PART B
STATEMENT OF ADDITIONAL INFORMATION
INDIVIDUAL FLEXIBLE PURCHASE PAYMENT DEFERRED
VARIABLE AND FIXED ANNUITY CONTRACTS
issued by
EQUITABLE LIFE INSURANCE COMPANY OF IOWA SEPARATE ACCOUNT A
AND
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
THIS IS NOT A PROSPECTUS. THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD
BE READ IN CONJUNCTION WITH THE PROSPECTUS DATED MAY 28, 1997, FOR THE
INDIVIDUAL FLEXIBLE PURCHASE PAYMENT DEFERRED VARIABLE AND FIXED ANNUITY
CONTRACTS WHICH ARE REFERRED TO HEREIN.
THE PROSPECTUS CONCISELY SETS FORTH INFORMATION THAT A PROSPECTIVE INVESTOR
OUGHT TO KNOW BEFORE INVESTING. FOR A COPY OF THE PROSPECTUS CALL OR WRITE
THE COMPANY AT: P.O. BOX 8794, WILMINGTON, DELAWARE 19899-8794,
(800) 344-6864.
THIS STATEMENT OF ADDITIONAL INFORMATION IS DATED MAY 28, 1997.
TABLE OF CONTENTS
PAGE
Company
Experts
Legal Opinions
Distributor
Yield Calculation For Money Market Subaccounts
Performance Information
Annuity Provisions
Financial Statements
COMPANY
Information regarding Equitable Life Insurance Company of Iowa (the "Company")
and its ownership is contained in the Prospectus.
EXPERTS
The consolidated financial statements and schedules of the Company as of
December 31, 1996 and 1995 and for each of the three years in the period
ended December 31, 1996, and the Statement of Assets and Liabilities
of the Separate Account A as of December 31, 1996, and the related statements
of operations and changes in net assets for each of the periods indicated
therein have been audited by Ernst & Young LLP, independent auditors, as set
forth in their reports appearing elsewhere herein, and are included in
reliance upon such reports given upon the authority of such firm as experts in
accounting and auditing.
LEGAL OPINIONS
Legal matters in connection with the Contracts described herein are being
passed upon by the law firm of Blazzard, Grodd & Hasenauer, P.C., Westport,
Connecticut.
DISTRIBUTOR
Equitable of Iowa Securities Network, Inc. ("Securities Network") acts as the
distributor. Securities Network is an affiliate of the Company and is
registered as a broker-dealer. The offering is on a continuous basis.
YIELD CALCULATION FOR MONEY MARKET SUBACCOUNTS
The Money Market Subaccounts of the Separate Account will calculate their
current yield based upon the seven days ended on the date of calculation.
For the seven calendar days ended December 31, 1997, the annualized yield
and effective yield for the Money Market Subaccount were 3.40% and
3.46%, respectively. For the seven calendar days ended December 31,
1997, the annualized yield and effective yield for the Smith Barney
Money Market Subaccount were 3.43% and 3.49%, respectively.
The current yields of the Money Market Subaccounts are computed by determining
the net change (exclusive of capital changes) in the value of a hypothetical
pre-existing Owner account having a balance of one Accumulation Unit of the
Subaccount at the beginning of the period, subtracting the Mortality and
Expense Risk Charge, the Administrative Charge and the Annual Contract
Maintenance Charge, dividing the difference by the value of the account at the
beginning of the same period to obtain the base period return and multiplying
the result by (365/7).
The Money Market Subaccounts compute their effective compound yield according
to the method prescribed by the Securities and Exchange Commission. The
effective yield reflects the reinvestment of net income earned daily on Money
Market Subaccounts assets.
Net investment income for yield quotation purposes will not include either
realized capital gains and losses or unrealized appreciation and depreciation,
whether reinvested or not.
The yields quoted should not be considered a representation of the yield of
the Money Market Subaccounts in the future since the yield is not fixed.
Actual yields will depend not only on the type, quality and maturities of the
investments held by the Money Market Subaccounts and changes in the interest
rates on such investments, but also on changes in the Money Market
Subaccounts' expenses during the period.
Yield information may be useful in reviewing the performance of the Money
Market Subaccounts and for providing a basis for comparison with other
investment alternatives. However, the Money Market Subaccounts' yield
fluctuates, unlike bank deposits or other investments which typically pay a
fixed yield for a stated period of time. The yield information does not
reflect the deduction of any applicable Withdrawal Charge at the time of the
surrender. (See "Charges and Deductions - Deduction for Withdrawal Charge
(Sales Load)" in the Prospectus.)
PERFORMANCE INFORMATION
From time to time, the Company may advertise performance data as described in
the Prospectus. Any such advertisement will include average annual total
return figures for the time periods indicated in the advertisement. Such total
return figures will reflect the deduction of a 1.25% Mortality and Expense
Risk Charge, a .15% Administrative Charge, the expenses for the underlying
Portfolio being advertised and any applicable Annual Contract Maintenance
Charge and Withdrawal Charges.
SEC Standard Average Annual Total Return
The hypothetical value of a Contract purchased for the time periods described
in the advertisement will be determined by using the actual Accumulation Unit
values for an initial $1,000 purchase payment, and deducting any applicable
Annual Contract Maintenance Charge and any applicable Withdrawal Charge to
arrive at the ending hypothetical value. The average annual total return is
then determined by computing the fixed interest rate that a $1,000 purchase
payment would have to earn annually, compounded annually, to grow to the
hypothetical value at the end of the time periods described. The formula used
in these calculations is
n
P (1 + T ) = ERV
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the time periods used
(or fractional portion thereof) of a hypothetical $1,000
payment made at the beginning of the time periods used.
SEC Standard 30-Day Yield for Non-Money Market SubAccounts
In addition to total return data, the Company may include yield information in
its advertisements. For each Subaccount (other than the Money Market
Subaccounts) for which the Company will advertise yield, it will show a yield
quotation based on a 30 day (or one month) period ended on the date of the
most recent balance sheet of the Separate Account included in the registration
statement, computed by dividing the net investment income per Accumulation
Unit earned during the period by the maximum offering price per Unit on the
last day of the period, according to the following formula:
Yield = a-b 6
[2(_____ + 1) - 1]
cd
Where:
a = Net investment income earned during the period by the
Portfolio attributable to shares owned by the Subaccount.
b = Expenses accrued for the period (net of reimbursements).
c = The average daily number of Accumulation Units outstanding
during the period.
d = The maximum offering price per Accumulation Unit on the last
day of the period.
Average Annualized Total Return for the SubAccounts presented on a standarized
basis for the period ending December 31, 1996 were as follows:
<TABLE>
<CAPTION>
Returns for Equi-Select Product:
Subaccounts Investing in:
One Year Period Inception to Subaccount
Ended 12/31/96 12/31/96 Inception Date
____________________________________________
<S> <C> <C> <C>
EQUI-SELECT SERIES TRUST
Money Market Portfolio (5.32)% (0.04)% 10/07/94
Advantage Portfolio (3.78)% 2.86% 10/07/94
International Fixed Income
Portfolio (4.63)% 5.66% 10/07/94
Mortgage-Backed Securities
Portfolio (6.28)% 4.26% 10/07/94
OTC Portfolio 10.63% 20.05% 10/07/94
Research Portfolio 13.40% 20.82% 10/07/94
Total Return Portfolio 3.84% 11.82% 10/07/94
Value + Growth Portfolio N/A 5.98% 04/01/96
Growth & Income Portfolio N/A 16.63% 04/01/96
WARBURG PINCUS TRUST
International Equity Portfolio N/A (5.39)% 04/01/96
</TABLE>
<TABLE>
<CAPTION>
Returns for PrimElite Product:
Subaccounts Investing in:
One Year Period Inception to Subaccount
Ended 12/31/96 12/31/96 Inception Date
____________________________________________
<S> <C> <C> <C>
TRAVELERS SERIES FUND INC.
Smith Barney Money Market Portfolio (5.03)% (1.33)% 05/24/95
Smith Barney Income and Growth
Portfolio 9.74% 18.55% 04/05/95
Smith Barney International Equity
Portfolio 7.87% 14.39% 03/27/95
Smith Barney High Income Portfolio 3.33% 8.41% 04/28/95
SMITH BARNEY SERIES FUND
Appreciation Portfolio N/A 4.21% 03/22/96
EQUI-SELECT SERIES TRUST
OTC Portfolio 10.59% 20.01% 10/07/94
Research Portfolio 13.26% 20.68% 10/07/94
Total Return Portfolio 3.86% 11.84% 10/07/94
</TABLE>
Nonstandard Total Return
The Company may also advertise performance data which will be calculated in
the same manner as described above but which will not reflect the deduction of
any Withdrawal Charge or Annual Contract Maintenance Charge.
Total Return for the SubAccounts presented on a nonstandarized basis for the
period ending December 31, 1996 were as follows:
<TABLE>
<CAPTION>
Subaccounts Investing in:
One Year Period Inception to Subaccount
Ended 12/31/96 12/31/96 Inception Date
__________________________________________
<S> <C> <C> <C>
EQUI-SELECT SERIES TRUST
Money Market Portfolio 3.37% 3.49% 10/07/94
Advantage Portfolio 4.57% 5.85% 10/07/94
International Fixed Income Portfolio 3.53% 8.32% 10/07/94
Mortgage-Backed Securities Portfolio 1.92% 7.02% 10/07/94
OTC Portfolio 18.79% 22.34% 10/07/94
Research Portfolio 21.61% 23.15% 10/07/94
Total Return Portfolio 12.09% 14.41% 10/07/94
Value + Growth Portfolio N/A 14.15% 04/01/96
Growth & Income Portfolio N/A 24.86% 04/01/96
WARBURG PINCUS TRUST
International Equity Portfolio N/A 2.77% 04/01/96
TRAVELERS SERIES FUND INC.
Smith Barney Money Market Portfolio 3.47% 3.61% 05/24/95
Smith Barney Income and Growth Portfolio 18.13% 22.44% 04/05/95
Smith Barney International Equity Portfolio 16.08% 18.13% 03/27/95
Smith Barney High Income Portfolio 11.66% 12.67% 04/28/95
SMITH BARNEY SERIES FUND
Appreciation Portfolio N/A 12.46% 03/22/96
</TABLE>
Owners should note that the investment results of each Subaccount will
fluctuate over time, and any presentation of the Subaccount's total return or
yield for any period should not be considered as a representation of what an
investment may earn or what an Owner's total return or yield may be in any
future period.
ANNUITY PROVISIONS
Currently, the Company makes available payment plans on a fixed basis only.
(See the Prospectus - "Contract Proceeds - Fixed Payment Plans" for a
description of the Payment Plans.)
FINANCIAL STATEMENTS
The consolidated financial statements of the Company included herein should be
considered only as bearing upon the ability of the Company to meet its
obligations under the Contracts.
Financial Statements
Equitable Life Insurance Company of Iowa
Years ended December 31, 1996, 1995 and 1994
with Report of Independent Auditors
Equitable Life Insurance Company of Iowa
Financial Statements
Years ended December 31, 1996, 1995 and 1994
Contents
Report of Independent Auditors
Audited Financial Statements
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Changes in Stockholder's Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Report of Independent Auditors
The Board of Directors and Stockholder
Equitable Life Insurance Company of Iowa
We have audited the accompanying consolidated balance sheets of Equitable
Life Insurance Company of Iowa (wholly owned by Equitable of Iowa Companies)
as of December 31, 1996 and 1995, and the related consolidated statements of
income, changes in stockholder's equity, and cash flows for each of the three
years in the period ended December 31, 1996. Our audits also included the
financial statement schedules in the Index at Item 24. These financial
statements and schedules are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements and
schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Equitable Life Insurance Company of Iowa at December 31, 1996 and 1995,
and the consolidated results of their operations and their cash flows for
each of the three years in the period ended December 31, 1996, in conformity
with generally accepted accounting principles. Also, in our opinion, the
related financial statement schedules, when considered in relation to the
basic financial statements taken as a whole, present fairly in all material
respects the information set forth therein.
As discussed in Note 3 to the consolidated financial statements, in 1994 the
Company changed its method of accounting for certain investments in debt
securities.
/S/ Ernst & Young LLP
Des Moines, Iowa
February 11, 1997
Equitable Life Insurance Company of Iowa
Consolidated Balance Sheets
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
December 31
1996 1995
__________________________
<S> <C> <C>
Assets
Investments
Fixed maturities,
available for sale, at fair value
(cost: 1996 - $7,282,582; 1995 - $6,884,837) $7,456,401 $7,352,211
Equity securities of unaffiliated companies, at
fair value (cost: 1996 - $48,821; 1995 - $49,789) 77,148 50,595
Equity security of affiliated company, at fair
value (cost: 1996 and 1995 - $618) 5,138 3,599
Mortgage loans on real estate 1,689,088 1,169,456
Real estate, less allowance for depreciation
of $4,588 in 1996 and $4,804 in 1995 8,613 13,960
Policy loans 185,853 182,423
Short-term investments 15,852 35,282
__________________________
Total investments 9,438,093 8,807,526
Cash and cash equivalents 11,741 10,390
Securities and indebtedness of related parties 7,872 13,755
Accrued investment income 131,152 122,834
Notes and other receivables 21,062 32,395
Deferred policy acquisition costs 721,690 554,179
Property and equipment, less allowance for
depreciation of $13,105 in 1996 and $9,628 in 1995 9,620 8,026
Intangible assets, less accumulated amortization
of $632 in 1996 and $558 in 1995 2,343 2,417
Other assets 82,031 47,991
Due from affiliates 5,039 1,995
Separate account assets 450,632 171,881
__________________________
Total assets $10,881,275 $9,773,389
==========================
</TABLE>
See accompanying notes.
Equitable Life Insurance Company of Iowa
Consolidated Balance Sheets (continued)
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
December 31
1996 1995
__________________________
<S> <C> <C>
Liabilities and stockholder's equity
Policy liabilities and accruals:
Future policy benefits:
Annuity and interest sensitive life products $8,389,888 $7,500,494
Traditional life insurance products 712,296 718,110
Unearned revenue reserve 18,398 14,326
Other policy claims and benefits 7,481 8,980
__________________________
9,128,063 8,241,910
Other policyholders' funds:
Advance premiums and other deposits 597 691
Accrued dividends 12,807 12,715
__________________________
13,404 13,406
Deferred income taxes 43,201 113,171
Due to affiliates 8,518 5,175
Other liabilities 188,493 180,452
Separate account liabilities 450,632 171,881
__________________________
Total liabilities 9,832,311 8,725,995
Commitments and contingencies
Stockholder's equity:
Common stock, par value $1.00 per share -
authorized 7,500,000 shares, issued and
outstanding 5,000,300 shares 5,000 5,000
Additional paid-in capital 274,009 274,009
Unrealized appreciation (depreciation) of
securities at fair value 108,968 212,719
Retained earnings 660,987 555,666
__________________________
Total stockholder's equity 1,048,964 1,047,394
__________________________
Total liabilities and stockholder's equity $10,881,275 $9,773,389
==========================
</TABLE>
See accompanying notes.
Equitable Life Insurance Company of Iowa
Consolidated Statements of Income
(Dollars in thousands)
<TABLE>
<CAPTION>
Year ended December 31
1996 1995 1994
_______________________________________
<S> <C> <C> <C>
Revenues:
Annuity and interest sensitive life
product charges $62,638 $51,466 $43,767
Traditional life insurance premiums 39,566 43,425 46,265
Net investment income 705,074 638,056 521,646
Realized gains on investments 16,213 9,524 19,697
Other income 730 8,883 8,297
_______________________________________
824,221 751,354 639,672
Benefits and expenses:
Annuity and interest sensitive life
benefits:
Interest credited to account balances 437,702 390,039 320,312
Benefit claims incurred in excess of
account balances 7,892 10,396 8,877
Traditional life insurance benefits 44,316 68,338 56,923
Increase (decrease) in future
traditional policy benefits (1,243) (6,867) 3,350
Distributions to participating
policyholders 25,209 25,125 24,988
Underwriting, acquisition and
insurance expenses:
Commissions 130,379 146,224 157,028
General Expenses 48,461 40,867 43,328
Insurance Taxes 7,391 45,472 9,961
Policy acquisition costs deferred (156,041) (178,133) (193,263)
Amortization:
Deferred policy acquisition costs 79,306 72,537 50,921
Goodwill 74 74 74
_______________________________________
623,446 614,072 482,499
Interest expense 1,880 2,565 2,069
Other expenses 1 (9) 1,880
_______________________________________
625,327 616,628 486,448
_______________________________________
198,894 134,726 153,224
Income taxes 69,486 47,233 53,262
_______________________________________
129,408 87,493 99,962
Equity income (loss), net of related
income taxes (87) 17 (39)
_______________________________________
Net income $129,321 $87,510 $99,923
=======================================
</TABLE>
See accompanying notes.
Equitable Life Insurance Company of Iowa
Consolidated Statements of Changes in Stockholder's Equity
(Dollars in thousands)
<TABLE>
<CAPTION>
Unreal-
ized
Appre
ciation
(Depre
ciation)
Addi- of Total
tional Securities Stock-
Common Paid-In at Fair Retained holder's
Stock Capital Value Earnings Equity
___________________________________________________
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1994 $5,000 $224,009 $3,009 $368,233 $600,251
Cumulative effect of change
in accounting principle
regarding fixed maturity
securities -- -- 22,516 -- 22,516
Net income for 1994 -- -- -- 99,923 99,923
Unrealized depreciation
of securities at fair
value -- -- (49,845) -- (49,845)
___________________________________________________
Balance at December 31, 1994 5,000 224,009 (24,320) 468,156 672,845
Net income for 1995 -- -- -- 87,510 87,510
Unrealized appreciation
of securities at fair
value -- -- 237,039 -- 237,039
Contributions from parent -- 50,000 -- -- 50,000
___________________________________________________
Balance at December 31, 1995 5,000 274,009 212,719 555,666 1,047,394
Net income for 1996 -- -- -- 129,321 129,321
Dividends paid to parent -- -- -- (24,000) (24,000)
Unrealized depreciation
of securities at fair
value -- -- (103,751) -- (103,751)
___________________________________________________
Balance at December 31, 1996 $5,000 $274,009 $108,968 $660,987 $1,048,964
===================================================
</TABLE>
See accompanying notes.
Equitable Life Insurance Company of Iowa
Consolidated Statements of Cash Flows
(Dollars in thousands)
<TABLE>
<CAPTION>
Year ended December 31
1996 1995 1994
_______________________________________
<S> <C> <C> <C>
Operating activities
Net income $129,321 $87,510 $99,923
Adjustments to reconcile net income to
net cash provided by operations:
Adjustments related to annuity and
interest sensitive life products:
Interest credited to account balances 434,621 390,039 320,312
Charges for mortality and
administration (63,398) (54,308) (46,280)
Change in unearned revenues 1,226 (293) (449)
Increase (decrease) in traditional life
policy liabilities and accruals (3,582) 2,758 3,750
Decrease in other policyholders' funds (2) (756) (130)
Increase in accrued investment income (8,318) (16,875) (13,486)
Policy acquisition costs deferred (156,041) (178,133) (193,263)
Amortization of deferred policy
acquisition costs 79,306 72,537 50,921
Change in other assets, other
liabilities, and accrued income taxes (13,270) 42,496 27,372
Provision for depreciation and
amortization 982 (8,449) (1,089)
Provision for deferred income taxes -- 1,117 9,958
Share of losses (equity in earnings)
of related parties 133 (27) 51
Realized gains on investments (16,213) (9,524) (19,697)
_______________________________________
Net cash provided by operating
activities 384,765 328,092 237,893
Investing activities
Sale, maturity or repayment of investments:
Fixed maturities - available for sale 525,164 145,173 204,847
Fixed maturities - held for investment -- 203,395 286,844
Equity securities 16,358 6,572 --
Mortgage loans on real estate 80,257 53,544 47,886
Real estate 7,414 2,030 5,662
Policy loans 32,417 28,436 30,397
Short-term investments - net 19,431 10,514 12,294
_______________________________________
681,041 449,664 587,930
Acquisition of investments:
Fixed maturities - available for sale (902,978) (943,285) (181,303)
Fixed maturities - held for investment -- (59,759) (1,422,409)
Equity securities (14,523) (32,097) (23,101)
Mortgage loans on real estate (599,802) (612,449) (314,255)
Real estate (710) (1,018) (876)
Policy loans (35,847) (34,411) (29,996)
_______________________________________
(1,553,860) (1,683,019) (1,971,940)
</TABLE>
See accompanying notes.
