UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM 10-K

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


         [X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                  SECURITIES EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 2000

                                       OR

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

                        Commission file number 333-95995


                        NORTHBROOK LIFE INSURANCE COMPANY

            (Exact name of Registrant as specified in its charter)

            ARIZONA                                       36-3001527
            ---------                                     -----------
(State or other jurisdiction of                        (I.R.S. Employer
incorporation or organization)                        Identification No.)

                                3100 Sanders Road
                           Northbrook, Illinois 60062
                             Attn: Bruce A. Teichner
               (Address of principal executive offices)(Zip Code)

                                  847/402-5000
              (Registrant's telephone number, including area code)

      Securities registered pursuant to Section 12(b) of the Act: None
      Securities registered pursuant to Section 12(g) of the Act: None

     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 by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

     As of March 29, 2001, there were 25,000 shares of common stock outstanding,
par value $100 per share, all of which shares are held by Allstate Life
Insurance Company.




<PAGE>


                                TABLE OF CONTENTS

                                                                    PAGE
                                                                    ----

PART I

Item 1.       Business* ............................................ 2
Item 2.       Properties* .......................................... 3
Item 3.       Legal Proceedings..................................... 3
Item 4.       Submission of Matters to a Vote of Security Holders**.N/A

PART II

Item 5.       Market for Registrant's Common Equity and
              Related Stockholder Matters........................... 4
Item 6.       Selected Financial Data**.............................N/A
Item 7.       Management's Discussion and Analysis of Financial
              Condition and Results of Operations................... 4
Item 7A.      Quantitative and Qualitative Disclosures About
              Market Risk...........................................10
Item 8.       Financial Statements and Supplementary Data...........10
Item 9.       Changes in and Disagreements with Accountants on
              Accounting and Financial Disclosure...................10

PART III

Item 10.      Directors and Executive Officers of the Registrant**..N/A
Item 11.      Executive Compensation**..............................N/A
Item 12.      Security Ownership of Certain Beneficial Owners and
              Management**..........................................N/A
Item 13.      Certain Relationships and Related Transactions**......N/A

PART IV

Item 14.      Exhibits, Financial Statement Schedules, and
              Reports on Form 8-K...................................11

Signatures..........................................................12
Index to Financial Statements.......................................13


* Item  prepared  in  accordance  with  General  Instruction  I(2) of Form 10-K.
**Omitted pursuant to General Instruction I(2) of Form 10-K.



<PAGE>




                                     PART I

Item 1.  Business

     Northbrook Life Insurance Company (hereinafter "Northbrook Life" or the
"Company"), was organized in 1978 as a stock life insurance company under the
laws of the State of Illinois. In 1998, it was redomesticated to the State of
Arizona. Since its inception, the Company has done business continuously as
"Northbrook Life Insurance Company."

     Northbrook Life is a wholly owned subsidiary of Allstate Life Insurance
Company ("ALIC"), a stock life insurance company incorporated under the laws of
the State of Illinois. ALIC is a wholly owned subsidiary of Allstate Insurance
Company ("AIC"), a stock property-liability insurance company incorporated under
the laws of the State of Illinois. All of the outstanding capital stock of AIC
is owned by The Allstate Corporation ("Corporation"), a Delaware company which
has several different classes of securities, including common stock, registered
with the Securities and Exchange Commission.

     Northbrook Life, a single segment entity, markets life insurance, annuity
and investment products exclusively through Dean Witter Reynolds, Inc. ("DWR").
DWR, which is registered as a broker-dealer under the Securities Exchange Act of
1934, is a subsidiary of Morgan Stanley Dean Witter & Co. ("MSDW"). Northbrook
Life currently offers single premium variable life insurance. Northbrook Life's
annuity products include single premium fixed annuities, flexible premium
variable annuities, and flexible premium market value adjusted annuities. DWR is
the principal underwriter and broker-dealer for the Northbrook investment
products, such as variable life insurance, variable annuities and market value
adjusted annuities, offered by MSDW. DWR, along with its various insurance
agency affiliates, also serves as the general agent for the sale of Northbrook's
insurance products. Approximately 9,000 MSDW Financial Advisors have been
appointed by Northbrook to sell its products. MSDW Financial Advisors are
employees of MSDW.

     Northbrook Life has entered into reinsurance agreements, effective December
31, 1987, whereby substantially all of its business is ceded to ALIC. Under
these agreements, premiums, contract charges, credited interest, policy benefits
and certain expenses under substantially all general account contracts are
reinsured with ALIC. ALIC is bound to stand behind the Company's contractual
obligations to its policyholders. The obligations of ALIC under the reinsurance
agreements, however, are to the Company. The Company continues to have primary
liability as the direct insurer for risks reinsured. In addition, assets of the
Company that relate to insurance in-force, excluding assets of the Separate
Accounts, are transferred to ALIC. Therefore, the funds necessary to support the
operations of the Company are provided by ALIC and the Company is not required
to obtain additional capital to support in-force or future business.

     Under the Company's reinsurance agreements with ALIC, the Company reinsures
substantially all reserve liabilities with ALIC except for the variable annuity
and variable life insurance contracts it issues. The assets which support these
liabilities are owned and managed by ALIC.

     The assets and liabilities of the variable annuity and variable life
contracts are held in legally-segregated, unitized Separate Accounts and are
retained by the Company. Contract charge revenue is reinsured to ALIC and
consists of charges assessed against the account values of the Separate
Accounts.

    Northbrook Life's and ALIC's general account assets must be invested in
accordance  with  applicable  state  laws  and   regulations.   These  laws  and
regulations  govern the nature and  quality of  investments  that may be made by
life  insurance  companies  and the  percentage  of  their  assets  that  may be
committed to any particular type of investment.

     Northbrook Life is engaged in a business that is highly competitive because
of the large number of stock and mutual life insurance companies and other
entities competing in the sale of life insurance, annuity and investment
products. As of December 1999, the last year for which current information is
available, there were approximately 1,400 stock, mutual and other types of
insurers in business in the United States. Several independent rating agencies
regularly evaluate life insurer's claims paying ability, quality of investments
and overall stability. A.M. Best Company has assigned A+(Superior) to ALIC,
which automatically reinsures all net business of Northbrook Life. A.M. Best
Company also has assigned Northbrook Life the rating of A+(r) because Northbrook
Life automatically reinsures all business with Allstate Life. Standard & Poor's
Insurance Rating Services has assigned AA+ (Excellent) to the Company's
claims-paying ability, and Moody's Investors Service has assigned an Aa2
(excellent) financial strength rating to the Company. Northbrook Life shares the
same ratings of its parent, ALIC.

                                       2
<PAGE>

     Although the federal government generally does not directly regulate the
business of insurance, federal initiatives often have an impact on the business
in a variety of ways. Recent public and regulatory initiatives which may
significantly affect the Company's insurance business relate to, for example,
the taxation of insurance companies, employee benefit regulations, the tax
treatment of insurance products, the removal of barriers preventing banks from
engaging in the insurance and securities business, and proposed legislation to
prohibit the use of gender in determining insurance rates and benefits.

     Northbrook Life is registered with the Securities and Exchange Commission
("SEC") as an issuer of registered products. The SEC also regulates certain
Northbrook Life Separate Accounts that issue variable life insurance contracts
or, together with the Company, issue variable annuity contracts.


Item 2.  Properties

     Northbrook Life occupies office space provided by AIC in Northbrook,
Illinois. Expenses associated with these offices are allocated to Northbrook
Life.


Item 3.  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
effect 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 position or results of operations of the Company.





                                       3
<PAGE>

                                 PART II

Item 5.  Market For Registrant's Common Equity and Related Stockholder Matters

     All of the Company's outstanding shares of common stock are owned by its
parent, ALIC. All of ALIC's outstanding shares are owned by AIC. All of the
outstanding shares of AIC are owned by the Corporation.



Item 7.  Management's Discussion and Analysis of Financial Condition and Results
of Operations


     THE FOLLOWING DISCUSSION HIGHLIGHTS SIGNIFICANT FACTORS INFLUENCING RESULTS
OF OPERATIONS AND CHANGES IN FINANCIAL POSITION OF NORTHBROOK LIFE INSURANCE
COMPANY (THE "COMPANY"). IT SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL
STATEMENTS AND RELATED NOTES.

OVERVIEW

     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 investment and life products through Dean Witter
Reynolds Inc., a wholly owned subsidiary of Morgan Stanley Dean Witter & Co.
Investment products include deferred annuities and immediate annuities without
life contingencies. Deferred annuities include fixed rate, market value
adjusted, and variable annuities. Life products consist of interest-sensitive
life, immediate annuities with life contingencies, and variable life insurance.

