UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended March 31, 2000 Commission File No. 0-25280
- --------------------------------------------------------------------------------
The Equitable Life Assurance Society of the United States
(Exact name of registrant as specified in its charter)
New York 13-5570651
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1290 Avenue of the Americas, New York, New York 10104
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 554-1234
----------------------------
None
- --------------------------------------------------------------------------------
(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) been subject to such filing requirements
for the past 90 days.
Yes X No
--- ----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Shares Outstanding
Class at May 11, 2000
- ---------------------------------------- --------------------------------------
Common Stock, $1.25 par value 2,000,000
Page 1 of 32
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
FORM 10-Q
FOR THE THREE MONTHS ENDED MARCH 31, 2000
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION
Item 1: Unaudited Consolidated Financial Statements
Consolidated Balance Sheets as of March 31, 2000 and
December 31, 1999......................................... 3
Consolidated Statements of Earnings for the Three
Months Ended March 31, 2000 and 1999...................... 4
Consolidated Statements of Shareholder's Equity and
Comprehensive Income (Loss) for the Three Months Ended
March 31, 2000 and 1999................................... 5
Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 2000 and 1999...................... 6
Notes to Consolidated Financial Statements.................. 7
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations....................... 14
Item 3: Quantitative and Qualitative Disclosures About
Market Risk............................................... 29
PART II OTHER INFORMATION
Item 1: Legal Proceedings........................................... 30
Item 6: Exhibits and Reports on Form 8-K............................ 31
SIGNATURES............................................................. 32
2
<PAGE>
PART I FINANCIAL INFORMATION
Item 1: Unaudited Consolidated Financial Statements.
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
----------------- -----------------
(In Millions)
<S> <C> <C>
ASSETS
Investments:
Fixed maturities:
Available for sale, at estimated fair value............................. $ 18,385.0 $ 18,599.7
Held to maturity, at amortized cost..................................... 135.4 133.2
Mortgage loans on real estate............................................. 3,196.8 3,270.0
Equity real estate........................................................ 1,149.4 1,160.2
Policy loans.............................................................. 2,302.4 2,257.3
Other equity investments.................................................. 738.5 671.2
Investment in and loans to affiliates..................................... 1,274.3 1,201.8
Other invested assets..................................................... 983.1 911.6
----------------- -----------------
Total investments..................................................... 28,164.9 28,205.0
Cash and cash equivalents................................................... 187.3 628.0
Deferred policy acquisition costs........................................... 4,147.7 4,033.0
Other assets................................................................ 4,109.3 3,868.3
Closed Block assets......................................................... 8,629.3 8,607.3
Separate Accounts assets.................................................... 57,446.8 54,453.9
----------------- -----------------
Total Assets................................................................ $ 102,685.3 $ 99,795.5
================= =================
LIABILITIES
Policyholders' account balances............................................. $ 20,674.2 $ 21,351.4
Future policy benefits and other policyholders' liabilities................. 4,840.4 4,777.6
Short-term and long-term debt............................................... 1,383.5 1,407.9
Other liabilities........................................................... 3,436.4 3,133.6
Closed Block liabilities.................................................... 9,036.1 9,025.0
Separate Accounts liabilities............................................... 57,319.8 54,332.5
----------------- -----------------
Total liabilities..................................................... 96,690.4 94,028.0
----------------- -----------------
Commitments and contingencies (Note 8)
SHAREHOLDER'S EQUITY
Common stock, $1.25 par value, 2.0 million shares authorized,
issued and outstanding.................................................... 2.5 2.5
Capital in excess of par value.............................................. 3,558.7 3,557.2
Retained earnings........................................................... 2,822.4 2,600.7
Accumulated other comprehensive loss........................................ (388.7) (392.9)
----------------- -----------------
Total shareholder's equity............................................ 5,994.9 5,767.5
----------------- -----------------
Total Liabilities and Shareholder's Equity.................................. $ 102,685.3 $ 99,795.5
================= =================
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
CONSOLIDATED STATEMENTS OF EARNINGS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
2000 1999
----------------- -----------------
(In Millions)
<S> <C> <C>
REVENUES
Universal life and investment-type product policy fee income................ $ 340.4 $ 296.7
Premiums.................................................................... 133.0 134.9
Net investment income....................................................... 606.2 568.5
Investment losses, net...................................................... (124.1) (19.3)
Commissions, fees and other income.......................................... 650.3 489.3
Contribution from the Closed Block.......................................... 16.7 18.9
----------------- -----------------
Total revenues........................................................ 1,622.5 1,489.0
----------------- -----------------
BENEFITS AND OTHER DEDUCTIONS
Interest credited to policyholders' account balances........................ 262.1 270.2
Policyholders' benefits..................................................... 282.0 240.8
Other operating costs and expenses.......................................... 686.4 648.2
----------------- -----------------
Total benefits and other deductions................................... 1,230.5 1,159.2
----------------- -----------------
Earnings from continuing operations before Federal income taxes
and minority interest..................................................... 392.0 329.8
Federal income taxes........................................................ 91.2 100.4
Minority interest in net income of consolidated subsidiaries................ 74.2 42.1
----------------- -----------------
Earnings from continuing operations......................................... 226.6 187.3
Discontinued operations, net of Federal income taxes........................ (4.9) (5.3)
----------------- -----------------
Net Earnings................................................................ $ 221.7 $ 182.0
================= =================
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
AND COMPREHENSIVE INCOME (LOSS)
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
2000 1999
----------------- -----------------
(In Millions)
<S> <C> <C>
SHAREHOLDER'S EQUITY
Common stock, at par value, beginning of year and end of period............. $ 2.5 $ 2.5
----------------- -----------------
Capital in excess of par value, beginning of year........................... 3,557.2 3,110.2
Capital contribution........................................................ 1.5 -
----------------- -----------------
Capital in excess of par value, end of period............................... $ 3,558.7 $ 3,110.2
----------------- -----------------
Retained earnings, beginning of year........................................ 2,600.7 1,944.1
Net earnings................................................................ 221.7 182.0
----------------- -----------------
Retained earnings, end of period............................................ 2,822.4 2,126.1
----------------- -----------------
Accumulated other comprehensive (loss) income, beginning of year............ (392.9) 355.8
Other comprehensive income (loss)........................................... 4.2 (243.0)
----------------- -----------------
Accumulated other comprehensive (loss) income, end of period................ (388.7) 112.8
----------------- -----------------
Total Shareholder's Equity, End of Period................................... $ 5,994.9 $ 5,351.6
================= =================
COMPREHENSIVE INCOME (LOSS)
Net earnings................................................................ $ 221.7 $ 182.0
----------------- -----------------
Change in unrealized gains (losses), net of reclassification adjustment..... 4.2 (243.0)
----------------- -----------------
Other comprehensive income (loss)........................................... 4.2 (243.0)
----------------- -----------------
Comprehensive Income (Loss)................................................. $ 225.9 $ (61.0)
================= =================
</TABLE>
See Notes to Consolidated Financial Statements.
5
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
2000 1999
----------------- -----------------
(In Millions)
<S> <C> <C>
Net earnings................................................................ $ 221.7 $ 182.0
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Interest credited to policyholders' account balances.................... 262.1 270.2
Universal life and investment-type product policy fee income............ (340.4) (296.7)
Investment losses, net.................................................. 124.1 19.3
Change in Federal income tax payable.................................... 98.9 101.6
Change in property and equipment........................................ (52.9) (35.6)
Change in deferred policy acquisition costs............................. (113.3) (46.4)
Other, net.............................................................. (50.2) (69.8)
----------------- -----------------
Net cash provided by operating activities................................... 150.0 124.6
----------------- -----------------
Cash flows from investing activities:
Maturities and repayments................................................. 456.9 541.0
Sales..................................................................... 1,181.0 1,719.2
Purchases................................................................. (1,491.4) (3,118.6)
Other, net................................................................ (69.5) (138.7)
----------------- -----------------
Net cash provided (used) by investing activities............................ 77.0 (997.1)
----------------- -----------------
Cash flows from financing activities:
Policyholders' account balances:
Deposits................................................................ 632.6 616.1
Withdrawals and transfers to Separate Accounts.......................... (1,256.9) (453.9)
Net (decrease) increase in short-term financings.......................... (11.1) 357.0
Repayments of long-term debt.............................................. - (5.8)
Other, net................................................................ (32.3) (29.5)
----------------- -----------------
Net cash (used) provided by financing activities............................ (667.7) 483.9
----------------- -----------------
Change in cash and cash equivalents......................................... (440.7) (388.6)
Cash and cash equivalents, beginning of year................................ 628.0 1,245.5
----------------- -----------------
Cash and Cash Equivalents, End of Period.................................... $ 187.3 $ 856.9
================= =================
Supplemental cash flow information
Interest Paid............................................................. $ 12.2 $ 6.9
================= =================
Income Taxes Paid......................................................... $ - $ -
================= =================
</TABLE>
See Notes to Consolidated Financial Statements.
6
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1) BASIS OF PRESENTATION
The accompanying consolidated financial statements are prepared in
conformity with GAAP which requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. These statements should be read in
conjunction with the consolidated financial statements of the Company for
the year ended December 31, 1999. The results of operations for the three
months ended March 31, 2000 are not necessarily indicative of the results
to be expected for the full year.
