VARIABLE LIFE INSURANCE POLICIES
FUNDED THROUGH SEPARATE ACCOUNT FP
PROSPECTUS SUPPLEMENT DATED MAY 1, 1996
Incentive Life Plus(TM) Survivorship 2000(TM)
Champion 2000(TM) Incentive Life(TM)
Incentive Life 2000(TM) SP-Flex(TM)
Issued By
EQUITABLE VARIABLE
LIFE INSURANCE COMPANY
Principal Office Located at:
787 Seventh Avenue
New York, NY 10019
VM 521
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THE HUDSON RIVER TRUST
PROSPECTUS DATED MAY 1, 1996
HRT 596
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<PAGE>
VARIABLE LIFE INSURANCE POLICIES
FUNDED THROUGH SEPARATE ACCOUNT FP
INCENTIVE LIFE PLUS (94-300)
CHAMPION 2000(TM) (90-400) ISSUED BY
INCENTIVE LIFE 2000(TM) (90-300) EQUITABLE VARIABLE
SURVIVORSHIP 2000(TM) (92-500) LIFE INSURANCE COMPANY
INCENTIVE LIFE(TM) (85-300 & 88-300)
SP-FLEX(TM) (87-500)
PROSPECTUS SUPPLEMENT DATED MAY 1, 1996
INTRODUCTION. This Supplement updates certain information contained in the
prospectuses for:
o INCENTIVE LIFE PLUS dated December 19, 1994, May 1, 1995 and
September 15, 1995;
o CHAMPION 2000 dated May 1, 1994, May 1, 1993, and November 27, 1991;
o INCENTIVE LIFE 2000 dated May 1, 1994, May 1, 1993 and November 27,
1991;
o SURVIVORSHIP 2000 dated May 1, 1995, May 1, 1994, May 1, 1993 and
August 18, 1992;
o INCENTIVE LIFE dated May 1, 1994, May 1, 1993, February 27, 1991,
May 1, 1990 and August 29, 1989; and
o SP-FLEX dated September 30, 1987 and August 24, 1987.
For your convenience, we have consolidated the prior updating supplements that
have been previously distributed. For this reason, you may already be familiar
with some of the information in this prospectus supplement, but we encourage you
to read it anyway. You can find the information about your policy by referring
to one or more of the following headings:
PAGE
INFORMATION RELATED TO ALL POLICIES 2
INFORMATION ABOUT ALL POLICIES EXCEPT SP-FLEX 6
INFORMATION ABOUT INCENTIVE LIFE PLUS 7
INFORMATION ABOUT INCENTIVE LIFE 2000 AND CHAMPION 2000 7
INFORMATION ABOUT INCENTIVE LIFE 7
INFORMATION ABOUT SP-FLEX 8
You should attach this Supplement to your prospectus and retain it for future
reference. Equitable Variable Life Insurance Company (Equitable Variable) will
send you an additional copy of any prospectus or supplement, without charge, on
written request. Except as otherwise noted, terms used in this supplement have
the same meaning as in the prospectus. However, we now refer to the Guaranteed
Interest Division as the Guaranteed Interest Account and to divisions of
Separate Account FP as "Funds."
Champion 2000, Incentive Life 2000, Incentive Life and SP-Flex policies are no
longer offered for sale.
INFORMATION RELATED TO ALL POLICIES:
1. EQUITABLE VARIABLE. The information under the heading EQUITABLE VARIABLE is
updated as follows: Equitable Variable was organized in 1972 in New York
State as a stock life insurance company. We are licensed to do business in
all 50 states, Puerto Rico, the Virgin Islands and the District of Columbia.
At December 31, 1995, we had approximately $132.8 billion face amount of
variable life insurance in force.
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THIS SUPPLEMENT SHOULD BE RETAINED FOR FUTURE REFERENCE.
VM 521 Copyright 1996 Equitable Variable Life Insurance Company.
All rights reserved.
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2. EQUITABLE. The information under the heading OUR PARENT, EQUITABLE is
updated as follows: Equitable is a wholly-owned subsidiary of The Equitable
Companies Incorporated (the Holding Company). The largest stockholder of the
Holding Company is AXA S.A. (AXA), a French insurance holding company. AXA
beneficially owns 60.6% of the outstanding shares of common stock of the
Holding Company plus convertible preferred stock. Under its investment
arrangements with Equitable and the Holding Company, AXA is able to exercise
significant influence over the operations and capital structure of the
Holding Company and its subsidiaries, including Equitable and Equitable
Variable. AXA is the principal holding company for most of the companies in
one of the largest insurance groups in Europe. The majority of AXA's stock
is controlled by a group of five French mutual insurance companies.
Equitable, the Holding Company and their subsidiaries managed approximately
$195.3 billion in assets as of December 31, 1995.
3. HUDSON RIVER TRUST INVESTMENT POLICIES. Net premiums can be allocated to the
Separate Account Funds or to the Guaranteed Interest Account (except for
SP-Flex policyowners). The Funds of Separate Account FP in turn invest those
net premiums in corresponding portfolios of The Hudson River Trust, a mutual
fund. Each portfolio has a different investment objective which it tries to
achieve by following separate investment policies. The objectives and
policies of each portfolio will affect its return and its risks. There is no
guarantee that these objectives will be achieved. The policies and
objectives of the Trust's portfolios are as follows:
<TABLE>
<CAPTION>
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PORTFOLIO INVESTMENT POLICY OBJECTIVE
--------- ----------------- ---------
<S> <C> <C>
THE FIXED INCOME SERIES:
MONEY MARKET ........... Primarily high quality short-term money market High level of current income while
instruments. preserving assets and maintaining
liquidity.
INTERMEDIATE ........... Primarily debt securities issued or guaranteed High current income consistent with
GOVERNMENT by the U.S. Government, its agencies and relative stability of principal.
SECURITIES instrumentalities. Each investment will have a
final maturity of not more than 10 years or a
duration not exceeding that of a 10-year
Treasury note.
QUALITY BOND ........... Primarily investment grade fixed income High current income consistent with
securities. preservation of capital.
HIGH YIELD ............. Primarily a diversified mix of high yield, High return by maximizing current
fixed-income securities involving greater income and, to the extent
volatility of price and risk of principal and consistent with that objective,
income than high quality fixed-income capital appreciation.
securities. The medium and lower quality debt
securities in which the Portfolio may invest are
known as "junk bonds."
THE EQUITY SERIES:
GROWTH & INCOME ........ Primarily common stocks and securities High return through a combination
convertible into common stocks. of current income and capital
appreciation.
EQUITY INDEX ........... Selected securities in the S&P's 500 Index (the Total return performance (before
"Index") which the adviser believes will, in the trust expenses) that approximates
aggregate, approximate the performance results the investment performance of the
of the Index. Index (including reinvestment of
dividends) at a risk level
consistent with that of the Index.
COMMON STOCK ........... Primarily common stock and other equity-type Long-term growth of capital and
instruments. increasing income.
GLOBAL ................. Primarily equity securities of non-United States Long-term growth of capital.
as well as United States companies.
INTERNATIONAL .......... Primarily equity securities selected principally Long-term growth of capital.
to permit participation in non-United States
companies with prospects for growth.
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</TABLE>
3
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<TABLE>
<CAPTION>
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PORTFOLIO INVESTMENT POLICY OBJECTIVE
--------- ----------------- ---------
<S> <C> <C>
AGGRESSIVE STOCK .......... Primarily common stock and other equity-type Long-term growth of capital.
securities issued by medium and other smaller
sized companies with strong growth potential.
ASSET ALLOCATION SERIES:
CONSERVATIVE INVESTORS .... Diversified mix of publicly-traded, fixed-income High total return without, in the
and equity securities; asset mix and security adviser's opinion, undue risk to
selection are primarily based upon factors principal.
expected to reduce risk. The Portfolio is
generally expected to hold approximately 70% of
its assets in fixed income securities and 30%
in equity securities.
BALANCED .................. Primarily common stocks, publicly-traded debt High return through a combination
securities and high quality money market of current income and capital
instruments. The portfolio is generally expected appreciation.
to hold 50% of its assets in equity securities
and 50% in fixed income securities.
GROWTH INVESTORS .......... Diversified mix of publicly-traded, fixed-income High total return consistent with
and equity securities; asset mix and security the adviser's determination of
selection based upon factors expected to reasonable risk.
increase possibility of high long-term return.
The Portfolio is generally expected to hold
approximately 70% of its assets in equity
securities and 30% in fixed income securities.
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</TABLE>
Subject to the terms described in your prospectus, you may transfer cash
values between Separate Account Funds and/or change how your net premiums
are allocated among Funds. See TRANSFERS OF POLICY ACCOUNT VALUE in your
prospectus and CHARGE FOR TRANSFERS below.
4. INVESTMENT PERFORMANCE. Footnote 7 to the Separate Account FP financial
statements included herein contains information about the net return for
each Fund. The attached prospectus supplement for The Hudson River Trust
contains rates of return and other portfolio performance information of the
Trust for various periods ended December 31, 1995. Remember, the changes in
the Policy Account value of your policy depend not only on the performance
of the Trust portfolios, but also on the deductions and charges under your
policy. To obtain the current unit values of the Separate Account Funds,
call (212) 714-5015.
The values reported in footnote 7 for all Policies are computed using the
net rates of return for the corresponding portfolios of the Trust. The
SP-Flex returns are net of charges for cost of insurance, administrative
expense, and mortality and expense risks.
The returns reported in footnote 7 for each of the other policy forms are
reduced only by any mortality and expense risk charge deducted from Separate
Account assets.
5. THE TRUST'S INVESTMENT ADVISER. The information about Alliance Capital
Management L.P. (Alliance), the Trust's investment adviser, is updated as
follows: As of December 31, 1995, Alliance was managing approximately $146.5
billion in assets. Alliance, a publicly traded limited partnership, is
indirectly majority-owned by Equitable.
For your convenience, we are restating that the advisory fee payable by the
Trust to Alliance, which is based on the following annual percentages of the
value of each portfolio's daily average net assets:
<TABLE>
<CAPTION>
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DAILY AVERAGE NET ASSETS
-------------------------------------------------
FIRST NEXT OVER
PORTFOLIO $350 MILLION $400 MILLION $750 MILLION
--------- ------------ ------------ ------------
<S> <C> <C> <C>
Common Stock, Money Market and Balanced................................... .400% .375% .350%
Aggressive Stock and Intermediate Government Securities................... .500% .475% .450%
High Yield, Global, Conservative Investors and Growth Investors........... .550% .525% .500%
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</TABLE>
4
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<TABLE>
<CAPTION>
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DAILY AVERAGE NET ASSETS
-------------------------------------------------
FIRST NEXT OVER
PORTFOLIO $500 MILLION $500 MILLION $1 BILLION
--------- ------------ ------------ ----------
<S> <C> <C> <C>
Quality Bond and Growth & Income.......................................... .550% .525% .500%
</TABLE>
<TABLE>
<CAPTION>
FIRST NEXT OVER
PORTFOLIO $750 MILLION $750 MILLION $1.5 BILLION
--------- ------------ ------------ ------------
<S> <C> <C> <C>
Equity Index.............................................................. .350% .300% .250%
</TABLE>
<TABLE>
<CAPTION>
FIRST NEXT OVER
PORTFOLIO $500 MILLION $1 BILLION $1.5 BILLION
--------- ------------ ---------- ------------
<S> <C> <C> <C>
International............................................................. .900 .850 .800
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</TABLE>
6. LIVING BENEFIT OPTION AVAILABLE. Subject to regulatory approval in your
state and our underwriting guidelines, you may now be eligible for a Living
Benefit payment under your policy. The Living Benefit enables the
policyowner to receive a portion of the policy's death benefit (excluding
death benefits payable under certain riders) if the insured has a terminal
illness. Certain eligibility requirements will apply when you submit a
Living Benefit claim (for example, satisfactory evidence of less than six
month life expectancy). We will deduct an administrative charge of up to
$250 from the proceeds of the Living Benefit payment. This charge may be
less in some states.
When a Living Benefit claim is paid, Equitable Variable establishes a lien
against the policy. The amount of the lien is the sum of the Living Benefit
payment, any accrued interest on that payment and any unpaid scheduled
premium (if applicable under your policy). Interest will be charged at a
rate equal to the greater of: (i) the yield on a 90-day Treasury bill and
(ii) the maximum adjustable policy loan interest rate permitted in the state
in which your policy is delivered.
Until a death benefit is paid, or the policy is surrendered, a portion of
the lien is allocated to the policy's Cash Surrender Value. This portion of
the liened amount will be transferred to the Guaranteed Interest Account
where it will earn interest at the same rate credited to unloaned amounts
(in the case of SP-Flex policies, this portion of the liened amount will be
transferred to the Money Market Fund). This portion of the liened amount
will not be available for loans or partial withdrawals (if permitted under
your policy). Any death benefit or Cash Surrender Value payable upon policy
surrender will be reduced by the amount of the lien.
Unlike a death benefit received by a beneficiary after the death of an
insured, receipt of a Living Benefit payment may be taxable as a
distribution under the policy. See TAX EFFECTS in your prospectus or, for
SP-Flex policyowners, in this supplement, for a discussion of the tax
treatment of distributions under the policy. Consult your tax adviser.
Receipt of a Living Benefit payment may also affect a policyowner's
eligibility for certain government benefits or entitlements. To submit a
claim for this benefit and receive a copy of the Living Benefit rider,
please contact your Equitable agent.
7. TELEPHONE TRANSFERS. The information under the heading Telephone Transfers
is updated, as follows:
In order to make a transfer by telephone, each policyowner must first
complete and return an authorization form. Authorization forms can be
obtained from your Equitable agent or our Administrative Office. The
completed form MUST be returned to our Administrative Office before
requesting a telephone transfer.
Telephone transfers may be requested on each day we are open to transact
business. You will receive the Fund's unit value as of the close of business
on the day you call. We do not accept telephone transfer requests after 4:00
p.m. Eastern Time. Only one telephone transfer request is permitted per day
and it may not be revoked at any time. Telephone transfer requests are
automatically recorded and are invalid if incomplete information is given,
portions of the request are inaudible, no authorization form is on file, or
the request does not comply with the transfer limitations described in your
policy.
We have established reasonable procedures designed to confirm that
instructions communicated by telephone are genuine. Such procedures include
requiring certain personal identification information prior to acting on
telephone instructions and providing written confirmation of instructions
communicated by telephone. If we do not employ reasonable procedures to
confirm that instructions communicated by telephone are genuine, we may be
liable for any losses arising out of any act or any failure to act resulting
from our own negligence, lack of good faith, or willful misconduct. In light
of the procedures established, we will not be liable for following telephone
instructions that we reasonably believe to be genuine.
During times of extreme market activity it may be impossible to contact us
to make a telephone transfer. If this occurs, you should submit a written
transfer request to our Administrative Office. Our rules on telephone
transfers are subject to change and we reserve the right to discontinue
telephone transfers in the future.
8. TAX CHANGES. The United States Congress may in the future enact legislation
that could change the tax treatment of life insurance policies. In addition,
the Treasury Department may amend existing regulations, issue new
regulations, or adopt new interpretations of existing laws. There is no way
of predicting whether, when or in what form any such change
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would be adopted. Any such change could have a retroactive effect
regardless of the date of enactment. State tax laws or, if you are not a
United States resident, foreign tax laws, may affect the tax consequences
to you, the insured person or your beneficiary. These laws may change from
time to time without notice.
The discussion of the tax effects on policy proceeds contained in your
prospectus and this supplement is based on our understanding of Federal
income tax laws as of the date of such prospectus or supplement, as applied
to policies owned by U.S. resident individuals. The tax effects on
corporate taxpayers, subject to the Federal alternative minimum tax, other
non-natural owners such as trusts, non-U.S. residents or non-U.S. citizens,
may be different. This discussion is general in nature, and should not be
considered tax advice, for which you should consult your legal or tax
adviser.
9. DISTRIBUTION. Equico Securities Inc. ("Equico"), a wholly-owned subsidiary
of Equitable, is the principal underwriter of the Trust under a
Distribution Agreement. Equico is also the distributor of our variable life
insurance policies and Equitable's variable annuity contracts under a
Distribution and Servicing Agreement. Equico is registered with the SEC as
a broker-dealer under the Securities Exchange Act of 1934 and is a member
of the National Association of Securities Dealers, Inc. Equico's principal
business address is 1755 Broadway, New York, NY 10019. Equico is paid a fee
for its services as distributor of our policies. In 1994 and 1995,
Equitable and Equitable Variable paid Equico a fee of $216,920 and
$325,380, respectively, for its services under the Distribution and
Servicing Agreement. On or about May 1, 1996, Equico will change its name
to EQ Financial Consultants, Inc.
The amounts paid and accrued to Equitable by us under our sales and
services agreements with Equitable totaled approximately $377.2 million in
1995, $380.5 million in 1994 and $355.7 million in 1993.
10. MANAGEMENT. A list of our directors and principal officers and a brief
statement of their business experience for the past five years is contained
in Appendix A to this supplement.
11. LONG-TERM MARKET TRENDS. Appendix B to this supplement presents historical
return trends for various types of securities which may be useful for
understanding how different investment strategies may affect long term
results.
12. FINANCIAL STATEMENTS. The financial statements of Separate Account FP and
Equitable Variable included in this prospectus supplement have been audited
for the years ended December 31, 1995, 1994 and 1993 by the accounting firm
of Price Waterhouse LLP, our independent auditors, to the extent stated in
their report. The financial statements of Separate Account FP and Equitable
Variable for the years ended December 31, 1995, 1994 and 1993 included in
this prospectus supplement have been so included in reliance on the reports
of Price Waterhouse LLP, given on the authority of such firm as experts in
accounting and auditing.
The financial statements of Equitable Variable contained in this prospectus
supplement should be considered only as bearing upon the ability of
Equitable Variable to meet its obligations under the policies. They should
not be considered as bearing upon the investment experience of the Separate
Account Funds.
INFORMATION ABOUT ALL POLICIES EXCEPT SP-FLEX
1. AUTOMATIC TRANSFER SERVICE. We offer an Automatic Transfer Service. This
service enables you to make automatic monthly transfers out of the Money
Market Fund into the other Separate Account Funds.
To start using this service you must first complete a special election form
that is available from your agent or our Administrative Office. You must
also have a minimum of $5,000 in the Money Market Fund on the date the
Automatic Transfer Service is scheduled to begin. You can elect up to eight
Separate Account Funds for monthly transfers, but the minimum amount that
may be transferred to each Fund each month is $50. Automatic transfers will
begin on the next monthly processing date after we receive your election
form at our Administrative Office.
The Automatic Transfer Service will remain in effect until the earliest of
the following events: (1) the funds in the Money Market Fund are
insufficient to cover the automatic transfer amount; (2) the policy is in a
grace period; (3) we receive at our Administrative Office your written
instruction to cancel the Automatic Transfer Service; (4) we receive a
death claim under the policy; or (5) you elect to use your Net Cash
Surrender Value to purchase a fixed-benefit insurance option (if available
under your policy).
Using the Automatic Transfer Service does not guarantee a profit or protect
against loss in a declining market.
