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 June 30, 2000 Commission File No. 0-25280
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The Equitable Life Assurance Society of the United States
(Exact name of registrant as specified in its charter)
New York 13-5570651
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1290 Avenue of the Americas, New York, New York 10104
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 554-1234
-----------------------------
None
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(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 August 11, 2000
----------------------------------------- ------------------------------------
Common Stock, $1.25 par value 2,000,000
Page 1 of 39
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 2000
TABLE OF CONTENTS
Page #
PART I FINANCIAL INFORMATION
Item 1: Unaudited Consolidated Financial Statements
Consolidated Balance Sheets as of June 30, 2000 and
December 31, 1999......................................... 3
Consolidated Statements of Earnings for the Three
Months and Six Months Ended June 30, 2000 and 1999......... 4
Consolidated Statements of Shareholder's Equity for
the Six Months Ended June 30, 2000 and 1999................ 5
Consolidated Statements of Cash Flows for the Six
Months Ended June 30, 2000 and 1999........................ 6
Notes to Consolidated Financial Statements.................. 7
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................. 18
Item 3: Quantitative and Qualitative Disclosures
About Market Risk.......................................... 34
PART II OTHER INFORMATION
Item 1: Legal Proceedings........................................... 35
Item 6: Exhibits and Reports on Form 8-K............................ 38
SIGNATURES............................................................. 39
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>
June 30, December 31,
2000 1999
----------------- -----------------
(In Millions)
<S> <C> <C>
ASSETS
Investments:
Fixed maturities:
Available for sale, at estimated fair value............................. $ 17,689.7 $ 18,599.7
Held to maturity, at amortized cost..................................... 137.7 133.2
Mortgage loans on real estate............................................. 3,120.2 3,270.0
Equity real estate........................................................ 1,046.0 1,160.2
Policy loans.............................................................. 2,381.0 2,257.3
Other equity investments.................................................. 814.8 671.2
Investment in and loans to affiliates..................................... 1,316.2 1,201.8
Other invested assets..................................................... 968.0 911.6
----------------- -----------------
Total investments..................................................... 27,473.6 28,205.0
Cash and cash equivalents................................................... 1,987.3 628.0
Deferred policy acquisition costs........................................... 4,266.0 4,033.0
Other assets................................................................ 4,401.2 3,868.3
Closed Block assets......................................................... 8,670.3 8,607.3
Separate Accounts assets.................................................... 55,599.9 54,453.9
----------------- -----------------
Total Assets................................................................ $ 102,398.3 $ 99,795.5
================= =================
LIABILITIES
Policyholders' account balances............................................. $ 20,259.5 $ 21,351.4
Future policy benefits and other policyholders' liabilities................. 4,834.3 4,777.6
Short-term and long-term debt............................................... 1,844.3 1,407.9
Other liabilities........................................................... 4,438.0 3,133.6
Closed Block liabilities.................................................... 9,060.9 9,025.0
Separate Accounts liabilities............................................... 55,493.3 54,332.5
----------------- -----------------
Total liabilities..................................................... 95,930.3 94,028.0
----------------- -----------------
Commitments and contingencies (Note 11)
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.............................................. 3,975.4 3,557.2
Retained earnings........................................................... 2,927.8 2,600.7
Accumulated other comprehensive loss........................................ (437.7) (392.9)
----------------- -----------------
Total shareholder's equity............................................ 6,468.0 5,767.5
----------------- -----------------
Total Liabilities and Shareholder's Equity.................................. $ 102,398.3 $ 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
(UNAUDITED)
<TABLE>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------------- ---------------------------------
2000 1999 2000 1999
--------------- --------------- --------------- ---------------
(In Millions)
<S> <C> <C> <C> <C>
REVENUES
Universal life and investment-type
product policy fee income........................ $ 348.6 $ 307.8 $ 689.0 $ 604.5
Premiums........................................... 137.6 130.7 270.6 265.6
Net investment income.............................. 586.6 573.7 1,192.8 1,142.2
Investment (losses) gains, net..................... (60.1) 73.4 (184.2) 54.1
Commissions, fees and other income................. 642.9 507.0 1,293.2 996.3
Contribution from the Closed Block................. 29.1 23.0 45.8 41.9
--------------- --------------- --------------- ---------------
Total revenues............................... 1,684.7 1,615.6 3,307.2 3,104.6
--------------- --------------- --------------- ---------------
BENEFITS AND OTHER DEDUCTIONS
Interest credited to policyholders' account
balances......................................... 250.6 269.6 512.7 539.8
Policyholders' benefits............................ 263.4 253.9 545.4 494.7
Other operating costs and expenses................. 729.6 769.3 1,416.0 1,417.5
--------------- --------------- --------------- ---------------
Total benefits and other deductions.......... 1,243.6 1,292.8 2,474.1 2,452.0
--------------- --------------- --------------- ---------------
Earnings from continuing operations before
Federal income taxes and minority interest....... 441.1 322.8 833.1 652.6
Federal income taxes............................... 119.0 58.3 210.2 158.7
Minority interest in net income of
consolidated subsidiaries........................ 65.2 41.9 139.4 84.0
--------------- --------------- --------------- ---------------
Earnings from continuing operations................ 256.9 222.6 483.5 409.9
Discontinued operations, net of Federal income
taxes............................................ (1.5) (1.3) (6.4) (6.6)
--------------- --------------- --------------- ---------------
Net Earnings....................................... $ 255.4 $ 221.3 $ 477.1 $ 403.3
=============== =============== =============== ===============
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
<TABLE>
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
Additional capital in excess of par value................................... 416.7 -
Capital contribution........................................................ 1.5 -
----------------- -----------------
Capital in excess of par value, end of period............................... 3,975.4 3,110.2
----------------- -----------------
Retained earnings, beginning of year........................................ 2,600.7 1,944.1
Dividend paid to the Holding Company........................................ (150.0) -
Net earnings................................................................ 477.1 403.3
----------------- -----------------
Retained earnings, end of period............................................ 2,927.8 2,347.4
----------------- -----------------
Accumulated other comprehensive (loss) income, beginning of year............ (392.9) 355.8
Other comprehensive loss.................................................... (44.8) (517.2)
----------------- -----------------
Accumulated other comprehensive loss, end of period......................... (437.7) (161.4)
----------------- -----------------
Total Shareholder's Equity, End of Period................................... $ 6,468.0 $ 5,298.7
================= =================
</TABLE>
See Notes to Consolidated Financial Statements.
5
<PAGE>
THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
<TABLE>
2000 1999
----------------- -----------------
(In Millions)
<S> <C> <C>
Net earnings................................................................ $ 477.1 $ 403.3
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Interest credited to policyholders' account balances.................... 512.7 539.8
Universal life and investment-type product policy fee income............ (689.0) (604.5)
Investment losses (gains), net.......................................... 184.2 (54.1)
Change in Federal income tax payable.................................... (45.0) 78.8
Change in property and equipment........................................ (122.3) (92.6)
Change in deferred policy acquisition costs............................. (222.8) (12.8)
Other, net.............................................................. (69.5) (99.4)
----------------- -----------------
Net cash provided by operating activities................................... 25.4 158.5
----------------- -----------------
Cash flows from investing activities:
Maturities and repayments................................................. 1,045.4 1,046.6
Sales.................................................................... 2,772.8 4,630.4
Purchases................................................................. (3,126.2) (7,048.7)
Other, net................................................................ (144.0) 2.7
----------------- -----------------
Net cash provided (used) by investing activities............................ 548.0 (1,369.0)
----------------- -----------------
Cash flows from financing activities:
Policyholders' account balances:
Deposits................................................................ 1,309.2 1,191.1
Withdrawals and transfers to Separate Accounts.......................... (2,286.1) (806.3)
Net increase in short-term financings..................................... 435.6 559.5
Dividend paid to the Holding Company..................................... (150.0) -
Proceeds from newly issued Alliance Units................................. 1,600.0 -
Other, net................................................................ (122.8) (71.4)
----------------- -----------------
Net cash provided by financing activities................................... 785.9 872.9
----------------- -----------------
Change in cash and cash equivalents......................................... 1,359.3 (337.6)
Cash and cash equivalents, beginning of year................................ 628.0 1,245.5
----------------- -----------------
Cash and Cash Equivalents, End of Period.................................... $ 1,987.3 $ 907.9
================= =================
Supplemental cash flow information
Interest Paid............................................................. $ 47.7 $ 56.4
================= =================
Income Taxes Paid......................................................... $ 276.9 $ 26.3
================= =================
</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 six
months ended June 30, 2000 are not necessarily indicative of the results
to be expected for the full year.
The terms "second quarter 2000" and "second quarter 1999" refer to the
three months ended June 30, 2000 and 1999, respectively. The terms "first
half of 2000" and "first half of 1999" refer to the six months ended June
30, 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) DEFERRED POLICY ACQUISITION COSTS
As part of its asset/liability management process, in second quarter 1999,
management initiated a review of the matching of invested assets to
Insurance product lines given their different liability characteristics
and liquidity requirements. As a result of this review, management
reallocated the current and prospective interests of the various product
lines in the invested assets. These asset reallocations and the related
changes in investment yields by product line, in turn, triggered a review
of and revisions to the estimated future gross profits used to determine
the amortization of DAC for universal life and investment-type products.