     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 contractholders' 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 and comprehensive income.

RESULTS OF OPERATIONS

($ in thousands)

<TABLE>
<CAPTION>
                                                2000           1999           1998
                                             ----------     ----------     ----------
<S>                                          <C>            <C>            <C>
Net investment income                        $    6,802     $    6,010     $    5,691
Realized capital gains and losses                  (230)           510              2
Income tax expense                                2,293          2,264          1,995
                                             ----------     ----------     ----------
Net income                                   $    4,279     $    4,256     $    3,698
                                             ==========     ==========     ==========
</TABLE>

     The Company has reinsurance agreements under which substantially all
contract and policy related transactions are transferred to ALIC. The Company's
results of operations include only net investment income and realized capital
gains and losses earned on the assets of the Company that are not transferred
under reinsurance agreements.

     Net income in 2000 was comparable to 1999 as the increase in net investment
income was offset by taxes and realized capital losses from the sale of publicly
traded corporate securities. In 1999, net income increased $558 thousand
primarily as a result of increased net investment income and realized capital
gains.



                                       4
<PAGE>
                        NORTHBROOK LIFE INSURANCE COMPANY
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     Net investment income increased 13.2% to $6.8 million in 2000 due to higher
investment balances and higher yields. In 1999, pretax investment income
increased 5.6% to $6.0 million due to higher investment balances partially
offset by higher investment expenses and lower investment yields. For both
years, the higher investment balances arose from positive cash flows from
operating activities. In addition, in 1999, positive cash flows from operating
activities were favorably impacted by changes in inter-company settlement
procedures. Investments, excluding Separate Accounts and unrealized gains and
losses on fixed income securities, grew 2.8% and 7.1% in 2000 and 1999,
respectively. The Company expects to experience lower investment yields due, in
part, to the reinvestment of proceeds from calls and maturities and the
investment of positive cash flows from operations in securities yielding less
than the average portfolio rate.

     Realized capital losses, after-tax, were $150 thousand in 2000 compared to
realized capital gains, after-tax of $332 thousand in 1999. In 2000, realized
capital losses resulted from the sale of publicly traded corporate securities.
Period to period fluctuations in realized capital gains and losses are largely
the result of the timing of sales decisions, reflecting management's view on
positioning the portfolio, as well as assessments of individual securities and
overall market conditions.


FINANCIAL POSITION

($ in thousands)

<TABLE>
<CAPTION>
                                                     2000                1999
                                                 -----------          -----------
<S>                                              <C>                  <C>
Fixed income securities (1)                      $    93,030          $    86,998
Short-term                                             3,859                3,170
                                                 -----------          -----------
         Total investments                       $    96,889          $    90,168
                                                 ===========          ===========
Reinsurance recoverable from ALIC                $ 1,975,150          $ 2,022,502
                                                 ===========          ===========
Separate Accounts assets and liabilities         $ 7,614,673          $ 8,211,996
                                                 ===========          ===========
Contractholder funds                             $ 1,826,062          $ 1,871,933
                                                 ===========          ===========
</TABLE>

(1)  Fixed income securities are carried at fair value. Amortized cost for these
     securities was $91,141 and $89,205 at December 31, 2000 and 1999,
     respectively.

     Total investments were $96.9 million at December 31, 2000 compared to $90.2
million at December 31, 1999. In 2000, the increase in investments was due to
positive cash flows generated from operations and unrealized gains on fixed
income securities compared to unrealized losses in 1999.

FIXED INCOME SECURITIES

     The Company's fixed income securities portfolio consists of publicly traded
corporate bonds, mortgage-backed securities, U.S. government bonds and
tax-exempt municipal bonds. The Company generally holds its fixed income
securities to maturity, but has classified all of these securities as available
for sale to allow maximum flexibility in portfolio management. At December 31,
2000, unrealized net capital gains on the fixed income securities portfolio
totaled $1.9 million compared to unrealized net capital losses of $2.2 million
at December 31, 1999. The change in the unrealized position is primarily
attributable to interest rate fluctuations from year to year.


                                       5
<PAGE>
                        NORTHBROOK LIFE INSURANCE COMPANY
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     At December 31, 2000, all of the Company's fixed income securities
portfolio was 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, Aa, A or Baa, or a comparable Company
internal rating. The quality mix of the Company's fixed income securities
portfolio at December 31, 2000 is presented in the following table.

($ in thousands)

<TABLE>
<CAPTION>
    NAIC
   RATINGS     MOODY'S EQUIVALENT DESCRIPTION             FAIR VALUE     PERCENT TO TOTAL
   -------     ------------------------------             ----------     ----------------
<S>            <C>                                        <C>            <C>
      1        Aaa/Aa/A                                   $   86,038           92.5%
      2        Baa                                             6,942            7.5
      3        In or near default                                 50            0.0
                                                          ----------     ----------
                                                          $   93,030          100.0%
                                                          ==========     ===========
</TABLE>

      At December 31, 2000 and 1999, $20.2 million and $18.7 million,
respectively, of the fixed income securities portfolio was invested in
mortgage-backed securities ("MBS"). The MBS portfolio consists primarily of
securities that were issued by or have underlying collateral that is guaranteed
by U.S. government agencies or sponsored entities, thus minimizing credit risk.

     The MBS portfolio is subject to interest rate risk since the price
volatility and ultimate realized yield are affected by the rate of repayment of
the underlying mortgages. The Company attempts to limit interest rate risk on
these securities by investing a portion of the portfolio in securities that
provide prepayment protection. At December 31, 2000, 21.3% of the MBS portfolio
was invested in planned amortization class bonds.

     The Company closely monitors its fixed income securities portfolio for
declines in value that are other than temporary. Securities are placed on
non-accrual status when they are in default or when the receipt of interest
payments is in doubt.

SHORT-TERM INVESTMENTS

     The Company's short-term investment portfolio was $3.9 million and $3.2
million at December 31, 2000 and 1999, respectively. The Company invests
available cash balances primarily in taxable short-term securities having a
final maturity date or redemption date of one year or less.

CONTRACTHOLDER FUNDS AND REINSURANCE RECOVERABLE FROM ALIC

     During 2000, contractholder funds decreased by $45.9 million and
reinsurance recoverable from ALIC under reinsurance agreements decreased by
$47.4 million. Deposits and higher levels of interest credited to
contractholders were more than offset by fixed annuity surrenders and
withdrawals and transfers to the Separate Accounts. Reinsurance recoverable from
ALIC relates to contract benefit obligations ceded to ALIC.

SEPARATE ACCOUNTS

     Separate Accounts assets and liabilities decreased 7.3% to $7.6 billion in
2000. The decrease was primarily attributable to decreased sales of variable
annuity contracts, increased surrenders and withdrawals and unfavorable
investment performance of the Separate Accounts investment portfolios.


                                       6
<PAGE>
                        NORTHBROOK LIFE INSURANCE COMPANY
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

MARKET RISK

     Market risk is the risk that the Company will incur losses due to adverse
changes in equity prices or interest rates. The Company's primary market risk
exposure is to changes in interest rates, although the Company also has certain
exposures to changes in equity prices.

CORPORATE OVERSIGHT

     The Company, administers and oversees investment risk management processes
primarily through its Board of Directors and the Credit and Risk Management
Committee ("CRMC"). The Board of Directors provides executive oversight of
investment activities. The CRMC is a senior management committee consisting of
the Chief Investment Officer, the Investment Risk Manager, and other investment
officers who are responsible for the day-to-day management of investment risk.
The CRMC meets at least monthly to provide detailed oversight of investment
risk, including market risk.

     The Company has investment guidelines that define the overall framework for
managing market and other investment risks, including the accountabilities and
controls over these activities. In addition, the Company has specific Board of
Directors-approved investment policies that delineate the investment limits and
strategies that are appropriate for the Company's liquidity, surplus, product
and regulatory requirements.

     The day-to-day management of market risk within defined tolerance ranges
occurs as portfolio managers buy and sell within their respective markets based
upon the acceptable boundaries established by the investment guidelines and
investment policies. The Company has implemented a comprehensive daily
measurement process, administered by the Investment Risk Manager, for monitoring
compliance to limits established by these governance documents.

INTEREST RATE RISK

     Interest rate risk is the risk that the Company will incur economic losses
due to adverse changes in interest rates, as the Company invests substantial
funds in interest-sensitive assets.