2. CHARGE FOR TRANSFERS. We have reserved the right under your policy to make
a charge of $25 for transfers of Policy Account value. You are currently
able to make twelve free transfers in any policy year but we will charge
$25 per transfer after the twelfth transfer. All transfers made on the same
effective date (either written or by telephone) will count as one transfer.
Transfers
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<PAGE>
made through the Automatic Transfer Service do not count toward the twelve
free transfers. There will be no charge for a transfer of all of your
amounts in the Separate Account to the Guaranteed Interest Account.
INFORMATION ABOUT INCENTIVE LIFE PLUS
DEDUCTIONS AND CHARGES. Cost of Insurance Charge. The information under Cost of
Insurance Charge is updated as follows: Beginning in the tenth policy year,
current monthly cost of insurance charges are reduced by an amount equal to a
percentage of your unloaned Policy Account value on the date such charges are
assessed. This means that the larger your unloaned Policy Account value, the
greater your potential reduction in current cost of insurance charges. This
percentage begins at an annual rate of .05%, grading up to an annual rate of
.50% in policy years 26 and later. Effective on or about July 1, 1996, we intend
to increase this cost of insurance charge reduction to grade up to .65% in
policy years 25 and later. This cost of insurance charge reduction applies on a
current basis and is not guaranteed. We may in the future increase, decrease,
change the duration of, or eliminate the amount of the current cost of insurance
charge reduction without advance notice to you. Because Incentive Life Plus was
offered for the first time in 1995, no reduction of cost of insurance charges in
the tenth policy year has yet been attained.
INFORMATION ABOUT INCENTIVE LIFE 2000 AND CHAMPION 2000
1. PROSPECTUS SUMMARY. On page 1 of the prospectus, under the heading
INVESTMENT FEATURES -- POLICY ACCOUNT the bold face text in the second
bullet point is replaced by the following: REQUESTS FOR TRANSFERS OUT OF
THE GUARANTEED INTEREST ACCOUNT CAN ONLY BE MADE ON OR WITHIN 30 DAYS OF A
POLICY ANNIVERSARY. SUCH TRANSFERS WILL BE EFFECTIVE AS OF THE DATE WE
RECEIVE YOUR REQUEST, BUT NO EARLIER THAN THE POLICY ANNIVERSARY. TRANSFERS
INTO THE GUARANTEED INTEREST ACCOUNT AND AMONG ALL SEPARATE ACCOUNT FUNDS
MAY BE REQUESTED AT ANY TIME.
2. BORROWING FROM YOUR POLICY ACCOUNT. We will first allocate loan repayments
to our Guaranteed Interest Account until the amount of any loan originally
allocated to that account has been repaid. After you have repaid this
amount, you may choose how you want us to allocate the balance of any
additional repayments. If you do not provide specific instructions,
repayments will be allocated on the basis of your premium allocation
percentages.
3. MINIMUM FACE AMOUNT (INCENTIVE LIFE 2000 ONLY). The minimum Face Amount for
Incentive Life 2000 is $50,000 for issue ages 65 and below. This is also
the minimum Face Amount for the "designated insured option" rider described
under ADDITIONAL BENEFITS MAY BE AVAILABLE in your Incentive Life 2000
prospectus.
INFORMATION ABOUT INCENTIVE LIFE
1. MONTHLY ADMINISTRATIVE CHARGE. We deduct a monthly administrative charge
from your Policy Account, which covers the costs associated with
administering Incentive Life policies. The current administrative charge is
$6 per month. This administrative charge is guaranteed never to exceed $8
per month.
2. COST OF INSURANCE CHARGE. The tables under "Cost of Insurance Charge" in
prospectuses dated February 27, 1991 and earlier are updated as follows:
<TABLE>
<CAPTION>
ILLUSTRATIVE TABLE OF MONTHLY COST OF INSURANCE RATES
(ROUNDED)
FACE AMOUNT $50,000-$199,000 FACE AMOUNT $200,000 AND OVER
-------------------------------------------------- ---------------------------------------------------
MALE GUARANTEED CURRENT GUARANTEED CURRENT
ISSUE AGE MAXIMUM RATE (NON-SMOKER) RATE MAXIMUM RATE (NON-SMOKER) RATE
- --------------------- ---------------------- ------------------------- ---------------------- -------------------------
<C> <C> <C> <C> <C>
5 $ .08 $ .08 $ .08 $ .08
15 .11 .11 .11 .11
25 .15 .13 .15 .12
35 .18 .14 .18 .13
45 .38 .25 .38 .22
55 .88 .54 .88 .46
65 2.14 1.41 2.14 1.19
</TABLE>
3. EMPLOYEE BENEFIT PROGRAMS. Complex rules may apply when a policy is held by
an employee or a trust, or acquired by an employee, in connection with the
provision of employee benefits. These policyowners also must consider
whether the policy was applied for by or issued to a person having an
insurable interest under applicable state law, as the lack of insurable
interest may, among other things, affect the qualification of the policy as
life insurance for federal income tax purposes and the right of the
beneficiary to death benefits. Employers and employer-created trusts may be
subject to
7
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reporting, disclosure, and fiduciary obligations under the Employee
Retirement Income Security Act of 1974 (ERISA). For information on these
matters, we suggest that you consult your tax and legal advisers.
4. UNISEX RATES. Incentive Life policies were issued on a unisex basis in
Montana and, after February 2, 1990, in Massachusetts. Unisex means that
there is no distinction based on sex in determining the cost of insurance
rates. Cost of insurance rates applicable to a policy issued on a unisex
basis would not be greater than the comparable male rates set forth or
illustrated in the prospectus. Similarly, illustrated policy values in the
prospectus would be no less favorable for comparable policies issued on a
unisex basis. The guaranteed cost of insurance rates for our Incentive Life
policy are based on the Commissioner's 1980 Standard Ordinary "B" Mortality
Table.
INFORMATION ABOUT SP-FLEX
1. TAX EFFECTS. This discussion supersedes the discussion of the tax effects
on policy proceeds contained in the prospectus. The Technical and
Miscellaneous Revenue Act of 1988 changed the tax consequences of
distributions from "modified endowments", a category of life insurance
policies. For this purpose, "distributions" include policy loans and
amounts received on lapse, maturity or surrender of a policy.
POLICY PROCEEDS. An SP-Flex Policy will be treated as "life insurance" for
Federal income tax purposes if it meets the definitional requirement of the
Internal Revenue Code (Code) and for as long as the portfolios of the Trust
satisfy the diversification requirements under the Code. We believe that
SP-Flex will meet these requirements, and that under Federal income tax
law:
o the death benefit received by the beneficiary under your policy will
not be subject to Federal income tax; and
o as long as your policy remains in force, increases in the value of your
policy as a result of investment experience will not be subject to
Federal income tax unless and until there is a distribution from your
policy.
SPECIAL TAX RULES MAY APPLY, HOWEVER, IF YOU TRANSFER YOUR OWNERSHIP OF THE
POLICY. CONSULT YOUR TAX ADVISER BEFORE ANY TRANSFER OF YOUR POLICY.
The Federal income tax consequences of a distribution from your policy will
depend on whether your policy is determined to be a "modified endowment."
SP-Flex policies entered into prior to June 21, 1988 will not be considered
modified endowments, unless an additional premium is paid. Generally,
SP-Flex policies entered into after June 20, 1988 will be considered
modified endowments. However, SP-Flex policies acquired as a result of an
exchange from a policy that is not a modified endowment, will generally not
be considered a modified endowment as long as no additional premiums are
paid and the death benefit of the new policy is not reduced below that of
the old policy.
IF YOUR POLICY IS NOT A MODIFIED ENDOWMENT, as long as it remains in force,
a loan under your policy will be treated as indebtedness and no part of the
loan will be subject to Federal income tax. Interest on the loan will not
be tax deductible. If your policy lapses, matures or is surrendered, the
excess, if any, of your Cash Surrender Value (which includes the amount of
any unpaid policy loan and loan interest) over your Basis will be subject
to Federal income tax. Your Basis in your policy generally will equal the
premiums you have paid.
IF YOUR POLICY IS A MODIFIED ENDOWMENT, any loan from your policy will be
taxed in a manner comparable to distributions from annuities (i.e., on an
"income-first" basis). A loan for this purpose also includes any increase
in the loan amount to pay interest on an existing loan or an assignment or
a pledge to secure a loan. A loan will be considered taxable income to you
to the extent your Policy Account Value exceeds your Basis in the policy at
the time you make the loan. For modified endowments, your Basis would be
increased by the amount of any prior loan under your policy that was
considered taxable income to you.
A 10% penalty tax will also apply to the taxable portion of a loan under a
modified endowment. The penalty tax will not, however, apply to loans (i)
to taxpayers 59 1/2 years of age or older, (ii) in the case of a disability
(as defined in the Code) or (iii) received as part of a series of
substantially equal periodic annuity payments for the life (or life
expectancy) of the taxpayer or the joint lives (or joint life expectancies)
of the taxpayer and his beneficiary. In addition, if your policy lapses,
matures or is surrendered, the excess, if any, of your Cash Surrender Value
over your Basis will be subject to Federal income tax and, unless one of
the above exceptions applies, the 10% penalty tax.
If your policy becomes a modified endowment, a distribution during the
policy year it becomes a modified endowment and any subsequent policy year
will be taxed as described in the two preceding paragraphs. In addition, a
distribution from a policy within two years before it becomes a modified
endowment will be subject to tax in this manner. As referred to above, if
additional premiums are paid under an SP-Flex policy entered into prior to
June 21, 1988, it will become a modified endowment. THIS MEANS THAT A
DISTRIBUTION MADE AFTER JUNE 20, 1988 FROM AN SP-FLEX POLICY ENTERED INTO
PRIOR TO JUNE 21, 1988 COULD LATER BECOME TAXABLE AS A DISTRIBUTION FROM A
MODIFIED ENDOWMENT. The Secretary of the Treasury has been authorized to
prescribe rules which would treat similarly other distributions made in
anticipation of a policy becoming a modified endowment.
DIVERSIFICATION. Under Section 817(h) of the Code, the Secretary of the
Treasury has the authority to set standards for diversification of the
investments underlying variable life insurance policies. The Treasury
Department has issued regulations regarding the
8
<PAGE>
diversification requirements. Failure by us to meet these requirements
would disqualify your policy as a life insurance policy under Section 7702
of the Code. If this were to occur, you would be subject to Federal income
tax on the income under the policy. Equitable Variable Separate Account FP,
through the Trust, intends to comply with these requirements.
In connection with the issuance of the temporary diversification
regulations, the Treasury Department stated that it anticipates the
issuance of regulations or rulings prescribing the circumstances in which
the ability of a policyowner to direct his investment to particular funds
of a separate account may cause the policyowner, rather than the insurance
company, to be treated as the owner of the assets in the account. If you
were considered the owner of the assets of the Separate Account, income and
gains from the account would be included in your gross income for Federal
income tax purposes.
For purposes of determining the taxable income to you resulting from a loan
under your policy or a distribution on its lapse, maturity or surrender,
all modified endowment contracts issued to you by the same insurer or an
affiliate during any calendar year will be aggregated and treated as one
contract. This provision applies to policies entered into after June 20,
1988, but does not affect contracts purchased by certain qualified plans.
Under prior law, a "twelve-month period" rather than a calendar year
standard was used.
POLICY CHANGES. For you and your beneficiary to receive the tax treatment
discussed above, your policy must initially qualify and continue to qualify
as life insurance under Sections 7702 and 817(h) of the Code. We have
reserved in the SP-Flex policy the right to decline to accept all or part
of any premium payments that would cause the policy to fail to qualify. We
may also make changes in the SP-Flex policy or its riders or make
distributions from the policy to the extent we deem necessary to qualify
the policy as life insurance for tax purposes. Any such change will apply
uniformly to all policies that are affected. SP-Flex policyowners will be
given advance written notice of such changes.
9
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Equitable Variable Life Insurance Company
and Policyowners of Separate Account FP
of Equitable Variable Life Insurance Company
In our opinion, the accompanying statements of assets and liabilities and the
related statements of operations and of changes in net assets present fairly, in
all material respects, the financial position of Money Market Division,
Intermediate Government Securities Division, Quality Bond Division, High Yield
Division, Growth and Income Division, Equity Index Division, Common Stock
Division, Global Division, International Division, Aggressive Stock Division,
Conservative Investors Division, Balanced Division and Growth Investors
Division, separate investment divisions of Equitable Variable Life Insurance
Company ("Equitable Variable Life") Separate Account FP at December 31, 1995 and
the results of each of their operations and changes in each of their net assets
for each of the periods indicated, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
Equitable Variable Life's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of shares in The Hudson River Trust at
December 31, 1995 with the transfer agent, provide a reasonable basis for the
opinion expressed above.
PRICE WATERHOUSE LLP
New York, NY
February 7, 1996
FSA-1
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<CAPTION>
INTERMEDIATE
MONEY GOVERNMENT QUALITY HIGH GROWTH & EQUITY
MARKET SECURITIES BOND YIELD INCOME INDEX
DIVISION DIVISION DIVISION DIVISION DIVISION DIVISION
------------ ----------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments in shares of
The Hudson River
Trust -- at market
value (Notes 2 and 7)
Cost: $207,548,119..... $207,638,095
37,536,467..... $37,681,989
141,011,715..... $138,906,039
68,700,148..... $72,524,129
17,021,456..... $19,144,802
59,443,291..... $71,895,056
Receivable for sales of
shares of The Hudson
River Trust........... -- -- -- -- -- --
Receivable for policy-
related transactions.. 1,030,719 472,227 195,736 671,870 272,371 214,843
------------ ----------- ------------ ----------- ----------- -----------
Total Assets............ 208,668,814 38,154,216 139,101,775 73,195,999 19,417,173 72,109,899
------------ ----------- ------------ ----------- ----------- -----------
LIABILITIES
Payable for purchases
of shares of The
Hudson River
Trust................. 1,021,043 488,551 195,429 740,734 272,227 214,856
Payable for policy-
related transactions.. -- -- -- -- -- --
Amount retained by
Equitable Variable Life
in Separate Account
FP (Note 4)........... 514,240 516,621 618,900 524,303 526,633 271,428
------------ ----------- ------------ ----------- ---------- -----------
Total Liabilities....... 1,535,283 1,005,172 814,329 1,265,037 798,860 486,284
------------ ----------- ------------ ----------- ---------- -----------
NET ASSETS ATTRIBUTABLE
TO POLICYOWNERS......... $207,133,531 $37,149,044 $138,287,446 $71,930,962 $18,618,313 $71,623,615
============ =========== ============ =========== =========== ===========
</TABLE>
See Notes to Financial Statements.
<TABLE>
<CAPTION>
COMMON AGGRESSIVE
STOCK GLOBAL INTERNATIONAL STOCK
DIVISION DIVISION DIVISION DIVISION
-------------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
ASSETS
Investments in shares of
The Hudson River
Trust -- at market
value (Notes 2 and 7)
Cost: 966,230,780...... $1,148,055,059
297,303,481...... $333,829,077
11,991,226...... $12,659,132
475,758,260...... $556,029,378
Receivable for sales of
shares of The Hudson
River Trust........... -- -- -- --
Receivable for policy-
related transactions.. 233,000 421,042 137,166 800,569
-------------- ------------ ----------- ------------
Total Assets............ 1,148,288,059 334,250,119 12,796,298 556,829,947
-------------- ------------ ----------- ------------
LIABILITIES
Payable for purchases
of shares of The
Hudson River
Trust................. 679,729 246,368 143,511 1,121,615
Payable for policy-
related transactions.. -- -- -- --
Amount retained by
Equitable Variable Life
in Separate Account
FP (Note 4)........... 1,023,056 506,731 220,849 520,201
-------------- ------------ ----------- ------------
Total Liabilities....... 1,702,785 753,099 364,360 1,641,816
-------------- ------------ ----------- ------------
NET ASSETS ATTRIBUTABLE
TO POLICYOWNERS....... $1,146,585,274 $333,497,020 $12,431,938 $555,188,131
============== ============ =========== ============
</TABLE>
See Notes to Financial Statements.
ASSET ALLOCATION SERIES
--------------------------------------------
CONSERVATIVE GROWTH
INVESTORS BALANCED INVESTORS
DIVISION DIVISION DIVISION
------------ ------------ ------------
ASSETS
Investments in shares of
The Hudson River
Trust -- at market
value (Notes 2 and 7)
Cost: 162,300,470...... $172,662,590
356,282,500...... $399,379,687
474,917,898...... $556,703,771
Receivable for sales of
shares of The Hudson
River Trust........... 76,736 -- --
Receivable for policy-
related transactions.. -- -- 191,779
------------ ------------ ------------
Total Assets............ 172,739,326 399,379,687 556,895,550
------------ ------------ ------------
LIABILITIES
Payable for purchases
of shares of The
Hudson River
Trust................. -- 179,701 414,996
Payable for policy-
related transactions.. 81,465 47,918 --
Amount retained by
Equitable Variable Life
in Separate Account
FP (Note 4)........... 570,762 586,859 602,888
------------ ------------ ------------
Total Liabilities....... 652,227 814,478 1,017,884
------------ ------------ ------------
NET ASSETS ATTRIBUTABLE
TO POLICYOWNERS....... $172,087,099 $398,565,209 $555,877,666
============ ============ ============
See Notes to Financial Statements.
FSA-2
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
INTERMEDIATE GOVERNMENT
MONEY MARKET DIVISION SECURITIES DIVISION
------------------------------------ --------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
------------------------------------ --------------------------------------
1995 1994 1993 1995 1994 1993
---------- ---------- ---------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson River Trust......... $9,225,401 $5,368,883 $4,163,389 $2,010,283 $ 5,671,984 $14,930,827
Expenses (Note 3):
Mortality and expense risk charges............ 954,556 826,379 834,113 197,721 527,675 1,470,325
---------- ---------- ---------- ---------- ----------- -----------
NET INVESTMENT INCOME............................. 8,270,845 4,542,504 3,329,276 1,812,562 5,144,309 13,460,502
---------- ---------- ---------- ---------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on investments........... (432,347) 95,530 (339,754) (810,768) (10,163,976) 3,999,846
Realized gain distribution from
The Hudson River Trust...................... -- -- -- -- -- 11,449,074
---------- ---------- ---------- ---------- ----------- -----------
NET REALIZED GAIN (LOSS).......................... (432,347) 95,530 (339,754) (810,768) (10,163,976) 15,448,920
Unrealized appreciation/depreciation on
investments:
Beginning of period........................... 32,760 (14,267) (224,885) (2,736,863) (1,617,237) 1,966,231
End of period................................. 89,976 32,760 (14,267) 145,522 (2,736,863) (1,617,237)
---------- ---------- ---------- ---------- ----------- -----------
Change in unrealized appreciation/depreciation
during the period............................. 57,216 47,027 210,618 2,882,385 (1,119,626) (3,583,468)
---------- ---------- ---------- ---------- ----------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS.................................. (375,131) 142,557 (129,136) 2,071,617 (11,283,602) 11,865,452
---------- ---------- ---------- ---------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS................................. $7,895,714 $4,685,061 $3,200,140 $3,884,179 $(6,139,293) $25,325,954
========== ========== ========== ========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
QUALITY BOND DIVISION
-------------------------------------------
OCTOBER 1*
TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
--------------------------- ------------
1995 1994 1993
----------- ------------ ------------
<S> <C> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson River Trust......... $ 7,958,285 $ 8,123,722 $ 1,221,840
Expenses (Note 3):
Mortality and expense risk charges............ 767,627 689,178 163,308
----------- ------------ ------------
NET INVESTMENT INCOME............................. 7,190,658 7,434,544 1,058,532
----------- ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on investments........... (632,666) (410,697) (106)
Realized gain distribution from
The Hudson River Trust...................... -- -- 130,973
----------- ------------ ------------
NET REALIZED GAIN (LOSS).......................... (632,666) (410,697) 130,867
Unrealized appreciation/depreciation on
investments:
Beginning of period........................... (15,521,200) (1,886,621) --
End of period................................. (2,105,676) (15,521,200) (1,886,621)
----------- ------------ -----------
Change in unrealized appreciation/depreciation
during the period............................. 13,415,524 (13,634,579) (1,886,621)
----------- ------------ -----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS.................................. 12,782,858 (14,045,276) (1,755,754)
----------- ------------ -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS................................. $19,973,516 $ (6,610,732) $ (697,222)
=========== ============ ===========
See Notes to Financial Statements.
