10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

Registrant meets the conditions set forth in General Instruction H (1)(a) and (b) of Form 10-Q and is therefore filing this Form with the reduced disclosure format.

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF
THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2005

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF
THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 333-100029

ALLSTATE LIFE INSURANCE COMPANY
OF
NEW YORK

(Exact name of registrant as specified in its charter)

New York	36-2608394
(State of Incorporation)	(I.R.S. Employer Identification No.)
100 Motor Parkway, Suite 132 Hauppauge, New York	11788
(Address of principal executive offices)	(Zip Code)

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

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  ý     No  o

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

Yes  o     No  ý

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  o     No  ý

As of October 31, 2005 the Registrant had 100,000 common shares, $25 par value, outstanding, all of which are held by Allstate Life Insurance Company.

ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK

INDEX TO QUARTERLY REPORT ON FORM 10-Q

September 30, 2005

		Page
PART 1.	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Statements of Operations for the Three-Month and Nine-Month Periods Ended September 30, 2005 and 2004 (unaudited)	3
	Condensed Statements of Financial Position as of September 30, 2005 (unaudited) and December 31, 2004	4
	Condensed Statements of Cash Flows for the Nine-Month Periods Ended September 30, 2005 and 2004 (unaudited)	5
	Notes to Condensed Financial Statements (unaudited)	6
	Report of Independent Registered Public Accounting Firm	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
Item 4.	Controls and Procedures	26
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	27
Item 6.	Exhibits	27

2

PART 1. FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS

ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK

CONDENSED STATEMENTS OF OPERATIONS

	Three Months Ended September 30,					Nine Months Ended September 30,
(in thousands)	2005		2004			2005			2004
	(unaudited)					(unaudited)
Revenues
Premiums	$	16,580	$	24,800		$	52,747		$	61,420
Contract charges	16,781		15,446			48,016			44,134
Net investment income	89,853		77,126			264,848			220,197
Realized capital gains and losses	4,531		(4,805		)	(3,978		)	(8,344		)
	127,745		112,567			361,633			317,407
Costs and expenses
Contract benefits	41,904		50,474			131,888			138,314
Interest credited to contractholder funds	39,523		34,253			115,187			92,439
Amortization of deferred policy acquisition costs	15,878		6,590			27,966			15,298
Operating costs and expenses	10,014		10,004			32,284			30,262
	107,319		101,321			307,325			276,313
Gain on disposition of operations	—		—			1			1,058
Income from operations before income tax expense and cumulative effect of change in accounting principle, after-tax	20,426		11,246			54,309			42,152
Income tax expense	6,863		3,644			19,921			14,738
Income before cumulative effect of change in accounting principle, after-tax	13,563		7,602			34,388			27,414
Cumulative effect of change in accounting principle, after-tax	—		—			—			(7,586		)
Net income	$	13,563	$	7,602		$	34,388		$	19,828

See notes to condensed financial statements.

3

ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK

CONDENSED STATEMENTS OF FINANCIAL POSITION

(in thousands, except par value data)	September 30, 2005		December 31, 2004
	(unaudited)
Assets
Investments
Fixed income securities, at fair value (amortized cost $5,515,539 and $5,012,977)	$	6,004,454	$	5,545,647
Mortgage loans	600,038		480,280
Short-term	118,742		111,509
Policy loans	36,330		34,948
Other	3,348		4,638
Total investments	6,762,912		6,177,022
Cash	7,305		8,624
Deferred policy acquisition costs	300,643		238,173
Accrued investment income	61,560		55,821
Reinsurance recoverables	10,987		8,422
Current income taxes receivable	—		367
Other assets	31,801		17,665
Separate Accounts	898,600		792,550
Total assets	$	8,073,808	$	7,298,644
Liabilities
Reserve for life-contingent contract benefits	$	1,859,240	$	1,782,451
Contractholder funds	4,228,371		3,802,846
Deferred income taxes	80,361		90,760
Other liabilities and accrued expenses	344,263		180,904
Payable to affiliates, net	7,417		8,831
Reinsurance payable to parent	—		1,067
Current income taxes payable	1,195		—
Separate Accounts	898,600		792,550
Total liabilities	7,419,447		6,659,409
Commitments and Contingent Liabilities (Note 3)
Shareholder’s equity
Common stock, $25 par value, 100 thousand shares authorized and outstanding	2,500		2,500
Additional capital paid-in	120,000		120,000
Retained income	395,832		361,480
Accumulated other comprehensive income:
Unrealized net capital gains and losses	136,029		155,255
Total accumulated other comprehensive income	136,029		155,255
Total shareholder’s equity	654,361		639,235
Total liabilities and shareholder’s equity	$	8,073,808	$	7,298,644

See notes to condensed financial statements.

4

ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK

CONDENSED STATEMENTS OF CASH FLOWS

	Nine Months Ended September 30,
(in thousands)	2005			2004
	(unaudited)
Cash flows from operating activities
Net income	$	34,388		$	19,828
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization and other non-cash items	(43,805		)	(37,624		)
Realized capital gains and losses	3,978			8,344
Gain on disposition of operations	(1		)	(1,058		)
Cumulative effect of change in accounting principle	—			7,586
Interest credited to contractholder funds	115,187			92,439
Changes in:
Reserve for life-contingent contract benefits and contractholder funds	23,505			28,950
Deferred policy acquisition costs	(25,464		)	(47,149		)
Income taxes payable	1,535			10,519
Other operating assets and liabilities	(14,564		)	(426		)
Net cash provided by operating activities	94,759			81,409
Cash flows from investing activities
Proceeds from sales of fixed income securities	394,169			342,905
Investment collections
Fixed income securities	125,606			145,165
Mortgage loans	44,886			21,129
Investment purchases
Fixed income securities	(837,268		)	(1,204,327		)
Mortgage loans	(162,189		)	(74,900		)
Change in short-term investments, net	14,201			7,581
Change in other investments, net	365			1,203
Net cash used in investing activities	(420,230		)	(761,244		)
Cash flows from financing activities
Contractholder fund deposits	681,725			895,148
Contractholder fund withdrawals	(357,573		)	(201,040		)
Net cash provided by financing activities	324,152			694,108
Net (decrease) increase in cash	(1,319		)	14,273
Cash at beginning of period	8,624			10,731
Cash at end of period	$	7,305		$	25,004

See notes to condensed financial statements.

5

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

1.   General

Basis of Presentation

The accompanying condensed 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”).

The condensed financial statements and notes as of September 30, 2005 and for the three-month and nine-month periods ended September 30, 2005 and 2004 are unaudited.  The condensed financial statements reflect all adjustments (consisting only of normal recurring accruals) which are, in the opinion of management, necessary for the fair presentation of the financial position, results of operations and cash flows for the interim periods.  These condensed financial statements and notes should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.  The results of operations for the interim periods should not be considered indicative of results to be expected for the full year.

To conform to the 2005 presentation, certain amounts in the prior year’s condensed financial statements and notes have been reclassified.

Pending accounting standards

Financial Accounting Standards Board Staff Position No. FAS 115-1, "The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments" ("FSP FAS 115-1")

In November 2005, the Financial Accounting Standards Board ("FASB") issued FSP FAS 115-1, which nullifies the guidance in paragraphs 10-18 of EITF Issue 03-1, "The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments" and references existing other than temporary impairment guidance. FSP FAS 115-1 clarifies that an investor should recognize an impairment loss no later than when the impairment is deemed other-than-temporary, even if a decision to sell the security has not been made, and also provides guidance on the subsequent accounting for an impaired debt security. FSP FAS 115-1 is effective for reporting periods beginning after December 15, 2005. The adoption of FSP FAS 115-1 is not expected to have a material impact on the Company's Condensed Statements of Operations or Financial Position.

