SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
=========
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 0-8590
Equitable of Iowa Companies
(Exact name of registrant as specified in its charter)
Iowa 42-1083593
(State or other jurisdiction of (IRS employer identification no.)
incorporation or organization)
604 Locust Street, Des Moines, Iowa 50306
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (515) 245-6911
__________________________________________________________________________
Former name, former address and formal 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 / /
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Section 12, 13 or 15(d)
of the Securities Exchange Act of 1934 subsequent to the distribution
of securities under a plan confirmed by a court. Yes / / No / /
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date: 31,650,592
shares of Common Stock as of November 1, 1994.
FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Person for whom the Financial Information is given: EQUITABLE OF IOWA
COMPANIES AND ITS
SUBSIDIARIES
Consolidated Statements of Income (Unaudited):
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
September 30, 1994 September 30, 1993
________________ ________________
(Current Year) (Preceding Year)
(Dollars in thousands)
<S> <C> <C>
REVENUES:
Universal life and annuity
product charges $11,151 $8,227
Traditional life insurance premiums 11,954 11,706
Net investment income 137,263 109,594
Realized gains on investments 3,343 8,229
Other income 4,670 4,002
_____________ _____________
168,381 141,758
BENEFITS AND EXPENSES:
Universal life and annuity product benefits:
Interest credited to account balances 82,555 68,033
Benefit claims incurred in excess of
account balances 3,090 1,641
Traditional life insurance benefits:
Death benefits 4,595 5,185
Other benefits 8,665 8,035
Increase in future policy benefits:
Life and annuity 2,425 1,061
Other contracts 143 612
Distributions to participating
policyholders 6,639 6,678
Underwriting, acquisition and insurance expenses:
Commissions 45,843 31,047
General expenses 11,827 10,048
Insurance taxes 2,779 1,512
Policy acquisition costs deferred (56,414) (37,493)
Amortization of deferred policy
acquisition costs 13,836 9,724
_____________ _____________
125,983 106,083
Interest expense 1,811 2,451
Other expenses 2,477 1,919
_____________ _____________
130,271 110,453
_____________ _____________
38,110 31,305
</TABLE>
Consolidated Statements of Income (Unaudited): (CONTINUATION)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
September 30, 1994 September 30, 1993
________________ ________________
(Current Year) (Preceding Year)
(Dollars in thousands,
except per share data)
<S> <C> <C>
Income taxes (credit):
Current $12,224 $10,254
Deferred 1,013 716
_____________ _____________
13,237 10,970
_____________ _____________
24,873 20,335
Equity income, net of related tax benefit
of $(77) in 1994 and $11 in 1993 (152) 17
_____________ _____________
NET INCOME $24,721 $20,352
============= =============
NET INCOME PER COMMON SHARE (average
shares used: 1994 - 31,644,743;
1993 - 29,118,261): $0.78 $0.70
============= =============
CASH DIVIDENDS PAID PER COMMON SHARE $0.12 $0.105
</TABLE>
Consolidated Statements of Income (Unaudited):
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
September 30, 1994 September 30, 1993
________________ ________________
(Current Year) (Preceding Year)
(Dollars in thousands)
<S> <C> <C>
REVENUES:
Universal life and annuity
product charges $32,262 $24,746
Traditional life insurance premiums 35,167 35,452
Net investment income 382,562 317,198
Realized gains on investments 17,057 24,706
Other income 13,242 11,706
_____________ _____________
480,290 413,808
BENEFITS AND EXPENSES:
Universal life and annuity product benefits:
Interest credited to account balances 232,432 196,575
Benefit claims incurred in excess of
account balances 5,886 4,309
Traditional life insurance benefits:
Death benefits 17,679 16,409
Other benefits 24,580 24,948
Increase in future policy benefits:
Life and annuity 3,603 2,157
Other contracts 187 44
Distributions to participating
policyholders 18,893 19,535
Underwriting, acquisition and insurance expenses:
Commissions 119,448 82,186
General expenses 31,446 26,008
Insurance taxes 7,412 4,568
Policy acquisition costs deferred (145,064) (99,139)
Amortization of deferred policy
acquisition costs 37,164 27,349
_____________ _____________
353,666 304,949
Interest expense 5,996 7,485
Other expenses 7,602 6,328
_____________ _____________
367,264 318,762
_____________ _____________
113,026 95,046
</TABLE>
Consolidated Statements of Income (Unaudited): (CONTINUATION)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
September 30, 1994 September 30, 1993
________________ ________________
(Current Year) (Preceding Year)
(Dollars in thousands,
except per share data)
<S> <C> <C>
Income taxes:
Current $36,250 $29,682
Deferred 3,359 4,098
_____________ _____________
39,609 33,780
_____________ _____________
73,417 61,266
Equity income, net of related tax benefit
of $(20) in 1994 and $53 in 1993 (81) 99
_____________ _____________
NET INCOME $73,336 $61,365
============= =============
NET INCOME PER COMMON SHARE (average
shares used: 1994 - 31,595,419;
1993 - 29,064,491): $2.32 $2.11
============= =============
CASH DIVIDENDS PAID PER COMMON SHARE $0.345 $0.30
</TABLE>
Consolidated Balance Sheets (Unaudited):
<TABLE>
<CAPTION>
September 30, 1994 December 31, 1993
________________ _______________
(Dollars in thousands)
<S> <C> <C>
ASSETS
Investments:
Fixed maturities:
Held for investment, at amortized cost
(market: 1994 - $5,112,551;
1993 - $5,407,358) $5,360,202 $5,078,226
Available for sale, at market
(cost: 1994 - $788,550; 1993 - $0) 758,891 --
Equity securities, at market
(cost: 1994 - $350; 1993 - $250) 183 83
Mortgage loans on real estate 503,039 346,829
Real estate, less allowances for
depreciation of $4,789 in 1994
and $4,580 in 1993 18,930 20,773
Policy loans 175,337 176,849
Short-term investments 20,566 67,619
_____________ _____________
TOTAL INVESTMENTS 6,837,148 5,690,379
Cash and cash equivalents 13,952 5,190
Securities and indebtedness of
related parties 9,443 11,791
Accrued investment income 102,923 92,473
Notes and other receivables 26,367 27,366
Deferred policy aquisition costs 568,987 451,180
Property and equipment, less
allowances for depreciation of
$6,079 in 1994 and $4,259 in 1993 7,550 7,431
Current income tax recoverable 2,577 --
Deferred income tax benefit 15,271 11,583
Intangible assets 2,650 3,346
Other assets 42,894 36,668
Separate account assets 86,612 94,028
_____________ _____________
TOTAL ASSETS $7,716,374 $6,431,435
============= =============
</TABLE>
Consolidated Balance Sheets (Unaudited):
<TABLE>
<CAPTION>
September 30, 1994 December 31, 1993
________________ _______________
(Dollars in thousands)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Policy liabilities and accruals:
Future policy benefits:
Traditional life insurance products $777,948 $774,356
Universal life and annuity
products 5,923,990 4,803,729
Unearned revenue reserve 14,033 14,451
Other policy claims and benefits 4,607 5,765
_____________ _____________
6,720,578 5,598,301
Other policyholders' funds:
Supplementary contracts without
life contingencies 12,063 11,729
Advance premiums and other deposits 880 925
Accrued dividends 12,928 13,251
_____________ _____________
25,871 25,905
Current income taxes payable -- 2,293
Notes and loans payable:
Commercial paper notes 174,500 34,000
Convertible subordinated installment
notes -- 218
Long-term bonds -- 49,996
_____________ _____________
174,500 84,214
Other liabilities 129,561 98,732
Separate account liabilities 86,612 94,028
_____________ _____________
TOTAL LIABILITIES 7,137,122 5,903,473
Stockholders' equity:
Serial preferred stock, without par value,
authorized 2,500,000 shares -- --
Common stock, without par value (stated
value $1.00 per share), authorized 70,000,000
shares, issued and outstanding 31,650,438
shares in 1994 and 31,504,586 in 1993 31,650 31,505
Additional paid-in capital 78,208 75,841
Unrealized appreciation (depreciation)
on fixed maturity securities (12,839) --
Unrealized appreciation (depreciation)
on marketable equity securities (167) (167)
Retained earnings 484,488 422,093
Unearned compensation (deduction) (2,088) (1,310)
_____________ _____________
TOTAL STOCKHOLDERS' EQUITY 579,252 527,962
_____________ _____________
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $7,716,374 $6,431,435
============= =============
</TABLE>
Consolidated Statement of Cash Flows (Unaudited):
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
September 30, 1994 September 30, 1993
________________ ________________
(Current Year) (Preceding Year)
(Dollars in thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net income $73,336 $61,365
Adjustments to reconcile net income to
net cash provided by operations:
Adjustments related to universal life
and annuity products:
Interest credited to account balances 232,432 196,575
Charges for mortality and
administration (34,040) (22,929)
Deferral of unearned revenues 495 1,500
Amortization of unearned revenue
reserve (1,110) (1,711)
Increase in traditional life policy
liabilities and accruals 1,634 2,503
Increase (decrease) in other policyholders'
funds (34) 195
Increase in accrued investment income (10,450) (12,819)
Policy acquisition costs deferred (145,064) (99,139)