The revisions to estimated future gross profits resulted in an after-tax
writedown of DAC of $85.6 million (net of a Federal income tax benefit of
$46.1 million) for the three and six months ended June 30, 1999.
3) COMMON STOCK DIVIDEND
In second quarter 2000, the Company paid a cash dividend in the aggregate
amount of $150.0 million to the Holding Company.
4) INVESTMENTS
Investment valuation allowances and changes thereto are shown below:
<TABLE>
Six Months Ended
June 30,
-----------------------------------
2000 1999
--------------- ---------------
(In Millions)
<S> <C> <C>
Balances, beginning of year............................................... $ 148.6 $ 230.6
Additions charged to income............................................... 31.0 23.9
Deductions for writedowns and asset dispositions.......................... (65.2) (74.6)
--------------- ---------------
Balances, End of Period................................................... $ 114.4 $ 179.9
=============== ===============
Balances, end of period:
Mortgage loans on real estate........................................... $ 29.2 $ 31.3
Equity real estate...................................................... 85.2 148.6
--------------- ---------------
Total..................................................................... $ 114.4 $ 179.9
=============== ===============
</TABLE>
For the second quarter and first half of 2000 and of 1999, investment
income is shown net of investment expenses of $54.0 million, $53.1
million, $110.7 million $113.3 million, respectively.
7
<PAGE>
As of June 30, 2000 and December 31, 1999, fixed maturities classified as
available for sale had amortized costs of $18,542.3 million and $19,373.6
million and fixed maturities in the held to maturity portfolio had
estimated fair values of $137.7 million and $133.2 million, respectively.
Other equity investments include equity securities with carrying values of
$16.2 million and $23.3 million and costs of $28.7 million and $32.7
million as of June 30, 2000 and December 31, 1999, respectively.
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 second quarter and first
half of 2000 and 1999, respectively, net unrealized holding gains of $.3
million, $4.2 million, $27.8 million, and $99.2 million were included in
net investment income in the consolidated statements of earnings. These
trading securities had a carrying value of $14.2 million and $14.1 million
and costs of $9.5 million and $7.2 million at June 30, 2000 and December
31, 1999, respectively.
For the first half of 2000 and of 1999, proceeds received on sales of
fixed maturities classified as available for sale amounted to $2,568.5
million and $4,390.9 million, respectively. Gross gains of $56.2 million
and $40.0 million and gross losses of $109.2 million and $89.5 million
were realized on these sales for the first half of 2000 and of 1999,
respectively. Unrealized investment gains (losses) related to fixed
maturities classified as available for sale increased by $78.7 million
during the first half of 2000, resulting in a balance of $(852.6) million
at June 30, 2000.
Impaired mortgage loans along with the related provision for losses were
as follows:
<TABLE>
June 30, December 31,
2000 1999
--------------- -----------------
(In Millions)
<S> <C> <C>
Impaired mortgage loans with provision for losses....................... $ 131.5 $ 142.4
Impaired mortgage loans without provision for losses.................... 2.8 2.2
--------------- -----------------
Recorded investment in impaired mortgage loans.......................... 134.3 144.6
Provision for losses.................................................... (24.9) (23.0)
--------------- -----------------
Net Impaired Mortgage Loans............................................. $ 109.4 $ 121.6
=============== =================
</TABLE>
During the first half of 2000 and of 1999, respectively, the Company's
average recorded investment in impaired mortgage loans was $140.3 million
and $129.0 million. Interest income recognized on these impaired mortgage
loans totaled $6.1 million and $4.5 million for the first half of 2000 and
of 1999, respectively.
5) PURCHASE AND SALE OF INTERESTS IN AFFILIATES
During second quarter 2000, Alliance sold approximately 32.6 million newly
issued Alliance Units to the Holding Company for $1.60 billion. At June
30, 2000, the Company's consolidated economic interest in Alliance was
approximately 47%. Alliance plans to use the cash proceeds primarily to
fund the cash portion of the consideration of its planned fourth quarter
acquisition of the assets and liabilities of Sanford C. Bernstein. The
Company recorded an increase in Capital in excess of par value as a result
of this transaction.
During second quarter 1999, DLJ completed its offering of a new class of
its common stock to track the financial performance of DLJdirect, its
online brokerage business. As a result of this offering, the Company
recorded a non-cash pre-tax realized gain of $95.8 million.
8
<PAGE>
6) CLOSED BLOCK
Summarized financial information for the Closed Block follows:
<TABLE>
June 30, December 31,
2000 1999
----------------- -----------------
(In Millions)
<S> <C> <C>
BALANCE SHEETS
Fixed maturities:
Available for sale, at estimated fair value (amortized cost of
$4,233.3 and $4,144.8)............................................. $ 4,091.7 $ 4,014.0
Mortgage loans on real estate.......................................... 1,628.4 1,704.2
Policy loans........................................................... 1,574.2 1,593.9
Cash and other invested assets......................................... 306.0 194.4
DAC.................................................................... 881.5 895.5
Other assets........................................................... 188.5 205.3
----------------- -----------------
Total Assets........................................................... $ 8,670.3 $ 8,607.3
================= =================
Future policy benefits and other policyholders' account balances....... $ 8,998.9 $ 9,011.7
Other liabilities...................................................... 62.0 13.3
----------------- -----------------
Total Liabilities...................................................... $ 9,060.9 $ 9,025.0
================= =================
</TABLE>
<TABLE>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------------- ---------------------------------
2000 1999 2000 1999
--------------- --------------- --------------- ---------------
(In Millions)
<S> <C> <C> <C> <C>
STATEMENTS OF EARNINGS
Premiums and other income................ $ 150.4 $ 156.4 $ 303.4 $ 312.4
Investment income (net of investment
expenses of $3.3, $4.8, $6.7 and
$10.0)................................. 146.6 145.2 289.6 287.2
Investment gains (losses), net........... 2.0 3.4 (1.0) 1.5
--------------- --------------- --------------- ---------------
Total revenues......................... 299.0 305.0 592.0 601.1
--------------- --------------- --------------- ---------------
Policyholders' benefits and dividends.... 254.5 260.5 511.8 526.9
Other operating costs and expenses....... 15.4 21.5 34.4 32.3
--------------- --------------- --------------- ---------------
Total benefits and other deductions.... 269.9 282.0 546.2 559.2
--------------- --------------- --------------- ---------------
Contribution from the Closed Block....... $ 29.1 $ 23.0 $ 45.8 $ 41.9
=============== =============== =============== ===============
</TABLE>
Investment valuation allowances amounted to $5.9 million and $4.6 million
on mortgage loans and $17.3 million and $24.7 million on equity real
estate at June 30, 2000 and December 31, 1999, respectively.
9
<PAGE>
Impaired mortgage loans along with the related provision for losses were
as follows:
<TABLE>
June 30, December 31,
2000 1999
----------------- -------------------
(In Millions)
<S> <C> <C>
Impaired mortgage loans with provision for losses...................... $ 26.5 $ 26.8
Impaired mortgage loans without provision for losses................... 4.3 4.5
----------------- -------------------
Recorded investment in impaired mortgages.............................. 30.8 31.3
Provision for losses................................................... (5.4) (4.1)
----------------- -------------------
Net Impaired Mortgage Loans............................................ $ 25.4 $ 27.2
================= ===================
</TABLE>
During the first half of 2000 and of 1999, respectively, the Closed
Block's average recorded investment in impaired mortgage loans was $31.2
million and $45.4 million.
7) DISCONTINUED OPERATIONS
Summarized financial information for discontinued operations follows:
<TABLE>
June 30, December 31,
2000 1999
----------------- -------------------
(In Millions)
<S> <C> <C>
BALANCE SHEETS
Mortgage loans on real estate.......................................... $ 373.7 $ 454.6
Equity real estate..................................................... 396.7 426.6
Fixed maturities available for sale, at estimated
fair value (amortized cost of $251.5 and $85.3)..................... 253.6 85.5
Other equity investments............................................... 50.5 55.8
Other invested assets.................................................. 1.9 1.6
----------------- -------------------
Total investments.................................................... 1,076.4 1,024.1
Cash and cash equivalents.............................................. 79.6 164.5
Other assets........................................................... 213.7 213.0
----------------- -------------------
Total Assets........................................................... $ 1,369.7 $ 1,401.6
================= ===================
Policyholders' liabilities............................................. $ 982.1 $ 993.3
Allowance for future losses............................................ 257.5 242.2
Other liabilities...................................................... 130.1 166.1
----------------- -------------------
Total Liabilities...................................................... $ 1,369.7 $ 1,401.6
================= ===================
</TABLE>
10
<PAGE>
<TABLE>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------------- ---------------------------------
2000 1999 2000 1999
--------------- --------------- --------------- ---------------
(In Millions)
<S> <C> <C> <C> <C>
STATEMENTS OF EARNINGS
Investment income (net of investment
expenses of $9.4, $12.4, $19.8
and $25.5)............................. $ 23.3 $ 22.9 $ 52.3 $ 42.5
Investment gains (losses), net 4.3 (3.5) 2.0 (10.5)
Policy fees, premiums and
other income.......................... .2 - .2 -
--------------- --------------- --------------- ---------------
Total revenues........................... 27.8 19.4 54.5 32.0
Benefits and other deductions............ 27.8 29.0 54.5 54.4
Losses charged to allowance
for future losses...................... - (9.6) - (22.4)
--------------- --------------- --------------- ---------------
Pre-tax results from operations.......... - - - -
Pre-tax loss from strengthening
the allowance for future losses........ (2.2) (1.9) (9.8) (10.1)
Federal income tax benefit............... .7 .6 3.4 3.5
--------------- --------------- --------------- ---------------
Loss from Discontinued Operations........ $ (1.5) $ (1.3) $ (6.4) $ (6.6)
=============== =============== =============== ===============
</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 half of
2000 and 1999 resulted in management's decision to strengthen the
allowance by $9.8 million for the first half of 2000 and by $10.1 million
for the first half of 1999. This resulted in after-tax losses of $6.4
million for the first half of 2000 and $6.6 million for the first half of
1999.
