As Filed with the Securities and Exchange Commission on May 1, 1998
File Nos. 33-79170, 811-8524
=========================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 8 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 9 [X]
(Check appropriate box or boxes.)
EQUITABLE LIFE INSURANCE COMPANY OF IOWA SEPARATE ACCOUNT A
___________________________________________________________
(Exact Name of Registrant)
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
________________________________________
(Name of Depositor)
909 Locust Street, Des Moines, Iowa 50309
____________________________________________________ __________
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code (800) 344-6860
NAME AND ADDRESS OF AGENT FOR SERVICE
Marilyn Talman, Secretary
Equitable Life Insurance Company of Iowa
1001 Jefferson Street, Suite400
Wilmington, DE 19801
(302)576-3400
COPIES TO:
Marilyn Talman, Esq. COPY TO:
Golden American Life Insurance Company Stephen E. Roth, Esq.
1001 Jefferson Street, Suite 400 Sutherland, Asbill & Brennan LLP
Wilmington, DE 19801 1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2404
It is proposed that this filing will become effective:
___ immediately upon filing pursuant to paragraph (b) of Rule 485
_X_ on May 1, 1998 pursuant to paragraph (b) of Rule 485
___ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
___ on (date) pursuant to paragraph (a)(1) of Rule 485
If appropriate, check the following:
___ This Post-Effective Amendment designates a new effective date for
a previously filed Post-Effective Amendment.
TITLE OF SECURITIES BEING REGISTERED:
Individual Flexible Purchase Payment Deferred Variable and Fixed
Annuity Contracts
<TABLE>
<CAPTION>
CROSS REFERENCE SHEET
(required by Rule 495)
Item No. Location
- -------- -------------------
PART A
<S> <C> <C>
Item 1. Cover Page................................. Cover Page
Item 2. Definitions................................ Definitions
Item 3. Synopsis................................... Highlights
Item 4. Condensed Financial Information............ Fee Table, Condensed
Financial Information
Item 5. General Description of Registrant,
Depositor, and Portfolio Companies......... The Company; The
Separate Account;
Equi-Select Series
Trust; Travelers
Series Fund Inc.;
Greenwich Street Series
Fund; Warburg Pincus
Trust; The GCG Trust;
Smith Barney Concert
Allocation Series Inc.
Item 6. Deductions and Expenses.................... Charges and
Deductions
Item 7. General Description of Variable
Annuity Contracts.......................... The Contracts
Item 8. Annuity Period............................. Annuity Provisions
Item 9. Death Benefit.............................. The Contracts;
Annuity
Provisions
Item 10. Purchases and Contract Value............... Purchase Payments
and Contract Value
Item 11. Redemptions................................ Withdrawals
Item 12. Taxes...................................... Tax Status
Item 13. Legal Proceedings.......................... Legal Proceedings
Item 14. Table of Contents of the Statement
of Additional Information.................. Table of Contents
of the Statement
of Additional
Information
</TABLE>
<TABLE>
<CAPTION>
CROSS REFERENCE SHEET (CONT'D)
(required by Rule 495)
Item No. Location
- -------- --------------------
PART B
<S> <C> <C>
Item 15. Cover Page................................. Cover Page
Item 16. Table of Contents.......................... Table of Contents
Item 17. General Information and History............ The Company
Item 18. Services................................... Not Applicable
Item 19. Purchase of Securities Being Offered....... Not Applicable
Item 20. Underwriters............................... Distributor
Item 21. Calculation of Performance Data............ Performance
Information
Item 22. Annuity Payments........................... Annuity Provisions
Item 23. Financial Statements....................... Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate Item so numbered in Part C to this Registration Statement.
EXPLANATORY NOTE
=============================================================================
This Registration Statement contains two Prospectuses for the Contract. The
distribution system for each version of the Prospectus is different. One
version (Version A) of the Prospectus contains nine Portfolios of Equi-Select
Series Trust, one Portfolio of Warburg Pincus Trust and three Portfolios of
The GCG Trust. The other version (Version B) of the Prospectus contains three
Portfolios of Equi-Select Series Trust, four Portfolios of Travelers Series
Fund Inc, one Portfolio of Greenwich Street Series Fund and five Portfolios of
Smith Barney Concert Allocation Series Inc. These Prospectuses and any
applicable Supplements will be filed with the Commission pursuant to Rule 497.
The Registrant undertakes to update this Explanatory Note each time a Post-
Effective Amendment is filed.
=============================================================================
[NAME] ES_0598
[CIK] 0000847554
[CCC] dweq4vr$
[NAME] PRIMELITE_0598
[CIK] 0000847554
[CCC] dweq4vr$
<PAGE>
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 1, 1998, 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 1, 1998.
TABLE OF CONTENTS
PAGE
Company
Experts
Legal Opinions
Distributor
Yield Calculation For Money Market Subaccounts
Performance Information
Annuity Provisions
Financial Statements
<PAGE>
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, 1997 and 1996 and for each of the three years in the period
ended December 31, 1997, and the Statement of Assets and Liabilities
of the Separate Account A as of December 31, 1997, 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
The Legal validity of the Contract described in the prospectus and herein
has been passed upon by James R. Mumford, Esquite, General Counsel and
Secretary of the Company. The law firm of Sutherland, Asbill & Brennan LLP,
of Washington, D.C. has provided advice on certain matters relating to
Federal Securities laws.
DISTRIBUTOR
Equitable of Iowa Securities Network, Inc. ("EISN") acts as the distributor.
EISN 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 Subaccounts were 3.77% and
3.84%, respectively. For the seven calendar days ended December 31,
1998, the annualized yield and effective yield for the Smith Barney
Money Market Subaccount were 3.65% and 3.72%, 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.