Amortization of deferred policy
acquisition costs 37,164 27,349
Change in other assets, other
liabilities, and accrued income taxes 23,914 69,411
Provision for depreciation and
amortization 1,247 120
Provision for deferred income taxes 3,226 4,147
Share of (earnings) losses of related
parties 58 (152)
Realized gains on investments (17,057) (24,706)
_____________ _____________
NET CASH PROVIDED BY OPERATING ACTIVITIES 165,751 201,709
INVESTING ACTIVITIES
Sale, maturity, or repayment of investments:
Fixed maturities - held for investment 256,416 734,228
Fixed maturities - available for sale 189,475 --
Mortgage loans on real estate 26,875 30,079
Real estate 1,279 289
Policy loans 23,761 19,964
Short-term investments - net 47,053 29,579
_____________ _____________
544,859 814,139
Acquisition of investments:
Fixed maturities - held for investment (1,361,086) (1,597,616)
Fixed maturities - available for sale (135,961) --
Equity securities (100) --
Mortgage loans on real estate (183,106) (90,135)
Real estate (395) (375)
Policy loans (22,249) (19,950)
_____________ _____________
(1,702,897) (1,708,076)
</TABLE>
Consolidated Statement of Cash Flows (Unaudited): (CONTINUATION)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
September 30, 1994 September 30, 1993
________________ ________________
(Current Year) (Preceding Year)
(Dollars in thousands)
<S> <C> <C>
INVESTING ACTIVITIES - continued
Disposal of investments accounted for
by the equity method $2,731 $802
Additions to investments accounted for
by the equity method (2) (326)
Repayments of notes receivable 1 5
Issuance of notes receivable (1,262) --
Sales of property and equipment 254 233
Purchases of property and equipment (2,197) (2,759)
_____________ _____________
NET CASH USED IN INVESTING ACTIVITIES (1,158,513) (895,982)
FINANCING ACTIVITIES
Repayment of notes and loans payable (50,214) (16)
Issuance of commercial paper - net 140,500 28,226
Receipts from universal life policies
and annuity contracts credited to
policyholder account balances 1,355,844 861,404
Return of policyholder account balances
on universal life policies and
annuity contracts (433,975) (182,039)
Issuance of stock under employee
stock plans and upon debt
conversion 311 475
Cash dividends paid (10,942) (8,754)
_____________ _____________
NET CASH PROVIDED BY FINANCING
ACTIVITIES 1,001,524 699,296
_____________ _____________
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 8,762 5,023
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 5,190 6,210
_____________ _____________
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $13,952 $11,233
============= =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $5,110 $7,593
Income taxes 46,794 34,279
Non-cash investing activites:
Foreclosure of mortgage loans 250 6,577
</TABLE>
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -- BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for annual financial statements. In the opinion of management,
all adjustments considered necessary for a fair presentation have been
included. All adjustments were of a normal recurring nature, unless
otherwise noted in Management's Discussion and Analysis and the Notes to
Financial Statements. Operating results for the three and nine months
ended September 30, 1994 are not necessarily indicative of the results that
may be expected for the year ended December 31, 1994. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the company's Annual Report on Form 10-K for the year
ended December 31, 1993.
NOTE 2 -- INVESTMENT OPERATIONS
Effective January 1, 1994, the company adopted Statement of Financial
Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments
in Debt and Equity Securities". Pursuant to SFAS No. 115, fixed maturity
securities that the company has the positive intent and ability to hold to
maturity are designated as "held for investment". Held for investment
securities are reported at cost adjusted for amortization of premiums and
discounts. Changes in the market value of these securities, except for
declines that are other than temporary, are not reflected in the company's
financial statements. Fixed maturity securities which may be sold are
designated as "available for sale". Available for sale securities are
reported at market value and unrealized gains and losses on these
securities are included directly in stockholders' equity, after adjustment
for changes in deferred policy acquisition costs, policy reserves and
deferred income taxes. Transfers of securities between categories are
restricted and are recorded at fair value at the time of transfer.
Securities that are determined to have a decline in value that is other
than temporary are written down to fair value which becomes the security's
new cost basis by a charge to realized losses in the company's Statement of
Income. Premiums and discounts are amortized/accrued utilizing the
scientific interest method which results in a constant yield over the
securities' expected life. Amortization/accrual of premiums and discounts on
mortgage-backed securities incorporates a prepayment assumption to estimate
the securities' expected life.
Prior to the adoption of SFAS No. 115, all of the company's fixed maturity
securities were classified as "held to maturity". Fixed maturity
securities were written down to net realizable value (the sum of the
estimated nondiscounted cash flows from the securities) if the securities
were determined to have declines in value that were "other than temporary".
Future investment income was recognized at the rate implicit in this
calculation of net realizable value.
Equity securities (common and nonredeemable preferred stocks) are reported
at market if readily marketable, or at cost if not readily marketable. The
change in unrealized appreciation and depreciation of marketable equity
securities (net of related deferred income taxes, if any) is included
directly in stockholders' equity.
Mortgage loans on real estate are reported at cost adjusted for
amortization of premiums and accrual of discounts. If the value of any
mortgage loan is determined to be impaired (i.e. when it is probable that
the company will be unable to collect all amounts due according to the
contractual terms of the loan agreement), the carrying value of the
mortgage loan is reduced to the present value of expected future cash flows
from the loan, discounted at the loan's effective interest rate, or to the
loan's observable market price, or the fair value of the underlying
collateral. The carrying value of impaired loans is reduced by the
establishment of a valuation allowance which is adjusted at each reporting
date for significant changes in the calculated value of the loan. Changes
in this valuation allowance are charged or credited to income.
Real estate, which includes real estate acquired through foreclosure, is
reported at cost less allowances for depreciation. Real estate acquired
through foreclosure, or in-substance foreclosure, is recorded at the lower
of cost (which includes the balance of the mortgage loan, any accrued
interest and any costs incurred to obtain title to the property) or fair
value as determined at or before the foreclosure date. After foreclosure,
foreclosed real estate is carried at the lower of fair value less estimated
sale costs, or cost.
Policy loans are reported at unpaid principal. Short-term investments are
reported at cost adjusted for amortization of premiums and accrual of
discounts (which approximates estimated market value for these securities).
Estimated market values, as reported herein, of publicly traded fixed
maturity securities are as reported by an independent pricing service.
Market values of conventional mortgage-backed securities not actively
traded in a liquid market are estimated using a third party pricing system
which uses a matrix calculation assuming a spread over U.S. Treasury bonds
based upon the expected average lives of the securities. Market values of
private placement bonds are estimated using a matrix that assumes a spread
over U.S. Treasury bonds based upon interest rates and a risk assessment of
the bonds. Market values of redeemable preferred stocks are as reported by
the National Association of Insurance Commissioners ("NAIC"). Market
values of equity securities are based on the latest quoted market prices,
or where not readily marketable, at values which are representative of the
market values of issues of comparable yield and quality. Realized gains
and losses are determined on the basis of specific identification of
investments.
The cumulative effect of adopting SFAS No. 115 was to increase
stockholders' equity by $22,516,000, or $0.71 per share, at January 1,
1994. The company analyzes projected cash flows from investments and
policy liabilities under a variety of economic scenarios to determine what
portion of its investment portfolio might need to be sold under these
scenarios. Based upon this analysis and other factors, the company
designates a portion of its fixed maturity securities portfolio as
"available for sale". On September 30, 1994, fixed income securities with
an amortized cost of $788,550,000 and an estimated market value of
$758,891,000 were designated as available for sale. Unrealized losses on
these securities, net of adjustments to deferred policy acquisition costs,
unearned revenue reserves and related deferred income taxes, decreased
stockholders' equity by $12,839,000, or $0.41 per share, at September 30,
1994.