<FN>
* Commencement of Operations
</FN>
</TABLE>
FSA-3
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
HIGH YIELD DIVISION
----------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------
1995 1994 1993
----------- ----------- ----------
<S> <C> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson River Trust................. $ 6,518,568 $ 4,578,946 $4,488,259
Expenses (Note 3):
Mortality and expense risk charges.................... 371,369 305,522 285,992
----------- ----------- ----------
NET INVESTMENT INCOME..................................... 6,147,199 4,273,424 4,202,267
----------- ----------- ----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on investments................... (179,454) (328,199) 107,852
Realized gain distribution from
The Hudson River Trust.............................. -- -- 1,030,687
----------- ----------- ----------
NET REALIZED GAIN (LOSS).................................. (179,454) (328,199) 1,138,539
Unrealized appreciation/depreciation on investments:
Beginning of period................................... (873,103) 4,734,999 763,746
End of period......................................... 3,823,981 (873,103) 4,734,999
----------- ----------- ----------
Change in unrealized appreciation/depreciation
during the period..................................... 4,697,084 (5,608,102) 3,971,253
----------- ----------- ----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS.... 4,517,630 (5,936,301) 5,109,792
----------- ----------- ----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS......................................... $10,664,829 $(1,662,877) $9,312,059
=========== =========== ==========
</TABLE>
See Notes to Financial Statements.
<TABLE>
<CAPTION>
GROWTH & INCOME DIVISION EQUITY INDEX DIVISION
--------------------------------------- --------------------------
OCTOBER 1* APRIL 1*
TO YEAR ENDED TO
YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
------------------------ ------------- ----------- -------------
1995 1994 1993 1995 1994
---------- --------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson River Trust................. $ 380,677 $ 108,492 $ 3,394 $ 964,775 $ 596,180
Expenses (Note 3):
Mortality and expense risk charges.................... 69,716 19,204 1,833 289,199 152,789
---------- --------- ------- ----------- ---------
NET INVESTMENT INCOME..................................... 310,961 89,288 1,561 675,576 443,391
---------- --------- ------- ----------- ---------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on investments................... 2,791 (11,709) (134) 3,060 (6,949)
Realized gain distribution from
The Hudson River Trust.............................. -- -- -- 536,890 134,154
---------- --------- ------- ----------- ---------
NET REALIZED GAIN (LOSS).................................. 2,791 (11,709) (134) 539,950 127,205
Unrealized appreciation/depreciation on investments:
Beginning of period................................... (141,585) (904) -- (399,286) --
End of period......................................... 2,123,346 (141,585) (904) 12,451,765 (399,286)
---------- --------- ------- ----------- ---------
Change in unrealized appreciation/depreciation
during the period..................................... 2,264,931 (140,681) (904) 12,851,051 (399,286)
---------- --------- ------- ----------- ---------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS.... 2,267,722 (152,390) (1,038) 13,391,001 (272,081)
---------- --------- ------- ----------- ---------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS......................................... $2,578,683 $ (63,102) $ 523 $14,066,577 $ 171,310
========== ========= ======= =========== =========
See Notes to Financial Statements.
<FN>
* Commencement of Operations
</FN>
</TABLE>
FSA-4
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
COMMON STOCK DIVISION GLOBAL STOCK DIVISION
-------------------------------------------- -----------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
-------------------------------------------- -----------------------------------------
1995 1994 1993 1995 1994 1993
------------ ------------ ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson
River Trust.................... $ 14,259,262 $ 11,755,355 $ 10,311,886 $ 5,152,442 $ 2,768,605 $ 1,060,406
Expenses (Note 3):
Mortality and expense risk
charges........................ 6,050,368 4,741,008 4,005,102 1,743,898 1,211,620 466,897
------------ ------------ ------------ ----------- ----------- -----------
NET INVESTMENT INCOME................ 8,208,894 7,014,347 6,306,784 3,408,544 1,556,985 593,509
------------ ------------ ------------ ----------- ----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on
investments.................... 16,793,683 292,144 4,176,629 3,049,444 3,347,704 1,333,766
Realized gain distribution from
The Hudson River Trust......... 63,838,178 43,936,280 85,777,775 9,214,950 4,821,242 11,642,904
------------ ------------ ------------ ----------- ----------- -----------
NET REALIZED GAIN (LOSS)............. 80,631,861 44,228,424 89,954,404 12,264,394 8,168,946 12,976,670
Unrealized appreciation
(depreciation) on investments:
Beginning of period.............. (2,048,649) 71,350,568 22,647,989 3,130,280 7,062,877 2,783,724
End of period.................... 181,824,279 (2,048,649) 71,350,568 36,525,596 3,130,280 7,062,877
------------ ------------ ------------ ----------- ----------- -----------
Change in unrealized appreciation/
depreciation during the period... 183,872,928 (73,399,217) 48,702,579 33,395,316 (3,932,597) 4,279,153
------------ ------------ ------------ ----------- ----------- -----------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS.............. 264,504,789 (29,170,793) 138,656,983 45,659,710 4,236,349 17,255,823
------------ ------------ ------------ ----------- ----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS.......... $272,713,683 $(22,156,446) $144,963,767 $49,068,254 $ 5,793,334 $17,849,332
============ ============ ============ =========== =========== ===========
</TABLE>
See Notes to Financial Statements.
<TABLE>
<CAPTION>
INTERNATIONAL
DIVISION AGGRESSIVE STOCK DIVISION
-------------- --------------------------------------------
APRIL 3*
TO
DECEMBER 31, YEAR ENDED DECEMBER 31,
-------------- --------------------------------------------
1995 1995 1994 1993
---------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson
River Trust.................... $195,500 $ 1,268,689 $ 400,102 $ 766,228
Expenses (Note 3):
Mortality and expense risk
charges........................ 36,471 2,702,978 1,944,639 1,757,109
-------- ------------ ------------ ------------
NET INVESTMENT INCOME................ 159,029 (1,434,289) (1,544,537) (990,881)
-------- ------------ ------------ ------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on
investments.................... (790) 11,560,966 (6,075,250) 35,696,507
Realized gain distribution from
The Hudson River Trust......... 51,741 61,903,470 -- 25,339,962
-------- ------------ ------------ ------------
NET REALIZED GAIN (LOSS)............. 50,951 73,464,436 (6,075,250) 61,036,469
Unrealized appreciation
(depreciation) on investments:
Beginning of period.............. -- 30,761,318 35,185,988 53,885,737
End of period.................... 667,906 80,271,118 30,761,318 35,185,988
-------- ------------ ------------ ------------
Change in unrealized appreciation/
depreciation during the period... 667,906 49,509,800 (4,424,670) (18,699,749)
-------- ------------ ------------ ------------
NET REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS.............. 718,857 122,974,236 (10,499,920) 42,336,720
-------- ------------ ------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS.......... $877,886 $121,539,947 $(12,044,457) $ 41,345,839
======== ============ ============ ============
See Notes to Financial Statements.
<FN>
*Commencement of Operations
</FN>
</TABLE>
FSA-5
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF OPERATIONS (CONCLUDED)
<TABLE>
<CAPTION>
ASSET ALLOCATION SERIES
---------------------------------------------------------------------------------
CONSERVATIVE INVESTORS DIVISION BALANCED DIVISION
-------------------------------------- ----------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
-------------------------------------- ----------------------------------------
1995 1994 1993 1995 1994 1993
----------- ----------- ---------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson River Trust....... $ 8,169,109 $ 6,205,574 $4,088,977 $12,276,328 $ 10,557,487 $10,062,862
Expenses (Note 3):
Mortality and expense risk charges.......... 921,294 750,164 551,610 2,237,982 2,103,510 2,047,811
----------- ----------- ---------- ----------- ------------ -----------
NET INVESTMENT INCOME........................... 7,247,815 5,455,410 3,537,367 10,038,346 8,453,977 8,015,051
----------- ----------- ---------- ----------- ------------ -----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on investments......... (378,551) (421,501) 91,739 (2,466,524) 858,164 1,446,919
Realized gain distribution from
The Hudson River Trust.................... 1,068,272 -- 4,651,717 10,894,130 -- 20,280,817
----------- ----------- ---------- ----------- ------------ -----------
NET REALIZED GAIN (LOSS)........................ 689,721 (421,502) 4,743,456 8,427,606 858,164 21,727,736
Unrealized appreciation (depreciation) on
investments:
Beginning of period......................... (8,767,697) 1,915,037 2,223,612 (2,878,875) 37,960,661 30,072,900
End of period............................... 10,362,120 (8,767,697) 1,915,037 43,097,187 (2,878,875) 37,960,661
----------- ----------- ---------- ----------- ------------ -----------
Change in unrealized appreciation/depreciation
during the period........................... 19,129,817 (10,682,734) (308,575) 45,976,062 (40,839,536) 7,887,761
----------- ----------- ---------- ----------- ------------ -----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS................................ 19,819,538 (11,104,236) 4,434,881 54,403,668 (39,981,372) 29,615,497
----------- ----------- ---------- ----------- ------------ -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS............................... $27,067,353 $(5,648,826) $7,972,248 $64,442,014 $(31,527,395) $37,630,548
=========== =========== ========== =========== ============ ===========
</TABLE>
See Notes to Financial Statements.
<TABLE>
<CAPTION>
ASSET ALLOCATION SERIES
-------------------------------------------
GROWTH INVESTORS DIVISION
-------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------------
1995 1994 1993
------------ ------------ -----------
<S> <C> <C> <C>
INCOME AND EXPENSES:
Income (Note 2):
Dividends from The Hudson River Trust......... $ 15,855,901 $ 10,663,204 $ 5,922,228
Expenses (Note 3):
Mortality and expense risk charges............ 2,796,354 1,995,747 1,274,117
------------ ------------ -----------
NET INVESTMENT INCOME............................. 13,059,547 8,667,457 4,648,111
------------ ------------ -----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS (Note 2):
Realized gain (loss) on investments........... 1,752,185 241,591 52,392
Realized gain distribution from
The Hudson River Trust...................... 7,421,853 -- 14,624,517
------------ ------------ -----------
NET REALIZED GAIN (LOSS).......................... 9,174,038 241,591 14,676,909
Unrealized appreciation (depreciation) on
investments:
Beginning of period........................... (770,693) 20,567,604 12,746,740
End of period................................. 81,785,873 (770,693) 20,567,604
------------ ------------ -----------
Change in unrealized appreciation/depreciation
during the period............................. 82,556,566 (21,338,297) 7,820,864
------------ ------------ -----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS.................................. 91,730,604 (21,096,706) 22,497,773
------------ ------------ -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS................................. $104,790,151 $(12,429,249) $27,145,884
============ ============ ===========
</TABLE>
See Notes to Financial Statements.
FSA-6
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
INTERMEDIATE GOVERNMENT
MONEY MARKET DIVISION SECURITIES DIVISION
------------------------------------------ -------------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
------------------------------------------ -------------------------------------------
1995 1994 1993 1995 1994 1993
------------ ------------ ------------ ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income............. $ 8,270,845 $ 4,542,504 $ 3,329,276 $ 1,812,562 $ 5,144,309 $ 13,460,502
Net realized gain (loss).......... (432,347) 95,530 (339,754) (810,768) (10,163,976) 15,448,920
Change in unrealized appreciation/
depreciation on investments..... 57,216 47,027 210,618 2,882,385 (1,119,626) (3,583,468)
------------ ------------ ------------ ----------- ------------- -------------
Net increase (decrease)
from operations................. 7,895,714 4,685,061 3,200,140 3,884,179 (6,139,293) 25,325,954
------------ ------------ ------------ ----------- ------------- -------------
FROM POLICY-RELATED TRANSACTIONS:
Net premiums (Note 3)............. 96,773,056 82,536,703 64,845,505 11,016,347 18,915,140 26,598,113
Benefits and other policy-related
transactions (Note 3)........... (39,770,849) (32,432,771) (31,747,197) (6,286,070) (5,813,181) (7,539,335)
Net transfers among divisions..... 4,776,165 (25,466,044) (50,510,704) 953,149 (125,116,319) (180,916,946)
------------ ------------ ------------ ----------- ------------- -------------
Net increase (decrease) from
policy-related transactions..... 61,778,372 24,637,888 (17,412,396) 5,683,426 (112,014,360) (161,858,168)
------------ ------------ ------------ ----------- ------------- -------------
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE VARIABLE IN
SEPARATE ACCOUNT FP (Note 4)...... (36,640) (24,067) 92,890 (72,636) 15,335 (69,330)
------------ ------------ ------------ ----------- ------------- -------------
INCREASE (DECREASE) IN NET ASSETS... 69,637,446 29,298,882 (14,119,366) 9,494,969 (118,138,318) (136,601,544)
NET ASSETS, BEGINNING OF PERIOD..... 137,496,085 108,197,203 122,316,569 27,654,075 145,792,393 282,393,937
------------ ------------ ------------ ----------- ------------- -------------
NET ASSETS, END OF PERIOD........... $207,133,531 $137,496,085 $108,197,203 $37,149,044 $ 27,654,075 $ 145,792,393
============ ============ ============ =========== ============= =============
</TABLE>
See Notes to Financial Statements.
<TABLE>
<CAPTION>
QUALITY BOND DIVISION
-------------------------------------------
OCTOBER 1*
TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
---------------------------- -----------
1995 1994 1993
------------ ------------ -----------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income............. $ 7,190,658 $ 7,434,544 $ 1,058,532
Net realized gain (loss).......... (632,666) (410,697) 130,867
Change in unrealized appreciation/
depreciation on investments..... 13,415,524 (13,634,579) (1,886,621)
------------ ------------ -----------
Net increase (decrease)
from operations................. 19,973,516 (6,610,732) (697,222)
------------ ------------ -----------
FROM POLICY-RELATED TRANSACTIONS:
Net premiums (Note 3)............. 2,516,135 850,240 181,283
Benefits and other policy-related
transactions (Note 3)........... (3,189,044) (2,891,278) (441,626)
Net transfers among divisions..... 2,462,969 25,765,197 100,786,909
------------ ------------ -----------
Net increase (decrease) from
policy-related transactions..... 1,790,060 23,724,159 100,526,566
------------ ------------ -----------
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE VARIABLE IN
SEPARATE ACCOUNT FP (Note 4)...... (712,602) 255,654 38,047
------------ ------------ -----------
INCREASE (DECREASE) IN NET ASSETS... 21,050,974 17,369,081 99,867,391
NET ASSETS, BEGINNING OF PERIOD..... 117,236,472 99,867,391 --
------------ ------------ -----------
NET ASSETS, END OF PERIOD........... $138,287,446 $117,236,472 $99,867,391
============ ============ ===========
See Notes to Financial Statements.
<FN>
*Commencement of Operations
</FN>
</TABLE>
FSA-7
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
HIGH YIELD DIVISION
------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------
1995 1994 1993
----------- ------------ -----------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income................................... $ 6,147,199 $ 4,273,424 $ 4,202,267
Net realized gain (loss)................................ (179,454) (328,199) 1,138,539
Change in unrealized appreciation/
depreciation on investments........................... 4,697,084 (5,608,102) 3,971,253
----------- ------------ -----------
Net increase (decrease) from operations................. 10,664,829 (1,662,877) 9,312,059
----------- ------------ -----------
FROM POLICY-RELATED TRANSACTIONS:
Net premiums (Note 3)................................... 15,333,474 14,287,345 10,787,763
Benefits and other policy-related
transactions (Note 3)................................. (8,211,013) (7,162,537) (5,179,424)
Net transfers among divisions........................... 4,789,450 (11,048,174) 1,006,671
----------- ------------ -----------
Net increase (decrease) from policy-related
transactions.......................................... 11,911,911 (3,923,366) 6,615,010
----------- ------------ -----------
NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE
VARIABLE IN SEPARATE ACCOUNT FP (Note 4)................ (100,679) 16,028 (31,889)
----------- ------------ -----------
INCREASE (DECREASE) IN NET ASSETS......................... 22,476,061 (5,570,215) 15,895,180
NET ASSETS, BEGINNING OF PERIOD........................... 49,454,901 55,025,116 39,129,936
----------- ------------ -----------
NET ASSETS, END OF PERIOD................................. $71,930,962 $ 49,454,901 $55,025,116
=========== ============ ===========
</TABLE>
See Notes to Financial Statements.
<TABLE>
<CAPTION>
GROWTH & INCOME DIVISION EQUITY INDEX DIVISION
------------------------------------- --------------------------
OCTOBER 1* APRIL 1*
TO YEAR ENDED TO
YEAR ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
------------------------- ----------- ----------- -----------
1995 1994 1993 1995 1994
----------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income................................... $ 310,961 $ 89,288 $ 1,561 $ 675,576 $ 443,391
Net realized gain (loss)................................ 2,791 (11,709) (134) 539,950 127,205
Change in unrealized appreciation/
depreciation on investments........................... 2,264,931 (140,681) (904) 12,851,051 (399,286)
----------- ---------- -------- ----------- -----------
Net increase (decrease) from operations................. 2,578,683 (63,102) 523 14,066,577 171,310
----------- ---------- -------- ----------- -----------
FROM POLICY-RELATED TRANSACTIONS:
Net premiums (Note 3)................................... 6,464,035 2,953,965 182,381 10,308,871 690,540
Benefits and other policy-related
transactions (Note 3)................................. (1,385,132) (481,430) (6,581) (2,111,532) (472,818)
Net transfers among divisions........................... 5,274,221 3,033,230 279,153 18,305,589 30,736,505
----------- ---------- -------- ----------- -----------
Net increase (decrease) from policy-related
transactions.......................................... 10,353,124 5,505,765 454,953 26,502,928 30,954,227
----------- ---------- -------- ----------- -----------
NET (INCREASE) DECREASE IN AMOUNT RETAINED BY EQUITABLE
VARIABLE IN SEPARATE ACCOUNT FP (Note 4)................ (221,877) 6,113 4,131 (71,293) (134)
----------- ---------- -------- ----------- -----------
INCREASE (DECREASE) IN NET ASSETS......................... 12,709,930 5,448,776 459,607 40,498,212 31,125,403
NET ASSETS, BEGINNING OF PERIOD........................... 5,908,383 459,607 -- 31,125,403 --
----------- ---------- -------- ----------- -----------
NET ASSETS, END OF PERIOD................................. $18,618,313 $5,908,383 $459,607 $71,623,615 $31,125,403
=========== ========== ======== =========== ===========
See Notes to Financial Statements.
