FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549


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

For the quarterly period ended: September 30, 1998

                              OR

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


Commission file number: 33-47245
                        33-65355
                        


                   ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
                  (Exact name of registrant as specified in its
                                    charter)


        NEW YORK                                     36-2608394
(State or other jurisdiction of                  (I.R.S. Employer
 incorporation or organization)                   Identification No.)

                                One Allstate Drive
                             Farmingville, New York  11738
               (Address of principal executive offices)(Zip Code)

                                  800/256-9392
              (Registrant's telephone number, including area code)

                                 Not Applicable
              (Former name, former address and former fiscal year,
                          if changed since last report)

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

Yes../X/..      No

     Indicate  the  number of shares of each of the  issuer's  classes of common
stock,  as of September  30, 1998;  there were 80,000  shares of common  capital
stock  outstanding,  par value $25 per  share  all of which  shares  are held by
Allstate Life Insurance Company.



<PAGE>



                         PART I - FINANCIAL INFORMATION

                                                                         Page
Item  1.   Financial Statements

            Statements of Financial Position As Of
            September 30, 1998(Unaudited)and December 31, 1997             3  

            Statements of Operations
            Three Months Ended September 30, 1998
            and September 30, 1997 (Unaudited)
            Nine Months Ended September 30, 1998
            and September 30, 1997 (Unaudited)                             4

            Statements of Cash Flows
            Nine Months Ended September 30, 1998
            and September 30, 1997(Unaudited)                              5   

            Notes to Financial Statements (Unaudited)                      6 

Item  2.   Management's Discussion and Analysis of
           Financial Condition and Results of Operations                  10    

Item  3.   Quantitative and Qualitative Disclosure about Market Risk*     N/A

                           PART II - OTHER INFORMATION


Item 1.   LEGAL PROCEEDINGS                                               16

Item 2.   CHANGES IN SECURITIES AND USE OF PROCEEDS*                      N/A

Item 3.   DEFAULTS UPON SENIOR SECURITIES*                                N/A

Item 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS*            N/A

Item 5.   OTHER INFORMATION                                               16

Item 6.   EXHIBITS AND REPORTS ON FORM 8-K                                16

SIGNATURE PAGE





*Omitted pursuant to General Instruction H(2) of Form 10-Q.



<PAGE>


                   ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
                        STATEMENTS OF FINANCIAL POSITION

<TABLE>
<CAPTION>

                                                                          September 30,             December 31,
($ in thousands)                                                                1998                       1997
                                                                       --------------------     ---------------------
                                                                           (Unaudited)
<S>                                                                     <C>                     <C>    
Investments
   Fixed income securities, at fair value (amortized cost
        $1,628,116 and $1,510,110)                                          $1,999,860                $1,756,257
   Mortgage loans                                                              131,584                   114,627
   Policy loans                                                                 28,759                    27,600
   Short-term                                                                   35,551                     9,513
                                                                            ----------                ----------
          Total investments                                                  2,195,754                 1,907,997

Deferred acquisition costs                                                      77,486                    71,946
Accrued investment income                                                       20,558                    21,725
Reinsurance recoverables                                                         1,943                     1,726
Cash                                                                                 -                       393
Net receivable from affiliates                                                     526                         -
Other assets                                                                     8,817                     6,167
Separate Accounts                                                              322,658                   308,595
                                                                            ----------                ----------
          Total assets                                                      $2,627,742                $2,318,549
                                                                            ==========                ==========

LIABILITIES
Reserve for life-contingent contract benefits                               $1,220,121                $1,084,409
Contractholder funds                                                           671,987                   607,474
Income taxes payable                                                             8,478                     1,419
Deferred income taxes                                                           34,189                    16,990
Other liabilities and accrued expenses                                          33,078                    10,985
Net payable to affiliates                                                            -                     5,267
Separate Accounts                                                              322,658                   308,595
                                                                            ----------                ----------
          Total liabilities                                                  2,290,511                 2,035,139
                                                                            ----------                ----------

Commitments and Contingent Liabilities (Note 3)

SHAREHOLDER'S EQUITY
Common stock, $25 par value, 80,000 shares
   authorized, issued and outstanding                                            2,000                     2,000
Additional capital paid-in                                                      45,787                    45,787
Retained income                                                                192,653                   171,144
Accumulated other comprehensive income:
        Unrealized net capital gains                                            96,791                    64,479
                                                                            ----------                ----------
    Total accumulated other comprehensive income                                96,791                    64,479
                                                                            ----------                ----------

            Total shareholder's equity                                         337,231                   283,410
                                                                            ----------                ----------
            Total liabilities and shareholder's equity                      $2,627,742                $2,318,549
                                                                            ==========                ==========

</TABLE>


See notes to financial statements.