The terms "first quarter 2000" and "first quarter 1999" refer to the three
months ended March 31, 2000 and 1999, respectively.
Certain reclassifications have been made in the amounts presented for
prior periods to conform these periods with the current presentation.
2) INVESTMENTS
Investment valuation allowances and changes thereto are shown below:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------------------
2000 1999
--------------- ---------------
(In Millions)
<S> <C> <C>
Balances, beginning of year............................................... $ 148.6 $ 230.6
Additions charged to income............................................... 8.4 9.1
Deductions for writedowns and asset dispositions.......................... (2.1) (26.0)
--------------- ---------------
Balances, End of Period................................................... $ 154.9 $ 213.7
=============== ===============
Balances, end of period:
Mortgage loans on real estate........................................... $ 29.1 $ 34.1
Equity real estate...................................................... 125.8 179.6
--------------- ---------------
Total..................................................................... $ 154.9 $ 213.7
=============== ===============
</TABLE>
For the first quarters of 2000 and 1999, investment income is shown net of
investment expenses of $56.7 million and $60.2 million, respectively.
As of March 31, 2000 and December 31, 1999, fixed maturities classified as
available for sale had amortized costs of $19,152.2 million and $19,373.6
million and fixed maturities in the held to maturity portfolio had
estimated fair values of $135.4 million and $133.2 million, respectively.
Other equity investments include equity securities with carrying values of
$27.5 million and $23.3 million and costs of $29.7 million and $32.7
million as of March 31, 2000 and December 31, 1999, respectively.
7
<PAGE>
On January 1, 1999, investments in publicly-traded common equity
securities in the General Account portfolio within other equity
investments amounting to $102.3 million were transferred from available
for sale securities to trading securities. As a result of this transfer,
unrealized investment gains of $83.3 million ($43.2 million net of related
DAC and Federal income taxes) were recognized as realized investment gains
in the consolidated statement of earnings. In first quarter 2000 and 1999,
net unrealized holding gains of $3.9 and $71.4 million were included in
net investment income in the consolidated statements of earnings. These
trading securities had a carrying value of $13.5 million and costs of
$11.1 million at March 31, 2000.
For the first quarters of 2000 and 1999, proceeds received on sales of
fixed maturities classified as available for sale amounted to $1,125.2
million and $1,592.6 million, respectively. Gross gains of $24.5 million
and $17.3 million and gross losses of $87.9 million and $56.7 million were
realized on these sales for the first quarters of 2000 and 1999,
respectively. Unrealized investment gains (losses) related to fixed
maturities classified as available for sale increased by $6.4 million
during the first three months of 2000, resulting in a balance of $(767.5)
million at March 31, 2000.
Impaired mortgage loans along with the related provision for losses were
as follows:
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
--------------- -----------------
(In Millions)
<S> <C> <C>
Impaired mortgage loans with provision for losses....................... $ 141.7 $ 142.4
Impaired mortgage loans without provision for losses.................... 1.9 2.2
--------------- -----------------
Recorded investment in impaired mortgage loans.......................... 143.6 144.6
Provision for losses.................................................... (24.7) (23.0)
--------------- -----------------
Net Impaired Mortgage Loans............................................. $ 118.9 $ 121.6
=============== =================
</TABLE>
During the first quarters of 2000 and 1999, respectively, the Company's
average recorded investment in impaired mortgage loans was $144.1 million
and $133.8 million. Interest income recognized on these impaired mortgage
loans totaled $2.9 million and $1.9 million for the first quarters of 2000
and 1999, respectively.
8
<PAGE>
3) CLOSED BLOCK
Summarized financial information for the Closed Block follows:
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
----------------- -----------------
(In Millions)
<S> <C> <C>
BALANCE SHEETS
Fixed maturities:
Available for sale, at estimated fair value (amortized cost of
$4,150.7 and $4,144.8)............................................. $ 4,027.9 $ 4,014.0
Mortgage loans on real estate.......................................... 1,672.9 1,704.2
Policy loans........................................................... 1,588.2 1,593.9
Cash and other invested assets......................................... 237.9 194.4
DAC.................................................................... 877.7 895.5
Other assets........................................................... 224.7 205.3
----------------- -----------------
Total Assets........................................................... $ 8,629.3 $ 8,607.3
================= =================
Future policy benefits and other policyholders' account balances....... $ 9,006.9 $ 9,011.7
Other liabilities...................................................... 29.2 13.3
----------------- -----------------
Total Liabilities...................................................... $ 9,036.1 $ 9,025.0
================= =================
Three Months Ended
March 31,
-----------------------------------
2000 1999
---------------- ---------------
(In Millions)
STATEMENTS OF EARNINGS
Premiums and other income................................................. $ 153.0 $ 156.0
Investment income (net of investment expenses of $3.4 and $5.2)........... 143.0 142.0
Investment losses, net.................................................... (3.0) (1.9)
--------------- ---------------
Total revenues.......................................................... 293.0 296.1
--------------- ---------------
Policyholders' benefits and dividends..................................... 260.7 266.4
Other operating costs and expenses........................................ 15.6 10.8
--------------- ---------------
Total benefits and other deductions..................................... 276.3 277.2
--------------- ---------------
Contribution from the Closed Block........................................ $ 16.7 $ 18.9
=============== ===============
</TABLE>
Investment valuation allowances amounted to $5.2 million and $4.6 million
on mortgage loans and $26.2 million and $24.7 million on equity real
estate at March 31, 2000 and December 31, 1999, respectively.
9
<PAGE>
Impaired mortgage loans along with the related provision for losses were
as follows:
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
----------------- -------------------
(In Millions)
<S> <C> <C>
Impaired mortgage loans with provision for losses...................... $ 27.0 $ 26.8
Impaired mortgage loans without provision for losses................... 4.2 4.5
----------------- -------------------
Recorded investment in impaired mortgages.............................. 31.2 31.3
Provision for losses................................................... (4.7) (4.1)
----------------- -------------------
Net Impaired Mortgage Loans............................................ $ 26.5 $ 27.2
================= ===================
During the first quarters of 2000 and 1999, respectively, the Closed
Block's average recorded investment in impaired mortgage loans was $31.3
million and $49.8 million.
4) DISCONTINUED OPERATIONS
Summarized financial information for discontinued operations follows:
March 31, December 31,
2000 1999
----------------- -------------------
(In Millions)
BALANCE SHEETS
Mortgage loans on real estate.......................................... $ 444.7 $ 454.6
Equity real estate..................................................... 419.9 426.6
Other equity investments............................................... 54.5 55.8
Other invested assets.................................................. 188.2 87.1
----------------- -------------------
Total investments.................................................... 1,107.3 1,024.1
Cash and cash equivalents.............................................. 50.2 164.5
Other assets........................................................... 209.7 213.0
----------------- -------------------
Total Assets........................................................... $ 1,367.2 $ 1,401.6
================= ===================
Policyholders' liabilities............................................. $ 987.2 $ 993.3
Allowance for future losses............................................ 252.9 242.2
Other liabilities...................................................... 127.1 166.1
----------------- -------------------
Total Liabilities...................................................... $ 1,367.2 $ 1,401.6
================= ===================
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------------
2000 1999
----------------- -----------------
(In Millions)
<S> <C> <C>
STATEMENTS OF EARNINGS
Investment income (net of investment expenses of $10.4 and $13.1)......... $ 29.0 $ 19.6
Investment losses, net.................................................... (2.3) (7.0)
Policy fees, premiums and other income.................................... - -
----------------- -----------------
Total revenues............................................................ 26.7 12.6
Benefits and other deductions............................................. 26.7 25.4
Losses charged to allowance for future losses............................. - (12.8)
----------------- -----------------
Pre-tax results from operations........................................... - -
Pre-tax loss from strengthening the allowance for future losses........... (7.6) (8.2)
Federal income tax benefit................................................ 2.7 2.9
----------------- -----------------
Loss from Discontinued Operations......................................... $ (4.9) $ (5.3)
================= =================
</TABLE>
The Company's quarterly process for evaluating the allowance for future
losses applies the current period's results of discontinued operations
against the allowance, re-estimates future losses, and adjusts the
allowance, if appropriate. The evaluations performed in the first quarters
of 2000 and 1999 resulted in management's decision to strengthen the
allowance by $7.6 million for the first quarter of 2000 and by $8.2
million for the first quarter of 1999. This resulted in after-tax losses
of $4.9 million for first quarter 2000 and after-tax losses of $5.3
million for first quarter 1999.
Management believes the allowance for future losses at March 31, 2000 is
adequate to provide for all future losses; however, the determination of
the allowance involves numerous estimates and subjective judgments
regarding the expected performance of Discontinued Operations Investment
Assets. There can be no assurance the losses provided for will not differ
from the losses ultimately realized. To the extent actual results or
future projections of discontinued operations differ from management's
current estimates and assumptions underlying the allowance for future
losses, the difference would be reflected in the consolidated statements
of earnings in discontinued operations. In particular, to the extent
income, sales proceeds and holding periods for equity real estate differ
from management's previous assumptions, periodic adjustments to the loss
allowance are likely to result.