Statement of Position 05-1, Accounting by Insurance Enterprises for Deferred Acquisition Costs in Connection with Modifications or Exchanges of Insurance Contracts (“SOP 05-1”)

In October 2005, the American Institute of Certified Public Accountants issued SOP 05-1.   SOP 05-1 provides accounting guidance for deferred policy acquisition costs on internal replacements of insurance and investment contracts other than those specifically described in Statement of Financial Accounting Standards (“SFAS”) No. 97, Accounting and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments.  SOP 05-1 defines an internal replacement as a modification in product benefits, features, rights or coverages that occurs by the exchange of a contract for a new contract, or by amendment, endorsement or rider to a contract, or by the election of a feature or coverage within a contract.  Internal replacement contracts are those that are substantially changed from the replaced contract and are accounted for as an extinguishment of the replaced contract.  Nonintegrated contract features are accounted for as separately issued contracts.  Modifications resulting from the election of a feature or coverage within a contract or from an integrated contract feature generally do not result in an internal replacement contract subject to SOP 05-1 provided certain conditions are met. The provisions of SOP 05-1 are effective for internal replacements occurring in fiscal years beginning after December 15, 2006.  The Company’s accounting policy for internal replacements is generally consistent with the accounting guidance prescribed in SOP 05–1; therefore, the SOP is not expected to have a material impact on the Company’s Condensed Statements of Operations or Financial Position.

Statement of Financial Accounting Standards No. 154, Accounting Changes and Error Corrections (“SFAS No.  154”)

In May 2005, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 154, which replaces Accounting Principles Board (“APB”) Opinion No. 20, Accounting Changes, and FASB Statement No. 3, Reporting Accounting Changes in Interim Financial Statements.  SFAS No. 154 requires retrospective application to prior periods’ financial statements for changes in accounting principle, unless determination of either the period specific effects or the cumulative effect of the change is impracticable.  SFAS No. 154 is effective for fiscal years beginning after December 15, 2005.  SFAS No. 154 is not expected to have a material impact on the Company’s Condensed Statements of Operations or Financial Position.

6

2.   Reinsurance

The effects of reinsurance on premiums and contract charges are as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands)	2005			2004			2005			2004
Premiums and contract charges
Direct	$	37,036		$	43,167		$	112,891		$	116,334
Assumed – non-affiliate	200			84			702			386
Ceded
Affiliate	(1,186		)	8			(3,538		)	(2,175		)
Non-affiliate	(2,689		)	(3,013		)	(9,292		)	(8,991		)
Premiums and contract charges, net of reinsurance	$	33,361		$	40,246		$	100,763		$	105,554

The effects of reinsurance on contract benefits are as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands)	2005			2004			2005			2004
Contract benefits
Direct	$	43,068		$	52,576		$	137,938		$	143,304
Assumed – non-affiliate	93			57			249			135
Ceded
Affiliate	(28		)	(283		)	(1,216		)	(266		)
Non-affiliate	(1,229		)	(1,876		)	(5,083		)	(4,859		)
Contract benefits, net of reinsurance	$	41,904		$	50,474		$	131,888		$	138,314

In addition to amounts included in the table above are reinsurance premiums ceded to ALIC of $738 thousand and $685 thousand for the third quarters of 2005 and 2004, respectively, and $2.16 million and $2.04 million for the first nine months of 2005 and 2004, respectively, under the terms of the structured settlement annuity reinsurance agreement.  These amounts are reflected as a component of realized capital gains and losses on the Condensed Statements of Operations as the treaty is recorded as a derivative instrument pursuant to the requirements of Statement of Financial Accounting Standard No. 133, “Accounting for Derivative Instruments and Hedging Activities.”

3.   Guarantees and Contingent Liabilities

Guarantees

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

The aggregate liability balance related to all guarantees was not material as of September 30, 2005.

7

Regulation

The Company is subject to changing social, economic and regulatory conditions.  Recent state and federal regulatory initiatives and proceedings have included efforts to impose additional regulations regarding agent and broker compensation and otherwise expand overall regulation of insurance products and the insurance industry. The ultimate changes and eventual effects of these initiatives on the Company’s business, if any, are uncertain.

Legal and Regulatory Proceedings and Inquiries

Background

The Company and certain affiliates are involved in a number of lawsuits, regulatory inquiries, and other legal proceedings arising out of various aspects of its business.  As background to the “Proceedings” sub-section below, please note the following:

•These matters raise difficult and complicated factual and legal issues and are subject to many uncertainties and complexities, including but not limited to, the underlying facts of each matter; novel legal issues; variations between jurisdictions in which matters are being litigated, heard or investigated; differences in applicable laws and judicial interpretations; the length of time before many of these matters might be resolved by settlement, through litigation or otherwise and, in some cases, the timing of their resolutions relative to other similar matters involving other companies; the fact that some of the lawsuits are putative class actions in which a class has not been certified and in which the purported class may not be clearly defined; the fact that some of the lawsuits involve multi-state class actions in which the applicable law(s) for the claims at issue is in dispute and therefore unclear; and the current challenging legal environment faced by large corporations and insurance companies.

•In the lawsuits, plaintiffs seek a variety of remedies including equitable relief in the form of injunctive and other remedies and monetary relief in the form of contractual and extra-contractual damages.  In some cases, the monetary damages sought include punitive damages.  Often specific information about the type of relief sought, such as the amount of damages, is not available because plaintiffs have not requested specific relief in their pleadings.  In our experience, monetary demands in pleadings bear little relation to the ultimate loss, if any, to the Company.

•In connection with regulatory examinations and proceedings, government authorities may seek various forms of relief, including penalties, restitution, and changes in business practices.  The Company may not be advised of the nature and extent of relief sought until the final stages of the examination or proceeding.

•For the reasons specified above, it is not possible at this time to make meaningful estimates of the amount or range of loss that could result from the matters described below in the “Proceedings” subsection.  The Company reviews these matters on an on-going basis and follows the provisions of Statement of Financial Accounting Standards No. 5, “Accounting for Contingencies” when making accrual and disclosure decisions.  When assessing reasonably possible and probable outcomes, the Company bases its decisions on its assessment of the ultimate outcome following all appeals.

•In the opinion of the Company’s management, while the ultimate liability in some of the matters described below in the “Proceedings” subsection in excess of amounts currently reserved may be material to the Company’s operating results for any particular period if an unfavorable outcome results, none will have a material adverse effect on the financial condition of the Company.

8

Proceedings

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

AIC is defending certain matters relating to its agency program reorganization announced in 1999. These matters include a lawsuit filed in December 2001 by the U.S. Equal Employment Opportunity Commission (“EEOC”) alleging retaliation under federal civil rights laws, a class action filed in August 2001 by former employee agents alleging retaliation and age discrimination under the Age Discrimination in Employment Act, breach of contract and ERISA violations, and a lawsuit filed in October 2004 by the EEOC alleging age discrimination with respect to a policy limiting the rehire of agents affected by the agency program reorganization.  AIC is also defending a certified class action, filed by former employee agents who terminated their employment prior to the agency program reorganization.  These plaintiffs have asserted breach of contract and ERISA claims and are seeking actual damages including benefits under Allstate employee benefit plans and payments provided in connection with the reorganization, as well as punitive damages.  In late March 2004, in the first EEOC lawsuit and class action lawsuit, the trial court issued a memorandum and order that, among other things, certified classes of agents, including a mandatory class of agents who had signed a release, for purposes of effecting the court’s declaratory judgment that the release is voidable at the option of the release signer.  The court also ordered that an agent who voids the release must return to AIC “any and all benefits received by the [agent] in exchange for signing the release.”  The court also “concluded that, on the undisputed facts of record, there is no basis for claims of age discrimination.”  The EEOC and plaintiffs have asked the court to clarify and/or reconsider its memorandum and order.  The case otherwise remains pending.  A putative nationwide class action has also been filed by former employee agents alleging various violations of ERISA, including a worker classification issue.  These plaintiffs are challenging certain amendments to the Agents Pension Plan and are seeking to have exclusive agent independent contractors treated as employees for benefit purposes.  This matter was dismissed with prejudice by the trial court, was the subject of further proceedings on appeal, and was reversed and remanded to the trial court in April 2005.  In these matters, plaintiffs seek compensatory and punitive damages, and equitable relief.  AIC has been vigorously defending these lawsuits and other matters related to its agency program reorganization.  The outcome of these disputes is currently uncertain.