                                      -3-
<PAGE>



                   ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
                            STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>

                                                     Three months ended                      Nine months ended
                                                        September 30,                          September 30,
                                              -----------------------------------    -----------------------------------
($ in thousands)                                   1998                1997               1998                1997
                                              ----------------    ---------------    ----------------    ---------------
                                                                             (Unaudited)

<S>                                            <C>                  <C>              <C>                  <C>
REVENUES
   Premiums (net of reinsurance
      ceded of $886 and $793,
      $2,643 and $2,243)                          $  20,388          $  21,075           $  63,642         $   67,882
   Contract charges                                   7,777              7,146              24,196             21,128
   Net investment income                             33,758             31,629             100,018             92,871
   Realized capital gains and losses                     53                817               4,157                742
                                                  ---------           ---------          ---------         ----------
                                                     61,976             60,667             192,013            182,623
                                                  ---------           ---------          ---------         ----------

COSTS AND EXPENSES
   Contract benefits (net of reinsurance
      recoveries of $254 and $950,
      $756 and $1,632)                               46,744             43,081             135,565            132,946
   Amortization of deferred acquisition
      costs                                           1,562                746               5,767              4,565
   Operating costs and expenses                       5,260              5,237              17,426             15,493
                                                  ---------          ---------           ---------         ----------
                                                     53,566             49,064             158,758            153,004
                                                  ---------          ---------           ---------         ----------

INCOME FROM OPERATIONS
    BEFORE INCOME TAX EXPENSE                         8,410             11,603              33,255             29,619

INCOME TAX EXPENSE                                    2,883              4,207              11,746             10,662
                                                  ---------          ---------           ---------         ----------

NET INCOME                                        $   5,527          $   7,396           $  21,509         $   18,957
                                                  =========          =========           =========         ==========


</TABLE>


See notes to financial statements.


                                      -4-
<PAGE>


                   ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
                            STATEMENTS OF CASH FLOWS



<TABLE>
<CAPTION>

                                                                                      Nine months ended
                                                                                        September 30,
                                                                        ----------------------------------------------
                                                                                 1998                     1997
                                                                        ---------------------    ---------------------
($ in thousands)                                                                         (Unaudited)

<S>                                                                       <C>                        <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income                                                                   $   21,509                 $  18,957
Adjustments to reconcile net income to net cash
    provided by operating activities
        Depreciation, amortization and other non-cash items                     (26,588)                  (23,167)
        Realized capital gains and losses                                        (4,157)                     (742)
        Interest credited to contractholder funds                                27,537                    25,025
        Increase in reserve for life-contingent contract
          benefits and contractholder funds                                      41,875                    52,221
        Increase in deferred policy acquisition costs                            (8,605)                   (7,222)
        Decrease in accrued investment income                                     1,167                     1,211
        Changes in deferred income taxes                                           (201)                   (1,492)
        Changes in other operating assets and
          liabilities                                                            (8,186)                   18,840
                                                                             ----------                 ---------
                 Net cash provided by operating activities                       44,351                    83,631
                                                                             ----------                 ---------

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales of fixed income securities                                   65,274                    14,776
Investment collections
        Fixed income securities                                                  92,221                    80,621
        Mortgage loans                                                            4,888                     1,899
Investment purchases
        Fixed income securities                                                (248,209)                 (175,460)
        Mortgage loans                                                          (14,312)                  (18,500)
Change in short-term investments, net                                              (977)                   14,950
Change in policy loans, net                                                      (1,159)                   (1,612)
                                                                             ----------                 ---------
                 Net cash used in investing activities                         (102,274)                  (83,326)
                                                                             ----------                 ---------

CASH FLOWS FROM FINANCING ACTIVITIES
Contractholder fund deposits                                                    100,721                    54,965
Contractholder fund withdrawals                                                 (43,191)                  (40,312)
                                                                             ----------                 ---------
                 Net cash provided by financing activities                       57,530                    14,653
                                                                             ----------                 ---------

NET (DECREASE) INCREASE IN CASH                                                    (393)                   14,958
CASH AT BEGINNING OF PERIOD                                                         393                     1,027
                                                                             ----------                 ---------
CASH AT END OF PERIOD                                                        $        -                 $  15,985
                                                                             ==========                 =========
</TABLE>



See notes to financial statements.


                                      -5-
<PAGE>
                   ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)



1.   Basis of Presentation

     Allstate Life Insurance Company of New York (the "Company") is wholly owned
by a wholly  owned  subsidiary  of Allstate  Insurance  Company,  a wholly owned
subsidiary of The Allstate Corporation.