Investment valuation allowances amounted to $1.7 million and $1.9 million
on mortgage loans and $54.5 million and $54.8 million on equity real
estate at March 31, 2000 and December 31, 1999, respectively.
5) FEDERAL INCOME TAXES
Federal income taxes for interim periods have been computed using an
estimated annual effective tax rate. This rate is revised, if necessary,
at the end of each successive interim period to reflect the current
estimate of the annual effective tax rate.
6) RESTRUCTURING COSTS
At March 31, 2000, the restructuring liabilities included costs related to
employee termination and exit costs, the termination of operating leases
and the consolidation of insurance operations' service centers and
amounted to $7.7 million. The amounts paid during first quarter 2000
totaled $2.5 million.
11
<PAGE>
7) RELATED PARTIES TRANSACTIONS
Effective January 1, 2000, the Company reimburses the Holding Company for
expenses relating to the Excess Retirement Plan, Supplemental Executive
Retirement Plan and certain other employee benefit plans that provide
participants with medical, life insurance, and deferred compensation
benefits. Such reimbursement is made on the basis of the cost to the
Holding Company of the benefits provided which totaled $3.8 million for
first quarter 2000. The Company paid $181.2 million of commission fees to
AXA Distribution and its subsidiaries for first quarter 2000. Effective
January 1, 2000, the Company charged AXA Distribution's subsidiaries for
their applicable share of operating expenses pursuant to the Agreements
for Services. Such charges totaled $41.9 million for first quarter 2000.
8) LITIGATION
There have been no new material legal proceedings and no material
developments in specific litigations previously described in the Company's
Notes to Consolidated Financial Statements for the year ended December 31,
1999, except as follows:
Equitable Life is a defendant in a purported class action commenced in
March 2000 on behalf of persons who purchased variable annuities from
Equitable Life from January 1989 to the present. The complaint alleges
various improper sales practices including misrepresentations in
connection with the use of variable annuities in a qualified retirement
plan or similar arrangement, charging inflated or hidden fees, and failure
to disclose unnecessary tax deferral fees. The plaintiff seeks damages
including punitive damages. In May 2000, Equitable Life filed a motion to
dismiss the complaint. Although the outcome of litigation cannot be
predicted with certainty, particularly in the early stages of an action,
the Company's management believes that the ultimate resolution of this
litigation should not have a material adverse effect on the financial
position of the Company. The Company's management cannot make an estimate
of loss, if any, or predict whether or not any such litigation will have a
material adverse effect on the Company's results of operations in any
particular period.
In September 1999, an action was brought on behalf of a purported class of
owners of limited partnership units of Alliance Holding challenging the
then-proposed reorganization of Alliance Holding. Named defendants include
Alliance Holding, Alliance, four Alliance Holding executives and the
general partner of Alliance Holding and Alliance. Equitable Life is
obligated to indemnify the defendants for losses and expenses arising out
of the litigation. Plaintiffs allege inadequate and misleading
disclosures, breaches of fiduciary duties, and the improper adoption of an
amended partnership agreement by Alliance Holding and seek payment of
unspecified money damages and an accounting of all benefits alleged to
have been improperly obtained by the defendants. Although the outcome of
any litigation cannot be predicted with certainty, the Company's
management believes that the ultimate resolution of this matter should not
have a material adverse effect on the financial position of the Company.
The Company's management cannot make an estimate of loss, if any, or
predict whether or not such matter will have a material adverse effect on
the Company's results of operations in any particular period.
In the Alliance North American Government Income Trust action, a
Stipulation and Agreement of Settlement has been signed with the lawyers
for the plaintiffs settling this action. Under the Stipulation and
Agreement of Settlement, the Operating Partnership will permit Fund
shareholders to invest up to $250 million in Alliance mutual funds free of
initial sales charges. The Stipulation and Agreement of Settlement is
subject to court approval.
In addition to the matters previously reported and those described above,
the Holding Company and its subsidiaries are involved in various legal
actions and proceedings in connection with their businesses. Some of the
actions and proceedings have been brought on behalf of various alleged
classes of claimants and certain of these claimants seek damages of
unspecified amounts. While the ultimate outcome of such matters cannot be
predicted with certainty, in the opinion of management no such matter is
likely to have a material adverse effect on the Company's consolidated
financial position or results of operations.
12
<PAGE>
9) BUSINESS SEGMENT INFORMATION
<TABLE>
<CAPTION>
Investment
Insurance Services Elimination Total
--------------- ----------------- --------------- -----------------
(In Millions)
<S> <C> <C> <C> <C>
Three Months Ended
March 31, 2000
---------------------------------------
Segment revenues..................... $ 1,151.3 $ 624.6 $ (29.3) $ 1,746.6
Investment (losses) gains............ (130.5) 6.4 - (124.1)
--------------- ----------------- --------------- -----------------
Total Revenues....................... $ 1,020.8 $ 631.0 $ (29.3) $ 1,622.5
=============== ================= =============== =================
Pre-tax operating earnings........... $ 270.7 $ 163.1 $ - $ 433.8
Investment (losses) gains , net of
related DAC and other charges...... (123.3) 6.1 - (117.2)
Pre-tax minority interest............ - 75.4 - 75.4
--------------- ----------------- --------------- -----------------
Pre-tax earnings from
Continuing Operations.............. $ 147.4 $ 244.6 $ - $ 392.0
=============== ================= =============== =================
Three Months Ended
March 31, 1999
---------------------------------------
Segment revenues..................... $ 1,047.3 $ 456.2 $ (1.4) $ 1,502.1
Investment (losses) gains............ (23.5) 10.4 - (13.1)
--------------- ----------------- --------------- -----------------
Total Revenues....................... $ 1,023.8 $ 466.6 $ (1.4) $ 1,489.0
=============== ================= =============== =================
Pre-tax operating earnings........... $ 221.2 $ 86.1 $ - $ 307.3
Investment (losses) gains, net of
related DAC and other charges...... (35.0) 10.2 - (24.8)
Pre-tax minority interest............ - 47.3 - 47.3
--------------- ----------------- --------------- -----------------
Pre-tax earnings from Continuing
Operations......................... $ 186.2 $ 143.6 $ - $ 329.8
=============== ================= =============== =================
Total Assets:
March 31, 2000....................... $ 89,592.5 $ 13,135.9 $ (43.1) $ 102,685.3
=============== ================= =============== =================
December 31, 1999.................... $ 86,842.7 $ 12,961.7 $ (8.9) $ 99,795.5
=============== ================= =============== =================
</TABLE>
13
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following analysis of the consolidated operating results and financial
condition of the Company should be read in conjunction with the Consolidated
Financial Statements and the related Notes to Consolidated Financial Statements
included elsewhere herein, and with the Management's Discussion and Analysis
("MD&A") section included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1999 ("1999 Form 10-K"). The terms "first quarter 2000"
and "first quarter 1999" refer to the three months ended March 31, 2000 and
1999, respectively.
COMBINED OPERATING RESULTS
The combined and segment level discussions for the Insurance and Investment
Services segments in this MD&A are presented on an adjusted basis; amounts
reported in the GAAP financial statements have been adjusted to exclude the
effect of unusual or non-recurring events and transactions and to exclude
certain revenue and expense categories. The following table presents the
combined operating results outside of the Closed Block combined on a
line-by-line basis with the contribution of Closed Block. The Insurance
analysis, which begins on page 15, likewise reflects the Closed Block amounts on
a line-by-line basis. The MD&A addresses the combined operating results unless
noted otherwise. The Investment Services discussion begins on page 19.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------------------
2000 1999
--------------- ---------------
(In Millions)
<S> <C> <C>
Operating Results:
Policy fee income and premiums................................................ $ 626.4 $ 587.1
Net investment income......................................................... 749.2 704.5
Commissions, fees and other income............................................ 647.3 487.7
--------------- ---------------
Total revenues.............................................................. 2,022.9 1,779.3
Total benefits and other deductions......................................... 1,513.7 1,424.7
--------------- ---------------
Pre-tax operating earnings before minority interest........................... 509.2 354.6
Minority interest............................................................. (75.4) (47.3)
--------------- ---------------
Pre-tax operating earnings.................................................... 433.8 307.3
Pre-tax Adjustments:
Investment losses, net of DAC and other charges............................... (117.2) (24.8)
Minority interest............................................................. 75.4 47.3
--------------- ---------------
GAAP Reported:
Earnings from continuing operations before Federal income taxes
and minority interest....................................................... 392.0 329.8
Federal income taxes.......................................................... 91.2 100.4
Minority interest in net income of consolidated subsidiaries.................. 74.2 42.1
--------------- ---------------
Earnings from Continuing Operations............................................. $ 226.6 $ 187.3
=============== ===============
</TABLE>
14
<PAGE>
Adjustments to GAAP reported earnings in first quarter 2000 resulted in the
exclusion of investment losses of $117.2 million (net of DAC and other charges
totaling $7.2 million) as compared to net investment losses of $24.8 million
(net of DAC and other charges totaling $5.5 million) for first quarter 1999. The
losses in 2000 included $59.0 million of writedowns and $51.5 million of
realized losses on fixed maturities sold from the General Account's portfolio.