The Company is currently undergoing a periodic market conduct examination by state insurance regulators.  Regulators are focusing, as they have with other insurers, on the Company’s compliance with the state’s replacement sales and record-keeping processes with regard to life insurance and annuities among other issues.  The ultimate outcome of this examination is currently uncertain.

Other Matters

The Corporation and some of its subsidiaries, including the Company, have received interrogatories and demands for information from regulatory and enforcement authorities relating to various insurance products and practices.  The areas of inquiry include variable annuity market timing and late trading.  The Corporation and some of its subsidiaries, including the Company, have also received interrogatories and demands for information from authorities seeking information relevant to on-going investigations into the possible violation of antitrust or insurance laws by unnamed parties and, in particular, seeking information as to whether any person engaged in activities for the purpose of price fixing, market allocation, or bid rigging. The Company believes that these inquiries are similar to those made to many financial services companies as part of industry-wide investigations by various authorities into the practices, policies and procedures relating to insurance and financial services products.  The Corporation and its subsidiaries have responded and will continue to respond to these inquiries

Various other legal and regulatory actions are currently pending that involve the Company and specific aspects of its conduct of business.  Like other members of the insurance industry, the Company is the target of a number of lawsuits and proceedings, some of which involve claims for substantial or indeterminate amounts.  These actions are based on a variety of issues and target a range of the Company’s practices.  The outcome of these disputes is currently unpredictable.

However, at this time, based on their present status, it is the opinion of management that the ultimate

9

liability, if any, in one or more of the actions described in this “Other Matters” subsection in excess of amounts currently reserved is not expected to have a material effect on the results of operations, liquidity or financial condition of the Company.

4.Other Comprehensive Income

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

	Three months ended September 30,
(in thousands)	2005									2004
	Pretax			Tax			After- tax			Pretax			Tax			After- tax
Unrealized holding (losses) gains arising during the period, net of related offsets	$	(52,711	)	$	18,448		$	(34,263	)	$	64,736		$	(22,658	)	$	42,078
Less: reclassification adjustments	1,342			(470		)	872			(4,849		)	1,697			(3,152		)
Other comprehensive (loss) income	$	(54,053	)	$	18,918		(35,135		)	$	69,585		$	(24,355	)	45,230
Net income							13,563									7,602
Comprehensive (loss) income							$	(21,572	)							$	52,832

	Nine months ended September 30,
(in thousands)	2005								2004
	Pretax			Tax		After- tax			Pretax			Tax			After- tax
Unrealized holding (losses) gains arising during the period, net of related offsets	$	(35,327	)	$	12,364	$	(22,963	)	$	14,564		$	(5,098	)	$	9,466
Less: reclassification adjustments	(5,749		)	2,012		(3,737		)	(6,334		)	2,217			(4,117		)
Other comprehensive (loss) income	$	(29,578	)	$	10,352	(19,226		)	$	20,898		$	(7,315	)	13,583
Net income						34,388									19,828
Comprehensive income						$	15,162								$	33,411

10

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholder of

Allstate Life Insurance Company of New York:

We have reviewed the accompanying condensed statement of financial position of Allstate Life Insurance Company of New York (the “Company”, an affiliate of The Allstate Corporation) as of September 30, 2005, and the related condensed statements of operations for the three-month and nine-month periods ended September 30, 2005 and 2004, and the condensed statements of cash flows for the nine-month periods ended September 30, 2005 and 2004.  These interim financial statements are the responsibility of the Company’s management.

We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States).  A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters.  It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole.  Accordingly, we do not express such an opinion.

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

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the statement of financial position of Allstate Life Insurance Company of New York as of December 31, 2004, and the related statements of operations and comprehensive income, shareholder’s equity, and cash flows for the year then ended, not presented herein.  In our report dated February 24, 2005, which report includes an explanatory paragraph relating to a change in the Company’s method of accounting for certain nontraditional long-duration contracts and for separate accounts in 2004, we expressed an unqualified opinion on those financial statements.  In our opinion, the information set forth in the accompanying condensed statement of financial position as of December 31, 2004 is fairly stated, in all material respects, in relation to the statement of financial position from which it has been derived.

/s/ Deloitte & Touche LLP

Chicago, Illinois

November 7, 2005

11

Item 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS FOR THE THREE-MONTH AND NINE-MONTH PERIODS
ENDED SEPTEMBER 30, 2005 AND 2004

OVERVIEW

The following discussion highlights significant factors influencing the financial position and results of operations of Allstate Life Insurance Company of New York (referred to in this document as “we”, “our”, “us” or the “Company”).  It should be read in conjunction with the condensed financial statements and notes thereto found under Part I. Item 1. contained herein, and with the discussion, analysis, financial statements and notes thereto in Part I. Item 1. and Part II. Item 7. and Item 8. of the Allstate Life Insurance Company of New York Annual Report on Form 10-K for 2004.  We operate as a single segment entity, based on the manner in which financial information is used internally to evaluate performance and determine the allocation of resources.

OPERATIONS

We are pursuing the following actions and strategies to improve return on equity: maintaining and developing focused top-tier products, deepening distribution partner relationships, improving our cost structure, advancing our enterprise risk management program and leveraging the strength of the Allstate brand name across products and distribution channels.  The execution of our business strategies has and may continue to involve simplifying our business model by changing the number and selection of products being marketed, for example, the sale of our direct response distribution business in 2004; terminating underperforming distribution relationships; reducing policy administration software systems; and other actions that we may determine are appropriate to successfully execute our business strategies.

Premiums represent revenues generated from traditional life, immediate annuities with life contingencies and other insurance products that have significant mortality or morbidity risk.

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

The following table summarizes premiums and contract charges by product.

	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2005		2004		2005		2004
Premiums
Traditional life	$	6,387	$	6,838	$	18,492	$	18,039
Immediate annuities with life contingencies	9,115		17,263		31,157		41,304
Accident and health and other	1,078		699		3,098		2,077
Total premiums	16,580		24,800		52,747		61,420
Contract charges
Interest-sensitive life	10,735		10,611		31,204		30,021
Fixed annuities	1,712		1,462		5,139		4,494
Variable annuities	4,334		3,373		11,673		9,619
Total contract charges	16,781		15,446		48,016		44,134
Premiums and contract charges	$	33,361	$	40,246	$	100,763	$	105,554

12

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

	Three Months Ended September 30,					Nine Months Ended September 30,
(in thousands)	2005		2004			2005		2004
Premiums
Allstate agencies	$	6,248	$	6,731		$	18,157	$	17,742
Broker dealers	—		—			36		107
Specialized brokers	9,116		17,262			31,121		41,196
Independent agents	1,216		865			3,433		2,350
Direct marketing	—		(58		)	—		25
Total premiums	16,580		24,800			52,747		61,420
Contract charges
Allstate agencies	10,324		10,201			30,248		29,757
Broker dealers	3,197		2,717			8,785		8,046
Banks	2,597		1,680			6,705		3,297
Specialized brokers	534		782			1,932		2,844
Independent agents	129		66			346		190
Total contract charges	16,781		15,446			48,016		44,134
Premiums and contract charges	$	33,361	$	40,246		$	100,763	$	105,554

Total premiums declined 33.1% and 14.1% in the third quarter and first nine months of 2005, respectively, compared to the same periods of 2004. In both periods the decrease was primarily the result of lower premiums on immediate annuities with life contingencies.