Equitable Life Insurance Company of Iowa
Consolidated Statements of Cash Flows (continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Year ended December 31
1996 1995 1994
_______________________________________
<S> <C> <C> <C>
Investing activities (continued)
Disposal of investments accounted for
by the equity method $790 $498 $489
Additions to investments accounted for
by the equity method (2,500) -- (1,376)
Repayments of notes receivable 200 1,317 221
Issuance of notes receivable -- -- (2,438)
Sales of property and equipment 177 109 281
Purchases of property and equipment (5,592) (3,397) (3,052)
_______________________________________
Net cash used in investing activities (879,744) (1,234,828) (1,389,885)
Financing activities
Proceeds from line of credit borrowing 592,289 754,104 1,053,746
Repayment of line of credit borrowing (592,289) (754,104) (1,053,746)
_______________________________________
-- -- --
Receipts from annuity and interest
sensitive life policies credited to
policyholder account balances 1,498,885 1,691,189 1,746,108
Return of policyholder account balances
on annuity policies and interest
sensitive life policies (978,555) (835,893) (586,762)
Contributions from parent -- 50,000 --
Dividends paid to parent (24,000) -- --
_______________________________________
Net cash provided by financing
activities 496,330 905,296 1,159,346
_______________________________________
Increase (decrease) in cash and cash
equivalents 1,351 (1,440) 7,354
Cash and cash equivalents at beginning
of year 10,390 11,830 4,476
_______________________________________
Cash and cash equivalents at end of year $11,741 $10,390 $11,830
=======================================
Supplemental disclosures of cash flow
information
Cash paid during the year for:
Interest $1,876 $2,567 $2,070
Income taxes 69,171 33,490 60,610
Noncash investing and financing
activities:
Foreclosure of mortgage loans,
including taxes and costs
capitalized ($15) in 1996 690 -- 250
</TABLE>
See accompanying notes.
Equitable Life Insurance Company of Iowa
Notes to Consolidated Financial Statements
December 31, 1996
1. SIGNIFICANT ACCOUNTING POLICIES
Organization
Equitable Life Insurance Company of Iowa ("the Company") is a wholly-owned
subsidiary of Equitable of Iowa Companies ("parent"). The Company and USG
Annuity & Life Company ("USG") offer various insurance products including
deferred and immediate fixed annuities, variable annuities and interest
sensitive and traditional life insurance. These products are marketed by the
Company's career agency force, independent insurance agents, broker/dealers
and financial institutions. The Company's primary customers are individuals.
Consolidation
The consolidated financial statements include the Company and its subsidiaries.
The Company's principal subsidiaries are USG, Equitable American Insurance
Company ("EAIC") and Equitable Companies. At December 31, 1996 and 1995, all
subsidiaries are wholly owned. All significant intercompany accounts and
transactions have been eliminated.
Investments
Fixed maturities: Effective January 1, 1994, the Company adopted Statement
of Financial Accounting Standards ("SFAS") No. 115, Accounting for Certain
Investments in Debt and Equity Securities. Pursuant to SFAS No. 115, fixed
maturity securities are designated as either "available for sale", "held for
investment" or "trading". Sales of fixed maturities designated as "available
for sale" are not restricted by SFAS No. 115. Available for sale securities
are reported at fair value and unrealized gains and losses on these securities
are included directly in stockholder's equity, after adjustment for related
changes in deferred policy acquisition costs, policy reserves and deferred
income taxes. At December 31, 1996 and 1995, all of the Company's fixed
maturity securities are designated as available for sale although the Company
is not precluded from designating fixed maturity securities as held for
investment or trading at some future date. Securities the Company has the
positive intent and ability to hold to maturity are designated as "held for
investment". Held for investment securities are reported at cost adjusted for
amortization of premiums and discounts. Changes in the fair value of these
securities, except for declines that are other than temporary, are not
reflected in the Company's financial statements. Sales of securities
designated as held for investment are severely restricted by SFAS No. 115.
Securities bought and held principally for the purpose of selling them in the
near term are designated as trading securities. Unrealized gains and losses
on trading securities are included in current earnings. Transfers of
securities between categories are restricted and are recorded at fair value at
the time of the transfer. Securities determined to have a decline in value
that is other than temporary are written down to estimated fair value which
becomes the security's new cost basis by a charge to realized losses in the
Company's Statement of Income. Premiums and discounts are amortized/accrued
utilizing the scientific interest method which results in a constant yield over
the security's expected life. Amortization/accrual of premiums and discounts
on mortgage-backed securities incorporates a prepayment assumption to estimate
1. SIGNIFICANT ACCOUNTING POLICIES (continued)
Investments (continued)
the securities' expected lives.
Equity securities: Equity securities (common and non-redeemable preferred
stocks) are reported at estimated fair value if readily marketable or
conversion value, if applicable, or at cost if not readily marketable. The
change in unrealized appreciation and depreciation of marketable equity
securities (net of related deferred income taxes, if any) is included directly
in stockholder's equity. Equity securities determined to have a decline in
value that is other than temporary are written down to estimated fair value
which becomes the security's new cost basis by a charge to realized losses in
the Company's Statement of Income.
Mortgage loans: Mortgage loans on real estate are reported at cost adjusted
for amortization of premiums and accrual of discounts. If the value of any
mortgage loan is determined to be impaired (i.e., when it is probable the
Company will be unable to collect all amounts due according to the contractual
terms of the loan agreement), the carrying value of the mortgage loan is
reduced to the present value of expected future cash flows from the loan,
discounted at the loan's effective interest rate, or to the loan's observable
market price, or the fair value of the underlying collateral. The carrying
value of impaired loans is reduced by the establishment of a valuation
allowance which is adjusted at each reporting date for significant changes in
the calculated value of the loan. Changes in this valuation allowance are
charged or credited to income.
Real estate: Real estate, which includes real estate acquired through
foreclosure, is reported at cost less allowances for depreciation. Real estate
acquired through foreclosure, or in-substance foreclosure, is recorded at the
lower of cost (which includes the balance of the mortgage loan, any accrued
interest and any costs incurred to obtain title to the property) or fair value
at or before the foreclosure date. The carrying value of these assets is
subject to review when events or circumstances indicate an impairment might
exist. If the estimated undiscounted cash flows is less than the carrying
amount of the assets, an impairment in value is deemed to exist and an
impairment loss is recognized. The carrying value of the asset is written
down to an amount representing the sum of the estimated undiscounted cash flows
which becomes the asset's new cost basis.
Other investments: Policy loans are reported at unpaid principal. Short-
term investments are reported at cost adjusted for amortization of premiums
and accrual of discounts. Investments accounted for by the equity method
include investments in, and advances to, various joint ventures and
partnerships.
Fair values: Estimated fair values, as reported herein, of publicly traded
fixed maturity securities are as reported by an independent pricing service.
Fair values of conventional mortgage-backed securities not actively traded in
a liquid market are estimated using a third party pricing system. This pricing
system uses a matrix calculation assuming a spread over U.S. Treasury bonds
based upon the expected average lives of the securities. Fair values of
private placement bonds are estimated using a matrix that assumes a spread
(based on interest rates and a risk assessment of the bonds) over U.S. Treasury
bonds. Estimated fair values of redeemable preferred stocks are as reported
by the National Association of Insurance Commissioners ("NAIC"). Estimated
fair values of equity securities are based on the latest quoted market prices
1. SIGNIFICANT ACCOUNTING POLICIES (continued)
Investments (continued)
or conversion value, if applicable. Estimated fair values of the Company's
investment in its registered separate accounts are based upon the quoted fair
value of the securities comprising the individual portfolios underlying the
separate accounts. Fair values of equity securities which are not readily
marketable, are estimated based upon values which are representative of the
fair values of issues of comparable yield and quality. Realized gains and
losses are determined on the basis of specific identification and average cost
methods for manager initiated and issuer initiated disposals, respectively.
Financial Instruments
Interest rate caps and cash settled put swaptions ("instruments") are reported
at amortized cost and included in other assets. These instruments were
purchased to reduce the negative effects of potential increases in withdrawal
activity related to the Company's annuity liabilities which may result from
extreme increases in interest rates. All outstanding instruments are
designated as hedges and, therefore, are not reported at fair value. Premiums
paid to purchase these instruments are deferred and amortized over the term of
the instruments on a straight-line basis. The instruments do not require any
additional payments by the Company. Any payments received in accordance with
the terms of the instruments are recorded as an adjustment to interest
credited. Unrealized gains and losses on these instruments and related assets
or liabilities will not be recorded in income until realized.
Cash and Cash Equivalents
For purposes of the consolidated statement of cash flows, the Company considers
all demand deposits and interest-bearing accounts not related to the investment
function to be cash equivalents. All interest-bearing accounts classified as
cash equivalents have original maturities of three months or less.
Deferred Policy Acquisition Costs
Certain costs of acquiring new insurance business, principally commissions and
other expenses related to the production of new business, have been deferred.
For annuity and interest sensitive life products, such costs are being
amortized generally in proportion to the present value (using the assumed
crediting rate) of expected gross profits. This amortization is adjusted
retrospectively, or "unlocked", when the Company revises its estimate of
current or future gross profits to be realized from a group of products. For
traditional life insurance products, such costs are being amortized over the
premium-paying period of the related policies in proportion to premium revenues
recognized, using principally the same assumptions for interest, mortality and
withdrawals that are used for computing liabilities for future policy benefits
subject to traditional "lock-in" concepts. Deferred policy acquisition costs
are adjusted to reflect the pro-forma impact of unrealized gains and losses on
fixed maturity securities the Company has designated as "available for sale"
under SFAS No. 115.
Property and Equipment
Property and equipment primarily represent leasehold improvements at the
Company's headquarters and at various agency offices, office furniture and
equipment and capitalized computer software and are not considered to be
significant to the Company's overall operations. Property and equipment are
1. SIGNIFICANT ACCOUNTING POLICIES (continued)
Property and Equipment (continued)
reported at cost less allowances for depreciation. Depreciation expense is
computed primarily on the basis of the straight-line method over the estimated
useful lives of the assets.
Intangible Assets
Intangible assets include the value of various licenses acquired in conjunction
with the purchase of USG which are being amortized over forty years using the
straight-line method.
Future Policy Benefits
Future policy benefits for fixed annuity and interest sensitive life products,
are established utilizing the retrospective deposit accounting method. Policy
reserves represent the premiums received plus accumulated interest, less
mortality and administration charges. Interest credited to these policies
ranged from 3.00% to 11.00% during 1996, 3.35% to 11.35% during 1995 and 3.50%
to 11.35% during 1994.
The unearned revenue reserve primarily reflects the unamortized balance of the
excess of first year administration charges over renewal period administration
charges (policy initiation fees) on fixed annuity and interest sensitive life
products. These excess charges have been deferred and are being recognized in
income over the period benefited using the same assumptions and factors used to
amortize deferred policy acquisition costs.
The liability for future policy benefits for traditional life insurance
products has been calculated on a net-level premium basis. Interest
assumptions range from 2.75% for 1956 and prior issues to a 9.00% level, graded
to 6.00% after twenty years for current issues. Mortality, morbidity and
withdrawal assumptions generally are based on actual experience. These
assumptions have been modified to provide for possible adverse deviation from
the assumptions. Future dividends for participating business (which accounted
for 1.71% of premiums and 8.59% of life insurance in force in 1996) are
provided for in the liability for future policy benefits.
Separate Accounts
Assets and liabilities of the separate accounts reported in the accompanying
balance sheets represent funds that are separately administered principally
for variable annuity contracts, as well as, the Company's defined pension
benefit plan assets and liabilities. Contractholders, rather than the Company,
bear the investment risk for variable products. At the direction of the
contractholders, the separate accounts invest the premiums from the sale of
variable annuity products in shares of specified mutual funds. The assets and
liabilities of the separate accounts are clearly identified and segregated from
other assets and liabilities of the Company. The portion of the separate
account assets applicable to variable annuity contracts cannot be charged with
liabilities arising out of any other business the Company may conduct.
Variable separate account assets carried at fair value of the underlying
investments generally represent contractholder investment values maintained
in the accounts. Variable separate account liabilities represent account
balances for the variable annuity contracts invested in the separate accounts.
The Company's separate account assets and liabilities for its pension plan
1. SIGNIFICANT ACCOUNTING POLICIES (continued)
Separate Accounts (continued)
represent the estimated fair values of the pension plan assets and associated
liabilities. Net investment income and realized and unrealized capital gains
and losses related to separate account assets are not reflected in the
accompanying Statements of Income.
Product charges recorded by the Company from variable annuity products consist
of charges applicable to each contract for mortality and expense risk, contract
administration and surrender charges. The Company also receives investment
advisory and investment management fees from the mutual funds underlying its
variable products which is recorded in other income.
Recognition of Premium Revenues and Costs
Revenues for fixed annuity and interest sensitive life products consist of
policy charges for the cost of insurance, policy administration charges,
amortization of policy initiation fees and surrender charges assessed against
policyholder account balances during the period. Expenses related to these
products include interest credited to policyholder account balances and benefit
claims incurred in excess of policyholder account balances.
Traditional life insurance premiums are recognized as revenues over the
premium-paying period. Future policy benefits and policy acquisition costs are
associated with the premiums as earned by means of the provision for future
policy benefits and amortization of deferred policy acquisition costs.
Deferred Income Taxes
Deferred tax assets or liabilities are computed based on the difference
between the financial statement and income tax bases of assets and liabilities
using the enacted marginal tax rate. Deferred tax assets or liabilities are
adjusted to reflect the pro forma impact of unrealized gains and losses on
equity securities and fixed maturity securities the Company has designated as
available for sale under SFAS No. 115. Changes in deferred tax assets or
liabilities resulting from this SFAS No. 115 adjustment are charged or credited
directly to stockholder's equity. Deferred income tax expenses or credits
reflected in the Company's Statements of Income are based on the changes in the
deferred tax asset or liability from period to period (excluding the SFAS
No. 115 adjustment).
Dividend Restrictions
The Company's ability to pay dividends to its parent company is restricted
because prior approval of insurance regulatory authorities is required for
payment of dividends to the stockholder which exceed an annual limitation. On
August 12, 1996, the Company paid a dividend to its parent of $24,000,000.
During 1997, the Company could pay dividends to the parent company of
approximately $95,363,000 without prior approval of statutory authorities.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenue and expenses during the preparation period. Actual results
1. SIGNIFICANT ACCOUNTING POLICIES (continued)
Use of Estimates (continued)
could differ from those estimates.
Management is required to utilize historical experience and assumptions about
future events and circumstances in order to develop estimates of material
reported amounts and disclosures. Included among the material (or potentially
material) reported amounts and disclosures that require extensive use of
estimates and assumptions are (1) estimates of fair values of investments in
securities and other financial instruments, as well as fair values of
policyholder liabilities, (2) policyholder liabilities, (3) deferred policy
acquisition costs, (4) net assets for pension and liabilities for
postretirement benefits, (5) asset valuation allowances, (6) guaranty fund
assessment accruals, (7) deferred tax benefits (liabilities) and (8) estimates
for commitments and contingencies including legal matters, if a liability is
anticipated and can be reasonably estimated. Estimates and assumptions
regarding all of the preceding are inherently subject to change and are
reassessed periodically. Changes in estimates and assumptions could materially
impact the financial statements.
Reclassification
Certain amounts in the 1995 and 1994 financial statements have been
reclassified to conform to the 1996 financial statement presentation.
2. BASIS OF FINANCIAL REPORTING
The financial statements of the Company differ from related statutory financial
statements principally as follows: (1) acquisition costs of acquiring new
business are deferred and amortized over the life of the policies rather than
charged to operations as incurred; (2) future policy benefit reserves for
annuity and interest sensitive life products are based on full account values,
rather than the greater of cash surrender value or amounts derived from
discounting methodologies utilizing statutory interest rates; (3) future
policy benefit reserves on traditional life insurance products are based on
reasonable assumptions of expected mortality, interest and withdrawals which
include a provision for possible unfavorable deviation from such assumptions,
which may differ from reserves based upon statutory mortality rates and
interest; (4) reserves are reported before reduction for reserve credits
related to reinsurance ceded and a receivable is established, net of an
allowance for uncollectible amounts, for these credits rather than presented
net of these credits; (5) fixed maturity investments are designated as
"available for sale" and valued at fair value with unrealized appreciation/
depreciation, net of adjustments to deferred income taxes (if applicable) and
deferred policy acquisition costs, credited/charged directly to stockholder's
equity rather than valued at amortized cost; (6) the carrying value of fixed
maturity securities is reduced to fair value by a charge to realized losses in
the statements of income when declines in carrying value are judged to be other
than temporary, rather than through the establishment of a formula-determined
statutory investment reserve (carried as a liability), changes in which are
charged directly to surplus; (7) deferred income taxes are provided for the
difference between the financial statement and income tax bases of assets and
liabilities; (8) net realized gains or losses attributed to changes in the
level of interest rates in the market are recognized when the sale is completed
rather than deferred and amortized over the remaining life of the fixed
maturity security or mortgage loan; (9) gains arising from sale lease-back
transactions are deferred and amortized over the life of the lease rather than
2. BASIS OF FINANCIAL REPORTING (continued)
recognized in the period of sale; (10) a liability is established for
anticipated guaranty fund assessments, net of related anticipated premium tax
credits, rather than capitalized when assessed and amortized in accordance with
procedures permitted by insurance regulatory authorities; (11) a prepaid
pension cost asset established in accordance with SFAS No. 87, Employers'
Accounting for Pensions, agents' balances and certain other assets designated
as "non-admitted assets" for statutory purposes are reported as assets rather
than being charged to surplus; (12) revenues for annuity and interest sensitive
life products consist of policy charges for the cost of insurance, policy
administration charges, amortization of policy initiation fees and surrender
charges assessed rather than premiums received; (13) expenses for
postretirement benefits other than pensions are recognized for all qualified
employees rather than for only vested and fully-eligible employees, and the
accumulated postretirement benefit obligation for years prior to adoption of
SFAS No. 106, Employers' Accounting for Postretirement Benefits Other than
Pensions, was recognized as a cumulative effect of change in accounting method
rather than deferred and amortized over twenty years, (14) assets and
liabilities are restated to fair values when a change in ownership occurs,
with provisions for goodwill and other intangible assets, rather than
continuing to be presented at historical cost; and (15) amortization of the
cost of financial instruments purchased in conjunction with the Company's
hedging program are recorded in interest credited rather than as a deduction
from net investment income.
Net income for the Company, USG and EAIC as determined in accordance with
statutory accounting practices was $96,841,000 in 1996, $87,179,000 in 1995,
and $61,421,000 in 1994. Total statutory capital and surplus was $567,316,000
at December 31, 1996 and $532,817,000 at December 31, 1995.
3. INVESTMENT OPERATIONS
Investment Results
Major categories of net investment income are summarized below:
<TABLE>
<CAPTION>
Year ended December 31
1996 1995 1994
_______________________________________
(Dollars in thousands)
<S> <C> <C> <C>
Fixed maturities $576,781 $558,903 $478,436
Equity securities 3,080 1,255 303
Mortgage loans on real estate 125,144 76,382 39,117
Real estate 2,588 2,747 3,696
Policy loans 10,414 10,049 9,788
Short-term investments 1,397 1,275 886
Other - net 1,007 996 801
_______________________________________
720,411 651,607 533,027
Less investment expenses (15,337) (13,551) (11,381)
_______________________________________
Net investment income $705,074 $638,056 $521,646
=======================================
</TABLE>
3. INVESTMENT OPERATIONS (continued)
Investment Results (continued)
Realized gains (losses) on investments are as follows:
<TABLE>
<CAPTION>
Realized*
_______________________________________
Year ended December 31
1996 1995 1994
_______________________________________
(Dollars in thousands)
<S> <C> <C> <C>
Fixed maturities:
Available for sale $13,557 ($3,401) $7,417
Held for investment -- 9,330 11,364
Equity securities 869 912 --
Mortgage loans on real estate -- -- (62)
Real estate 1,218 (161) 7
Equity investments 569 2,844 971
_______________________________________
Realized gains on investments $16,213 $9,524 $19,697
=======================================
<FN>
* See Note 6 for the income tax effects attributable to realized gains and
losses on investments.
</TABLE>
The change in unrealized appreciation (depreciation) on securities at fair
value is as follows:
<TABLE>
<CAPTION>
Unrealized
_______________________________________
Year ended December 31
1996 1995 1994
_______________________________________
(Dollars in thousands)
<S> <C> <C> <C>
Fixed maturities:
Available for sale ($293,555) $507,971 ($40,597)
Held for investment -- 334,708 (663,840)
Equity securities 29,060 1,614 (836)
_______________________________________
Unrealized appreciation (depre-
ciation) of investments ($264,495) $844,293 ($705,273)
=======================================
</TABLE>
Fixed Maturity and Equity Securities
Effective January 1, 1994, the Company adopted SFAS No. 115, Accounting for
Certain Investments in Debt and Equity Securities. SFAS No. 115 requires
companies to classify their securities as "held to maturity", "available for
sale" or "trading".
On November 15, 1995, the Financial Accounting Standards Board ("FASB") issued
a special report allowing companies an opportunity to reassess the
3. INVESTMENT OPERATIONS (continued)
Fixed Maturity and Equity Securities (continued)
classification of their securities holdings pursuant to SFAS No. 115. In
response to this opportunity, the Company reclassified 100% of the securities
in its "held to maturity" category to "available for sale" on December 1, 1995
to maximize investment flexibility. As a result of this reclassification,
securities with combined cost totaling $5,250,921,000 and estimated fair value
of $5,560,519,000 were transferred from the Company's held for investment
portfolio to its available for sale portfolio. This transfer caused the net
unrealized investment gain component of stockholder's equity to increase by
$138,795,000 (net of deferred income taxes of $74,735,000 and an adjustment of
$96,068,000 to deferred policy acquisition costs). The Company is not,
however, precluded from classifying securities as held to maturity in the
future.