Management believes the allowance for future losses at June 30, 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 $.6 million and $1.9 million
on mortgage loans and $31.7 million and $54.8 million on equity real
estate at June 30, 2000 and December 31, 1999, respectively.
8) 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.
9) RESTRUCTURING COSTS
At June 30, 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 $7.3 million. The amounts paid during the first half of 2000
totaled $2.9 million.
11
<PAGE>
10) 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 $8.5 million for
the first half of 2000. The Company paid $358.2 million of commissions and
fees to AXA Distribution and its subsidiaries for the first half of 2000
on sales of insurance products. For the first half of 2000, the Company
charged AXA Distribution's subsidiaries for their applicable share of
operating expenses pursuant to the Agreements for Services. Such charges
totaled $172.4 million for the first half of 2000.
11) LITIGATION
There have been no new material legal proceedings and no material
developments in matters which were previously reported in the Company's
Notes to Consolidated Financial Statements for the year ended December 31,
1999, except as described below:
In June 2000, an action was brought against Equitable Life, AXA Advisors
and EDI (the defendants) alleging that the defendants engaged in
fraudulent and deceptive practices in connection with the marketing and
sale of deferred annuity products to fund tax-qualified contributory
retirement plans. The named plaintiff purports to act as a private
attorney general on behalf of the general public of the State of
California. On behalf of the named plaintiff and in certain instances also
on behalf of the general public, the complaint asserts claims for
unlawful, unfair or fraudulent business acts and practices and for false
or misleading advertising and for fraud, fraudulent concealment and
deceit, negligent misrepresentation and negligence. The complaint seeks
injunctive relief, restitution for members of the general public of the
State of California who have been harmed by defendants' conduct,
compensatory and punitive damages on behalf of the named plaintiff, and
attorneys' fees, costs and expenses. In July 2000, the defendants removed
the case to Federal court and filed a motion to dismiss the complaint.
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 and plaintiff moved to remand the case to state
court.
In January 2000, the California Supreme Court denied Equitable Life's
petition for review of an October 1999 decision by the California Court of
Appeal. Such decision reversed the dismissal by the Superior Court of
Orange County, California of an action which was commenced in 1995 by a
real estate developer in connection with a limited partnership formed in
1991 with Equitable Life on behalf of Prime Property Fund ("PPF").
Equitable Life serves as investment manager for PPF, an open-end,
commingled real estate separate account of Equitable Life for pension
clients. Plaintiff alleges, among other claims, that Equitable Life
breached its fiduciary duty as general partner of the limited partnership
principally in connection with the 1995 purchase and subsequent
foreclosure by Equitable Life on behalf of PPF of the loan which financed
the partnership's property. In reversing the Superior Court's dismissal of
the plaintiff's claims, the Court of Appeal held that a general partner
who acquires a partnership obligation breaches its fiduciary duty by
foreclosing on partnership assets. The case was remanded to the Superior
Court for further proceedings, and in May 2000, the court scheduled a jury
trial for February 2001. The plaintiff seeks compensatory and punitive
damages.
Although the outcome of litigation cannot be predicted with certainty, the
Company's management believes that the ultimate resolution of the matters
described above should not have a material adverse effect on the
consolidated financial position of the Company. The Company's management
cannot make an estimate of loss, if any, or predict whether or not such
litigations will have a material adverse effect on the Company's
consolidated results of operations in any particular period.
12
<PAGE>
On July 21, 2000, in the consolidated action captioned In re Public
Offering Fee Antitrust Litigation pending in the U.S. District Court for
the Southern District of New York, plaintiffs filed a motion for leave to
file a second amended complaint. The principal proposed amendment to the
previously filed Consolidated Amended Complaint is the addition of an
issuer company as a plaintiff. On August 3, 2000, another purported class
action was filed in the U.S. District Court for the Southern District of
Florida against 18 securities firms, including DLJ. The complaint makes
allegations substantially similar to those advanced in In re Public
Offering Fee Antitrust Litigation, and seeks treble damages in an
unspecified amount and injunctive relief as well as attorney's fees and
costs. To date, DLJ has not been served in the action filed in Florida.
DLJ and DLJSC intend to vigorously defend themselves against all the
allegations contained in the complaints.
Over a period of several years, DLJSC provided investment banking
services, to an entity and its related corporations, including
participating in the distribution of its securities. In addition, a DLJ
merchant banking affiliate was for a time an investor in one of the
companies, and an employee of DLJSC and an employee of a DLJ merchant
banking affiliate were members of the board of directors of that company.
In January 2000, these companies filed Chapter 11 petitions in the U.S.
Bankruptcy Court for the District of Delaware. In the Bankruptcy Court
proceedings discovery has been sought from DLJ and its affiliates in
connection with their relationships with these companies. In addition, the
staff of the Securities and Exchange Commission has issued an informal
request for information, and the U.S. Attorney's Office for the Eastern
District of New York has issued a grand jury subpoena requesting
information. DLJ and its affiliates are cooperating with these discovery
requests. No claim has been brought against DLJ or its affiliates to date.
Between September 1995 and October 1998, DLJSC was named as a defendant in
six separate actions filed by institutional investors who invested and
lost approximately $300 million in three hedge funds, which filed for
bankruptcy in April 1994. All six complaints have been consolidated for
discovery purposes and are currently pending in the U.S. District Court
for the Southern District of New York. The only claim against DLJSC that
has survived a motion to dismiss is aiding and abetting common law fraud.
The complaints allege that DLJSC aided and abetted an alleged fraud of the
investors by two of the defendants by selling securities that were
inconsistent with the funds' investment objectives and by providing
inaccurate monthly mark-to-market prices for securities purchased by the
funds. The actions seek joint and several recovery of rescissionary,
compensatory, and punitive damages. DLJSC's motion for summary judgment on
the plaintiffs' claims is currently pending. DLJSC intends to defend
itself vigorously against all of the allegations contained in the
complaints.
In August 1997, DLJSC was named as a defendant in another action arising
out of the bankruptcy of the funds described in the prior paragraph. This
action was brought by an entity created by the funds' plan of liquidation
to pursue all unresolved claims held by the funds. The action is currently
pending in the U.S. District Court for the Southern District of New York.
The only claims against DLJSC that have survived a motion to dismiss are
for breach of contract. Generally, the lawsuit alleges that the funds were
damaged when DLJSC issued allegedly improper margin calls and liquidated
the funds' reverse repurchase positions at less than fair market value.
The complaint alleges that the funds' investors lost over $400 million in
equity, but does not specify the amount of damages that the funds
themselves claim to have suffered as a result of the allegations made in
this complaint. DLJSC intends to defend itself vigorously against all of
the allegations contained in the complaint.
Although there can be no assurance, DLJ's management does not believe that
the ultimate outcome of the matters described above related to DLJSC will
have a material adverse effect on DLJ's consolidated financial condition.
Based upon the information currently available to it, DLJ's management
cannot predict whether or not such matters will have a material adverse
effect on DLJ's results of operations in any particular period.
13
<PAGE>
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
shareholders of the fund to invest up to $250 million in Alliance mutual
funds free of initial sales charges. On August 3, 2000, the court signed
an order approving the Stipulation and Agreement of Settlement.
Shareholders of the fund have thirty days from the date the order becomes
final to appeal the order.
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.