Contract charges increased 8.6% and 8.8% in the third quarter and first nine months of 2005, respectively, compared to the same periods of 2004.  The increases were due to higher contract charges on variable annuities, interest-sensitive life products and fixed annuities.  Higher variable annuity contract charges were the result of increased average account values during the current periods of 2005 compared to the same periods of 2004, reflecting positive investment results and net deposits on variable annuity and life contracts.  The increase in the interest-sensitive life contract charges were attributable to in-force business growth resulting from deposits and credited interest more than offsetting surrenders and benefits.  Fixed annuity contract charges for the third quarter and first nine months of 2005 reflect higher surrender charges compared with the same periods in the prior year.

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Contractholder funds represent interest-bearing liabilities arising from the sale of fixed annuities,  interest-sensitive life and variable annuity and life deposits allocated to fixed accounts.  The balance of contractholder funds is equal to the cumulative deposits received and interest credited to the contractholder less cumulative contract benefits, surrenders, withdrawals and contract charges for mortality or administrative expenses.

The following table shows the changes in contractholder funds.

	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands)	2005			2004			2005			2004
Contractholder funds, beginning balance	$	4,135,238		$	3,084,086		$	3,802,846		$	2,658,325
Impact of adoption of SOP 03-1(1)	—			—			—			2,031
Deposits:
Fixed annuities (immediate and deferred)	136,486			340,560			567,860			742,959
Interest-sensitive life	25,216			24,937			74,042			75,969
Variable annuity and life deposits allocated to fixed accounts	12,341			19,562			46,322			76,219
Total deposits	174,043			385,059			688,224			895,147
Interest credited	42,241			34,124			124,861			92,075
Benefits, withdrawals and other adjustments
Benefits	(21,260		)	(12,315		)	(55,757		)	(32,209		)
Surrenders and partial withdrawals	(81,088		)	(54,485		)	(272,377		)	(138,784		)
Contract charges	(10,429		)	(10,756		)	(30,876		)	(31,084		)
Net transfers to separate accounts	(10,656		)	(9,388		)	(29,395		)	(30,782		)
Other adjustments	282			594			845			2,200
Total benefits, withdrawals and other adjustments	(123,151		)	(86,350		)	(387,560		)	(230,659		)
Contractholder funds, ending balance	$	4,228,371		$	3,416,919		$	4,228,371		$	3,416,919

(1)The increase in contractholder funds due to the adoption of SOP 03-1 reflects the establishment of reserves for certain liabilities that are primarily related to income benefit guarantees provided under variable annuities and the reclassification of deferred sales inducements (“DSI”) from contractholder funds to other assets.

Contractholder funds deposits decreased 54.8% and 23.1% in the third quarter and first nine months of 2005, respectively, compared to the same periods in 2004.  The decline in both periods was primarily the result of lower deposits on fixed annuities.  Fixed annuity deposits declined 59.9% and 23.6% in the third quarter and first nine months of 2005, respectively, due to lower consumer demand and our continued focus on achieving higher returns.  In addition, the comparison to the prior year was impacted by our promotional pricing of a new product offering in the third quarter of 2004. Increases in short-term interest rates without corresponding increases in longer term rates have generally reduced the competitiveness of fixed annuity products relative to shorter-term deposit products such as money market funds and certificates of deposit.  A continuation of this environment will impact the level of expected fixed annuity deposits.  Average contractholder funds increased 28.7% in the third quarter and 32.2% in the first nine months of 2005 compared to the same periods in 2004.

Surrenders and partial withdrawals increased 48.8% in the third quarter and 96.3% in the first nine months of 2005 compared to the same periods of 2004 reflecting an annualized withdrawal rate of 7.8% in the third quarter and 9.5% in the first nine months of 2005 based on the beginning of period contractholder funds balance.  This compares to an annualized withdrawal rate of 7.1% in third quarter and 7.0% in the first nine months of 2004.  These increases were primarily attributable to higher surrenders on the fixed account option on certain variable annuity contracts.  The funds subject to these surrenders were invested in prior years when the crediting rate on our fixed investment option was attractive relative to short-term market interest rates.  Contractholders withdrew their funds at an increased rate due to the rise in short-term

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market interest rates, which were not accompanied by a structural rise in crediting rates.  Fixed annuity surrenders and withdrawals are also contributing to the increase due to the growth and aging of our in-force business.  Surrenders and withdrawals may vary with changes in interest rates and equity market conditions and the aging of our in-force contracts.

Separate accounts liabilities represent contractholders’ claims to the related separate accounts assets.   Separate accounts liabilities primarily arise from the sale of variable annuity contracts and variable life insurance policies.

The following table shows the changes in separate accounts liabilities.

	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands)	2005			2004			2005			2004
Separate accounts liabilities, beginning balance	$	851,253		$	710,363		$	792,550		$	665,875
Variable annuity and life deposits	38,562			40,179			144,790			151,411
Variable annuity and life deposits allocated to fixed accounts	(12,341		)	(19,562		)	(46,322		)	(76,219		)
Net deposits	26,221			20,617			98,468			75,192
Investment results	32,821			(5,992		)	39,100			11,611
Contract charges	(3,469		)	(2,614		)	(9,689		)	(7,466		)
Net transfers from fixed accounts	10,656			9,388			29,395			30,782
Surrenders and benefits	(18,882		)	(21,337		)	(51,224		)	(65,569		)
Separate accounts liabilities, ending balance	$	898,600		$	710,425		$	898,600		$	710,425

Separate accounts liabilities increased $106.1 million as of September 30, 2005 compared to December 31, 2004. Variable annuity and life deposits in the third quarter and first nine months of 2005 decreased 4.0% and 4.4%, respectively, compared to the same periods in the prior year. However, net deposits increased 27.2% and 31.0% in the third quarter and first nine months of 2005, respectively, as the decline in the variable annuity and life deposits was more than offset by a lower amount of deposits being allocated to fixed accounts.  Variable annuity contractholders often allocate a significant portion of their initial variable annuity contract deposit into a fixed rate investment option.  The level of this activity is reflected above in the deposits allocated to the fixed accounts, while all other transfer activity between the fixed and separate accounts investments options is reflected in net transfers from fixed accounts.  The liability for the fixed portion of variable annuity contracts is reflected in contractholder funds.

Net investment income increased 16.5% in the three months ended September 30, 2005 and 20.3% in the first nine months of 2005 compared to the same periods in 2004. The increases in both periods were primarily due to the effect of higher portfolio balances, partially offset by declining portfolio yields.  Portfolio balances as of September 30, 2005 increased 9.5% from December 31, 2004.

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Net income analysis is presented in the following table.