The 1999 net losses were primarily due to $84.2 million of writedowns and $37.9
million of losses on sales of fixed maturities, partially offset by the $83.5
million of gains recognized upon reclassification of publicly-traded common
equities to a trading portfolio (see page 25) and $10.2 million of gains on the
exercise of Alliance and DLJ options and conversion of DLJ RSUs.
Continuing Operations
Compared to first quarter 1999, the $126.5 million higher pre-tax operating
earnings for first quarter 2000 were due to higher operating earnings in both
business segments. Minority interest in net income of consolidated subsidiaries
was higher due to increased earnings at Alliance.
The $243.2 million increase in revenues for first quarter 2000 from first
quarter 1999 was attributed to the $159.6 million increase in commissions, fees
and other income principally due to increased business activity within the
Investment Services segment, a $44.7 million increase in investment income and a
$39.3 million increase in policy fee income and premiums principally in
Insurance.
For first quarter 2000, total benefits and other deductions increased by $89.0
million from the comparable 1999 period reflecting increases in other operating
costs and expenses of $61.6 million and higher policyholder benefits. The
increase in other operating costs and expenses principally resulted from higher
costs associated with increased revenues in the two business segments and with
expenditures related to the businesses' strategic initiatives.
COMBINED OPERATING RESULTS BY SEGMENT
Insurance
The following table combines the Closed Block amounts with the operating results
of operations outside of the Closed Block on a line-by-line basis.
Insurance - Combined Operating Results
(In Millions)
<TABLE>
<CAPTION>
Three Months Ended March 31,
------------------------------------------------------------------
2000
------------------------------------------------
Insurance Closed 1999
Operations Block Combined Combined
------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Operating Results:
Policy fees, premiums and other income........ $ 535.0 $ 150.0 $ 685.0 $ 633.6
Net investment income......................... 599.6 143.0 742.6 690.9
Contribution from the Closed Block............ 16.7 (16.7) - -
------------- -------------- ------------- --------------
Total revenues.............................. 1,151.3 276.3 1,427.6 1,324.5
Total benefits and other deductions........... 880.6 276.3 1,156.9 1,103.3
------------- -------------- ------------- --------------
Pre-tax operating earnings...................... 270.7 - 270.7 221.2
Pre-tax Adjustments:
Investment losses, net of DAC
and other charges........................... (123.3) - (123.3) (35.0)
------------- -------------- ------------- --------------
GAAP Reported:
Earnings from Continuing Operations
before Federal Income Taxes and
Minority Interest........................... $ 147.4 $ - $ 147.4 $ 186.2
============= ============== ============= ==============
15
<PAGE>
</TABLE>
For first quarter 2000, Insurance pre-tax operating earnings reflected an
increase of $49.5 million from the year earlier period. Higher policy fees on
variable and interest-sensitive life and individual annuities contracts, and
higher margins between investment income and interest credited on policyholders'
account balances contributed to the improved earnings.
Segment revenues were up $103.1 million due to a $51.7 million increase in
investment income and a $51.4 million increase in policy fees, premiums and
other income. Higher yields on General Account Investment Assets principally
related to other equity investments and fixed maturities as well as higher
investment income from the larger mortgage portfolio all contributed to the
increase in investment income. Policy fee income rose $43.7 million to $340.4
million due to higher insurance and annuity account balances while premiums
declined $4.4 million to $286.0 million. The increase in other income was
principally due to higher gross investment management fees received from EQ
Advisor Trust offset by a decrease in mutual fund fees resulting from the
transfer of AXA Advisors to AXA Distribution in third quarter 1999. The increase
in management fees was partially offset by an increase in fees to subadvisors.
Total benefits and other deductions for first quarter 2000 increased $53.6
million from the comparable 1999 period reflecting higher commissions,
compensation and benefits, higher policyholders' benefits and higher subadvisory
fees. Commissions increased due to higher product sales and higher commission
rates paid to AXA Distribution subsidiaries. Higher policyholders' benefits for
first quarter 2000 were primarily due to higher DI and reinsurance assumed
benefits. Offsetting these increases were higher DAC capitalization and lower
other operating expenses. The decline in the Insurance segment's other operating
expenses resulted from charging AXA Distribution and its subsidiaries, AXA
Advisors and AXA Network, their applicable share of such expenses. Partially
offsetting this decline were higher strategic initiative related expenditures in
first quarter 2000 as compared to first quarter 1999.
16
<PAGE>
Premiums and Deposits - The following table lists sales for major insurance
product lines. Premiums and deposits are presented net of internal conversions
(1999 data have been restated to conform to this presentation); premiums are
presented gross of reinsurance ceded.
Premiums and Deposits
(In Millions)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------------------
2000 1999
--------------- ---------------
<S> <C> <C>
Retail:
Annuities
First year.................................................................... $ 838.7 $ 755.3
Renewal....................................................................... 485.4 477.0
--------------- ---------------
1,324.1 1,232.3
Life(1)
First year.................................................................... 106.5 83.2
Renewal....................................................................... 622.0 563.5
--------------- ---------------
728.5 646.7
Other(2)
First year.................................................................... 2.6 1.9
Renewal....................................................................... 90.1 97.0
--------------- ---------------
92.7 98.9
--------------- ---------------
Total retail................................................................ 2,145.3 1,977.9
--------------- ---------------
Wholesale:
Annuities
First year.................................................................... 680.7 404.6
Renewal....................................................................... 18.5 6.7
--------------- ---------------
699.2 411.3
Life
First year.................................................................... 2.1 .1
--------------- ---------------
Total wholesale............................................................. 701.3 411.4
--------------- ---------------
Total Premiums and Deposits..................................................... $ 2,846.6 $ 2,389.3
=============== ===============
<FN>
(1) Includes variable and interest-sensitive and traditional life products.
(2) Includes reinsurance assumed and health insurance.
</FN>
</TABLE>
First year premiums and deposits for insurance and annuity products for first
quarter 2000 increased from prior year levels by $385.5 million primarily due to
higher sales of individual annuities by both the retail and wholesale
distribution channels as well as a $23.3 million increase in life sales. In
first quarter 2000, first year life sales increased due to sales of a new series
of variable life products introduced in 1999 and higher premiums received on
COLI policies. Renewal premiums and deposits increased by $71.8 million during
first quarter 2000 over the prior year period as increases in the larger block
of annuity and variable life business were partially offset by decreases in
other products and traditional life policies.
17
<PAGE>
Surrenders and Withdrawals - The following table presents surrenders and
withdrawals, including universal life and investment-type contract withdrawals,
for major individual insurance and annuity product lines. Annuity surrenders and
withdrawals are presented net of internal replacements; the 1999 data have been
restated to conform to this presentation.
Surrenders and Withdrawals
(In Millions)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------------------
2000 1999
--------------- ---------------
<S> <C> <C>
Individual Insurance and Annuity Product Lines:
Individual annuities.......................................................... $ 1,245.9 $ 865.7
Variable and interest-sensitive life.......................................... 188.4 168.1
Traditional life.............................................................. 83.3 92.9
--------------- ---------------
Total........................................................................... $ 1,517.6 $ 1,126.7
=============== ===============
</TABLE>
Policy and contract surrenders and withdrawals increased $390.9 million during
first quarter 2000 compared to the same period in 1999 principally due to the
growing size and maturity of the book of annuities and variable and
interest-sensitive life business. There was an increase in the annuities'
surrender rate from 9.2% in first quarter 1999 to 10.5% in first quarter 2000.
18
<PAGE>
Investment Services
The following table summarizes the results of continuing operations for
Investment Services.
Investment Services - Operating Results
(In Millions)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------------------
2000 1999
--------------- ---------------
<S> <C> <C>
Operating Results:
Investment advisory and service fees.......................................... $ 374.2 $ 305.4
Distribution revenues......................................................... 147.2 93.6
Equity in DLJ's earnings...................................................... 75.3 37.1
Other income.................................................................. 27.9 20.1
--------------- ---------------
Total revenues.............................................................. 624.6 456.2
--------------- ---------------
Promotion and servicing....................................................... 198.6 139.1
Employee compensation and benefits............................................ 128.6 118.3
All other operating expenses.................................................. 58.9 65.4
--------------- ---------------
Total expenses.............................................................. 386.1 322.8
--------------- ---------------
Pre-tax operating earnings before minority interest........................... 238.5 133.4
Minority interest.......................................................... (75.4) (47.3)
--------------- ---------------
Pre-tax operating earnings.................................................... 163.1 86.1
Pre-tax Adjustments:
Investment gains (losses), net of DAC......................................... 6.1 10.2
Minority interest............................................................... 75.4 47.3
--------------- ---------------
GAAP Reported:
Earnings from Continuing Operations before Federal Income
Taxes and Minority Interest................................................. $ 244.6 $ 143.6
=============== ===============
</TABLE>
For first quarter 2000, pre-tax operating earnings for Investment Services
increased by $77.0 million from the year-earlier period primarily due to higher
earnings for Alliance and higher equity in DLJ's earnings. DLJ's first quarter
2000 earnings contribution was more than double the comparable 1999 amount
largely due to higher net investment income, gains on principal transactions,
net, commissions and fees which were partially offset by higher compensation and
benefits and higher occupancy, equipment and communications costs related to
DLJ's continuing geographic expansion. Total segment revenues were up $168.4
million principally due to higher revenues at Alliance. Investment advisory and
service fees increased $68.8 million while distribution revenues grew by $53.6
million. The increase in investment advisory and service fees primarily resulted
from increases in average assets under management due to market appreciation and
net new client and existing client accounts partially offset by a $34.5 million
decline in performance fees for first quarter 2000. These lower performance fees
were principally due to a refinement of procedures for estimating these fees
implemented in fourth quarter 1999. The growth in distribution revenues was
principally due to higher average mutual fund assets under management from
strong sales, particularly of U.S. equity mutual funds, and from market
appreciation.