<FN>
*Commencement of Operations
</FN>
</TABLE>
FSA-8
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
<TABLE>
<CAPTION>
COMMON STOCK DIVISION GLOBAL STOCK DIVISION
-------------------------------------------- ------------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
-------------------------------------------- ------------------------------------------
1995 1994 1993 1995 1994 1993
-------------- ------------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
FROM OPERATIONS:
Net investment income..... $ 8,208,894 $ 7,014,347 $ 6,306,784 $ 3,408,544 $ 1,556,985 $ 593,509
Net realized gain (loss).. 80,631,861 44,228,424 89,954,404 12,264,394 8,168,946 12,976,670
Change in unrealized
appreciation/
depreciation on
investments............. 183,872,928 (73,399,217) 48,702,579 33,395,316 (3,932,597) 4,279,153
-------------- ------------ ------------ ------------ ------------ ------------
Net increase (decrease)
from operations......... 272,713,683 (22,156,446) 144,963,767 49,068,254 5,793,334 17,849,332
-------------- ------------ ------------ ------------ ------------ ------------
FROM POLICY-RELATED
TRANSACTIONS:
Net premiums (Note 3)..... 216,068,996 171,525,812 124,210,476 92,666,618 77,766,997 25,508,452
Benefits and other
policy-related
transactions (Note 3)... (118,456,643) (93,481,219) (77,837,895) (37,507,499) (23,371,745) (8,931,159)
Net transfers among
divisions............... (34,354,864) 19,730,410 (9,498,455) (12,472,104) 47,610,957 59,544,080
-------------- ------------ ------------ ------------ ------------ ------------
Net increase (decrease)
from policy-related
transactions............ 63,257,489 97,775,003 36,874,126 42,687,015 102,006,209 76,121,373
-------------- ------------ ------------ ------------ ------------ ------------
NET (INCREASE) DECREASE IN
AMOUNT RETAINED BY
EQUITABLE VARIABLE IN
SEPARATE ACCOUNT FP
(Note 4).................. (392,099) 44,948 (124,376) (96,720) (17,737) 4,085
-------------- ------------ ------------ ------------ ------------ ------------
INCREASE IN NET ASSETS...... 335,579,073 75,663,505 181,713,517 91,658,549 107,781,806 93,974,790
NET ASSETS, BEGINNING OF
PERIOD.................... 811,006,201 735,342,696 553,629,179 241,838,471 134,056,665 40,081,875
-------------- ------------ ------------ ------------ ------------ ------------
NET ASSETS, END OF
PERIOD.................... $1,146,585,274 $811,006,201 $735,342,696 $333,497,020 $241,838,471 $134,056,665
============== ============ ============ ============ ============ ============
</TABLE>
See Notes to Financial Statements.
<TABLE>
<CAPTION>
INTERNATIONAL
DIVISION AGGRESSIVE STOCK DIVISION
----------- ------------------------------------------
APRIL 3*
TO
DECEMBER 31, YEAR ENDED DECEMBER 31,
----------- ------------------------------------------
1995 1995 1994 1993
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:
FROM OPERATIONS:
Net investment income..... $ 159,029 $ (1,434,289) $ (1,544,537) $ (990,881)
Net realized gain (loss).. 50,951 73,464,436 (6,075,250) 61,036,469
Change in unrealized
appreciation/
depreciation on
investments............. 667,906 49,509,800 (4,424,670) (18,699,749)
----------- ------------ ------------ ------------
Net increase (decrease)
from operations......... 877,886 121,539,947 (12,044,457) 41,345,839
----------- ------------ ------------ ------------
FROM POLICY-RELATED
TRANSACTIONS:
Net premiums (Note 3)..... 2,028,670 121,962,483 101,932,221 77,930,596
Benefits and other
policy-related
transactions (Note 3)... (339,723) (63,165,185) (48,604,650) (39,462,340)
Net transfers among
divisions............... 9,885,952 19,367,834 4,346,636 (73,890,214)
----------- ------------ ------------ ------------
Net increase (decrease)
from policy-related
transactions............ 11,574,899 78,165,132 57,674,207 (35,421,958)
----------- ------------ ------------ ------------
NET (INCREASE) DECREASE IN
AMOUNT RETAINED BY
EQUITABLE VARIABLE IN
SEPARATE ACCOUNT FP
(Note 4).................. (20,847) (188,813) 35,791 (2,220)
----------- ------------ ------------ ------------
INCREASE IN NET ASSETS...... 12,431,938 199,516,266 45,665,541 5,921,661
NET ASSETS, BEGINNING OF
PERIOD.................... 0 355,671,865 310,006,324 304,084,663
----------- ------------ ------------ ------------
NET ASSETS, END OF
PERIOD.................... $12,431,938 $555,188,131 $355,671,865 $310,006,324
=========== ============ ============ ============
See Notes to Financial Statements.
<FN>
*Commencement of Operations
</FN>
</TABLE>
FSA-9
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
STATEMENTS OF CHANGES IN NET ASSETS (CONCLUDED)
<TABLE>
<CAPTION>
ASSET ALLOCATION SERIES
-----------------------------------------------------------------------------------------
CONSERVATIVE INVESTORS DIVISION BALANCED DIVISION
------------------------------------------- ------------------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
------------------------------------------- ------------------------------------------
1995 1994 1993 1995 1994 1993
------------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income.............. $ 7,247,815 $ 5,455,410 $ 3,537,367 $ 10,038,346 $ 8,453,977 $ 8,015,051
Net realized gain (loss)........... 689,721 (421,502) 4,743,456 8,427,606 858,164 21,727,736
Change in unrealized appreciation/
depreciation on investments...... 19,129,817 (10,682,734) (308,575) 45,976,062 (40,839,536) 7,887,761
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease)
from operations.................. 27,067,353 (5,648,826) 7,972,248 64,442,014 (31,527,395) 37,630,548
------------ ------------ ------------ ------------ ------------ ------------
FROM POLICY-RELATED TRANSACTIONS:
Net premiums (Note 3).............. 41,419,959 48,492,315 43,782,002 63,451,955 70,116,900 67,351,402
Benefits and other policy-related
transactions (Note 3)............ (22,866,003) (21,612,430) (17,644,077) (48,742,571) (45,655,363) (44,497,967)
Net transfers among divisions...... (3,379,296) (2,076,793) 6,165,330 (18,908,540) (19,954,097) (6,834,099)
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) from
policy-related transactions...... 15,174,660 24,803,092 32,303,255 (4,199,156) 4,507,440 16,019,336
------------ ------------ ------------ ------------ ------------ ------------
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE VARIABLE
IN SEPARATE ACCOUNT FP (Note 4).... (95,412) 22,600 18,535 (93,214) 47,322 256,506
------------ ------------ ------------ ------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS.... 42,146,601 19,176,866 40,294,038 60,149,644 (26,972,633) 53,906,390
NET ASSETS, BEGINNING OF PERIOD...... 129,940,498 110,763,632 70,469,594 338,415,565 365,388,198 311,481,808
------------ ------------ ------------ ------------ ------------ ------------
NET ASSETS, END OF PERIOD............ $172,087,099 $129,940,498 $110,763,632 $398,565,209 $338,415,565 $365,388,198
============ ============ ============ ============ ============ ============
</TABLE>
See Notes to Financial Statements.
<TABLE>
<CAPTION>
ASSET ALLOCATION SERIES
--------------------------------------------
GROWTH INVESTORS DIVISION
--------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net investment income.............. $ 13,059,547 $ 8,667,457 $ 4,648,111
Net realized gain (loss)........... 9,174,038 241,591 14,676,909
Change in unrealized appreciation/
depreciation on investments...... 82,556,566 (21,338,297) 7,820,864
------------ ------------ ------------
Net increase (decrease)
from operations.................. 104,790,151 (12,429,249) 27,145,884
------------ ------------ ------------
FROM POLICY-RELATED TRANSACTIONS:
Net premiums (Note 3).............. 155,616,059 139,140,391 105,136,825
Benefits and other policy-related
transactions (Note 3)............ (68,357,709) (54,863,821) (36,431,873)
Net transfers among divisions...... (3,269,896) 20,294,785 30,908,183
------------ ------------ ------------
Net increase (decrease) from
policy-related transactions...... 83,988,454 104,571,355 99,613,135
------------ ------------ ------------
NET (INCREASE) DECREASE IN AMOUNT
RETAINED BY EQUITABLE VARIABLE
IN SEPARATE ACCOUNT FP (Note 4).... (120,493) 15,372 (27,455)
------------ ------------ ------------
INCREASE (DECREASE) IN NET ASSETS.... 188,658,112 92,157,478 126,731,564
NET ASSETS, BEGINNING OF PERIOD...... 367,219,554 275,062,076 148,330,512
------------ ------------ ------------
NET ASSETS, END OF PERIOD............ $555,877,666 $367,219,554 $275,062,076
============ ============ ============
</TABLE>
See Notes to Financial Statements.
FSA-10
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. General
Equitable Variable Life Insurance Company (Equitable Variable Life), a
wholly-owned subsidiary of The Equitable Life Assurance Society of the
United States (Equitable Life), established Separate Account FP (the
Account) as a unit investment trust registered with the Securities and
Exchange Commission under the Investment Company Act of 1940. The Account
consists of thirteen investment divisions: the Money Market Division, the
Intermediate Government Securities Division, the High Yield Division, the
Balanced Division, the Common Stock Division, the Global Division, the
Aggressive Stock Division, the Conservative Investors Division, the Growth
Investors Division, the Growth & Income Division, the Quality Bond Division,
the Equity Index Division and the International Division. The assets in each
Division are invested in shares of a designated portfolio (Portfolio) of a
mutual fund, The Hudson River Trust (the Trust). Each Portfolio has separate
investment objectives.
The Account supports the operations of Incentive Life,(TM) flexible premium
variable life insurance policies, Incentive Life 2000,(TM) flexible premium
variable life insurance policies, Champion 2000,(TM) modified premium
variable whole life insurance policies, Survivorship 2000,(TM) flexible
premium joint survivorship variable life insurance policies, Incentive Life
Plus,(TM) flexible premium variable life insurance policies and SP-Flex,(TM)
variable life insurance policies with additional premium option,
collectively, the Policies, and the Incentive Life 2000, Champion 2000 and
Survivorship 2000 policies are referred to as the Series 2000 Policies.
Incentive Life policies offered with the prospectus dated September 15,
1995, are referred to as Incentive Life Plus Second Series. Incentive Life
Plus policies issued with a prior prospectus are referred to as Incentive
Life Plus Original Series. All Policies are issued by Equitable Variable.
The assets of the Account are the property of Equitable Variable. However,
the portion of the Account's assets attributable to the Policies will not be
chargeable with liabilities arising out of any other business Equitable
Variable may conduct.
Policyowners may allocate amounts in their individual accounts to the
Divisions of the Account and/or (except for SP-Flex policies) to the
guaranteed interest division of Equitable Variable Life's General Account.
Net transfers to the guaranteed interest division of the General Account and
other Separate Accounts of $6,569,372, $35,120,632 and $125,668,098 for the
years ended 1995, 1994 and 1993, respectively, are included in Net Transfers
Among Divisions. The net assets of any Division of the Account may not be
less than the aggregate of the policyowners' accounts allocated to that
Division. Additional assets are set aside in Equitable Variable Life's
General Account to provide for (1) the unearned portion of the monthly
charges for mortality costs, and (2) other policy benefits, as required
under the state insurance law.
2. Significant Accounting Policies
The accompanying financial statements are prepared in conformity with
generally accepted accounting principles (GAAP). The preparation of
financial statements in conformity with GAAP 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. Actual results could differ from those
estimates.
Investments are made in shares of the Trust and are valued at the net asset
values per share of the respective Portfolios. The net asset value is
determined by the Trust using the market or fair value of the underlying
assets of the Portfolio.
Investment transactions are recorded on the trade date. Realized gains and
losses include gains and losses on redemptions of the Trust's shares
(determined on the identified cost basis) and Trust distributions
representing the net realized gains on Trust investment transactions.
The operations of the Account are included in the consolidated Federal
income tax return of Equitable Life. Under the provisions of the Policies,
Equitable Variable Life has the right to charge the Account for Federal
income tax attributable to the Account. No charge is currently being made
against the Account for such tax since, under current tax law, Equitable
Variable Life pays no tax on investment income and capital gains reflected
in variable life insurance policy reserves. However, Equitable Variable Life
retains the right to charge for any Federal income tax incurred which is
attributable to the Account if the law is changed. Charges for state and
local taxes, if any, attributable to the Account also may be made.
Dividends are recorded as income at the end of each quarter on the
ex-dividend date. Capital gains are distributed by the Trust at the end of
each year.
3. Asset Charges
Under the Policies, Equitable Variable Life assumes mortality and expense
risks and, to cover these risks, deducts charges from the assets of the
Account currently at annual rates of 0.60% of the net assets attributable to
Incentive Life, Incentive Life 2000, Incentive Life Plus Second Series and
Champion 2000 policyowners, 0.90% of net assets attributable to Survivorship
2000 policyowners, and 0.85% for SP-Flex policyowners. Incentive Life Plus
Original Series deducts this charge from the Policy Account. Under SP-Flex,
Equitable Variable Life also deducts charges from the assets of the Account
for mortality and administrative costs of 0.60% and 0.35%, respectively, of
net assets attributable to SP-Flex policies.
FSA-11
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
Under Incentive Life, Incentive Life Plus and the Series 2000 Policies,
mortality and administrative costs are charged in a different manner than
SP-Flex policies (see Notes 4 and 5).
Before amounts are allocated to the Account for Incentive Life, Incentive
Life Plus and the Series 2000 Policies, Equitable Variable Life deducts a
charge for taxes and either an initial policy fee (Incentive Life) or a
premium sales charge (Incentive Life Plus and Series 2000 Policies) from
premiums. Under SP-Flex, the entire initial premium is allocated to the
Account. Before any additional premiums under SP-Flex are allocated to the
Account, an administrative charge is deducted.
The amounts attributable to Incentive Life, Incentive Life Plus and the
Series 2000 policyowners' accounts are charged monthly by Equitable Variable
Life for mortality and administrative costs. These charges are withdrawn
from the Account along with amounts for additional benefits. Under the
Policies, amounts for certain policy-related transactions (such as policy
loans and surrenders) are transferred out of the Separate Account.
4. Amounts Retained by Equitable Variable Life in Separate Account FP
The amount retained by Equitable Variable Life in the Account arises
principally from (1) contributions from Equitable Variable Life, and (2)
that portion, determined ratably, of the Account's investment results
applicable to those assets in the Account in excess of the net assets for
the Policies. Amounts retained by Equitable Variable Life are not subject to
charges for mortality and expense risks or mortality and administrative
costs.
Amounts retained by Equitable Variable Life in the Account may be
transferred at any time by Equitable Variable Life to its General Account.
The following table shows the surplus contributions (withdrawals) by
Equitable Variable Life by investment division:
<TABLE>
<CAPTION>
INVESTMENT DIVISION 1995 1994 1993
------------------- ----------- ----------- ----------
<S> <C> <C> <C>
Common Stock $ (630,000) -- --
Money Market (250,000) -- $1,145,000
Balanced -- -- --
Aggressive Stock (350,000) -- --
High Yield (100,000) -- 330,000
Global (130,000) -- (6,895,000)
Conservative Investors -- -- 575,000
Growth Investors -- -- 130,000
Short-Term World Income -- $(5,165,329) --
Intermediate Government Securities (165,000) -- --
Growth & Income (685,000) -- 1,000,000
Quality Bond (4,800,000) -- 5,000,000
Equity Index -- 200,000 --
International 200,000 -- --
----------- ----------- ----------
$(6,910,000) $(4,965,329) $1,285,000
=========== =========== ==========
</TABLE>
5. Distribution and Servicing Agreements
Equitable Variable Life has entered into a Distribution and Servicing
Agreement with Equitable Life and Equico Securities Inc. (Equico), whereby
registered representatives of Equico, authorized as variable life insurance
agents under applicable state insurance laws, sell the Policies. The
registered representatives are compensated on a commission basis by
Equitable Life.
Equitable Variable Life also has entered into an agreement with Equitable
Life under which Equitable Life performs the administrative services related
to the Policies, including underwriting and issuance, billings and
collections, and policyowner services. There is no charge to the Account
related to this agreement.
6. Share Substitution
On February 22, 1994, Equitable Variable Life, the Account and the Trust
substituted shares of the Trust's Intermediate Government Securities
Portfolio for shares of the Trust's Short-Term World Income Portfolio. The
amount transferred to Intermediate Government Securities Portfolio was
$2,192,109. The statements of operations and statements of changes in net
assets for the Intermediate Government Securities Portfolio is combined with
the Short-Term World Income Portfolio for periods prior to the merger on
February 22, 1994. The Short-Term World Income Division is not available for
future investment.
FSA-12
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
7. Investment Returns
The Separate Account rates of return attributable to Incentive Life,
Incentive Life 2000, Incentive Life Plus Second Series and Champion 2000
policyowners are different than those attributable to Survivorship 2000,
Incentive Life Plus Original Series and to SP-Flex policyowners because
asset charges are deducted at different rates under each policy (see Note
3).
The tables on this page and the following pages show the gross and net
investment returns with respect to the Divisions for the periods shown. The
net return for each Division is based upon net assets for a policy whose
policy commences with the beginning date of such period and is not based on
the average net assets in the Division during such period. Gross return is
equal to the total return earned by the underlying Trust investment.