     The  financial  statements  and notes as of September  30, 1998 and for the
three  month  and nine  month  periods  ended  September  30,  1998 and 1997 are
unaudited.  The financial statements reflect all adjustments (consisting only of
normal  recurring  accruals) which are, in the opinion of management,  necessary
for the fair presentation of the financial  position,  results of operations and
cash flows for the interim periods.  These financial statements and notes should
be read in conjunction with the financial  statements and notes thereto included
in the Allstate  Life  Insurance  Company of New York Annual Report on Form 10-K
for 1997.  The  results of  operations  for the  interim  periods  should not be
considered indicative of results to be expected for the full year.

     Effective  January 1, 1998,  the Company  adopted  Statement  of  Financial
Accounting  Standards ("SFAS") No. 125,  "Accounting for Transfers and Servicing
of Financial  Assets and  Extinguishment  of Liabilities"  under the guidance of
SFAS No. 127,  "Deferral of the  Effective  Date of Certain  Provisions  of FASB
Statement  No. 125." As a result of this  adoption,  the Company has recorded an
asset and  corresponding  liability  representing  the  collateral  received  in
connection with the Company's  securities  lending program.  The cash collateral
received is recorded in short-term  investments  with the  offsetting  liability
being reflected in other liabilities in the statements of financial position. In
accordance  with SFAS No. 127, the  statements  of financial  position for prior
periods have not been restated.

     Effective  January 1, 1998,  the Company  adopted SFAS No. 130,  "Reporting
Comprehensive  Income." Comprehensive income is a measurement of certain changes
in shareholder's  equity that result from transactions and other economic events
other than transactions  with  shareholders.  For the Company,  these consist of
changes in unrealized gains and losses on the investment portfolio, adjusted for
deferred  acquisition  costs and reserves for life  insurance  policy  benefits.
These amounts,  presented as other  comprehensive  income, net of related taxes,
are added to net income which results in  comprehensive  income.  The cumulative
amount of these changes is reported in the  statements of financial  position as
accumulated other comprehensive  income. The required  disclosures are presented
in Note 2.

     In March 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public  Accountants  issued Statement of Position ("SOP")
98-1,  "Accounting for the Costs of Computer Software  Developed or Obtained for
Internal Use." The SOP provides guidance on accounting for the costs of computer
software developed or obtained for internal use. Specifically, certain external,
payroll and payroll  related costs should be capitalized  during the application
development  stage of a software  development  project and depreciated  over the
computer  software's  useful  life.  The Company  has adopted the SOP  effective
January 1, 1998.


                                      -6-
<PAGE>


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



        
     In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting  for Derivative  Instruments and Hedging  Activities."  SFAS No. 133
replaces the existing  pronouncements  and practices  with a single,  integrated
accounting framework for derivatives and hedging activities. The requirements of
this SFAS are effective for fiscal years beginning after June 15, 1999.  Earlier
application of this SFAS is encouraged but is only permitted as of the beginning
of any fiscal quarter after issuance. This SFAS requires that all derivatives be
recognized on the balance sheet at fair value.  Derivatives  that are not hedges
must be adjusted to fair value  through  income.  If the  derivative is a hedge,
depending on the nature of the hedge,  changes in the fair value of  derivatives
will  either be offset  against  the change in fair value of the hedged  assets,
liabilities,  or firm  commitments  through  earnings  or  recognized  in  other
comprehensive   income  until  the  hedged  item  is   recognized  in  earnings.
Additionally, the change in fair value of a derivative which is not effective as
a hedge will be  immediately  recognized  in earnings.  The Company is currently
reviewing  these  requirements  and has not yet  determined  the  impact  or the
expected date of adoption.

     In December  1997,  the  Accounting  Standards  Executive  Committee of the
American Institute of Certified Public Accountants issued SOP 97-3,  "Accounting
by Insurance and Other Enterprises for  Insurance-Related  Assessments." The SOP
is required to be adopted in 1999. The SOP provides guidance  concerning when to
recognize  a  liability  for   insurance-related   assessments   and  how  those
liabilities  should be  measured.  Specifically,  insurance-related  assessments
should be recognized as liabilities when all of the following criteria have been
met: 1) an assessment has been imposed or it is probable that an assessment will
be imposed,  2) the event obligating an entity to pay an assessment has occurred
and  3)  the  amount  of  the  assessment  can  be  reasonably  estimated.   The
requirements  of this SOP are not  expected  to have a  material  impact  on the
results of  operations,  liquidity  or financial  position of the  Company.  The
Company expects to adopt the SOP as of January 1, 1999.