The resolution of a class action lawsuit resulted in the recognition of a
one-time, non-cash gain of $23.9 million in first quarter 2000, which reduced
all other operating expenses for the period. When this one-time gain is
excluded, Investment Services' total expenses increased by $87.2 million for
first quarter 2000 as compared to the same period in 1999 principally reflecting
increases in mutual fund promotional expenses and employee compensation and
benefits at Alliance. Promotion and servicing increased 42.6% primarily due to
increased distribution plan payments related to the higher average mutual fund
assets under management and higher amortization of deferred sales commissions,
as well as higher travel, entertainment and promotional expenses incurred in
connection with mutual fund sales initiatives. Higher compensation and benefits
were due to increased base compensation and commissions reflecting increased
headcounts in the mutual fund area along with salary increases. Commissions
increased primarily due to higher mutual fund sales.
19
<PAGE>
Fees and Assets Under Management.
As the following table illustrates, third party clients represent the primary
source of fees from assets under management.
Fees and Assets Under Management
(In Millions)
<TABLE>
<CAPTION>
At or For the
Three Months Ended
March 31,
-----------------------------------
2000 1999
--------------- ---------------
<S> <C> <C>
FEES:
Third parties................................................................... $ 407.2 $ 316.1
Equitable Life Separate Accounts................................................ 30.7 25.2
Equitable Life General Account and other........................................ 10.7 10.3
--------------- ---------------
Total Fees...................................................................... $ 448.6 $ 351.6
=============== ===============
ASSETS UNDER MANAGEMENT:
Assets by Manager
Alliance:
Third party................................................................... $ 326,986 $ 240,759
Equitable Life General Account and Holding Company............................ 24,257 25,635
Equitable Life Separate Accounts.............................................. 43,003 34,959
--------------- ---------------
Total Alliance.................................................................. 394,246 301,353
--------------- ---------------
DLJ:
Third party................................................................... 41,518 25,016
DLJ invested assets........................................................... 33,938 16,103
--------------- ---------------
Total DLJ....................................................................... 75,456 41,119
--------------- ---------------
Equitable Life and Affiliates:
Equitable Life (non-Alliance) General Account................................. 13,315 13,619
Equitable Life Separate Accounts - EQ Advisors Trust.......................... 7,676 3,571
Equitable Life real estate related Separate Accounts.......................... 3,650 4,098
Equitable Life Separate Accounts - Other...................................... 3,118 2,465
--------------- ---------------
Total Equitable Life and Affiliates............................................. 27,759 23,753
--------------- ---------------
Total by Account:
Third Party................................................................... 368,504 265,775
General Account and Other..................................................... 71,510 55,357
Separate Accounts............................................................. 57,447 45,093
--------------- ---------------
Total Assets Under Management................................................... $ 497,461 $ 366,225
=============== ===============
</TABLE>
Fees from assets under management increased 27.6% for first quarter 2000 from
the comparable 1999 period principally as a result of growth in assets under
management for third parties principally at Alliance. The Alliance assets under
management growth in first quarter 2000 was primarily due to market
appreciation, good investment performance and net sales of mutual funds and
other products. DLJ's third party assets under management increased in first
quarter 2000 by $16.50 billion as compared to first quarter 1999 principally due
to new business in its Asset Management Group.
20
<PAGE>
GENERAL ACCOUNT INVESTMENT PORTFOLIO
Management discusses the Closed Block assets and assets outside of the Closed
Block on a combined basis as General Account Investment Assets. The following
table reconciles the consolidated balance sheet asset amounts to General Account
Investment Assets.
General Account Investment Asset Carrying Values
March 31, 2000
(In Millions)
<TABLE>
<CAPTION>
General
Account
Balance Closed Investment
Balance Sheet Captions: Sheet Block Other Assets(1)
- ------------------------------------------------- --------------- -------------- --------------- -------------
<S> <C> <C> <C> <C>
Fixed maturities:
Available for sale(2)....................... $ 18,385.0 $ 4,027.9 $ (58.1) $ 22,471.0
Held to maturity............................ 135.4 - - 135.4
Mortgage loans on real estate................. 3,196.8 1,672.9 (0.1) 4,869.8
Equity real estate............................ 1,149.4 89.0 (2.7) 1,241.1
Policy loans.................................. 2,302.4 1,588.2 .5 3,890.1
Other equity investments...................... 738.5 31.0 - 769.5
Other invested assets......................... 2,257.4 1.3 1,564.8 693.9
----------------- -------------- --------------- -------------
Total investments........................... 28,164.9 7,410.3 1,504.4 34,070.8
Cash and cash equivalents..................... 187.3 116.6 185.1 118.8
Corporate debt and other(3)................... - - 701.3 (701.3)
----------------- -------------- --------------- -------------
Total......................................... $ 28,352.2 $ 7,526.9 $ 2,390.8 $ 33,488.3
================= ============== =============== =============
<FN>
(1) General Account Investment Assets are computed by adding the Balance Sheet
and Closed Block and deducting the Other amounts.
(2) At March 31, 2000, the amortized cost of the General Account's available
for sale and held to maturity fixed maturities portfolios were $23.37
billion and $135.4 million, respectively, compared with estimated market
values of $22.47 billion and $135.4 million, respectively.
(3) Includes Equitable Life debt and other miscellaneous assets and liabilities
related to General Account Investment assets and various balance sheet
lines.
</FN>
</TABLE>
21
<PAGE>
Asset Valuation Allowances and Writedowns
Writedowns on fixed maturities were $59.0 million and $84.2 million for the
first quarters of 2000 and 1999, respectively. The following table shows asset
valuation allowances and additions to and deductions from such allowances for
the periods indicated.
General Account Investment Assets
Valuation Allowances
(In Millions)
<TABLE>
<CAPTION>
Equity Real
Mortgages Estate Total
--------------- --------------- --------------
<S> <C> <C> <C>
Balances at January 1, 2000................................... $ 32.1 $ 145.8 $ 177.9
Additions..................................................... 3.4 7.2 10.6
Deductions(1)................................................. (1.2) (1.0) (2.2)
--------------- --------------- --------------
Ending Balances at March 31, 2000............................. $ 34.3 $ 152.0 $ 186.3
=============== =============== ==============
Balances at January 1, 1999................................... $ 45.4 $ 211.8 $ 257.2
Additions..................................................... .3 10.0 10.3
Deductions(1)................................................. (3.1) (25.7) (28.8)
--------------- --------------- --------------
Ending Balances at March 31, 1999............................. $ 42.6 $ 196.1 $ 238.7
=============== =============== ==============
<FN>
(1) Primarily reflected releases of allowances due to asset dispositions.
</FN>
</TABLE>
General Account Investment Assets
The following table shows amortized cost, valuation allowances and net amortized
cost of major categories of General Account Investment Assets at March 31, 2000
and net amortized cost at December 31, 1999.
General Account Investment Assets
(In Millions)
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
------------------------------------------------ ----------------------
Net Net
Amortized Valuation Amortized Amortized
Cost Allowances Cost Cost
--------------- ------------- --------------- ----------------------
<S> <C> <C> <C> <C>
Fixed maturities(1)...................... $ 23,503.4 $ - $ 23,503.4 $ 23,719.1
Mortgages................................ 4,904.1 34.3 4,869.8 4,974.2
Equity real estate....................... 1,393.1 152.0 1,241.1 1,251.2
Other equity investments................. 893.8 - 893.8 826.2
Policy loans............................. 3,890.1 - 3,890.1 3,851.2
Cash and short-term investments.......... 813.6 - 813.6 1,220.6
--------------- ------------- --------------- ----------------------
Total.................................... $ 35,398.1 $ 186.3 $ 35,211.8 $ 35,842.5
=============== ============= =============== ======================
<FN>
(1) Excludes unrealized losses of $897.0 million and unrealized losses of
$896.4 million in fixed maturities classified as available for sale at
March 31, 2000 and December 31, 1999, respectively.