     One of the measures used to quantify this exposure is duration. Duration
measures the sensitivity of the fair value of assets to changes in interest
rates. For example, if interest rates increase 1%, the fair value of an asset
with a duration of 5 years is expected to decrease in value by approximately 5%.
At December 31, 2000, the Company's asset duration was approximately 4.4, versus
4.9 at December 31, 1999.

     To calculate duration, the Company projects asset cash flows, and discounts
them to a net present value basis using a risk-free market rate adjusted for
credit quality, sector attributes, liquidity and other specific risks. Duration
is calculated by revaluing these cash flows at an alternative level of interest
rates, and determining the percentage change in fair value from the base case.
The projections include assumptions (based upon historical market experience and
Company specific experience) reflecting the impact of changing interest rates on
the prepayment and/or option features of instruments, where applicable. Such
assumptions relate primarily to mortgage-backed securities, collateralized
mortgage obligations, and municipal and corporate obligations.

      Based upon the information and assumptions the Company uses in its
duration calculation and interest rates in effect at December 31, 2000,
management estimates that a 100 basis point immediate, parallel increase in
interest rates ("rate shock") would decrease the net fair value of its assets
identified above by approximately $4.2 million, a decrease over the $4.3 million
at December 31, 1999. The selection of a 100 basis point immediate parallel
increase in interest rates should not be construed as a prediction by the
Company's management of future market events, but only as an illustration of the
potential impact of such an event.


                                        7
<PAGE>
                        NORTHBROOK LIFE INSURANCE COMPANY
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     To the extent that actual results differ from the assumptions utilized, the
Company's duration and rate shock measures could be significantly impacted.
Additionally, the Company's calculation assumes that the current relationship
between short-term and long-term interest rates (the term structure of interest
rates) will remain constant over time. As a result, these calculations may not
fully capture the impact of non-parallel changes in the term structure of
interest rates and/or large changes in interest rates.

EQUITY PRICE RISK

     Equity price risk is the risk that the Company will incur economic losses
due to adverse changes in a particular stock, stock fund or stock index. At
December 31, 2000, the Company had Separate Accounts assets totaling $7.6
billion. This is a decrease over the $8.2 billion of Separate Accounts assets at
December 31, 1999. The Company earns mortality and expense fees as a percentage
of account value in the Separate Accounts. In the event of an immediate decline
of 10% in the account values due to equity market declines, the Company would
earn approximately $10.6 million less in annualized fee income which would be
ceded to ALIC. This is a slight decrease over the $11.1 million amount
determined at December 31, 1999. The contractholder of a variable annuity
product may elect to purchase a minimum death benefit guarantee or a minimum
income benefit guarantee, generally at the time of purchase. Both guarantees may
subject the Company to additional equity price risk, as the beneficiary or
contractholder may receive their benefit for an amount greater than the fund
balance under contractually defined circumstances and terms. The Company
recorded actuarially determined reserves as of December 31, 2000 for these
exposures and has ceded them to either ALIC or a third party. The Company
expects growth in its variable annuity products in the future, stemming from
both new sales as well as market value appreciation, which will increase its
exposure to equity price risk.

CAPITAL RESOURCES AND LIQUIDITY

CAPITAL RESOURCES

     Under the terms of reinsurance agreements, substantially all premiums and
deposits, excluding those relating to Separate Accounts, are transferred to
ALIC, which maintains the investment portfolios supporting the Company's
products. Substantially all payments of policyholder claims, benefits, contract
maturities, contract surrenders and withdrawals and certain operating costs are
also reimbursed by ALIC, under the terms of the reinsurance agreements. The
Company continues to have primary liability as a direct insurer for risks
reinsured. The Company's ability to meet liquidity demands is dependent on
ALIC's ability to meet those demands. ALIC's claims-paying ability was rated
Aa2, AA+ and A+ by Moody's, Standard and Poor's and A.M. Best, respectively, at
December 31, 2000.

     The primary sources of the Company's funds are collection of principal and
interest from the investment portfolio and capital contributions from ALIC. The
primary uses of the Company's funds are to purchase investments and pay costs
associated with the maintenance of the Company's investment portfolio.

FINANCIAL RATINGS AND STRENGTH

     At December 31, 2000, the Moody's, Standard and Poor's, and A.M. Best's
claims-paying rating for the Company were Aa2, AA+ and A+, respectively.
Additionally A.M. Best affirmed its December 31, 2000 rating in the first
quarter of 2001.

LIQUIDITY

     The NAIC has a standard for assessing the solvency of insurance companies,
which is referred to as risk-based capital ("RBC"). The standard is based on a
formula for determining each insurer's RBC and a model law specifying regulatory
actions if an insurer's RBC falls below specified levels. The RBC formula for
life insurance companies establishes capital requirements relating to insurance,
business, asset and interest rate risks. At December 31, 2000, RBC for the
Company was significantly above a level that would require regulatory action.


                                        8
<PAGE>
                        NORTHBROOK LIFE INSURANCE COMPANY
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


OTHER DEVELOPMENTS

     The NAIC's codification initiative has produced a comprehensive guide of
statutory accounting principles, which the Company will implement effective
January 2001. The Company's state of domicile, Arizona, has passed legislation
revising various statutory accounting requirements to conform to codification.
These requirements did not have a material impact on the statutory surplus of
the Company.

FORWARD-LOOKING STATEMENTS

     This document contains "forward-looking statements" that anticipate results
based on management's 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.

     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 of future events. We cannot
guarantee that any forward-looking statement will be accurate. However, we
believe that our forward-looking statements are based on reasonable, 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.

-    Changes in market interest rates can have adverse effects on the Company's
     investment portfolio and investment income. 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 lead to lower sales and/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 invests proceeds from
     positive cash flows from operations and reinvests proceeds from maturing
     and called investments into new investments that could be yielding less
     than the portfolio's average rate.

-    The impact of decreasing Separate Accounts balances as a result of
     fluctuating market conditions could cause contract charges ceded by the
     Company to decrease.

-    Management believes the reserves for life-contingent contract benefits are
     adequate to cover ultimate policy benefits, despite the underlying risks
     and uncertainties associated with their determination when payments will
     not occur until well into the future. The Company periodically reviews and
     revises its estimates. If future experience differs from assumptions, it
     may have a material impact on results of operations ceded to ALIC.

-    In order to manage interest rate risk, from time to time the effective
     duration of the assets of the investment portfolio is adjusted. Those
     adjustments may have an impact on the value of the investment portfolio and
     on investment income.

                                       9
<PAGE>
                        NORTHBROOK LIFE INSURANCE COMPANY
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

-    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.

-    The Company distributes its products under an agreement with another
     financial services entity. Termination of such an agreement due to changes
     in control of this non-affiliated entity or other factors could have a
     detrimental effect on the Company's sales. This risk may be increased due
     to the 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.

-    A number of enacted and pending legislative measures could lead to
     increased consolidation and increased competition for business and for
     capital in the financial services industry.

     -    At the federal level, these measures include 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.

     -    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) more than 50% 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).

     -    In addition, state insurance regulators are reexamining the regulatory
          framework that currently governs the United States insurance business.
          They are engaged in an effort to determine the proper role of the
          state insurance regulation in the United States financial services
          industry following the enactment of the Graham-Leach-Bliley Act. The
          Company cannot predict whether any state or federal measures will be
          adopted to change the nature or scope of the regulation of the
          insurance business or what effect any such measures would have on the
          Company.

-    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. Additionally,
     the demand for life insurance products that are used to address a
     customers' estate planning needs, may be impacted to the extent any
     legislative changes to the current estate tax laws occur.

-    Financial strength ratings have become an increasingly important factor in
     establishing the competitive position of insurance companies and generally,
     may be expected to have an effect on an insurance company's sales. On an
     ongoing basis, rating organizations review the financial performance and
     condition of insurers. A downgrade, while not expected, could have a
     material adverse effect on the Company's or ALIC's business, financial
     condition and results of operations.

-    Additional risk factors regarding market risk are incorporated by reference
     to the discussion of "Market Risk" beginning on page 4.


ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The pertinent  provisions of  Management's  Discussion and Analysis of Financial
Condition and Results of Operations are herein incorporated by reference.


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Index to Financial Statements filed with this report.

ITEM  9.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
FINANCIAL DISCLOSURE

No disclosure is required by this Item.

                                       10
<PAGE>

                                     PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

         (a) Documents Filed as Part of this Report

     1. Financial Statements.  The Registrant's  financial  statements,  for the
year  ended  December  31,  2000,   together  with  the  Report  of  Independent
Accountants, are set forth on pages F-1 to F-18 of this report.