Hypothetical Average Annualized Total Return for the SubAccounts presented on
a standarized basis for the period ending December 31, 1997 were as follows:
<TABLE>
<CAPTION>
Returns for Equi-Select Product:
Subaccounts Investing in:
One Year Period Inception to Subaccount
Ended 12/31/97 12/31/97 Inception Date
____________________________________________
<S> <C> <C> <C>
EQUI-SELECT SERIES TRUST
Money Market Portfolio (4.42)% 1.98% 10/07/94
Advantage Portfolio (3.84)% (3.85)% 10/07/94
International Fixed Income
Portfolio (8.84)% (3.93)% 10/07/94
Mortgage-Backed Securities
Portfolio (1.69)% 5.37% 10/07/94
OTC Portfolio 9.89% 19.89% 10/07/94
Research Portfolio 10.35% 20.59% 10/07/94
Total Return Portfolio 11.08% 14.65% 10/07/94
Value + Growth Portfolio 6.05% 12.61% 04/01/96
Growth & Income Portfolio 15.30% 24.56% 04/01/96
THE GCG TRUST
Small Cap 0.69% 11.14% 02/03/97
Rising Dividend 19.91% 17.11% 02/03/97
Fully Managed 5.64% 7.92% 02/03/97
WARBURG PINCUS TRUST
International Equity Portfolio (11.72)% (4.74)% 04/01/96
</TABLE>
<TABLE>
<CAPTION>
Returns for PrimElite Product:
Subaccounts Investing in:
One Year Period Inception to Subaccount
+ Ended 12/31/97 12/31/97 Inception Date
____________________________________________
<S> <C> <C> <C>
TRAVELERS SERIES FUND INC.
Smith Barney Money Market Portfolio (4.46)% 1.01% 05/24/95
Smith Barney Income and Growth
Portfolio 16.77% 21.71% 04/05/95
Smith Barney International Equity
Portfolio (6.82)% 9.84% 03/27/95
Smith Barney High Income Portfolio 4.17% 10.57% 04/28/95
GREENWICH STREET SERIES FUND
Appreciation Portfolio 16.53% 17.38% 03/22/96
EQUI-SELECT SERIES TRUST
OTC Portfolio 9.90% 19.89% 10/07/94
Research Portfolio 10.35% 20.60% 10/07/94
Total Return Portfolio 11.08% 14.66% 10/07/94
SMITH BARNEY CONCERT ALLOCATION SERIES INC.
Select High Growth N/A 0.69% 05/06/97
Select Growth N/A 2.67% 05/06/97
Select Balanced N/A 2.78% 05/06/97
Select Conservative N/A 2.60% 05/06/97
Select Income N/A 2.44% 05/06/97
</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.
Hypothetical Total Return for the SubAccounts presented on a nonstandarized
basis for the period ending December 31, 1997 were as follows:
<TABLE>
<CAPTION>
Subaccounts Investing in:
One Year Period Inception to Subaccount
Ended 12/31/97 12/31/97 Inception Date
__________________________________________
<S> <C> <C> <C>
EQUI-SELECT SERIES TRUST
Money Market Portfolio 3.68% 3.56% 10/07/94
Advantage Portfolio 4.26% 5.36% 10/07/94
International Fixed Income Portfolio (0.75)% 5.43% 10/07/94
Mortgage-Backed Securities Portfolio 6.41% 6.83% 10/07/94
OTC Portfolio 17.99% 20.98% 10/07/94
Research Portfolio 18.44% 21.67% 10/07/94
Total Return Portfolio 19.17% 15.86% 10/07/94
Value + Growth Portfolio 14.15% 16.32% 04/01/96
Growth & Income Portfolio 23.40% 28.00% 04/01/96
THE GCG TRUST
Small Cap 8.78% 13.54% 02/03/97
Rising Dividend 28.01% 17.87% 02/03/97
Fully Managed 13.74% 7.86% 02/03/97
WARBURG PINCUS TRUST
International Equity Portfolio (3.62)% (0.55%) 04/01/96
TRAVELERS SERIES FUND INC.
Smith Barney Money Market Portfolio 3.63% 3.62% 05/24/95
Smith Barney Income and Growth Portfolio 24.86% 23.31% 04/05/95
Smith Barney International Equity Portfolio 1.27% 11.73% 03/27/95
Smith Barney High Income Portfolio 12.26% 12.52% 04/28/95
GREENWICH SERIES FUND
Appreciation Portfolio 24.62% 20.90% 03/22/96
SMITH BARNEY CONCERT ALLOCATION SERIES INC.
Select High Growth N/A 8.71% 05/06/97
Select Growth N/A 10.49% 05/06/97
Select Balanced N/A 10.59% 05/06/97
Select Conservative N/A 10.69% 05/06/97
Select Income N/A 10.29% 05/06/97
</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 - Statutory-Basis
Equitable Life Insurance Company of Iowa
Years ended December 31, 1997, 1996 and 1995
with Report of Independent Auditors
Equitable Life Insurance Company of Iowa
Financial Statements - Statutory-Basis
Years ended December 31, 1997, 1996 and 1995
CONTENTS
Report of Independent Auditors
Audited Financial Statements
Balance Sheets - Statutory-Basis
Statements of Operations - Statutory-Basis
Statements of Changes in Capital and Surplus - Statutory-Basis
Statements of Cash Flows - Statutory-Basis
Notes to Financial Statements
Schedules
Schedule I - Summary of Investments - Other Than Investments
in Related Parties
Schedule III - Supplemental Insurance Information
Schedule IV - Reinsurance
Report of Independent Auditors
The Board of Directors and Stockholder
Equitable Life Insurance Company of Iowa
We have audited the accompanying statutory-basis balance sheets of Equitable
Life Insurance Company of Iowa (wholly owned by Equitable of Iowa Companies,
Inc.) as of December 31, 1997 and 1996, and the related statutory-basis
statements of operations, changes in capital and surplus, and cash flows for
each of the three years in the period ended December 31, 1997. Our audits
also included the accompanying statutory-basis financial statement schedules
required by Article 7 of Regulation S-X. 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.