</FN>
</TABLE>
22
<PAGE>
Investment Results of General Account Investment Assets
<TABLE>
<CAPTION>
Investment Results by Asset Category
(Dollars In Millions)
Three Months Ended March 31,
---------------------------------------------------------
2000 1999
--------------------------- ---------------------------
(1) (1)
Yield Amount Yield Amount
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Fixed Maturities:
Income.................................................... 7.97% $ 461.8 7.90% $ 449.0
Investment gains(losses).................................. (1.95)% (110.5) (2.19)% (122.1)
----------- ------------- ----------- -------------
Total..................................................... 6.02% $ 351.3 5.71% $ 326.9
Ending assets(2).......................................... $ 23,906.1 $ 23,866.9
Mortgages:
Income.................................................... 8.69% $ 103.5 8.86% $ 97.5
Investment gains(losses).................................. (0.23)% (2.7) 0.16% 1.8
----------- ------------- ----------- -------------
Total..................................................... 8.46% $ 100.8 9.02% $ 99.3
Ending assets(3).......................................... $ 4,909.9 $ 4,721.7
Equity Real Estate:
Income(4)................................................. 8.17% $ 19.8 6.86% $ 22.9
Investment gains(losses).................................. (0.21)% (0.5) 2.63% 8.5
----------- ------------- ----------- -------------
Total..................................................... 7.96% $ 19.3 9.49% $ 31.4
Ending assets(4).......................................... $ 1,002.6 $ 1,371.7
Other Equity Investments:
Income.................................................... 54.74% $ 95.1 35.35% $ 63.8
Investment gains(losses).................................. (12.84)% (19.7) 52.94% 75.3
----------- ------------- ----------- -------------
Total..................................................... 41.90% $ 75.4 88.29% $ 139.1
Ending assets(5).......................................... $ 896.9 $ 903.1
Policy Loans:
Income.................................................... 6.72% $ 62.9 6.63% $ 59.9
Ending assets............................................. $ 3,890.1 $ 3,742.1
Cash and Short-term Investments:
Income.................................................... 9.16% $ 22.4 6.53% $ 20.0
Ending assets(6).......................................... $ 822.8 $ 905.6
Equitable Life Debt and Other:
Interest expense and other................................ 8.34% $ (14.7) 7.32% $ (11.2)
Ending liabilities........................................ $ (701.3) $ (670.0)
Total:
Income(7)................................................. 8.93% $ 750.8 8.40% $ 701.9
Investment gains(losses).................................. (1.63)% (133.4) (0.45)% (36.5)
----------- ------------- ----------- -------------
Total(8).................................................. 7.30% $ 617.4 7.95% $ 665.4
Ending net assets......................................... $ 34,727.1 $ 34,841.1
<FN>
(1) Yields have been calculated on a compound annual effective rate basis
using the quarterly average asset carrying values, excluding unrealized
gains (losses) in fixed maturities and adjusted for the current periods'
income, gains(losses) and fees. Annualized yields are not necessarily
indicative of a full year's results.
(2) Fixed maturities are shown net of securities purchased but not yet paid
for of $81.1 million and $749.7 million, and include accrued income of
$394.5 million and $385.8 million, amounts due from securities sales of
$70.8 million and $26.6 million and other assets of $18.6 million and
$28.6 million at March 31, 2000 and 1999, respectively.
(3) Mortgages include accrued income of $54.6 million and $56.9 million and
are adjusted for related liability balances of $(14.4) million and $(22.9)
million at March 31, 2000 and 1999, respectively.
23
<PAGE>
(4) Equity real estate is shown, and equity real estate yields are calculated,
net of third party debt and minority interest in real estate of $251.4
million and $385.0 million. The carrying values include accrued income of
$20.8 million and $30.1 million and are adjusted for related liability
balances of $(7.9) million and $(18.0) million as of March 31, 2000 and
1999, respectively. Equity real estate income is shown net of operating
expenses, depreciation, third party interest expense and minority
interest. Third party interest expense and minority interest totaled $3.4
million and $6.0 million for first quarter 2000 and 1999, respectively.
(5) Other equity investments include adjustments for accrued income and
pending trade settlements of $3.1 million and $(1.9) million as of March
31, 2000 and 1999, respectively.
(6) Cash and short-term investments are shown net of financing arrangements of
$(168.8) million as of March 31, 1999, as well as accrued income and cash
in transit totaling $9.2 million and $4.4 million as of March 31, 2000 and
1999, respectively.
(7) Total investment income includes non-cash income from amortization,
payments-in-kind distributions and undistributed equity earnings of $15.9
million and $24.5 million for first quarter 2000 and 1999, respectively.
Investment income is shown net of depreciation of $5.4 million and $5.5
million for the same respective periods.
(8) Total yields are shown before deducting investment fees paid to investment
advisors. These fees include asset management, acquisition, disposition,
accounting and legal fees. If investment fees had been deducted, total
yields would have been 7.11% and 7.70% for the first quarters of 2000 and
1999, respectively.
</FN>
</TABLE>
Fixed Maturities. Fixed maturities consist largely of investment grade corporate
debt securities, including significant amounts of U.S. government and agency
obligations. At March 31, 2000 and December 31, 1999, respectively, 76.7% and
76.9% of total fixed maturities were publicly traded; 82.8% and 87.4% of below
investment grade securities were also publicly traded. The $110.5 million of
investment losses in first quarter 2000 were due to $59.0 million of writedowns
on private structured and public high yield securities and $51.5 million of
losses on sales. The $122.1 million of investment losses in first quarter 1999
were due to $84.3 million of writedowns on high yield and emerging market
securities and $37.8 million of losses on sales.
Fixed Maturities By Credit Quality
(Dollars In Millions)
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
-------------------------------------- -------------------------------------
Rating Agency
NAIC Equivalent Amortized Estimated Amortized Estimated
Rating Designation Cost Fair Value Cost Fair Value
- -------------- -------------------- ------------------- ----------------- ------------------ ----------------
<S> <C> <C> <C> <C>
1-2 Aaa/Aa/A and Baa.... $ 20,539.4 $ 20,007.1 $ 20,561.4 $ 19,973.0
3-6 Ba and lower........ 2,964.0 2,599.3 3,157.7 2,849.7
------------------- ----------------- ------------------ ----------------
Total Fixed Maturities.............. $ 23,503.4 $ 22,606.4 $ 23,719.1 $ 22,822.7
=================== ================= ================== ================
</TABLE>
At March 31, 2000, the Company held mortgage pass-through securities with an
amortized cost of $2.64 billion, $2.51 billion of CMOs, including $2.06 billion
in publicly-traded CMOs, and $1.40 billion of public and private asset backed
securities, primarily backed by home equity, mortgage, airline and other
equipment, and credit card receivables.
The amortized cost of problem and potential problem fixed maturities was $175.8
million (0.7% of the amortized cost of this category) and $176.6 million (0.8%)
at March 31, 2000, respectively, compared to $154.0 million (0.6%) and $42.7
million (0.2%) at December 31, 1999, respectively.
Mortgages. Mortgages consist principally of commercial and agricultural loans.
At March 31, 2000, commercial mortgages totaled $2.96 billion (60.4% of the
amortized cost of the category) and agricultural loans were $1.94 billion
(39.6%).
24
<PAGE>
Problem, Potential Problem and Restructured Mortgages
Amortized Cost
(Dollars In Millions)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
--------------- -----------------
<S> <C> <C>
COMMERCIAL MORTGAGES.......................................................... $ 2,961.8 $ 3,048.2
Potential problem commercial mortgages........................................ 119.1 120.6
Restructured commercial mortgages............................................. 128.7 130.7
AGRICULTURAL MORTGAGES........................................................ $ 1,941.7 $ 1,957.4
</TABLE>
The original weighted average coupon rate on the $128.7 million of restructured
mortgages was 8.9%. As a result of these restructurings, the restructured
weighted average coupon rate was 8.1% and the restructured weighted average cash
payment rate was 8.0%.
At March 31, 2000 and 1999, respectively, management identified impaired
mortgage loans with carrying values of $139.7 million and $129.1 million. The
provisions for losses for these impaired mortgage loans were $29.5 million and
$36.2 million at March 31, 2000 and 1999, respectively. For the first quarters
of 2000 and 1999, respectively, income accrued on these loans was $3.5 million
and $2.6 million, including cash received of $3.3 million and $2.5 million.
For first quarter 2000, scheduled principal amortization payments and
prepayments on commercial mortgage loans received aggregated $128.2 million. In
addition, $9.5 million of commercial mortgage loan maturity payments were
scheduled, all of which were paid as due.
Equity Real Estate. As of March 31, 2000, on the basis of amortized cost, the
equity real estate category included $797.5 million (57.3%) acquired as
investment real estate and $593.1 million (42.7%) acquired through or in lieu of
foreclosure (including in-substance foreclosures).
During the first quarters of 2000 and 1999, respectively, proceeds from the sale
of equity real estate totaled $14.0 million and $69.1 million, with gains of
$6.7 million and $12.2 million. The carrying value of the equity real estate at
the date of sale reflected total writedowns and additions to valuation
allowances on the properties taken in periods prior to their sale of $1.0
million and $19.3 million, respectively.
At March 31, 2000, the vacancy rate for the Company's office properties was 7.1%
in total, with a vacancy rate of 5.6% for properties acquired as investment real
estate and 18.2% for properties acquired through foreclosure. The national
commercial office vacancy rate was 9.6% (as of December 31, 1999) as measured by
CB Commercial.