     2. Financial Statement Schedules.  The following is included in Part IV of
this report:

     Schedule IV - Reinsurance: page F-18

     All other  schedules  have been omitted  because they are not applicable or
not required,  or because the required  information is included in the financial
statements or notes thereto.

     3.  Exhibits.  The exhibits  required to be filed by Item 601 of Regulation
S-K are listed under the caption "Exhibits" in Item 14(c).

     (b) Reports on Form 8-K

No reports on Form 8-K were filed for the quarter ended December 31, 2000.

     (c) Exhibits

Exhibit No.      Description

  3(i)           Amended and Restated Articles of Incorporation and Articles of
                 Redomestication of Northbrook Life Insurance Company
                 (previously filed in Form 10-K, dated March 30, 1999)

  3(ii)          Amended and Restated By-laws of Northbrook Life Insurance
                 Company (previously filed in Form 10-K, dated March 30, 1999)



                                       11




<PAGE>
                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) 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.

                        NORTHBROOK LIFE INSURANCE COMPANY

                              /s/ THOMAS J. WILSON, II
                        By:   ------------------------
                              Thomas J. Wilson, II
                              President, Chief Executive Officer and Director
                              (Principal Executive Officer)

                        Date:    March 23, 2001
                                ------------------
     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.


 By:  /s/ THOMAS J. WILSON, II
      ------------------------
         Thomas J. Wilson, II
         President, Chief Executive Officer and Director
         (Principal Executive Officer)

Date:    March 23, 2001
      ------------------

By:  /s/ STEVEN C. VERNEY
      ------------------------
         Steven C. Verney
         Vice President and Director
         (Principal Financial Officer)

Date:    March 23, 2001
      ------------------

By:  /s/ SAMUEL H. PILCH
      ------------------------
         Samuel H. Pilch
         Vice President and Controller
         (Principal Accounting Officer)

Date:    March 23, 2001
      ------------------

By:  /s/ MICHAEL J. VELOTTA
      ------------------------
         Michael J. Velotta
         Vice President, Secretary, General Counsel
         and Director

Date:    March 23, 2001
      ------------------

By:  /s/ MARLA G. FRIEDMAN
      ------------------------
         Marla G. Friedman
         Vice President and Director

Date:    March 23, 2001
      ------------------

By:  /s/ MARGARET G. DYER
      ------------------------
         Margaret G. Dyer
         Director

Date:    March 23, 2001
      ------------------

By:  /s/ JOHN C. LOUNDS
      ------------------------
         John C. Lounds
         Director

Date:    March 23, 2001
      ------------------

By:  /s/ J. KEVIN MCCARTHY
      ------------------------
         J. Kevin McCarthy
         Director

Date:    March 23, 2001
      ------------------
                                       12
<PAGE>




                              Financial Statements

                                      Index
                                      -----

                                                                            Page
                                                                            ----

Independent Auditors' Report............................................... F-1

Financial Statements:



     Statements of Operations and Comprehensive Income for the Years Ended
      December 31, 2000, 1999 and 1998..................................... F-2

     Statements of Financial Position
      December 31, 2000 and 1999........................................... F-3

     Statements of Shareholder's Equity for the Years Ended
      December 31, 2000, 1999 and 1998..................................... F-4

     Statements of Cash Flows for the Years Ended
      December 31, 2000, 1999 and 1998..................................... F-5

     Notes to Financial Statements......................................... F-6

     Schedule IV - Reinsurance for the Years Ended
      December 31, 2000, 1999 and 1998..................................... F-18



                                       13
<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholder of
Northbrook Life Insurance Company:

--------------------------------------------------------------------------------

We have audited the accompanying Statements of Financial Position of Northbrook
Life Insurance Company (the "Company", an affiliate of The Allstate Corporation)
as of December 31, 2000 and 1999, and the related Statements of Operations and
Comprehensive Income, Shareholder's Equity and Cash Flows for each of the three
years in the period ended December 31, 2000. Our audits also included Schedule
IV--Reinsurance. These financial statements and financial statement schedule are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and financial statement schedule based
on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 2000 and
1999, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 2000 in conformity with accounting
principles generally accepted in the United States of America. Also, in our
opinion, Schedule IV--Reinsurance, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.

/s/ Deloitte & Touche LLP

Chicago, Illinois
February 23, 2001

                                      F-1
<PAGE>


                       NORTHBROOK LIFE INSURANCE COMPANY

               STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

<TABLE>
<CAPTION>
                                                                 YEAR ENDED DECEMBER 31,
                                                              ------------------------------
                                                                2000       1999       1998
                                                              --------   --------   --------
                                                                     ($ IN THOUSANDS)
<S>                                                           <C>        <C>        <C>
REVENUES
  Net investment income.....................................   $6,802     $6,010     $5,691
  Realized capital gains and losses.........................     (230)       510          2
                                                               ------     ------     ------
INCOME FROM OPERATIONS BEFORE INCOME TAX EXPENSE............    6,572      6,520      5,693
INCOME TAX EXPENSE..........................................    2,293      2,264      1,995
                                                               ------     ------     ------
NET INCOME..................................................    4,279      4,256      3,698
                                                               ------     ------     ------
OTHER COMPREHENSIVE INCOME (LOSS), AFTER-TAX
  Change in unrealized net capital gains and losses.........    2,663     (4,802)       825
                                                               ------     ------     ------
COMPREHENSIVE INCOME (LOSS).................................   $6,942     $ (546)    $4,523
                                                               ======     ======     ======
</TABLE>


                       See notes to financial statements.

                                   F-2
<PAGE>
                       NORTHBROOK LIFE INSURANCE COMPANY
                        STATEMENTS OF FINANCIAL POSITION

<TABLE>
<CAPTION>
                                                                      DECEMBER 31,
                                                              ----------------------------
                                                                  2000           1999
                                                              ------------   -------------
                                                              ($ IN THOUSANDS, EXCEPT PAR
                                                                      VALUE DATA)
<S>                                                           <C>            <C>
ASSETS
Investments
  Fixed income securities, at fair value (amortized cost
   $91,141 and $89,205).....................................   $   93,030     $    86,998
  Short-term................................................        3,859           3,170
                                                               ----------     -----------
  Total investments.........................................       96,889          90,168
Cash........................................................           --              21
Reinsurance recoverable from Allstate Life Insurance
  Company...................................................    1,975,150       2,022,502
Other assets................................................        4,817           5,997
Separate Accounts...........................................    7,614,673       8,211,996
                                                               ----------     -----------
      TOTAL ASSETS..........................................   $9,691,529     $10,330,684
                                                               ==========     ===========
LIABILITIES
Reserve for life-contingent contract benefits...............   $  149,111     $   150,587
Contractholder funds........................................    1,826,062       1,871,933
Current income taxes payable................................        2,078           2,171
Deferred income taxes.......................................        2,279             746
Payable to affiliates, net..................................        7,123           5,990
Separate Accounts...........................................    7,614,673       8,211,996
                                                               ----------     -----------
      TOTAL LIABILITIES.....................................    9,601,326      10,243,423
                                                               ----------     -----------
COMMITMENTS AND CONTINGENT LIABILITIES (NOTE 8)

SHAREHOLDER'S EQUITY
Common stock, $100 par value, 25,000 shares authorized,
  issued and outstanding....................................        2,500           2,500
Additional capital paid-in..................................       56,600          56,600
Retained income.............................................       29,875          29,596
Accumulated other comprehensive income (loss):
  Unrealized net capital gains and losses...................        1,228          (1,435)
                                                               ----------     -----------
      Total accumulated other comprehensive income (loss)...        1,228          (1,435)
                                                               ----------     -----------
      TOTAL SHAREHOLDER'S EQUITY............................       90,203          87,261
                                                               ----------     -----------
      TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY............   $9,691,529     $10,330,684
                                                               ==========     ===========
</TABLE>

                       See notes to financial statements.


                                     F-3
<PAGE>
                       NORTHBROOK LIFE INSURANCE COMPANY

                       STATEMENTS OF SHAREHOLDER'S EQUITY

<TABLE>
<CAPTION>
                                                                       DECEMBER 31,
                                                              ------------------------------
                                                                2000       1999       1998
                                                              --------   --------   --------
                                                                     ($ IN THOUSANDS)
<S>                                                           <C>        <C>        <C>
COMMON STOCK................................................  $ 2,500    $ 2,500    $ 2,500
                                                              -------    -------    -------
ADDITIONAL CAPITAL PAID-IN..................................   56,600     56,600     56,600
                                                              -------    -------    -------
RETAINED INCOME
Balance, beginning of year..................................   29,596     25,340     21,642
Net income..................................................    4,279      4,256      3,698
Dividends...................................................   (4,000)        --         --
                                                              -------    -------    -------
Balance, end of year........................................   29,875     29,596     25,340
                                                              -------    -------    -------
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Balance, beginning of year..................................   (1,435)     3,367      2,542
Change in unrealized net capital gains and losses...........    2,663     (4,802)       825
                                                              -------    -------    -------
Balance, end of year........................................    1,228     (1,435)     3,367
                                                              -------    -------    -------
    Total Shareholder's Equity..............................  $90,203    $87,261    $87,807
                                                              =======    =======    =======
</TABLE>

                       See notes to financial statements.