As described in Note 2 to the financial statements, the Company presents its
financial statements in conformity with accounting practices prescribed or
permitted by the Insurance Division, Department of Commerce, of the State of
Iowa, which practices differ from generally accepted accounting principles.
The variances between such practices and generally accepted accounting
principles and the effects on the accompanying financial statements are
described in Note 2.
In our opinion, because of the effects of the matters described in the
preceding paragraph, the financial statements referred to above do not
present fairly, in conformity with generally accepted accounting principles,
the financial position of Equitable Life Insurance Company of Iowa at
December 31, 1997 and 1996, or the results of its operations or its cash
flows for each of the three years in the period ended December 31, 1997.
However, in our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Equitable Life
Insurance Company of Iowa at December 31, 1997 and 1996, and the results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1997 in conformity with accounting practices prescribed or
permitted by the Insurance Division, Department of Commerce, of the State of
Iowa. Also, in our opinion, the related financial statement schedules, when
considered in relation to the basic statutory-basis financial statements
taken as a whole, present fairly in all material respects the information set
forth therein.
February 12, 1998 /S/Ernst & Young LLP
Equitable Life Insurance Company of Iowa
Balance Sheets - Statutory-Basis
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
December 31
1997 1996
__________________________
<S> <C> <C>
ADMITTED ASSETS
Bonds:
United States government and agencies $56,563 $83,906
Public utilities 306,382 334,155
Industrial and miscellaneous 1,630,968 1,338,875
__________________________
1,993,913 1,756,936
Stocks:
Common stocks of unaffiliated companies, at
market (cost: 1997 - $7,806; 1996 - $7,280) 7,617 7,089
Common stocks of affiliated companies
(cost: 1997 - $408,837; 1996 - $419,926) 631,814 573,878
__________________________
639,431 580,967
Mortgage loans on real estate 505,116 402,358
Real estate 3,449 --
Policy loans 165,161 164,659
Cash and short-term investments 52,474 8,212
Derivative financial instruments 33,388 18,041
Funds in transit 7,746 3,463
Other invested assets 5,959 5,997
__________________________
Total cash and investments 3,406,637 2,940,633
Due from non-affiliated reinsurers 148 266
Electronic data processing equipment 2,319 --
Due from parent under tax allocation agreement 22,904 4,612
Premiums deferred and uncollected 9,214 9,822
Investment income due and accrued 37,071 34,312
Due from affiliates 2,943 2,844
Other assets 3,499 3,867
Separate account assets 1,142,251 450,623
__________________________
Total admitted assets $4,626,986 $3,446,979
==========================
</TABLE>
See accompanying notes.
Equitable Life Insurance Company of Iowa
Balance Sheets - Statutory-Basis (continued)
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
December 31
1997 1996
__________________________
<S> <C> <C>
LIABILITIES AND CAPITAL AND SURPLUS
Liabilities:
Policy reserves:
Annuity and life policy reserves $2,483,277 $2,109,884
Policy proceeds left at interest 40,265 37,398
Policyholders' dividend accumulations 113,602 113,491
__________________________
2,637,144 2,260,773
Policy and contract claims 8,949 6,148
Other policyholders' funds:
Dividends payable to policyholders 25,104 25,357
Premium deposit funds and other 40,305 43,144
__________________________
65,409 68,501
Interest maintenance reserve 26,426 23,926
Borrowed money from parent 50,000 --
Other liabilities 17,697 36,427
Asset valuation reserve 31,488 33,266
Separate account liabilities 1,142,251 450,623
__________________________
Total liabilities 3,979,364 2,879,664
Commitments and contingencies
Capital and surplus:
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 248,743 248,743
Unassigned surplus 393,879 313,572
__________________________
Total capital and surplus 647,622 567,315
__________________________
Total liabilities and capital and surplus $4,626,986 $3,446,979
==========================
</TABLE>
See accompanying notes.
Equitable Life Insurance Company of Iowa
Statements of Operations - Statutory-Basis
(Dollars in thousands)
<TABLE>
<CAPTION>
Year ended December 31
1997 1996 1995
_____________________________________
<S> <C> <C> <C>
Revenues:
Annuity and life premiums $1,155,513 $569,866 $354,601
Policy proceeds and dividends left
at interest 27,270 30,982 23,670
Investment income, less investment
expenses of $8,335 in 1997, $6,105
in 1996 and $5,841 in 1995 282,745 252,120 234,864
Commission and expense allowances on
reinsurance ceded 299 348 389
Reserve transfer for reinsurance ceded -- 24,523 --
Other income 1,238 64 155
_____________________________________
1,467,065 877,903 613,679
Benefits and expenses:
Benefits paid or provided for:
Death benefits 37,197 33,136 37,579
Annuity benefits 48,306 118,850 75,229
Surrender benefits 189,194 37,078 34,222
Payments from funds left at interest 32,524 29,091 21,647
Other benefits 1,547 1,617 2,681
Increase in policy reserves 375,717 231,684 193,114
Increase (decrease) in liability
for premium deposit funds and other (2,840) (6,073) 521
_____________________________________
681,645 445,383 364,993
Insurance expenses:
Commissions 82,521 42,272 31,676
General expenses 44,455 32,732 28,851
Insurance taxes, licenses and fees 5,386 4,125 5,240
Net transfers to separate account 539,820 221,241 56,888
Interest expense 3,088 -- --
Other 539 231 8,272
_____________________________________
675,809 300,601 130,927
_____________________________________
1,357,454 745,984 495,920
_____________________________________
</TABLE>
See accompanying notes.