At September 30, 1994 and December 31, 1993, amortized cost, gross
unrealized gains and losses and estimated market values of fixed maturity
securities held for investment are as follows:
<TABLE>
<CAPTION>
HELD FOR INVESTMENT
Gross Gross Estimated
Amortized Unrealized Unrealized Market
September 30, 1994 Cost Gains Losses Value
______________________________________________________________________
(Dollars in thousands)
<S> <C> <C> <C> <C>
U.S. government and
governmental agencies
and authorities:
Mortgage-backed
securities $294,555 $5,467 ($12,153) $287,869
Other 3,985 96 (95) 3,986
States, municipalities
and political
subdivisions 15,634 -- (684) 14,950
Foreign governments 10,573 712 -- 11,285
Public utilities 1,231,911 8,198 (93,665) 1,146,444
Investment grade
corporate 1,596,062 40,510 (71,241) 1,565,331
Below investment grade
corporate 236,113 1,401 (11,382) 226,132
Mortgage-backed
securities 1,970,674 11,795 (126,352) 1,856,117
Redeemable preferred
stocks 695 -- (258) 437
___________ ___________ ___________ ___________
TOTAL HELD FOR
INVESTMENT $5,360,202 $68,179 ($315,830) $5,112,551
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
HELD FOR INVESTMENT
Gross Gross Estimated
Amortized Unrealized Unrealized Market
December 31, 1993 Cost Gains Losses Value
______________________________________________________________________
(Dollars in thousands)
<S> <C> <C> <C> <C>
U.S. government and
governmental agencies
and authorities:
Mortgage-backed
securities $327,195 $22,121 $ -- $349,316
Other 3,493 380 -- 3,873
States, municipalities
and political
subdivisions 15,854 700 (28) 16,526
Foreign governments 10,573 2,580 -- 13,153
Public utilities 1,198,523 75,309 (6,399) 1,267,433
Investment grade
corporate 1,724,879 187,348 (4,529) 1,907,698
Below investment grade
corporate 361,869 14,266 (4,765) 371,370
Mortgage-backed
securities 1,435,129 51,384 (8,971) 1,477,542
Redeemable preferred
stocks 711 -- (264) 447
___________ ___________ ___________ ___________
TOTAL HELD FOR
INVESTMENT $5,078,226 $354,088 ($24,956) $5,407,358
=========== =========== =========== ===========
</TABLE>
At September 30, 1994, amortized cost, gross unrealized gains and losses
and estimated market values of fixed maturity securities designated as
available for sale are as follows:
<TABLE>
<CAPTION>
AVAILABLE FOR SALE
Gross Gross Estimated
Amortized Unrealized Unrealized Market
September 30, 1994 Cost Gains Losses Value
______________________________________________________________________
(Dollars in thousands)
<S> <C> <C> <C> <C>
U.S. government and
governmental agencies
and authorities:
Mortgage-backed
securities $18,477 $ -- ($334) $18,143
Other 30,620 -- (622) 29,998
Public utilities 70,197 738 (6,836) 64,099
Investment grade
corporate 319,788 11,094 (18,331) 312,551
Below investment grade
corporate 201,804 901 (19,720) 182,985
Mortgage-backed
securities 147,664 3,491 (40) 151,115
___________ ___________ ___________ ___________
TOTAL AVAILABLE
FOR SALE $788,550 $16,224 ($45,883) $758,891
=========== =========== =========== ===========
</TABLE>
No fixed maturity securities were designated as available for sale on
December 31, 1993. Amortized cost and estimated market value of debt
securities at September 30, 1994, by contractual maturity, are shown below.
Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without
call or prepayment penalties.
<TABLE>
<CAPTION>
Estimated
Amortized Market
HELD FOR INVESTMENT Cost Value
_____________________________________________________________________
(Dollars in thousands)
<S> <C> <C>
Due in one year or less $1,179 $1,184
Due after one year through five years 44,273 45,478
Due after five years through ten years 593,913 576,580
Due after ten years 2,455,608 2,345,323
_____________ _____________
3,094,973 2,968,565
Mortgage-backed securities 2,265,229 2,143,986
_____________ _____________
TOTAL HELD FOR INVESTMENT $5,360,202 $5,112,551
============= =============
</TABLE>
<TABLE>
<CAPTION>
Estimated
Amortized Market
AVAILABLE FOR SALE Cost Value
_____________________________________________________________________
(Dollars in thousands)
<S> <C> <C>
Due after one year through five years $22,993 $23,432
Due after five years through ten years 117,695 112,226
Due after ten years 481,721 453,975
_____________ _____________
622,409 589,633
Mortgage-backed securities 166,141 169,258
_____________ _____________
TOTAL AVAILABLE FOR SALE $788,550 $758,891
============= =============
</TABLE>
Short-term investments with maturities of 30 days or less have been
excluded from the above schedules, since amortized cost approximates market
value for those securities.
Carrying value and estimated market value of mortgage-backed securities,
which comprise 39.8% of the company's investment in fixed maturity
securities as of September 30, 1994, are as follows:
<TABLE>
<CAPTION>
Estimated
Carrying Market
Value Value
_____________________________
(Dollars in thousands)
<S> <C> <C>
Mortgage-backed securities:
Government and agency guaranteed pools:
Very accurately defined maturities $17,109 $16,379
Planned amortization class 79,459 76,966
Sequential pay 104,598 97,130
Pass through 111,531 115,537
Private Label CMO's and REMIC's:
Very accurately defined maturities 30,365 30,058
Planned amortization class 17,601 17,640
Targeted amortization class 453,943 417,893
Sequential pay 1,549,941 1,477,954
Mezzanines 40,491 37,613
Private placements 29,449 26,074
_____________ _____________
TOTAL MORTGAGE-BACKED SECURITIES $2,434,487 $2,313,244
============= =============
</TABLE>
During periods of significant interest rate volatility, the mortgages
underlying mortgage-backed securities may prepay more quickly or more
slowly than anticipated. If the principal amount of such mortgages are
prepaid earlier than anticipated during periods of declining interest
rates, investment income may decline due to reinvestment of these funds at
lower current market rates. If principal repayments are slower than
anticipated during periods of rising interest rates, increases in
investment yield may lag behind increases in interest rates because funds
will remain invested at lower historical rates rather than reinvested at
higher current rates. To mitigate this prepayment volatility, the company
invests primarily in intermediate tranche collateralized mortgage
obligations ("CMOs"). CMOs are pools of mortgages that are segregated into
sections, or tranches, which provide sequential retirement of bonds rather
than pro-rata share of principal return in the pass-through structure. The
company does not hold any "interest only" or "principal only" mortgage-
backed securities. Further, the company has not purchased obligations at
significant premiums, thereby limiting exposure to loss during periods of
accelerated prepayments. At September 30, 1994, unamortized premiums on
mortgage-backed securities totaled $4,984,000 and unaccrued discounts on
mortgage-backed securities totaled $70,695,000.
An analysis of sales, maturities and principal repayments of the company's
fixed maturities portfolio for the nine months ended September 30, 1994 and
1993 is as follows:
<TABLE>
<CAPTION>
Gross Gross Proceeds
Amortized Realized Realized from
Cost Gains Losses Sale
_______________________________________________
<S> <C> <C> <C> <C>
Nine months ended September 30, 1994
- - - ---------------------------------
Scheduled principal
repayments, calls and
tenders:
Held for investment $246,271 $10,162 ($17) $256,416
Available for sale 152,107 4,783 (11) 156,879
Sales - available for
sale 29,446 3,164 (14) 32,596
___________ ___________ ___________ ___________
TOTAL $427,824 $18,109 ($42) $445,891
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Gross Gross Proceeds
Amortized Realized Realized from
Cost Gains Losses Sale
_______________________________________________
<S> <C> <C> <C> <C>
Nine months ended September 30, 1993
- - - ---------------------------------
Scheduled principal
repayments, calls and
tenders $695,049 $33,414 $-- $728,463
Sales 5,481 284 -- 5,765
___________ ___________ ___________ ___________
TOTAL $700,530 $33,698 $-- $734,228
=========== =========== =========== ===========
</TABLE>
No held for investment securities were sold and there were no transfers
between the held for investment and available for sale portfolios during
the nine months ended September 30, 1994. During the nine months ended
September 30, 1994, the change in the net unrealized gain or loss on
available for sale securities included in stockholders' equity, net of
adjustments, amounted to $35,355,000 of net depreciation.
At September 30, 1994, the company owned equity securities with a combined
book value of $350,000 and an estimated market value of $183,000, resulting
in gross unrealized depreciation of $167,000.
Effective January 1, 1994, the company adopted SFAS No. 114, "Accounting by
Creditors for Impairment of a Loan". The adoption of SFAS No. 114 had no
impact on the company's financial statements at January 1, 1994. During the
nine months ended September 30, 1994, one mortgage loan with a carrying
value of $3,645,000 was restructured resulting in the establishment of a
$66,000 valuation allowance. In addition, the company's regular analysis
of its real estate portfolio indicated that the estimated fair value, less
costs to sell, of two of its real estate properties had declined below
their carrying value at September 30, 1994. As a result of that
determination, valuation allowances totaling $1,074,000 have been established
to reduce the carrying value of these properties to estimated fair value.
The carrying value of investments which have been non-income producing for
the twelve months preceding September 30, 1994 includes: fixed maturities
- - - - $80,000; and real estate - $239,000.
No investment in any person or its affiliates (other than bonds issued by
agencies of the United States government) exceeded ten percent of
stockholders' equity at September 30, 1994.
NOTE 3 -- COMMITMENTS AND CONTINGENCIES
In the normal course of business, the company seeks to limit its exposure
to loss on any single insured and to recover a portion of benefits paid by
ceding reinsurance to other insurance enterprises or reinsurers.