                                      F-4
<PAGE>
                       NORTHBROOK LIFE INSURANCE COMPANY

                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                 YEAR ENDED DECEMBER 31,
                                                              ------------------------------
                                                                2000       1999       1998
                                                              --------   --------   --------
                                                                     ($ IN THOUSANDS)
<S>                                                           <C>        <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income..................................................  $  4,279   $  4,256   $  3,698
Adjustments to reconcile net income to net cash provided by
 operating activities
    Amortization and other non-cash items...................       295        559        518
    Realized capital gains and losses.......................       230       (510)        (2)
    Changes in:
      Life-contingent contract benefits and contractholder
       funds................................................         5        (68)       273
      Income taxes payable..................................         7        355      1,866
      Other operating assets and liabilities................     1,563        924      4,126
                                                              --------   --------   --------
    Net cash provided by operating activities...............     6,379      5,516     10,479
                                                              --------   --------   --------
CASH FLOWS FROM INVESTING ACTIVITIES
Fixed income securities
  Proceeds from sales.......................................     6,780     17,992      1,922
  Investment collections....................................     2,933      6,555     10,253
  Investment purchases......................................   (11,561)   (32,050)   (20,690)
  Change in short-term investments, net.....................      (552)     2,008     (1,964)
                                                              --------   --------   --------
    Net cash used in investing activities...................    (2,400)    (5,495)   (10,479)
                                                              --------   --------   --------
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid..............................................    (4,000)        --         --
                                                              --------   --------   --------
    Net cash used in financing activities...................    (4,000)        --         --
                                                              --------   --------   --------

NET INCREASE (DECREASE) IN CASH.............................       (21)        21         --
CASH AT THE BEGINNING OF YEAR...............................        21         --         --
                                                              --------   --------   --------
CASH AT END OF YEAR.........................................  $     --   $     21   $     --
                                                              ========   ========   ========
</TABLE>

                       See notes to financial statements.

                                      F-5
<PAGE>
NORTHBROOK LIFE INSURANCE COMPANY
NOTES TO FINANCIAL STATEMENTS
($ IN THOUSANDS)
-------------------------------------------------------------------

1.  GENERAL

BASIS OF PRESENTATION
The accompanying financial statements include the accounts of Northbrook Life
Insurance Company (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.

NATURE OF OPERATIONS
The Company markets investment and life insurance products exclusively through
Dean Witter Reynolds, Inc. ("Dean Witter") (see Note 4), a wholly owned
subsidiary of Morgan Stanley Dean Witter & Co. Investment products include
deferred annuities and immediate annuities without life contingencies. Deferred
annuities include fixed rate, market value adjusted, and variable annuities.
Life insurance products consist of interest-sensitive life, immediate annuities
with life contingencies, and variable life insurance. In 2000, substantially all
of the Company's statutory premiums and deposits were from annuities.

Annuity contracts and life insurance policies issued by the Company are subject
to discretionary surrender or withdrawal by customers, subject to applicable
surrender charges. These policies and contracts are reinsured primarily with
ALIC (see Note 3), which invests premiums and deposits to provide cash flows
that will be used to fund future benefits and expenses.

The Company monitors economic and regulatory developments that have the
potential to impact its business. Federal legislation has allowed for banks and
other financial organizations to have greater participation in the securities
and insurance businesses. This legislation may present an increased level of
competition for sales of the Company's products. Furthermore, the market for
deferred annuities and interest-sensitive life insurance is enhanced by the tax
incentives available under current law. Any legislative changes that lessen
these incentives are likely to negatively impact the demand for these products.
The demand for life insurance products that are used to address a customer's
estate planning needs may be impacted to the extent any legislative changes
occur to the current estate tax laws.

Additionally, traditional demutualizations of mutual insurance companies and
enacted and pending state legislation to permit mutual insurance companies to
convert to a hybrid structure known as a mutual holding company could have a
number of significant effects on the Company by (1) increasing industry
competition through consolidation caused by mergers and acquisitions related to
the new corporate form of business; and (2) increasing competition in the
capital markets.

The Company is authorized to sell life and investment products in all states
except New York, as well as in the District of Columbia and Puerto Rico. The top
geographic locations for statutory premiums and deposits for the Company were
California, Florida, and Texas for the year ended December 31, 2000. No other
jurisdiction accounted for more than 5% of statutory premiums and deposits.

                                      F-6
<PAGE>
                       NORTHBROOK LIFE INSURANCE COMPANY
                         NOTES TO FINANCIAL STATEMENTS

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

INVESTMENTS
Fixed income securities include bonds and mortgage-backed securities. All fixed
income securities are carried at fair value and may be sold prior to their
contractual maturity ("available for sale"). The difference between amortized
cost and fair value, net of deferred income taxes, is reflected as a component
of shareholder's equity. Provisions are recognized for declines in the value of
fixed income securities that are other than temporary. Such write-downs are
included in realized capital gains and losses. Short-term investments are
carried at cost or amortized cost, which approximates fair value.

Investment income consists primarily of interest. Interest is recognized on an
accrual basis. Interest income on mortgage-backed securities is determined on
the effective yield method, based on the estimated principal repayments. Accrual
of income is suspended for fixed income securities that are in default or when
the receipt of interest payments is in doubt. Realized capital gains and losses
are determined on a specific identification basis.

REINSURANCE RECOVERABLE
The Company has reinsurance agreements whereby substantially all premiums,
contract charges, credited interest, policy benefits and certain expenses are
ceded to ALIC (See Note 3). Such amounts are reflected net of such reinsurance
in the statements of operations and comprehensive income. Reinsurance
recoverable 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.

RECOGNITION OF INSURANCE REVENUE AND RELATED BENEFITS AND INTEREST CREDITED
Interest-sensitive life contracts are insurance contracts whose terms are not
fixed and guaranteed. The terms that may be changed include premiums paid by the
contractholder, interest credited to the contractholder account balance and
one or more amounts assessed against the contractholder. Premiums from these
contracts are reported as deposits to contractholder funds. Contract charge
revenue consists of fees assessed against the contractholder account balance for
the cost of insurance (mortality risk), contract administration and surrender
charges. Contract benefits include interest credited to contracts and claims
incurred in excess of the related contractholder account balance.

Contracts that do not subject the Company to significant risk arising from
mortality or morbidity are referred to as investment contracts. Fixed rate
annuities, market value adjusted annuities and immediate annuities without life
contingencies are considered investment contracts. Deposits received for such
contracts are reported as deposits to contractholder funds. Contract charge
revenue for investment contracts consists of charges assessed against the
contractholder account balance for contract administration and surrender
charges. Contract benefits include interest credited and claims incurred in
excess of the related contractholder account balance.

                                      F-7
<PAGE>
                       NORTHBROOK LIFE INSURANCE COMPANY
                         NOTES TO FINANCIAL STATEMENTS

Crediting rates for fixed rate annuities and interest-sensitive life contracts
are adjusted periodically by the Company to reflect current market conditions.

Variable annuity and variable life contracts are sold as Separate Accounts
products. The assets supporting these products are legally segregated and
available only to settle Separate Accounts contract obligations. Deposits
received are reported as Separate Accounts liabilities. The Company's contract
charge revenue for these contracts consists of charges assessed against the
Separate Accounts fund balances for contract maintenance, administration,
mortality, expense and surrenders.

All premiums, contract charges, contract benefits and interest credited are
reinsured.

INCOME TAXES
The income tax provision is calculated under the liability method and presented
net of reinsurance. Deferred tax assets and liabilities are recorded based on
the difference between the financial statement and tax bases of assets and
liabilities at the enacted tax rates. Deferred income taxes arise primarily from
unrealized capital gains and losses on fixed income securities carried at fair
value and differences in the tax bases of investments.

SEPARATE ACCOUNTS
The Company issues deferred variable annuity and variable life contracts, the
assets and liabilities of which are legally segregated and recorded as assets
and liabilities of the Separate Accounts. Absent any contract provision wherein
the Company guarantees either a minimum return or account value upon death or
annuitization, variable annuity and variable life contractholders bear the
investment risk that the Separate Accounts' funds may not meet their stated
investment objectives.