Equitable Life Insurance Company of Iowa
Statements of Operations - Statutory-Basis (continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Year ended December 31
1997 1996 1995
_____________________________________
<S> <C> <C> <C>
Gain from operations before dividends to
policyholders, federal income taxes
and net realized capital gains $109,611 $131,919 $117,759
Dividends to policyholders 25,015 25,259 25,063
_____________________________________
Gain from operations before federal
income taxes and net realized
capital gains 84,596 106,660 92,696
Federal income taxes (19,726) 11,297 6,938
_____________________________________
Net gain from operations before net
realized capital gains 104,322 95,363 85,758
Net realized capital gains 7,610 1,479 1,421
_____________________________________
Net income $111,932 $96,842 $87,179
=====================================
</TABLE>
See accompanying notes.
Equitable Life Insurance Company of Iowa
Statements of Changes in Capital and Surplus - Statutory-Basis
(Dollars in thousands)
<TABLE>
<CAPTION>
Total
Additional Capital
Common Paid-In Unassigned and
Stock Capital Surplus Surplus
___________________________________________
<S> <C> <C> <C> <C>
Balance at January 1, 1995 $5,000 $198,743 $227,842 $431,585
Net income -- -- 87,179 87,179
Net unrealized capital losses -- -- (19,658) (19,658)
Increase in non-admitted assets -- -- (7,687) (7,687)
Increase in policy reserves due
to change in valuation basis -- -- (1,011) (1,011)
Decrease in liability for
reinsurance in unauthorized
companies -- -- 9 9
Increase in asset valuation
reserve -- -- (7,600) (7,600)
Contributions from parent -- 50,000 -- 50,000
___________________________________________
Balance at December 31, 1995 5,000 248,743 279,074 532,817
Net income -- -- 96,842 96,842
Net unrealized capital losses -- -- (23,172) (23,172)
Increase in non-admitted assets -- -- (9,442) (9,442)
Increase in policy reserves due
to change in valuation basis -- -- (828) (828)
Decrease in liability for
reinsurance in unauthorized
companies -- -- 21 21
Increase in asset valuation
reserve -- -- (4,927) (4,927)
Non-admitted investment income -- -- 4 4
Dividends paid to parent -- -- (24,000) (24,000)
___________________________________________
Balance at December 31, 1996 5,000 248,743 313,572 567,315
Net income -- -- 111,932 111,932
Net unrealized capital losses -- -- (19,672) (19,672)
Increase in non-admitted assets -- -- (27,080) (27,080)
Increase in policy reserves due
to change in valuation basis -- -- (653) (653)
Decrease in asset valution
reserve -- -- 1,778 1,778
Non-admitted investment income -- -- (4) (4)
Pension adjustment -- -- 14,006 14,006
___________________________________________
Balance at December 31, 1997 $5,000 $248,743 $393,879 $647,622
===========================================
</TABLE>
See accompanying notes.
Equitable Life Insurance Company of Iowa
Statements of Cash Flows - Statutory-Basis
(Dollars in thousands)
<TABLE>
<CAPTION>
Year ended December 31
1997 1996 1995
__________________________________
<S> <C> <C> <C>
OPERATING ACTIVITIES
Premiums, policy proceeds and other
considerations $1,183,197 $345,052 $313,017
Investment income, less investment expenses 190,346 177,849 161,637
Reserve transfer for reinsurance ceded -- 24,523 --
Commissions and expense allowances on
reinsurance ceded 314 345 401
Other income 1,244 72 148
Benefits (305,862) (214,353) (169,994)
Insurance expenses (713,749) (69,694) (73,437)
Dividends to policyholders (25,269) (25,116) (25,172)
Federal income taxes paid (9,051) (19,974) (1,915)
__________________________________
Net cash provided by operating activities 321,170 218,704 204,685
INVESTING ACTIVITIES
Proceeds from investments sold, matured
or repaid:
Bonds 280,112 124,325 89,186
Common stocks - money market funds -- 226,468 184,911
Common stocks - affiliates 25,058 26,358 6,572
Mortgage loans on real estate 49,411 39,615 32,912
Policy loans - net -- 3,185 809
Real estate 68 7,034 --
Other invested assets 3,245 924 6,227
__________________________________
357,894 427,909 320,617
Cost of investments acquired:
Bonds (510,735) (210,135) (246,092)
Common stocks - money market funds -- (226,519) (184,911)
Common stocks - unaffilited companies (526) (637) (6,368)
Common stocks - affiliates (3,223) (11,288) (50,258)
Mortgage loans on real estate (155,883) (138,611) (111,475)
Policy loans - net (502) -- --
Real estate -- (559) (247)
Other invested assets (1,586) (650) (17)
__________________________________
(672,455) (588,399) (599,368)
Other (12,347) (35,620) 10,292
__________________________________
Net cash used in investing activities (326,908) (196,110) (268,459)
</TABLE>
See accompanying notes.