14
<PAGE>
12) BUSINESS SEGMENT INFORMATION
<TABLE>
Investment
Insurance Services Elimination Total
--------------- ----------------- --------------- -----------------
(In Millions)
<S> <C> <C> <C> <C>
Three Months Ended
June 30, 2000
-------------------------------------
Segment revenues..................... $ 1,159.0 $ 615.9 $ (29.6) $ 1,745.3
Investment (losses) gains............ (60.1) (.5) - (60.6)
--------------- ----------------- --------------- -----------------
Total Revenues....................... $ 1,098.9 $ 615.4 $ (29.6) $ 1,684.7
=============== ================= =============== =================
Pre-tax operating earnings........... $ 300.8 $ 129.6 $ - $ 430.4
Investment (losses) gains, net of
related DAC and other charges...... (55.7) (.2) - (55.9)
Pre-tax minority interest............ - 66.6 - 66.6
--------------- ----------------- --------------- -----------------
Pre-tax Earnings from Continuing
Operations......................... $ 245.1 $ 196.0 $ - $ 441.1
=============== ================= =============== =================
Three Months Ended
June 30, 1999
-------------------------------------
Segment revenues..................... $ 1,070.9 $ 469.0 $ (1.5) $ 1,538.4
Investment (losses) gains............ (21.2) 98.4 - 77.2
--------------- ----------------- --------------- -----------------
Total Revenues....................... $ 1,049.7 $ 567.4 $ (1.5) $ 1,615.6
=============== ================= =============== =================
Pre-tax operating earnings........... $ 226.3 $ 105.3 $ - $ 331.6
Investment (losses) gains, net of
related DAC and other charges...... (21.9) 98.2 - 76.3
Non-recurring DAC
adjustments........................ (131.7) - - (131.7)
Pre-tax minority interest............ - 46.6 - 46.6
--------------- ----------------- --------------- -----------------
Pre-tax Earnings from Continuing
Operations......................... $ 72.7 $ 250.1 $ - $ 322.8
=============== ================= =============== =================
15
<PAGE>
Investment
Insurance Services Elimination Total
--------------- ----------------- --------------- -----------------
(In Millions)
Six Months Ended
June 30, 2000
-------------------------------------
Segment revenues..................... $ 2,310.3 $ 1,240.5 $ (58.9) $ 3,491.9
Investment (losses) gains............ (190.6) 5.9 - (184.7)
--------------- ----------------- --------------- -----------------
Total Revenues....................... $ 2,119.7 $ 1,246.4 $ (58.9) $ 3,307.2
=============== ================= =============== =================
Pre-tax operating earnings........... $ 571.5 $ 292.7 $ - $ 864.2
Investment (losses) gains, net of
related DAC and other charges...... (179.0) 5.9 - (173.1)
Pre-tax minority interest............ - 142.0 - 142.0
--------------- ----------------- --------------- -----------------
Pre-tax Earnings from Continuing
Operations......................... $ 392.5 $ 440.6 $ - $ 833.1
=============== ================= =============== =================
Six Months Ended
June 30, 1999
-------------------------------------
Segment revenues..................... $ 2,118.2 $ 925.2 $ (2.9) $ 3,040.5
Investment (losses) gains............ (44.7) 108.8 - 64.1
--------------- ----------------- --------------- -----------------
Total Revenues....................... $ 2,073.5 $ 1,034.0 $ (2.9) $ 3,104.6
=============== ================= =============== =================
Pre-tax operating earnings........... $ 447.5 $ 191.4 $ - $ 638.9
Investment (losses) gains, net of
related DAC and other charges...... (56.9) 108.4 - 51.5
Non-recurring DAC
adjustments........................ (131.7) - - (131.7)
Pre-tax minority interest............ - 93.9 - 93.9
--------------- ----------------- --------------- -----------------
Pre-tax Earnings from Continuing
Operations......................... $ 258.9 $ 393.7 $ - $ 652.6
=============== ================= =============== =================
Total Assets:
June 30, 2000........................ $ 88,808.8 $ 13,623.7 $ (34.2) $ 102,398.3
=============== ================= =============== =================
December 31, 1999.................... $ 86,842.7 $ 12,961.7 $ (8.9) $ 99,795.5
=============== ================= =============== =================
</TABLE>
13) COMPREHENSIVE INCOME (LOSS)
The components of comprehensive income (loss) for second quarters 2000 and
1999 and the first half of 2000 and of 1999 are as follows:
<TABLE>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------------- ---------------------------------
2000 1999 2000 1999
--------------- --------------- --------------- ---------------
(In Millions)
<S> <C> <C> <C> <C>
Net earnings............................. $ 255.4 $ 221.3 $ 477.1 $ 403.3
--------------- --------------- --------------- ---------------
Change in unrealized losses,
net of reclassification adjustment..... (49.0) (274.2) (44.8) (517.2)
--------------- --------------- --------------- ---------------
Other comprehensive loss................. (49.0) (274.2) (44.8) (517.2)
--------------- --------------- --------------- ---------------
Comprehensive Income (Loss).............. $ 206.4 $ (52.9) $ 432.3 $ (113.9)
=============== =============== =============== ===============
</TABLE>
16
<PAGE>
14) SUBSEQUENT EVENT
In July 2000, Equitable Life transferred, at no gain or loss, all the risk
of its directly written DI business for years 1993 and prior to Centre
Life Insurance Company, a subsidiary of Zurich Financial Services. The
transfer of risk to Centre Life Insurance was accomplished through an
indemnity reinsurance contract. The cost of the arrangement will be
amortized over the expected lives of the contracts reinsured and will not
have a significant impact on the results of operations in any specific
period.
17
<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").
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 20, 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 23.
<TABLE>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------------- --------------------------------
2000 1999 2000 1999
--------------- --------------- --------------- ---------------
(In Millions)
<S> <C> <C> <C> <C>
Operating Results:
Policy fee income and premiums................ $ 636.6 $ 591.4 $ 1,263.0 $ 1,178.5
Net investment income......................... 733.2 718.4 1,482.4 1,422.9
Commissions, fees and other income............ 645.4 515.3 1,292.7 998.3
--------------- --------------- --------------- ---------------
Total revenues.............................. 2,015.2 1,825.1 4,038.1 3,599.7
Total benefits and other deductions......... 1,518.2 1,446.9 3,031.9 2,866.9
--------------- --------------- --------------- ---------------
Pre-tax operating earnings before
minority interest........................... 497.0 378.2 1,006.2 732.8
Minority interest............................. (66.6) (46.6) (142.0) (93.9)
--------------- --------------- --------------- ---------------
Pre-tax operating earnings.................... 430.4 331.6 864.2 638.9
Pre-tax Adjustments:
Investment gains, net of related DAC
and other charges........................... (55.9) 76.3 (173.1) 51.5
Non-recurring DAC adjustments................. - (131.7) - (131.7)
Minority interest............................. 66.6 46.6 142.0 93.9
-------------- ------------- ------------- -------------
GAAP Reported:
Earnings from continuing operations
before Federal income taxes and
minority interest........................... 441.1 322.8 833.1 652.6
Federal income taxes.......................... 119.0 58.3 210.2 158.7
Minority interest in net income of
consolidated subsidiaries................... 65.2 41.9 139.4 84.0
--------------- --------------- --------------- ---------------
Earnings from Continuing Operations............. $ 256.9 $ 222.6 $ 483.5 $ 409.9
=============== =============== =============== ===============
</TABLE>
18
<PAGE>
Adjustments to GAAP pre-tax reported earnings in the first half of 2000 resulted
in the exclusion of investment losses of $173.1 million (net of DAC and other
charges totaling $11.6 million) as compared to net investment gains of $51.5
million (net of DAC and other charges totaling $2.1 million) for the 1999
period. The losses in 2000 included $104.0 million of writedowns and $61.1
million of realized losses on fixed maturities sold from the General Account's
portfolio. The 1999 net gains were primarily due to the $95.8 million gain
related to the sale of an approximately 18% interest in DLJdirect's financial
performance through the sale of a new class of DLJ common stock in second
quarter 1999. In addition, $83.5 million of gains were recognized upon
reclassification of public-traded common equities to a trading portfolio in
first quarter 1999 and $10.4 million of gains resulted from the exercise of
subsidiaries' options and conversion of DLJ RSU's. Losses of $104.3 on
writedowns and of $45.0 on sales of General Account fixed maturities partially
offset these 1999 gains. Also in the first half of 1999, there was a $131.7
million non-recurring DAC adjustment resulting from the revisions to estimated
future gross profits related to the investment asset reallocation in second
quarter 1999.
Continuing Operations
Compared to the first half of 1999, the $225.3 million higher pre-tax operating
earnings for the 2000 period 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 $438.4 million increase in revenues for the first half of 2000 from the
comparable 1999 period was attributed to a $294.4 million increase in
commissions, fees and other income principally due to increased business
activity within the Investment Services segment, an $84.5 million increase in
policy fee income and premiums in Insurance and a $59.5 million increase in
investment income.
For the first half of 2000, total benefits and other deductions increased by
$165.0 million from the comparable 1999 period reflecting increases in other
operating costs and expenses of $149.6 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 their strategic initiatives.