SFAS No. 115 requires the carrying value of fixed maturity securities
classified as available for sale to be adjusted for changes in market value,
primarily caused by interest rates. While other related accounts are
adjusted as discussed above, the insurance liabilities supported by these
securities are not adjusted under SFAS No. 115, thereby creating volatility
in stockholder's equity as interest rates change. As a result, the company
expects that its stockholder's equity will be exposed to incremental
volatility due to changes in market interest rates and the accompanying
changes in the reported value of securities classified as available for sale,
with equity increasing as market interest rates decline and, conversely,
decreasing as market interest rates rise. Due to this potential for
distortion in stockholder's equity, fair value disclosure is provided in Note
5. SFAS No. 107, Disclosures about Fair Value of Financial Instruments
requires disclosure of fair values for selected financial instruments but does
not require disclosure of fair value of life insurance liabilities. Although
the Company's life insurance liabilities are specifically exempted from this
disclosure requirement, estimated fair value disclosure of these liabilities
is provided in an effort to more properly reflect changes in stockholder's
equity from fluctuations in interest rates.
3. INVESTMENT OPERATIONS (continued)
Fixed Maturity and Equity Securities (continued)
At December 31, 1996 and 1995, amortized cost, gross unrealized gains and
losses and estimated fair value of the Company's fixed maturity, all of which
are designated as available for sale, are as follows:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
_____________________________________________________
(Dollars in thousands)
<S> <C> <C> <C> <C>
December 31, 1996
U.S. Government and
governmental agencies
and authorities:
Mortgage-backed
securities $251,342 $9,674 ($755) $260,261
Other 87,374 2,125 (1,420) 88,079
States, municipalities
and political
subdivisions 15,131 1,134 -- 16,265
Foreign governments 10,572 2,706 -- 13,278
Public utilities 1,205,377 41,076 (15,757) 1,230,696
Investment grade
corporate 2,654,742 156,968 (16,290) 2,795,420
Below investment grade
corporate 707,260 13,981 (15,992) 705,249
Mortgage-backed
securities 2,350,168 41,857 (45,259) 2,346,766
Redeemable preferred
stocks 616 -- (229) 387
_____________________________________________________
Total $7,282,582 $269,521 ($95,702) $7,456,401
=====================================================
</TABLE>
3. INVESTMENT OPERATIONS (continued)
Fixed Maturity and Equity Securities (continued)
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
_____________________________________________________
(Dollars in thousands)
<S> <C> <C> <C> <C>
December 31, 1995
U.S. Government and
governmental agencies
and authorities:
Mortgage-backed
securities $289,422 $16,738 $306,160
Other 60,567 4,163 ($2) 64,728
States, municipalities
and political
subdivisions 15,485 1,639 -- 17,124
Foreign governments 10,573 3,426 -- 13,999
Public utilities 1,271,641 92,546 (2,077) 1,362,110
Investment grade
corporate 2,322,036 277,981 (1,303) 2,598,714
Below investment grade
corporate 574,284 19,428 (12,492) 581,220
Mortgage-backed
securities 2,340,194 75,704 (8,142) 2,407,756
Redeemable preferred
stocks 635 -- (235) 400
_____________________________________________________
Total $6,884,837 $491,625 ($24,251) $7,352,211
=====================================================
</TABLE>
At December 31, 1996, net unrealized investment gains on fixed maturity
securities designated as available for sale totaled $173,819,000. This
appreciation caused an increase in stockholder's equity of $76,121,000 at
December 31, 1996 (net of deferred income taxes of $43,533,000 and an
adjustment of $54,165,000 to deferred policy acquisition costs). At December
31, 1995, net unrealized investment gains on fixed maturity securities
designated as available for sale totaled $467,375,000. This appreciation
caused an increase in stockholder's equity of $208,932,000 at December 31,
1995 (net of deferred income taxes of $113,503,000 and an adjustment of
$144,940,000 to deferred policy acquisition costs). No fixed maturity
securities were designated as held for investment or trading at December 31,
1996 or 1995. Short-term investments, all with maturities of 30 days or less,
have been excluded from the above schedules. Amortized cost approximates fair
value for these securities.
At December 31, 1996, net unrealized appreciation of equity securities of
$32,847,000 was comprised of gross unrealized appreciation of $6,765,000 on
the Company's investment in affiliated common stock and its registered separate
account, gross unrealized appreciation of $26,315,000 on an investment in a
real estate investment trust and gross unrealized depreciation of $233,000 on
other equity securities. The Company's investment in the real estate
investment trust had an estimated fair value of $61,339,000 and a cost basis
of $35,024,000 at December 31, 1996. The estimated fair value of the Company's
3. INVESTMENT OPERATIONS (continued)
Fixed Maturity and Equity Securities (continued)
investment is based upon conversion value. Conversion value is derived from
the quoted market value of the publicly traded security into which the
Company's investment can be converted and the issuer's cash flow from
operations. As such, changes in operating cash flows or the quoted market
price of the issuer may result in significant volatility in the estimated fair
value of the Company's investment.
The amortized cost and estimated fair value of fixed maturity securities, by
contractual maturity, at December 31, 1996, are shown below. Expected
maturities will differ from contractual maturities because borrowers may have
the right to call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
Estimated
Amortized Fair
Cost Value
_________________________
(Dollars in thousands)
<S> <C> <C>
December 31, 1996
Due within one year $11,894 $12,101
Due after one year through five years 200,094 206,230
Due after five years through ten years 1,961,325 2,016,564
Due after ten years 2,507,759 2,614,479
_________________________
4,681,072 4,849,374
Mortgage-backed securities 2,601,510 2,607,027
_________________________
Total $7,282,582 $7,456,401
=========================
</TABLE>
3. INVESTMENT OPERATIONS (continued)
Fixed Maturity and Equity Securities (continued)
An analysis of sales, maturities and principal repayments of the Company's
fixed maturities portfolio for the years ended December 31, 1996, 1995 and
1994 is as follows:
<TABLE>
<CAPTION>
Gross Gross Proceeds
Amortized Realized Realized from
Cost Gains Losses Sale
_______________________________________________________________________________
(Dollars in thousands)
<S> <C> <C> <C> <C>
Year ended December 31, 1996
Scheduled principal repayments,
calls and tenders $289,645 $11,866 ($315) $301,196
Sales 221,962 3,461 (1,455) 223,968
______________________________________________
Total $511,607 $15,327 ($1,770) $525,164
==============================================
Year ended December 31, 1995
Scheduled principal repayments,
calls and tenders (available
for sale only):
Available for sale $59,935 $319 ($19) $60,235
Held for investment 172,082 5,279 (274) 177,087
Sales:
Available for sale 82,837 2,104 (3) 84,938
Held for investment 21,983 4,325 -- 26,308
______________________________________________
Total $336,837 $12,027 ($296) $348,568
==============================================
Year ended December 31, 1994
Scheduled principal repayments,
calls and tenders (available
for sale only):
Available for sale $167,285 $4,877 ($11) $172,151
Held for investment 275,480 11,389 (25) 286,844
Sales:
Available for sale 29,526 3,184 (14) 32,696
______________________________________________
Total $472,291 $19,450 ($50) $491,691
==============================================
</TABLE>
3. INVESTMENT OPERATIONS (continued)
Mortgage-backed Securities
The amortized cost and estimated fair value of mortgage-backed securities,
which comprise 35% of the Company's investment in fixed maturity securities
at December 31, 1996, by type, are as follows:
<TABLE>
<CAPTION>
Estimated
Amortized Fair
Cost Value
_________________________
(Dollars in thousands)
<S> <C> <C>
December 31, 1996
Mortgage-backed securities:
Government and agency guaranteed pools:
Very accurately defined maturities $17,344 $17,987
Planned amortization class 70,308 74,081
Targeted amortization class 29,336 29,051
Sequential pay 62,453 62,634
Pass through 71,901 76,508
Private label CMOs and REMICs:
Very accurately defined maturities 30,654 31,439
Planned amortization class 25,569 26,889
Targeted amortization class 435,801 426,698
Sequential pay 1,796,138 1,798,645
Mezzanines 37,685 37,835
Private placements and subordinate issues 24,321 25,260
_________________________
Total mortgage-backed securities $2,601,510 $2,607,027
=========================
</TABLE>
During periods of significant interest rate volatility, the mortgages
underlying mortgage-backed securities may prepay more quickly or more slowly
than anticipated. If the principal amount of such mortgages are prepaid
earlier than anticipated during periods of declining interest rates,
investment income may decline due to reinvestment of these funds at lower
current market rates. If principal repayments are slower than anticipated
during periods of rising interest rates, increases in investment yield may
lag behind increases in interest rates because funds will remain invested at
lower historical rates rather than reinvested at higher current rates. To
mitigate this prepayment volatility, the Company invests primarily in
intermediate tranche collateralized mortgage obligations ("CMOs"). CMOs are
pools of mortgages that are segregated into sections, or tranches, which
provide sequential retirement of bonds rather than a pro-rata share of
principal return in the pass-through structure. The Company owns no "interest
only" or "principal only" mortgage-backed securities. Further, the Company
has not purchased obligations at significant premiums, thereby limiting
exposure to loss during periods of accelerated prepayments. At December 31,
1996, unamortized premiums on mortgage-backed securities totaled $4,253,000
and unaccrued discounts on mortgage-backed securities totaled $52,817,000.
3. INVESTMENT OPERATIONS (continued)
Other Investment Information
Investment Valuation Analysis: The Company analyzes its investment portfolio
at least quarterly in order to determine if the carrying value of its
investments has been impaired. The carrying value of debt and equity
securities is written down to fair value by a charge to realized losses when
an impairment in value appears to be other than temporary. During 1996, no
investments were identified as having an impairment other than temporary.
During 1995, the Company identified two below investment grade securities as
having impairments in value that were other than temporary. As a result of
those determinations, the Company recognized pre-tax losses of $5,802,000 to
reduce the carrying value of the securities to their estimated fair value.
These securities were subsequently sold resulting in realized gains totaling
$1,200,000 during 1995. During 1994, the Company recognized a pre-tax loss
of $619,000 to reduce the carrying value of one fixed maturity security to
its estimated fair value.
At December 31, 1996, one mortgage loan with a carrying value of $41,000 was
delinquent by 90 days or more.
The carrying value of investments which have been non-income producing for
the years ending December 31, 1996 and 1995 totaled $239,000 related to a
real estate property.
Investments on Deposit: At December 31, 1996, affidavits of deposits covering
bonds with a par value of $1,780,482,000 (1995 - $1,693,573,000), mortgage
loans with an unpaid principal balance of $402,911,000 (1995 - $304,729,000)
and policy loans with an unpaid balance of $164,659,000 (1995 - $167,844,000)
were on deposit with state agencies to meet regulatory requirements. In
addition, at December 31, 1996, pursuant to a reinsurance agreement, the
Company had investments with a carrying value of $56,314,000 (1995 -
$63,664,000) and estimated market values of $53,833,000 (1995 -
$64,350,000) deposited in a trust for the benefit of the ceding company.
Investment Diversifications: The Company's investment policies related to
its investment portfolio require diversification by asset type, company and
industry and set limits on the amounts which can be invested in an individual
issuer. Such policies are at least as restrictive as those set forth by
regulatory authorities. Fixed maturity investments included investments in
various non-governmental mortgage-backed securities (24% in 1996 and 33% in
1995), public utilities (19% in 1996 and 1995), basic industrials (26% in
1996 and 21% in 1995), and consumer products (14% in 1996 and 12% in
1995). Mortgage loans on real estate have been analyzed by geographical
locations and there are no concentrations of mortgage loans in any state
exceeding ten percent in 1996 and 1995. Mortgage loans on real estate have also
been analyzed by collateral type with significant concentrations identified in
retail facilities (28% in 1996 and 32% in 1995), industrial buildings (29% in
1996 and 26% in 1995), multi-family residential buildings (20% in 1996 and
24% in 1995), and office buildings (22% in 1996 and 17% in 1995). Equity
securities (which represents 0.9% of the Company's investments) consist
primarily of investments in the Company's registered separate accounts and an
investment of $61,339,000 in a real estate investment trust. Real estate and
investments accounted for by the equity method are not significant to the
Company's overall investment portfolio.
No investment in any person or its affiliates (other than bonds issued by
agencies of the United States government) exceeded ten percent of stockholder's
equity at December 31, 1996.
4. FINANCIAL INSTRUMENTS - RISK MANAGEMENT
Hedging Program: During the second quarter of 1996, the Company implemented
a hedging program under which certain derivative financial instruments,
interest rate caps and cash settled put swaptions ("instruments"), were
purchased to reduce the negative effects of potential increases in withdrawal
activity related to the Company's annuity liabilities which may result from
extreme increases in interest rates. The Company purchased instruments, all
during the second quarter, with notional amounts totaling approximately
$600,000,000 in interest rate caps and $1,300,000,000 in cash settled put
swaptions all of which were outstanding at December 31, 1996. The Company
paid approximately $21,100,000 in premiums for these instruments. The cost of
this program has been incorporated into the Company's product pricing. The
instruments do not require any additional payments by the Company.
The agreements for these instruments entitle the Company to receive payments
from the instruments' counterparties on future reset dates if interest rates,
as specified in the agreements, rise above a specified fixed rate (9.0% and
9.5%). The amount of such payments to be received by the Company for the
interest rate caps, if any, will be calculated by taking the excess of the
current applicable rate over the specified fixed rate, and multiplying this
excess by the notional amount of the caps. Payments on cash settled put
swaptions are also calculated based upon the excess of the current applicable
rate over the specified fixed rate multiplied by the notional amount. The
product of this rate differential times the notional amount is assumed to
continue for a series of defined future semi-annual payment dates and the
resulting hypothetical payments are discounted to the current payment date
using the discount rate defined in the agreement. Any payments received from
the counterparties will be recorded as an adjustment to interest credited.
The following table summarizes the contractual maturities of notional
amounts by type of instrument at December 31, 1996:
<TABLE>
<CAPTION>
1998 1999 2000 2001 2002 Total
_______________________________________________________________________________
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest rate
caps $400,000 $200,000 $600,000
Cash settled
put swaptions $100,000 $400,000 $400,000 350,000 50,000 1,300,000
_____________________________________________________________
Total notional
amount $100,000 $400,000 $400,000 $750,000 $250,000 $1,900,000
=============================================================
</TABLE>
4. FINANCIAL INSTRUMENTS - RISK MANAGEMENT (continued)
Accounting Treatment: Premiums paid to purchase these instruments are deferred
and included in other assets. Premiums are amortized and included in interest
credited to account balances over the term of the instruments on a straight-
line basis. The Company has recorded amortization of $3,081,000 for 1996.
Unrealized gains and losses on these instruments and related assets or
liabilities will not be recorded in income until realized. The Financial
Accounting Standards Board ("FASB") and the Securities and Exchange Commission
are evaluating the accounting and disclosure requirements for these
instruments. The SEC amended its derivative disclosures rules in January of
1997 requiring additional qualitative and quantitative disclosures by December
31, 1997. FASB has issued an exposure draft titled "Accounting for Derivative
and Similar Financial Instruments and for Hedging Activities" which, if adopted
as a Statement of Financial Accounting Standards in its current form, would
require the Company to change its accounting treatment for these instruments.
The requirements of any final standard which may result from this exposure
process are not known at this time and, therefore, the impact of such a
standard on the Company's financial statements cannot be determined at this
time.
Any unrealized gain or loss on the instruments is off-balance sheet and
therefore, is not reflected in the financial statements. The following table
summarizes the amortized cost, gross unrealized gains and losses and estimated
fair value on these instruments as of December 31, 1996:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
December 31, 1996 Cost Gains Losses Value
______________________________________________________________________________
(Dollars in thousands)
<S> <C> <C> <C> <C>
Interest rate caps $5,164 ($1,456) $3,708
Cash settled put swaptions 12,877 $65 (2,570) 10,372
__________________________________________________
Total $18,041 $65 ($4,026) $14,080
==================================================
</TABLE>
The decline in fair value from amortized cost reflects changes in interest
rates and market conditions since time of purchase.
Exposure to Loss - Counterparty Nonperformance: The Company is exposed to
the risk of losses in the event of nonperformance by the
counterparties of these instruments. Losses recorded in the Company's
financial statements in the event of nonperformance will be limited to the
unamortized premium (remaining amortized cost) paid to purchase the instrument
because no additional payments are required by the Company on these instruments
after the initial premium. Counterparty nonperformance would result in an
economic loss if interest rates exceeded the specified fixed rate. Economic
losses would be measured by the net replacement cost, or estimated fair value,
for such instruments. The estimated fair value is the average of quotes
obtained from related and unrelated counterparties. The Company limits its
exposure to such losses by: diversification among counterparties, limiting
exposure to any individual counterparty based upon that counterparty's credit
rating, and limiting its exposure by instrument type to only those instruments
that do not require future payments. For purposes of determining risk exposure
4. FINANCIAL INSTRUMENTS - RISK MANAGEMENT (continued)
to any individual counterparty, the Company evaluates the combined exposure to
that counterparty on both a derivative financial instruments' level and on
the total investment portfolio credit risk and reports its exposure to senior
management at least monthly. The maximum potential economic loss (the cost
of replacing an instrument or the net replacement value) due to nonperformance
of the counterparties will increase or decrease during the life of the
instruments as a function of maturity and market conditions.
The Company determines counterparty credit quality by reference to ratings
from independent rating agencies. As of December 31, 1996, the ratings
assigned by Standard & Poor's Corporation by instrument with respect to the
net replacement value (fair value) of the Company's instruments was as follows:
<TABLE>
<CAPTION>
December 31, 1996 Net Replacement Value
_______________________________________________________________________________
(Dollars in thousands) Interest Rate Cash Settled
Caps Put Swaptions Total
_______________________________________________
<S> <C> <C> <C>
Counterparties credit quality:
AAA $2,447 $5,363 $7,810
AA- 1,261 2,828 4,089
A+ -- 2,181 2,181
_______________________________________________
Total $3,708 $10,372 $14,080
===============================================
</TABLE>
5. FAIR VALUES OF FINANCIAL INSTRUMENTS
SFAS No. 107, Disclosures about Fair Value of Financial Instruments, requires
disclosure of estimated fair value of all financial instruments, including
both assets and liabilities recognized and not recognized in a Company's
balance sheet, unless specifically exempted. SFAS No. 119, Disclosure about
Derivative Financial Instruments and Fair Value of Financial Instruments,
requires additional disclosures about derivative financial instruments. Most
of the Company's investments, insurance liabilities and debt, as well as off-
balance-sheet items such as loan guarantees, fall within the standards'
definition of a financial instrument. Although the Company's life insurance
liabilities are specifically exempted from this disclosure requirement,
estimated fair value disclosure of these liabilities is also provided in order
to make the disclosures more meaningful. Accounting, actuarial and regulatory
bodies are continuing to study the methodologies to be used in developing fair
value information, particularly as it relates to liabilities for insurance
contracts. Accordingly, care should be exercised in deriving conclusions about
the Company's business or financial condition based on the information
presented herein.
The Company closely monitors the level of its insurance liabilities, the
level of interest rates credited to its interest-sensitive products and the
assumed interest margin provided for within the pricing structure of its
other products. These amounts are taken into consideration in the Company's
overall management of interest rate risk, which attempts to minimize exposure
to changing interest rates through the matching of investment cash flows with
5. FAIR VALUES OF FINANCIAL INSTRUMENTS (continued)
amounts expected to be due under insurance contracts. As discussed below,
the Company has used discount rates in its determination of fair values for
its liabilities which are consistent with market yields for related assets.
The use of the asset market yield is consistent with management's opinion that
the risks inherent in its asset and liability portfolios are similar. This
assumption, however, might not result in values that are consistent with
those obtained through an actuarial appraisal of the Company's business or
values that might arise in a negotiated transaction.