Reinsurance coverages for life insurance vary according to the age and risk
classification of the insured with retention limits ranging up to $500,000
of coverage per individual life. The company does not use surplus relief
reinsurance.
Reinsurance contracts do not relieve the company from its obligations to
its policyholders. To the extent that reinsuring companies are later
unable to meet obligations under reinsurance agreements, the company's life
insurance subsidiaries would be liable for these obligations and could
result in losses to the company. To limit the possibility of such losses
the company evaluates the financial condition of its reinsurers, monitors
concentrations of credit risk arising from factors such as similar
geographic regions, and limits its exposure to any one reinsurer. At
September 30, 1994, the company had reinsurance treaties with 18 reinsurers,
all of which are deemed to be long-duration, retroactive contracts, and has
established a receivable totaling $11,275,000 for reserve credits,
reinsurance claims and other receivables from these reinsurers. No allowance
for uncollectible amounts has been established since none of the receivables
are deemed to be uncollectible, and because such receivables, either
individually or in the aggregate, are not material to the company's
operations. The company's liability for future policy benefits and notes and
other receivables has been increased by $9,327,000 at September 30, 1994 for
reserve credits on reinsured policies. Insurance premiums and product charges
have been reduced by $4,594,000 in the first nine months and $1,574,000 in the
third quarter of 1994 compared to $4,247,000 and $1,521,000, respectively, in
the same periods of 1993, as a result of the cession agreements. Insurance
benefits and expenses have been reduced by $3,198,000 in the first nine months
and $1,460,000 in the third quarter of 1994 compared to $1,724,000 and
$229,000, respectively, in the same periods of 1993. The amount of
reinsurance assumed is not significant.
The company's insurance subsidiaries are assessed contributions by life and
health guaranty associations in almost all states to indemnify
policyholders of failed companies. In some states, such assessments are
offset by reductions in future premium taxes. The company cannot predict
whether and to what extent legislative initiatives may affect the right to
offset. The amount of these assessments prior to 1991 was not material.
Failures of substantially larger companies since 1990 could result in
future assessments in material amounts. During 1991, the company
established a reserve to cover such assessments and regularly reviews
information regarding known failures and revises its estimate of future
guaranty fund assessments accordingly. During the third quarter of 1994
an additional $629,000 was added to this reserve and at September 30, 1994,
the remaining reserve for insurance guaranty fund assessments, net of
expected future premium tax credits, totaled $14,703,000. The company
believes this reserve is sufficient to cover expected future insurance
guaranty fund assessments related to known insolvencies at this time.
At September 30, 1994, outstanding commitments to fund mortgage loans on
real estate totaled $51,654,000. In addition, outstanding commitments to
purchase mortgage-backed securities totaled $61,277,000 at September 30,
1994.
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The purpose of this section is to discuss and analyze the company's
consolidated financial condition, liquidity and capital resources and
results of operations. This analysis should be read in conjunction with
the consolidated financial statements and related notes which appear
elsewhere in this report. The company reports financial results on a
consolidated basis. The consolidated financial statements include the
accounts of the company and its subsidiaries. All of the company's
significant subsidiaries are wholly-owned. The company's primary
subsidiaries are Equitable Life Insurance Company of Iowa ("Equitable
Life") and USG Annuity & Life Company ("USG").
FINANCIAL CONDITION
Investments
The company's total investments grew $1,146,769,000, or 20.2%, in the first
nine months of 1994 compared to growth of $920,083,000, or 20.6%, for the
same period of 1993, as $1,333,981,000 of annuity and life insurance
premiums were received during the period. The company manages the growth
of its insurance operations in order to maintain adequate capital ratios.
The company has established a goal of growing assets at least 20% annually
and expects to surpass that goal in 1994.
To support the company's annuities and life insurance products, cash flow
was invested primarily in fixed income investments. At September 30, 1994,
99.7% of the company's investments, excluding policy loans, were in cash
and short-term investments (0.5%) or fixed income investments which consist
of governments and agency mortgage-backed securities (5.6%); investment
grade corporate bonds, as determined by either Standard & Poor's
Corporation ("Standard & Poor's" or "S&P") or Moody's Investors Service
("Moody's") (48.0%); conventional investment grade mortgage-backed
securities (31.8%); below investment grade securities (6.3%); and mortgage
loans on real estate (7.5%).
Effective January 1, 1994, the company adopted Statement of Financial
Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments
in Debt and Equity Securities". The cumulative effect of this change in
accounting method was to increase stockholders' equity by $22,516,000, or
$0.71 per share, at January 1, 1994. The company analyzes projected cash
flows from investments and policy liabilities under a variety of economic
scenarios to determine what portion of its investment portfolio might need
to be sold under these scenarios. Based upon this analysis and other
factors, the company designates a portion of its fixed maturity securities
portfolio as "available for sale". On September 30, 1994, fixed income
securities with an amortized cost of $788,550,000 and an estimated market
value of $758,891,000 were designated as available for sale. Unrealized
holding losses on these securities, net of adjustments to deferred policy
acquisition costs, unearned revenue reserves and related deferred income
taxes, decreased stockholders' equity by $12,839,000, or $0.41 per share,
at September 30, 1994.
At September 30, 1994, the ratings assigned by Standard & Poor's and
Moody's to the individual securities in the company's fixed maturities
portfolio are summarized as follows:
<TABLE>
<CAPTION>
Carrying % of Estimated % of
Value Total Market Value Total
____________ _______ ____________ _______
(Dollars in thousands)
<S> <C> <C> <C> <C>
Ratings assigned by
Standard & Poor's:
U.S. governments, agencies
& AAA Corporates $2,432,371 39.8% $2,316,301 39.5%
AA+ to AA- 246,368 4.0% 231,763 3.9%
A+ to A- 1,823,584 29.8% 1,765,764 30.1%
BBB+ to BBB- 1,071,179 17.5% 1,026,920 17.5%
BB+ to BB- 345,258 5.6% 336,481 5.7%
B+ to B- 65,235 1.1% 65,174 1.1%
D 3,850 0.1% 3,850 0.1%
Issues not rated by S & P
(by NAIC rating):
Rated 1 (AAA to A-) 33,634 0.5% 31,873 0.5%
Rated 2 (BBB+ to BBB-) 33,345 0.5% 31,736 0.5%
Rated 3 (BB+ to BB-) 58,992 1.0% 56,315 1.0%
Rated 4 (B+ to B-) 4,502 0.1% 4,748 0.1%
Rated 6 (CI, D) 80 0.0% 80 0.0%
Redeemable preferred stock 695 0.0% 437 0.0%
____________ _______ ____________ _______
TOTAL FIXED MATURITIES $6,119,093 100.0% $5,871,442 100.0%
============ ======= ============ =======
</TABLE>
<TABLE>
<CAPTION>
Carrying % of Estimated % of
Value Total Market Value Total
____________ _______ ____________ _______
(Dollars in thousands)
<S> <C> <C> <C> <C>
Ratings assigned by Moody's
U.S. governments, agencies
& Aaa Corporates $2,341,784 38.3% $2,232,528 38.0%
Aa1 to Aa3 359,143 5.9% 333,816 5.7%
A1 to A3 1,878,824 30.7% 1,822,225 31.0%
Baa1 to Baa3 997,713 16.3% 955,169 16.3%
Ba1 to Ba3 347,380 5.7% 340,853 5.8%
B1 to B3 65,890 1.1% 64,339 1.1%
Ca 3,850 0.1% 3,850 0.1%
Issues not rated by Moody's
(by NAIC rating):
Rated 1 (Aaa to A3) 33,633 0.5% 31,873 0.5%
Rated 2 (Baa1 to Baa3) 33,345 0.5% 31,736 0.5%
Rated 3 (Ba1 to Ba3) 52,254 0.8% 49,788 0.9%
Rated 4 (B1 to B3) 4,502 0.1% 4,748 0.1%
Rated 6 (Ca, C) 80 0.0% 80 0.0%
Redeemable preferred stock 695 0.0% 437 0.0%
____________ _______ ____________ _______
TOTAL FIXED MATURITIES $6,119,093 100.0% $5,871,442 100.0%
============ ======= ============ =======
<FN>
Note: Estimated market values of publicly traded securities are as reported
by an independent pricing service. Estimated market values of
conventional mortgage-backed securities not actively traded in a liquid
market are estimated using a third party pricing system, which uses a
matrix calculation assuming a spread over U.S. Treasury bonds based
upon the expected average lives of the securities. Estimated market
values of private placement bonds are estimated using a matrix that
assumes a spread (based on interest rates and a risk assessment of the
bonds) over U.S. Treasury bonds. Estimated market values of redeemable
preferred stocks are as reported by the National Association of
Insurance Commissioners ("NAIC").
</TABLE>
Net unrealized depreciation of fixed maturity investments of $277,310,000
was comprised of gross appreciation of $84,403,000 and gross depreciation
of $361,713,000.
The percentage of the company's portfolio invested in below investment
grade securities has declined slightly during the first nine months of 1994.