Equitable Life Insurance Company of Iowa
Statements of Cash Flows - Statutory-Basis (continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
Year ended December 31
1997 1996 1995
__________________________________
<S> <C> <C> <C>
FINANCING ACTIVITIES
Cash contributions from parent -- -- $50,000
Borrowed money from parent $50,000 -- --
Dividends paid to parent -- ($24,000) --
__________________________________
Net cash provided by (used in)
financing activities 50,000 (24,000) 50,000
__________________________________
Increase (decrease) in cash and
short-term investments 44,262 (1,406) (13,774)
Cash and short-term investments at
beginning of year 8,212 9,618 23,392
__________________________________
Cash and short-term investments at
end of year $52,474 $8,212 $9,618
==================================
</TABLE>
See accompanying notes.
Equitable Life Insurance Company of Iowa
Notes to Financial Statements
December 31, 1997
1. SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Equitable Life Insurance Company of Iowa (the "Company") is domiciled in Iowa
and is a wholly owned subsidiary of Equitable of Iowa Companies, Inc. The
Company offers various insurance products including deferred and immediate
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.
On October 24, 1997, PFHI Holdings, Inc. ("PFHI"), a Delaware corporation,
acquired all of the outstanding capital stock of Equitable of Iowa Companies
("Equitable") pursuant to an Agreement and Plan of Merger among Equitable,
PFHI, and ING Groep N.V. ("ING"). PFHI is a wholly owned subsidiary of ING,
a global financial services holding company based in The Netherlands. As a
result of the merger, Equitable was merged into PFHI which was simultaneously
renamed Equitable of Iowa Companies, Inc. ("EIC" or the "Parent"), a Delaware
corporation.
FINANCIAL STATEMENTS
The financial statements presented herein are prepared on a statutory-basis
for the Company only and, as such, the accounts of the Company's wholly owned
subsidiaries, USG Annuity & Life Company ("USG"), Equitable American
Insurance Company ("Equitable American") and Equitable Companies are not
consolidated with those of the Company.
The preparation of financial statements of the Company requires management to
make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Such estimates and assumptions
could change in the future as more information becomes known which could
impact the amounts reported and disclosed herein.
INVESTMENTS
Investments in bonds [except those to which the Securities Valuation
Committee of the National Association of Insurance Commissioners ("NAIC") has
ascribed a value], mortgage loans on real estate and short-term investments
are reported at cost adjusted for amortization of premiums and accrual of
discounts. Premiums and discounts are amortized/accrued utilizing the
scientific interest method which results in a constant yield over the
security's expected life. The amortization of premiums and accretion of dis-
counts of bonds backed by mortgages and other loans are periodically adjusted
for changes in the expected prepayment rate of the loans using the
retrospective method. Common stocks of unaffiliated companies, the Company's
Parent and affiliated mutual funds are carried at estimated fair value.
Common stock of subsidiaries (all 100% owned) are recorded at the equity in
net assets. Estimated fair values of publicly traded securities are based on
the latest quoted market prices as reported by an independent pricing
service.
Equitable Life Insurance Company of Iowa
Notes to Financial Statements (continued)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
Estimated 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 common stocks of
unaffiliated companies, as reported herein, are based on the latest quoted
market prices, or where not readily marketable, at cost or values which are
representative of the fair values of issues of comparable yield, maturity and
quality. Estimated fair values of common stocks of affiliated mutual funds
are based upon net asset values of the underlying assets of the funds. Real
estate is reported at cost less allowances for depreciation. Depreciation is
computed principally by the straight-line method.
Policy loans are reported at unpaid principal. Other invested assets consist
principally of investments in various joint ventures and are recorded at
equity in underlying net assets. Other "admitted assets" are valued,
principally at cost, as required or permitted by State of Iowa insurance laws
and rules and regulations adopted thereunder by the Insurance Division,
Department of Commerce, of the State of Iowa.
Realized capital gains and losses are determined on the basis of specific
identification and average cost methods for manager initiated and issuer
initiated disposals and are recorded net of related federal income taxes.
Under a formula prescribed by the NAIC, the Company has established an
Interest Maintenance Reserve which defers the portion of realized gains and
losses on sales, maturities and prepayments of fixed income investments,
principally bonds and mortgage loans, attributable to changes in the general
level of interest rates and amortizes those deferrals over the remaining
period to maturity. The Asset Valuation Reserve ("AVR") provides for
anticipated losses in the event of default by issuers of certain invested
assets. The amount of the AVR is determined using formulae prescribed by the
NAIC and is reported as a liability. The formula for the AVR provides for a
corresponding adjustment for realized gains and losses, net of amounts
attributed to changes in the general level of interest rates.
Interest income is recognized on an accrual basis. The Company does not
accrue income on bonds where management determines collection is uncertain,
on mortgage loans on real estate which are more than three months in arrears
or where the loan is in foreclosure, or on real estate where rent is in
arrears for more than three months. At December 31, 1997 and 1996, the
Company excluded no investment income due and accrued with respect to such
investments.
Equitable Life Insurance Company of Iowa
Notes to Financial Statements (continued)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DERIVATIVE FINANCIAL INSTRUMENTS
The premiums paid for interest rate caps ("caps"), cash settled put swaptions
("swaptions") and Standard & Poors' ("S&P") 500 ([email protected].) Index
call options ("call options," or collectively with the caps and swaptions,
"instruments") are deferred. The deferred premiums are amortized over the
term of the instruments on a straight-line basis. Amortization of the deferred
premium and any payments received in accordance with the terms of the
instruments are recorded as an adjustment to other investment income. The
instruments do not require additional payments by the Company. The caps and
swaptions are held at amortized cost. Unrealized gains and losses on the caps
and swaptions are not recorded in income until realized. The call options are
held at market value with changes in market value reflected in investment
income.