19
<PAGE>
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>
Six Months Ended June 30,
------------------------------------------------------------------
2000
------------------------------------------------
Insurance Closed 1999
Operations Block Combined Combined
------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Operating Results:
Policy fee income and premiums................ $ 959.6 $ 303.4 $ 1,263.0 $ 1,178.5
Net investment income......................... 1,169.1 289.6 1,458.7 1,394.8
Commissions, fees and other income............ 135.8 (1.0) 134.8 104.1
Contribution from the Closed Block............ 45.8 (45.8) - -
------------- -------------- ------------- -------------
Total revenues.............................. 2,310.3 546.2 2,856.5 2,677.4
Total benefits and other deductions......... 1,738.8 546.2 2,285.0 2,229.9
------------- -------------- ------------- -------------
Pre-tax operating earnings...................... 571.5 - 571.5 447.5
Pre-tax Adjustments:
Investment gains (losses), net of DAC
and other charges........................... (179.0) (179.0) (56.9)
Non-recurring DAC adjustments................ - - - (131.7)
------------- -------------- ------------- -------------
GAAP Reported:
Earnings from Continuing Operations
before Federal Income Taxes and
Minority Interest........................... $ 392.5 $ - $ 392.5 $ 258.9
============= ============== ============= =============
</TABLE>
For the first half of 2000, Insurance pre-tax operating earnings reflected an
increase of $124.0 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
$179.1 million due to an $84.5 million increase in policy fees income and
premiums, a $63.9 million increase in investment income and a $30.7 million
increase in commissions, fees and other income. Higher yields on General Account
Investment Assets principally related to other equity investments and fixed
maturities contributed to the increase in investment income. Policy fee income
rose $88.1 million to $689.0 million due to higher insurance and annuity account
balances while premiums declined $3.6 million to $574.0 million. The increase in
commissions, fees and other income was principally due to higher gross
investment management fees received from EQ Advisors 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 subadvisory fees included in total benefits
and other deductions.
Total benefits and other deductions for the first half of 2000 increased $55.1
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
the first half of 2000 were primarily due to higher DI and reinsurance assumed
benefits principally in first quarter 2000. 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 the first six months 2000 as
compared to the 1999 period.
20
<PAGE>
During July 2000, Equitable Life transferred, at no gain or loss, all the risk
of its directly written DI business for years 1993 and prior to Centre Life
Insurance Company, a subsidiary of Zurich Financial Services. The transfer of
risk to Centre Life Insurance was accomplished through an indemnity reinsurance
contract. The cost of the arrangement will be amortized over the expected lives
of the contracts reinsured and will not have a significant impact on the results
of operations in any specific period. Equitable Life discontinued writing DI
business in 1997.
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) and are presented
gross of reinsurance ceded.
Premiums and Deposits
(In Millions)
<TABLE>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------------- ---------------------------------
2000 1999 2000 1999
--------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C>
Retail:
Annuities
First year.................................. $ 806.0 $ 861.1 $ 1,644.7 $ 1,616.6
Renewal..................................... 489.3 480.5 974.7 957.5
--------------- ---------------- --------------- ---------------
1,295.3 1,341.8 2,619.4 2,574.1
Life(1)
First year.................................. 104.0 127.6 210.5 210.8
Renewal..................................... 527.1 565.3 1,149.1 1,128.8
--------------- ---------------- --------------- ---------------
631.1 692.9 1,359.6 1,339.6
Other(2)
First year.................................. 2.0 3.3 4.6 5.2
Renewal..................................... 91.8 86.6 181.9 183.6
--------------- ---------------- --------------- ---------------
93.8 89.9 186.5 188.8
--------------- ---------------- --------------- ---------------
Total retail.............................. 2,020.2 2,124.6 4,165.5 4,102.5
--------------- ---------------- --------------- ---------------
Wholesale:
Annuities
First year.................................. 622.7 506.2 1,303.4 910.8
Renewal..................................... 15.6 11.1 34.1 17.8
--------------- ---------------- --------------- ---------------
638.3 517.3 1,337.5 928.6
Life
First year.................................. 3.1 - 5.2 .1
--------------- ---------------- --------------- ---------------
Total wholesale........................... 641.4 517.3 1,342.7 928.7
--------------- ---------------- --------------- ---------------
Total Premiums and Deposits $ 2,661.6 $ 2,641.9 $ 5,508.2 $ 5,031.2
=============== ================ =============== ===============
<FN>
(1) Includes variable and interest-sensitive and traditional life products.
(2) Includes health insurance and reinsurance assumed.
</FN>
</TABLE>
First year premiums and deposits for life and annuity products for the first
half of 2000 increased from prior year levels by $425.5 million primarily due to
higher sales of individual annuities by both the wholesale and retail
distribution channels and higher variable and interest-sensitive life sales
(excluding COLI sales which declined). Renewal premiums and deposits increased
by $53.8 million during the first half of 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.
21
<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>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------------- ---------------------------------
2000 1999 2000 1999
--------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C>
Annuities..................................... $ 1,166.2 $ 861.4 $ 2,412.1 $ 1,727.1
Variable and interest-sensitive life.......... 169.4 148.0 357.8 316.1
Traditional life.............................. 92.6 89.4 175.9 182.3
--------------- ---------------- --------------- ---------------
Total......................................... $ 1,428.2 $ 1,098.8 $ 2,945.8 $ 2,225.5
=============== ================ =============== ===============
</TABLE>
Policy and contract surrenders and withdrawals increased $720.3 million during
the first half of 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 9.0% in the first half of 1999 to 10.1% in the comparable
2000 period while the surrender rate declined to 9.7% for second quarter 2000
from 10.5% in first quarter 2000.
22
<PAGE>
Investment Services
The following table summarizes the results of continuing operations for
Investment Services.
Investment Services - Operating Results
(In Millions)
<TABLE>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------------- --------------------------------
2000 1999 2000 1999
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Operating Results:
Investment advisory and service fees............ $ 377.6 $ 291.3 $ 751.8 $ 596.7
Distribution revenues........................... 155.4 105.2 302.7 198.8
Equity in DLJ's earnings........................ 49.0 50.8 124.3 87.9
Other revenues.................................. 33.9 21.7 61.7 41.8
--------------- --------------- --------------- ---------------
Total revenues................................ 615.9 469.0 1,240.5 925.2
--------------- --------------- --------------- ---------------
Promotion and servicing......................... 209.3 151.0 407.8 290.3
Employee compensation and benefits.............. 131.4 102.7 260.1 221.0
All other operating expenses.................... 79.0 63.4 137.9 128.6
--------------- --------------- --------------- ---------------
Total expenses................................ 419.7 317.1 805.8 639.9
--------------- --------------- --------------- ---------------
Pre-tax earnings before minority interest....... 196.2 151.9 434.7 285.3
Minority interest............................... (66.6) (46.6) (142.0) (93.9)
--------------- --------------- --------------- ---------------
Pre-tax operating earnings...................... 129.6 105.3 292.7 191.4
Pre-tax Adjustments:
Investment gains (losses), net of DAC........... (.2) 98.2 5.9 108.4
Minority interest................................. 66.6 46.6 142.0 93.9
--------------- --------------- --------------- ---------------
GAAP Reported:
Earnings from Continuing Operations
before Federal Income Taxes and
and Minority Interest......................... $ 196.0 $ 250.1 $ 440.6 $ 393.7
=============== =============== =============== ===============
</TABLE>
For the first half of 2000, pre-tax operating earnings for Investment Services
increased by $101.3 million from the year-earlier period primarily due to higher
earnings for Alliance and higher equity in DLJ's earnings. DLJ's earnings
contribution for the first half of 2000 was $36.4 million higher than the
comparable 1999 amount due to higher net investment income, fees, commissions
and gains on principal transactions, net, partially offset by higher
compensation and benefits and higher occupancy, equipment and communications
costs related to DLJ's growth in the correspondent and online discount
securities businesses as well as to DLJ's continuing geographic expansion.
Excluding DLJ's earnings contribution, total segment revenues were up $278.9
million principally due to higher revenues at Alliance. Investment advisory and
service fees increased $155.1 million while distribution revenues grew by $103.9
million. The increase in investment advisory and service fees primarily resulted
from increases in average assets under management due to market appreciation
partially offset by a $34.5 million decline in performance fees to $16.1 million
for the first half of 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 equity mutual fund assets under management from strong sales and from
market appreciation.
23
<PAGE>
The resolution of a class action lawsuit at Alliance 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 first half of 2000. When this
one-time gain is excluded, Investment Services' total expenses increased by
$189.8 million for the first half of 2000 as compared to the same period in 1999
primarily due to increases in mutual fund promotional expenses and employee
compensation and benefits at Alliance. Promotion and servicing increased 40.4%
principally due to increased distribution plan payments related to the higher
average domestic, offshore and cash management 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
incentive and base compensation and commissions reflecting increased headcounts
in the mutual fund area along with salary increases. Commissions increased
primarily due to higher mutual fund and institutional sales.
On June 20, 2000, Alliance Holding, Alliance and Sanford C. Bernstein Inc.
("Bernstein") announced they had entered into a definitive agreement whereby
Alliance will acquire substantially all of the assets and liabilities of
Bernstein for an aggregate current value of approximately $3.5 billion ($1.48
billion in cash and 40.8 million newly issued Alliance Units). The consideration
may be adjusted downward if a base level of Bernstein client revenues is not
achieved at closing. The closing of the Bernstein acquisition is also subject to
various regulatory approvals, the maintenance of a minimum Bernstein client
revenue base and unaffiliated unitholder approval. On July 20, 2000, the
Bernstein shareholders approved and adopted the acquisition agreement. The
transaction is expected to close in fourth quarter 2000. The Holding Company
provided Alliance with the cash portion of the consideration by purchasing
approximately 32.6 million newly issued Alliance Units for $1.60 billion on June
21, 2000. At June 30, 2000, Equitable Life's and AXA Financial's respective
consolidated economic interests in Alliance were approximately 47% and 63%. Upon
completion of the transaction, their respective consolidated economic interests
in the newly combined entity will decrease to 40% and 53%. Additionally, the
Holding Company has agreed to provide liquidity to former Bernstein shareholders
after a two-year lock-out period to allow the 40.8 million private Units to be
sold to the Holding Company over the following eight years, but generally not
more than 20% of such Units in any one annual period.