Other Equity Investments. Other equity investments consist of LBO, mezzanine,
venture capital and other limited partnership interests ($544.6 million or 60.7%
of the amortized cost of this portfolio at March 31, 2000), alternative limited
partnerships ($191.2 million or 21.3%) and common stock and other equity
securities, including the excess of Separate Account assets over Separate
Account liabilities ($161.1 million or 18.0%). Alternative funds utilize trading
strategies that may be leveraged. These funds attempt to protect against market
risk through a variety of methods including short sales, financial futures,
options and other derivative instruments. Other equity investments can produce
significant volatility in investment income since they predominantly are
accounted for in accordance with the equity method which treats increases and
decreases in the estimated fair value of the underlying assets (or allocable
portion thereof, in the case of partnerships), whether realized or unrealized,
as investment income or loss to the General Account. Effective January 1, 1999,
all investments in publicly-traded common equity securities in the General
Account portfolio were designated as "trading securities" for purposes of
classification under SFAS No. 115. Investment gains of $83.5 million were
recognized at that date on the portfolio. Changes in the investments' fair value
are included in investment income. Returns on equity investments are very
volatile and investment results for any period are not representative of any
other period.
25
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
In May 2000, the Superintendent advised Equitable Life he had no objection to
the payment of a $150.0 million shareholder dividend by Equitable Life.
Management intends to recommend to the Board of Directors the payment of such a
dividend.
Equitable Life has a commercial paper program with an issue limit of up to $1.00
billion. This program is available for general corporate purposes and is
supported by Equitable Life's $350.0 million 5-year credit facility expiring in
June 2000 and its $350.0 million 364-day credit facility expiring in August
2000. Equitable Life uses this program from time to time in its liquidity
management. At March 31, 2000, approximately $99.9 million was outstanding under
the commercial paper program; no amounts were outstanding under the revolving
credit facility.
At March 31, 2000, Alliance had $432.6 million of short-term debt outstanding,
principally under its commercial paper program. The $42.5 million increase since
December 31, 1999 was primarily due to funding payments to financial
intermediaries and capital expenditures.
Consolidated Cash Flows
Net cash provided by operating activities was $150.0 million for first quarter
2000 compared to $124.6 million for first quarter 1999.
Net cash provided by investing activities was $77.0 million for first quarter
2000 as compared to net cash used by investing activities of $997.1 million for
the same period in 1999. In first quarter 2000, sales, maturities and repayments
of investment assets exceeded purchases by $146.5 million. In first quarter
1999, investment purchases exceeded sales, maturities and repurchases by $858.4
million.
Net cash used by financing activities was $667.7 million for first quarter 2000
as compared to net cash provided by financing activities of $483.9 million for
first quarter 1999. During first quarter 2000, withdrawals and transfers to
Separate Accounts from policyholders' accounts exceeded deposits by $624.3
million. In first quarter 1999, short-term financings increased by $357.0
million and deposits to policyholders' accounts exceeded withdrawals and
transfers to Separate Accounts by $162.2 million.
The operating, investing and financing activities described above resulted in a
decrease in cash and cash equivalents during the first three months of 2000 of
$440.7 million to $187.3 million.
26
<PAGE>
FORWARD-LOOKING STATEMENTS
The Company's management has made in this report, and from time to time may make
in its public filings and press releases as well as in oral presentations and
discussions, forward-looking statements concerning the Company's operations,
economic performance and financial condition. Forward-looking statements
include, among other things, discussions concerning the potential exposure of
the Company and DLJ to market risks, as well as statements expressing
management's expectations, beliefs, estimates, forecasts, projections and
assumptions, as indicated by words such as "believes," "estimates," "intends,"
"anticipates," "expects," "projects," "should," "probably," "risk," "target,"
"goals," "objectives," or similar expressions. The Company claims the protection
afforded by the safe harbor for forward-looking statements contained in the
Private Securities Litigation Reform Act of 1995, and assumes no duty to update
any forward-looking statement. Forward-looking statements are based on
management's expectations and beliefs concerning future developments and their
potential effects and are subject to risks and uncertainties. Actual results
could differ materially from those anticipated by forward-looking statements due
to a number of important factors including those discussed elsewhere in this
report and in the Company's other public filings, press releases, oral
presentations and discussions. The following discussion highlights some of the
more important factors that could cause such differences.
Market Risk. The businesses of the Company and its Investment Subsidiaries are
subject to market risks arising from their insurance asset/liability management,
investment management and trading activities. Primary market risk exposures
exist in the Insurance and Investment Services segments and result from interest
rate fluctuations, equity price movements, changes in credit quality and, at
DLJ, foreign currency exchange exposure. The nature of each of these risks is
discussed under the caption "Quantitative and Qualitative Disclosure About
Market Risk" and in Note 13 of Notes to Consolidated Financial Statements in the
1999 Form 10-K.
Strategic Initiatives. Management continues to implement certain strategic
initiatives identified after a comprehensive review of AXA Financial's
organization and strategy conducted in late 1997. These initiatives are designed
to make AXA Financial a premier provider of financial planning, insurance and
investment management products and services. The "branding" initiative, which
consists in part of a reorganization of certain wholly owned subsidiaries and
changes to the names of such subsidiaries and the Holding Company, is designed
in part to separate product manufacturing under the "Equitable" name from
product distribution and the provision of financial planning services under the
"AXA" name.
Certain changes in the organization took place in 1999. The Holding Company
formed AXA Client Solutions, LLC ("AXA Client Solutions") in mid-September and
contributed its investment in Equitable Life to AXA Client Solutions. Also in
September, EQ Financial Consultants, Inc., a broker-dealer subsidiary of
Equitable Life, was merged into a new company, AXA Advisors. Equitable Life then
transferred AXA Advisors to AXA Distribution, a wholly owned direct subsidiary
of AXA Client Solutions. In first quarter 2000, EquiSource of New York, Inc. and
its subsidiaries were merged into AXA Network, and Equitable Life transferred
AXA Network to AXA Distribution. In 2000, management expects to further
consolidate the distribution and customer service activities under AXA
Distribution. Subsidiaries of AXA Distribution sell the insurance products of
Equitable Life, as well as of unaffiliated insurance companies, and other
investment products and services through retail sales associates. Equitable Life
pays commissions and other fees to AXA Network and is in turn reimbursed for
expenses such as occupancy and information technology incurred on behalf of its
affiliate. Equitable Life continues to distribute its products through its
wholesale distribution channels. Implementation of these strategic initiatives
could affect certain historic trends in the Insurance segment. Implementation is
subject to various uncertainties, including those relating to timing and
expense, and the results of the implementation of these initiatives could be
other than what management intends. The Company may, from time to time, explore
selective acquisition opportunities in its core insurance and investment
management businesses.
Insurance. The Insurance Group's future sales of life insurance and annuity
products are dependent on numerous factors including successful implementation
of the strategic initiatives referred to above, the intensity of competition
from other insurance companies, banks and other financial institutions, the
strength and professionalism of distribution channels, the continued development
of additional channels, the financial and claims paying ratings of Equitable
Life, its reputation and visibility in the market place, its ability to develop,
distribute and administer competitive products and services in a timely,
27
<PAGE>
cost-effective manner and its investment management performance. In addition,
the nature and extent of competition and the markets for products sold by the
Insurance Group may be materially affected by changes in laws and regulations,
including changes relating to savings, retirement funding and taxation as well
as changes resulting from the Gramm-Leach-Bliley Act. The Administration's
fiscal year 2001 revenue proposals contain provisions which, if enacted, could
have a material adverse impact on sales of certain insurance products and would
adversely affect the taxation of insurance companies. See "Business - Segment
Information - Insurance" and "Business - Regulation - Federal Initiatives" in
the 1999 Form 10-K. The profitability of the Insurance Group depends on a number
of factors, including levels of gross operating expenses and the amount which
can be deferred as DAC, secular trends and the Company's mortality, morbidity,
persistency and claims experience, and profit margins between investment results
from General Account Investment Assets and interest credited on individual
insurance and annuity products. The performance of General Account Investment
Assets depends, among other things, on levels of interest rates and the markets
for equity securities and real estate, the need for asset valuation allowances
and writedowns, and the performance of equity investments which have created,
and in the future may create, significant volatility in investment income. See
"Investment Results of General Account Investment Assets" in the 1999 Form 10-K
and herein. The ability of the Company to continue its accelerated real estate
sales program without incurring net losses will depend on real estate markets
for the remaining properties held for sale and the negotiation of transactions
which confirm management's expectations on property values. For further
information, including information concerning the writedown in the fourth
quarter of 1997 in connection with management's decision to accelerate the sale
of certain real estate assets, see "Investment Results of General Account
Investment Assets - Equity Real Estate" in the 1999 Form 10-K and herein. The
Company's DI and group pension businesses produced pre-tax losses in 1995 and
1996. In late 1996, loss recognition studies for the DI and group pension
businesses were completed. As a result, $145.0 million of unamortized DAC on DI
policies at December 31, 1996 was written off; reserves for directly written DI
policies and DI reinsurance assumed were strengthened by $175.0 million; and a
Pension Par premium deficiency reserve was established which resulted in a $73.0
million pre-tax charge to results of continuing operations at December 31, 1996.
Based on the experience that emerged on these two books of business since 1996,
management continues to believe the DI and Pension Par reserves have been
calculated on a reasonable basis and are adequate. However, there can be no
assurance that they will be sufficient to provide for all future liabilities.
Equitable Life no longer underwrites new DI policies. Equitable Life is
reviewing the arrangements pursuant to which a third party manages claims
incurred under DI policies previously issued by Equitable Life and is exploring
its ability to dispose of the DI business through reinsurance.