The assets of the Separate Accounts are carried at fair value. Separate Accounts
liabilities represent the contractholders' 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 and comprehensive income. As discussed
earlier, revenues to the Company from the Separate Accounts are recorded as
contract charges.

RESERVE FOR LIFE-CONTINGENT CONTRACT BENEFITS
The reserve for life-contingent contract benefits, which relates to immediate
annuities with life contingencies and certain variable annuity contract
guarantees, is computed on the basis of assumptions as to future investment
yields, mortality, morbidity, terminations and expenses at the time the policy
is issued. These assumptions include provisions for adverse deviation and
generally vary by such characteristics as type of coverage, year of issue and
policy duration. Detailed reserve assumptions and reserve interest rates are
outlined in Note 7.

CONTRACTHOLDER FUNDS
Contractholder funds arise from the issuance of contracts that include an
investment component, including most fixed annuities, interest-sensitive life
policies and certain investment contracts. Deposits received are recorded as
interest-bearing liabilities. Contractholder funds are equal to deposits
received and interest credited to the benefit of the contractholder less
withdrawals, mortality charges and administrative expenses. Detailed information
on crediting rates and surrender and withdrawal protection on contractholder
funds are outlined in Note 7.

USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
                                      F-8

<PAGE>
                       NORTHBROOK LIFE INSURANCE COMPANY
                         NOTES TO FINANCIAL STATEMENTS

3.  RELATED PARTY TRANSACTIONS

REINSURANCE
The Company has reinsurance agreements whereby substantially all premiums,
contract charges, credited interest, policy benefits and certain expenses are
ceded to ALIC and reflected net of such reinsurance in the statements of
operations and comprehensive income. Reinsurance recoverable and the related
reserve for life-contingent contract benefits and contracholder funds are
reported separately in the statements of financial position. The Company
continues to have primary liability as the direct insurer for risks reinsured.

Investment income earned on the assets which support contractholder funds and
the reserve for life-contingent contract benefits is not included in the
Company's financial statements as those assets are owned and managed under the
terms of the reinsurance agreements.

The following table summarizes amounts that were ceded to ALIC under reinsurance
agreements.

<TABLE>
<CAPTION>
                                      YEAR ENDED DECEMBER 31,
                                    2000        1999        1998
                                  --------    --------    --------
<S>                               <C>         <C>         <C>
Premiums                          $    289    $  2,966    $  2,528
Contract charges                   124,250     118,290     102,218
Credited interest, policy
 benefits, and certain
 expenses                          224,265     222,513     217,428
</TABLE>

BUSINESS OPERATIONS
The Company utilizes services provided by AIC and ALIC and business facilities
owned or leased, and operated by AIC in conducting its business activities. The
Company reimburses AIC and ALIC for the operating expenses incurred on behalf of
the Company. The Company is charged for the cost of these operating expenses
based on the level of services provided. Operating expenses, including
compensation and retirement and other benefit programs, allocated to the Company
were $22,026, $33,892 and $26,230 in 2000, 1999 and 1998, respectively. Of these
costs, the Company retains investment related expenses. All other costs are
ceded to ALIC under reinsurance agreements.

4.  EXCLUSIVE DISTRIBUTION AGREEMENT
The Company has a strategic alliance with Dean Witter to develop, market and
distribute proprietary savings and life insurance products through Morgan
Stanley Dean Witter Financial Advisors. Affiliates of Dean Witter are the
investment managers for the Morgan Stanley Dean Witter Variable Investment
Series and the Universal Institutional Funds, Inc., the funds in which certain
assets of the Separate Accounts products are invested. Under the terms of the
alliance, the Company has agreed to use Dean Witter as an exclusive distribution
channel for the Company's products. In addition to the Company's products, Dean
Witter markets other products that compete with those of the Company.

Pursuant to the alliance agreement, Dean Witter provides approximately half of
the statutory capital necessary to maintain these products on the Company's
books through loans to a subsidiary of AIC. AIC unconditionally guarantees the
repayment of these loans. The Company shares approximately half the net profits
with Dean Witter on contracts written under the alliance.

The strategic alliance is cancelable for new business by either party by giving
30 days written notice, however, the Company believes the benefits derived by
Dean Witter will preserve the alliance.

                                      F-9
<PAGE>
                       NORTHBROOK LIFE INSURANCE COMPANY
                         NOTES TO FINANCIAL STATEMENTS

5.  INVESTMENTS

FAIR VALUES
The amortized cost, gross unrealized gains and losses, and fair value for fixed
income securities are as follows:

<TABLE>
<CAPTION>
                                            GROSS
                                         UNREALIZED
    AT DECEMBER 31,      AMORTIZED   -------------------     FAIR
         2000              COST       GAINS      LOSSES     VALUE
         ----            ---------   --------   --------   --------
<S>                      <C>         <C>        <C>        <C>
U.S. government and
  agencies                $10,778     $1,193    $    --    $11,971
Municipal                   1,501         26        (38)     1,489
Corporate                  59,449        656       (720)    59,385
Mortgage-backed
  securities               19,413        958       (186)    20,185
                          -------     ------    -------    -------
  Total fixed income
   securities             $91,141     $2,833    $   944    $93,030
                          =======     ======    =======    =======
At December 31, 1999
U.S. government and
  agencies                $ 8,660     $  131    $   (57)   $ 8,734
Municipal                   1,155          6       (108)     1,053
Corporate                  61,049         26     (2,541)    58,534
Mortgage-backed
  securities               18,341        822       (486)    18,677
                          -------     ------    -------    -------
  Total fixed income
   securities             $89,205     $  985    $(3,192)   $86,998
                          =======     ======    =======    =======
</TABLE>

SCHEDULED MATURITIES
The scheduled maturities for fixed income securities are as follows at
December 31, 2000:

<TABLE>
<CAPTION>
                                           AMORTIZED     FAIR
                                             COST       VALUE
                                           ---------   --------
<S>                                        <C>         <C>
Due in one year or less                     $   454    $   456
Due after one year through five years        31,914     32,461
Due after five years through ten years       31,618     31,119
Due after ten years                           7,742      8,809
                                            -------    -------
                                             71,728     72,845
Mortgage-backed securities                   19,413     20,185
                                            -------    -------
  Total                                     $91,141    $93,030
                                            =======    =======
</TABLE>

Actual maturities may differ from those scheduled as a result of prepayments by
the issuers.

NET INVESTMENT INCOME

<TABLE>
<CAPTION>
      YEAR ENDED DECEMBER 31,           2000       1999       1998
      -----------------------         --------   --------   --------
<S>                                   <C>        <C>        <C>
Fixed income securities                $6,635     $5,881     $5,616
Short-term investments                    249        261        190
                                       ------     ------     ------
  Investment income, before expense     6,884      6,142      5,806
  Investment expense                       82        132        115
                                       ------     ------     ------
  Net investment income                $6,802     $6,010     $5,691
                                       ======     ======     ======
</TABLE>

                                      F-10
<PAGE>
                       NORTHBROOK LIFE INSURANCE COMPANY
                         NOTES TO FINANCIAL STATEMENTS


REALIZED CAPITAL GAINS AND LOSSES, AFTER TAX

<TABLE>
<CAPTION>
        YEAR ENDED DECEMBER 31,             2000       1999       1998
        -----------------------           --------   --------   --------
<S>                                       <C>        <C>        <C>
Fixed income securities                    $(230)     $ 510       $ 2
                                           -----      -----       ---
  Realized capital gains and losses         (230)       510         2
  Income taxes                                80       (178)       (1)
                                           -----      -----       ---
  Realized capital gains and losses,
   after tax                               $(150)     $ 332       $ 1
                                           =====      =====       ===
</TABLE>

Excluding calls and prepayments, gross gains of $78 and $629 were realized on
sales of fixed income securities during 2000 and 1999, respectively and gross
losses of $308, $119 and $9 were realized on sales of fixed income securities
during 2000, 1999 and 1998, respectively. There were no gross gains realized on
sales of fixed income securities during 1998.