RATES OF RETURN:
INCENTIVE LIFE,
- --------------
INCENTIVE LIFE 2000,
- --------------------
INCENTIVE LIFE PLUS SECOND SERIES
- ---------------------------------
AND CHAMPION 2000*
- -----------------
<TABLE>
<CAPTION>
JANUARY 26(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
----------------------------------------------------------------------------------------------------
MONEY MARKET DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
- --------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 5.74 % 4.02 % 3.00 % 3.56 % 6.18 % 8.24 % 9.18 % 7.32 % 6.63 % 6.05 %
Net return................ 5.11 % 3.39 % 2.35 % 2.94 % 5.55 % 7.59 % 8.53 % 6.68 % 5.99 % 5.47 %
</TABLE>
APRIL 1(A) TO
INTERMEDIATE YEAR ENDED DECEMBER 31, DECEMBER 31,
GOVERNMENT -----------------------------------------------
SECURITIES DIVISION 1995 1994 1993 1992 1991
- ------------------- ---- ---- ---- ---- ----
Gross return.............. 13.33 % (4.37)% 10.58 % 5.60 % 12.26 %
Net return................ 12.65 % (4.95)% 9.88 % 4.96 % 11.60 %
YEAR ENDED OCTOBER 1(A)
DECEMBER 31, DECEMBER 31,
----------------------------------
QUALITY BOND DIVISION 1995 1994 1993
- --------------------- ---- ---- ----
Gross return.............. 17.02 % (5.10)% (0.51)%
Net return................ 16.32 % (5.67)% (0.66)%
<TABLE>
<CAPTION>
JANUARY 26(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
----------------------------------------------------------------------------------------------------
HIGH YIELD DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
- ------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 19.92 % (2.79)% 23.15 % 12.31 % 24.46 % (1.12)% 5.13 % 9.73 % 4.68 % --
Net return................ 19.20 % (3.37)% 22.41 % 11.64 % 23.72 % (1.71)% 4.50 % 9.08 % 4.05 % --
</TABLE>
YEAR ENDED OCTOBER 1(A) TO
DECEMBER 31, DECEMBER 31,
----------------------------------
GROWTH & INCOME DIVISION 1995 1994 1993
- ------------------------- ---- ---- ----
Gross return.............. 24.07 % (0.58)% (0.25)%
Net return................ 23.33 % (1.17)% (0.41)%
YEAR ENDED MARCH 31(A) TO
DECEMBER 31, DECEMBER 31,
-----------------------------------
EQUITY INDEX DIVISION 1995 1994
- --------------------- ---- ----
Gross return.............. 36.48 % 1.08 %
Net return................ 35.66 % 0.58 %
- -------------------------------
* Sales of Incentive Life 2000 and Champion 2000 commenced on March 2, 1992.
Sales of Incentive Life Plus Second Series commenced on September 15, 1995.
(a) Date as of which net premiums under the policies were first allocated to the
Division. The gross return and the net return for the periods indicated are
not annual rates of return.
FSA-13
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
<TABLE>
<CAPTION>
JANUARY 26(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
----------------------------------------------------------------------------------------------------
COMMON STOCK DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
- --------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 32.45 % (2.14)% 24.84 % 3.22 % 37.88 % (8.12)% 25.59 % 22.43 % 7.49 % 15.65 %
Net return................ 31.66 % (2.73)% 24.08 % 2.60 % 37.06 % (8.67)% 24.84 % 21.70 % 6.84 % 15.01 %
</TABLE>
<TABLE>
<CAPTION>
AUGUST 31(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
-------------------------------------------------------------------------------------------
GLOBAL DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987
- --------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 18.81 % 5.23 % 32.09 % (0.50)% 30.55 % (6.07)% 26.93 % 10.88 % (13.27)%
Net return................ 18.11 % 4.60 % 31.33 % (1.10)% 29.77 % (6.63)% 26.17 % 10.22 % (13.45)%
</TABLE>
APRIL 3(A)
TO
DECEMBER 31,
INTERNATIONAL DIVISION 1995
- ---------------------- ----------
Gross return.............. 11.29 %
Net return................ 10.79 %
<TABLE>
<CAPTION>
JANUARY 26(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
----------------------------------------------------------------------------------------------------
AGGRESSIVE STOCK DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
- -------------------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 31.63 % (3.81)% 16.77 % (3.16)% 86.86 % 8.17 % 43.50 % 1.17 % 7.31 % 35.88 %
Net return................ 30.85 % (4.39)% 16.05 % (3.74)% 85.75 % 7.51 % 42.64 % 0.53 % 6.66 % 35.13 %
</TABLE>
<TABLE>
<CAPTION>
JANUARY 26(A) TO
ASSET ALLOCATION SERIES YEAR ENDED DECEMBER 31, DECEMBER 31,
------------------------------------------------------------------------------------------------------
BALANCED DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
- ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 19.75 % (8.02)% 12.28 % (2.84)% 41.26 % 0.24 % 25.83 % 13.27 % (0.85)% 29.07 %
Net return................ 19.03 % (8.57)% 11.64 % (3.42)% 40.42 % (0.36)% 25.08 % 12.59 % (1.45)% 28.34 %
</TABLE>
<TABLE>
<CAPTION>
OCTOBER 2(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
CONSERVATIVE --------------------------------------------------------------------------------
INVESTORS DIVISION 1995 1994 1993 1992 1991 1990 1989
- ------------------ ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 20.40 % (4.10)% 10.76 % 5.72 % 19.87 % 6.37 % 3.09 %
Net return................ 19.68 % (4.67)% 10.15 % 5.09 % 19.16 % 5.73 % 2.94 %
</TABLE>
<TABLE>
<CAPTION>
GROWTH INVESTORS DIVISION 1995 1994 1993 1992 1991 1990 1989
- ------------------------- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 26.37 % (3.15)% 15.26 % 4.90 % 48.89 % 10.66 % 3.98 %
Net return................ 25.62 % (3.73)% 14.58 % 4.27 % 48.01 % 10.00 % 3.82 %
<FN>
- ----------------------------
* Sales of Incentive Life 2000 and Champion 2000 commenced on March 2, 1992.
(a) Date as of which net premiums under the policies were first allocated to the
Division. The gross return and the net return for the periods indicated are
not annual rates of return.
</FN>
</TABLE>
RATES OF RETURN:
SURVIVORSHIP 2000
- -----------------
AUGUST 17(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
---------------------------------------------------
MONEY MARKET DIVISION 1995 1994 1993 1992
- --------------------- ---- ---- ---- ----
Gross return.............. 5.74 % 4.02 % 3.00 % 1.11 %
Net return................ 4.80 % 3.08 % 2.04 % 0.77 %
INTERMEDIATE GOVERNMENT
SECURITIES DIVISION 1995 1994 1993 1992
- ------------------- ---- ---- ---- ----
Gross return.............. 13.33 % (4.37)% 10.58 % 0.90 %
Net return................ 12.31 % (5.23)% 9.55 % 0.56 %
- ----------
(a) Date as of which net premiums under the policies were first allocated to the
Division. The gross return and the net return for the periods indicated are
not annual rates of return.
FSA-14
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
OCTOBER 1(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
------------------------------------------------
QUALITY BOND DIVISION 1995 1994 1993
- --------------------- ---- ---- ----
Gross return.............. 17.02 % (5.10)% (0.51)%
Net return................ 15.97 % (5.95)% (0.73)%
AUGUST 17(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
---------------------------------------------------
HIGH YIELD DIVISION 1995 1994 1993 1992
- ------------------- ---- ---- ---- ----
Gross return.............. 19.92 % (2.79)% 23.15 % 1.84 %
Net return................ 18.84 % (3.66)% 22.04 % 1.50 %
OCTOBER 1(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
--------------------------------------------------
GROWTH & INCOME DIVISION 1995 1994 1993
- ------------------------ ---- ---- ----
Gross return.............. 24.07 % (0.58)% (0.25)%
Net return................ 22.96 % (1.47)% (0.48)%
YEAR ENDED MARCH 1(A) TO
DECEMBER 31, DECEMBER 31,
------------------------------
EQUITY INDEX DIVISION 1995 1994
- --------------------- ---- ----
Gross return.............. 36.48 % 1.08 %
Net return................ 35.26 % 0.33 %
AUGUST 17(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
---------------------------------------------------
COMMON STOCK DIVISION 1995 1994 1993 1992
- --------------------- ---- ---- ---- ----
Gross return.............. 32.45 % (2.14)% 24.84 % 5.28 %
Net return................ 31.26 % (3.02)% 23.70 % 4.93 %
GLOBAL DIVISION
- ---------------
Gross return.............. 18.81 % 5.23 % 32.09 % 4.87 %
Net return................ 17.75 % 4.29 % 30.93 % 4.52 %
APRIL 3(A) TO
DECEMBER 31,
----------------
INTERNATIONAL DIVISION 1995
- ---------------------- ----
Gross return.............. 11.29 %
Net return................ 10.55 %
AUGUST 17(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
---------------------------------------------------
AGGRESSIVE STOCK DIVISION 1995 1994 1993 1992
- ------------------------- ---- ---- ---- ----
Gross return.............. 31.63 % (3.81)% 16.77 % 11.49 %
Net return................ 30.46 % (4.68)% 15.70 % 11.11 %
ASSET ALLOCATION SERIES
AUGUST 17(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
CONSERVATIVE INVESTORS --------------------------------------------------
DIVISION 1995 1994 1993 1992
- -------- ---- ---- ---- ----
Gross return.............. 20.40 % (4.10)% 10.76 % 1.38 %
Net return................ 19.32 % (4.96)% 9.81 % 1.04 %
BALANCED DIVISION 1995 1994 1993 1992
- ----------------- ---- ---- ---- ----
Gross return.............. 19.75 % (8.02)% 12.28 % 5.37 %
Net return................ 18.68 % (8.84)% 11.30 % 5.02 %
GROWTH INVESTORS DIVISION 1995 1994 1993 1992
- ------------------------- ---- ---- ---- ----
Gross return.............. 26.37 % (3.15)% 15.26 % 6.89 %
Net return................ 25.24 % (4.02)% 14.24 % 6.53 %
- ----------
(a) Date as of which net premiums under the policies were first allocated to the
Division. The gross return and the net return for the periods indicated are
not annual rates of return.
FSA-15
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31,1995
RATES OF RETURN:
INCENTIVE LIFE PLUS ORIGINAL SERIES(B)*
- ---------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------
1995
----
Money Market Division........ 5.69%
Intermediate Government
Securities Division.......... 13.31%
Quality Bond Division........ 17.13%
High Yield Division.......... 19.95%
Growth & Income Division..... 24.38%
Equity Index Division........ 36.53%
Common Stock Division........ 33.07%
Global Division.............. 19.38%
APRIL 30 TO DECEMBER 31,
------------------------
1995
----
International Division....... 11.29%
YEAR ENDED DECEMBER 31,
------------------------
1995
----
Aggressive Stock Division.... 33.00%
ASSET ALLOCATION SERIES
YEAR ENDED DECEMBER 31,
------------------------
1995
----
Conservative Investors Division... 20.59%
Balanced Division................ 20.32%
Growth Investors Division......... 26.92%
- --------------------
*Sales of Incentive Life Plus Original Series commenced on January 6, 1995.
(b) There are no Separate Account asset charges for this policy and therefore
the gross and net rates of return are the same. The rate of return for the
period indicated is not an annual rate of return.
FSA-16
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31,1995
RATES OF RETURN:
SP-FLEX
- -------
<TABLE>
<CAPTION>
AUGUST 31(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
-------------------------------------------------------------------------------------------
MONEY MARKET DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987
- --------------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 5.74 % 4.02 % 3.00 % 3.56 % 6.17 % 8.24 % 9.18 % 7.32 % 2.15 %
Net return................ 3.86 % 2.17 % 1.13 % 1.71 % 4.29 % 6.30 % 7.24 % 5.41 % 1.62 %
</TABLE>
APRIL 1(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
INTERMEDIATE GOVERNMENT --------------------------------------------------
SECURITIES DIVISION 1995 1994 1993 1992 1991
- ------------------- ---- ---- ---- ---- ----
Gross return.............. 13.33 % (4.37) % 10.58 % 5.60 % 12.10 %
Net return................ 11.31 % (6.08) % 8.57 % 3.71 % 10.59 %
YEAR ENDED SEPTEMBER 1(A) TO
DECEMBER 31, DECEMBER 31,
-------------------------------
QUALITY BOND DIVISION 1995 1994
- --------------------- ---- ----
Gross return.............. 17.02 % (2.20)%
Net return................ 14.94 % (2.35)%
<TABLE>
<CAPTION>
AUGUST 31(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
-------------------------------------------------------------------------------------------
HIGH YIELD DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987
- ------------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 19.92 % (2.79)% 23.15 % 12.31 % 24.46 % (1.12)% 5.13 % 9.73 % 1.95 %
Net return................ 17.79 % (4.52)% 20.96 % 10.30 % 22.25 % (2.89)% 3.26 % 7.78 % 1.39 %
</TABLE>
YEAR ENDED SEPTEMBER 1(A) TO
DECEMBER 31, DECEMBER 31,
---------------------------------
GROWTH & INCOME DIVISION 1995 1994
- ------------------------ ---- ----
Gross return.............. 24.07 % (3.40)%
Net return................ 21.87 % (3.55)%
EQUITY INDEX DIVISION 1995 1994
- --------------------- ---- ----
Gross return.............. 36.48 % (2.54)%
Net return................ 34.06 % (2.69)%
<TABLE>
<CAPTION>
AUGUST 31(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
--------------------------------------------------------------------------------------------
COMMON STOCK DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987
- --------------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 32.45 % 2.14 % 24.84 % 3.23 % 37.87 % (8.12)% 25.59 % 22.43 % (22.57)%
Net return................ 30.10 % (3.88)% 22.60 % 1.38 % 35.43 % (9.76)% 23.36 % 20.26 % (23.00)%
GLOBAL DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987
- --------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
Gross return.............. 18.81 % 5.23 % 32.09 % (0.50)% 30.55 % (6.07)% 26.93 % 10.88 % (11.40)%
Net return................ 16.70 % 3.36 % 29.77 % (2.28)% 28.23 % (7.75)% 24.67 % 8.90 % (11.86)%
</TABLE>
APRIL 3(A) TO
DECEMBER 31,
-------------
INTERNATIONAL DIVISION 1995
- ---------------------- ----
Gross return.............. 11.29 %
Net return................ 9.82 %
<TABLE>
<CAPTION>
AUGUST 31(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
--------------------------------------------------------------------------------------------
AGGRESSIVE STOCK DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987
- ------------------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.............. 31.63 % 3.81 % 16.77 % (3.16)% 86.86 % 8.17 % 43.50 % 1.17 % (24.28)%
Net return................ 29.30 % (5.53)% 14.67 % (4.89)% 83.54 % 6.23 % 40.95 % (0.66)% (24.68)%
<FN>
- ------------------------------
(a) Date as of which net premiums under the policies were first allocated to the
Division. The gross return and the net return for the periods indicated are
not annual rates of return.
</FN>
</TABLE>
FSA-17
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
SEPARATE ACCOUNT FP
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1995
ASSET ALLOCATION SERIES
YEAR ENDED SEPTEMBER 1(A) TO
DECEMBER 31, DECEMBER 31,
CONSERVATIVE INVESTORS ---------------------------------------
DIVISION 1995 1994
- -------- ---- ----
Gross return.......... 20.40 % (1.83)%
Net return............ 18.26 % (1.98)%
<TABLE>
<CAPTION>
AUGUST 31(A) TO
YEAR ENDED DECEMBER 31, DECEMBER 31,
-------------------------------------------------------------------------------------------------
BALANCED DIVISION 1995 1994 1993 1992 1991 1990 1989 1988 1987
- ----------------- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Gross return.......... 19.75 % (8.02)% 12.28 % (2.83)% 41.27 % 0.24 % 25.83 % 13.27 % (20.26)%
Net return............ 17.62 % (9.66)% 10.31 % (4.57)% 38.75 % (1.56)% 23.59 % 11.25 % (20.71)%
</TABLE>
YEAR ENDED SEPTEMBER 1(A) TO
DECEMBER 31, DECEMBER 31,
GROWTH INVESTORS ------------------------------------
DIVISION 1995 1994
- -------- ---- ----
Gross return........... 26.37 % (3.16)%
Net return............. 24.12 % (3.31)%
- -------------------------
(a) Date as of which net premiums under the policies were first allocated to
the Division. The gross return and the net return for the periods indicated
are not annual rates of return.