	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands)	2005			2004			2005			2004
Premiums	$	16,580		$	24,800		$	52,747		$	61,420
Contract charges(1)	16,776			15,443			48,011			44,121
Net investment income	89,853			77,126			264,848			220,197
Periodic settlements and accruals on non-hedge derivative instruments (2)	289			141			773			217
Contract benefits	(41,904		)	(50,474		)	(131,888		)	(138,314		)
Interest credited to contractholder funds(3)	(38,780		)	(34,110		)	(113,507		)	(91,912		)
Gross margin	42,814			32,926			120,984			95,729
Amortization of DAC and DSI	(13,025		)	(7,787		)	(26,918		)	(14,639		)
Operating costs and expenses	(10,014		)	(10,004		)	(32,284		)	(30,262		)
Income tax expense	(6,580		)	(5,037		)	(22,717		)	(17,922		)
Realized capital gains and losses, after-tax	2,795			(3,067		)	(2,490		)	(5,298		)
DAC and DSI amortization expense on realized capital gains and losses, after-tax	(2,243		)	661			(1,704		)	(745		)
Reclassification of periodic settlements and accruals on non-hedge derivative instruments, after-tax	(184		)	(90		)	(484		)	(137		)
Gain on disposition of operations, after-tax	—			—			1			688
Cumulative effect of change in accounting principle, after-tax	—			—			—			(7,586		)
Net income	$	13,563		$	7,602		$	34,388		$	19,828

(1)Amortization of deferred loads on interest-sensitive life products related to realized capital gains and losses is excluded from contract charges for purposes of calculating gross margin.  Amortization of deferred loads related to realized capital gains and losses totaled $5 thousand and $3 thousand in the third quarter of 2005 and 2004, respectively and $5 thousand and $13 thousand in the first nine months of 2005 and 2004, respectively.

(2)Periodic settlements and accruals on non-hedge derivative instruments are reflected as a component of realized capital gains and losses on the Condensed Statements of Operations.

(3)Amortization of DSI is excluded from interest credited to contractholder funds for purposes of calculating gross margin.  Amortization of DSI totaled $743 thousand and $143 thousand in the three months ended September 30, 2005 and 2004, respectively, and $1.68 million and $527 thousand in the first nine months of 2005 and 2004, respectively.

Gross margin, a non-GAAP measure, represents premiums, contract charges, net investment income and periodic settlements and accruals on non-hedge derivative instruments, less contract benefits and interest credited to contractholder funds excluding amortization of DSI.  We reclassify periodic settlements and accruals on non-hedge derivative instruments into gross margin to report them in a manner consistent with the economically hedged investments, replicated assets or product attributes (e.g. net investment income or interest credited to contractholder funds) and by doing so, appropriately reflect trends in product performance.  We use gross margin as a component of our evaluation of the profitability of our life insurance and financial product portfolio.  Additionally, for many of our products, including fixed annuities, variable life and annuities, and interest-sensitive life insurance, the amortization of DAC and DSI is determined based on actual and expected gross margin.  Gross margin is comprised of three components that are utilized to further analyze the business: investment margin, benefit margin, and contract charges and fees.  We believe gross margin and its components are useful to investors because they allow for the evaluation of income components separately and in the aggregate when reviewing performance.  Gross margin, investment margin and benefit margin should not be considered as a substitute for net income and do not reflect the overall profitability of the business.  Net income is the GAAP measure that is most directly comparable to these margins.  Gross margin is reconciled to GAAP net income in the table above.

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

	Three Months Ended September 30,
	Investment Margin						Benefit Margin						Contract Charges and Fees				Gross Margin
(in thousands)	2005			2004 (4)			2005			2004 (4)			2005		2004 (4)		2005			2004
Premiums	$	—		$	—		$	16,580		$	24,800		$	—	$	—	$	16,580		$	24,800
Contract charges  (1)	—			—			8,417			7,661			8,359		7,782		16,776			15,443
Net investment income	89,853			77,126			—			—			—		—		89,853			77,126
Periodic settlements and accruals on non-hedge derivative instruments  (2)	289			141			—			—			—		—		289			141
Contract benefits	(25,466		)	(24,519		)	(16,438		)	(25,955		)	—		—		(41,904		)	(50,474		)
Interest credited to contractholder funds(3)	(38,780		)	(34,110		)	—			—			—		—		(38,780		)	(34,110		)
	$	25,896		$	18,638		$	8,559		$	6,506		$	8,359	$	7,782	$	42,814		$	32,926

	Nine Months Ended September 30,
	Investment Margin						Benefit Margin						Contract Charges and Fees				Gross Margin
(in thousands)	2005			2004 (4)			2005			2004 (4)			2005		2004 (4)		2005			2004
Premiums	$	—		$	—		$	52,747		$	61,420		$	—	$	—	$	52,747		$	61,420
Contract charges (1)	—			—			24,447			22,841			23,564		21,280		48,011			44,121
Net investment income	264,848			220,197			—			—			—		—		264,848			220,197
Periodic settlements and accruals on non-hedge derivative instruments  (2)	773			217			—			—			—		—		773			217
Contract benefits	(75,627		)	(73,100		)	(56,261		)	(65,214		)	—		—		(131,888		)	(138,314		)
Interest credited to contractholder funds(3)	(113,507		)	(91,912		)	—			—			—		—		(113,507		)	(91,912		)
	$	76,487		$	55,402		$	20,933		$	19,047		$	23,564	$	21,280	$	120,984		$	95,729

(1)Amortization of deferred loads on interest-sensitive life products related to realized capital gains and losses is excluded from contract charges for purposes of calculating gross margin.  Amortization of deferred loads related to realized capital gains and losses totaled $5 thousand and $3 thousand in the third quarter of 2005 and 2004, respectively, and $5 thousand and $13 thousand in the first nine months of 2005 and 2004, respectively.

(2)Periodic settlements and accruals on non-hedge derivative instruments are reflected as a component of realized capital gains and losses on the Condensed Statements of Operations.

(3)Amortization of DSI is excluded from interest credited to contractholder funds for purposes of calculating gross margin.  Amortization of DSI totaled $743 thousand and $143 thousand in the three months ended September 30, 2005 and 2004, respectively, and $1.68 million and $527 thousand in the first nine months of 2005 and 2004, respectively.

(4)The prior period has been restated to conform to the current period presentation.  In connection therewith, contract charges related to guaranteed minimum death, income, accumulation and withdrawal benefits on variable annuities have been reclassified to benefit margin from maintenance charges.  Additionally, amounts previously presented as maintenance charges and surrender charges are now presented in the aggregate as contract charges and fees.  These reclassifications did not result in a change in gross margin.

Gross margin increased 30.0% in the third quarter of 2005 and 26.4% in the first nine months of 2005 compared to the same periods of 2004.  The increases in both periods were mostly due to higher investment margin.

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Investment marginis a component of gross margin, both of which are non-GAAP measures. Investment margin represents the excess of net investment income and periodic settlements and accruals on non-hedge derivative instruments over interest credited to contractholder funds and the implied interest on life-contingent immediate annuities included in the reserve for life-contingent contract benefits.  Amortization of DSI is excluded from interest credited to contractholder funds for purposes of calculating investment margin.  We use investment margin to evaluate our profitability related to the difference between investment returns on assets supporting certain products and amounts credited to customers (“spread”) during the fiscal period.

Investment margin by product group is shown in the following table.

	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2005		2004		2005		2004
Annuities	$	23,562	$	16,281	$	69,571	$	47,363
Life insurance	2,334		2,357		6,916		8,039
Total investment margin	$	25,896	$	18,638	$	76,487	$	55,402

Investment margin increased 38.9% in the third quarter of 2005 and 38.1% in the first nine months of 2005 compared to the same periods of 2004 due primarily to higher average contractholder funds, an improved weighted average investment spread on deferred annuities and increased yields on investments supporting capital, traditional life and other products.

The following table summarizes the weighted average investment yield, interest crediting rates and investment spreads for the three months ended September 30. 

	Weighted Average Investment Yield				Weighted Average Interest Crediting Rate				Weighted Average Investment Spread
	2005		2004		2005		2004		2005		2004
Interest-sensitive life	5.6	%	6.0	%	4.5	%	4.9	%	1.1	%	1.1	%
Fixed annuities – deferred annuities	5.4		5.6		3.2		3.6		2.2		2.0
Fixed annuities – immediate annuities with and without life contingencies	7.4		7.6		6.7		6.8		0.7		0.8
Investments supporting capital, traditional life and other products	6.4		6.2		N/A		N/A		N/A		N/A

The following table summarizes the weighted average investment yield, interest crediting rates and investment spreads for the nine months ended September 30. 