CASH AND CASH EQUIVALENTS
For purposes of the statements of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of twelve months or
less to be cash equivalents.
POLICY RESERVES
The reserves for annuity and life policies, all developed by actuarial
methods, are established and maintained on the basis of published mortality
tables using assumed interest rates and valuation methods that will provide,
in the aggregate, reserves that are equal to or greater than the minimum
valuation required by law or guaranteed policy cash values.
RECOGNITION OF PREMIUM REVENUES AND COSTS
Premiums are recognized as revenues over the premium-paying period, whereas
commissions and other costs applicable to the acquisition of new business are
charged to operations as incurred.
DIVIDENDS TO POLICYHOLDERS
Dividends payable to policyholders in the following year are charged to
operations and are established by the Company's Board of Directors.
SEPARATE ACCOUNT
Separate account assets and liabilities are presented in the aggregate in the
balance sheets. The statements of operations include the premiums, benefits,
net transfers to the separate account and other items arising from the
operations of the separate account of the Company.
Equitable Life Insurance Company of Iowa
Notes to Financial Statements (continued)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DIVIDEND RESTRICTIONS
Prior approval of insurance regulatory authorities is required for payment of
dividends to the Company's Parent which exceed an annual limitation. On
August 12, 1996, the Company paid a dividend to Equitable of $24,000,000.
During 1998, the Company could pay dividends to its Parent of approximately
$104,322,000 without prior approval of regulatory authorities.
2. BASIS OF FINANCIAL REPORTING
The financial statements have been prepared on the basis of accounting
practices prescribed or permitted by the Insurance Division, Department of
Commerce, of the State of Iowa, which practices differ in some respects from
generally accepted accounting principles. The significant differences are as
follows: (1) costs of acquiring new business are charged to current
operations as incurred rather than deferred and amortized over the life of
the policies; (2) an asset is not recorded and amortized to expense for the
present value of future cash flows from insurance contracts acquired as a
result of the merger; (3) policy reserves on traditional life products are
based on statutory mortality rates and interest which may differ from
reserves based on reasonable assumptions of expected mortality, interest and
withdrawals which include a provision for possible unfavorable deviation from
such assumptions; (4) policy reserves on annuity and interest sensitive life
products use discounting methodologies utilizing statutory interest rates
rather than full account values; (5) reserves are reported net of reserve
credits related to reinsurance ceded rather than the reserve credit being
established as a receivable, net of an allowance for uncollectible amounts;
(6) bonds are valued at amortized cost rather than being designated as
"available for sale" and valued at estimated fair value with unrealized
appreciation/depreciation, net of adjustments to deferred income taxes (if
applicable), present value of in force acquired and deferred policy
acquisition costs, credited/charged directly to stockholder's equity; (7) the
carrying value of bonds is reduced to estimated fair value through the
establishment of a formula-determined statutory investment reserve (carried
as a liability), changes in which are charged directly to surplus rather than
by a charge to realized losses in the statements of income when declines in
carrying value are judged to be other than temporary; (8) deferred income
taxes are not provided for the difference between the financial statement and
income tax bases of assets and liabilities except for tax-basis deferred
policy acquisition costs; (9) net realized gains or losses attributed to
changes in the level of interest rates in the market are deferred and
amortized over the remaining life of the bond or mortgage loan, rather than
recognized as gains or losses in the statements of operations when the sale
is completed; (10) gains arising from sale-leaseback transactions are
recognized in the period of sale rather than being deferred and amortized
over the life of the lease; (11) guaranty fund assessments, depending upon
the laws of the particular state guaranty association, are either expensed or
capitalized and amortized, when assessed in accordance with procedures
permitted by insurance regulatory authorities rather than accrued, net of
related anticipated premium tax credits, when the amounts to be assessed are
probable and estimable; (12) a prepaid pension cost asset established in
accordance with Statement of Financial Accounting Standard (SFAS) No. 87,
"Employers' Accounting for Pensions," agents' balances and certain other
Equitable Life Insurance Company of Iowa
Notes to Financial Statements (continued)
2. BASIS OF FINANCIAL REPORTING (CONTINUED)
assets designated as "non-admitted assets" have been charged to surplus
rather than being reported as assets; (13) revenues for annuity and universal
life products consist of premiums received rather than policy charges for
the cost of insurance, policy administration charges, amortization of policy
initiation fees and surrender charges assessed; (14) expenses for
postretirement benefits other than pensions are recognized for vested and
fully-eligible employees rather than all qualified 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 deferred and amortized over twenty years rather than recognized
as a cumulative effect of change in accounting method; (15) assets and
liabilities retain their historical value rather than being restated to fair
values with provision for goodwill and other intangible assets when a change
in ownership occurs; (16) amortization of the cost of the caps and swaptions
purchased in conjunction with the hedging program are deducted from net
investment income rather than recorded in interest credited; (17) call options
are carried at market value with changes in market value reported in
investment income rather than amortized cost plus intrinsic value, if any;
(18) the financial statements of subsidiaries are not consolidated with those
of the Company; and (19) certain contingent liabilities (i.e. class action
lawsuits) are provided for as incurred rather than expensed when the amount of
the loss is probable and estimable.
A summary of financial information for the Company on the basis of generally
accepted accounting principles ("GAAP") follows. The Company's financial
information for the period subsequent to October 24, 1997, is presented on
the Post-Merger new basis of accounting and for October 24, 1997 and prior
periods on the Pre-Merger basis of accounting.