The following compares carrying values as shown for financial reporting
purposes with estimated fair values:
<TABLE>
<CAPTION>
December 31 1996 1995
_______________________________________________________________________________
(Dollars in thousands) Estimated Estimated
Carrying Fair Carrying Fair
Value Value Value Value
___________________________________________________
<S> <C> <C> <C> <C>
ASSETS
Balance sheet financial
assets:
Fixed maturities
available for sale $7,456,401 $7,456,401 $7,352,211 $7,352,211
Equity securities of
unaffiliated companies 77,148 77,148 50,595 50,595
Equity security of
affiliated company 5,138 5,138 3,599 3,599
Mortgage loans on real
estate 1,689,088 1,708,464 1,169,456 1,245,128
Short-term investments 15,852 15,852 35,282 35,282
Cash and cash equivalents 11,741 11,741 10,390 10,390
Notes and other
receivables 137,949 137,949 137,126 137,126
Separate account assets 450,632 450,632 171,881 171,881
___________________________________________________
9,843,949 9,863,325 8,930,540 9,006,212
Deferred policy acquisition
costs and intangible
assets 724,033 -- 556,596 --
Prepaid pension and other
postretirement benefits 26,579 27,143 24,547 22,737
Derivative financial
instruments 18,041 14,080 -- --
Non-financial assets 59,588 60,021 45,209 45,209
___________________________________________________
Total assets $10,672,190 $9,964,569 $9,556,892 $9,074,158
===================================================
</TABLE>
<TABLE>
<CAPTION>
December 31 1996 1995
_______________________________________________________________________________
(Dollars in thousands) Estimated Estimated
Carrying Fair Carrying Fair
Value Value Value Value
___________________________________________________
<S> <C> <C> <C> <C>
LIABILITIES AND
STOCKHOLDER'S EQUITY
Liabilities:
Balance sheet financial
liabilities:
Future policy benefits (net
of related policy loans):
Annuity products $7,741,524 $6,473,411 $6,846,030 $5,905,241
Universal life and
current interest
products 490,780 307,252 441,726 309,142
Participating insurance
and non-participaiting
traditional life
insurance 688,758 515,706 745,339 558,445
___________________________________________________
8,921,062 7,296,369 8,033,095 6,772,828
Separate account
liabilities 450,632 405,083 171,881 171,881
___________________________________________________
9,371,694 7,701,452 8,204,976 6,944,709
Deferred income taxes on
fair value adjustments -- 336,917 -- 272,137
Non-financial liabilities 251,532 251,532 304,522 304,522
___________________________________________________
Total liabilities 9,623,226 8,289,901 8,509,498 7,521,368
Stockholder's equity 1,048,964 1,674,668 1,047,394 1,552,790
___________________________________________________
Total liabilities and
stockholder's equity $10,672,190 $9,964,569 $9,556,892 $9,074,158
===================================================
</TABLE>
The following methods and assumptions were used by the Company in estimating
fair values:
Fixed maturities: Estimated fair values of publicly traded securities are
as reported by an independent pricing service. Estimated fair values of
conventional mortgage-backed securities not actively traded in a liquid market
are estimated using a third-party pricing system. This pricing system uses a
matrix calculation assuming a spread over U. S. Treasury bonds based upon the
expected average lives of the securities. Fair values of private placement
bonds are estimated using a matrix that assumes a spread (based on interest
rates and a risk assessment of the bonds) over U.S. Treasury bonds.
Estimated fair values of redeemable preferred stocks are as reported by the
NAIC.
5. FAIR VALUES OF FINANCIAL INSTRUMENTS (continued)
Equity securities: Estimated fair values are based upon the latest quoted
market prices, where available. For equity securities not actively traded,
estimated fair values are based upon values of issues of comparable yield and
quality or conversion value.
Mortgage loans on real estate: Fair values are estimated by discounting
expected cash flows, using interest rates currently being offered for similar
loans.
Short-term investments, cash and cash equivalents and notes and other
receivables: Carrying values reported in the Company's historical cost basis
balance sheet approximate estimated fair value for these instruments, due to
their short-term nature.
Deferred policy acquisition costs and intangible assets: For historical cost
purposes, the recovery of policy acquisition costs is based on the
realization, among other things, of future interest spreads and gross premiums
on in-force business. Because these cash flows are considered in the
computation of the future policy benefit cash flows, the balances of deferred
policy acquisition cost does not appear on the estimated fair value balance
sheet. Intangible assets do not appear in the estimated fair value balance
sheet because there are no cash flows related to these assets.
Prepaid pension and other postretirement benefits: Estimated fair value of
the prepaid pension costs asset and other postretirement benefits obligations
represents the fair value of plan assets less accumulated benefit obligations
(pension) and accumulated postretirement benefit obligations. Differences in
estimated fair value and carrying value are the result of deferral of
recognition of: prior service costs, unrecognized gains and losses and the
remaining balance of the unrecognized transition asset for pensions.
Derivative financial instruments: SFAS No. 119 requires disclosures about
derivative financial instruments such as futures, forward, swap or option
contracts, or other financial instruments with similar characteristics.
During 1996, with the implementation of the Company's hedging program, the
Company purchased interest rate caps and cash settled put swaptions. The
estimated fair values are the average of quotes obtained from related and
unrelated counterparties. The Company was not a party to such derivative
financial instruments at any time during 1995. Estimated fair values for
these instruments reflect changes in interest rates and market conditions
since time of purchase.
Separate account assets: Separate account assets represent the estimated
fair values of the underlying securities in the Company's historical cost
and estimated fair value basis balance sheets.
Future policy benefits: Estimated fair values of the Company's liabilities
for future policy benefits for interest sensitive life products, annuity
products and participating insurance and non-participating traditional life
insurance products are based upon discounted cash flow calculations. Cash
flows of future policy benefits are discounted using the market yield rate of
the assets supporting these liabilities. Estimated fair values are
presented net of the estimated fair value of corresponding policy loans due to
the interdependent nature of the cash flows associated with these items.
5. FAIR VALUES OF FINANCIAL INSTRUMENTS (continued)
Separate account liabilities: Separate account liabilities are reported
at full account value in the Company's historical cost balance sheet.
Estimated fair values of separate account liabilities are based upon
assumptions using an estimated long-term average market rate of return to
discount future cash flows. The reduction in fair values for separate
account liabilities reflect the present value of future revenues from product
charges or surrender charges.
Deferred income taxes on fair value adjustments: Deferred income taxes
have been reported at the statutory rate for the differences (except for
those attributed to permanent differences) between the carrying value and
estimated fair value of assets and liabilities set forth herein.
Non-financial assets and liabilities: Values are presented at historical
cost. Non-financial assets consist primarily of real estate, securities
and indebtedness of related parties, property and equipment, current income
taxes recoverable and guaranty fund premium tax offset. Non-financial
liabilities consist primarily of other policy claims and benefits, accrued
dividends, deferred income taxes payable, guaranty fund assessments payable,
outstanding checks, suspense accounts, draft accounts payable and amounts
payable to reinsurers.
SFAS No. 107 and SFAS No. 119 require disclosure of estimated fair value
information about financial instruments, whether or not recognized in the
consolidated balance sheets, for which it is practicable to estimate that
value. In cases where quoted market prices are not available, estimated fair
values are based on estimates using present value or other valuation
techniques. Those techniques are significantly affected by the assumptions
used, including the discount rate and estimates of future cash flows. In
that regard, the derived fair value estimates cannot be substantiated by
comparison to independent markets and, in many cases, could not be realized
in immediate settlement of the instrument. The above presentation should not
be viewed as an appraisal as there are several factors, such as the fair
value associated with customer or agent relationships and other intangible
items, which have not been considered. In addition, interest rates and other
assumptions might be modified if an actual appraisal were to be performed.
ACCORDINGLY, THE AGGREGATE ESTIMATED FAIR VALUE AMOUNTS PRESENTED HEREIN ARE
LIMITED BY EACH OF THESE FACTORS AND DO NOT PURPORT TO REPRESENT THE
UNDERLYING VALUE OF THE COMPANY.
6. INCOME TAXES
The Company and all of its subsidiaries file a consolidated federal income
tax return with its parent company. The parent company and its subsidiaries
each report current income tax expense as allocated under a consolidated tax
allocation agreement. Taxes payable to the parent under this agreement were
$3,417,000 and $3,149,000 at December 31, 1996 and 1995, respectively.
Generally, this allocation results in profitable companies recognizing a tax
provision as if the individual company filed a separate return and loss
companies recognizing benefits to the extent their losses contribute to reduce
consolidated taxes. Deferred income taxes have been established by each
member of the consolidated group based upon the temporary differences, the
reversal of which will result in taxable or deductible amounts in future years
when the related asset or liability is recovered or settled, within each
entity.
6. INCOME TAXES (continued)
Income tax expenses (credits) are included in the consolidated financial
statements as follows:
<TABLE>
<CAPTION>
Year ended December 31 1996 1995 1994
_______________________________________________________________________________
(Dollars in thousands)
<S> <C> <C> <C>
Taxes provided in consolidated statements
of income on:
Income before equity income (loss):
Current $69,538 $46,168 $43,357
Deferred (52) 1,065 9,905
________________________________________
69,486 47,233 53,262
Equity income (loss):
Current (99) (43) (65)
Deferred 52 52 52
________________________________________
(47) 9 (13)
Taxes provided in consolidated
statement changes in stockholder's
equity on unrealized gains and
losses, less valuation allowance
of $9,403 in 1994 - deferred (69,970) 113,503 --
________________________________________
($531) $160,745 $53,249
</TABLE> ========================================
Income tax expense attributed to realized gains and losses on investments
amounted to $5,675,000, $3,333,000 and $6,744,000 for the years ended
December 31, 1996, 1995 and 1994, respectively. The effective tax rate on
income before income taxes and equity income (loss) is different from the
prevailing federal income tax rate as follows:
<TABLE>
<CAPTION>
Year ended December 31 1996 1995 1994
_______________________________________________________________________________
(Dollars in thousands)
<S> <C> <C> <C>
Income before income taxes and
equity income (loss) $198,894 $134,726 $153,224
Income tax at federal statutory rate 69,613 47,154 53,628
Tax effect (decrease) of other items (127) 79 (366)
________________________________________
Income tax expense $69,486 $47,233 $53,262
========================================
</TABLE>
6. INCOME TAXES (continued)
The Internal Revenue Service ("IRS") is currently examining, or has examined,
the parent company's consolidated income tax returns through 1992. The 1993,
1994 and 1995 consolidated income tax returns remain open to examination.
Management believes amounts provided for income taxes are adequate to settle
any adjustments raised by the IRS.
The tax effect of temporary differences giving rise to the Company's deferred
income tax assets and liabilities at December 31, 1996 and 1995, is as
follows:
<TABLE>
<CAPTION>
December 31 1996 1995
_______________________________________________________________________________
(Dollars in thousands)
<S> <C> <C>
Deferred tax assets:
Future policy benefits $231,465 $208,431
Accrued dividends 4,393 4,375
Guaranty fund assessment accruals 16,103 17,030
Other 10,154 9,194
__________________________
262,115 239,030
Deferred tax liabilities:
Net unrealized appreciation of securities at
fair value (60,992) (163,581)
Deferred policy acquisition costs (221,889) (168,753)
Prepaid pension costs (12,441) (11,532)
Other (9,994) (8,335)
__________________________
(305,316) (352,201)
__________________________
Deferred income tax liability ($43,201) ($113,171)
==========================
</TABLE>
Prior to 1984, a portion of the Company's current income was not subject to
current income taxation, but was accumulated, for tax purposes, in a
memorandum account designated as "policyholders' surplus account". The
aggregate accumulation in this account at December 31, 1996 was $14,388,000.
Should the policyholders' surplus account of the Company exceed the
limitation prescribed by federal income tax law, or should distributions be
made by the Company to the parent company in excess of $385,006,000, such
excess would be subject to federal income taxes at rates then effective.
Deferred income taxes of $5,036,000 have not been provided on amounts included
in this memorandum account since the Company contemplates no action and can
foresee no events that would create such a tax.
Deferred income taxes (credits) were also reported on equity income during
these periods. These taxes arise from the recognition of income and losses
differently for purposes of filing federal income tax returns than for
financial reporting purposes.
7. EMPLOYEE STOCK COMPENSATION PLANS
Certain key employees of the Company participate in stock incentive plans
sponsored by Equitable of Iowa Companies, which provide for the award of
stock options or shares of stock of Equitable of Iowa Companies through three
means: qualified incentive stock options (as defined in the Internal Revenue
Code), non-qualified stock options and restricted shares. The non-qualified
stock options are compensatory, and require the accrual of compensation
expense over the period of service from the date the options are granted
until they become fully exercisable if market values exceed the option price
on the measurement date. No expense was recognized in 1996. During the
years ended December 31, 1995 and 1994, compensation (income)/expense of
$(4,000) and $15,000, respectively, was recognized related to these options.
The Company also awards restricted common stock of Equitable of Iowa Companies
to certain key employees. These shares are subject to forfeiture to Equitable
of Iowa Companies should the individuals terminate their relationship with the
Company for reasons other than death, permanent disability or change in
Company control prior to full vesting. Shares granted to key employees
generally vest over three to five years from the date of grant. The Company
amortizes as compensation expense the market value on date of grant of
restricted stock using the straight-line method over the vesting periods.
Compensation expense recognized during the years ended December 31, 1996, 1995
and 1994 aggregated $953,000, $533,000 and $696,000, respectively.
The Company also participates in a discretionary stock award plan under which
employees and agents are awarded shares of Equitable of Iowa Companies' stock
for superior performance. During the years ended December 31, 1996, 1995 and
1994, awards of 620, 1,370 and 495 shares of stock resulted in charges to
income of $22,000, $42,000 and $16,000, respectively.
The Company sponsors a long-term incentive compensation plan which allows
certain agents to earn units equal to shares of Equitable of Iowa Companies'
common stock based on personal production and the maintenance of specific
levels of assets under management. At December 31, 1996 and 1995, the Company
held 112,000 shares of common stock of Equitable of Iowa Companies, with a
market value of $5,138,000 and $3,599,000, respectively (cost - $618,000), to
provide for projected distributions based on current performance levels, under
this plan. This program resulted in expense/(income) of $1,195,000, $736,000
and $(129,000) in the years ended December 31, 1996, 1995 and 1994,
respectively.
8. RETIREMENT PLANS
Defined Benefit Plans
Substantially all full-time employees of the Company are covered by a non-
contributory self-insured defined benefit pension plan. The benefits are
based on years of service and the employee's compensation during the last
five years of employment. Further, the parent sponsors a supplemental defined
benefit plan to provide benefits in excess of amounts allowed pursuant to
Internal Revenue Code Section 401(a)(17) and those allowed due to integration
rules. The Company's funding policy with respect to the plan is consistent
with the funding requirements of federal law and regulations.
8. RETIREMENT PLANS (continued)
Defined Benefit Plans (continued)
The following table sets forth the plan's funded status and amounts recognized
in the Company's consolidated balance sheet:
<TABLE>
<CAPTION>
December 31
1996 1995
________________________
(Dollars in thousands)
<S> <C> <C>
Accumulated benefit obligation, including vested
benefits of $56,470 in 1996 and $53,522 in 1995 $57,401 $54,441
========================
Plan assets at fair value, primarily bonds, common
stocks (including 400,000 shares of the Equitable
of Iowa Companies' common stock), mortgage loans
and short-term investments $101,025 $92,827
Projected benefit obligation for service rendered
to date 64,454 61,332
________________________
Plan assets in excess of projected benefit
obligation 36,571 31,495
Unrecognized net (gain) loss from past experience
different from that assumed and effects of changes
in assumptions (899) 2,793
Prior service cost not yet recognized 477 619
Unrecognized net liability (asset) at the transition
date, net of amortization 82 (1,109)
________________________
Prepaid pension cost $36,231 $33,798
========================
</TABLE>
Net periodic pension benefit included the following components:
<TABLE>
<CAPTION>
Year ended December 31
1996 1995 1994
_____________________________________
(Dollars in thousands)
<S> <C> <C> <C>
Actual return on plan assets $11,801 $18,201 ($7,681)
Service cost-benefits earned during
the period (1,402) (1,052) (1,221)
Interest cost on projected benefit
obligation (4,233) (4,096) (3,867)
Net amortization and deferral (3,619) (9,979) 16,761
_____________________________________
Net periodic pension benefit $2,547 $3,074 $3,992
=====================================
</TABLE>
8. RETIREMENT PLANS (continued)
Defined Benefit Plans (continued)
The discount rate and rate of increase in future compensation levels used in
determining the actuarial present value of the projected benefit obligation
were 7.0% and 5.0%, respectively, at December 31, 1996 and 1995. The average
expected long term rate of return on plan assets was 8.0% in 1996, 1995 and
1994.
Postretirement Benefit Plans
The Company sponsors plans that provide postretirement medical and group term
life insurance benefits to full-time employees and agents who have worked for
the Company for five years or had been hired, had attained age 50 and had a
combined age and years of service of 60 or more before January 1, 1992. The
medical plans are contributory, with retiree contributions adjusted annually,
and contain other cost-sharing features such as deductibles and coinsurance.
The accounting for these plans anticipates that the Company's contributions
will increase annually by the lesser of the health care inflation rate or 3%,
with increases in excess of these amounts borne by the employee or agent.
All payments of the liability for group-term life insurance are funded by the
Company on a pay-as-you-go (cash) basis.
The Company has chosen not to fund any amounts in excess of current benefits.
The following table sets forth the amounts recognized in the Company's
consolidated balance sheet:
<TABLE>
<CAPTION>
December 31, 1996
_____________________________
Life
Medical Insurance
Plans Plans Total
_____________________________
(Dollars in thousands)
<S> <C> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $3,978 $2,232 $6,210
Fully eligible active plan participants 1,037 155 1,192
Other active plan participants 1,669 54 1,723
_____________________________
Accumulated postretirement benefit obligation
in excess of plan assets 6,684 2,441 9,125
Prior service cost not yet recognized in net
postretirement benefit cost 327 75 402
Unrecognized net loss (226) (335) (561)
_____________________________
Accrued postretirement benefit cost $6,785 $2,181 $8,966
=============================
</TABLE>
8. RETIREMENT PLANS (continued)
Postretirement Benefit Plans (continued)
<TABLE>
<CAPTION>
December 31, 1995
_____________________________
Life
Medical Insurance
Plans Plans Total
_____________________________
(Dollars in thousands)
<S> <C> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $4,033 $1,981 $6,014
Fully eligible active plan participants 969 140 1,109
Other active plan participants 1,236 73 1,309
_____________________________
Accumulated postretirement benefit obligation
in excess of plan assets 6,238 2,194 8,432
Prior service cost not yet recognized in net
postretirement benefit cost 360 83 443
Unrecognized net loss (358) (116) (474)
_____________________________
Accrued postretirement benefit cost $6,240 $2,161 $8,401
=============================
</TABLE>
Net periodic postretirement benefit costs include the following components:
<TABLE>
<CAPTION>
December 31, 1996
_____________________________
Life
Medical Insurance
Plans Plans Total
_____________________________
(Dollars in thousands)
<S> <C> <C> <C>
Service cost $511 $12 $523
Interest cost 415 164 579
Net amortization of prior service cost (33) (8) (41)
_____________________________
Net periodic postretirement benefit cost $893 $168 $1,061
=============================
</TABLE>
8. RETIREMENT PLANS (continued)
Postretirement Benefit Plans (continued)
<TABLE>
<CAPTION>
December 31, 1995
_____________________________
Life
Medical Insurance
Plans Plans Total
_____________________________
(Dollars in thousands)
<S> <C> <C> <C>
Service cost $250 $10 $260
Interest cost 409 153 562
Net amortization of prior service cost (33) (7) (40)
_____________________________
Net periodic postretirement benefit cost $626 $156 $782
=============================
</TABLE>
<TABLE>
<CAPTION>
December 31, 1994
_____________________________
Life
Medical Insurance
Plans Plans Total
_____________________________
(Dollars in thousands)
<S> <C> <C> <C>
Service cost $279 $13 $292
Interest cost 405 159 564
Net amortization of prior service cost and
amortization of unrecognized loss (26) (6) (32)
_____________________________
Net periodic postretirement benefit cost $658 $166 $824
=============================
</TABLE>
The weighted-average annual assumed rate of increase in the per capita cost
of health care benefits (i.e., health care cost trend rate) used in
determining the actuarial present value of the accumulated postretirement
benefit obligation was 11.5% at December 31, 1996 and 12.5% at December 31,
1995 for employees under 65 and 8.0% at December 31, 1996 and 8.5% at
December 31, 1995 for employees over 65, with the rates for both groups to be
graded down to 5.5% for 2005 and thereafter. The health care cost trend rate
assumption has a significant effect on the amounts reported. For example,
increasing the assumed health care trend rates by one percent would increase
the accumulated postretirement benefit obligation as of December 31, 1996 by
$854,000 and net periodic postretirement benefit costs for the year ended
December 31, 1996 by $165,000. The discount rate used in determining the
accumulated postretirement benefit obligation was 7.0% at December 31, 1996
and 1995.
8. RETIREMENT PLANS (continued)
Other Benefit Plans
The Company also sponsors an unfunded deferred compensation plan providing
benefits to certain former employees. The Company did not recognize any
benefits during 1996. During the years ended December 31, 1995 and 1994, the
Company recognized benefits of $20,000 and $38,000, respectively, in connection
with this plan.
The Company sponsors pension plans for its employees which are qualified
under Internal Revenue Code Section 401(k). Employees may contribute a
portion of their annual salary, subject to limitation, to the plans. The
Company contributes an additional amount, subject to limitation, based on the
voluntary contribution of the employee. Company contributions charged to
expense with respect to these plans during the years ended December 31, 1996,
1995 and 1994 were $372,000, $292,000 and $289,000, respectively.
The Company has non-contributory defined contribution pension plans, tax
qualified and non-qualified, for its agents. Combined contributions charged
to expense under the career, general and corporate agent pension plans during
the years ended December 31, 1996, 1995 and 1994 amounted to $710,000, $729,000
and $507,000, respectively.
Certain of the assets related to the plans discused above are on deposit with
the Company and amounts relating to these plans are included in these
consolidated financial statements.
9. COMMITMENTS AND CONTINGENCIES
Reinsurance
In the normal course of business, the Company seeks to limit its exposure to
loss on any single insured and to recover a portion of benefits paid by
ceding reinsurance to other insurance enterprises or reinsurers. Reinsurance
coverages for life insurance vary according to the age and risk classification
of the insured with retention limits ranging up to $500,000 of coverage per
individual life. The Company does not use financial or surplus relief
reinsurance. At December31, 1996, life insurance in force ceded on a
consolidated basis amounted to $1,482,900,000, or approximately 12.9% of total
life insurance in force.