24
<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>
At or For the
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------------- -------------------------------
2000 1999 2000 1999
----------------- --------------- --------------- --------------
<S> <C> <C> <C> <C>
FEES:
Third parties................................. $ 419.9 $ 300.0 $ 827.1 $ 616.1
Equitable Life Separate Accounts.............. 28.6 26.6 59.3 51.8
Equitable Life General Account and other...... 12.0 11.8 22.7 22.1
----------------- --------------- --------------- --------------
Total Fees.................................... $ 460.5 $ 338.4 $ 909.1 $ 690.0
================= =============== =============== ===============
</TABLE>
<TABLE>
<S> <C> <C>
ASSETS UNDER MANAGEMENT:
Assets by Manager
Alliance:
Third party................................................................... $ 321,682 $ 257,935
Equitable Life Separate Accounts.............................................. 41,570 37,716
Equitable Life General Account and Holding Company Group...................... 24,507 25,355
--------------- ---------------
Total Alliance.................................................................. 387,759 321,006
--------------- ---------------
DLJ:
Third party................................................................... 40,110 27,352
DLJ invested assets........................................................... 28,891 18,720
--------------- ---------------
Total DLJ....................................................................... 69,001 46,072
--------------- ---------------
Equitable Life:
Equitable Life (non-Alliance) General Account................................. 12,882 13,025
Equitable Life Separate Accounts - EQ Advisors Trust.......................... 7,858 4,294
Equitable Life real estate related Separate Accounts.......................... 3,035 4,044
Equitable Life Separate Accounts - other...................................... 3,137 2,386
--------------- ---------------
Total Equitable Life (non-Alliance)............................................. 26,912 23,749
--------------- ---------------
Total by Account:
Third party................................................................... 361,792 285,287
General Account and other..................................................... 66,280 57,100
Separate Accounts............................................................. 55,600 48,440
--------------- ---------------
Total Assets Under Management................................................... $ 483,672 $ 390,827
=============== ===============
</TABLE>
Fees from assets under management increased 31.8% for the first half of 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 the first half of 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 the first
half of 2000 by $12.76 billion as compared to the comparable 1999 period
principally due to new business in its Asset Management Group.
25
<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
June 30, 2000
(In Millions)
<TABLE>
General
Account
Balance Closed Investment
Balance Sheet Captions: Sheet Block Other Assets(1)
---------------------------------------------- ----------------- -------------- --------------- -------------
<S> <C> <C> <C> <C>
Fixed maturities:
Available for sale(2)....................... $ 17,689.7 $ 4,091.7 $ (67.9) $ 21,849.3
Held to maturity............................ 137.7 - - 137.7
Mortgage loans on real estate................. 3,120.2 1,628.4 - 4,748.6
Equity real estate............................ 1,046.0 62.5 (2.7) 1,111.2
Policy loans.................................. 2,381.0 1,574.2 .5 3,954.7
Other equity investments...................... 814.8 31.8 - 846.6
Other invested assets......................... 2,284.2 1.1 1,685.9 599.4
----------------- -------------- --------------- -------------
Total investments........................... 27,473.6 7,389.7 1,615.8 33,247.5
Cash and cash equivalents..................... 1,987.3 209.5 1,456.0 740.8
Corporate debt and other(3)................... - - 601.6 (601.6)
----------------- -------------- --------------- -------------
Total......................................... $ 29,460.9 $ 7,599.2 $ 3,673.4 $ 33,386.7
================= ============== =============== =============
<FN>
(1) General Account Investment Assets are computed by adding the Balance Sheet
and Closed Block and deducting the Other amounts.
(2) At June 30, 2000, the amortized cost of the General Account's available for
sale and held to maturity fixed maturities portfolios were $22.84 billion
and 137.7 million, respectively, compared with estimated market values of
$21.85 billion and $137.7 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>
26
<PAGE>
Asset Valuation Allowances and Writedowns
Writedowns on fixed maturities were $104.0 million and $104.3 million for the
first six months 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>
Equity Real
Mortgages Estate Total
--------------- --------------- --------------
<S> <C> <C> <C>
Balances at January 1, 2000................................... $ 32.1 $ 145.8 $ 177.9
Additions..................................................... 6.1 30.3 36.4
Deductions(1)................................................. (3.1) (73.6) (76.7)
--------------- --------------- --------------
Ending Balances at June 30, 2000.............................. $ 35.1 $ 102.5 $ 137.6
=============== =============== ==============
Balances at January 1, 1999................................... $ 45.4 $ 211.8 $ 257.2
Additions..................................................... 3.7 21.6 25.3
Deductions(1)................................................. (9.3) (71.1) (80.4)
--------------- --------------- --------------
Ending Balances at June 30, 1999.............................. $ 39.8 $ 162.3 $ 202.1
=============== =============== ==============
<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 June 30, 2000
and net amortized cost at December 31, 1999.
General Account Investment Assets
(In Millions)
<TABLE>
June 30, 2000 December 31, 1999
------------------------------------------------ ----------------------
Net Net
Amortized Valuation Amortized Amortized
Cost Allowances Cost Cost
--------------- ------------- --------------- ----------------------
<S> <C> <C> <C> <C>
Fixed maturities(1)...................... $ 22,975.4 $ - $ 22,975.4 $ 23,719.1
Mortgages................................ 4,783.7 35.1 4,748.6 4,974.2
Equity real estate....................... 1,213.7 102.5 1,111.2 1,251.2
Other equity investments................. 846.6 - 846.6 826.2
Policy loans............................. 3,954.7 - 3,954.7 3,851.2
Cash and short-term investments.......... 1,340.2 - 1,340.2 1,220.6
--------------- ------------- --------------- ----------------------
Total.................................... $ 35,114.3 $ 137.6 $ 34,976.7 $ 35,842.5
=============== ============= =============== ======================
<FN>
(1) Excludes unrealized losses of $988.4 million and $896.4 million in fixed
maturities classified as available for sale at June 30, 2000 and December
31, 1999, respectively.
</FN>
</TABLE>
27
<PAGE>
Investment Results of General Account Investment Assets
<TABLE>
Investment Results by Asset Category
(Dollars In Millions)
Three Months Ended June 30, Six Months Ended June 30,
-------------------------------------------------- --------------------------------------------------
2000 1999 2000 1999
------------------------ ------------------------ ------------------------ ------------------------
(1) (1) (1) (1)
Yield Amount Yield Amount Yield Amount Yield Amount
----------------------- ------------------------ ------------------------ ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed Maturities:
Income.............. 8.07% $ 460.5 7.78% $ 447.9 8.02% $ 922.3 7.84% $ 896.9
Investment
gains/(losses).... (.99)% (54.6) (0.49)% (27.2) (1.47)% (165.1) (1.34)% (149.3)
---------- ------------- ---------- ------------- --------- -------------- ---------- -------------
Total............... 7.08% $ 405.9 7.29% $ 420.7 6.55% $ 757.2 6.50% $ 747.6
Ending assets(2).... $ 23,537.2 $ 23,937.9 $ 23,537.2 $ 23,937.9
Mortgages:
Income.............. 8.29% $ 96.1 8.98% $ 104.7 8.50% $ 199.6 8.92% $ 202.2
Investment
gains/(losses).... .11% 1.2 (0.39)% (4.4) (.07)% (1.5) (0.12)% (2.6)
---------- ------------- ---------- ------------- --------- -------------- ---------- -------------
Total............... 8.40% $ 97.3 8.59% $ 100.3 8.43% $ 198.1 8.80% $ 199.6
Ending assets(3).... $ 4,739.9 $ 5,018.2 $ 4,739.9 $ 5,018.2
Equity Real
Estate:
Income(4)........... 8.66% $ 19.5 7.65% $ 25.3 8.41% $ 39.3 7.25% $ 48.2
Investment
gains/(losses).... (.87)% (1.9) 2.82% 9.0 (.53)% (2.4) 2.73% 17.5
---------- ------------- ---------- ------------- --------- ------------- ---------- -------------
Total............... 7.79% $ 17.6 10.47% $ 34.3 7.88% $ 36.9 9.98% $ 65.7
Ending assets(4).... $ 873.4 $ 1,384.3 $ 873.4 $ 1,384.3
Other Equity
Investments:
Income.............. 38.50% $ 75.6 34.38% $ 66.4 46.13% $ 170.7 34.85% $ 130.2
Investment
gains/(losses).... (1.77)% (3.1) 0.52% 0.9 (6.93)% (22.8) 24.22% 76.2
---------- ------------- ---------- ------------- --------- -------------- ---------- -------------
Total............... 36.73% $ 72.5 34.90% $ 67.3 39.20% $ 147.9 59.07% $ 206.4
Ending assets(5).... $ 958.1 $ 896.1 $ 958.1 $ 896.1
Policy Loans:
Income.............. 6.74% $ 64.0 6.78% $ 61.6 6.73% $ 126.9 6.70% $ 121.5
Ending assets....... $ 3,954.7 $ 3,775.4 $ 3,954.7 $ 3,775.4
Cash and Short-term
Investments:
Income.............. 13.74% $ 21.9 8.29% $ 16.0 10.97% $ 44.3 7.21% $ 36.0
Ending assets(6).... $ 537.7 $ 701.6 $ 537.7 $ 701.6
Equitable Life
Debt and Other:
Interest expense
and other......... 8.18% $ (12.8) 10.74% $ (16.2) 8.26% $ (27.5) 9.02% $ (27.4)
Ending liabilities $ (601.6) $ (600.1) $ (601.6) $ (600.1)
Total:
Income(7)........... 8.79% $ 724.8 8.40% $ 705.7 8.86% $ 1,475.6 8.40% $ 1,407.6
Investment
gains/(losses).... (.73)% (58.4) (0.27)% (21.7) (1.18)% (191.8) (0.36)% (58.2)
---------- ------------- ---------- ------------- --------- -------------- ---------- -------------
Total(8)............ 8.06% $ 666.4 8.13% $ 684.0 7.68% $ 1,283.8 8.04% $ 1,349.4
Ending net assets... $ 33,999.4 $ 35,113.4 $ 33,999.4 $ 35,113.4
28
<PAGE>
<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 and fees. Annualized yields are not necessarily indicative
of a full year's results.