	Weighted Average Investment Yield				Weighted Average Interest Crediting Rate				Weighted Average Investment Spread
	2005		2004		2005		2004		2005		2004
Interest-sensitive life	5.7	%	6.1	%	4.5	%	5.0	%	1.2	%	1.1	%
Fixed annuities – deferred annuities	5.4		5.6		3.1		3.5		2.3		2.1
Fixed annuities – immediate annuities with and without life contingencies	7.5		7.6		6.7		6.8		0.8		0.8
Investments supporting capital, traditional life and other products	6.3		6.1		N/A		N/A		N/A		N/A

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The following table summarizes the liabilities for these contracts and policies.

	Nine Months Ended September  30,
(in thousands)	2005			2004
Fixed annuities – immediate annuities with life contingencies	$	1,752,353		$	1,662,072
Other life contingent contracts and other	106,887			98,262
Reserve for life-contingent contract benefits	$	1,859,240		$	1,760,334
Interest-sensitive life	$	412,136		$	356,309
Fixed annuities – deferred annuities	3,289,970			2,531,923
Fixed annuities – immediate annuities without life contingencies	526,603			528,609
Other	(338		)	78
Contractholder funds	$	4,228,371		$	3,416,919

Benefit margin is a component of gross margin, both of which are non-GAAP measures.  Benefit margin represents life and life-contingent immediate annuity premiums, cost of insurance contract charges and variable annuity contract charges for contract guarantees less contract benefits.  Benefit margin excludes the implied interest on life-contingent immediate annuities, which is included in the calculation of investment margin.  We use the benefit margin to evaluate our underwriting performance, as it reflects the profitability of our products with respect to mortality or morbidity risk during a fiscal period.

Benefit margin by product group is shown in the following table.

	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands)	2005			2004(1)			2005			2004(1)
Life insurance	$	9,958		$	8,351		$	25,482		$	23,420
Annuities	(1,399		)	(1,845		)	(4,549		)	(4,373		)
Total benefit margin	$	8,559		$	6,506		$	20,933		$	19,047

(1)The prior period has been restated to conform to the current period presentation.

Benefit margin increased 31.6% in the third quarter of 2005 and 9.9% in the first nine months of 2005 compared to the same periods of 2004.  The increase in the third quarter of 2005 compared to the same period in the prior year was mostly due to improved mortality experience and growth on life insurance products. In addition, mortality experience on immediate annuities with life contingencies was more favorable in the third quarter of 2005 compared to the same period in the prior year, but was increasingly unfavorable in the first nine months of 2005 compared to the same period in the prior year.

Upon the adoption of Statement of Position No. 03-1, “Accounting and Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration Contracts and for Separate Accounts”, on January 1, 2004, reserves were established for death and income benefits provided under variable annuities and other secondary guarantees.  Annuity benefit margin will continue to be adversely impacted by life-contingent immediate annuities whose benefit payments are anticipated to extend beyond their original pricing expectations.  The annuity benefit margin in future periods will fluctuate based on the timing of annuitant deaths on these life-contingent immediate annuities and the annual evaluation of assumptions used in our valuation models for variable annuity guarantees.

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Amortization of DAC and DSI, excluding amortization related to realized capital gains and losses, increased 67.3% in the three months ended September 30, 2005 and 83.9% in the first nine months of 2005 compared to the same periods of 2004 as a result of higher gross margin primarily from the growth in our annuity investment margin.  For the nine-month period, the variance was favorably impacted by adjustments recorded in connection with our annual comprehensive evaluation of the assumptions used in our valuation models for all investment products, including variable and fixed annuities and interest-sensitive and variable life products.

In the first quarter of 2005, as a result of our annual evaluation of assumptions, we recorded DAC and DSI deceleration (commonly referred to as “DAC and DSI unlocking”) of $7.3 million, which included deceleration of $2.8 million on interest-sensitive and variable life products and deceleration of $4.5 million for variable annuities.  The amortization deceleration on variable annuities was mostly attributable to better than anticipated equity market performance and persistency.

In the prior year, the comparable DAC and DSI unlocking was a net deceleration of amortization of $10.2 million.  This deceleration of amortization was the result of favorable projected mortality on our interest-sensitive life products.

Operating costs and expenses remained consistent in the three months ended September 30, 2005 compared to the same period in 2004 as lower marketing and compensation costs offset the growth in technology and administrative expenses used to support in-force business growth. The 6.7% increase in the first nine months of 2005 compared to the same periods of 2004 is primarily attributable to higher technology, distribution, marketing and administrative expenses incurred to support growth in in-force business.  For the nine-month period, these increases were partially offset by lower guaranty fund assessments and expenses related to taxes, licenses and fees in the first quarter of 2005 compared to the first quarter of 2004.

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INVESTMENTS

An important component of our financial results is the return on our investment portfolio.  The composition of the investment portfolio at September 30, 2005 is presented in the table below.

	Carrying		Percent
(in thousands)	value		of total
Fixed income securities (1)	$	6,004,454	88.8	%
Mortgage loans	600,038		8.9
Short-term	118,742		1.8
Policy loans	36,330		0.5
Other	3,348		—
Total	$	6,762,912	100.0	%

(1) Fixed income securities are carried at fair value.  Amortized cost basis for these securities was $5.52 billion.

Total investments increased to $6.76 billion at September 30, 2005 from $6.18 billion at December 31, 2004 due to positive cash flows from operating and financing activities and increased funds associated with securities lending transactions, partially offset by lower unrealized capital gains on fixed income securities.

Total investments at amortized cost related to collateral, due to securities lending transactions, increased to $302 million at September 30, 2005 from $133 million at December 31, 2004.

At September 30, 2005, 96.4% of the fixed income securities portfolio was rated investment grade, which is defined as a security having a rating from the National Association of Insurance Commissioners (“NAIC”) of 1 or 2, a rating of Aaa, Aa, A or Baa from Moody’s or a rating of AAA, AA, A or BBB from S&P, Fitch or Dominion; or a comparable internal rating if an externally provided rating is not available.

The unrealized net capital gains on fixed income securities at September 30, 2005 were $488.9 million, a decrease of $43.8 million or 8.2% since December 31, 2004.   The net unrealized gain was comprised of $517.8 million of unrealized gains and $28.9 million of unrealized losses at September 30, 2005.  This is compared to a net unrealized gain totaling $532.7 million at December 31, 2004, comprised of $545.5 million of unrealized gains and $12.8 million of unrealized losses.

Of the gross unrealized losses in the fixed income portfolio at September 30, 2005, $26.6 million or 92.1% were related to investment grade securities and are believed to be primarily a result of a rising interest rate environment.  Of the remaining $2.3 million of losses in the fixed income portfolio, $2.2 million or 98.4% were in the corporate fixed income portfolio.  The $2.2 million of corporate fixed income gross unrealized losses were primarily comprised of securities in the financial services, communications, and capital and consumer goods sectors.  The gross unrealized losses in these sectors were primarily company specific and interest rate related.  Approximately $1.3 million of the total gross unrealized losses in the corporate fixed income portfolio were associated with the automobile industry, which includes direct debt issuances of automobile manufacturers, captive automotive financing companies and automobile parts and equipment suppliers, which are reported in the consumer goods and financial services sectors.  Values in the automobile industry were primarily depressed due to company specific conditions. We expect eventual recovery of these securities.  Every security was included in our portfolio monitoring process.