At September 30, 1994 the carrying value of the company's total investment in
below investment grade securities consisted of investments in 86 issuers
totaling $419,098,000, or 6.3% of the company's investment portfolio
compared to 81 issuers totaling $361,869,000, or 6.6%, at December 31,
1993. The company intends to purchase additional below investment grade
securities but it does not expect the percentage of its portfolio invested
in below investment grade securities to increase significantly. At
September 30, 1994, the yield on the company's below investment grade
portfolio was 10.1% compared to 8.5% for the company's investment grade
corporate bond portfolio. The company estimates that the market value of
its below investment grade portfolio was $409,117,000, or 93.4% of carrying
value, at September 30, 1994.
Below investment grade securities have different characteristics than
investment grade corporate debt securities. Risk of loss upon default by
the borrower is significantly greater with respect to below investment
grade securities than with other corporate debt securities. Below
investment grade securities are generally unsecured and are often
subordinated to other creditors of the issuer. Also, issuers of below
investment grade securities usually have higher levels of debt and are more
sensitive to adverse economic conditions, such as recession or increasing
interest rates, than are investment grade issuers. The company attempts to
reduce the overall risk in its below investment grade portfolio, as in all
of its investments, through careful credit analysis, strict investment
policy guidelines, and diversification by company and by industry.
The company analyzes its investment portfolio, including below investment
grade securities, at least quarterly in order to determine if its ability
to realize its carrying value on any investment has been impaired. For
debt and equity securities, if impairment in value is determined to be
other than temporary (i.e. if it is probable that the company will be
unable to collect all amounts due according to the contractual terms of the
security), the cost basis of the impaired security is written down to fair
value, which becomes the security's new cost basis. The amount of the
writedown is included in earnings as a realized loss. Future events may
occur, or additional or updated information may be received, which may
necessitate future write-downs of securities in the company's portfolio.
Significant write-downs in the carrying value of investments could
materially adversely affect the company's net income in future periods.
At September 30, 1994, one below investment grade security was in default.
This security had an original cost of $7,959,000 and had been written down
to $699,000 prior to the adoption of SFAS No. 115. Effective January 1,
1994, the cost basis of this security was written down to its estimated
fair value of $80,000 and a $619,000 realized loss was charged to earnings.
The carrying value of fixed maturity investments considered to have other
than temporary impairments represent a negligible portion of total
investments, total assets, or total stockholders' equity at September 30,
1994.
During the first nine months of 1994, fixed maturity securities designated
as held for investment with a combined amortized cost value of $246,271,000
were called or repaid by their issuers generating net realized gains totaling
$10,145,000. Also during the first nine months of 1994, fixed maturity
securities designated as available for sale with a combined amortized cost
value of $152,107,000 were called or repaid generating net realized gains
totaling $4,772,000. In addition, two investment grade securities
designated as available for sale with an amortized cost of $29,446,000 were
sold by the company generating net realized gains of $3,150,000. In total,
pre-tax gains from sales, calls and prepayments of fixed maturity investments
amounted to $18,067,000 in the first nine months of 1994.
At September 30, 1994, the company's fixed maturity investment portfolio
had a combined yield of 8.4% compared to 8.5% at December 31, 1993.
Interest rates have risen in recent months and as new investment rates have
begun to rise the decline in the overall yield on the company's fixed
maturity investment portfolio has begun to slow. At September 30, 1994,
the average annual interest rate in effect for interest sensitive products,
including annuities and universal life-type policies, and participating
life policies, was 5.7%, compared to 6.1% at December 31, 1993.
Mortgage loans make up approximately 7.5% of the company's investment
portfolio, as compared to an industry average of 14.8%, as reported in the
1993 ACLI Fact Book. The company has resumed active mortgage lending to
broaden its investment alternatives and, as a result of this increase in
lending activity, mortgages outstanding increased to $503,039,000 from
$346,829,000 during the first nine months of 1994. The company expects the
carrying value of this asset category to continue to grow over the next
several years. The company's mortgage loan portfolio includes 262 loans
with an average size of $1,920,000. Average seasoning of the company's
mortgage loan portfolio is 8.9 years if weighted by the number of loans, or
3.7 years if weighted by mortgage loan carrying values. The company's
mortgage loans are typically secured by occupied buildings in major
metropolitan locations and not speculative developments, and are
diversified by type of property and geographic location. At September 30,
1994, the yield on the company's mortgage loan portfolio was 8.8%.
Distribution of these loans by type of collateral and geographic location
is as follows:
<TABLE>
<CAPTION>
% of
# of Carrying Mortgage
Loans Value Portfolio
_____________________________
(Dollars in thousands)
<S> <C> <C> <C>
Collateral Breakdown
- - - -------------------------
Farm 4 $188 0.1%
Multi-family residential 41 133,375 26.5%
Industrial 114 125,075 24.9%
Office buildings 33 66,002 13.1%
Retail 67 165,624 32.9%
Other 3 12,775 2.5%
______ ____________ _______
TOTAL 262 $503,039 100.0%
====== ============ =======
</TABLE>
<TABLE>
<CAPTION>
% of
# of Carrying Mortgage
Loans Value Portfolio
_____________________________
(Dollars in thousands)
<S> <C> <C> <C>
Geographic Breakdown
- - - -------------------------
New England 1 $255 0.0%
Middle Atlantic 24 50,800 10.1%
South Atlantic 26 44,633 8.9%
East North Central 67 136,159 27.1%
West North Central 34 75,794 15.1%
East South Central 9 20,025 4.0%
West South Central 15 27,743 5.5%
Mountain 16 35,857 7.1%
Pacific 70 111,773 22.2%
______ ____________ _______
TOTAL 262 $503,039 100.0%
====== ============ =======
</TABLE>
At September 30, 1994, no mortgage loans were delinquent by 90 days or
more. The company holds $14,257,000 in foreclosed real estate. The
company does not expect to incur material losses from its mortgage loan
portfolio since mortgage loans represent a small percentage of the
company's investment portfolio. The company has been able to recover 93% of
the principal amount of problem mortgages that have been resolved in the
last three years.
During the first nine months of 1994, the company determined that the
carrying value of two of its real estate properties exceeded their
estimated fair value, less costs of sale. As a result of this
determination the company established valuation allowances totaling
$1,074,000 on these properties.
In total, the company has experienced a relatively small number of problems
with its total investment portfolio, with only 0.001% of the company's
investments in default at September 30, 1994. The company estimates its
total investment portfolio, excluding policy loans, had a market value
equal to 96.1% of carrying value at September 30, 1994.
Other assets
Accrued investment income increased $10,450,000 primarily due to growth of
the company's investment portfolio. Deferred policy acquisition costs
increased $117,807,000 over year-end 1993 levels as the deferral of current
period costs (primarily commissions) incurred to generate insurance and
annuity sales totaled $145,064,000. Amortization of costs deferred in
prior periods totaled $37,164,000. In addition, deferred acquisition
costs were increased by $9,907,000 as a result of adjustments related to
the valuation of fixed maturity securities designated as available for sale
under SFAS No. 115. At September 30, 1994, the company had total assets of
$7,716,374,000, an increase of 20.0% over total assets at December 31,
1993.
Liabilities
In conjunction with the volume of insurance and annuity sales, and the
resulting increase in business in force, the company's liability for policy
liabilities and accruals increased $1,122,277,000, or 20.0%, during the
first nine months of 1994 and totaled $6,720,578,000 at September 30,
1994. Reserves for the company's annuity policies increased
$1,087,124,000, or 24.5%, during this period and totaled $5,527,384,000 at
September 30, 1994. Life insurance reserves increased $36,729,000, or
3.2%, during the first nine months of 1994 and totaled $1,174,554,000 at
September 30, 1994.
Total consolidated debt increased $90,286,000 during the first nine months
of 1994 as commercial paper was issued to offset timing differences in
investment related cash receipts and disbursements, and amounted to
$174,500,000 at September 30, 1994. Other liabilities increased
$30,829,000 from year-end 1993 levels due to increases in liabilities for
premiums received but not yet applied, outstanding checks, securities
purchased but not yet paid for and draft accounts payable related to the
company's asset retention program.
At September 30, 1994, the company had total liabilities of $7,137,122,000
compared to $5,903,473,000 at December 31, 1993, a 20.9% increase.
Equity
At September 30, 1994, stockholders' equity was $579,252,000, or $18.30 per
share, compared to $527,962,000 or $16.76 per common share at year end
1993. Unrealized depreciation of available for sale fixed maturity
securities reduced stockholders' equity by $12,839,000, or $0.41 per share,
after adjustments to accounts such as deferred acquisition costs and
deferred income taxes. The ratio of consolidated debt to total capital was
23.2% at September 30, 1994, up from 13.8% at year-end 1993 as a result of
the increase in short-term borrowings. At September 30, 1994, there were
31,650,438 common shares outstanding compared to 31,504,586 shares at
December 31, 1993.