Reinsurance contracts do not relieve the Company of its obligations to its
policyholders. To the extent that reinsuring companies are later unable to
meet obligations under reinsurance agreements, the Company would be liable
for these obligations, and payment of these obligations could result in losses
to the Company. To limit the possibility of such losses, the Company evaluates
the financial condition of its reinsurers, monitors concentrations of credit
risk arising from factors such as similar geographic regions, and limits its
exposure to any one reinsurer. At December 31, 1996, the Company had
reinsurance treaties with 14 reinsurers, all of which are deemed to be long-
duration, retroactive contracts, and has established a receivable totaling
$14,885,000 for reserve credits ($19,298,000 in 1995), reinsurance claims and
other receivables from these reinsurers. No allowance for uncollectible
amounts has been established since none of the receivables are deemed to be
uncollectible, and because such receivables, either individually or in the
aggregate, are not material to the Company's operations. The Company's
liability for future policy benefits and notes and other receivables have been
increased by $14,265,000 at December 31, 1996 ($18,103,000 in 1995) for reserve
9. COMMITMENTS AND CONTINGENCIES (continued)
Reinsurance (continued)
credits on reinsured policies. This "gross-up" of assets and liabilities for
reserve credits on reinsurance had no impact on the Company's net income.
Insurance premiums and product charges have been reduced by $6,850,000,
$6,271,000 and $5,916,000 and insurance benefits have been reduced by
$5,916,000, $8,281,000 and $5,310,000 in 1996, 1995 and 1994, respectively, as
a result of the cession agreements. The amount of reinsurance assumed is not
significant.
Guaranty Fund Assessments
Assessments are levied on the Company by life and health guaranty associations
in most states in which the Company is licensed to cover losses of
policyholders of insolvent or rehabilitated insurers. In some states, these
assessments can be partially recovered through a reduction in future premium
taxes. The Company cannot predict whether and to what extent legislative
initiatives may affect the right to offset. Based upon information currently
available from the National Organization of Life and Health Guaranty
Association (NOLHGA), the Company believes that it is probable that these
insolvencies will result in future assessments which could be material to the
Company's financial statements if the Company's reserve is not sufficient. The
Company regularly reviews its reserve for these insolvencies and updates its
reserve based upon the Company's interpretation of the NOLGHA annual report
recently received. The associated cost for a particular insurance company can
vary significantly based upon its premium volume by line of business and state
premium levels as well as its potential for premium tax offset. Accordingly,
the Company accrued and charged to expense an additional $13,000, $36,492,000
and $1,763,000 during 1996, 1995 and 1994, respectively. At December 31, 1996,
the Company has an undiscounted reserve of $45,947,000 to cover estimated
future assessments (net of related anticipated premium tax credits) and has
established an asset totaling $16,809,000 for assessments paid which may be
recoverable through future premium tax offsets. The Company believes this
reserve is sufficient to cover expected future guaranty fund assessments, based
upon previous premium levels, and known insolvencies at this time.
Litigation
As previously reported, the Company and certain of its subsidiaries are
defendants in class action lawsuits filed in the United States District Court
for the Middle District of Florida, Tampa Division in February 1996 and in
the Court of Common Pleas of Allegheny County, Pennsylvania in June 1996.
The suits claim unspecified damages as a result of alleged improper life
insurance sales practices. The Company believes the allegations are without
merit. The suits are in the discovery and procedural stages and have not yet
been certified as class actions. The Company intends to defend the suits
vigorously. The amount of any liability which may arise as a result of these
suits, if any, cannot be reasonably estimated and no provision for loss has
been made in the Company's financial statements. The Company had also been a
party to a similar previously reported class action lawsuit filed in Iowa which
has now been dismissed.
As previously reported, on December 15, 1995, USG received a Notice of
Intention to Arbitrate a dispute with one of its insurance brokerage agencies
before the American Arbitration Association regarding the payment of certain
commissions. The matter was submitted to arbitration and the determination
of the arbitration panel was that the Company must pay, over time, commissions
9. COMMITMENTS AND CONTINGENCIES (continued)
Litigation (continued)
in amounts that are not material.
In the ordinary course of business, the Company and its subsidiaries are also
engaged in certain other litigation, none of which management believes is
material.
Vulnerability from Concentrations
The Company has various concentrations in its investment portfolio (see Note
3 for further information). The Company's asset growth, net investment income
and cash flow are primarily generated from the sale of individual fixed
annuity policies, variable products and associated future policy benefits and
separate account liabilities. Substantial changes in tax laws that would make
these products less attractive to consumers, extreme fluctuations in interest
rates or stock market returns which may result in higher lapse experience than
assumed, could cause a severe impact to the Company's financial condition. The
Company has purchased interest rate caps and swaptions for its hedging program
(see Note 4) to mitigate the financial statement impact of significant
increases in interest rates.
Leases and Other Commitments
The Company leases its home office space and certain other equipment under
operating leases which expire through 2017. During the years ended December
31, 1996, 1995 and 1994, rent expense totaled $2,570,000, $2,001,000 and
$1,995,000, respectively. At December 31, 1996, minimum rental payments due
under all non-cancelable operating leases with initial terms of one year or
more are: 1997 - $3,425,000; 1998 - $4,210,000; 1999 - $2,832,000; 2000 -
$2,562,000 and 2001 - $2,562,000.
At December 31, 1996, outstanding commitments to fund mortgage loans on real
estate and equity investments totaled $49,050,000 and $10,915,000,
respectively.
10. RELATED PARTY TRANSACTIONS
The Company purchases investment management services from an affiliate.
Payments for these services aggregated $9,257,000, $8,143,000 and $6,734,000
during the years ended December 31, 1996, 1995 and 1994, respectively.
Additionally, the Company maintains a line of credit agreement with Equitable
of Iowa Companies to facilitate the handling of unusual and/or unanticipated
short-term cash requirements. Under the current agreement which expires on
December 31, 1997, the Company can borrow up to $130 million. Interest on
any outstanding borrowings is charged at a rate of Equitable of Iowa
Companies' monthly average aggregate cost of short-term funds plus 1.00%. At
December 31, 1996, no amounts were outstanding under the line of credit.
Equitable Life Insurance Company of Iowa
SCHEDULE I
SUMMARY OF INVESTMENTS
OTHER THAN INVESTMENTS IN RELATED PARTIES
(Dollars in thousands)
<TABLE>
<CAPTION>
Balance
Sheet
December 31, 1996 Cost 1 Value Amount
_______________________________________________________________________________
<S> <C> <C> <C>
TYPE OF INVESTMENT
Fixed maturities, available for sale:
Bonds:
United States Government and governmental
agencies and authorities $338,716 $348,340 $348,340
States, municipalities and
political subdivisions 15,131 16,265 16,265
Foreign governments 10,572 13,278 13,278
Public utilities 1,205,377 1,230,696 1,230,696
Investment grade corporate 2,654,742 2,795,420 2,795,420
Below investment grade corporate 707,260 705,249 705,249
Mortgage-backed securities 2,350,168 2,346,766 2,346,766
Redeemable preferred stocks 616 387 387
___________ ___________ ___________
Total fixed maturities, available
for sale 7,282,582 7,456,401 7,456,401
Equity securities:
Common stocks:
Affiliates 618 5,138 5,138
Industrial, miscellaneous and
all other 48,821 77,148 77,148
___________ ___________ ___________
Total equity securities 49,439 82,286 82,286
Mortgage loans on real estate 1,689,088 1,689,088
Real estate:
Investment properties 3,291 3,291
Acquired in satisfaction of debt 5,322 5,322
___________ ___________
Total real estate 8,613 8,613
Policy loans 185,853 185,853
Short-term investments 15,852 15,852
___________ ___________
Total investments $9,231,427 $9,438,093
=========== ===========
<FN>
Note 1: Cost is defined as original cost for stocks and other invested assets,
amortized cost for bonds and unpaid principal for policy loans and
mortgage loans on real estate, adjusted for amortization of premiums,
accrual of discounts and cost less allowances for depreciation for
real estate.
Note 2: Original cost and amortized cost of investments have been adjusted
to reflect other than temporary declines in value by charges to
income on real estate of $392,000.
</TABLE>
Equitable Life Insurance Company of Iowa
SCHEDULE III
SUPPLEMENTARY INSURANCE INFORMATION
(Dollars in thousands)
<TABLE>
<CAPTION>
Column Column Column Column Column Column
A B C D E F
_______________________________________________________________________________
Future
Policy Other
De- Benefits, Policy
ferred Losses, Claims Insur-
Policy Claims Un- and ance
Acqui- and earned Bene- Premiums
sition Loss Revenue fits and
Segment Costs Expenses Reserve Payable Charges
_______________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1996:
Life insurance $721,690 $9,102,184 $18,398 $7,481 $102,204
Year ended December 31, 1995:
Life insurance 554,179 8,218,604 14,326 8,980 94,891
Year ended December 31, 1994:
Life insurance 607,626 7,014,207 14,317 7,785 90,032
</TABLE>
<TABLE>
<CAPTION>
Column Column Column Column Column Column
A G H I J K
_______________________________________________________________________________
Amorti-
Benefits zation
Claims, of
Losses Deferred
Net and Policy Other
Invest- Settle- Acqui- Opera-
ment ment sitions ting Premiums
Segment Income Expenses Costs Expenses Written
_______________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1996:
Life insurance $705,074 $513,876 $79,306 $30,264 --
Year ended December 31, 1995:
Life insurance 638,056 487,031 72,537 54,504 --
Year ended December 31, 1994:
Life insurance 521,646 414,450 50,921 17,128 --
</TABLE>
Equitable Life Insurance Company of Iowa
SCHEDULE IV
REINSURANCE
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F
________________________________________________________________________________
Percentage
Ceded to Assumed of Amount
Gross Other from Other Net Assumed
Amount Companies Companies Amount to Net
________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1996:
Life insurance in
force $11,507,009 $1,482,900 $ -- $10,024,109 --
============ =========== ========= ============ ==========
Insurance premiums
and charges $109,015 $6,850 $39 $102,204 --
============ =========== ========= ============ ==========
Year ended December 31, 1995:
Life insurance in
force $10,927,445 $1,459,523 $ -- $9,467,922 --
============ =========== ========= ============ ==========
Insurance premiums
and charges $101,095 $6,271 $67 $94,891 --
============ =========== ========= ============ ==========
Year ended December 31, 1994:
Life insurance in
force $10,146,940 $1,421,608 $ -- $8,725,332 --
============ =========== ========= ============ ==========
Insurance premiums
and charges $95,821 $5,916 $127 $90,032 --
============ =========== ========= ============ ==========
</TABLE>
Financial Statements
Equitable Life Insurance Company of Iowa
Separate Account A
Equi-Select Product
Periods ended December 31, 1996, and 1995
with Report of Independent Auditors
Equitable Life Insurance Company of Iowa
Separate Account A
Equi-Select Product
Financial Statements
Periods ended December 31, 1996 and 1995
Contents
Report of Independent Auditors
Audited Financial Statements
Statements of Net Assets
Statements of Operations
Statements of Changes in Net Assets
Notes to Financial Statements
Report of Independent Auditors
The Board of Directors
Equitable Life Insurance Company of Iowa
We have audited the accompanying statements of net assets of certain accounts
of Equitable Life Insurance Company of Iowa Separate Account A (comprising,
respectively, the Money Market, Mortgage-Backed Securities, International
Fixed Income, OTC, Research, Total Return, Advantage, Value + Growth, Growth
& Income, and Warburg Pincus International Equity Accounts) as of December 31,
1996, and the related statements of operations and changes in net assets for
each of the periods indicated therein. These financial statements are the
responsibility of the Account's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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.
Our procedures included confirmation of securities owned as of December 31,
1996, by correspondence with the transfer agent. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of certain accounts of the
Equitable Life Insurance Company of Iowa Separate Account A at December 31,
1996, and the results of their operations and changes in their net assets for
each of the periods indicated therein, in conformity with generally accepted
accounting principles.
/S/ Ernst & Young LLP
Des Moines, Iowa
February 11, 1997
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF NET ASSETS
EQUI-SELECT PRODUCT
December 31, 1996
<TABLE>
<CAPTION>
Money
Market
Account
____________
<S> <C>
ASSETS
Investments at net asset value:
Equi-Select Series Trust Money Market Portfolio,
19,056,850 shares (cost - $19,056,850) $19,056,850
Equi-Select Series Trust Mortgage-Backed Securities Portfolio,
967,973 shares (cost - $10,569,586)
Equi-Select Series Trust International Fixed Income Portfolio,
728,503 shares (cost - $8,130,969)
Equi-Select Series Trust OTC Portfolio,
2,812,183 shares (cost - $37,637,315)
Equi-Select Series Trust Research Portfolio,
4,870,814 shares (cost - $68,215,717)
Equi-Select Series Trust Total Return Portfolio,
4,356,245 shares (cost - $53,111,757)
Equi-Select Series Trust Advantage Portfolio,
1,390,566 shares (cost - $14,686,564)
Equi-Select Series Trust Value + Growth Portfolio,
1,225,402 shares (cost - $13,017,842)
Equi-Select Series Trust Growth & Income Portfolio,
2,205,517 shares (cost - $25,290,065)
Warburg Pincus Trust International Equity Portfolio,
1,813,960 shares (cost - $20,715,484)
____________
TOTAL INVESTMENTS 19,056,850
Accrued investment income 81,522
____________
TOTAL NET ASSETS $19,138,372
============
NET ASSETS REPRESENTED BY:
Units 1,772,486
Unit Value 10.80
____________
Net Assets $19,138,372
============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF NET ASSETS
EQUI-SELECT PRODUCT
December 31, 1996
<TABLE>
<CAPTION>
Mortgage-
Backed
Securities
Account
____________
<S> <C>
ASSETS
Investments at net asset value:
Equi-Select Series Trust Money Market Portfolio,
19,056,850 shares (cost - $19,056,850)
Equi-Select Series Trust Mortgage-Backed Securities Portfolio,
967,973 shares (cost - $10,569,586) $10,254,354
Equi-Select Series Trust International Fixed Income Portfolio,
728,503 shares (cost - $8,130,969)
Equi-Select Series Trust OTC Portfolio,
2,812,183 shares (cost - $37,637,315)
Equi-Select Series Trust Research Portfolio,
4,870,814 shares (cost - $68,215,717)
Equi-Select Series Trust Total Return Portfolio,
4,356,245 shares (cost - $53,111,757)
Equi-Select Series Trust Advantage Portfolio,
1,390,566 shares (cost - $14,686,564)
Equi-Select Series Trust Value + Growth Portfolio,
1,225,402 shares (cost - $13,017,842)
Equi-Select Series Trust Growth & Income Portfolio,
2,205,517 shares (cost - $25,290,065)
Warburg Pincus Trust International Equity Portfolio,
1,813,960 shares (cost - $20,715,484)
____________
TOTAL INVESTMENTS 10,254,354
Accrued investment income 578,893
____________
TOTAL NET ASSETS $10,833,247
============
NET ASSETS REPRESENTED BY:
Units 930,828
Unit Value 11.64
____________
Net Assets $10,833,247
============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF NET ASSETS
EQUI-SELECT PRODUCT
December 31, 1996
<TABLE>
<CAPTION>
International
Fixed
Income
Account
______________
<S> <C>
ASSETS
Investments at net asset value:
Equi-Select Series Trust Money Market Portfolio,
19,056,850 shares (cost - $19,056,850)
Equi-Select Series Trust Mortgage-Backed Securities Portfolio,
967,973 shares (cost - $10,569,586)
Equi-Select Series Trust International Fixed Income Portfolio,
728,503 shares (cost - $8,130,969) $7,925,804
Equi-Select Series Trust OTC Portfolio,
2,812,183 shares (cost - $37,637,315)
Equi-Select Series Trust Research Portfolio,
4,870,814 shares (cost - $68,215,717)
Equi-Select Series Trust Total Return Portfolio,
4,356,245 shares (cost - $53,111,757)
Equi-Select Series Trust Advantage Portfolio,
1,390,566 shares (cost - $14,686,564)
Equi-Select Series Trust Value + Growth Portfolio,
1,225,402 shares (cost - $13,017,842)
Equi-Select Series Trust Growth & Income Portfolio,
2,205,517 shares (cost - $25,290,065)
Warburg Pincus Trust International Equity Portfolio,
1,813,960 shares (cost - $20,715,484)
______________
TOTAL INVESTMENTS 7,925,804
Accrued investment income 513,844
______________
TOTAL NET ASSETS $8,439,648
==============
NET ASSETS REPRESENTED BY:
Units 705,870
Unit Value 11.96
______________
Net Assets $8,439,648
==============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF NET ASSETS
EQUI-SELECT PRODUCT
December 31, 1996
<TABLE>
<CAPTION>
OTC
Account
____________
<S> <C>
ASSETS
Investments at net asset value:
Equi-Select Series Trust Money Market Portfolio,
19,056,850 shares (cost - $19,056,850)
Equi-Select Series Trust Mortgage-Backed Securities Portfolio,
967,973 shares (cost - $10,569,586)
Equi-Select Series Trust International Fixed Income Portfolio,
728,503 shares (cost - $8,130,969)
Equi-Select Series Trust OTC Portfolio,
2,812,183 shares (cost - $37,637,315) $38,868,650
Equi-Select Series Trust Research Portfolio,
4,870,814 shares (cost - $68,215,717)
Equi-Select Series Trust Total Return Portfolio,
4,356,245 shares (cost - $53,111,757)
Equi-Select Series Trust Advantage Portfolio,
1,390,566 shares (cost - $14,686,564)
Equi-Select Series Trust Value + Growth Portfolio,
1,225,402 shares (cost - $13,017,842)
Equi-Select Series Trust Growth & Income Portfolio,
2,205,517 shares (cost - $25,290,065)
Warburg Pincus Trust International Equity Portfolio,
1,813,960 shares (cost - $20,715,484)
____________
TOTAL INVESTMENTS 38,868,650
Accrued investment income 1,984,172
____________
TOTAL NET ASSETS $40,852,822
============
NET ASSETS REPRESENTED BY:
Units 2,602,724
Unit Value 15.70
____________
Net Assets $40,852,822
============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF NET ASSETS
EQUI-SELECT PRODUCT
December 31, 1996
<TABLE>
<CAPTION>
Research
Account
____________
<S> <C>
ASSETS
Investments at net asset value:
Equi-Select Series Trust Money Market Portfolio,
19,056,850 shares (cost - $19,056,850)
Equi-Select Series Trust Mortgage-Backed Securities Portfolio,
967,973 shares (cost - $10,569,586)
Equi-Select Series Trust International Fixed Income Portfolio,
728,503 shares (cost - $8,130,969)
Equi-Select Series Trust OTC Portfolio,
2,812,183 shares (cost - $37,637,315)
Equi-Select Series Trust Research Portfolio,
4,870,814 shares (cost - $68,215,717) $75,163,868
Equi-Select Series Trust Total Return Portfolio,
4,356,245 shares (cost - $53,111,757)
Equi-Select Series Trust Advantage Portfolio,
1,390,566 shares (cost - $14,686,564)
Equi-Select Series Trust Value + Growth Portfolio,
1,225,402 shares (cost - $13,017,842)
Equi-Select Series Trust Growth & Income Portfolio,
2,205,517 shares (cost - $25,290,065)
Warburg Pincus Trust International Equity Portfolio,
1,813,960 shares (cost - $20,715,484)
____________
TOTAL INVESTMENTS 75,163,868
Accrued investment income 2,011,415
____________
TOTAL NET ASSETS $77,175,283
============
NET ASSETS REPRESENTED BY:
Units 4,845,240
Unit Value 15.93
____________
Net Assets $77,175,283
============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF NET ASSETS
EQUI-SELECT PRODUCT
December 31, 1996
<TABLE>
<CAPTION>
Total
Return
Account
____________
<S> <C>
ASSETS
Investments at net asset value:
Equi-Select Series Trust Money Market Portfolio,
19,056,850 shares (cost - $19,056,850)
Equi-Select Series Trust Mortgage-Backed Securities Portfolio,
967,973 shares (cost - $10,569,586)
Equi-Select Series Trust International Fixed Income Portfolio,
728,503 shares (cost - $8,130,969)
Equi-Select Series Trust OTC Portfolio,
2,812,183 shares (cost - $37,637,315)
Equi-Select Series Trust Research Portfolio,
4,870,814 shares (cost - $68,215,717)
Equi-Select Series Trust Total Return Portfolio,
4,356,245 shares (cost - $53,111,757) $57,291,505
Equi-Select Series Trust Advantage Portfolio,
1,390,566 shares (cost - $14,686,564)
Equi-Select Series Trust Value + Growth Portfolio,
1,225,402 shares (cost - $13,017,842)
Equi-Select Series Trust Growth & Income Portfolio,
2,205,517 shares (cost - $25,290,065)
Warburg Pincus Trust International Equity Portfolio,
1,813,960 shares (cost - $20,715,484)
____________
TOTAL INVESTMENTS 57,291,505
Accrued investment income 1,543,660
____________
TOTAL NET ASSETS $58,835,165
============
NET ASSETS REPRESENTED BY:
Units 4,354,338
Unit Value 13.51
____________
Net Assets $58,835,165
============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF NET ASSETS
EQUI-SELECT PRODUCT
December 31, 1996
<TABLE>
<CAPTION>
Advantage
Account
____________
<S> <C>
ASSETS
Investments at net asset value:
Equi-Select Series Trust Money Market Portfolio,
19,056,850 shares (cost - $19,056,850)
Equi-Select Series Trust Mortgage-Backed Securities Portfolio,
967,973 shares (cost - $10,569,586)
Equi-Select Series Trust International Fixed Income Portfolio,
728,503 shares (cost - $8,130,969)
Equi-Select Series Trust OTC Portfolio,
2,812,183 shares (cost - $37,637,315)
Equi-Select Series Trust Research Portfolio,
4,870,814 shares (cost - $68,215,717)
Equi-Select Series Trust Total Return Portfolio,
4,356,245 shares (cost - $53,111,757)
Equi-Select Series Trust Advantage Portfolio,
1,390,566 shares (cost - $14,686,564) $14,474,318
Equi-Select Series Trust Value + Growth Portfolio,
1,225,402 shares (cost - $13,017,842)
Equi-Select Series Trust Growth & Income Portfolio,
2,205,517 shares (cost - $25,290,065)
Warburg Pincus Trust International Equity Portfolio,
1,813,960 shares (cost - $20,715,484)
____________
TOTAL INVESTMENTS 14,474,318
Accrued investment income 544,631
____________
TOTAL NET ASSETS $15,018,949
============
NET ASSETS REPRESENTED BY:
Units 1,322,512
Unit Value 11.36
____________
Net Assets $15,018,949
============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF NET ASSETS
EQUI-SELECT PRODUCT
December 31, 1996
<TABLE>
<CAPTION>
Value +
Growth
Account
____________
<S> <C>
ASSETS
Investments at net asset value:
Equi-Select Series Trust Money Market Portfolio,
19,056,850 shares (cost - $19,056,850)