Our portfolio monitoring process identifies and evaluates fixed income securities whose carrying value may be other than temporarily impaired.  The process includes a quarterly review of all securities using a screening process to identify those securities whose fair value compared to amortized cost is below established thresholds for certain time periods, or which are identified through other monitoring criteria such as ratings downgrades or payment defaults.  We also recognize impairment on securities in an unrealized loss position for which we do not have the intent and ability to hold until recovery.

We also monitor the quality of our fixed income portfolio by categorizing certain investments as “problem”, “restructured” or “potential problem.”  Problem fixed income securities are securities in default with respect to principal or interest and/or securities issued by companies that have gone into bankruptcy subsequent to our acquisition of the security.  Restructured fixed income securities have rates and terms that are

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not consistent with market rates or terms prevailing 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, we have concerns regarding the borrower’s ability to pay future principal and interest, which causes us to believe these securities may be classified as problem or restructured in the future.

The following table summarizes problem, restructured and potential problem fixed income securities.

(in thousands)	September 30, 2005						December 31, 2004
	Amortized cost		Fair value		Percent of total Fixed Income portfolio		Amortized cost		Fair value		Percent of total Fixed Income portfolio
Problem	$	14,535	$	16,313	0.3	%	$	10,637	$	10,813	0.2	%
Restructured	—		—		—		5,396		6,151		0.1
Potential problem	5,793		5,773		0.1		11,231		10,539		0.2
Total net carrying value	$	20,328	$	22,086	0.4	%	$	27,264	$	27,503	0.5	%
Cumulative write-downs recognized	$	5,381					$	4,606

We have experienced a decrease in securities categorized as potential problem as of September 30, 2005 compared to December 31, 2004.  The decrease was primarily related to the removal of a security due to improving conditions.

We evaluated each of these securities through our portfolio monitoring process at September 30, 2005 and recorded write-downs when appropriate.  We further concluded that any remaining unrealized losses on these securities were temporary in nature and that we have the intent and ability to hold until recovery.  While these balances may increase in the future, particularly if economic conditions are unfavorable, management expects that the total amount of securities in these categories will remain low relative to the total fixed income securities portfolio.

Net Realized Capital Gains and Losses The following table presents the components of realized capital gains and losses and the related tax effect.

	Three Months Ended September 30,						Nine Months Ended September 30,
(in thousands)	2005			2004			2005			2004
Investment write-downs	$	1		$	(2,518	)	$	(1,468	)	$	(3,402	)
Dispositions	1,341			739			(1,703		)	(3,300		)
Valuation of derivative instruments	457			(3,934		)	(3,021		)	(3,226		)
Settlement of derivative instruments	2,732			908			2,214			1,584
Realized capital gains and losses, pretax	4,531			(4,805		)	(3,978		)	(8,344		)
Income tax (expense) benefit	(1,736		)	1,738			1,488			3,046
Realized capital gains and losses, after-tax	$	2,795		$	(3,067	)	$	(2,490	)	$	(5,298	)

Dispositions in the above table include sales, losses recognized in anticipation of sales and other transactions such as calls and prepayments.  We may sell securities during the period in which fair value has declined below amortized cost.  In certain situations new factors such as negative developments, subsequent credit deterioration, relative value opportunities, market liquidity concerns and portfolio reallocations can subsequently change our previous intent to continue holding a security.

A changing interest rate environment will also drive changes in our portfolio duration targets at a tactical level.  A duration target and range is established with an economic view of liabilities relative to a long-term portfolio view.  Tactical duration adjustments within management’s approved ranges are accomplished through both cash market transactions and derivative activities that generate realized gains and losses and through new purchases.  As a component of our approach to managing portfolio duration,

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realized gains and losses on derivative instruments are most appropriately considered in conjunction with the unrealized gains and losses on the fixed income portfolio.  This approach mitigates the impacts of general interest rate changes to the overall financial condition of the Company.

Because of changes in existing market conditions and asset return assumptions, certain changes are planned within the investment portfolio impacting approximately $20 million of securities at the end of the third quarter of 2005. These changes result from continued asset-liability management strategies, on-going comprehensive reviews of our portfolios, and changes being made to our strategic asset allocations. Approximately $14 million of these securities were in an unrealized loss position and, therefore, with the change in our intent to hold these investments, we recognized $0.5 million of anticipated disposition write-downs during the quarter.

In the first quarter of 2005, because of an anticipated rise in interest rates, as well as changes in existing market conditions and long-term asset return assumptions, certain changes were planned within various portfolios. They included continued asset-liability management strategies; on-going comprehensive reviews of our portfolios; and changes being made to our strategic asset allocations, including a decision to pursue yield enhancement strategies.  At that time, we identified, in total, approximately $216 million of securities, all of which were in an unrealized loss position, which we would consider selling to achieve these objectives.  As a result, we recognized $6 million of write-downs due to a change in intent to hold these securities until recovery.  Securities totaling $36 million with write-downs of $1 million were sold and we continue to consider selling securities with a carrying value of approximately $0.3 million with write-downs of $0.1 million.  The remaining $180 million of securities with write-downs of $4 million have been re-designated as being held to recovery within the available-for-sale category, primarily as a consequence of the lower than expected interest rate environment.  The difference between the current carrying value and par value of the re-designated securities will be recognized in net investment income over the remaining life of the securities, pursuant to the guidance in Statement of Position 03-3, “Accounting for Certain Loans or Debt Securities Acquired in a Transfer”.

CAPITAL RESOURCES AND LIQUIDITY

Capital Resources consist of shareholder’s equity, representing funds deployed or available to be deployed to support business operations.  The following table summarizes our capital resources.

(in thousands)	September 30, 2005		December 31, 2004
Common stock, retained earnings and other shareholder’s equity items	$	518,332	$	483,980
Accumulated other comprehensive income	136,029		155,255
Total shareholder’s equity	$	654,361	$	639,235

Shareholder’s equity increased in the first nine months of 2005 when compared to December 31, 2004 primarily as a result of net income, partially offset by lower unrealized net capital gains.

Financial Ratings and Strength Our ratings are influenced by many factors including our operating and financial performance, asset quality, liquidity, asset/liability management, overall portfolio mix, financial leverage (i.e., debt), risk exposures, operating leverage, Allstate Insurance Company’s (“AIC”) ratings, Allstate Life Insurance Company’s (“ALIC”) ratings and other factors. There have been no changes to our insurance financial strength ratings since December 31, 2004.

In connection with developments at AIC, in October 2005, Standard & Poor’s affirmed the AA insurance financial strength ratings of the Company and ALIC, with a revised rating outlook of ‘Negative’ (from ‘Stable’).  Also in October 2005, Moody’s affirmed the Aa2 insurance financial strength ratings of the Company and ALIC. Furthermore, in November 2005, A.M. Best affirmed the A+ insurance financial strength ratings of the Company and ALIC.

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Liquidity Sources and Uses  As reflected in our Condensed Statements of Cash Flows, higher operating cash flows in the first nine months of 2005 when compared to the first nine months of 2004 primarily relate to higher net investment income, partially offset by higher income taxes paid.  Cash flows used in investing activities decreased in the first nine months of 2005 , as the increase in operating cash flows was more than offset by lower financing cash flows.

Lower cash flow from financing activities during the first nine months of 2005 when compared to the first nine months of 2004 reflect lower deposits on fixed annuities and higher fixed annuity withdrawals.  For quantification of the changes in contractholder funds, see the Operations section of the MD&A.

We have entered into an inter-company loan agreement with the Corporation.  The amount of inter-company loans available to us is at the discretion of the Corporation.  The maximum amount of loans the Corporation will have outstanding to all its eligible subsidiaries at any given point in time is limited to $1.00 billion.  We had no amounts outstanding under the inter-company loan agreement at September 30, 2005 or December 31, 2004.  The Corporation uses commercial paper borrowings and bank lines of credit to fund intercompany borrowings.