At its August 11, 1994 board meeting the company's Board of Directors approved
a Dividend Reinvestment and Stock Purchase Plan, which became available to
shareholders in September 1994. This voluntary plan allows common stock
dividends to be automatically reinvested in the company's common stock, with
no brokerage commissions.
The effects of inflation and changing prices on the company are not
material since insurance assets and liabilities are both primarily monetary
and remain in balance. An effect of inflation, which has been low in
recent years, is a decline in purchasing power when monetary assets exceed
monetary liabilities.
LIQUIDITY AND CAPITAL RESOURCES
The liquidity requirements of the company's subsidiaries are met by cash
flow from insurance and annuity premiums, investment income, and maturities
of fixed maturity investments and mortgage loans. The company primarily
uses funds for the payment of insurance and annuity benefits, operating
expenses and commissions, and the purchase of new investments. No material
capital expenditures are planned.
The company issues short-term debt, including commercial paper notes, for
working capital needs and to provide short term liquidity. At September
30, 1994 the company had $174,500,000 in commercial paper notes
outstanding, an increase of $140,500,000 from December 31, 1993 as
additional commercial paper was issued to fund short-term advances to the
company's insurance subsidiaries to smooth timing differences between
investment related cash receipts and disbursements and to provide for short-
term operating needs. The company's commercial paper is rated A1 by
Standard and Poor's, P2 by Moody's and D1 by Duff & Phelps Credit Rating
Co.
To enhance short term liquidity and back up its outstanding commercial
paper notes, the company maintains line of credit agreements with several
banks. On March 31, 1994, the company entered into new agreements which
provide for lines of credit totaling $249,000,000. A credit line
totaling $166,000,000 expires on March 31, 1997 and a credit line
totaling $83,000,000 expires on March 30, 1995.
Since Equitable of Iowa Companies is a holding company, funds required to
meet its debt service requirements, dividend payments and other expenses
are primarily provided by its subsidiaries. The ability of the company's
insurance subsidiaries to pay dividends and other distributions to the
company is regulated by state law. Iowa law provides that an insurance
company may pay dividends, without prior approval of the Commissioner of
Insurance if, together with all dividends or distributions made during the
preceding twelve month period, the dividends would not exceed the greater
of (a) 10% of the insurer's statutory surplus as of the December 31st next
preceding; or (b) the statutory net gain from operations for the twelve
month period ending as of the next preceding December 31st. In addition,
the law provides that the insurer may only make dividend payments to its
shareholders from its earned surplus (i.e., its surplus as regards
policyholders less paid-in and contributed surplus). Equitable Life could
pay dividends to the company without prior approval of the Iowa
Commissioner of Insurance of approximately $39,335,000 during the remainder
of 1994. The company's insurance subsidiaries have maintained adequate
statutory capital and surplus and have not used surplus relief or financial
reinsurance, which have come under scrutiny by many state insurance
departments.
The NAIC's risk-based capital requirements require insurance companies to
calculate and report information under a risk-based capital formula. These
requirements are intended to allow insurance regulators to identify
inadequately capitalized insurance companies based upon the type and
mixture of risks inherent in the company's operations. The formula
includes components for asset risk, liability risk, interest rate exposure
and other factors. The company's insurance subsidiaries have complied with
the NAIC's risk-based capital reporting requirements. Amounts reported
indicate that the company's insurance subsidiaries have total adjusted
capital (as defined in the requirements) which is well above all required
capital levels.
The terms of the line of credit agreements totaling $249,000,000 require
the company to maintain certain adjusted consolidated tangible net worth
levels. "Adjusted consolidated tangible net worth" is defined as
consolidated stockholders' equity, adjusted to exclude the effects of SFAS
No. 115, less intangible assets. The most restrictive of these covenants
requires the company to maintain adjusted consolidated tangible net worth
equal to or in excess of the sum of (i) $420,000,000, plus (ii) 50% of
consolidated net income from January 1, 1994 to the end of the most recent
quarter, plus (iii) net proceeds from the issuance of stock from January 1,
1994 to the end of the most recent quarter. At September 30, 1994,
$132,462,000 of retained earnings were free of restrictions and could be
distributed to the company's public stockholders.
Developing and writing increased volumes of insurance and annuity business
require increased amounts of capital and surplus for the company's
insurance operations including amounts in excess of those which may be
realized from operating results. The company may also expand its insurance
operations through acquisition of blocks of business from other insurance
companies, or through the acquisition of an insurance company, although no
such acquisitions are currently planned. On October 21, 1993, the company
completed a primary stock offering of 2,300,000 shares to the public at a
price of $35 per share and received net proceeds of approximately
$76,473,000 from the sale after deduction of the underwriter's discount and
expenses. The company has contributed $70,000,000 of these proceeds to its
insurance subsidiaries. Over time, further growth in the company's
insurance operations may require additional capital although the company
believes it now has sufficient capital resources to support growth in its
operations for the next few years. The company's primary sources of
capital are retained earnings and the issuance of additional common stock
or debt.
On June 1, 1994, the company redeemed notes payable totaling $49,996,000.
Operating cash flows were used to redeem these notes.
The company's insurance subsidiaries operate under the regulatory scrutiny
of each of the state insurance departments supervising business activities
in the states where each company is licensed. The company is not aware of
any current recommendations by these regulatory authorities which, if they
were to be implemented, would have a material effect on the company's
liquidity, capital resources or operations.
RESULTS OF OPERATIONS
Sales
Total annuity and life insurance sales, as measured by first year and
single premiums, increased $184,191,000, or 58.7%, to $497,978,000 in the
third quarter and $443,569,000, or 54.6%, to $1,255,368,000 in the first
nine months of 1994. Annuity sales remained strong and increased
$182,982,000, or 59.3%, to $491,512,000 in the third quarter and
$439,207,000, or 55.1%, to $1,236,990,000 in the first nine months of 1994.
The company believes that its commitment to customer service, the quality
of its investment portfolio, competitive pricing and its overall financial
strength continue to attract consumers to its annuity products as consumers
seek a secure return on their retirement savings. Insurance agents are
attracted to sell the company's products by the same factors, as well as a
diversified product portfolio, competitive commissions, rapid policy issuance
and weekly commission payments. First year and single life insurance premiums
increased $1,209,000, or 23.0%, to $6,466,000 in the third quarter and
$4,362,000, or 31.1%, to $18,378,000 in the first nine months of 1994 due to
increases in sales of the company's universal life and current interest
products.
Revenues
Total revenues increased $26,623,000, or 18.8%, to $168,381,000 in the
third quarter and $66,482,000, or 16.1%, to $480,290,000 in the first nine
months of 1994. Universal life insurance and investment product charges
increased $2,924,000, or 35.5%, to $11,151,000 in the third quarter and
$7,516,000, or 30.4%, to $32,262,000 in the first nine months of 1994, as
increased withdrawals from the company's annuity products generated higher
surrender charge revenues. In addition to increased withdrawal levels,
withdrawals and surrenders of the company's annuity products which contain
a "market value adjustment" feature generate greater surrender charge income
as interest rates increase. Surrender charge income, which allows the
company to recover a portion of the expenses incurred to generate policy
sales, was offset by greater amortization of deferred policy acquisition
costs. Premiums from traditional life insurance products increased $248,000,
or 2.1%, to $11,954,000 in the third quarter and decreased $285,000, or 0.8%,
to $35,167,000 in the first nine months of 1994. Decreases in traditional
life insurance renewal premiums were partially offset by increases in first
year and single premiums during the first nine months and a 53.6% increase in
first year and single premiums in the third quarter more than offset declines
in renewal premiums for that period.
Net investment income increased $27,669,000, or 25.2%, to $137,263,000 in
the third quarter and $65,364,000, or 20.6%, to $382,562,000 in the first
nine months of 1994 as the increase in invested assets more than offset a
decline in portfolio yield. The effective average annual yield on assets
invested to support policy accounts for interest-sensitive products,
including annuities, universal life-type policies and participating life
policies, was 8.6% in the third quarter and first nine months of 1994
compared to 9.0% in the third quarter and 9.2% in the first nine months of
1993. The company's investment portfolio, excluding policy loans, had a
yield to maturity of 8.4% at September 30, 1994, compared to 8.7% at
September 30, 1993, reflecting a general decline in interest rates from the
previous year, and substantial principal repayments, calls and tenders of
investments. New money rates have begun to increase in recent months and
the company expects an increase in its portfolio yield as new funds are
invested at higher rates. During the third quarter and first nine months
of 1994, the company had realized gains on the sale of investments of
$3,343,000 and $17,057,000, respectively, compared to gains of $8,229,000
and $24,706,000 in the same periods of 1993. The level of realized gains
has decreased as calls and repayments of fixed maturity securities have
slowed due to rising interest rates.