Equi-Select Series Trust Mortgage-Backed Securities Portfolio,
967,973 shares (cost - $10,569,586)
Equi-Select Series Trust International Fixed Income Portfolio,
728,503 shares (cost - $8,130,969)
Equi-Select Series Trust OTC Portfolio,
2,812,183 shares (cost - $37,637,315)
Equi-Select Series Trust Research Portfolio,
4,870,814 shares (cost - $68,215,717)
Equi-Select Series Trust Total Return Portfolio,
4,356,245 shares (cost - $53,111,757)
Equi-Select Series Trust Advantage Portfolio,
1,390,566 shares (cost - $14,686,564)
Equi-Select Series Trust Value + Growth Portfolio,
1,225,402 shares (cost - $13,017,842) $13,993,422
Equi-Select Series Trust Growth & Income Portfolio,
2,205,517 shares (cost - $25,290,065)
Warburg Pincus Trust International Equity Portfolio,
1,813,960 shares (cost - $20,715,484)
____________
TOTAL INVESTMENTS 13,993,422
Accrued investment income 142,543
____________
TOTAL NET ASSETS $14,135,965
============
NET ASSETS REPRESENTED BY:
Units 1,238,349
Unit Value 11.42
____________
Net Assets $14,135,965
============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF NET ASSETS
EQUI-SELECT PRODUCT
December 31, 1996
<TABLE>
<CAPTION>
Growth &
Income
Account
______________
<S> <C>
ASSETS
Investments at net asset value:
Equi-Select Series Trust Money Market Portfolio,
19,056,850 shares (cost - $19,056,850)
Equi-Select Series Trust Mortgage-Backed Securities Portfolio,
967,973 shares (cost - $10,569,586)
Equi-Select Series Trust International Fixed Income Portfolio,
728,503 shares (cost - $8,130,969)
Equi-Select Series Trust OTC Portfolio,
2,812,183 shares (cost - $37,637,315)
Equi-Select Series Trust Research Portfolio,
4,870,814 shares (cost - $68,215,717)
Equi-Select Series Trust Total Return Portfolio,
4,356,245 shares (cost - $53,111,757)
Equi-Select Series Trust Advantage Portfolio,
1,390,566 shares (cost - $14,686,564)
Equi-Select Series Trust Value + Growth Portfolio,
1,225,402 shares (cost - $13,017,842)
Equi-Select Series Trust Growth & Income Portfolio,
2,205,517 shares (cost - $25,290,065) $27,761,968
Warburg Pincus Trust International Equity Portfolio,
1,813,960 shares (cost - $20,715,484)
______________
TOTAL INVESTMENTS 27,761,968
Accrued investment income 67,604
______________
TOTAL NET ASSETS $27,829,572
==============
NET ASSETS REPRESENTED BY:
Units 2,228,888
Unit Value 12.49
______________
Net Assets $27,829,572
==============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF NET ASSETS
EQUI-SELECT PRODUCT
December 31, 1996
<TABLE>
<CAPTION>
International
Equity
Account
_____________
<S> <C>
ASSETS
Investments at net asset value:
Equi-Select Series Trust Money Market Portfolio,
19,056,850 shares (cost - $19,056,850)
Equi-Select Series Trust Mortgage-Backed Securities Portfolio,
967,973 shares (cost - $10,569,586)
Equi-Select Series Trust International Fixed Income Portfolio,
728,503 shares (cost - $8,130,969)
Equi-Select Series Trust OTC Portfolio,
2,812,183 shares (cost - $37,637,315)
Equi-Select Series Trust Research Portfolio,
4,870,814 shares (cost - $68,215,717)
Equi-Select Series Trust Total Return Portfolio,
4,356,245 shares (cost - $53,111,757)
Equi-Select Series Trust Advantage Portfolio,
1,390,566 shares (cost - $14,686,564)
Equi-Select Series Trust Value + Growth Portfolio,
1,225,402 shares (cost - $13,017,842)
Equi-Select Series Trust Growth & Income Portfolio,
2,205,517 shares (cost - $25,290,065)
Warburg Pincus Trust International Equity Portfolio,
1,813,960 shares (cost - $20,715,484) $20,824,258
_____________
TOTAL INVESTMENTS 20,824,258
Accrued investment income --
_____________
TOTAL NET ASSETS $20,824,258
=============
NET ASSETS REPRESENTED BY:
Units 2,026,704
Unit Value 10.28
_____________
Net Assets $20,824,258
=============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF OPERATIONS
EQUI-SELECT PRODUCT
For the year ended December 31, 1996, Except as Noted
<TABLE>
<CAPTION>
Mortgage-
Money Backed International
Market Securities Fixed Income
Account Account Account
______________ ______________ ______________
<S> <C> <C> <C>
INVESTMENT INCOME (LOSS)
Income:
Dividends $614,911 $549,723 $411,937
Capital gains distributions -- 29,342 127,829
Expenses:
Annual contract charges (2,200) (3,370) (3,042)
Transfer charges (130) -- (44)
Administrative charges (19,533) (12,090) (8,720)
Mortality and expense
risk charges (162,805) (100,677) (72,630)
______________ ______________ ______________
Net investment income (loss) 430,243 462,928 455,330
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net realized gain (loss) on
investments -- 3,182 48,607
Net unrealized appreciation
(depreciation) of
investments -- (236,988) (239,063)
______________ ______________ ______________
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $430,243 $229,122 $264,874
============== ============== ==============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF OPERATIONS
EQUI-SELECT PRODUCT
For the year ended December 31, 1996, Except as Noted
<TABLE>
<CAPTION>
Total
OTC Research Return
Account Account Account
______________ ______________ ______________
<S> <C> <C> <C>
INVESTMENT INCOME (LOSS)
Income:
Dividends -- $12,455 $1,110,366
Capital gains distributions $2,075,049 2,116,798 500,681
Expenses:
Annual contract charges (13,074) (19,646) (19,076)
Transfer charges (50) (38) (100)
Administrative charges (34,124) (61,564) (51,077)
Mortality and expense
risk charges (284,479) (513,268) (425,691)
______________ ______________ ______________
Net investment income (loss) 1,743,322 1,534,737 1,115,103
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net realized gain (loss) on
investments 61,629 662,781 120,266
Net unrealized appreciation
(depreciation) of
investments 1,203,795 5,420,258 3,147,975
______________ ______________ ______________
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $3,008,746 $7,617,776 $4,383,344
============== ============== ==============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF OPERATIONS
EQUI-SELECT PRODUCT
For the year ended December 31, 1996, Except as Noted
<TABLE>
<CAPTION>
Value +
Advantage Growth
Account Account*
______________ ______________
<S> <C> <C>
INVESTMENT INCOME (LOSS)
Income:
Dividends $527,678 --
Capital gains distributions 16,953 $142,543
Expenses:
Annual contract charges (2,311) (471)
Transfer charges (213) (25)
Administrative charges (12,814) (6,775)
Mortality and expense
risk charges (106,821) (56,664)
______________ ______________
Net investment income (loss) 422,472 78,608
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net realized gain (loss) on
investments 57,513 4,559
Net unrealized appreciation
(depreciation) of
investments (111,913) 975,580
______________ ______________
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $368,072 $1,058,747
============== ==============
<FN>
* Commencement of operations, April 1, 1996
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF OPERATIONS
EQUI-SELECT PRODUCT
For the year ended December 31, 1996, Except as Noted
<TABLE>
<CAPTION>
Growth & International
Income Equity
Account* Account*
______________ ______________
<S> <C> <C>
INVESTMENT INCOME (LOSS)
Income:
Dividends $33,036 $273,307
Capital gains distributions 34,568 121,604
Expenses:
Annual contract charges (795) (1,985)
Transfer charges -- (22)
Administrative charges (12,429) (8,219)
Mortality and expense
risk charges (103,970) (68,801)
______________ ______________
Net investment income (loss) (49,590) 315,884
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net realized gain (loss) on
investments 30,064 (10,354)
Net unrealized appreciation
(depreciation) of
investments 2,471,903 108,774
______________ ______________
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $2,452,377 $414,304
============== ==============
<FN>
* Commencement of operations, April 1, 1996
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
EQUI-SELECT PRODUCT
For the years ended December 31, 1995 and 1996, Except as Noted
<TABLE>
<CAPTION>
Money
Market
Account
______________
<S> <C>
NET ASSETS AT JANUARY 1, 1995 $345,499
INCREASE IN NET ASSETS
Operations:
Net investment income 125,935
Net realized gain on investments --
Net unrealized appreciation (depreciation) of investments --
______________
Net increase in net assets resulting from operations 125,935
Changes from principal transactions:
Purchase payments 30,141,356
Contract distributions and terminations (18,210)
Transfer payments from (to) other Accounts and Fixed Account (24,862,359)
______________
Increase in net assets derived from principal transactions 5,260,787
______________
Total increase 5,386,722
______________
NET ASSETS AT DECEMBER 31, 1995 5,732,221
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) 430,243
Net realized gain (loss) on investments --
Net unrealized appreciation (depreciation) of investments --
______________
Net increase in net assets resulting from operations 430,243
Changes from principal transactions:
Purchase payments 97,297,490
Contract distributions and terminations (409,078)
Transfer payments from (to) other Accounts and Fixed Account (83,912,504)
______________
Increase in net assets derived from principal transactions 12,975,908
______________
Total increase 13,406,151
______________
NET ASSETS AT DECEMBER 31, 1996 $19,138,372
==============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
EQUI-SELECT PRODUCT
For the years ended December 31, 1995 and 1996, Except as Noted
<TABLE>
<CAPTION>
Mortgage-
Backed
Securities
Account
______________
<S> <C>
NET ASSETS AT JANUARY 1, 1995 $28,822
INCREASE IN NET ASSETS
Operations:
Net investment income 216,981
Net realized gain on investments 994
Net unrealized appreciation (depreciation) of investments (77,915)
______________
Net increase in net assets resulting from operations 140,060
Changes from principal transactions:
Purchase payments 1,764,376
Contract distributions and terminations (7,691)
Transfer payments from (to) other Accounts and Fixed Account 2,413,953
______________
Increase in net assets derived from principal transactions 4,170,638
______________
Total increase 4,310,698
______________
NET ASSETS AT DECEMBER 31, 1995 4,339,520
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) 462,928
Net realized gain (loss) on investments 3,182
Net unrealized appreciation (depreciation) of investments (236,988)
______________
Net increase in net assets resulting from operations 229,122
Changes from principal transactions:
Purchase payments 3,866,835
Contract distributions and terminations (272,503)
Transfer payments from (to) other Accounts and Fixed Account 2,670,273
______________
Increase in net assets derived from principal transactions 6,264,605
______________
Total increase 6,493,727
______________
NET ASSETS AT DECEMBER 31, 1996 $10,833,247
==============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
EQUI-SELECT PRODUCT
For the years ended December 31, 1995 and 1996, Except as Noted
<TABLE>
<CAPTION>
International
Fixed
Income
Account
______________
<S> <C>
NET ASSETS AT JANUARY 1, 1995 $51,288
INCREASE IN NET ASSETS
Operations:
Net investment income 149,959
Net realized gain on investments 4,271
Net unrealized appreciation (depreciation) of investments 34,190
______________
Net increase in net assets resulting from operations 188,420
Changes from principal transactions:
Purchase payments 1,703,537
Contract distributions and terminations (6,355)
Transfer payments from (to) other Accounts and Fixed Account 1,662,677
______________
Increase in net assets derived from principal transactions 3,359,859
______________
Total increase 3,548,279
______________
NET ASSETS AT DECEMBER 31, 1995 3,599,567
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) 455,330
Net realized gain (loss) on investments 48,607
Net unrealized appreciation (depreciation) of investments (239,063)
______________
Net increase in net assets resulting from operations 264,874
Changes from principal transactions:
Purchase payments 2,509,049
Contract distributions and terminations (213,335)
Transfer payments from (to) other Accounts and Fixed Account 2,279,493
______________
Increase in net assets derived from principal transactions 4,575,207
______________
Total increase 4,840,081
______________
NET ASSETS AT DECEMBER 31, 1996 $8,439,648
==============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
EQUI-SELECT PRODUCT
For the years ended December 31, 1995 and 1996, Except as Noted
<TABLE>
<CAPTION>
OTC
Account
______________
<S> <C>
NET ASSETS AT JANUARY 1, 1995 $660,106
INCREASE IN NET ASSETS
Operations:
Net investment income 933,058
Net realized gain on investments 36,066
Net unrealized appreciation (depreciation) of investments 20,313
______________
Net increase in net assets resulting from operations 989,437
Changes from principal transactions:
Purchase payments 4,028,128
Contract distributions and terminations (33,765)
Transfer payments from (to) other Accounts and Fixed Account 4,392,791
______________
Increase in net assets derived from principal transactions 8,387,154
______________
Total increase 9,376,591
______________
NET ASSETS AT DECEMBER 31, 1995 10,036,697
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) 1,743,322
Net realized gain (loss) on investments 61,629
Net unrealized appreciation (depreciation) of investments 1,203,795
______________
Net increase in net assets resulting from operations 3,008,746
Changes from principal transactions:
Purchase payments 16,302,789
Contract distributions and terminations (628,676)
Transfer payments from (to) other Accounts and Fixed Account 12,133,266
______________
Increase in net assets derived from principal transactions 27,807,379
______________
Total increase 30,816,125
______________
NET ASSETS AT DECEMBER 31, 1996 $40,852,822
==============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
EQUI-SELECT PRODUCT
For the years ended December 31, 1995 and 1996, Except as Noted
<TABLE>
<CAPTION>
Research
Account
______________
<S> <C>
NET ASSETS AT JANUARY 1, 1995 $672,603
INCREASE IN NET ASSETS
Operations:
Net investment income 190,119
Net realized gain on investments 19,662
Net unrealized appreciation (depreciation) of investments 1,548,017
______________
Net increase in net assets resulting from operations 1,757,798
Changes from principal transactions:
Purchase payments 8,333,228
Contract distributions and terminations (32,130)
Transfer payments from (to) other Accounts and Fixed Account 5,715,449
______________
Increase in net assets derived from principal transactions 14,016,547
______________
Total increase 15,774,345
______________
NET ASSETS AT DECEMBER 31, 1995 16,446,948
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) 1,534,737
Net realized gain (loss) on investments 662,781
Net unrealized appreciation (depreciation) of investments 5,420,258
______________
Net increase in net assets resulting from operations 7,617,776
Changes from principal transactions:
Purchase payments 32,407,473
Contract distributions and terminations (1,057,801)
Transfer payments from (to) other Accounts and Fixed Account 21,760,887
______________
Increase in net assets derived from principal transactions 53,110,559
______________
Total increase 60,728,335
______________
NET ASSETS AT DECEMBER 31, 1996 $77,175,283
==============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
EQUI-SELECT PRODUCT
For the years ended December 31, 1995 and 1996, Except as Noted
<TABLE>
<CAPTION>
Total
Return
Account
______________
<S> <C>
NET ASSETS AT JANUARY 1, 1995 $324,925
INCREASE IN NET ASSETS
Operations:
Net investment income 246,476
Net realized gain on investments 6,083
Net unrealized appreciation (depreciation) of investments 1,034,214
______________
Net increase in net assets resulting from operations 1,286,773
Changes from principal transactions:
Purchase payments 7,285,539
Contract distributions and terminations (72,501)
Transfer payments from (to) other Accounts and Fixed Account 6,997,106
______________
Increase in net assets derived from principal transactions 14,210,144
______________
Total increase 15,496,917
______________
NET ASSETS AT DECEMBER 31, 1995 15,821,842
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) 1,115,103
Net realized gain (loss) on investments 120,266
Net unrealized appreciation (depreciation) of investments 3,147,975
______________
Net increase in net assets resulting from operations 4,383,344
Changes from principal transactions:
Purchase payments 23,245,480
Contract distributions and terminations (1,235,631)
Transfer payments from (to) other Accounts and Fixed Account 16,620,130
______________
Increase in net assets derived from principal transactions 38,629,979
______________
Total increase 43,013,323
______________
NET ASSETS AT DECEMBER 31, 1996 $58,835,165
==============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
EQUI-SELECT PRODUCT
For the years ended December 31, 1995 and 1996, Except as Noted
<TABLE>
<CAPTION>
Advantage
Account
______________
<S> <C>
NET ASSETS AT JANUARY 1, 1995 $459,024
INCREASE IN NET ASSETS
Operations:
Net investment income 219,723
Net realized gain on investments 15,065
Net unrealized appreciation (depreciation) of investments (96,273)
______________
Net increase in net assets resulting from operations 138,515
Changes from principal transactions:
Purchase payments 1,956,116
Contract distributions and terminations (15,339)
Transfer payments from (to) other Accounts and Fixed Account 1,205,921
______________
Increase in net assets derived from principal transactions 3,146,698
______________
Total increase 3,285,213
______________
NET ASSETS AT DECEMBER 31, 1995 3,744,237
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) 422,472
Net realized gain (loss) on investments 57,513
Net unrealized appreciation (depreciation) of investments (111,913)
______________
Net increase in net assets resulting from operations 368,072
Changes from principal transactions:
Purchase payments 7,649,569
Contract distributions and terminations (381,407)
Transfer payments from (to) other Accounts and Fixed Account 3,638,478
______________
Increase in net assets derived from principal transactions 10,906,640
______________
Total increase 11,274,712
______________
NET ASSETS AT DECEMBER 31, 1996 $15,018,949
==============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
EQUI-SELECT PRODUCT
For the years ended December 31, 1995 and 1996, Except as Noted
<TABLE>
<CAPTION>
Value +
Growth
Account*
______________
<S> <C>
NET ASSETS AT JANUARY 1, 1995 --
INCREASE IN NET ASSETS
Operations:
Net investment income --
Net realized gain on investments --
Net unrealized appreciation (depreciation) of investments --
______________
Net increase in net assets resulting from operations --
Changes from principal transactions:
Purchase payments --
Contract distributions and terminations --
Transfer payments from (to) other Accounts and Fixed Account --
______________
Increase in net assets derived from principal transactions --
______________
Total increase --
______________
NET ASSETS AT DECEMBER 31, 1995 --
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) $78,608
Net realized gain (loss) on investments 4,559
Net unrealized appreciation (depreciation) of investments 975,580
______________
Net increase in net assets resulting from operations 1,058,747
Changes from principal transactions:
Purchase payments 5,855,390
Contract distributions and terminations (86,176)
Transfer payments from (to) other Accounts and Fixed Account 7,308,004
______________
Increase in net assets derived from principal transactions 13,077,218
______________
Total increase 14,135,965
______________
NET ASSETS AT DECEMBER 31, 1996 $14,135,965
==============
<FN>
* Commencement of operations, April 1, 1996
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
EQUI-SELECT PRODUCT
For the years ended December 31, 1995 and 1996, Except as Noted
<TABLE>
<CAPTION>
Growth +
Income
Account*
______________
<S> <C>
NET ASSETS AT JANUARY 1, 1995 --
INCREASE IN NET ASSETS
Operations:
Net investment income --
Net realized gain on investments --
Net unrealized appreciation (depreciation) of investments --
______________
Net increase in net assets resulting from operations --
Changes from principal transactions:
Purchase payments --
Contract distributions and terminations --
Transfer payments from (to) other Accounts and Fixed Account --
______________
Increase in net assets derived from principal transactions --
______________
Total increase --
______________
NET ASSETS AT DECEMBER 31, 1995 --
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) ($49,590)
Net realized gain (loss) on investments 30,064
Net unrealized appreciation (depreciation) of investments 2,471,903
______________
Net increase in net assets resulting from operations 2,452,377
Changes from principal transactions:
Purchase payments 12,034,879
Contract distributions and terminations (227,921)
Transfer payments from (to) other Accounts and Fixed Account 13,570,237
______________
Increase in net assets derived from principal transactions 25,377,195
______________
Total increase 27,829,572
______________
NET ASSETS AT DECEMBER 31, 1996 $27,829,572
==============
<FN>
* Commencement of operations, April 1, 1996
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
EQUI-SELECT PRODUCT
For the years ended December 31, 1995 and 1996, Except as Noted
<TABLE>
<CAPTION>
International
Equity
Account*
______________
<S> <C>
NET ASSETS AT JANUARY 1, 1995 --
INCREASE IN NET ASSETS
Operations:
Net investment income --
Net realized gain on investments --
Net unrealized appreciation (depreciation) of investments --
______________
Net increase in net assets resulting from operations --
Changes from principal transactions:
Purchase payments --
Contract distributions and terminations --
Transfer payments from (to) other Accounts and Fixed Account --
______________
Increase in net assets derived from principal transactions --
______________
Total increase --
______________
NET ASSETS AT DECEMBER 31, 1995 --
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) $315,884
Net realized gain (loss) on investments (10,354)
Net unrealized appreciation (depreciation) of investments 108,774
______________
Net increase in net assets resulting from operations 414,304
Changes from principal transactions:
Purchase payments 4,679,176
Contract distributions and terminations (172,244)
Transfer payments from (to) other Accounts and Fixed Account 15,903,022
______________
Increase in net assets derived from principal transactions 20,409,954
______________
Total increase 20,824,258
______________
NET ASSETS AT DECEMBER 31, 1996 $20,824,258
==============
<FN>
* Commencement of operations, April 1, 1996
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS
EQUI-SELECT PRODUCT
December 31, 1996
NOTE 1 - INVESTMENT AND ACCOUNTING POLICIES
Equitable Life Insurance Company of Iowa Separate Account A (the "Account") was
established by Equitable Life Insurance Company of Iowa (the "Company") in
accordance with the provisions of Iowa Insurance laws and is a part of the
total operations of the Company. The assets and liabilities of the Account
are clearly identified and distinguished from the other assets and liabilities
of the Company. Commencement of operations is defined as the date of initial
sale of contract units to contract owners. Investments are stated at the
closing net asset values per share on December 31, 1996.