A summary of the Company's balance sheet information on a GAAP basis is as
follows:
<TABLE>
<CAPTION>
POST-MERGER PRE-MERGER
_____________________________________
December 31, 1997 | December 31, 1996
__________________| _________________
(Dollars in thousands)
<S> <C> | <C>
Investments $10,629,767 | $9,438,093
Total assets 13,731,191 | 10,881,275
Total liabilities 11,369,021 | 9,832,311
Stockholder's equity 2,362,170 | 1,048,964
|
</TABLE>
Equitable Life Insurance Company of Iowa
Notes to Financial Statements (continued)
2. BASIS OF FINANCIAL REPORTING (CONTINUED)
A summary of the Company's statement of income information on a GAAP basis is
as follows:
<TABLE>
<CAPTION>
POST-MERGER PRE-MERGER
___________________________________________________________
For the period | For the period
October 25, | January 1,
1997 | 1997
through | through
December 31, | October 24, Year ended December 31
1997 | 1997 1996 1995
_______________| __________________________________________
| (Dollars in thousands)
<S> <C> | <C> <C> <C>
Revenues $145,159 | $745,839 $824,221 $751,354
Benefits and |
expenses 114,766 | 600,696 625,327 616,628
Net income 15,825 | 100,723 129,321 87,510
</TABLE>
At December 31, 1997, participating business approximates 9.73% of life
insurance in force. Participating life insurance accounted for 2.3% in 1997
and 4.7% in 1996 of premium income from all products written by the Company.
Equitable Life Insurance Company of Iowa
Notes to Financial Statements (continued)
3. INVESTMENT OPERATIONS
At December 31, 1997 and 1996, the statement value, gross unrealized gains
and losses, and estimated fair value of the Company's debt securities are as
follows:
<TABLE>
<CAPTION>
Gross Gross Estimated
Statement Unrealized Unrealized Fair
Value Gains Losses Value
_______________________________________________
(Dollars in thousands)
<S> <C> <C> <C> <C>
December 31, 1997
Bonds:
United States government
and agencies:
Mortgage-backed securities $44,207 $2,163 -- $46,370
Other 12,104 620 -- 12,724
States, municipalities and
political subdivisions 252 4 -- 256
Public utilities 312,166 20,285 ($287) 332,164
Industrial and miscellaneous:
Mortgage-backed securities 535,225 10,631 (2,412) 543,444
Other 1,089,959 78,857 (1,210) 1,167,606
_______________________________________________
Total $1,993,913 $112,560 ($3,909) $2,102,564
===============================================
</TABLE>
<TABLE>
<CAPTION>
Gross Gross Estimated
Statement Unrealized Unrealized Fair
Value Gains Losses Value
_______________________________________________
(Dollars in thousands)
<S> <C> <C> <C> <C>
December 31, 1996
Bonds:
United States government
and agencies:
Mortgage-backed securities $60,679 $1,685 ($156) $62,208
Other 22,974 709 (310) 23,373
States, municipalities and
political subdivisions 253 -- -- 253
Public utilities 327,491 12,131 (3,906) 335,716
Industrial and miscellaneous:
Mortgage-backed securities 443,299 7,071 (8,860) 441,510
Other 902,240 49,388 (10,220) 941,408
_______________________________________________
Total $1,756,936 $70,984 ($23,452) $1,804,468
===============================================
</TABLE>
Equitable Life Insurance Company of Iowa
Notes to Financial Statements (continued)
3. INVESTMENT OPERATIONS (CONTINUED)
Short-term investments, all with maturities of 30 days or less, have been
excluded from the above schedules. Statement value approximates estimated
fair value for these securities.
The amortized cost and estimated fair value of the Company's portfolio of
debt securities at December 31, 1997, by contractual maturity, are shown
below. Expected maturities will differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without
call or prepayment penalties.
<TABLE>
<CAPTION>
Statement Estimated
Value Fair Value
___________________________
(Dollars in thousands)
<S> <C> <C>
Due after one year through five years $38,994 $40,811
Due after five years through ten years 536,609 564,616
Due after ten years 838,878 907,323
___________________________
1,414,481 1,512,750
Mortgage-backed securities 579,432 589,814
___________________________
Total $1,993,913 $2,102,564
===========================
</TABLE>
Realized gains (losses) on investments are as follows:
<TABLE>
<CAPTION>
Year ended December 31
1997 1996 1995
_________________________________________
(Dollars in thousands)
<S> <C> <C> <C>
Bonds $5,486 $4,611 $3,301
Common stocks of unaffiliated
mutual funds 1,831 -- --
Common stocks of affiliated
mutual funds 8,915 868 912
Mortgage loans on real estate 394 112 772
Real estate (469) 717 --
Other invested assets 1,621 569 1,988
Tax effect (6,222) (2,517) (2,441)
Transfer to IMR (3,946) (2,881) (3,111)
_________________________________________
Net realized capital gains $7,610 $1,479 $1,421
=========================================
</TABLE>
Equitable Life Insurance Company of Iowa
Notes to Financial Statements (continued)
3. INVESTMENT OPERATIONS (CONTINUED)
Net realized capital gains (losses) include gross gains on the sale or
prepayment of bonds of $7,701,000, $5,030,000 and $4,184,000 and gross losses
on the sale or prepayment of bonds of $2,215,000, $419,000 and $883,000 for
the years ended December 31, 1997, 1996 and 1995, respectively.