FSA-18
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------------- ----------------
ASSETS (IN MILLIONS)
<S> <C> <C>
Investments:
Fixed maturities:
Available for sale, at estimated fair value........................................ $ 4,366.3 $ 2,138.8
Held to maturity, at amortized cost................................................ -- 2,008.5
Policy loans......................................................................... 1,300.1 1,185.2
Mortgage loans on real estate........................................................ 771.5 888.5
Equity real estate................................................................... 525.4 641.0
Other equity investments............................................................. 200.5 239.1
Other invested assets................................................................ 120.9 107.8
----------------- ----------------
Total investments.................................................................. 7,284.7 7,208.9
Cash and cash equivalents............................................................... 277.6 182.3
Deferred policy acquisition costs....................................................... 2,037.8 2,077.1
Other assets............................................................................ 250.6 240.7
Separate Accounts assets................................................................ 4,611.6 3,345.3
----------------- ----------------
TOTAL ASSETS............................................................................ $ 14,462.3 $ 13,054.3
================= ================
LIABILITIES
Policyholders' account balances......................................................... $ 7,045.9 $ 7,340.0
Future policy benefits and other policyholders' liabilities............................. 570.8 509.4
Other liabilities....................................................................... 521.4 441.1
Separate Accounts liabilities........................................................... 4,586.5 3,314.9
----------------- ----------------
Total liabilities.................................................................. 12,724.6 11,605.4
----------------- ----------------
Commitments and contingencies (Notes 7, 9, 10 and 11)
SHAREHOLDER'S EQUITY
Common stock, par value $1 per share;
5.0 million shares authorized, 1.5 million shares issued and outstanding............. 1.5 1.5
Capital in excess of par value.......................................................... 1,480.7 1,355.7
Retained earnings....................................................................... 221.6 165.5
Net unrealized investment gains (losses)................................................ 44.6 (72.6)
Minimum pension liability............................................................... (10.7) (1.2)
----------------- ----------------
Total shareholder's equity......................................................... 1,737.7 1,448.9
----------------- ----------------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY.............................................. $ 14,462.3 $ 13,054.3
================= ================
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
F-1
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
REVENUES
<S> <C> <C> <C>
Universal life and investment-type product policy fee income...... $ 584.5 $ 552.6 $ 485.2
Premiums.......................................................... 33.7 40.1 46.9
Net investment income............................................. 529.1 526.8 557.6
Investment (losses) gains, net.................................... (.5) (4.6) 1.5
Other income...................................................... 2.1 2.9 3.0
----------------- ---------------- -----------------
Total revenues.................................................. 1,148.9 1,117.8 1,094.2
----------------- ---------------- -----------------
BENEFITS AND OTHER DEDUCTIONS
Interest credited to policyholders' account balances.............. 376.1 389.3 439.2
Policyholders' benefits........................................... 267.5 242.3 251.0
Other operating costs and expenses................................ 419.5 413.8 356.7
----------------- ---------------- -----------------
Total benefits and other deductions............................. 1,063.1 1,045.4 1,046.9
----------------- ---------------- -----------------
Earnings before Federal income taxes and cumulative
effect of accounting change....................................... 85.8 72.4 47.3
Federal income tax expense........................................... 29.7 25.0 20.5
----------------- ---------------- -----------------
Earnings before cumulative effect of accounting change............... 56.1 47.4 26.8
Cumulative effect of accounting change, net of Federal income taxes. -- (11.4) --
----------------- ---------------- -----------------
Net Earnings......................................................... $ 56.1 $ 36.0 $ 26.8
================= ================ =================
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
F-2
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
COMMON STOCK AT PAR VALUE, beginning and end of year................. $ 1.5 $ 1.5 $ 1.5
----------------- ---------------- -----------------
CAPITAL IN EXCESS OF PAR VALUE, beginning of year.................... 1,355.7 1,305.7 1,055.7
Additional capital in excess of par value............................ 125.0 50.0 250.0
----------------- ---------------- -----------------
Capital in excess of par value, end of year.......................... 1,480.7 1,355.7 1,305.7
----------------- ---------------- -----------------
RETAINED EARNINGS, beginning of year................................. 165.5 129.5 102.7
Net earnings......................................................... 56.1 36.0 26.8
----------------- ---------------- -----------------
Retained earnings, end of year....................................... 221.6 165.5 129.5
----------------- ---------------- -----------------
NET UNREALIZED INVESTMENT (LOSSES) GAINS, beginning of year.......... (72.6) 22.3 11.1
Change in unrealized investment gains (losses)....................... 117.2 (94.9) 11.2
----------------- ---------------- -----------------
Net unrealized investment gains (losses), end of year................ 44.6 (72.6) 22.3
----------------- ---------------- -----------------
MINIMUM PENSION LIABILITY, beginning of year......................... (1.2) (6.3) --
Change in minimum pension liability.................................. (9.5) 5.1 (6.3)
----------------- ---------------- -----------------
Minimum pension liability, end of year............................... (10.7) (1.2) (6.3)
----------------- ---------------- -----------------
TOTAL SHAREHOLDER'S EQUITY, END OF YEAR.............................. $ 1,737.7 $ 1,448.9 $ 1,452.7
================= ================ =================
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
F-3
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
NET EARNINGS......................................................... $ 56.1 $ 36.0 $ 26.8
ADJUSTMENTS TO RECONCILE NET EARNINGS TO NET CASH (USED) PROVIDED
BY OPERATING ACTIVITIES:
Interest credited to policyholders' account balances.............. 376.1 389.3 439.2
General Account policy charges.................................... (618.7) (572.8) (496.7)
Investment losses (gains), net.................................... .5 4.6 (1.5)
Other, net........................................................ 63.8 (17.2) 117.2
----------------- ---------------- -----------------
Net cash (used) provided by operating activities..................... (122.2) (160.1) 85.0
----------------- ---------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Maturities and repayments......................................... 640.7 511.8 1,165.8
Sales............................................................. 2,667.0 2,119.0 2,844.2
Return of capital from joint ventures and limited partnerships.... 23.9 14.2 56.3
Purchases......................................................... (3,065.9) (2,251.7) (4,414.0)
Other, net........................................................ (114.8) (102.2) (98.8)
----------------- ---------------- -----------------
Net cash provided (used) by investing activities..................... 150.9 291.1 (446.5)
----------------- ---------------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Policyholders' account balances:
Deposits........................................................ 581.1 602.8 612.9
Withdrawals..................................................... (636.6) (697.7) (506.2)
Capital contribution from Equitable Life.......................... 125.0 50.0 250.0
Other, net........................................................ (2.9) (1.8) 2.0
----------------- ---------------- -----------------
Net cash provided (used) by financing activities..................... 66.6 (46.7) 358.7
----------------- ---------------- -----------------
Change in cash and cash equivalents.................................. 95.3 84.3 (2.8)
Cash and cash equivalents, beginning of year......................... 182.3 98.0 100.8
----------------- ---------------- -----------------
Cash and Cash Equivalents, End of Year............................... $ 277.6 $ 182.3 $ 98.0
================= ================ =================
Supplemental cash flow information
Interest Paid..................................................... $ -- $ 5.7 $ 2.1
================= ================ =================
Income Taxes Refunded............................................. $ -- $ 8.4 $ .3
================= ================ =================
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
F-4
<PAGE>
EQUITABLE VARIABLE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
Equitable Variable Life Insurance Company ("Equitable Variable Life") was
incorporated on September 11, 1972 as a wholly owned subsidiary of The
Equitable Life Assurance Society of the United States ("Equitable Life").
Equitable Variable Life's operations consist principally of the sale of
interest-sensitive life insurance and annuity products.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements are prepared in conformity
with generally accepted accounting principles ("GAAP").
The accompanying consolidated financial statements include the accounts of
Equitable Variable Life and its subsidiaries, (collectively "EVLICO").
The preparation of financial statements in conformity with GAAP 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. Actual results could differ from
those estimates.
All significant intercompany transactions and balances have been eliminated
in consolidation.
Certain reclassifications have been made in the amounts presented for prior
periods to conform these periods with the 1995 presentation.
Accounting Changes
In the first quarter of 1995, EVLICO adopted Statement of Financial
Accounting Standards ("SFAS") No. 114, "Accounting by Creditors for
Impairment of a Loan." This statement applies to all loans, including loans
restructured in a troubled debt restructuring involving a modification of
terms. This statement addresses the accounting for impairment of a loan by
specifying how allowances for credit losses should be determined. Impaired
loans within the scope of this statement are measured based on the present
value of expected future cash flows discounted at the loan's effective
interest rate, at the loan's observable market price or the fair value of the
collateral if the loan is collateral dependent. EVLICO provides for
impairment of loans through an allowance for possible losses. The adoption of
this statement did not have a material effect on the level of these
allowances or on EVLICO's consolidated statements of earnings and
shareholder's equity.
In the fourth quarter of 1994 (effective as of January 1, 1994), EVLICO
adopted SFAS No. 112, "Employers' Accounting for Postemployment Benefits,"
which required employers to recognize the obligation to provide
postemployment benefits. Implementation of this statement resulted in a
charge for the cumulative effect of accounting change of $11.4 million, net
of a Federal income tax benefit of $6.2 million.
At December 31, 1993, EVLICO adopted SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," which expanded the use of fair
value accounting for those securities that a company does not have positive
intent and ability to hold to maturity. Implementation of this statement
increased consolidated shareholder's equity by $7.2 million, net of deferred
policy acquisition costs and deferred Federal income tax. Beginning
coincident with issuance of SFAS No. 115 implementation guidance in November
1995, the Financial Accounting Standards Board ("FASB") permitted companies a
one-time opportunity, through December 31, 1995, to reassess the
appropriateness of the classification of all securities held at that time. On
December 1, 1995, EVLICO transferred $1,806.7 million of securities
classified as held to maturity to the available for sale portfolio. As a
result, consolidated shareholder's equity increased by $17.9 million, net of
deferred policy acquisition costs and deferred Federal income tax.
New Accounting Pronouncements
In March 1995, the FASB issued SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," which
requires that long-lived assets and certain identifiable intangibles be
reviewed for impairment whenever events or changes in circumstances indicate
the carrying amount of such assets may not be recoverable. EVLICO will
implement this statement as of January 1, 1996. EVLICO currently provides
allowances for possible losses for assets under the scope of this statement.
Management has not yet determined the impact of this statement on these
assets.
Valuation of Investments
Fixed maturities which have been identified as available for sale are
reported at estimated fair value. At December 31, 1994, fixed maturities
which EVLICO had both the ability and the intent to hold to maturity, were
stated principally at amortized cost. The amortized cost of fixed maturities
is adjusted for impairments in value deemed to be other than temporary.
F-5
<PAGE>
Mortgage loans on real estate are stated at unpaid principal balances, net of
unamortized discounts and valuation allowances. Effective with the adoption
of SFAS No. 114 on January 1, 1995, the valuation allowances are based on the
present value of expected future cash flows discounted at the loan's original
effective interest rate or the collateral value if the loan is collateral
dependent. However, if foreclosure is or becomes probable, the measurement
method used is collateral value. Prior to the adoption of SFAS No. 114, the
valuation allowances were based on losses expected by management to be
realized on transfers of mortgage loans to real estate (upon foreclosure or
in-substance foreclosure), on the disposition or settlement of mortgage loans
and on mortgage loans management believed may not be collectible in full. In
establishing valuation allowances, management previously considered, among
other things, the estimated fair value of the underlying collateral.
Real estate, including real estate acquired in satisfaction of debt, is
stated at depreciated cost less valuation allowances. At the date of
foreclosure (including in-substance foreclosure), real estate acquired in
satisfaction of debt is valued at estimated fair value. Valuation allowances
on real estate held for the production of income are computed using the
forecasted cash flows of the respective properties discounted at a rate equal
to EVLICO's cost of funds; valuation allowances on real estate available for
sale are computed using the lower of current estimated fair value, net of
disposition costs, or depreciated cost.
Policy loans are stated at unpaid principal balances.
Partnerships and joint venture interests in which EVLICO does not have
control and a majority economic interest are reported on the equity basis of
accounting and are included with either equity real estate or other equity
investments, as appropriate.
Common stocks are carried at estimated fair value and are included in other
equity investments.
Short-term investments are stated at amortized cost which approximates fair
value and are included with other invested assets.
Cash and cash equivalents includes cash on hand, amounts due from banks and
highly liquid debt instruments purchased with an original maturity of three
months or less.
All securities are recorded in the consolidated financial statements on a
trade date basis.
Investment Results and Unrealized Investment Gains (Losses)
Realized investment gains and losses are determined by specific
identification and are presented as a component of revenue. Valuation
allowances are netted against the asset categories to which they apply and
changes in the valuation allowances are included in investment gains or
losses.
Unrealized investment gains and losses on fixed maturities available for sale
and equity securities held by EVLICO are accounted for as a separate
component of shareholder's equity, net of related deferred Federal income
taxes and deferred policy acquisition costs related to universal life and
investment-type products.
Recognition of Insurance Income and Related Expenses
Premiums from universal life and investment-type contracts are reported as
deposits to policyholders' account balances. Revenues from these contracts
consist of amounts assessed during the period against policyholders' account
balances for mortality charges, policy administration charges and surrender
charges. Policy benefits and claims that are charged to expenses include
benefit claims incurred in the period in excess of related policyholders'
account balances.
Premiums from life and annuity policies with life contingencies generally are
recognized as income when due. Benefits and expenses are matched with such
income so as to result in the recognition of profits over the life of the
contracts. This match is accomplished by means of the provision for
liabilities for future policy benefits and the deferral and subsequent
amortization of policy acquisition costs.
Deferred Policy Acquisition Costs
The costs of acquiring new business, principally commissions, underwriting,
agency and policy issue expenses, all of which vary with and are primarily
related to the production of new business, are deferred. Deferred policy
acquisition costs are subject to recoverability testing at the time of policy
issue and loss recognition testing at the end of each accounting period.
For universal life products and investment-type products, deferred policy
acquisition costs are amortized over the expected average life of the
contracts (periods ranging from 15 to 35 years and 5 to 17 years,
respectively) as a constant percentage of estimated gross profits arising
principally from investment results, mortality and expense margins and
surrender charges based on historical and anticipated future experience,
updated at the end of each accounting period. The effect on the amortization
of deferred policy acquisition costs of revisions to estimated gross profits
is reflected in earnings in the period such estimated gross profits are
revised. The effect on the deferred policy acquisition cost asset that would
result from realization of unrealized gains (losses) is recognized with an
offset to unrealized gains (losses) in consolidated shareholder's equity as
of the balance sheet date.
Amortization charged to income amounted to $199.0 million, $200.2 million and
$135.5 million for the years ended December 31, 1995, 1994 and 1993,
respectively.
F-6
<PAGE>
Policyholders' Account Balances and Future Policy Benefits
EVLICO's insurance contracts primarily are universal life and investment-type
contracts. Policyholders' account balances are equal to the policy account
values. The policy account values represent an accumulation of gross premium
payments plus credited interest less expense and mortality charges and
withdrawals.
The future policy benefit liabilities for the remainder of EVLICO's insurance
contracts, consisting primarily of supplementary contracts with life
contingencies and various policy riders, are computed by various valuation
methods based on assumed interest rates and mortality and morbidity
assumptions reflecting EVLICO's experience and industry standards.
Federal Income Taxes
EVLICO is included in a consolidated Federal income tax return with Equitable
Life and its other eligible subsidiaries. In accordance with an agreement
between EVLICO and Equitable Life, the amount of current income taxes as
determined on a separate return basis will be paid to, or received from,
Equitable Life. Benefits for losses, which are paid to EVLICO to the extent
they are utilized by Equitable Life, may not have been received in the
absence of such agreement. Deferred income tax assets and liabilities are
recognized based on the difference between financial statement carrying
amounts and income tax bases of assets and liabilities using the enacted
income tax rates and laws.
Separate Accounts
Separate Accounts are established in conformity with the New York State
Insurance Law and generally are not chargeable with liabilities that arise
from any other business of EVLICO. Separate Accounts assets are subject to
General Account claims only to the extent the value of such assets exceeds
the Separate Accounts liabilities.
Assets and liabilities of the Separate Accounts, representing net deposits
and accumulated net investment earnings less fees, held primarily for the
benefit of contractholders are shown as separate captions in the consolidated
balance sheets. Assets held in the Separate Accounts are carried at quoted
market values or, where quoted values are not available, at estimated fair
values as determined by management.
The investment results of Separate Accounts are reflected directly in
Separate Accounts liabilities. For the years ended December 31, 1995, 1994
and 1993, investment results of Separate Accounts were $342.2 million, $135.9
million and $344.1 million, respectively.
Deposits to Separate Accounts are reported as increases in Separate Accounts
liabilities and are not reported in revenues. Mortality, policy
administration and surrender charges of the Separate Accounts are included in
revenues.
F-7
<PAGE>
3. INVESTMENTS
The following tables provide additional information relating to fixed
maturities and equity securities:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
---------------- ----------------- ----------------- ---------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
December 31, 1995
Fixed Maturities:
Available for Sale:
Corporate................................. $ 3,053.5 $ 101.0 $ 22.0 $ 3,132.5
Mortgage-backed........................... 573.9 7.7 .4 581.2
U.S. Treasury securities and U.S. government
and agency securities.................. 569.2 9.2 2.6 575.8
States and political subdivisions......... 4.3 .1 -- 4.4
Foreign governments....................... 16.2 .8 -- 17.0
Redeemable preferred stock................ 56.8 3.7 5.1 55.4
---------------- ----------------- ----------------- ---------------
Total Available for Sale.................... $ 4,273.9 $ 122.5 $ 30.1 $ 4,366.3
================ ================= ================= ===============
Equity Securities:
Common stock................................ $ 36.2 $ 10.3 $ 4.7 $ 41.8
================ ================= ================= ===============
December 31, 1994
Fixed Maturities:
Available for Sale:
Corporate................................. $ 1,622.3 $ 5.1 $ 112.6 $ 1,514.8
Mortgage-backed........................... 221.9 .5 16.4 206.0
U.S. Treasury securities and U.S. government
and agency securities.................. 365.4 1.4 20.7 346.1
States and political subdivisions......... 4.8 -- .6 4.2
Foreign governments....................... 14.8 .2 -- 15.0
Redeemable preferred stock................ 58.0 .1 5.4 52.7
---------------- ----------------- ----------------- ---------------
Total Available for Sale.................... $ 2,287.2 $ 7.3 $ 155.7 $ 2,138.8
================ ================= ================= ===============
Held to Maturity:
Corporate................................. $ 1,812.4 $ 11.9 $ 93.1 $ 1,731.2
U.S. Treasury securities and U.S. government
and agency securities.................. 180.4 -- 21.7 158.7
States and political subdivisions......... 14.4 -- .9 13.5
Foreign governments....................... 1.3 .1 -- 1.4
---------------- ----------------- ----------------- ---------------
Total Held to Maturity...................... $ 2,008.5 $ 12.0 $ 115.7 $ 1,904.8
================ ================= ================= ===============
Equity Securities:
Common stock................................ $ 42.0 $ 10.1 $ 9.4 $ 42.7
================ ================= ================= ===============
</TABLE>
For publicly traded fixed maturities and equity securities, estimated fair
value is determined using quoted market prices. For fixed maturities without
a readily ascertainable market value, EVLICO has determined an estimated fair
value using a discounted cash flow approach, including provisions for credit
risk, generally based upon the assumption that such securities will be held
to maturity. Estimated fair value for equity securities, substantially all of
which do not have a readily ascertainable market value, has been determined
by EVLICO. Such estimated fair values do not necessarily represent the values
for which these securities could have been sold at the dates of the
consolidated balance sheets. At December 31, 1995 and 1994, respectively,
securities without a readily ascertainable market value having an amortized
cost of $1,233.7 million and $1,571.5 million, respectively, had estimated
fair values of $1,291.1 million and $1,512.2 million, respectively.
F-8
<PAGE>
The contractual maturity of bonds at December 31, 1995 are shown below:
<TABLE>
<CAPTION>
AVAILABLE FOR SALE
------------------------------------
AMORTIZED ESTIMATED
COST FAIR VALUE
----------------- ----------------
(IN MILLIONS)
<S> <C> <C>
Due in one year or less............................................................. $ 133.3 $ 133.4
Due in years two through five....................................................... 1,416.4 1,444.9
Due in years six through ten........................................................ 1,361.5 1,391.8
Due after ten years................................................................. 732.0 759.6
Mortgage-backed securities.......................................................... 573.9 581.2
----------------- ----------------
Total............................................................................... $ 4,217.1 $ 4,310.9
================= ================
</TABLE>
Bonds not due at a single maturity date have been included in the above table
in the year of final maturity. Actual maturities will differ from contractual
maturities because borrowers may have the right to call or prepay obligations
with or without call or prepayment penalties.
Investment valuation allowances and changes thereto are shown below:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ----------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Balances, beginning of year.................................... $ 68.5 $ 87.3 $ 147.2
Additions charged to income.................................... 31.0 12.7 44.4
Deductions for writedowns and asset dispositions............... (33.8) (31.5) (104.3)
----------------- ----------------- -----------------
Balances, End of Year.......................................... $ 65.7 $ 68.5 $ 87.3
================= ================= =================
Balances, end of year comprise:
Mortgage loans on real estate............................... $ 15.9 $ 24.0 $ 46.7
Equity real estate.......................................... 49.8 44.5 40.6
----------------- ----------------- -----------------
Total.......................................................... $ 65.7 $ 68.5 $ 87.3
================= ================= =================
</TABLE>
Deductions for writedowns and asset dispositions for 1993 include a $20.2
million writedown of fixed maturity investments at December 31, 1993 as a
result of adopting a new accounting statement for the valuation of these
investments that requires specific writedowns instead of valuation
allowances.
At December 31, 1995, the carrying values of investments held for the
production of income which were non-income producing for the twelve months
preceding the consolidated balance sheet date were $21.5 million of fixed
maturities and $29.1 million of mortgage loans on real estate.
EVLICO's fixed maturity investment portfolio includes corporate high yield
securities consisting of public high yield bonds, redeemable preferred stocks
and directly negotiated debt in leveraged buyout transactions. EVLICO seeks
to minimize the higher than normal credit risks associated with such
securities by monitoring the total investments in any single issuer or total
investment in a particular industry group. Certain of these corporate high
yield securities are classified as other than investment grade by the various
rating agencies, i.e., a rating below Baa or an NAIC (National Association of
Insurance Commissioners) designation of 3 (medium grade), 4 or 5 (below
investment grade) or 6 (in or near default). At December 31, 1995,
approximately 11.0% of the $4,217.2 million aggregate amortized cost of bonds
held by EVLICO were considered to be other than investment grade.
