial Data Schedule (b) Reports on 8-K No reports on Form 8-K were filed during the second quarter of 2000. 17 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized, on the 14th day of August 2000. ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK ------------------------------------------- (Registrant) /s/ THOMAS J. WILSON, II PRESIDENT - ------------------------ (Principal Executive Officer) THOMAS J. WILSON, II /s/ SAMUEL H. PILCH CONTROLLER - ------------------------ (Chief Accounting Officer) SAMUEL H. PILCH 18 Exhibit Index Exhibit No. Exhibit (27) Financial Data Schedule 19 EX-27 2 0002.txt FDS --
7 THIS SCHEUDLE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM STATEMENTS OF FINANCIAL POSITION AT JUNE 30, 2000; STATEMENTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 2000 AND JUNE 30, 1999 AND SIX MONTHS ENDED JUNE 30, 2000 AND JUNE 30, 1999; AND STATEMENTS OF CASH FLOWS SIX MONTHS ENDED JUNE 30, 2000. 0000839759 ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK 1,000 U.S. DOLLARS 6-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 1 2,165,497 0 0 0 191,055 0 2,400,433 2,724 1,530 128,968 3,067,613 0 0 1,189,803 1,016,504 0 0 0 2,500 305,447 3,067,613 63,572 84,490 (2,911) 0 105,200 5,475 10,806 23,670 7,830 15,840 0 0 0 15,840 0 0 0 0 0 0 0 0 0
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