                                      -7-
<PAGE>


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



2.   Comprehensive Income

     The  components  of other  comprehensive  income on a pretax and after -tax
basis are as follows:
<TABLE>
<CAPTION>

                                                                      Three months ended September 30,
                                               --------------------------------------------------------------------------------
    ($ in thousands)                                            1998                                     1997
                                               ---------------------------------------  ---------------------------------------
                                                               Income                                   Income
                                                                 tax        After-                        tax        After-
                                                  Pretax       effect         tax          Pretax       effect         tax  
                                                  ------       ------       ------         ------       ------       ------
<S>                                               <C>          <C>          <C>            <C>          <C>          <C>
    Unrealized capital gains and losses:
        Unrealized holding gains arising
           during the period                     $ 88,775     $ (31,070)    $ 57,705      $  68,073    $ (23,825)   $ 44,248
        Adjustments to unrealized capital
          gains and losses arising during
          the period:
             Deferred acquisition costs            (2,495)          872       (1,623)          (318)         111        (207)
             Reserves for life insurance
               policy benefits                    (48,181)       16,863      (31,318)       (44,814)      15,684     (29,130)
                                                ---------     ---------     --------      ---------    ---------    --------
             Net  unrealized holding gains
               arising during the period           38,099       (13,335)      24,764         22,941       (8,030)     14,911
                                                ---------     ---------     --------      ---------    ---------    --------
        Less:  reclassification adjustment
         for realized net capital gains in-
         cluded in net income                       3,015        (1,055)       1,960            738         (259)        479
                                                ---------     ---------     --------      ---------    ---------    --------

    Other comprehensive income                  $  35,084     $ (12,280)    $ 22,804      $  22,203    $  (7,771)   $ 14,432
                                                =========     =========     --------      =========    =========    --------
    Net income                                                                 5,527                                   7,396
                                                                            --------                                --------
    Comprehensive income                                                    $ 28,331                                $ 21,828
                                                                            ========                                ========

</TABLE>



                                      -8-
<PAGE>

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

<TABLE>
<CAPTION>


                                                                      Nine months ended September 30,
                                              ---------------------------------------------------------------------------------
    ($ in thousands)                                           1998                                    1997
                                              ---------------------------------------  ----------------------------------------
                                                              Income                                  Income
                                                                tax        After-                       tax         After-
                                                 Pretax       effect        tax           Pretax      effect         tax  
                                                  ------       ------       ------         ------       ------       ------
<S>                                               <C>          <C>          <C>            <C>          <C>          <C>

    Unrealized capital gains and losses:
       Unrealized holding gains arising
          during the period                    $ 130,282      $ (45,598)   $ 84,684        $ 54,810    $ (19,184)   $  35,626
       Adjustments to unrealized capital
          gains and losses arising during
          the period:
          Deferred acquisition costs              (3,066)         1,072      (1,994)           (234)          82         (152)
          Reserves for life insurance
              policy benefits                    (73,283)        25,649     (47,634)        (36,744)      12,860      (23,884)
                                               ---------      ---------    --------        --------    ---------    ---------
           Net  unrealized holding gains
              arising during the period           53,933        (18,877)     35,056          17,832       (6,242)      11,590
                                               ---------      ---------    --------        --------    ---------    ---------
       Less:  reclassification adjustment
          for realized net capital gains
          included in net income                   4,221         (1,477)      2,744             556         (195)         361
                                               ---------      ---------    --------        --------    ---------    ---------

    Other comprehensive income                 $  49,712      $ (17,400)   $ 32,312        $ 17,276    $  (6,047)   $  11,229
                                               =========      =========    --------        ========    =========    ---------
    Net income                                                               21,509                                    18,957
                                                                           --------                                 ---------
    Comprehensive income                                                   $ 53,821                                 $  30,186
                                                                           ========                                 =========
</TABLE>


3.   Regulation and Legal Proceedings

     The  Company's  business  is subject to the  effects of a changing  social,
economic and  regulatory  environment.  Public and regulatory  initiatives  have
varied and have included employee benefit  regulation,  controls on medical care
costs,  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.

     From  time to time the  Company  is  involved  in  pending  and  threatened
litigation  in the normal  course of its  business in which  claims for monetary
damages are asserted. In the opinion of management,  the ultimate liability,  if
any, arising from such pending or threatened  litigation is not expected to have
a material effect on the results of operations,  liquidity or financial position
of the Company.


                                      -9-
<PAGE>
                   Allstate Life Insurance Company of New York
                      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  Allstate  Life
Insurance Company of New York (the "Company").  It should be read in conjunction
with the  financial  statements  and notes  thereto  found  under Part I. Item 1
contained herein and the discussion,  analysis,  financial  statements and notes
thereto  found under Part II. Item 7 and Item 8 of the Allstate  Life  Insurance
Company of New York Annual Report on Form 10-K for 1997.