In addition to its holding of corporate high yield securities, EVLICO is an
equity investor in limited partnership interests which primarily invest in
securities considered to be other than investment grade.
EVLICO has restructured or modified the terms of certain fixed maturity
investments. The fixed maturity portfolio, based on amortized cost, includes
$13.7 million and $13.3 million at December 31, 1995 and 1994, respectively,
of such restructured securities. The December 31, 1994 amount includes fixed
maturities which are in default as to principal and/or interest payments, are
to be restructured pursuant to commenced negotiations or where the borrowers
went into bankruptcy subsequent to acquisition (collectively, "problem fixed
maturities") of $5.6 million. Gross interest income that would have been
recorded in accordance with the original terms of restructured fixed
maturities amounted to $1.4 million, $1.1 million and $2.2 million in 1995,
1994 and 1993, respectively. Gross interest income on these fixed maturities
included in net investment income aggregated $1.4 million, $1.0 million and
$1.5 million in 1995, 1994 and 1993, respectively.
F-9
<PAGE>
At December 31, 1995 and 1994, mortgage loans on real estate with scheduled
payments 60 days (90 days for agricultural mortgages) or more past due or in
foreclosure (collectively, "problem mortgage loans on real estate") had an
amortized cost of $36.0 million (4.6% of total mortgage loans on real estate)
and $35.2 million (3.9% of total mortgage loans on real estate),
respectively.
The payment terms of mortgage loans on real estate may from time to time be
restructured or modified. The investment in restructured mortgage loans on
real estate, based on amortized cost, amounted to $173.5 million and $130.8
million at December 31, 1995 and 1994, respectively. Gross interest income on
restructured mortgage loans on real estate that would have been recorded in
accordance with the original terms of such loans amounted to $16.1 million,
$12.3 million and $13.9 million in 1995, 1994 and 1993, respectively. Gross
interest income on these loans included in net investment income aggregated
$14.0 million, $11.4 million and $11.5 million in 1995, 1994 and 1993,
respectively.
Impaired mortgage loans (as defined under SFAS No. 114) along with the
related provision for losses were as follows:
DECEMBER 31, 1995
------------------
(IN MILLIONS)
Impaired mortgage loans with provision for losses.... $ 99.0
Impaired mortgage loans with no provision for losses. 24.5
------------------
Recorded investment in impaired mortgage loans....... 123.5
Provision for losses................................. 14.5
------------------
Net Impaired Mortgage Loans.......................... $ 109.0
==================
Impaired mortgage loans with no provision for losses are loans where the fair
value of the collateral or the net present value of the loan equals or
exceeds the recorded investment. Interest income earned on loans where the
collateral value is used to measure impairment is recorded on a cash basis.
Interest income on loans where the present value method is used to measure
impairment is accrued on the net carrying value amount of the loan at the
interest rate used to discount the cash flows. Changes in the present value
attributable to changes in the amount or timing of expected cash flows are
reported as investment gains or losses.
During the year ended December 31, 1995, EVLICO's average recorded investment
in impaired mortgage loans was $99.2 million. Interest income recognized on
these impaired mortgage loans totaled $8.2 million for the year ended
December 31, 1995, including $2.2 million recognized on a cash basis.
EVLICO's investment in equity real estate is through direct ownership and
through investments in real estate joint ventures. At December 31, 1995 and
1994, the carrying value of equity real estate available for sale amounted to
$55.6 million and $138.4 million, respectively. For the years ended December
31, 1995, 1994 and 1993, respectively, real estate of $12.2 million, $59.0
million and $92.1 million was acquired in satisfaction of debt. At December
31, 1995 and 1994, EVLICO owned $196.6 million and $230.5 million,
respectively, of real estate acquired in satisfaction of debt.
Depreciation on real estate is computed using the straight-line method over
the estimated useful lives of the properties, which generally range from 40
to 50 years. Accumulated depreciation on real estate was $51.0 million and
$51.1 million at December 31, 1995 and 1994, respectively. Depreciation
expense on real estate totaled $12.8 million, $12.7 million and $11.6 million
for the years ended December 31, 1995, 1994 and 1993, respectively.
F-10
<PAGE>
4. JOINT VENTURES AND PARTNERSHIPS
Summarized combined financial information of real estate joint ventures (10
and 12 individual ventures as of December 31, 1995 and 1994, respectively)
and of other limited partnership interests accounted for under the equity
method, in which EVLICO has an investment of $10.0 million or greater and an
equity interest of 10% or greater is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------
1995 1994
------------------- ------------------
(IN MILLIONS)
<S> <C> <C>
FINANCIAL POSITION
Investments in real estate, at depreciated cost............................... $ 966.3 $ 1,047.0
Investments in securities, generally at estimated fair value.................. 648.5 3,061.2
Cash and cash equivalents..................................................... 99.2 46.4
Other assets.................................................................. 90.8 261.9
------------------- ------------------
Total assets.................................................................. 1,804.8 4,416.5
------------------- ------------------
Borrowed funds -- third party.................................................. 74.4 1,233.6
Other liabilities............................................................. 132.4 611.0
------------------- ------------------
Total liabilities............................................................. 206.8 1,844.6
------------------- ------------------
Partners' Capital............................................................. $ 1,598.0 $ 2,571.9
=================== ==================
Equity in partners' capital included above.................................... $ 243.8 $ 327.3
Equity in limited partnership interests not included above.................... 82.3 50.4
(Deficit) excess of equity in partners' capital over
investment cost and equity earnings........................................ (.4) 3.7
------------------- ------------------
Carrying Value................................................................ $ 325.7 $ 381.4
=================== ==================
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
STATEMENTS OF EARNINGS
Revenues of real estate joint ventures............................ $ 152.3 $ 180.1 $ 136.6
Revenues of other limited partnership interests................... 86.9 102.5 318.9
Interest expense -- third party.................................... (23.1) (88.1) (79.7)
Interest expense -- The Equitable.................................. (5.6) -- --
Other expenses.................................................... (131.8) (172.4) (132.7)
----------------- ---------------- -----------------
Net Earnings...................................................... $ 78.7 $ 22.1 $ 243.1
================= ================ =================
Equity in net earnings included above............................. $ 14.4 $ 11.7 $ 34.0
Equity in net earnings of limited partnership
interests not included above................................... 12.9 6.3 12.0
Reduction of earnings in joint ventures
over equity ownership percentage and
amortization of differences in bases........................... -- (1.1) (.1)
----------------- ----------------- -----------------
Total Equity in Net Earnings...................................... $ 27.3 $ 16.9 $ 45.9
================= ================ =================
</TABLE>
F-11
<PAGE>
5. NET INVESTMENT INCOME AND INVESTMENT (LOSSES) GAINS
The sources of net investment income are summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Fixed maturities................................................. $ 319.5 $ 331.4 $ 319.9
Mortgage loans on real estate.................................... 70.3 86.7 105.7
Equity real estate............................................... 66.2 67.0 69.8
Policy loans..................................................... 86.8 79.5 76.1
Other equity investments......................................... 22.4 13.4 38.5
Other investment income.......................................... 30.5 24.5 17.0
----------------- ---------------- -----------------
Gross investment income.......................................... 595.7 602.5 627.0
Investment expenses.............................................. 66.6 75.7 69.4
----------------- ---------------- -----------------
Net Investment Income............................................ $ 529.1 $ 526.8 $ 557.6
================= ================ =================
</TABLE>
Investment (losses) gains, net, including changes in valuation allowances,
are summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Fixed maturities................................................. $ 23.7 $ (6.8) $ 45.1
Mortgage loans on real estate.................................... (7.0) (13.3) (32.0)
Equity real estate............................................... (18.9) (5.3) (13.4)
Other equity investments......................................... 1.7 20.8 1.8
----------------- ---------------- -----------------
Investment (Losses) Gains, Net................................... $ (.5) $ (4.6) $ 1.5
================= ================ =================
</TABLE>
Writedowns of fixed maturities amounted to $11.1 million, $8.2 million and
$1.4 million for the years ended December 31, 1995, 1994 and 1993,
respectively.
For the years ended December 31, 1995 and 1994, respectively, proceeds
received on sales of fixed maturities classified as available for sale
amounted to $2,551.6 million and $2,065.1 million. Gross gains of $49.6
million and $22.1 million and gross losses of $18.7 million and $24.4
million, respectively, were realized on these sales. The change in unrealized
investment gains (losses) related to fixed maturities classified as available
for sale for the years ended December 31, 1995 and 1994, amounted to $240.8
million and $(215.2) million, respectively.
Gross gains of $66.2 million and gross losses of $66.5 million were realized
on sales of investments in fixed maturities held for investment and available
for sale for the year ended December 31, 1993.
F-12
<PAGE>
Net unrealized investment gains (losses), included in the consolidated
balance sheets as a component of equity, and the changes for the
corresponding years are summarized as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Balance, beginning of year....................................... $ (72.6) $ 22.3 $ 11.1
Changes in unrealized investment gains (losses).................. 244.7 (241.8) 3.4
Effect of adopting SFAS No. 115.................................. -- -- 72.2
Changes in unrealized investment (gains) losses attributable to:
Deferred policy acquisition costs............................. (64.4) 95.8 (58.2)
Deferred Federal income taxes................................. (63.1) 51.1 (6.2)
----------------- ---------------- -----------------
Balance, End of Year............................................. $ 44.6 $ (72.6) $ 22.3
================= ================ =================
Balance, end of year comprises:
Unrealized investment gains (losses) on:
Fixed maturities............................................ $ 92.4 $ (148.4) $ 66.8
Other equity investments.................................... 5.6 .7 25.6
Other....................................................... (2.7) (1.7) --
----------------- ---------------- -----------------
Total......................................................... 95.3 (149.4) 92.4
Amounts of unrealized investment (gains) losses attributable to:
Deferred policy acquisition costs........................... (26.8) 37.6 (58.2)
Deferred Federal income taxes............................... (23.9) 39.2 (11.9)
----------------- ---------------- -----------------
Total............................................................ $ 44.6 $ (72.6) $ 22.3
================= ================ =================
</TABLE>
6. FEDERAL INCOME TAXES
A summary of the Federal income tax expense in the consolidated statements of
earnings is shown below:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Federal income tax expense (benefit):
Current....................................................... $ -- $ (1.4) $ (3.4)
Deferred...................................................... 29.7 26.4 23.9
----------------- ---------------- -----------------
Total............................................................ $ 29.7 $ 25.0 $ 20.5
================= ================ =================
</TABLE>
The Federal income taxes attributable to consolidated operations are
different from the amounts determined by multiplying the earnings before
Federal income taxes and cumulative effect of accounting change by the
expected Federal income tax rate of 35%.
The sources of the difference and the tax effects of each are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Expected Federal income tax expense.............................. $ 30.0 $ 25.3 $ 16.6
Tax rate adjustment.............................................. -- -- 4.0
Other............................................................ (.3) (.3) (.1)
----------------- ---------------- -----------------
Federal Income Tax Expense....................................... $ 29.7 $ 25.0 $ 20.5
================= ================ =================
</TABLE>
F-13
<PAGE>
The components of the net deferred Federal income tax account are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31, 1994
--------------------------------- ---------------------------------
ASSETS LIABILITIES ASSETS LIABILITIES
--------------- --------------- --------------- ---------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Deferred policy acquisition costs, reserves and
reinsurance....................................... $ -- $ 253.8 $ -- $ 250.6
Investments.......................................... -- 20.5 38.4 --
Compensation and related benefits.................... 44.3 -- 52.2 --
Other................................................ 7.9 -- 25.6 --
--------------- --------------- --------------- ---------------
Total................................................ $ 52.2 $ 274.3 $ 116.2 $ 250.6
=============== =============== =============== ===============
</TABLE>
The deferred Federal income tax expense (benefit) impacting operations
reflect the net tax effects of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the
amounts used for income tax purposes. The sources of these temporary
differences and the tax effects of each are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Deferred policy acquisition costs, reserves and
reinsurance................................................... $ 3.2 $ (11.4) $ (6.8)
Investments...................................................... (4.2) 26.1 11.4
Compensation and related benefits................................ 13.0 (2.8) 1.9
Other............................................................ 17.7 14.5 17.4
----------------- ---------------- -----------------
Deferred Federal Income Tax Expense.............................. $ 29.7 $ 26.4 $ 23.9
================= ================ =================
</TABLE>
At December 31, 1995, EVLICO had net operating loss carryforwards of
approximately $10.2 million. These loss carryforwards are available to offset
future tax payments to Equitable Life under the tax sharing agreement.
7. REINSURANCE AGREEMENTS
EVLICO cedes reinsurance to other insurance companies. EVLICO evaluates the
financial condition of its reinsurers to minimize its exposure to significant
losses from reinsurer insolvencies. The effect of reinsurance is summarized
as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1995 1994
----------------- ----------------
(IN MILLIONS)
<S> <C> <C>
Direct premiums..................................................................... $ 34.1 $ 40.2
Reinsurance ceded................................................................... (.4) (.1)
----------------- ----------------
Premiums............................................................................ $ 33.7 $ 40.1
================= ================
Universal Life and Investment-type Product Policy Fee Income Ceded.................. $ 31.0 $ 24.9
================= ================
Policyholders' Benefits Ceded....................................................... $ 18.7 $ 8.3
================= ================
</TABLE>
EVLICO reinsures mortality risks in excess of $5.0 million on any single
life. EVLICO also reinsures the entire risk on certain substandard
underwriting risks as well as in certain other cases.
F-14
<PAGE>
8. RELATED PARTY TRANSACTIONS
Under a cost sharing agreement, EVLICO reimburses Equitable Life for its use
of Equitable Life's personnel, property and facilities in carrying out
certain of its operations. Reimbursement for intercompany services is based
on the allocated cost of the services provided. The incurred balances of
these intercompany transactions, which are included in other operating costs
and expenses are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Personnel and facilities......................................... $ 249.8 $ 257.9 $ 252.7
Agent commissions and fees....................................... 127.4 122.6 103.0
</TABLE>
These cost allocations include various employee related obligations for
pensions and postretirement benefits. At December 31, 1995 and 1994, EVLICO
recorded as a reduction of shareholder's equity its allocated portion of an
additional minimum pension liability of $10.7 million and $1.2 million, net
of Federal income taxes, respectively, representing the excess of the
accumulated benefit obligation over the fair value of plan assets and accrued
pension liability.
During 1995, 1994 and 1993, Equitable Life restructured certain operations in
connection with cost reduction programs. EVLICO recorded provisions of $6.7
million, $6.9 million and $17.3 million in 1995, 1994 and 1993, respectively,
relating primarily to allocated lease obligations (net of sub-lease rentals)
and severance liabilities.
EVLICO incurred investment advisory and asset management fee expenses of
$17.6 million, $19.2 million and $16.0 million during 1995, 1994 and 1993,
respectively.
EVLICO and Equitable Life have an agreement whereby certain Equitable Life
policyholders may purchase EVLICO's policies without presenting evidence of
insurability. Under the agreement, Equitable Life pays EVLICO a conversion
charge for the extra mortality risk associated with issuing these policies.
EVLICO received payments of $2.9 million, $3.0 million and $3.1 million in
1995, 1994 and 1993, respectively, which were reported as other income.
On August 31, 1993, EVLICO sold $250.0 million of primarily privately placed
below investment grade fixed maturities to EQ Asset Trust 1993 (the "Trust").
EVLICO realized a $1.1 million gain, net of related deferred policy
acquisition costs and deferred Federal income taxes. In conjunction with this
transaction, EVLICO received $75.4 million of Class B notes issued by the
Trust. These notes have interest rates ranging from 6.85% to 9.45%. The Class
B notes are classified as other invested assets on the consolidated balance
sheets.
Net amounts payable to Equitable Life were $190.2 million and $226.7 million
at December 31, 1995 and 1994, respectively.
9. DERIVATIVES AND FAIR VALUE OF FINANCIAL INSTRUMENTS
Derivatives
EVLICO primarily uses derivatives for asset/liability risk management and for
hedging individual securities. Derivatives mainly are utilized to reduce
EVLICO's exposure to interest rate fluctuations. Accounting for interest rate
swap transactions is on an accrual basis. Gains and losses related to
interest rate swap transactions are amortized as yield adjustments over the
remaining life of the underlying hedged security. Income and expense
resulting from interest rate swap activities are reflected in net investment
income. The notional amount of matched interest rate swaps outstanding at
December 31, 1995 was $444.8 million. The average unexpired terms at December
31, 1995 is 3.0 years. At December 31, 1995, the cost of terminating
outstanding matched swaps in a loss position was $10.1 million and the
unrealized gain on outstanding matched swaps in a gain position was $3.4
million. EVLICO has no intention of terminating these contracts prior to
maturity.
Fair Value of Financial Instruments
EVLICO defines fair value as the quoted market prices for those instruments
that are actively traded in financial markets. In cases where quoted market
prices are not available, fair values are estimated using present value or
other valuation techniques. The fair value estimates are made at a specific
point in time, based on available market information and judgments about the
financial instrument, including estimates of timing, amount of expected
future cash flows and the credit standing of counterparties. Such estimates
do not reflect any premium or discount that could result from offering for
sale at one time EVLICO's entire holdings of a particular financial
instrument, nor do they consider the tax impact of the realization of
unrealized gains or losses. In many cases, the fair value estimates cannot be
substantiated by comparison to independent markets, nor can the disclosed
value be realized in immediate settlement of the instrument.
Certain financial instruments are excluded, particularly insurance
liabilities other than financial guarantees and investment contracts. Fair
market value of off-balance-sheet financial instruments of EVLICO was not
material at December 31, 1995 and 1994.
F-15
<PAGE>
Fair value for mortgage loans on real estate are estimated by discounting
future contractual cash flows using interest rates at which loans with
similar characteristics and credit quality would be made. Fair values for
foreclosed mortgage loans and problem mortgage loans are limited to the
estimated fair value of the underlying collateral if lower.
The estimated fair values for single premium deferred annuities ("SPDA") are
estimated using projected cash flows discounted at current offering rates.
The estimated fair values for supplementary contracts not involving life
contingencies ("SCNILC") and annuities certain are derived using discounted
cash flows based upon the estimated current offering rate.
The following table discloses carrying value and estimated fair value for
financial instruments not otherwise disclosed in Note 3:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------------------------
1995 1994
-------------------------------- --------------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
VALUE FAIR VALUE VALUE FAIR VALUE
--------------- --------------- --------------- ---------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Consolidated Financial Instruments:
Mortgage loans on real estate....................... $ 771.5 $ 809.4 $ 888.5 $ 865.3
Other joint ventures................................ 158.7 158.7 196.4 196.4
Policy loans........................................ 1,300.1 1,374.0 1,185.2 1,138.7
Policyholders' account balances:
SPDA............................................. 1,265.8 1,272.0 1,744.3 1,732.7
Annuities certain and SCNILC..................... 188.0 188.1 159.0 151.3
</TABLE>
10. COMMITMENTS AND CONTINGENT LIABILITIES
EVLICO is the obligor under certain structured settlement agreements which
it had entered into with unaffiliated insurance companies and beneficiaries.