The Account is a unit investment trust, registered with the Securities and
Exchange Commission under the Investment Company Act of 1940, as amended, and
as of December 31, 1996, consisted of fifteen investment accounts, nine of
which (the Money Market, Mortgage-Backed Securities, International Fixed
Income, OTC, Research, Total Return, Advantage, Value + Growth and Growth &
Income) are invested in specified portfolios of the Equi-Select Series Trust,
and one of which (the International Equity Account) is invested in the
International Equity Portfolio of the Warburg Pincus Trust, as directed by
eligible contract owners. Activity in these ten investment accounts is
available to contract owners of the Equi-Select Variable Annuity product.
The Equi-Select Series Trust and Warburg Pincus Trust are open-end management
companies.
The remaining five investment accounts are invested in specified portfolios
of the Travelers Series Fund Inc. and Smith Barney Series Fund. These five
investment accounts and the Research, OTC and Total Return Accounts, which
invest in the Equi-Select Series Trust, are available to contract owners of
the PrimElite Variable Annuity product.
On May 16, 1996, the Government Securities and Short-Term Bond Accounts were
closed. On December 12, 1996, the International Stock Account was closed.
The net assets were transferred to other accounts. Accordingly, the accounts
have not been included in these financial statements.
In 1997, the Account began offering certain accounts in The GCG Trust. These
accounts include the Fully Managed and Small Cap Series which commenced
operations in the Account on February 5, 1997 and the Rising Dividends on
February 10, 1997.
The financial statements included herein present only those investment accounts
available to contract owners of the Equi-Select Variable Annuity product as of
December 31, 1996. The financial statements of the remaining investment
accounts as well as the Research, OTC and Total Return Accounts, which are also
available to contract owners of the PrimElite Variable Annuity product are
presented separately.
Realized gains and losses are determined on the basis of specific
identification. Dividends are taken into income on an accrual basis as of the
ex-dividend date.
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
NOTE 2 - EXPENSES
The Company is compensated for mortality and expense risks and administrative
costs by a charge equivalent to an annual rate of 1.25% and 0.15%,
respectively, of the total net assets of each Account. These charges amounted
to $1,895,806 and $227,345, respectively, for the period ended December 31,
1996 ($348,739 and $42,078, respectively, for the year ended December 31,
1995).
An annual contract charge of $30 is deducted on each contract anniversary prior
to the maturity date, upon full withdrawal of a contract's value or upon
commencement of annuity payments if such withdrawal is made or annuity payments
commence on a date other than the contract anniversary. For the period ended
December 31, 1996, annual contract charges amounted to $65,970, and for the
year ended December 31, 1995, these charges amounted to $2,806.
A transfer charge computed as the lesser of 2% of the contract value
transferred or $25 will be imposed on each transfer between Accounts in excess
of twelve in any one calendar year. For the year ended December 31, 1996,
transfer charges amounted to $622. No transfer charges were assessed in 1995.
A withdrawal charge may be imposed in the event of withdrawal of any portion
of the contract value or upon annuitization. The withdrawal charge is 8% of
the amount withdrawn prior to the first anniversary of any purchase payment and
reduces by 1% at each subsequent purchase payment anniversary.
NOTE 3 - FEDERAL INCOME TAXES
Operations of the Account form a part of the operations of the Company which
is taxed as a life insurance company under the Internal Revenue Code. Under
current law, no federal income taxes are payable with respect to operations
of the Account.
NOTE 4 - PURCHASES AND SALES OF INVESTMENT SECURITIES
The aggregate cost of purchases and proceeds from sales of investments were
as follows:
<TABLE>
<CAPTION>
Period From January 1,
1996 or Commencement of
Operations to Year Ended
December 31, 1996 December 31, 1995
_________________________ _________________________
Purchases Sales Purchases Sales
____________ ____________ ____________ ____________
<S> <C> <C> <C> <C>
Money Market Portfolio $43,852,637 $30,504,481 $18,116,828 $12,751,952
Mortgage-Backed Securities
Portfolio 8,065,695 1,682,068 4,186,979 33,921
International Fixed
Income Portfolio 5,234,780 557,676 3,461,113 111,334
OTC Portfolio 28,902,017 341,386 8,736,489 410,391
Research Portfolio 54,653,079 1,744,943 14,168,762 230,594
Total Return Portfolio 39,063,198 532,334 14,267,685 137,651
Advantage Portfolio 13,475,395 2,445,892 3,718,744 592,976
Value + Growth Portfolio 13,221,408 208,125 -- --
Growth & Income Portfolio 25,439,201 179,200 -- --
International Equity
Portfolio 21,093,357 367,519 -- --
</TABLE>
NOTE 5 - SUMMARY OF CHANGES FROM UNIT TRANSACTIONS
Transactions in units were as follows:
<TABLE>
<CAPTION>
Period From January 1,
1996 or Commencement of
Operations to Year Ended
December 31, 1996 December 31, 1995
_________________________ _________________________
Purchases Sales Purchases Sales
____________ ____________ ____________ ____________
<S> <C> <C> <C> <C>
Money Market Account 9,656,473 8,432,754 2,969,444 2,454,999
Mortgage-Backed Securities
Account 806,213 255,416 380,372 3,227
International Fixed
Income Account 502,939 108,758 309,796 3,205
OTC Account 2,002,398 159,271 705,565 9,749
Research Account 3,947,429 357,941 1,196,506 9,931
Total Return Account 3,298,269 256,496 1,315,204 35,745
Advantage Account 1,374,019 396,282 359,214 59,955
Value + Growth Account 1,294,691 56,342 -- --
Growth & Income Account 2,280,154 51,266 -- --
International Equity
Account 2,094,800 68,096 -- --
</TABLE>
NOTE 6 - NET ASSETS
Net assets at December 31, 1996 consisted of the following:
<TABLE>
<CAPTION>
Mortgage- International
Money Backed Fixed
Market Securities Income OTC
Account Account Account Account
____________ _____________ ____________ _____________
<S> <C> <C> <C> <C>
Unit transactions $19,055,599 $10,484,591 $8,050,647 $36,983,620
Accumulated net
investment income (loss) 82,773 663,888 594,166 2,637,867
Net unrealized appreciation
(depreciation) of
investments -- (315,232) (205,165) 1,231,335
____________ _____________ ____________ _____________
$19,138,372 $10,833,247 $8,439,648 $40,852,822
============ ============= ============ =============
</TABLE>
<TABLE>
<CAPTION>
Total
Research Return Advantage
Account Account Account
____________ _____________ ____________
<S> <C> <C> <C>
Unit transactions $68,507,383 $53,320,057 $14,598,213
Accumulated net
investment income (loss) 1,719,749 1,335,360 632,982
Net unrealized appreciation
(depreciation) of
investments 6,948,151 4,179,748 (212,246)
____________ _____________ ____________
$77,175,283 $58,835,165 $15,018,949
============ ============= ============
</TABLE>
<TABLE>
<CAPTION>
Value + Growth & International
Growth Income Equity
Account Account Account
____________ _____________ ____________
<S> <C> <C> <C>
Unit transactions $13,081,777 $25,407,259 $20,399,600
Accumulated net
investment income (loss) 78,608 (49,590) 315,884
Net unrealized appreciation
(depreciation) of
investments 975,580 2,471,903 108,774
____________ _____________ ____________
$14,135,965 $27,829,572 $20,824,258
============ ============= ============
</TABLE>
Financial Statements
Equitable Life Insurance Company of Iowa
Separate Account A
PrimElite Product
Periods ended December 31, 1996, and 1995
with Report of Independent Auditors
Equitable Life Insurance Company of Iowa
Separate Account A
PrimElite
Financial Statements
Periods ended December 31, 1996 and 1995
Contents
Report of Independent Auditors
Audited Financial Statements
Statements of Net Assets
Statements of Operations
Statements of Changes in Net Assets
Notes to Financial Statements
Report of Independent Auditors
The Board of Directors
Equitable Life Insurance Company of Iowa
We have audited the accompanying statements of net assets of certain accounts
of Equitable Life Insurance Company of Iowa Separate Account A (comprising,
respectively, the Research, OTC, Total Return, International Equity, Income and
Growth, High Income, Money Market and Appreciation Accounts) as of December 31,
1996, and the related statements of operations and changes in net assets for
each of the periods indicated therein. These financial statements are the
responsibility of the Account's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. Our
procedures included confirmation of securities owned as of December 31, 1996,
by correspondence with the transfer agent. An audit also includes assessing
the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of certain accounts of the
Equitable Life Insurance Company of Iowa Separate Account A at December 31,
1996, and the results of their operations and changes in their net assets for
each of the periods indicated therein, in conformity with generally accepted
accounting principles.
/S/ Ernst & Young LLP
Des Moines, Iowa
February 11, 1997
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF NET ASSETS
PRIMELITE PRODUCT
December 31, 1996
<TABLE>
<CAPTION>
Research
Account
____________
<S> <C>
ASSETS
Investments at net asset value:
Equi-Select Series Trust Research Portfolio,
4,870,814 shares (cost - $68,215,717) $75,163,868
Equi-Select Series Trust OTC Portfolio,
2,812,183 shares (cost - $37,637,315)
Equi-Select Series Trust Total Return Portfolio,
4,356,245 shares (cost - $53,111,757)
Travelers Series Fund Inc.
Smith Barney International Equity Portfolio,
860,276 shares (cost - $10,042,334)
Travelers Series Fund Inc.
Smith Barney Income and Growth Portfolio,
1,492,090 shares (cost - $20,664,534)
Travelers Series Fund Inc.
Smith Barney High Income Portfolio,
692,114 shares (cost - $8,099,774)
Travelers Series Fund Inc.
Smith Barney Money Market Portfolio,
3,687,775 shares (cost - $3,687,775)
Smith Barney Series Fund Appreciation Portfolio,
352,217 shares (cost - $5,627,698)
____________
TOTAL INVESTMENTS 75,163,868
Accrued investment income 2,011,415
____________
TOTAL NET ASSETS $77,175,283
============
NET ASSETS REPRESENTED BY:
Units 4,845,240
Unit Value 15.93
____________
Net Assets $77,175,283
============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF NET ASSETS
PRIMELITE PRODUCT
December 31, 1996
<TABLE>
<CAPTION>
OTC
Account
____________
<S> <C>
ASSETS
Investments at net asset value:
Equi-Select Series Trust Research Portfolio,
4,870,814 shares (cost - $68,215,717)
Equi-Select Series Trust OTC Portfolio,
2,812,183 shares (cost - $37,637,315) $38,868,650
Equi-Select Series Trust Total Return Portfolio,
4,356,245 shares (cost - $53,111,757)
Travelers Series Fund Inc.
Smith Barney International Equity Portfolio,
860,276 shares (cost - $10,042,334)
Travelers Series Fund Inc.
Smith Barney Income and Growth Portfolio,
1,492,090 shares (cost - $20,664,534)
Travelers Series Fund Inc.
Smith Barney High Income Portfolio,
692,114 shares (cost - $8,099,774)
Travelers Series Fund Inc.
Smith Barney Money Market Portfolio,
3,687,775 shares (cost - $3,687,775)
Smith Barney Series Fund Appreciation Portfolio,
352,217 shares (cost - $5,627,698)
____________
TOTAL INVESTMENTS 38,868,650
Accrued investment income 1,984,172
____________
TOTAL NET ASSETS $40,852,822
============
NET ASSETS REPRESENTED BY:
Units 2,602,724
Unit Value 15.70
____________
Net Assets $40,852,822
============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF NET ASSETS
PRIMELITE PRODUCT
December 31, 1996
<TABLE>
<CAPTION>
Total
Return
Account
____________
<S> <C>
ASSETS
Investments at net asset value:
Equi-Select Series Trust Research Portfolio,
4,870,814 shares (cost - $68,215,717)
Equi-Select Series Trust OTC Portfolio,
2,812,183 shares (cost - $37,637,315)
Equi-Select Series Trust Total Return Portfolio,
4,356,245 shares (cost - $53,111,757) $57,291,505
Travelers Series Fund Inc.
Smith Barney International Equity Portfolio,
860,276 shares (cost - $10,042,334)
Travelers Series Fund Inc.
Smith Barney Income and Growth Portfolio,
1,492,090 shares (cost - $20,664,534)
Travelers Series Fund Inc.
Smith Barney High Income Portfolio,
692,114 shares (cost - $8,099,774)
Travelers Series Fund Inc.
Smith Barney Money Market Portfolio,
3,687,775 shares (cost - $3,687,775)
Smith Barney Series Fund Appreciation Portfolio,
352,217 shares (cost - $5,627,698)
____________
TOTAL INVESTMENTS 57,291,505
Accrued investment income 1,543,660
____________
TOTAL NET ASSETS $58,835,165
============
NET ASSETS REPRESENTED BY:
Units 4,354,338
Unit Value 13.51
____________
Net Assets $58,835,165
============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF NET ASSETS
PRIMELITE PRODUCT
December 31, 1996
<TABLE>
<CAPTION>
International
Equity
Account
______________
<S> <C>
ASSETS
Investments at net asset value:
Equi-Select Series Trust Research Portfolio,
4,870,814 shares (cost - $68,215,717)
Equi-Select Series Trust OTC Portfolio,
2,812,183 shares (cost - $37,637,315)
Equi-Select Series Trust Total Return Portfolio,
4,356,245 shares (cost - $53,111,757)
Travelers Series Fund Inc.
Smith Barney International Equity Portfolio,
860,276 shares (cost - $10,042,334) $10,805,062
Travelers Series Fund Inc.
Smith Barney Income and Growth Portfolio,
1,492,090 shares (cost - $20,664,534)
Travelers Series Fund Inc.
Smith Barney High Income Portfolio,
692,114 shares (cost - $8,099,774)
Travelers Series Fund Inc.
Smith Barney Money Market Portfolio,
3,687,775 shares (cost - $3,687,775)
Smith Barney Series Fund Appreciation Portfolio,
352,217 shares (cost - $5,627,698)
______________
TOTAL INVESTMENTS 10,805,062
Accrued investment income --
______________
TOTAL NET ASSETS $10,805,062
==============
NET ASSETS REPRESENTED BY:
Units 804,975
Unit Value 13.42
______________
Net Assets $10,805,062
==============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF NET ASSETS
PRIMELITE PRODUCT
December 31, 1996
<TABLE>
<CAPTION> Income and
Growth
Account
______________
<S> <C>
ASSETS
Investments at net asset value:
Equi-Select Series Trust Research Portfolio,
4,870,814 shares (cost - $68,215,717)
Equi-Select Series Trust OTC Portfolio,
2,812,183 shares (cost - $37,637,315)
Equi-Select Series Trust Total Return Portfolio,
4,356,245 shares (cost - $53,111,757)
Travelers Series Fund Inc.
Smith Barney International Equity Portfolio,
860,276 shares (cost - $10,042,334)
Travelers Series Fund Inc.
Smith Barney Income and Growth Portfolio,
1,492,090 shares (cost - $20,664,534) $22,470,880
Travelers Series Fund Inc.
Smith Barney High Income Portfolio,
692,114 shares (cost - $8,099,774)
Travelers Series Fund Inc.
Smith Barney Money Market Portfolio,
3,687,775 shares (cost - $3,687,775)
Smith Barney Series Fund Appreciation Portfolio,
352,217 shares (cost - $5,627,698)
______________
TOTAL INVESTMENTS 22,470,880
Accrued investment income --
______________
TOTAL NET ASSETS $22,470,880
==============
NET ASSETS REPRESENTED BY:
Units 1,579,649
Unit Value 14.23
______________
Net Assets $22,470,880
==============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF NET ASSETS
PRIMELITE PRODUCT
December 31, 1996
<TABLE>
<CAPTION> High
Income
Account
______________
<S> <C>
ASSETS
Investments at net asset value:
Equi-Select Series Trust Research Portfolio,
4,870,814 shares (cost - $68,215,717)
Equi-Select Series Trust OTC Portfolio,
2,812,183 shares (cost - $37,637,315)
Equi-Select Series Trust Total Return Portfolio,
4,356,245 shares (cost - $53,111,757)
Travelers Series Fund Inc.
Smith Barney International Equity Portfolio,
860,276 shares (cost - $10,042,334)
Travelers Series Fund Inc.
Smith Barney Income and Growth Portfolio,
1,492,090 shares (cost - $20,664,534)
Travelers Series Fund Inc.
Smith Barney High Income Portfolio,
692,114 shares (cost - $8,099,774) $8,194,631
Travelers Series Fund Inc.
Smith Barney Money Market Portfolio,
3,687,775 shares (cost - $3,687,775)
Smith Barney Series Fund Appreciation Portfolio,
352,217 shares (cost - $5,627,698)
______________
TOTAL INVESTMENTS 8,194,631
Accrued investment income --
______________
TOTAL NET ASSETS $8,194,631
==============
NET ASSETS REPRESENTED BY:
Units 670,736
Unit Value 12.22
______________
Net Assets $8,194,631
==============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF NET ASSETS
PRIMELITE PRODUCT
December 31, 1996
<TABLE>
<CAPTION> Money
Market
Account
______________
<S> <C>
ASSETS
Investments at net asset value:
Equi-Select Series Trust Research Portfolio,
4,870,814 shares (cost - $68,215,717)
Equi-Select Series Trust OTC Portfolio,
2,812,183 shares (cost - $37,637,315)
Equi-Select Series Trust Total Return Portfolio,
4,356,245 shares (cost - $53,111,757)
Travelers Series Fund Inc.
Smith Barney International Equity Portfolio,
860,276 shares (cost - $10,042,334)
Travelers Series Fund Inc.
Smith Barney Income and Growth Portfolio,
1,492,090 shares (cost - $20,664,534)
Travelers Series Fund Inc.
Smith Barney High Income Portfolio,
692,114 shares (cost - $8,099,774)
Travelers Series Fund Inc.
Smith Barney Money Market Portfolio,
3,687,775 shares (cost - $3,687,775) $3,687,775
Smith Barney Series Fund Appreciation Portfolio,
352,217 shares (cost - $5,627,698)
______________
TOTAL INVESTMENTS 3,687,775
Accrued investment income 6,215
______________
TOTAL NET ASSETS $3,693,990
==============
NET ASSETS REPRESENTED BY:
Units 348,906
Unit Value 10.59
______________
Net Assets $3,693,990
==============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF NET ASSETS
PRIMELITE PRODUCT
December 31, 1996
<TABLE>
<CAPTION>
Appreciation
Account
______________
<S> <C>
ASSETS
Investments at net asset value:
Equi-Select Series Trust Research Portfolio,
4,870,814 shares (cost - $68,215,717)
Equi-Select Series Trust OTC Portfolio,
2,812,183 shares (cost - $37,637,315)
Equi-Select Series Trust Total Return Portfolio,
4,356,245 shares (cost - $53,111,757)
Travelers Series Fund Inc.