     The Company, which is wholly owned by a wholly owned subsidiary of Allstate
Insurance  Company  ("AIC"),  a  subsidiary  of The  Allstate  Corporation  (the
"Corporation"),  markets a broad line of life insurance and annuity  products in
the state of New York.  Life  insurance  includes  traditional  products such as
whole  life  and term  life  insurance,  as well as  universal  life  and  other
interest-sensitive life products.  Annuities include deferred annuities, such as
variable  annuities and fixed rate single and flexible  premium  annuities,  and
immediate  annuities  such  as  structured  settlement  annuities.  The  Company
distributes  its products using a combination of Allstate  agents (which include
life  specialists),  banks,  independent  agents,  brokers  and direct  response
marketing.

<TABLE>
<CAPTION>

FINANCIAL HIGHLIGHTS
($ in thousands)
                                                 Three months ended                       Nine months ended
                                                   September 30,                            September 30,
                                         -----------------------------------    ------------------------------------
                                              1998               1997                 1998                1997
                                         ---------------    ----------------    ----------------    ----------------

<S>                                      <C>                <C>                 <C>                 <C>        
Statutory premiums and deposits          $     67,025       $     45,682        $   195,585         $   149,446
                                         ============       ============        ===========         ===========

Investments                              $  2,195,754       $  1,797,535        $ 2,195,754         $ 1,797,535
Separate Account assets                       322,658            308,716            322,658             308,716
                                         ------------       ------------        -----------         -----------
Investments including
   Separate Account assets               $  2,518,412       $  2,106,251        $ 2,518,412         $ 2,106,251
                                         ============       ============        ===========         ===========

Premiums and contract charges            $     28,165       $     28,221        $    87,838         $    89,010
Net investment income                          33,758             31,629            100,018              92,871
Contract benefits                              46,744             43,081            135,565             132,946
Operating costs and expenses                    6,787              5,983             22,735              20,058
                                         ------------       ------------        -----------         -----------
Income from operations                          8,392             10,786             29,556              28,877
Income tax expense on
   operations                                   2,877              3,921             10,451              10,402
                                         ------------       ------------        -----------         -----------
Operating income                                5,515              6,865             19,105              18,475
Realized capital gains and
   losses, after-tax (1)                           12                531              2,404                 482
                                         ------------       ------------        -----------         -----------
Net income                               $      5,527       $      7,396        $    21,509         $    18,957
                                         ============       ============        ===========         ===========

</TABLE>

(1) Net of the effect of related  amortization  of deferred  policy  acquisition
costs in 1998.

                                      -10-
<PAGE>

                   Allstate Life Insurance Company of New York
                      Management's Discussion and Analysis
                of Financial Condition and Results of Operations
                                  (Continued)


Premiums, deposits, contract charges and contract benefits

     Statutory  premiums and deposits,  which include  premiums and deposits for
all products,  increased 46.7% in the third quarter and 30.9% for the first nine
months of 1998  compared  with the same periods  last year.  For the three month
period ended  September  30, 1998,  the increase was primarily  attributable  to
increased  sales  of  fixed  annuities  and,  to  a  lesser  extent,  structured
settlement annuities.  For the nine-month period, the increase was primarily the
result of increased sales of fixed annuities.

     Premiums  and  contract   charges  under  generally   accepted   accounting
principles  ("GAAP")  decreased  slightly  in the third  quarter  and first nine
months of 1998 from the comparable 1997 periods.  Under GAAP,  revenues  exclude
deposits on most annuity  contracts  and premiums on  universal  life  insurance
policies and will vary with the mix of products sold during the period. In 1998,
increased  revenues from universal and term life insurance were more than offset
by lower sales of life-contingent structured settlement annuities.

Operating income

     Pretax net investment  income  increased 6.7% and 7.7% in the third quarter
and the  first  nine  months of 1998,  respectively,  from the  comparable  1997
periods, primarily due to higher investment balances,  partially offset by lower
investment yields. Investments, excluding Separate Account assets and unrealized
gains on fixed income  securities,  grew by 9.8%.  The overall  portfolio  yield
declined  slightly,  as proceeds  from calls and  maturities as well as positive
cash flows from operating  activities were invested in securities  yielding less
than the average  portfolio rate. In relatively low interest rate  environments,
funds from maturing  investments  may be reinvested at lower interest rates than
those which prevailed when the funds were previously invested.

     Operating  expenses,  which includes the  amortization  of deferred  policy
acquisition  costs,  increased  $804 thousand or 13.4% and $2.7 million or 13.3%
for  the   three-month   and  nine-month   periods  ended  September  30,  1998,
respectively.  The increase for the three-month  period ended September 30, 1998
was  primarily  due to increased  amortization  of deferred  policy  acquisition
costs.  The increase for the  nine-month  period  ended  September  30, 1998 was
related to increased  general  expenses  resulting  from growth in the number of
customer  policies  and an  increase  in the  amortization  of  deferred  policy
acquisition  costs. In both the three and nine month periods ended September 30,
1997,  the  amortization  of deferred  acquisition  costs was reduced due to the
revised estimates of future gross profits on interest sensitive life products.