To satisfy its obligations under these agreements, EVLICO has purchased
single premium annuities from Equitable Life and directed Equitable Life to
make payments directly to the beneficiaries. A contingent liability exists
with respect to these agreements should Equitable Life be unable to meet its
obligations. Management believes the need to satisfy such obligations is
remote.
11. LITIGATION
A number of lawsuits have been filed against life and health insurers in the
jurisdictions in which EVLICO does business 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 amounts, or in substantial settlements. In some states juries have
substantial discretion in awarding punitive damages. EVLICO, like other life
and health insurers, from time to time is involved in such litigation as
well as other legal actions and proceedings in connection with its
businesses. Some of these litigations 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 EVLICO's financial position or
results of operations.
12. STATUTORY FINANCIAL INFORMATION
EVLICO is restricted as to the amounts it may pay as dividends to Equitable
Life. Under the New York Insurance Law, the New York Superintendent has
broad discretion to determine whether the financial condition of a stock
life insurance company would support the payment of dividends to its
shareholders. For the years ended December 31, 1995, 1994 and 1993,
statutory (loss) earnings totaled $(102.5) million, $27.3 million and
$(88.4) million, respectively. No amounts are expected to be available for
dividends from EVLICO to Equitable Life in 1996.
At December 31, 1995, EVLICO, in accordance with various government and
state regulations, had $4.2 million of securities deposited with such
government or state agencies.
Accounting practices used to prepare statutory financial statements for
regulatory filings of stock life insurance companies differ in certain
instances from GAAP. The following reconciles EVLICO's net change in
statutory surplus and capital stock and statutory surplus and capital stock
determined in accordance with accounting practices prescribed by the New
York Insurance Department with net earnings and equity on a GAAP basis.
F-16
<PAGE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Net change in statutory surplus and capital stock................ $ (56.6) $ 64.8 $ 184.4
Change in asset valuation reserves............................... 57.8 18.5 26.0
----------------- ---------------- -----------------
Net change in statutory surplus, capital stock
and asset valuation reserves.................................. 1.2 83.3 210.4
Adjustments:
Future policy benefits and policyholders' account balances.... (12.9) (13.5) (22.5)
Initial fee liability......................................... (34.2) (20.3) (11.6)
Deferred policy acquisition costs............................. 25.1 34.7 62.2
Deferred Federal income taxes................................. (29.7) (20.2) (23.9)
Valuation of investments...................................... 38.3 19.9 25.9
Limited risk reinsurance...................................... 146.9 .1 (5.4)
Contribution from Equitable Life.............................. (125.0) (50.0) (250.0)
Other, net.................................................... 46.4 2.0 41.7
----------------- ---------------- -----------------
Net Earnings..................................................... $ 56.1 $ 36.0 $ 26.8
================= ================ =================
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------
1995 1994 1993
----------------- ---------------- -----------------
(IN MILLIONS)
<S> <C> <C> <C>
Statutory surplus and capital stock.............................. $ 720.9 $ 777.6 $ 712.7
Asset valuation reserves......................................... 146.1 88.3 69.8
----------------- ---------------- -----------------
Statutory surplus, capital stock and asset valuation reserves.... 867.0 865.9 782.5
Adjustments:
Future policy benefits and policyholders' account balances.... (367.4) (354.5) (341.1)
Initial fee liability......................................... (234.7) (200.5) (180.3)
Deferred policy acquisition costs............................. 2,037.8 2,077.1 1,946.7
Deferred Federal income taxes................................. (222.1) (134.4) (159.5)
Valuation of investments...................................... 68.4 (219.2) 4.4
Limited risk reinsurance...................................... (231.7) (378.6) (378.7)
Postretirement and other pension liabilities.................. (111.6) (105.8) (122.7)
Other, net.................................................... (68.0) (101.1) (98.6)
----------------- ---------------- -----------------
Shareholder's Equity............................................. $ 1,737.7 $ 1,448.9 $ 1,452.7
================= ================ =================
</TABLE>
F-17
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Equitable Variable Life
Insurance Company
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of earnings, of shareholder's equity and of cash
flows present fairly, in all material respects, the financial position of
Equitable Variable Life Insurance Company and its subsidiaries ("EVLICO") at
December 31, 1995 and 1994, and the results of their operations and their
cash flows for each of the three years in the period ended December 31,
1995, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of EVLICO's management; our
responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
As discussed in Note 2 to the consolidated financial statements, EVLICO
changed its methods of accounting for loan impairments in 1995, for
postemployment benefits in 1994 and for investment securities in 1993.
PRICE WATERHOUSE LLP
New York, New York
February 7, 1996
F-18
<PAGE>
APPENDIX A
MANAGEMENT
Here is a list of our directors and principal officers and a brief statement of
their business experience for the past five years. Unless otherwise noted, the
following persons have been involved in the management of Equitable and its
subsidiaries in various positions for the last five years. Unless otherwise
noted, their address is 787 Seventh Avenue, New York, New York 10019.
<TABLE>
<CAPTION>
NAME AND PRINCIPAL BUSINESS EXPERIENCE
BUSINESS ADDRESS WITHIN PAST FIVE YEARS
- -------------------- ------------------------
<S> <C>
DIRECTORS
Michel Beaulieu...................... Director of Equitable Variable since February 1992. Senior Vice President, Equitable, since
September 1991; prior thereto, Chief Life Actuary AXA group 1989 to 1991; Managing Director
Blondeau & CIE (France) 1986 to 1989. Director, Equity & Law (London).
Laurent Clamagirand.................. Director of Equitable Variable since February 1995; Vice President, Financial Reporting,
Equitable, since March 1996; prior thereto, Director from November 1994 to March 1996; prior
thereto, International Controller, AXA, January 1990 to October 1994; Director, Equitable of
Colorado, since March 1995.
William T. McCaffrey................. Director of Equitable Variable since February 1987; Senior Executive Vice President and
Chief Operating Officer, Equitable Life, since February 1996; prior thereto, Executive Vice
President, since February 1986 and Chief Administrative Officer since February 1988;
Director, Equitable Life, since February 1996 and Equitable Foundation since September 1986.
Michael J. Rich...................... Director of Equitable Variable since May 1995. Senior Vice President, Equitable, since
October 1994; prior thereto, Vice President of Underwriting, John Hancock Mutual Life
Insurance Co. since 1988.
Jose S. Suquet....................... Director of Equitable Variable since January 1995. Executive Vice President and Chief Agency
Officer, Equitable, since August 1994; prior thereto, Agency Manager, Equitable, since
February 1985.
OFFICERS -- DIRECTORS
James M. Benson...................... President and Chief Executive Officer, Equitable Variable since March 1996; prior thereto,
President from December 1993 to March 1996; Vice Chairman of the Board, Equitable Variable,
July 1993 to December 1993. President & Chief Executive Officer, Equitable Life, since
February 1996; President and Chief Operating Officer, Equitable, February 1994 to present;
Senior Executive Vice President, April 1993 to February 1994. Prior thereto, President,
Management Compensation Group, 1983 to February 1993. Director, Alliance Capital, October
1993 to present; National Mutual Association of Australasia, September 1995 to present and
AXA Re Life Insurance Co., January 1995 to present.
Harvey Blitz......................... Vice President, Equitable Variable since April 1995; Director of Equitable Variable since
October 1992. Senior Vice President, Equitable, since September 1987. Senior Vice President,
The Equitable Companies Incorporated, since July 1992. Director, Equico Securities, Inc.,
since September 1992; Equitable of Colorado, since September 1992; Equisource and its
subsidiaries since October 1992, and Chairman of the Board Frontier Trust since September
1995 and Director of Equitable Distributors, Inc. since February 1995.
Gordon Dinsmore...................... Senior Vice President, Equitable Variable, since February 1991. Senior Vice President,
Equitable, since September 1989; prior thereto, various other Equitable positions. Director
and Senior Vice President, March 1991 to present, Equitable of Colorado; Director, FHJV
Holdings, Inc., December 1990 to present; Director, Equitable Distributors, Inc., August
1993 to present, and Director, Equitable Foundation, May 1991 to present.
Jerry de St. Paer.................... Senior Investment Officer, Equitable Variable, since April 1995; Director of Equitable
Variable since April 1992. Senior Executive Vice President & Chief Financial Officer,
Equitable Life, since February 1996; prior thereto, Executive Vice President & Chief
Financial Officer, Equitable, since April 1992; Executive Vice President since December
1990; Senior Vice President & Treasurer June 1990 to December 1990; Senior Vice President,
Equitable Investment Corporation, January 1987 to January 1991; Executive Vice President &
Chief Financial Officer, The Equitable Companies Incorporated, since May 1992; Director,
Economic Services Corporation & various Equitable subsidiaries.
</TABLE>
A-1
<PAGE>
<TABLE>
<CAPTION>
NAME AND PRINCIPAL BUSINESS EXPERIENCE
BUSINESS ADDRESS WITHIN PAST FIVE YEARS
- ----------------------- -------------------------
<S> <C>
OFFICERS -- DIRECTORS (Continued)
Joseph J. Melone..................... Chairman of the Board, Equitable Variable since March 1996; Chairman of the Board and Chief
Executive Officer, Equitable Variable, November 1990 to March 1996; Chairman of the Board,
Equitable Life, since February 1996; prior thereto, Chairman of the Board and Chief
Executive Officer, Equitable, February 1994 to February 1996; President and Chief Executive
Officer, September 1992 to February 1994; President and Chief Operating Officer from
November 1990 to September 1992. President & Chief Executive Officer of The Equitable
Companies Incorporated since February 1996; prior thereto, President and Chief Operating
Officer since July 1992. Prior thereto, President, The Prudential Insurance Company of
America, since December 1984. Director, Equity & Law (United Kingdom) and various other
Equitable subsidiaries.
Peter D. Noris....................... Executive Vice President and Chief Investment Officer, Equitable Variable, since September
1995. Director of Equitable Variable since June 1995. Executive Vice President and Chief
Investment Officer, Equitable, since May 1995; prior thereto, Vice President, Salomon
Brothers, Inc., 1992 to 1995; Principal of Equity Division, Morgan Stanley & Co. Inc., from
1984 to 1992. Director, various Equitable subsidiaries.
Samuel B. Shlesinger................. Senior Vice President, Equitable Variable, since February 1988. Senior Vice President and
Actuary, Equitable; prior thereto, Vice President and Actuary. Director, Chairman and CEO,
Equitable of Colorado.
Dennis D. Witte...................... Senior Vice President, Equitable Variable, since February 1991; Senior Vice President,
Equitable, since July 1990; prior thereto, various other Equitable positions; Director,
Equitable Distributors, Inc. since February 1995.
OFFICERS
Kevin R. Byrne....................... Treasurer, Equitable Variable, since September 1990; Vice President and Treasurer,
Equitable, since September 1993; prior thereto, Vice President from March 1989 to September
1993. Vice President and Treasurer, The Equitable Companies Incorporated, September 1993 to
present; Frontier Trust since August 1990; Equisource and its subsidiaries, October 1990 to
present.
Stephen Hogan........................ Vice President and Controller, Equitable Variable, February 1994 to present. Vice President,
135 West 50th Street Equitable, January 1994 to present; prior thereto, Controller, John Hancock subsidiaries,
New York, New York 10020 from 1987 to December 1993.
J. Thomas Liddle, Jr................. Senior Vice President and Chief Financial Officer, Equitable Variable, since February 1986.
Senior Vice President, Equitable, since April 1991; prior thereto, Vice President and
Actuary, Equitable; Director, Equitable of Colorado since December 1985.
William A. Narducci.................. Vice President and Chief Claims Officer, Equitable Variable, since February 1989. Vice
200 Plaza Drive President, Equitable, since February 1988; prior thereto, Assistant Vice President.
Secaucus, New Jersey 07096
John P. Natoli....................... Vice President and Chief Underwriting Officer, Equitable Variable, since February 1988. Vice
President, Equitable.
</TABLE>
A-2
<PAGE>
APPENDIX B
COMMUNICATING PERFORMANCE DATA
In reports or other communications to policyowners or in advertising material,
we may describe general economic and market conditions affecting the Separate
Account and the Trust and may compare the performance or ranking of the Separate
Account Funds and Trust portfolios with (1) that of other insurance company
separate accounts or mutual funds included in the rankings prepared by Lipper
Analytical Services, Inc., Morningstar, Inc. or similar investment services that
monitor the performance of insurance company separate accounts or mutual funds,
(2) other appropriate indices of investment securities and averages for peer
universes of funds, or (3) data developed by us derived from such indices or
averages. Advertisements or other communications furnished to present or
prospective policyowners may also include evaluations of a Separate Account Fund
or Trust portfolio by financial publications that are nationally recognized such
as Barron's, Morningstar's Variable Annuities/Life, Business Week, Forbes,
Fortune, Institutional Investor, Money, Kiplinger's Personal Finance, Financial
Planning, Investment Adviser, Investment Management Weekly, Money Management
Letter, Investment Dealers Digest, National Underwriter, Pension & Investments,
USA Today, Investor's Daily, The New York Times, The Wall Street Journal, the
Los Angeles Times and the Chicago Tribune.
Performance data for peer universes of funds with similar investment objectives
are compiled by Lipper Analytical Services, Inc. (Lipper) in its Lipper Variable
Insurance Products Performance Analysis Service (Lipper Survey) and Morningstar,
Inc. in the Morningstar Variable Annuity/Life Report (Morningstar Report).
The Lipper Survey records performance data as reported to it by over 800 funds
underlying variable annuity and life insurance products. The Lipper Survey
divides these actively managed funds into 25 categories by portfolio objectives.
The Lipper Survey contains two different universes, which differ in terms of the
types of fees reflected in performance data. The "Separate Account" universe
reports performance data net of investment management fees, direct operating
expenses and asset-based charges applicable under variable insurance and annuity
contracts. The "Mutual Fund" universe reports performance net only of investment
management fees and direct operating expenses, and therefore reflects
asset-based charges that relate only to the underlying mutual fund.
The Morningstar Report consists of over 700 variable life and annuity funds, all
of which report their data net of investment management fees, direct operating
expenses and separate account level charges.
LONG-TERM MARKET TRENDS
As a tool for understanding how different investment strategies may affect
long-term results, it may be useful to consider the historical returns on
different types of assets. The following chart presents historical return trends
for various types of securities. The information presented, while not directly
related to the performance of the Funds of the Separate Account or the Trust
portfolios, may help to provide a perspective on the potential returns of
different asset classes over different periods of time. By combining this
information with your knowledge of your own financial needs, you may be able to
better determine how you wish to allocate your Incentive Life Plus premiums.
Historically, the investment performance of common stocks over the long term has
generally been superior to that of long or short-term debt securities, although
common stocks have been subject to more dramatic changes in value over short
periods of time. The Common Stock Fund of the Separate Account may, therefore,
be a desirable selection for policyowners who are willing to accept such risks.
Policyowners who have a need to limit short-term risk, may find it preferable to
allocate a smaller percentage of their net premiums to those funds that invest
primarily in common stock. Any investment in securities, whether equity or debt,
involves varying degrees of potential risk, in addition to offering varying
degrees of potential reward.
The chart on page A-2 illustrates the average annual compound rates of return
over selected time periods between December 31, 1925 and December 31, 1995 for
common stocks, long-term government bonds, long-term corporate bonds,
intermediate-term government bonds and Treasury Bills. The Consumer Price Index
is shown as a measure of inflation for comparison purposes. The average annual
returns assume the reinvestment of dividends, capital gains and interest.
The information presented is an historical record of unmanaged groups of
securities and is neither an estimate nor a guarantee of future results. In
addition, investment management fees and expenses and charges associated with a
variable life insurance policy, are not reflected.
The rates of return illustrated do not represent returns of the Separate Account
or the Trust and do not constitute a representation that the performance of the
Separate Account funds or the Trust portfolios will correspond to rates of
return such as those illustrated in the chart. For a comparative illustration of
performance results of The Hudson River Trust, see page A-1 of the Trust's
prospectus.
B-1
<PAGE>
<TABLE>
<CAPTION>
AVERAGE ANNUAL RATES OF RETURN
FOR THE
FOLLOWING LONG-TERM LONG-TERM INTERMEDIATE- U.S. CONSUMER
PERIODS ENDING COMMON GOVERNMENT CORPORATE TERM GOV'T TREASURY PRICE
12/31/95: STOCKS BONDS BONDS BONDS BILLS INDEX
- -------- ------ ----- ----- ------ ----- -----
<S> <C> <C> <C> <C> <C> <C>
1 year.................. 37.43 31.67 26.39 16.80 5.60 2.74
3 years................. 15.26 12.82 10.47 7.22 4.13 2.72
5 years................. 16.57 13.10 12.07 8.81 4.29 2.83
10 years................. 14.84 11.92 11.25 9.08 5.55 3.48
20 years................. 14.59 10.45 10.54 9.69 7.28 5.23
30 years................. 10.68 7.92 8.17 8.36 6.72 5.39
40 years................. 10.78 6.38 6.75 7.02 5.73 4.46
50 years................. 11.94 5.35 5.75 5.87 4.80 4.36
60 years................. 11.34 5.20 5.46 5.34 4.01 4.10
Since 1926............... 10.54 5.17 5.69 5.25 3.72 3.12
Inflation Adjusted
Since 1926............... 7.20 1.99 2.49 2.07 0.58 0.00
- ----------------------------
</TABLE>
*Source: Ibbotson, Roger G. and Rex A. Sinquefield, STOCKS, BONDS, BILLS, AND
INFLATION (SBBI), 1982, updated in STOCKS, BONDS, BILLS, AND INFLATION 1996
YEARBOOK,(TM) Ibbotson Associates, Inc., Chicago. All rights reserved.
Common Stocks (S&P 500) -- Standard and Poor's Composite Index, an unmanaged
weighted index of the stock performance of 500 industrial, transportation,
utility and financial companies.
Long-term Government Bonds -- Measured using a one-bond portfolio constructed
each year containing a bond with approximately a twenty year maturity and a
reasonably current coupon.
Long-term Corporate Bonds -- For the period 1969-1995, represented by the
Salomon Brothers Long-Term, High-Grade Corporate Bond Index; for the period
1946-1968, the Salomon Brothers' Index was backdated using Salomon Brothers'
monthly yield data and a methodology similar to that used by Salomon for
1969-1995; for the period 1926-1945, the Standard and Poor's monthly
High-Grade Corporate Composite yield data were used, assuming a 4 percent
coupon and a twenty year maturity.
Intermediate-term Government Bonds -- Measured by a one-bond portfolio
constructed each year containing a bond with approximately a five year maturity.
U.S. Treasury Bills -- Measured by rolling over each month a one-bill
portfolio containing, at the beginning of each month, the bill having the
shortest maturity not less than one month.
Inflation -- Measured by the Consumer Price Index for all Urban Consumers
(CPI-U), not seasonally adjusted.
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EQUITABLE VARIABLE LIFE Bulk Rate
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