Expenses
Total insurance benefits and expenses increased $19,900,000, or 18.8%, to
$125,983,000 in the third quarter and $48,717,000, or 16.0%, to
$353,666,000 in the first nine months of 1994. Interest credited to
universal life and investment product account balances increased
$14,522,000, or 21.3%, to $82,555,000 in the third quarter and $35,857,000,
or 18.2%, to $232,432,000 in the first nine months of 1994 as a result of
higher account balances associated with those products. The average annual
interest rate credited to policy accounts for interest sensitive products,
including annuities and universal life-type policies, and participating
life policies, was 5.7% for the third quarter and 5.8% for the first nine
months of 1994 compared to 6.5% and 6.7% in the same periods of 1993. The
average annual interest rate in effect for those policies at September 30,
1994 was 5.7%, compared to 6.4% at September 30, 1993. The company's
policy is to change rates credited to policy accounts as investment yields
increase or decline. Most of the company's interest sensitive policies
allow for interest rate adjustments at least annually.
Death benefits on traditional life products and benefit claims incurred in
excess of account balances increased $859,000, or 12.6%, to $7,685,000 in
the third quarter and $2,847,000, or 13.7%, to $23,565,000 in the first
nine months of 1994. Other benefits increased $630,000, or 7.9%, to
$8,665,000 in the third quarter and declined $368,000, or 1.5%, to
$24,580,000 in the first nine months of 1994. These changes were offset by
a corresponding change in the reserve for future policy benefits and,
therefore, had a smaller impact on net income.
The withdrawal ratio for the company's annuity products, as calculated by
dividing aggregate surrenders and withdrawals by average aggregate account
balances, was 9.1%, on an annualized basis, for the nine months ended
September 30, 1994 compared to 4.4% in the first nine months of 1993. Most
of the company's annuity products have surrender charges which are designed
to discourage early withdrawals and to allow the company to recover a
portion of the expenses incurred to generate annuity sales in the event of
early withdrawal. The withdrawal rate has been impacted by several
factors. (1) The company had anticipated an increase in annuity surrenders
as this block of business ages. (2) A block of annuity policies sold
in 1988 and 1989 primarily by stockbrokers contained a 5 year interest
guarantee which is currently expiring. The company has planned for, and
experienced, higher surrenders related to this block of business. Excluding
these surrenders, the company's annuity withdrawal ratio would have been 7.3%.
The company currently does not market annuity policies with multi-year
guarantees although it may in the future. Also, the company has not actively
solicited fixed annuity sales through stockbrokers since 1989. At September
30, 1994, policies issued with a 5 year interest guarantee represent
approximately 3% ($176 million) of the company's annuity liabilities.
(3) Withdrawals tend to increase in periods of rising interest rates as
policyholders seek higher returns on their savings. The company's annualized
lapse ratio for life insurance measured in terms of face amount and using A.M.
Best's formula, was 7.4% in the first nine months of 1994 compared to 7.2% in
the first nine months of 1993.
Commissions increased $14,796,000, or 47.7%, to $45,843,000 in the third
quarter and $37,262,000, or 45.3%, to $119,448,000 in the first nine months
of 1994. General expenses increased $1,779,000, or 17.7%, to $11,827,000 in
the third quarter and $5,438,000, or 20.9%, to $31,446,000 in the first
nine months of 1994. Insurance taxes also increased $1,267,000, or 83.8%,
to $2,779,000 in the third quarter and $2,844,000, or 62.3%, to $7,412,000
in the first nine months of 1994. Increases in commissions and insurance
taxes and a portion of the increase in general expenses are the result of
increased life insurance and annuity sales during these periods. Most of
these increased costs were incurred as the result of new sales and have been
deferred, thus having very little impact on total insurance expenses.
The amortization of deferred policy acquisition costs increased by $4,112,000,
or 42.3%, to $13,836,000 in the third quarter and $9,815,000, or 35.9%, to
$37,164,000 in the first nine months of 1994. Amortization of deferred
acquisition costs related to operating earnings increased 91.2% to
$12,582,000 in the third quarter and 62.9% to $31,608,000 in the first nine
months of 1994 as the result of a 26.1% increase in the deferred policy
acquisition cost asset since September 30, 1993 as costs of acquiring
continued increases in sales of the company's products are deferred and
amortized in later periods. Also, higher withdrawals and surrenders of the
company's products have accelerated the amortization of deferred acquisition
costs related to those products although surrender charges assessed on certain
withdrawals offset some of this accelerated amortization. Amortization
related to realized gains totaled $1,253,000 in the third quarter and
$5,556,000 in the first nine months of 1994 compared to $3,143,000 in the
third quarter and $7,941,000 in the first nine months of 1993.
Income
Operating income (income excluding realized gains and losses, mortgage
backed securities prepayment gains and related amortization of deferred
policy acquisition costs, net of related income taxes) increased
$5,475,000, or 31.9%, in the third quarter and $14,571,000, or 28.9%, in
the first nine months of 1994. Net income increased $4,369,000, or 21.5%,
in the third quarter and $11,971,000, or 19.5%, in the first nine months of
1994. A breakdown of income is as follows:
<TABLE>
<CAPTION>
1994 1993
-------------------- --------------------
$ Per Share $ Per Share
--------- --------- --------- ---------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Quarter ended September 30:
Operating income $22,638 $0.72 $17,163 $0.59
Realized gains (net of tax):
Gains realized on disposal
of investments 2,226 0.06 5,184 0.18
Mortgage-backed securities
prepayment gains 672 0.02 -- --
Realized gains related
amortization of DPAC (815) (0.02) (1,995) (0.07)
--------- --------- --------- ---------
2,083 0.06 3,189 0.11
--------- --------- --------- ---------
Net Income $24,721 $0.78 $20,352 $0.70
========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
1994 1993
-------------------- --------------------
$ Per Share $ Per Share
--------- --------- --------- ---------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Nine months ended September 30:
Operating income $65,039 $2.06 $50,468 $1.74
Realized gains (net of tax):
Gains realized on disposal
of investments 11,237 0.35 16,059 0.55
Mortgage-backed securities
prepayment gains 672 0.02 -- --
Realized gains related (3,612) (0.11) (5,162) (0.18)
amortization of DPAC --------- --------- --------- ---------
8,297 0.26 10,897 0.37
--------- --------- --------- ---------
Net Income $73,336 $2.32 $61,365 $2.11
========= ========= ========= =========
</TABLE>
Average shares outstanding totaled 31,644,743 in the third quarter and
31,595,419 in the first nine months of 1994 up from 29,118,261 and
29,064,491, respectively, in the same periods of 1993 reflecting the
issuance of 2,300,000 shares of common stock in October 1993.
Insurance Regulation
Currently, the company's insurance subsidiaries are subject to regulation
and supervision by the states in which they are admitted to transact
business. State insurance laws generally establish supervisory agencies
with broad administrative and supervisory powers related to granting and
revoking licenses to transact business, establishing guaranty fund
associations, licensing agents, approving policy forms, regulating premium
rates for some lines of business, establishing reserve requirements,
prescribing the form and content of required financial statements and
reports, determining the reasonableness and adequacy of statutory capital
and surplus and regulating the type and amount of investments permitted.
The insurance regulatory framework continues to be placed under increased
scrutiny by various states, the federal government and the NAIC. Various
states have considered or enacted legislation which changes, and in many
cases increases, the states' authority to regulate insurance companies.
Legislation is under consideration in Congress which could result in the
federal government assuming some role in the regulation of insurance
companies. The NAIC, in conjunction with state regulators, has been
reviewing existing insurance laws and regulations. The NAIC recently
approved and recommended to the states for adoption and implementation
several regulatory initiatives designed to reduce the risk of insurance
company insolvencies. These initiatives include new investment reserve
requirements, risk-based capital standards and restrictions on an insurance
company's ability to pay dividends to its stockholders.
A committee of the NAIC is developing proposals to govern insurance company
investments presently anticipated to be considered for adoption as a model
law in 1995. While the specific provisions of such a model law are not
known at this time, and current proposals are still being debated, the
company is monitoring developments in this area and the effects any change
would have on the company.
Federal Income Taxes
Currently, under the Internal Revenue Code, income tax payable by
policyholders on investment earnings is deferred during the accumulation
period of certain life insurance and annuity products. This favorable
federal income tax treatment may enhance the competitive position of certain
of the company's products as compared with other retirement savings products
that do not offer such benefits. If the Internal Revenue Code were to be
revised to eliminate or reduce the tax deferred status of life insurance and
annuity products, including the products offered by the company, market
demand for some or all of the company's products could be adversely affected.
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
In the ordinary course of business, the company and its
subsidiaries are engaged in litigation. Management believes it is
unlikely that the outcome of any pending litigation will have a
material adverse effect on the company's financial condition.
Item 5. OTHER INFORMATION
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
4(a) Letter agreement to furnish Commission upon request
copies of other long-term debt instruments
11 Statement re: Computation of per share earnings
21 Subsidiary list
27 Financial Data Schedule (electronic filing only)
(b) No reports on Form 8-K were filed for the quarter ended
September 30, 1994.
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.