     Operating  income  decreased 19.7% during the third quarter,  and increased
3.4%  during the first nine  months of 1998  compared  with the same  periods in
1997. For the three month period,  increased net investment income was more than
offset by  increased  costs and  expenses.  For the nine  month  period,  income
generated from new and existing structured settlement annuity and life insurance
business was partially offset by increased costs and expenses.

Realized capital gains and losses

     Net realized capital gains after-tax decreased to $12 thousand in the third
quarter as a result of lower gains on fixed income  securities.  The increase to
$2.4 million for the first nine months of 1998 is due primarily to gains arising
from the receipt of prepayments of fixed income securities.


                                      -11-
<PAGE>

                   Allstate Life Insurance Company of New York
                      Management's Discussion and Analysis
                of Financial Condition and Results of Operations
                                  (Continued)


INVESTMENTS

     The  composition  of the  investment  portfolio at September  30, 1998,  at
financial statement carrying values, is presented in the table below.

                                                                Percent
($ in thousands)                                                to total
                                                                --------

Fixed income securities (1)             $1,999,860                 91.1.%
Mortgage loans                             131,584                  6.0
Policy loans                                28,759                  1.3
Short-term                                  35,551                  1.6
                                        ----------              -------

    Total                               $2,195,754                100.0%
                                        ==========              =======


(1) Fixed income securities are carried at fair value.  Amortized cost for these
securities was $1,628,116.

     Total  investments  increased to $2.20  billion at September  30, 1998 from
$1.91 billion at December 31, 1997. The increase in investments is primarily due
to the increase in  unrealized  net capital  gains on fixed  income  securities,
amounts invested from positive cash flows generated from financing and operating
activities,  and the  addition to  short-term  investments  of $24.4  million of
collateral  resulting  from a change  in  accounting  treatment  for  securities
lending  programs.  At September 30, 1998,  unrealized  net capital gains on the
fixed income securities portfolio were $371.7 million compared to $246.1 million
at December 31, 1997.

Fixed income securities

     The   Company's   fixed   income   securities    portfolio    consists   of
privately-placed  securities,  U.S. government bonds,  publicly traded corporate
bonds, mortgage-backed securities,  asset-backed securities and municipal bonds.
The Company  generally holds its fixed income  securities for the long term, but
has  classified  all of these  securities as available for sale to allow maximum
flexibility in portfolio management.

     Substantially  all of the Company's  fixed income  securities  portfolio is
rated investment  grade,  which is defined by the Company as a security having a
National  Association  of  Insurance  Commissioners  rating of 1 or 2, a Moody's
rating of Aaa, Aa, A or Baa, or a comparable Company internal rating.

Short-term investments

     The carrying  value of the Company's  short-term  investment  portfolio was
$35.6  million and $9.5  million at  September  30, 1998 and  December 31, 1997,
respectively.  The Company  generally invests available cash balances in taxable
short-term  securities  having a final  maturity date or redemption  date of one
year or less.


                                      -12-
<PAGE>

                   Allstate Life Insurance Company of New York
                      Management's Discussion and Analysis
                of Financial Condition and Results of Operations
                                  (Continued)


SEPARATE ACCOUNTS

     Separate Account assets and liabilities  increased 4.6% from $308.6 million
at December 31, 1997 to $322.7  million at September  30, 1998 due  primarily to
sales of variable annuity contracts and the favorable investment  performance of
the Separate Account investment portfolios which were, to a large extent, offset
by variable annuity contract surrenders and withdrawals.


LIQUIDITY AND CAPITAL RESOURCES

Liquidity

     The Company's  principal  sources of funds are collections of principal and
interest from the investment portfolio and the receipt of premiums and deposits.
The primary uses of these funds are to purchase investments and pay policyholder
claims, benefits, contract maturities and surrenders, and operating costs.

     The maturity  structure of the  Company's  fixed income  securities,  which
represent  91.1% of the  Company's  total  investments,  is  managed to meet the
anticipated cash flow requirements of the underlying  liabilities.  A portion of
the Company's  product  portfolio,  primarily  fixed annuity and universal  life
insurance  products,  is subject to  discretionary  surrender and  withdrawal by
contractholders.  Management believes its assets are sufficiently liquid to meet
future  obligations  to its  life  and  annuity  contractholders  under  various
interest rate scenarios.