FORWARD-LOOKING STATEMENTS AND RISK FACTORS

This document contains “forward-looking statements” that anticipate results based on our estimates, assumptions and plans that are subject to uncertainty.  These statements are made subject to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995.  We assume no obligation to update any forward-looking statements as a result of new information or future events or developments.

These forward-looking statements do not relate strictly to historical or current facts and may be identified by their use of words like “plans,” “seeks,” “expects,” “will,” “should,” “anticipates,” “estimates,” “intends,” “believes,” “likely,” “targets” 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, litigation and reserves.  We believe that these statements are based on reasonable estimates, assumptions and plans.  However, if the estimates, assumptions or plans underlying the forward-looking statements prove inaccurate or if other risks or uncertainties arise, actual results could differ materially from those communicated in these forward-looking statements.  Factors which could cause actual results to differ materially from those suggested by such forward-looking statements include but are not limited to those discussed or identified in this document (including the risks described below) and are incorporated in this Part I, Item 2 by reference to the information set forth in our Annual Report on Form 10-K, Part II, Item 7, under the caption “Forward-Looking Statements and Risk Factors”.

A decrease in our financial strength ratings may have an adverse effect on our competitive position.

Financial strength ratings are important factors in establishing the competitive position of insurance companies and generally have an effect on an insurance company’s business.  On an ongoing basis, rating agencies review the financial performance and condition of insurers and could downgrade or change the outlook on an insurer’s ratings due to, for example, a change in an insurer’s statutory capital; a change in a rating agency’s determination of the amount of risk-adjusted capital required to maintain a particular rating; an increase in the perceived risk of an insurer’s investment portfolio; a reduced confidence in management or a host of other considerations that may or may not be under the insurer’s control. The insurance financial strength ratings of both AIC and ALIC are A+, AA and Aa2 from A.M. Best, Standard and Poor’s and Moody’s, respectively.  Because all of these ratings are subject to continuous review, the retention of these ratings cannot be assured.  A multiple level downgrade in any of these ratings could have a material adverse effect on our sales, our competitiveness, the marketability of our product offerings, and our liquidity, operating results and financial condition.

Actions taken to simplify our business model and improve profitability may not be successful and may result in losses and costs.

We are pursuing strategies intended to improve our return on equity.  Actions that we have taken and may continue to take include changing the number and selection of products being marketed, terminating underperforming distribution relationships, reducing policy administration software systems, and other actions that we may determine are appropriate to successfully execute our business strategies.  The actions

24

that we have taken and may take in the future may not achieve their intended outcome and could result in lower premiums and contract charges, restructuring costs, losses on disposition or losses related to the discontinuance of individual products or distribution relationships.

Changes in market interest rates may lead to a significant decrease in the sales and profitability of spread-based products.

Our ability to manage the investment margin for spread-based products is dependent upon maintaining profitable spreads between investment yields and interest crediting rates.  As interest rates decrease or remain at low levels, proceeds from investments that have matured or that have been prepaid or sold may be reinvested at lower yields, reducing investment margin.  Lowering interest-crediting rates can offset decreases in investment margin on some products.  However, these changes could be limited by market conditions, regulatory or contractual minimum rate guarantees on many contracts and may not match the timing or magnitude of changes in asset yields.  Decreases in the rates offered on products could make those products less attractive, leading to lower sales and/or changes in the level of surrenders and withdrawals for these products.  Non-parallel shifts in interest rates, such as increases in short-term rates without accompanying increases in medium- and long-term rates, can influence customer demand for fixed annuities, which could impact the level and profitability of new customer deposits.  Increases in market interest rates can also have negative effects, for example by increasing the attractiveness of other investments, which can lead to higher surrenders at a time when the investment asset values are lower as a result of the increase in interest rates.  For certain products, principally fixed annuity and interest-sensitive life products, the earned rate on assets could lag behind market yields.  We may react to market conditions by increasing crediting rates, which could narrow spreads.  Unanticipated surrenders could result in DAC unlocking or affect the recoverability of DAC and thereby increase expenses and reduce profitability.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures.  We maintain disclosure controls and procedures as defined in Rule 15d-15(e) under the Securities Exchange Act of 1934.  Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report.  Based upon this evaluation, the principal executive officer and the principal financial officer concluded that our disclosure controls and procedures are effective in providing reasonable assurance that material information required to be disclosed in our reports filed with or submitted to the Securities and Exchange Commission under the Securities Exchange Act is made known to management, including the principal executive officer and the principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting.  During the fiscal quarter ended September 30, 2005, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II.  OTHER INFORMATION

Item 1.Legal Proceedings

Information required for this Part II, Item 1, is incorporated by reference to the discussion under the heading “Regulation” and under the heading “Legal and Regulatory Proceedings and Inquiries” in Note 3 of the Company’s Condensed Financial Statements in Part I, Item 1, of this Form 10-Q.

Item 6.Exhibits

(a)Exhibits

An Exhibit Index has been filed as part of this report on page E-1.

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SIGNATURE

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)
November 7, 2005	By	/s/ Samuel H. Pilch
	Samuel H. Pilch
	Controller
	(chief accounting officer and duly
	authorized officer of the registrant)

28

Exhibit No.	Description
15	Acknowledgement of awareness from Deloitte & Touche LLP dated November 7, 2005, concerning unaudited interim financial information.
31.1	Rule 15d-14(a) Certification of Principal Executive Officer
31.2	Rule 15d-14(a) Certification of Principal Financial Officer
32	Section 1350 Certifications

E-1

EX-15

EXHIBIT 15

To the Board of Directors and Shareholder of

Allstate Life Insurance Company of New York:

We have reviewed, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the unaudited interim financial information of Allstate Life Insurance Company of New York for the three-month and nine-month periods ended September 30, 2005 and 2004, as indicated in our report dated November 7, 2005; because we did not perform an audit, we expressed no opinion on such financial information.

We are aware that our report referred to above, which is included in your Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2005, is incorporated by reference in the following Registration Statements:

Form S-3 Registration Nos.	Form N-4 Registration Nos.
333-58512	033-65381
333-100029	333-68344
	333-81970
	333-94785

We also are aware that the aforementioned report, pursuant to Rule 436(c) under the Securities Act of 1933, is not considered a part of the Registration Statement prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of Sections 7 and 11 of that Act.

/s/Deloitte & Touche LLP

Chicago, Illinois

November 7, 2005

E-2

EX-31.1

EXHIBIT 31.1

CERTIFICATIONS

I, Casey J. Sylla, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Allstate Life Insurance Company of New York;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15(d)-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

November 7, 2005

/s/ Casey J. Sylla

Casey J. Sylla

Chairman of the Board and President

E-3

EX-31.2

EXHIBIT 31.2

CERTIFICATIONS

I, John C. Pintozzi, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Allstate Life Insurance Company of New York;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f) and 15(d)-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

November 7, 2005

/s/ John C. Pintozzi

John C. Pintozzi

Senior Vice President and Chief

Financial Officer

E-4

EX-32

EXHIBIT 32

CERTIFICATIONS PURSUANT TO 18 UNITED STATES CODE § 1350

Each of the undersigned hereby certifies that to his knowledge the quarterly report on Form 10-Q for the fiscal period ended September 30, 2005 of Allstate Life Insurance Company of New York filed with the Securities and Exchange Commission fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in such report fairly presents, in all material respects, the financial condition and result of operations of Allstate Life Insurance Company of New York.

November 7, 2005

/s/ Casey J. Sylla

Casey J. Sylla

Chairman of the Board and President

/s/ John C. Pintozzi

John C. Pintozzi

Senior Vice President and Chief Financial Officer

E-5