(2) Fixed maturities investment assets are shown net of securities purchased
but not yet paid for of $134.5 million and $235.0 million, and include
accrued income of $386.9 million and $379.1 million, amounts due from
securities sales of $293.1 million and $59.7 million and other assets of
$16.4 million and $25.6 million as of June 30, 2000 and 1999,
respectively.
(3) Mortgage investment assets include accrued income of $58.1million and
$63.6 million and are adjusted for related liability balances of $(66.8)
million and $(24.4) million as of June 30, 2000 and 1999, respectively.
(4) Equity real estate investment assets are shown net of third party debt and
minority interest in real estate of $251.4 million and $274.4 million, and
include accrued income of $19.0 million and $25.4 million and are adjusted
for related liability balances of $(5.4) million and $(0.8) million as of
June 30, 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 $4.5 million, $5.1 million, $7.9 million and $11.1 million for the
second quarter and first half of 2000 and of 1999, respectively.
(5) Other equity investment assets include adjustment for accrued income and
pending settlements of $(8.0) million and $(0.1) million as of June 30,
2000 and 1999, respectively.
(6) Cash and short-term investments are shown net of financing arrangements of
$708.2 million and $388.5 million and other adjustments for accrued income
and cash in transit of $47.1 million and $1.3 million as of June 30, 2000
and 1999, respectively.
(7) Total investment income includes non-cash income from amortization,
payments-in-kind distributions and undistributed equity earnings of $16.0
million, $18.8 million, $31.9 million and $33.3 million for the second
quarters and first half of 2000 and of 1999, respectively. Investment
income is shown net of depreciation of $5.3 million, $5.1 million, $10.7
million and $7.8 million for the same respective periods.
(8) Total yields are shown before deducting investment fees paid to its
investment advisors. These fees include asset management, acquisition,
disposition, accounting and legal fees. If investment fees had been
deducted, total yields would have been 7.80%, 7.87%, 7.45% and 7.78% for
the second quarter and the first half of 2000 and of 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 June 30, 2000 and December 31, 1999, respectively, 76.9% and
76.9% of total fixed maturities were publicly traded; 83.3% and 87.4% of below
investment grade securities were also publicly traded. The $165.1 million of
investment losses in the first half of 2000 were due to $104.0 million of
writedowns on private structured and public high yield securities and $61.1
million of losses on sales. The $149.3 million of investment losses in the first
half of 1999 were due to $104.3 million of writedowns primarily on high yield
and emerging market securities and $44.9 million of losses on sales.
29
<PAGE>
Fixed Maturities By Credit Quality
(Dollars In Millions)
<TABLE>
June 30, 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...... $ 20,134.5 $ 19,525.2 $ 20,561.4 $ 19,973.0
3-6 Ba and lower.......... 2,840.9 2,461.8 3,157.7 2,849.7
------------------- ----------------- ------------------ ----------------
Total Fixed Maturities............... $ 22,975.4 $ 21,987.0 $ 23,719.1 $ 22,822.7
=================== ================= ================== ================
</TABLE>
At June 30, 2000, the Company held mortgage pass-through securities with an
amortized cost of $2.63 billion, $2.42 billion of CMOs, including $1.99 billion
in publicly-traded CMOs, and $1.34 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 $215.2
million (.9% of the amortized cost of this category) and $155.9 million (.7%) at
June 30, 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 June 30, 2000, commercial mortgages totaled $2.83 billion (59.2% of the
amortized cost of the category) and agricultural loans were $1.95 billion
(40.8%).
Problem, Potential Problem and Restructured Mortgages
Amortized Cost
(Dollars In Millions)
<TABLE>
June 30, December 31,
2000 1999
--------------- -----------------
<S> <C> <C>
COMMERCIAL MORTGAGES.......................................................... $ 2,831.5 $ 3,048.2
Potential problem commercial mortgages........................................ 110.1 120.6
Restructured commercial mortgages............................................. 126.7 130.7
AGRICULTURAL MORTGAGES........................................................ $ 1,951.7 $ 1,957.4
</TABLE>
The original weighted average coupon rate on the $126.7 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 8.6%.
At June 30, 2000 and 1999, respectively, management identified impaired mortgage
loans with carrying values of $129.1 million and $122.7 million. The provisions
for losses for these impaired mortgage loans were $30.3 million and $33.4
million at June 30, 2000 and 1999, respectively. For the first half of 2000 and
of 1999, respectively, income accrued on these loans was $7.3 million and $5.9
million, including cash received of $6.9 million and $5.9 million.
For the first half of 2000, scheduled principal amortization payments and
prepayments on commercial mortgage loans received aggregated $396.2 million. In
addition, $12.6 million of commercial mortgage loan maturity payments were
scheduled: $10.1 million were paid as due and $2.5 million were granted short
term extensions of up to six months.
Equity Real Estate. As of June 30, 2000, on the basis of amortized cost, the
equity real estate category included $722.3 million (59.6%) acquired as
investment real estate and $488.8 million (40.4%) acquired through or in lieu of
foreclosure (including in-substance foreclosures).
30
<PAGE>
During the first half of 2000 and of 1999, respectively, proceeds from the sale
of equity real estate totaled $148.0 million and $180.8 million, with gains of
$28.0 million and $32.3 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 $71.7
million and $64.3 million, respectively.
At June 30, 2000, the vacancy rate for the Company's office properties was 7.3%
in total, with a vacancy rate of 5.9% for properties acquired as investment real
estate and 17.9% for properties acquired through foreclosure. The national
commercial office vacancy rate was 9.0% (as of March 31, 2000) as measured by CB
Richard Ellis.
Other Equity Investments. Other equity investments consist of LBO, mezzanine,
venture capital and other limited partnership interests ($633.2 million or 66.1%
of the amortized cost of this portfolio at June 30, 2000), alternative limited
partnerships ($189.7 million or 19.8%) and common stock and other equity
securities ($135.2 million or 14.1%), including the excess of Separate Account
assets over Separate Account liabilities. 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.
LIQUIDITY AND CAPITAL RESOURCES
In May 2000, Equitable Life paid a $150.0 million shareholder dividend.
Management expects to discuss further dividends with the NYID in third quarter
2000.
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. On June 30,
2000, Equitable Life renewed its $350.0 million 5-year credit facility expiring
in June 2005 and its $350.0 million 364-day credit facility. These credit
facilities support the commercial paper program. Equitable Life uses this
program from time to time in its liquidity management. At June 30, 2000, no
amounts were outstanding under either the commercial paper program or the
revolving credit facility.
On June 21, 2000, Alliance sold 32.6 million newly issued Units to the Holding
Company for $1.60 billion. Alliance will use the proceeds primarily to finance
the cash portion of the acquisition price of Bernstein.
At June 30, 2000, Alliance had $217.3 million of commercial paper and ECNs,
borrowings under the revolving credit facilities of $48.0 million and a $3.1
million note outstanding. The $121.7 million decrease in debt since December 31,
1999 was attributed to repayments made from a portion of the cash proceeds from
the sale of new Alliance Units to the Holding Company.
31
<PAGE>
Consolidated Cash Flows
Net cash provided by operating activities was $25.4 million for the first half
of 2000 compared to $158.5 million for the first half of 1999.
Net cash provided by investing activities was $548.0 million for the first half
of 2000 as compared to net cash used by investing activities of $1.37 billion
for the same period in 1999. In the 2000 period, sales, maturities and
repayments of investment assets exceeded purchases by $692.0 million. In the
comparable 1999 period, investment purchases exceeded sales, maturities and
repurchases by $1.37 billion.