YEAR 2000

   
     The Company is heavily  dependent  upon  complex  computer  systems for all
phases of its  operations,  including  customer  service,  policy  and  contract
administration,  risk  analysis,  investment  processing  and  other  enterprise
systems.  Since many of the Company's older computer software programs recognize
only the last two  digits of the year in any  date,  some  software  may fail to
operate properly in or after the year 1999, if the software is not reprogrammed,
remediated, or replaced ("Year 2000"). Also, many systems and equipment that are
not typically thought of as  computer-related  (referred to as "non-IT") contain
imbedded hardware or software that may have a Year 2000 sensitive component. The
Company  believes that many of its  counterparties  and suppliers also have Year
2000 issues and non-IT issues which could affect the Company.

     In 1995, the  Corporation  commenced a plan consisting of four phases which
are  intended to mitigate  and/or  prevent the adverse  affects of the Year 2000
issues on its  systems:  (1)  assessment  and  analysis of affected  systems and
equipment;  (2)  remediation  and  compliance of systems and  equipment  through
strategies that include the enhancement of new and existing systems, upgrades to
operating systems already covered by maintenance agreements and modifications to
existing  systems to make them Year 2000  compliant;  (3) testing of systems and
equipment using clock-forward  testing for both current and future dates and for
dates which trigger specific processing; and (4) contingency planning which will
address  possible  adverse  scenarios and the potential  financial impact to the
Company's results of operations, liquidity or financial position.

                                      -13-
<PAGE>
                   Allstate Life Insurance Company of New York
                      Management's Discussion and Analysis
                of Financial Condition and Results of Operations
                                  (Continued)





     The Corporation believes that the first step of this plan,  assessment,  is
complete,  and is  currently  in the  remediation  phase  for  all  systems  and
equipment.  The Corporation is relying on other  remediation  techniques for its
midrange and personal computer environments, and certain mainframe applications.
Management  believes  the  majority of the  Corporation's  computer  systems and
equipment will be remediated by the end of 1998, with the investment  processing
systems and certain midrange computers to be remediated by the middle of 1999.

     The third  phase of the plan which  includes  clock-forward  testing of the
Corporation's systems and non-IT, is scheduled to be largely complete by the end
of 1998.  The  Corporation  is  currently  in the  process  of  identifying  key
processes  and  developing  contingency  plans in the event that the systems and
equipment  supporting  these processes are not Year 2000 compliant at the end of
1999.  Management  believes  these  contingency  plans  should be  completed  by
mid-1999.  Until these plans are complete,  management is unable to determine an
estimate  of the most  reasonably  possible  worst case  scenario  due to issues
relating to the Year 2000.

     In  addition  the  Company  is  actively  working  with its major  external
counterparties  and  suppliers  to  assess  their  compliance  efforts  and  the
Company's exposure to both their Year 2000 issues and non-IT issues. The Company
is currently soliciting its key external counterparties and suppliers to certify
that they are  compliant  with the Year 2000 issues or are taking  actions  they
believe  will  adequately  prepare  them for the Year  2000.  The  Company  will
continue  its efforts to receive  responses on Year 2000  compliance  from these
parties.  If key  vendors  are  unable  to meet the Year 2000  requirement,  the
Company  intends to  prepare  contingency  plans that will allow the  Company to
continue  to  sell to and  service  its  customers.  Management  believes  these
contingency  plans  should  be  completed  by  mid-1999.  The  Company  also has
investments which have been publicly and privately placed.  The Company may also
be exposed to the risk that the issuers of these  investments  will be adversely
impacted by Year 2000 issues.

     The Company presently  believes that it will resolve the Year 2000 issue in
a timely  manner,  and the costs  incurred to achieve  Year 2000  compliance  of
Company  systems are not  expected to be  material to the  Company's  results of
operations,  liquidity  or financial  position.  Year 2000 costs are expensed as
incurred.
    





                                      -14-
<PAGE>

                   Allstate Life Insurance Company of New York
                      Management's Discussion and Analysis
                of Financial Condition and Results of Operations
                                  (Continued)


PENDING ACCOUNTING STANDARDS

     In June 1998, the Financial  Accounting Standards Board issued Statement of
Financial  Accounting  Standards  ("SFAS") No. 133,  "Accounting  for Derivative
Instruments   and  Hedging   Activities."   SFAS  No.  133   replaces   existing
pronouncements and practices with a single,  integrated accounting framework for
derivatives and hedging  activities.  The  requirements are effective for fiscal
years  beginning after June 15, 1999.  Earlier  application is encouraged but is
only  permitted as of the beginning of any fiscal quarter after  issuance.  This
SFAS  requires that all  derivatives  be recognized on the balance sheet at fair
value.  Derivatives  that are not hedges must be adjusted to fair value  through
income.  If the  derivative  is a hedge,  depending  on the nature of the hedge,
changes in the fair  value of  derivatives  will  either be offset  against  the
change in fair  value of the hedged  assets,  liabilities,  or firm  commitments
through  earnings or recognized in other  comprehensive  income until the hedged
item is  recognized  in  earnings.  Additionally,  the change in fair value of a
derivative  which is not effective as a hedge will be immediately  recognized in
earnings.  The Company is currently reviewing these requirements and has not yet
determined the impact or the expected date of adoption.