UNREALIZED NET CAPITAL GAINS
Unrealized net capital gains on fixed income securities included in
shareholder's equity at December 31, 2000 are as follows:

<TABLE>
<CAPTION>
                                                     GROSS
                         COST/                    UNREALIZED        UNREALIZED
                       AMORTIZED     FAIR     -------------------      NET
                         COST       VALUE      GAINS      LOSSES      GAINS
                       ---------   --------   --------   --------   ----------
<S>                    <C>         <C>        <C>        <C>        <C>
Fixed income
 securities             $91,141    $93,030    $ 2,833    $  (944)     $1,889
                        =======    =======    =======    =======
Deferred income taxes                                                   (661)
                                                                      ------
Unrealized net
 capital gains                                                        $1,228
                                                                      ======
</TABLE>

CHANGE IN UNREALIZED NET CAPITAL GAINS AND LOSSES

<TABLE>
<CAPTION>
      YEAR ENDED DECEMBER 31,          2000       1999       1998
      -----------------------        --------   --------   --------
<S>                                  <C>        <C>        <C>
Fixed income securities              $ 4,096    $(7,387)   $ 1,269
Deferred income taxes                 (1,433)     2,585       (444)
                                     -------    -------    -------
Increase (decrease) in unrealized
 net capital gains and losses        $ 2,663    $(4,802)   $   825
                                     =======    =======    =======
</TABLE>

SECURITIES ON DEPOSIT
At December 31, 2000, fixed income securities with a carrying value of $8,939
were on deposit with regulatory authorities as required by law.

                                      F-11
<PAGE>
                       NORTHBROOK LIFE INSURANCE COMPANY
                         NOTES TO FINANCIAL STATEMENTS

6.  FINANCIAL INSTRUMENTS
In the normal course of business, the Company invests in various financial
assets and incurs various financial liabilities. The fair value estimates of
financial instruments presented below are not necessarily indicative of the
amounts the Company might pay or receive in actual market transactions.
Potential taxes and other transaction costs have not been considered in
estimating fair value. The disclosures that follow do not reflect the fair value
of the Company as a whole since a number of the Company's significant assets
(including reinsurance recoverable) and liabilities (including
interest-sensitive life insurance reserves and deferred income taxes) are not
considered financial instruments and are not carried at fair value. Other assets
and liabilities considered financial instruments, such as accrued investment
income and cash are generally of a short-term nature. Their carrying values
approximate fair value.

FINANCIAL ASSETS
The carrying value and fair value of financial assets at December 31, are as
follows:

<TABLE>
<CAPTION>
                                2000                      1999
                       -----------------------   -----------------------
                        CARRYING       FAIR       CARRYING       FAIR
                         VALUE        VALUE        VALUE        VALUE
                       ----------   ----------   ----------   ----------
<S>                    <C>          <C>          <C>          <C>
Fixed income
 securities            $   93,030   $   93,030   $   86,998   $   86,998
Short-term                  3,859        3,859        3,170        3,170
Separate Accounts       7,614,673    7,614,673    8,211,996    8,211,996
</TABLE>

Fair values for fixed income securities are based on quoted market prices where
available. Non-quoted securities are valued based on discounted cash flows using
current interest rates for similar securities. Short-term investments are highly
liquid investments with maturities of less than one year whose carrying value
are deemed to approximate fair value. Separate Accounts assets are carried in
the statements of financial position at fair value based on quoted market
prices.

FINANCIAL LIABILITIES
The carrying value and fair value of financial liabilities at December 31, are
as follows:

<TABLE>
<CAPTION>
                                2000                      1999
                       -----------------------   -----------------------
                        CARRYING       FAIR       CARRYING       FAIR
                         VALUE        VALUE        VALUE        VALUE
                       ----------   ----------   ----------   ----------
<S>                    <C>          <C>          <C>          <C>
Contractholder funds
 on investment
 contracts             $1,652,039   $1,644,231   $1,735,843   $1,675,910
Separate Accounts       7,614,673    7,614,673    8,211,996    8,211,996
</TABLE>

The fair value of contractholder funds on investment contracts is based on the
terms of the underlying contracts. Investment contracts with no stated
maturities (single premium and flexible premium deferred annuities) are valued
at the account balance less surrender charges. The fair value of immediate
annuities and annuities without life contingencies with fixed terms is estimated
using discounted cash flow calculations based on interest rates currently
offered for contracts with similar terms and durations. Separate Accounts
liabilities are carried at the fair value of the underlying assets.

                                      F-12
<PAGE>
                       NORTHBROOK LIFE INSURANCE COMPANY
                         NOTES TO FINANCIAL STATEMENTS

7.  RESERVE FOR LIFE-CONTINGENT CONTRACT BENEFITS AND CONTRACTHOLDER FUNDS
At December 31, the Reserve for life-contingent contract benefits consists of
the following:

<TABLE>
<CAPTION>
                                             2000       1999
                                           --------   --------
<S>                                        <C>        <C>
Immediate annuities:
  Structured settlement annuities          $108,441   $109,907
  Other immediate annuities                  40,670     40,680
                                           --------   --------
  Total Reserve for life-contingent
   contract benefits                       $149,111   $150,587
                                           ========   ========
</TABLE>

The assumptions for mortality generally utilized in calculating reserves
include, the U.S. population with projected calendar year improvements and age
setbacks for impaired lives for structured settlement annuities; and the 1983
group annuity mortality table for other immediate annuities. Interest rate
assumptions vary from 3.5% to 10.0% for immediate annuities. Other estimation
methods used include the present value of contractually fixed future benefits
for structured settlement annuities and other immediate annuities.

Premium deficiency reserves are established, if necessary, for the structured
settlement annuity business, to the extent the unrealized gains on fixed income
securities would result in a premium deficiency had those gains actually been
realized. The Company did not have a premium deficiency reserve at December 31,
2000 and 1999.

At December 31, Contractholder funds consists of the following:

<TABLE>
<CAPTION>
                                           2000         1999
                                        ----------   ----------
<S>                                     <C>          <C>
Interest-sensitive life                 $  171,192   $  173,867
Fixed annuities:
  Immediate annuities                       66,051       78,197
  Deferred annuities                     1,588,819    1,619,869
                                        ----------   ----------
  Total Contractholder funds            $1,826,062   $1,871,933
                                        ==========   ==========
</TABLE>

Contractholder funds are equal to deposits received and interest credited to the
benefit of the contractholder less withdrawals, mortality charges and
administrative expenses. Interest rates credited range from 5.8% to 6.5% for
interest-sensitive life contracts; 3.5% to 10.2% for immediate annuities and
4.3% to 7.3% for deferred annuities. Withdrawal and surrender charge protection
includes: i) for interest-sensitive life, either a percentage of account balance
or dollar amount grading off generally over 20 years; and, ii) for deferred
annuities not subject to a market value adjustment, either a declining or a
level percentage charge generally over nine years or less. Approximately 44.4%
of deferred annuities are subject to a market value adjustment.

8.  COMMITMENTS AND CONTINGENT LIABILITIES

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, the tax treatment of insurance
products and its impact on the relative desirability of various personal
investment vehicles, and proposed legislation to prohibit the use of gender in
determining insurance rates and benefits. 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.

                                      F-13
<PAGE>
                       NORTHBROOK LIFE INSURANCE COMPANY
                         NOTES TO FINANCIAL STATEMENTS

GUARANTY FUNDS
Under state insurance guaranty fund laws, insurers doing business in a state can
be assessed, up to prescribed limits, for certain obligations of insolvent
insurance companies to policyholders and claimants. The Company's expenses
related to these funds are immaterial and are ceded to ALIC under reinsurance
agreements.

MARKETING AND COMPLIANCE ISSUES
Companies operating in the insurance and financial services markets have come
under the scrutiny of regulators with respect to market conduct and compliance
issues. Under certain circumstances, companies have been held responsible for
providing incomplete or misleading sales materials and for replacing existing
policies with policies that were less advantageous to the policyholder. The
Company monitors its sales materials and enforces compliance procedures to
mitigate exposure to potential litigation. The Company is a member of the
Insurance Marketplace Standards Association, an organization that advocates
ethical market conduct.

9.  INCOME TAXES
The Company joins the Corporation and its other eligible domestic subsidiaries
(the "Allstate Group") in the filing of a consolidated federal income tax return
and is party to a federal income tax allocation agreement (the "Allstate Tax
Sharing Agreement"). Under the Allstate Tax Sharing Agreement, the Company pays
to or receives from the Corporation the amount, if any, by which the Allstate
Group's federal income tax liability is affected by virtue of inclusion of the
Company in the consolidated federal income tax return. The Company has also
entered into a supplemental tax sharing agreement with respect to reinsurance
ceded to ALIC to allocate to ALIC the tax consequences of such reinsurance.
Effectively, these agreements result in the Company's annual income tax
provision being computed as if the Company filed a separate return, as adjusted
for the reinsurance ceded to ALIC.