DATE: November 4, 1994 EQUITABLE OF IOWA COMPANIES
By /s/ P. E. Larson
______________________________________
Executive Vice President and CFO
(Principal Financial Officer)
By /s/ D. A. Terwilliger
______________________________________
Vice President and Controller
(Principal Accounting Officer)
INDEX
Exhibits to Form 10-Q
Nine Months ended September 30, 1994
EQUITABLE OF IOWA COMPANIES
Page Number
3 Articles of Incorporation and By-Laws
(a) Restated Articles of Incorporation as amended through
April 29, 1993, filed as Exhibit 3(a) to Form 10-Q for
the period ended June 30, 1993, is incorporated by
reference --
(b) Amended and restated By-Laws filed as Exhibit 2 to
Form 8-K dated November 11, 1991, is incorporated by
reference --
4 Instruments Defining the Rights of Security Holders, Including
Indentures
(a) Letter Agreement to furnish Commission upon request copies
of other long-term debt instruments --
(b)(i) Rights Agreement filed as Exhibit 1 to Form 8-K dated
April 30, 1992, is incorporated by reference --
(ii) First amendment to Rights Agreement changing Rights Agent
filed as Exhibit 4(b)(ii) to Form 10-Q for the period
ended September 30, 1992, is incorporated by reference --
(iii) Second amendment to Rights Agreement dated April 29, 1993,
adjusting Purchase Price filed as Exhibit 2.2 to Form
8-A/A dated May 13, 1993, is incorporated by reference --
10 Material Contracts
(a) Executive compensation plans and arrangements *
(i) Restated Executive Severance Pay Plan filed as Exhibit
10(a) to Form 10-K for the year ended December 31, 1992,
is incorporated by reference --
(ii) Directors' Deferred Compensation Plan filed as Exhibit
10(b) to Form 10-K for the year ended December 31, 1989,
is incorporated by reference --
(iii) 1982 Stock Incentive Plan filed as Exhibit 10(c) to Form
10-K for the year ended December 31, 1989, is incorporated
by reference --
(iv) Excess Benefit Plan filed as Exhibit 10(d) to Form 10-K
for the year ended December 31, 1989, is incorporated by
reference --
(v) Supplemental Employee Retirement Plan filed as Exhibit
10(e) to Form 10-K for the year ended December 31, 1989,
is incorporated by reference --
(vi) Executive Flexible Perquisite Program filed as Exhibit
10(f) to Form 10-K for the year ended December 31, 1992,
is incorporated by reference --
INDEX
Exhibits to Form 10-Q
Nine Months ended September 30, 1994
EQUITABLE OF IOWA COMPANIES
Page Number
(vii) Key Employee Incentive Plan filed as Exhibit 10(g) to Form
10-K for the year ended December 31, 1992, is incorporated
by reference --
(viii) 1992 Stock Incentive Plan, as amended, Registration
Statement No. 33-57492 filed as Exhibit 10(i) to Form
10-Q for the period ended March 31, 1993, is incorporated
by reference --
(ix) James E. Luhrs Consulting Agreement filed as Exhibit
10(j) to Form 10-Q for the period ended June 30, 1992,
is incorporated by reference --
* Management contracts or compensation plans required to
be filed as an Exhibit pursuant to Item 14(c) of Form
10(K).
11 Statement re: Computation of Per Share Earnings --
21 Subsidiaries List --
23 Consent of Experts and Counsel
(a) Consent of independent auditors (not required) --
(b) Consent of counsel (not required) --
27 Financial Data Schedule (electronic filing only) --
99 Additional Exhibits
Independence Policy filed as an Exhibit to Form 8-K dated November
11, 1991, is incorporated by reference --
Exhibit 4(a)
November 4, 1994
Securities and Exchange Commission
450 5th Street NW
Washington, DC 20549
Ladies/Gentlemen:
The company agrees to furnish the Commission upon request copies of the
following long-term debt instruments:
1. Credit Agreement between Equitable of Iowa Companies and Morgan
Guaranty Trust Company of New York, as Agent, and the Bank of New
York, as Administrative Agent, and participating banks, dated March
31, 1994, re: line of credit in amount of $166,000,000.
2. Credit Agreement between Equitable of Iowa Companies and Morgan
Guaranty Trust Company of New York, as Agent, and the Bank of New
York, as Administrative Agent, and participating banks, dated March
31, 1994, re: line of credit in amount of $83,000,000.
3. Note Purchase Agreement dated August 19, 1986, between Walnut Mall
Limited Partnership ("Issuer") and Teacher Retirement System of
Texas ("Purchaser") in the remaining principal amount of $25,925,988
due through August 19, 1996.
4. Trust Indenture dated December 1, 1984, with Security National Bank
of Sioux City, Iowa, as Trustee, re: industrial development revenue
bonds in remaining principal amount of $3,090,000 due in various a
mounts on December 1, 1986 and each anniversary thereof through
December 1, 1999.
Very truly yours,
/s/ John A. Merriman
John A. Merriman
General Counsel/Secretary
Equitable of Iowa Companies
Exhibit 11
EQUITABLE OF IOWA COMPANIES
Consolidated Net Income Per Share Computation
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1994 1993 1994 1993
___________ ___________ ___________ ___________
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Primary:
Net income $24,721 $20,352 $73,336 $61,365
=========== =========== =========== ===========
Average shares
outstanding 31,644,743 29,118,261 31,595,419 29,064,491
=========== =========== =========== ===========
Net income per share $0.78 $0.70 $2.32 $2.11
=========== =========== =========== ===========
Fully diluted:
Net income $24,721 $20,352 $73,336 $61,365
Add: Interest on 9%
convertible installment
notes -- 5 -- 15
___________ ___________ ___________ ___________
Total $24,721 $20,357 $73,336 $61,380
=========== =========== =========== ===========
Average shares
outstanding 31,644,743 29,118,261 31,595,419 29,064,491
Add: Net effect of dilutive
stock options - based on
the treasury stock method
using period-end market
price, if higher than
average market
price 661,269 847,107 661,269 847,107
Assumed conversion of
9% convertible installment
notes -- 37,486 -- 37,486
___________ ___________ ___________ ___________
Total 32,306,012 30,002,854 32,256,688 29,949,084
=========== =========== =========== ===========
Net income per share $0.76 $0.68 $2.27 $2.05
=========== =========== =========== ===========
<FN>
NOTE: This computation is required by Regulation S-K Item 601 and is filed
as an Exhibit under Item 6(a) of Form 10-Q. Fully diluted earnings
per share calculated above has not been presented on the face of the
company's Consolidated Statements of Income because dilution is less
than three percent and, therefore, presentation is not required by
Accounting Principles Board Opinion No. 15.
</TABLE>
Exhibit 21
The company's subsidiaries are:
Name State of Incorporation
_________________________________ ______________________
Equitable Life Insurance Company of Iowa Iowa
Equitable Investment Services, Inc. Iowa
Equitable of Iowa Securities Network, Inc. Iowa
Locust Street Securities, Inc. Iowa
Shiloh Farming Company Louisiana
Tower Locust, Ltd. Iowa
Walnut Investments, Ltd. Iowa
All are wholly-owned.
USG Annuity & Life Company, an Oklahoma corporation, is a wholly-owned
subsidiary of Equitable Life Insurance Company of Iowa. Equitable American
Insurance Company, an Iowa corporation, is a wholly-owned subsidiary of
Equitable Life Insurance Company of Iowa. In addition, these entities own
other subsidiaries which are not considered in the aggregate to be a
significant subsidiary as defined in Securities and Exchange Commission
rules.
All subsidiaries do business only under their corporate names.
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF INCOME AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> SEP-30-1994
<DEBT-HELD-FOR-SALE> 758,891
<DEBT-CARRYING-VALUE> 5,360,202
<DEBT-MARKET-VALUE> 5,112,551
<EQUITIES> 183
<MORTGAGE> 503,039
<REAL-ESTATE> 18,930
<TOTAL-INVEST> 6,837,148
<CASH> 13,952
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 568,987
<TOTAL-ASSETS> 7,716,374
<POLICY-LOSSES> 6,701,938
<UNEARNED-PREMIUMS> 14,033
<POLICY-OTHER> 4,607
<POLICY-HOLDER-FUNDS> 25,871
<NOTES-PAYABLE> 174,500
<COMMON> 31,650
0
0
<OTHER-SE> 547,602
<TOTAL-LIABILITY-AND-EQUITY> 7,716,374
35,167
<INVESTMENT-INCOME> 382,562
<INVESTMENT-GAINS> 17,057
<OTHER-INCOME> 45,504
<BENEFITS> 303,260
<UNDERWRITING-AMORTIZATION> 37,164
<UNDERWRITING-OTHER> 13,242
<INCOME-PRETAX> 113,026
<INCOME-TAX> 39,609
<INCOME-CONTINUING> 73,336
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 73,336
<EPS-PRIMARY> 2.32
<EPS-DILUTED> 2.27
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