     In December  1997,  the  Accounting  Standards  Executive  Committee of the
American  Institute of Certified Public Accountants issued Statement of Position
("SOP")   97-3,   "Accounting   by   Insurance   and   Other   Enterprises   for
Insurance-Related  Assessments."  The SOP is required to be adopted in 1999. The
SOP  provides   guidance   concerning   when  to   recognize  a  liability   for
insurance-related  assessments  and how those  liabilities  should be  measured.
Specifically,  insurance-related assessments should be recognized as liabilities
when all of the  following  criteria  have been met: 1) an  assessment  has been
imposed or it is  probable  that an  assessment  will be  imposed,  2) the event
obligating an entity to pay an assessment  has occurred and 3) the amount of the
assessment can be reasonably  estimated.  The  requirements  of this SOP are not
expected to have a material  impact on the results of  operations,  liquidity or
financial  position of the Company.  The Company  expects to adopt the SOP as of
January 1, 1999.


FORWARD-LOOKING STATEMENTS

     The statements contained in this Management's  Discussion and Analysis that
are not historical information are forward-looking  statements that are based on
management's  estimates,  assumptions and  projections.  The Private  Securities
Litigation Reform Act of 1995 provides a safe harbor under The Securities Act of
1933 and The Securities Exchange Act of 1934 for forward-looking statements.



                                      -15-
<PAGE>
                           PART II - Other Information

Item 1.  Legal Proceedings

          The  Company  and its Board of  Directors  know of no  material  legal
          proceedings  pending to which the  Company  is a party or which  would
          materially affect the Company.  The Company is involved in pending and
          threatened  litigation  in the normal  course of its business in which
          claims  for  monetary   damages  are   asserted.   Management,   after
          consultation  with legal  counsel,  does not  anticipate  the ultimate
          liability arising from such pending or threatened litigation to have a
          material effect on the financial condition of the Company.

Item 2.  Changes in Securities

         Not applicable.

Item 3.  Defaults Upon Senior Securities

         Not applicable.

Item 4.  Submission of Matters to a Vote of Security Holders

         Not applicable.

Item 5.  Other Information

         Not applicable.

Item 6. Exhibits and Reports on Form 8-K

        (a) Exhibits required by Item 601 of Regulation S-K

              (2)    None
              (3)(i) Articles of Incorporation*
                (ii) By-laws*
              (4)    Allstate Life Insurance Company of New York
                     Single Premium Deferred Annuity Contract**
                      Allstate Life Insurance Company of New York Flexible
                     Premium Deferred Annuity Contract*
              (10) None 
              (11) None 
              (15) None 
              (18) None 
              (19) None 
              (22) None
              (23)(a)Consent of Independent Public Accountants***
                  (b)Consent of Attorneys****
              (24) None
              (27) Financial Data Schedule
              (99) None

       (b)  Reports on 8-K

             No reports on Form 8-K were filed during the third quarter of 1998.




*  Previously  filed  in  Form  N-4  Registration  Statement  No.33-65381  dated
September 20, 1996 and incorporated by reference.

**  Previously  filed  in Form  S-1  Registration  Statement  No.33-47245  dated
November 13, 1992 and incorporated by reference.

*** Previously filed in Form S-1 Registration  Statement No.33-47245 filed April
1, 1998 and  incorporated  by  reference;  Form S-1  Registration  Statement No.
33-65355 filed April 1, 1998 and incorporated by reference.

**** Previously filed in Form S-1 Registration Statement No.33-47245 filed April
1, 1998 and Form S-1 Registration Statement No. 33-65355 filed April 1, 1998 and
incorporated by reference.





                                      -16-


<PAGE>


                                   SIGNATURES


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized, on the 13th day of November, 1998.



                           ALLSTATE LIFE INSURANCE COMPANY OF NEW YORK
                           -------------------------------------------
                                  (Registrant)






/s/ LOUIS G. LOWER, II               CHAIRMAN OF THE BOARD OF DIRECTORS
------------------------               AND CHIEF EXECUTIVE OFFICER
 LOUIS G. LOWER, II                  (Principal Executive Officer)



/s/ KEITH A. HAUSCHILDT              ASSISTANT VICE PRESIDENT AND CONTROLLER
------------------------              (Chief Accounting Officer)
 KEITH A. HAUSCHILDT