Net cash provided by financing activities was $785.9 million for the first six
months of 2000 as compared to $872.9 million for the 1999 period. In second
quarter 2000, a $1.6 billion increase in cash resulted from the Holding
Company's purchase of new Alliance Units while the Equitable Life $150.0 million
shareholder dividend partially offset the effect of that transaction. During the
first half of 2000, withdrawals from policyholders' accounts and transfers to
Separate Accounts exceeded deposits by $976.9 million. In the first half of
1999, short-term financings increased by $559.5 million and deposits to
policyholders' accounts exceeded withdrawals and transfers to Separate Accounts
by $384.8 million.
The operating, investing and financing activities described above resulted in a
increase in cash and cash equivalents during the first half of 2000 of $1.36
billion to $1.99 billion.
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. 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. 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.
32
<PAGE>
Insurance. 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,
cost-effective manner and its investment management performance. The Insurance
Group evaluates the financial condition of its reinsurers and takes other steps
to minimize its exposure to significant losses from reinsurer insolvencies.
Ceded reinsurance, including the book of DI business recently transferred, does
not relieve the originating insurer of liability. 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 operating expenses after 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 group pension business produced pre-tax
losses in 1995 and 1996. In late 1996, a loss recognition study for the group
pension business was completed. As a result, 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 this book of business since 1996, management continues to
believe the Pension Par reserve has been calculated on a reasonable basis and is
adequate. However, there can be no assurance that it will be sufficient to
provide for all future liabilities.
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.
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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.
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 consolidated 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.
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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. In
June 2000, the Appellate Division denied plaintiffs' motion 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 associates in Circuit Court, Mobile
County, Alabama, and asserts claims under state law. The action was brought by
an individual who alleges that she 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,
charging of inflated and hidden fees, and failure to disclose unnecessary tax
deferral 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, and the plaintiff has
filed a motion to remand the case to state court. 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 consolidated
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 consolidated results of
operations in any particular period.
In Kane, the plaintiff's claims have been settled on an individual basis and the
action has been dismissed.
In June 2000, an action entitled Raymond Patenaude v. The Equitable Life
Assurance Society of the United States, AXA Advisors, LLC and Equitable
Distributors, Inc. was commenced in the Superior Court of California, County of
San Diego. The complaint alleges that the defendants engaged in fraudulent and
deceptive practices in connection with the marketing and sale of deferred
annuity products to fund tax-qualified contributory retirement plans. The named
plaintiff purports to act as a private attorney general on behalf of the general
public of the State of California under California consumer protection statutes
and also asserts individual common-law claims. On behalf of the named plaintiff
and the general public, the complaint asserts claims for unlawful, unfair or
fraudulent business acts and practices and for false or misleading advertising.
On behalf of the named plaintiff alone, the complaint alleges claims for fraud,
fraudulent concealment and deceit, negligent misrepresentation and negligence.
The complaint seeks injunctive relief, restitution for members of the general
public of the State of California who have been harmed by defendants' conduct,
compensatory and punitive damages on behalf of the named plaintiff, and
attorneys' fees, costs and expenses. In July 2000, the defendants removed the
case to the United States District Court for the Southern District of California
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 consolidated
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 consolidated results of
operations in any particular period.
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In January 2000, the California Supreme Court denied Equitable Life's petition
for review of an October 1999 decision by the California Court of Appeal which
reversed the dismissal by the Superior Court of Orange County, California of an
action entitled BT-I v. The Equitable Life Assurance Society of the United
States. The action was commenced in 1995 by a real estate developer in
connection with a limited partnership formed in 1991 with Equitable Life on
behalf of Prime Property Fund ("PPF"). Equitable Life serves as investment
manager for PPF, an open-end, commingled real estate separate account of
Equitable Life for pension clients. Plaintiff alleges, among other claims, that
Equitable Life breached its fiduciary duty as general partner of the limited
partnership principally in connection with the 1995 purchase and subsequent
foreclosure by Equitable Life on behalf of PPF of the loan which financed the
partnership's property. In reversing the Superior Court's dismissal of the
plaintiff's claims, the Court of Appeal held that a general partner who acquires
a partnership obligation breaches its fiduciary duty by foreclosing on
partnership assets. The case was remanded to the Superior Court for further
proceedings, and in May 2000, the court scheduled a jury trial for February
2001. The plaintiff seeks compensatory and punitive damages. Although the
outcome of 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 consolidated financial position of the Company.
The Company's management cannot make an estimate of loss, if any, or predict
whether or not this matter will have a material adverse effect on the Company's
consolidated results of operations in any particular period.
In the Alliance North American Government Income Trust action, on August 3,
2000, the court signed an order approving the Stipulation and Agreement of
Settlement. Shareholders of the fund have thirty days from the date the order
becomes final to appeal the order.
On July 21, 2000, in the consolidated action captioned In re Public Offering Fee
Antitrust Litigation pending in the U.S. District Court for the Southern
District of New York, plaintiffs filed a motion for leave to file a second
amended complaint. The principal proposed amendment to the previously filed
Consolidated Amended Complaint is the addition of an issuer company as a
plaintiff. On August 3, 2000, another purported class action, captioned CHS
Electronics, Inc. v. Credit Suisse First Boston Corporation, et al., was filed
in the U.S. District Court for the Southern District of Florida against 18
securities firms, including DLJ. The complaint makes allegations substantially
similar to those advanced in In re Public Offering Fee Antitrust Litigation,
asserting that defendants conspired to fix the "fee" paid for underwriting
initial public offering securities by setting the underwriters' discount or
"spread" at 7%, in violation of the Federal antitrust laws. The complaint seeks
treble damages in an unspecified amount and injunctive relief as well as
attorney's fees and costs. To date, DLJ has not been served in the action filed
in Florida. DLJ and DLJSC intend to vigorously defend themselves against all the
allegations contained in the complaints.
On or about January 31, 2000, Ameriserve Food Distribution, Inc. ("Ameriserve"),
its parent company, Nebco Evans Holding Company ("NEHC"), and related
corporations, filed Chapter 11 petitions in the U.S. Bankruptcy Court for the
District of Delaware. Over a period of several years, Donaldson, Lufkin &
Jenrette Securities Corporation ("DLJSC") provided investment banking services
to Ameriserve and NEHC, including participating in the distribution of their
securities. A Donaldson, Lufkin & Jenrette, Inc. ("DLJ") merchant banking
affiliate was for a time an investor in Ameriserve, and an employee of DLJSC and
an employee of a DLJ merchant banking affiliate were members of the board of
directors of Ameriserve. In the Bankruptcy Court proceedings discovery has been
sought from DLJ and its affiliates in connection with their relationships with
these companies. In addition, the staff of the Securities and Exchange
Commission has issued an informal request for information, and the U.S.
Attorney's Office for the Eastern District of New York has issued a grand jury
subpoena requesting information. DLJ and its affiliates are cooperating with
these discovery requests. No claim has been brought against DLJ or its
affiliates to date.
Between September 1995 and October 1998, DLJSC was named as a defendant in six
separate actions filed by institutional investors who invested and lost
approximately $300 million in three hedge funds (the "Funds") managed by David
Askin ("Askin"). The Funds filed for bankruptcy in April 1994. All six
complaints have been consolidated for discovery purposes and are currently
pending in the U.S. District Court for the Southern District of New York. The
defendants are Askin, Askin Capital Management ("ACM", Askin's management
company), and two securities dealers (including DLJSC) that sold collateralized
mortgage obligations to the Funds. The only claim against DLJSC that has
survived a motion to dismiss is aiding and abetting common law fraud. The
complaints allege that DLJSC aided and abetted an alleged fraud of the investors
by Askin and ACM by selling securities that were inconsistent with the Funds'
investment objectives and by providing inaccurate monthly mark-to-market prices
for securities purchased by the Funds. The actions seek joint and several
recovery of rescissionary, compensatory, and punitive damages. DLJSC's motion
for summary judgment on the plaintiffs' claims is currently pending. DLJSC
itends to defend itself vigorously against all of the allegations contained in
the complaints.
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In August 1997, DLJSC was named as a defendant in another action arising out of
the bankruptcy of the Funds. This action was brought by the "Litigation Advisory
Board," an entity created by the Funds' plan of liquidation to pursue all
unresolved claims held by the Funds. The action is currently pending in the U.S.
District Court for the Southern District of New York. The only claims against
DLJSC that have survived a motion to dismiss are for breach of contract.
Generally, the lawsuit alleges that the Funds were damaged when DLJSC issued
allegedly improper margin calls and liquidated the Funds' reverse repurchase
positions at less than fair market value. The complaint alleges that the Funds'
investors lost over $400 million in equity, but does not specify the amount of
damages that the Funds themselves claim to have suffered as a result of the
allegations made in this complaint. DLJSC intends to defend itself vigorously
against all of the allegations contained in the complaint.
Although there can be no assurance, DLJ's management does not believe that the
ultimate outcome of the matters described above relating to DLJSC will have a
material adverse effect on DLJ's consolidated financial condition. Based upon
the information currently available to it, DLJ's management cannot predict
whether or not these matters will have a material adverse effect on DLJ's
results of operations in any particular period.
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Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K
None.
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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: August 10, 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: August 10, 2000 /s/Alvin H. Fenichel
----------------------------------------
Name: Alvin H. Fenichel
Title Senior Vice President
and Controller
39