                                      F-14
<PAGE>
                       NORTHBROOK LIFE INSURANCE COMPANY
                         NOTES TO FINANCIAL STATEMENTS


Prior to June 30, 1995, the Corporation was a subsidiary of Sears Roebuck & Co.
("Sears") and, with its eligible domestic subsidiaries, was included in the
Sears consolidated federal income tax return and federal income tax allocation
agreement. Effective June 30, 1995, the Corporation and Sears entered into a new
tax sharing agreement, which governs their respective rights and obligations
with respect to federal income taxes for all periods during which the
Corporation was a subsidiary of Sears, including the treatment of audits of tax
returns for such periods.

The Internal Revenue Service ("IRS") has completed its review of the Allstate
Group's federal income tax returns through the 1993 tax year. Any adjustments
that may result from IRS examinations of tax returns are not expected to have a
material impact on the financial position, liquidity or results of operations of
the Company.

The components of the deferred income tax assets and liabilities at
December 31, are as follows:

<TABLE>
<CAPTION>
                                                2000       1999
                                              --------   --------
<S>                                           <C>        <C>
DEFERRED ASSETS
Unrealized net capital losses                 $    --    $   772
                                              -------    -------
  Total deferred assets                            --        772
DEFERRED LIABILITIES
Difference in tax bases of investments         (1,618)    (1,518)
Unrealized net capital gains                     (661)        --
                                              -------    -------
  Total deferred liabilities                   (2,279)    (1,518)
                                              -------    -------
  Net deferred liability                      $(2,279)   $  (746)
                                              =======    =======
</TABLE>

The components of income tax expense for the year ended December 31, are as
follows:

<TABLE>
<CAPTION>
                                        2000       1999       1998
                                      --------   --------   --------
<S>                                   <C>        <C>        <C>
Current                                $2,193     $2,249     $1,797
Deferred                                  100         15        198
                                       ------     ------     ------
  Total income tax expense             $2,293     $2,264     $1,995
                                       ======     ======     ======
</TABLE>

The Company paid income taxes of $2,286, $1,908 and $129 in 2000, 1999 and 1998,
respectively.

A reconciliation of the statutory federal income tax rate to the effective
income tax rate on income from operations for the year ended December 31, is as
follows:

<TABLE>
<CAPTION>
                                         2000       1999       1998
                                       --------   --------   --------
<S>                                    <C>        <C>        <C>
Statutory federal income tax rate       35.0%      35.0%      35.0%
Tax-exempt income                       (0.1)      (0.1)      (0.2)
Other                                     --       (0.2)       0.2
                                        ----       ----       ----
Effective income tax rate               34.9%      34.7%      35.0%
                                        ====       ====       ====
</TABLE>

                                      F-15
<PAGE>
                       NORTHBROOK LIFE INSURANCE COMPANY
                         NOTES TO FINANCIAL STATEMENTS

Prior to January 1, 1984, the Company was entitled to exclude certain amounts
from taxable income and accumulate such amounts in a "policyholder surplus"
account. The balance in this account at December 31, 2000, approximately $16,
will result in federal income taxes payable of $6 if distributed by the Company.
No provision for taxes has been made as the Company has no plan to distribute
amounts from this account. No further additions to the account have been
permitted since 1983.

10.  STATUTORY FINANCIAL INFORMATION
The Company's statutory capital and surplus was $84,335 and $83,746 at
December 31, 2000 and 1999, respectively. The Company's statutory net income was
$4,893, $4,840 and $3,518 for the years ended December 31, 2000, 1999 and 1998,
respectively.

PERMITTED STATUTORY ACCOUNTING PRACTICES
The Company prepares its statutory financial statements in accordance with
accounting practices prescribed or permitted by the Arizona Department of
Insurance. Prescribed statutory accounting practices include a variety of
publications of the National Association of Insurance Commissioners ("NAIC"), as
well as state laws, regulations and general administrative rules. Permitted
statutory accounting practices encompass all accounting practices not so
prescribed. The Company does not follow any permitted statutory accounting
practices that have a significant impact on statutory surplus or statutory net
income.

The NAIC has approved a January 1, 2001 implementation date for newly developed
statutory accounting principles ("codification"). The Company's state of
domicile, Arizona, has passed legislation revising various statutory accounting
requirements to conform to codification. These requirements will not have a
material impact on the statutory surplus of the Company. The NAIC has installed
a formal maintenance process to develop and propose new guidance, as well as on-
going clarification and interpretation of issues. The impact of any future
changes will be recorded as they are approved by the NAIC.

DIVIDENDS
The ability of the Company to pay dividends is dependent on business conditions,
income, cash requirements of the Company and other relevant factors. The payment
of shareholder dividends by the Company without the prior approval of the state
insurance regulator is limited to formula amounts based on net income and
capital and surplus, determined in accordance with statutory accounting
practices, as well as the timing and amount of dividends paid in the preceding
twelve months. On December 28, 2000, the Company paid a cash dividend of $4.0
million to ALIC. The maximum amount of dividends that the Company can distribute
during 2001 without prior approval of the Arizona Department of Insurance is
$4,893.

                                      F-16
<PAGE>
                       NORTHBROOK LIFE INSURANCE COMPANY
                         NOTES TO FINANCIAL STATEMENTS


RISKED-BASED CAPITAL
The NAIC has a standard for assessing the solvency of insurance companies, which
is referred to as risk-based capital ("RBC"). The requirement consists of a
formula for determining each insurer's RBC and a model law specifying regulatory
actions if an insurer's RBC falls below specified levels. The RBC formula for
life insurance companies establishes capital requirements relating to insurance,
business, asset and interest rate risks. At December 31, 2000, RBC for the
Company was significantly above levels that would require regulatory action.

11.  OTHER COMPREHENSIVE INCOME
The components of other comprehensive income on a pretax and after-tax basis for
the year ended December 31, are as follows:

<TABLE>
<CAPTION>
                                           2000                              1999                              1998
                              -------------------------------   -------------------------------   -------------------------------
                               PRETAX      TAX      AFTER-TAX    PRETAX      TAX      AFTER-TAX    PRETAX      TAX      AFTER-TAX
                              --------   --------   ---------   --------   --------   ---------   --------   --------   ---------
<S>                           <C>        <C>        <C>         <C>        <C>        <C>         <C>        <C>        <C>
UNREALIZED CAPITAL GAINS AND
  LOSSES:
----------------------------
Unrealized holding gains
  (losses) arising during
  the period                   $3,843    $(1,344)    $2,499     $(6,877)    $2,407     $(4,470)    $1,271     $(445)      $826
Less: reclassification
  adjustments                    (253)        89       (164)        510       (178)        332          2        (1)         1
                               ------    -------     ------     -------     ------     -------     ------     -----       ----
Unrealized net capital gains
  (losses)                      4,096     (1,433)     2,663      (7,387)     2,585      (4,802)     1,269      (444)       825
                               ------    -------     ------     -------     ------     -------     ------     -----       ----
Other comprehensive income
  (loss)                       $4,096    $(1,433)    $2,663     $(7,387)    $2,585     $(4,802)    $1,269     $(444)      $825
                               ======    =======     ======     =======     ======     =======     ======     =====       ====
</TABLE>

                                      F-17
<PAGE>
                       NORTHBROOK LIFE INSURANCE COMPANY

                            SCHEDULE IV--REINSURANCE

                                ($ IN THOUSANDS)

<TABLE>
<CAPTION>
                                                               GROSS                  NET
                                                               AMOUNT     CEDED      AMOUNT
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
YEAR ENDED DECEMBER 31, 2000
Life insurance in force.....................................  $441,073   $441,073   $     --
                                                              ========   ========   ========
Premiums and contract charges:
  Life and annuities........................................  $124,621   $124,621   $     --
                                                              ========   ========   ========
</TABLE>

<TABLE>
<CAPTION>
                                                               GROSS                  NET
                                                               AMOUNT     CEDED      AMOUNT
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
YEAR ENDED DECEMBER 31, 1999
Life insurance in force.....................................  $474,824   $474,824   $     --
                                                              ========   ========   ========
Premiums and contract charges:
  Life and annuities........................................  $121,351   $121,351   $     --
                                                              ========   ========   ========
</TABLE>

<TABLE>
<CAPTION>
                                                               GROSS                  NET
                                                               AMOUNT     CEDED      AMOUNT
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
YEAR ENDED DECEMBER 31, 1998
Life insurance in force.....................................  $494,256   $494,256   $     --
                                                              ========   ========   ========
Premiums and contract charges:
  Life and annuities........................................  $104,746   $104,746   $     --
                                                              ========   ========   ========
</TABLE>

                                      F-18