Investment Services. Alliance's revenues are largely dependent on the total
value and composition of assets under its management and are, therefore,
affected by market appreciation and depreciation, additions and withdrawals of
assets, purchases and redemptions of mutual funds and shifts of assets between
accounts or products with different fee structures. DLJ's business activities
include securities underwriting, sales and trading, merchant banking, financial
advisory services, investment research, venture capital, correspondent brokerage
services, online interactive brokerage services and asset management. These
activities are subject to various risks, including volatile trading markets and
fluctuations in the volume of market activity. Consequently, DLJ's net income
and revenues have been, and may continue to be, subject to wide fluctuations,
reflecting the impact of many factors beyond DLJ's control, including securities
market conditions, the level and volatility of interest rates, competitive
conditions and the size and timing of transactions. Over the last several years,
DLJ's results have been at historically high levels. See "Combined Operating
Results by Segment - Investment Services" in the 1999 Form 10-K for a discussion
of the negative impact on equity in DLJ's earnings in the second half of 1998
from losses in emerging markets. Potential losses could result from DLJ's
merchant banking activities as a result of their capital intensive nature.
Discontinued Operations. The determination of the allowance for future losses
for the discontinued Wind-Up Annuities and GIC lines of business continues to
involve numerous estimates and subjective judgments including those regarding
expected performance of investment assets, ultimate mortality experience and
other factors which affect investment and benefit projections. There can be no
assurance the losses provided for will not differ from the losses ultimately
realized. To the extent actual results or future projections of discontinued
operations differ from management's current best estimates underlying the
allowance, the difference would be reflected as earnings or loss from
discontinued operations within the consolidated statements of earnings. In
particular, to the extent income, sales proceeds and holding periods for equity
real estate differ from management's previous assumptions, periodic adjustments
to the allowance are likely to result. See "Discontinued Operations" in the 1999
Form 10-K for further information including a discussion of significant reserve
strengthening in 1997 and the assumptions used in making cash flow projections.
28
<PAGE>
Technology and Information Systems. The Company's and DLJ's information systems
are central to, among other things, designing and pricing products, marketing
and selling products and services, processing policyholder and investor
transactions, client recordkeeping, communicating with agents, employees and
clients, and recording information for accounting and management information
purposes. Any significant difficulty associated with the operation of such
systems, or any material delay or inability to develop needed system
capabilities, could have a material adverse affect on the results of operations
of the Company and its Investment Subsidiaries and, ultimately, their ability to
achieve their strategic goals.
Legal Environment. A number of lawsuits have been filed against life and health
insurers involving insurers' sales practices, alleged agent misconduct, failure
to properly supervise agents and other matters. Some of the lawsuits have
resulted in the award of substantial judgments against other insurers, including
material amounts of punitive damages, or in substantial settlements. In some
states, juries have substantial discretion in awarding punitive damages. The
Company, like other life and health insurers, is involved in such litigation.
While no such lawsuit has resulted in an award or settlement of any material
amount against the Company to date, its results of operations and financial
condition could be affected by defense and settlement costs and any unexpected
material adverse outcomes in such litigations as well as in other material
litigations pending against the Company and its subsidiaries and DLJ. In
addition, examinations by Federal and state regulators could result in adverse
publicity, sanctions and fines. For further information, see "Business -
Regulation" in the 1999 Form 10-K and "Legal Proceedings" in the 1999 Form 10-K
and herein.
Future Accounting Pronouncements. In the future, new accounting pronouncements
may have material effects on the Company's consolidated statements of earnings
and shareholders' equity. See Note 2 of Notes to Consolidated Financial
Statements for the pronouncements issued but not implemented. In addition,
members of the NAIC approved its Codification project providing regulators and
insurers with uniform statutory guidance, addressing areas where statutory
accounting previously was silent and changing certain existing statutory
positions. Equitable Life will be subject to Codification to the extent and in
the form adopted in New York State, which would require action by both the New
York legislature and the New York Insurance Department. In February 2000, the
Superintendent indicated the New York Insurance Department intends to proceed
with implementation of Codification rules, subject to any provisions in New York
statutes which conflict with particular points in the Codification rules. It is
not possible to predict in what form, or when Codification will be adopted in
New York, and accordingly it is not possible to predict the effect of
Codification on Equitable Life.
Regulation. The businesses conducted by the Company and its subsidiaries and
affiliates are subject to extensive regulation and supervision by state
insurance departments and Federal and state agencies regulating, among other
things, insurance and annuities, securities transactions, investment banking,
investment companies, investment advisors and customer privacy. Changes in the
regulatory environment could have a material impact on operations and results.
The activities of the Insurance Group and the Holding Company's other
subsidiaries conducting insurance related businesses are subject to the
supervision of the insurance regulators of each of the 50 states.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See "Quantitative and Qualitative Disclosures About Market Risk" in the 1999
Form 10-K and "MD&A - Combined Operating Results by Segment - Investment
Services" herein.
29
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceedings.
There have been no new material legal proceedings and no material developments
in matters which were previously reported in the Registrant's Form 10-K for the
year ended December 31, 1999, except as described below:
In Cole, in April 2000, the Appellate Division, First Department, unanimously
affirmed, with costs, the decisions of the lower court dismissing all of
plaintiffs' claims and denying plaintiffs' motion for class certification.
Plaintiffs have moved for reargument or, in the alternative, leave to appeal to
the New York Court of Appeals.
In R.S.M., in April 2000, following confirmatory discovery pursuant to the
Memorandum of Understanding, plaintiffs have indicated that they will proceed
with the litigation.
In March 2000, an action entitled Brenda McEachern v. The Equitable Life
Assurance Society of the United States and Gary Raymond, Jr. was commenced
against Equitable Life and one of its agents in Circuit Court, Mobile County,
Alabama, and asserts claims under state law. The action was brought by an
individual who purchased a variable annuity from Equitable Life in 1997. The
action purports to be on behalf of a class consisting of all persons who from
January 1, 1989 (i) purchased a variable annuity from Equitable Life to fund a
qualified retirement plan, (ii) were charged allegedly unnecessary fees for tax
deferral for variable annuities held in qualified retirement accounts, or (iii)
were sold a variable annuity while owning a qualified retirement plan from
Equitable Life. The complaint alleges various improper sales practices,
including misrepresentations in connection with the use of variable annuities in
a qualified retirement plan or similar arrangement, failure to disclose
unnecessary tax deferral fees, charging of inflated and hidden fees., Plaintiff
seeks damages, including punitive damages, in an unspecified amount and
attorneys' fees and expenses. In May 2000, Equitable Life removed the case to
the United States District Court for the Southern District of Alabama and filed
a motion to dismiss the complaint. Although the outcome of litigation cannot be
predicted with certainty, particularly in the early stages of an action, the
Company's management believes that the ultimate resolution of this litigation
should not have a material adverse effect on the financial position of the
Company. The Company's management cannot make an estimate of loss, if any, or
predict whether or not any such litigation will have a material adverse effect
on the Company's results of operations in any particular period.
30
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K
None.
31
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, The
Equitable Life Assurance Society of the United States has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: May 11, 2000 THE EQUITABLE LIFE ASSURANCE SOCIETY
OF THE UNITED STATES
By: /s/Stanley B. Tulin
-------------------------------------
Name: Stanley B. Tulin
Title: Vice Chairman of the Board
and Chief Financial Officer
Date: May 11, 2000 /s/Alvin H. Fenichel
-------------------------------------
Alvin H. Fenichel
Senior Vice President and Controller
32
<TABLE> <S> <C>
<ARTICLE> 7
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<DEBT-HELD-FOR-SALE> 18,385,000
<DEBT-CARRYING-VALUE> 135,400
<DEBT-MARKET-VALUE> 135,400
<EQUITIES> 738,500
<MORTGAGE> 3,196,800
<REAL-ESTATE> 1,149,400
<TOTAL-INVEST> 28,164,900
<CASH> 187,300
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 4,147,700
<TOTAL-ASSETS> 102,685,300
<POLICY-LOSSES> 0
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 4,840,400
<POLICY-HOLDER-FUNDS> 20,674,200
<NOTES-PAYABLE> 1,383,500
0
0
<COMMON> 2,500
<OTHER-SE> 5,992,400
<TOTAL-LIABILITY-AND-EQUITY> 102,685,300
473,400
<INVESTMENT-INCOME> 606,200
<INVESTMENT-GAINS> (124,100)
<OTHER-INCOME> 667,000
<BENEFITS> 282,000
<UNDERWRITING-AMORTIZATION> 81,500
<UNDERWRITING-OTHER> 604,900
<INCOME-PRETAX> 392,000
<INCOME-TAX> 91,200
<INCOME-CONTINUING> 226,600
<DISCONTINUED> (4,900)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 221,700
<EPS-BASIC> 0
<EPS-DILUTED> 0
<RESERVE-OPEN> 0
<PROVISION-CURRENT> 0
<PROVISION-PRIOR> 0
<PAYMENTS-CURRENT> 0
<PAYMENTS-PRIOR> 0
<RESERVE-CLOSE> 0
<CUMULATIVE-DEFICIENCY> 0
</TABLE>