Smith Barney International Equity Portfolio,
860,276 shares (cost - $10,042,334)
Travelers Series Fund Inc.
Smith Barney Income and Growth Portfolio,
1,492,090 shares (cost - $20,664,534)
Travelers Series Fund Inc.
Smith Barney High Income Portfolio,
692,114 shares (cost - $8,099,774)
Travelers Series Fund Inc.
Smith Barney Money Market Portfolio,
3,687,775 shares (cost - $3,687,775)
Smith Barney Series Fund Appreciation Portfolio,
352,217 shares (cost - $5,627,698) $5,586,164
______________
TOTAL INVESTMENTS 5,586,164
Accrued investment income --
______________
TOTAL NET ASSETS $5,586,164
==============
NET ASSETS REPRESENTED BY:
Units 497,034
Unit Value 11.24
______________
Net Assets $5,586,164
==============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF OPERATIONS
PRIMELITE PRODUCT
For the year ended December 31, 1996, Except as Noted
<TABLE>
<CAPTION>
Total
Research OTC Return
Account Account Account
______________ ______________ ______________
<S> <C> <C> <C>
INVESTMENT INCOME (LOSS)
Income:
Dividends $12,455 -- $1,110,366
Capital gains distributions 2,116,798 $2,075,049 500,681
Expenses:
Annual contract charges (19,646) (13,074) (19,076)
Transfer charges (38) (50) (100)
Administrative charges (61,564) (34,124) (51,077)
Mortality and expense
risk charges (513,268) (284,479) (425,691)
______________ ______________ ______________
Net investment income (loss) 1,534,737 1,743,322 1,115,103
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net realized gain on
investments 662,781 61,629 120,266
Net unrealized appreciation
(depreciation) of
investments 5,420,258 1,203,795 3,147,975
______________ ______________ ______________
NET INCREASE IN
NET ASSETS RESULTING FROM
OPERATIONS $7,617,776 $3,008,746 $4,383,344
============== ============== ==============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF OPERATIONS
PRIMELITE PRODUCT
For the year ended December 31, 1996, Except as Noted
<TABLE>
<CAPTION>
International Income High
Equity and Growth Income
Account Account Account
______________ ______________ ______________
<S> <C> <C> <C>
INVESTMENT INCOME (LOSS)
Income:
Dividends $10,897 $252,108 $419,511
Capital gains distributions -- 247,811 34,959
Expenses:
Annual contract charges (1,788) (3,084) (629)
Transfer charges -- -- --
Administrative charges (8,674) (17,746) (5,796)
Mortality and expense
risk charges (72,323) (147,965) (48,347)
______________ ______________ ______________
Net investment income (loss) (71,888) 331,124 399,698
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net realized gain on
investments 17,392 113,961 22,650
Net unrealized appreciation
(depreciation) of
investments 731,168 1,617,928 94,928
______________ ______________ ______________
NET INCREASE IN
NET ASSETS RESULTING FROM
OPERATIONS $676,672 $2,063,013 $517,276
============== ============== ==============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF OPERATIONS
PRIMELITE PRODUCT
For the year ended December 31, 1996, Except as Noted
<TABLE>
<CAPTION>
Money
Market Appreciation
Account Account*
______________ ______________
<S> <C> <C>
INVESTMENT INCOME (LOSS)
Income:
Dividends $122,144 $77,590
Capital gains distributions -- 355,982
Expenses:
Annual contract charges (114) (36)
Transfer charges -- --
Administrative charges (3,801) (2,734)
Mortality and expense
risk charges (31,672) (22,856)
______________ ______________
Net investment income (loss) 86,557 407,946
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS
Net realized gain on
investments -- 8,262
Net unrealized appreciation
(depreciation) of
investments -- (41,534)
______________ ______________
NET INCREASE IN
NET ASSETS RESULTING FROM
OPERATIONS $86,557 $374,674
============== ==============
<FN>
*Commencement of operations, March 25, 1996
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
PRIMELITE PRODUCT
For the years ended December 31, 1995 and 1996, Except as Noted
<TABLE>
<CAPTION>
Research
Account
______________
<S> <C>
NET ASSETS AT JANUARY 1, 1995 $672,603
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) 190,119
Net realized gain (loss) on investments 19,662
Net unrealized appreciation (depreciation) of investments 1,548,017
______________
Net increase in net assets resulting from operations 1,757,798
Changes from principal transactions:
Purchase payments 8,333,228
Contract distributions and terminations (32,130)
Transfer payments from (to) other Accounts and Fixed Account 5,715,449
______________
Increase in net assets derived from principal transactions 14,016,547
______________
Total increase 15,774,345
______________
NET ASSETS AT DECEMBER 31, 1995 16,446,948
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) 1,534,737
Net realized gain on investments 662,781
Net unrealized appreciation (depreciation) of investments 5,420,258
______________
Net increase in net assets resulting from operations 7,617,776
Changes from principal transactions:
Purchase payments 32,407,473
Contract distributions and terminations (1,057,801)
Transfer payments from (to) other Accounts and Fixed Account 21,760,887
______________
Increase in net assets derived from principal transactions 53,110,559
______________
Total increase 60,728,335
______________
NET ASSETS AT DECEMBER 31, 1996 $77,175,283
==============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
PRIMELITE PRODUCT
For the years ended December 31, 1995 and 1996, Except as Noted
<TABLE>
<CAPTION>
OTC
Account
______________
<S> <C>
NET ASSETS AT JANUARY 1, 1995 $660,106
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) 933,058
Net realized gain (loss) on investments 36,066
Net unrealized appreciation (depreciation) of investments 20,313
______________
Net increase in net assets resulting from operations 989,437
Changes from principal transactions:
Purchase payments 4,028,128
Contract distributions and terminations (33,765)
Transfer payments from (to) other Accounts and Fixed Account 4,392,791
______________
Increase in net assets derived from principal transactions 8,387,154
______________
Total increase 9,376,591
______________
NET ASSETS AT DECEMBER 31, 1995 10,036,697
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) 1,743,322
Net realized gain on investments 61,629
Net unrealized appreciation (depreciation) of investments 1,203,795
______________
Net increase in net assets resulting from operations 3,008,746
Changes from principal transactions:
Purchase payments 16,302,789
Contract distributions and terminations (628,676)
Transfer payments from (to) other Accounts and Fixed Account 12,133,266
______________
Increase in net assets derived from principal transactions 27,807,379
______________
Total increase 30,816,125
______________
NET ASSETS AT DECEMBER 31, 1996 $40,852,822
==============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
PRIMELITE PRODUCT
For the years ended December 31, 1995 and 1996, Except as Noted
<TABLE>
<CAPTION>
Total Return
Account
______________
<S> <C>
NET ASSETS AT JANUARY 1, 1995 $324,925
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) 246,476
Net realized gain (loss) on investments 6,083
Net unrealized appreciation (depreciation) of investments 1,034,214
______________
Net increase in net assets resulting from operations 1,286,773
Changes from principal transactions:
Purchase payments 7,285,539
Contract distributions and terminations (72,501)
Transfer payments from (to) other Accounts and Fixed Account 6,997,106
______________
Increase in net assets derived from principal transactions 14,210,144
______________
Total increase 15,496,917
______________
NET ASSETS AT DECEMBER 31, 1995 15,821,842
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) 1,115,103
Net realized gain on investments 120,266
Net unrealized appreciation (depreciation) of investments 3,147,975
______________
Net increase in net assets resulting from operations 4,383,344
Changes from principal transactions:
Purchase payments 23,245,480
Contract distributions and terminations (1,235,631)
Transfer payments from (to) other Accounts and Fixed Account 16,620,130
______________
Increase in net assets derived from principal transactions 38,629,979
______________
Total increase 43,013,323
______________
NET ASSETS AT DECEMBER 31, 1996 $58,835,165
==============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
PRIMELITE PRODUCT
For the years ended December 31, 1995 and 1996, Except as Noted
<TABLE>
<CAPTION>
International
Equity
Account (a)
______________
<S> <C>
NET ASSETS AT JANUARY 1, 1995 --
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) ($3,744)
Net realized gain (loss) on investments (4)
Net unrealized appreciation (depreciation) of investments 31,560
______________
Net increase in net assets resulting from operations 27,812
Changes from principal transactions:
Purchase payments 1,444,691
Contract distributions and terminations --
Transfer payments from (to) other Accounts and Fixed Account 312,731
______________
Increase in net assets derived from principal transactions 1,757,422
______________
Total increase 1,785,234
______________
NET ASSETS AT DECEMBER 31, 1995 1,785,234
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) (71,888)
Net realized gain on investments 17,392
Net unrealized appreciation (depreciation) of investments 731,168
______________
Net increase in net assets resulting from operations 676,672
Changes from principal transactions:
Purchase payments 6,290,530
Contract distributions and terminations (32,636)
Transfer payments from (to) other Accounts and Fixed Account 2,085,262
______________
Increase in net assets derived from principal transactions 8,343,156
______________
Total increase 9,019,828
______________
NET ASSETS AT DECEMBER 31, 1996 $10,805,062
==============
<FN>
(a) Commencement of operations, March 27, 1995
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
PRIMELITE PRODUCT
For the years ended December 31, 1995 and 1996, Except as Noted
<TABLE>
<CAPTION>
Income
and Growth
Account (b)
______________
<S> <C>
NET ASSETS AT JANUARY 1, 1995 --
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) $46,665
Net realized gain (loss) on investments 106
Net unrealized appreciation (depreciation) of investments 188,418
______________
Net increase in net assets resulting from operations 235,189
Changes from principal transactions:
Purchase payments 2,609,690
Contract distributions and terminations (77)
Transfer payments from (to) other Accounts and Fixed Account 710,152
______________
Increase in net assets derived from principal transactions 3,319,765
______________
Total increase 3,554,954
______________
NET ASSETS AT DECEMBER 31, 1995 3,554,954
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) 331,124
Net realized gain on investments 113,961
Net unrealized appreciation (depreciation) of investments 1,617,928
______________
Net increase in net assets resulting from operations 2,063,013
Changes from principal transactions:
Purchase payments 12,391,247
Contract distributions and terminations (313,379)
Transfer payments from (to) other Accounts and Fixed Account 4,775,045
______________
Increase in net assets derived from principal transactions 16,852,913
______________
Total increase 18,915,926
______________
NET ASSETS AT DECEMBER 31, 1996 $22,470,880
==============
<FN>
(b) Commencement of operations, April 5, 1995
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
PRIMELITE PRODUCT
For the years ended December 31, 1995 and 1996, Except as Noted
<TABLE>
<CAPTION>
High Income
Account (c)
______________
<S> <C>
NET ASSETS AT JANUARY 1, 1995 --
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) $30,883
Net realized gain (loss) on investments 20
Net unrealized appreciation (depreciation) of investments (71)
______________
Net increase in net assets resulting from operations 30,832
Changes from principal transactions:
Purchase payments 672,913
Contract distributions and terminations (1,611)
Transfer payments from (to) other Accounts and Fixed Account 88,806
______________
Increase in net assets derived from principal transactions 760,108
______________
Total increase 790,940
______________
NET ASSETS AT DECEMBER 31, 1995 790,940
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) 399,698
Net realized gain on investments 22,650
Net unrealized appreciation (depreciation) of investments 94,928
______________
Net increase in net assets resulting from operations 517,276
Changes from principal transactions:
Purchase payments 5,464,065
Contract distributions and terminations (30,888)
Transfer payments from (to) other Accounts and Fixed Account 1,453,238
______________
Increase in net assets derived from principal transactions 6,886,415
______________
Total increase 7,403,691
______________
NET ASSETS AT DECEMBER 31, 1996 $8,194,631
==============
<FN>
(c) Commencement of operations, April 28, 1995
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
PRIMELITE PRODUCT
For the years ended December 31, 1995 and 1996, Except as Noted
<TABLE>
<CAPTION>
Money Market
Account (d)
______________
<S> <C>
NET ASSETS AT JANUARY 1, 1995 --
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) $9,600
Net realized gain (loss) on investments --
Net unrealized appreciation (depreciation) of investments --
______________
Net increase in net assets resulting from operations 9,600
Changes from principal transactions:
Purchase payments 3,007,403
Contract distributions and terminations (13,913)
Transfer payments from (to) other Accounts and Fixed Account (1,723,565)
______________
Increase in net assets derived from principal transactions 1,269,925
______________
Total increase 1,279,525
______________
NET ASSETS AT DECEMBER 31, 1995 1,279,525
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) 86,557
Net realized gain on investments --
Net unrealized appreciation (depreciation) of investments --
______________
Net increase in net assets resulting from operations 86,557
Changes from principal transactions:
Purchase payments 16,828,214
Contract distributions and terminations (12,087)
Transfer payments from (to) other Accounts and Fixed Account (14,488,219)
______________
Increase in net assets derived from principal transactions 2,327,908
______________
Total increase 2,414,465
______________
NET ASSETS AT DECEMBER 31, 1996 $3,693,990
==============
<FN>
(d) Commencement of operations, May 24, 1995
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
PRIMELITE PRODUCT
For the years ended December 31, 1995 and 1996, Except as Noted
<TABLE>
<CAPTION>
Appreciation
Account (e)
______________
<S> <C>
NET ASSETS AT JANUARY 1, 1995 --
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) --
Net realized gain (loss) on investments --
Net unrealized appreciation (depreciation) of investments --
______________
Net increase in net assets resulting from operations --
Changes from principal transactions:
Purchase payments --
Contract distributions and terminations --
Transfer payments from (to) other Accounts and Fixed Account --
______________
Increase in net assets derived from principal transactions --
______________
Total increase --
______________
NET ASSETS AT DECEMBER 31, 1995 --
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) $407,946
Net realized gain on investments 8,262
Net unrealized appreciation (depreciation) of investments (41,534)
______________
Net increase in net assets resulting from operations 374,674
Changes from principal transactions:
Purchase payments 4,266,029
Contract distributions and terminations (3,440)
Transfer payments from (to) other Accounts and Fixed Account 948,901
______________
Increase in net assets derived from principal transactions 5,211,490
______________
Total increase 5,586,164
______________
NET ASSETS AT DECEMBER 31, 1996 $5,586,164
==============
<FN>
(e) Commencement of operations, March 25, 1996
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS
PRIMELITE PRODUCT
December 31, 1996
NOTE 1 - INVESTMENT AND ACCOUNTING POLICIES
Equitable Life Insurance Company of Iowa Separate Account A (the "Account") was
established by Equitable Life Insurance Company of Iowa (the "Company") in
accordance with the provisions of Iowa Insurance laws and is a part of the
total operations of the Company. The assets and liabilities of the Account are
clearly identified and distinguished from the other assets and liabilities of
the Company. Commencement of operations is defined as the date of initial
sale of contract units to contract owners. Investments are stated at the
closing net asset values per share on December 31, 1996.
The Account is a unit investment trust, registered with the Securities and
Exchange Commission under the Investment Company Act of 1940, as amended, and
as of December 31, 1996, consisted of fifteen investment accounts, eight of
which are available to contract owners of the PrimElite Variable Annuity
product. Four of the Accounts (International Equity, Income and Growth, High
Income, and Money Market), are invested in specified portfolios of the
Travelers Series Fund Inc., which commenced operations on June 16, 1994.
The Appreciation Account invests in the Appreciation Portfolio of the Smith
Barney Series Fund. Activity in these five investment accounts, as well as the
Research Account, OTC Account, and Total Return Account, which invest in the
Equi-Select Series Trust, are available to contract owners of the PrimElite
Variable Annuity Product. The Travelers Series Fund Inc., Smith Barney Series
Fund and Equi-Select Series Trust are open-end management companies.
The remaining seven investment accounts (as well as the Research Account, OTC
Account and Total Return Account) are invested in specified portfolios of the
Equi-Select Series Trust and The International Equity Account. These
investment accounts are available to contract owners of the Equi-Select
Variable Annuity product.
In 1997, the Account began offering certain accounts in the Smith Barney
Concert Allocation Series, Inc. These include the Select High Growth and
Select Balanced which commenced operations on February 21, 1997, Select Growth
on March 6, 1997, Select Income on March 19, 1997 and the Select Conservative
on March 26, 1997.
The financial statements included herein present only those investment accounts
available to contract owners of the PrimElite Variable Annuity product as of
December 31, 1996. The financial statements of the remaining investment
accounts as well as the Research, OTC and Total Return Accounts, which are also
available to contract owners of the Equi-Select Variable Annuity product are
presented separately.
Realized gains and losses are determined on the basis of specific
identification. Dividends are taken into income on an accrual basis as of the
ex-dividend date.
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
NOTE 2 - EXPENSES
The Company is compensated for mortality and expense risks and administrative
costs by a charge equivalent to an annual rate of 1.25% and 0.15%,
respectively, of the total net assets of each Account. These charges amounted
to $1,546,601 and $185,516, respectively, for the period ended December 31,
1996 ($223,978 and $27,025, respectively for 1995).
An annual contract charge of $30 is deducted on each contract anniversary prior
to the maturity date, upon full withdrawal of a contract's value or upon
commencement of annuity payments if such withdrawal is made or annuity payments
commence on a date other than the contract anniversary. For the period ended
December 31, 1996, annual contract charges amounted to $57,447 ($1,874 for
December 31, 1995).
A transfer charge computed as the lesser of 2% of the contract value
transferred or $25 will be imposed on each transfer between Accounts in excess
of twelve in any one calendar year. For the period ended December 31, 1996,
transfer charges amounted to $188. No transfer charges were assessed in 1995.
A withdrawal charge may be imposed in the event of withdrawal of any portion of
the contract value or upon annuitization. The withdrawal charge is 8% of the
amount withdrawn prior to the first anniversary of any purchase payment and
reduces by 1% at each subsequent purchase payment anniversary.
NOTE 3 - FEDERAL INCOME TAXES
Operations of the Account form a part of the operations of the Company which
is taxed as a life insurance company under the Internal Revenue Code. Under
current law, no federal income taxes are payable with respect to operations of
the Account.
NOTE 4 - PURCHASES AND SALES OF INVESTMENT SECURITIES
The aggregate cost of purchases and proceeds from sales of investments
were as follows:
<TABLE>
<CAPTION>
Period From Period From
January 1, 1996 or January 1, 1995 or
Commencement of Commencement of
Operations Operations
to December 31, 1996 to December 31, 1995
_________________________ _________________________
Purchases Sales Purchases Sales
____________ ____________ ____________ ____________
<S> <C> <C> <C> <C>
Research Portfolio $54,653,079 $1,744,943 $14,168,762 $230,594
OTC Portfolio 28,902,017 341,386 8,736,489 410,391
Total Return Portfolio 39,063,198 532,334 14,267,685 137,651
International Equity
Portfolio 8,397,915 126,647 1,754,791 1,113
Income and Growth
Portfolio 17,726,592 542,555 3,373,110 6,680
High Income Portfolio 7,606,805 320,692 792,963 1,972
Money Market Portfolio 11,135,757 8,725,874 2,614,578 1,336,686
Appreciation Portfolio 5,719,716 100,280 -- --
</TABLE>
NOTE 5 - SUMMARY OF CHANGES FROM UNIT TRANSACTIONS
Transactions in units were as follows:
<TABLE>
<CAPTION>
Period From Period From
January 1, 1996 or January 1, 1995 or
Commencement of Commencement of
Operations Operations
to December 31, 1996 to December 31, 1995
_________________________ _________________________
Purchases Sales Purchases Sales
____________ ____________ ____________ ____________
<S> <C> <C> <C> <C>
Research Account 3,947,429 357,941 1,196,506 9,931
OTC Account 2,002,398 159,271 705,565 9,749
Total Return Account 3,298,269 256,496 1,315,204 35,745
International Equity
Account 663,194 12,607 154,388 --
Income and Growth
Account 1,330,977 46,462 295,140 6
High Income Account 623,760 25,307 72,433 150
Money Market Account 1,696,660 1,472,802 295,977 170,929
Appreciation Account 509,854 12,820 -- --
</TABLE>
NOTE 6 - NET ASSETS
Net assets at December 31, 1996 consisted of the following:
<TABLE>
<CAPTION>
Total International
Research OTC Return Equity
Account Account Account Account
____________ ____________ ____________ ______________
<S> <C> <C> <C> <C>
Unit transactions $68,507,383 $36,983,620 $53,320,057 $10,117,851
Accumulated net
investment income (loss) 1,719,749 2,637,867 1,335,360 (75,517)
Net unrealized appreciation
(depreciation) of
investments 6,948,151 1,231,335 4,179,748 762,728
____________ ____________ ____________ ______________
$77,175,283 $40,852,822 $58,835,165 $10,805,062
============ ============ ============ ==============
</TABLE>
<TABLE>
<CAPTION>
Income High Money
and Growth Income Market Appreciation
Account Account Account Account
____________ ____________ ____________ ______________
<S> <C> <C> <C> <C>
Unit transactions $20,290,356 $7,669,715 $3,676,170 $5,219,752
Accumulated net
investment income (loss) 374,178 430,059 17,820 407,946
Net unrealized appreciation
(depreciation) of
investments 1,806,346 94,857 -- (41,534)
____________ ____________ ____________ ______________
$22,470,880 $8,194,631 $3,693,990 $5,586,164
============ ============ ============ ==============
</TABLE>