Unrealized depreciation of common stock of unaffiliated companies of $189,000
and $191,000 is comprised of gross unrealized appreciation of $47,000 and
$42,000 at December 31, 1997 and 1996, and gross unrealized depreciation of
$236,000 and $233,000 on the individual securities at December 31, 1997 and
1996, respectively. Unrealized appreciation of affiliated common stock (ING
in 1997, Equitable in 1996) and affiliated mutual funds of $1,119,000 and
$6,764,000 is comprised entirely of gross unrealized appreciation at
December 31, 1997 and 1996, respectively.
The Company's investment policies related to its investment portfolio require
diversification by asset type, company and industry and set limits on the
amount which can be invested in an individual issuer. Such policies are at
least as restrictive as those set forth by the Insurance Division, Department
of Commerce, of the State of Iowa. Investments in bonds included investments
in various non-governmental mortgage-backed securities (27% in 1997, 25% in
1996), basic industrials (26% in 1997 and 1996), public utilities (16% in
1997, 19% in 1996), consumer products (13% in 1997, 14% in 1996) and
financial companies (10% in 1997, 6% in 1996). Mortgage loans on real estate
have been analyzed by geographical location and there are no significant
concentrations of mortgage loans in any state. Mortgage loans on real estate
have also been analyzed by collateral type with significant concentrations
identified in retail facilities (31% in 1997, 36% in 1996), office buildings
(28% in 1997, 21% in 1996), industrial buildings (23% in 1997, 22% in 1996)
and multi-family residential buildings (17% in 1997, 20% in 1996). Common
stocks of unaffiliated companies, real estate and other invested assets are
not significant to the Company's overall investment portfolio.
Mortgage loans are net of loans sold and being serviced for the benefit of
others. At December 31, 1997, the principal amount of serviced loans was
$8,531,000. This amount is comprised of loans being serviced by the Company
for USG. At December 31, 1996, this amount was $9,666,000 and included loans
being serviced by the Company for USG and the Company's separate account
aggregating $9,363,000 and $303,000, respectively. During 1997, the Company
had sales of mortgage loans to Equitable American of $23,427,000. The total
mortgage loans sold during 1996 was $24,800,000. This amount consisted of
sales to Equitable American of $22,870,000 and sales to Golden American Life
Insurance Company ("Golden American") of $1,930,000.
At December 31, 1997, one mortgage loan with a carrying value of $33,000 was
delinquent by 90 days or more. During the first quarter of 1997, the value
of a mortgage loan with a book value of $4,266,000 was determined to be
impaired other than temporary. At that time, a valuation allowance was
established to reduce the carrying value of this mortgage loan to its
estimated fair value, resulting in a charge to investment income of $245,000.
The Company foreclosed on property in June 1997 and based upon an appraisal,
recorded a permanent writedown on the real estate investment of $572,000
resulting in a charge to realized losses. At December 31, 1996, no
investments were identified as having an impairment other than temporary.
Equitable Life Insurance Company of Iowa
Notes to Financial Statements (continued)
3. INVESTMENT OPERATIONS (CONTINUED)
During 1997, the maximum and minimum lending rates for mortgage loans were
8.55% and 7.12% for city loans. At the issuance of a loan, the percentage of
loan to value on any one loan does not exceed 75%, except for loans made in
accordance with Section 511.8(9)(f) of the Code of Iowa. All properties
covered by mortgage loans have fire insurance at least equal to the excess of
the loan over the maximum loan that would be allowed on the land without the
building.
At December 31, 1997, affidavits of deposits covering bonds with a par value
of $2,002,654,000 (1996 - $1,769,472,000), mortgage loans with an unpaid
principal balance of $505,419,000 (1996 - $402,911,000) and policy loans with
an unpaid balance of $165,161,000 (1996 - $164,659,000) were on deposit with
state agencies to meet regulatory requirements.
4. FINANCIAL INSTRUMENTS - RISK MANAGEMENT
HEDGING PROGRAM
During the second quarter of 1996, the Company implemented a hedging program
under which caps and swaptions 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 caps and swaptions, all during the second
quarter of 1996, with notional amounts totaling $600,000,000 and
$1,300,000,000, respectively, all of which were outstanding at December 31,
1997. The Company paid approximately $21,100,000 in premiums for these caps
and swaptions in 1996. The cost of this program has been incorporated into
the Company's product pricing. The caps and swaptions do not require any
additional payments by the Company.
The agreements for the caps and swaptions 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 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 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 semiannual payment dates and the resulting
hypothetical payments are discounted to the current payment date using the
discount rate defined in the agreement.
In January 1997, the Company introduced an equity-indexed annuity product
which provides a guaranteed base rate of return with a higher potential
return linked to the performance of a broad based equity index.
Concurrently, the Company implemented a hedging program to purchase S&P call
options. Call options are purchased to hedge potential increases in
policyholder account balances for equity-indexed annuity policies resulting
from increases in the index to which the product is linked. During 1997, the
Company paid approximately $17,400,000 in premiums for call options, which
mature beginning in 2002 through 2004. The cost of this program has been
Equitable Life Insurance Company of Iowa
Notes to Financial Statements (continued)
4. FINANCIAL INSTRUMENTS - RISK MANAGEMENT (CONTINUED)
incorporated into the Company's pricing of its equity-indexed annuity
product. The call options do not require any additional payments by the
Company.
The agreement for the call options entitle the Company to receive payments
from the counterparty if the S&P 500 Index exceeds the specified strike
price on the maturity date. The amount of such payments to be received by
the Company for the call options, if any, will be calculated by taking the
excess of the average closing price (as defined in the contract) at maturity
over the specified strike price and multiplying this excess by the number of
the S&P 500 units defined in the contract. Any payments received from the
counterparties will be recorded as an adjustment to other investment income.
The following table summarizes the contractual maturities of notional amounts
by type of instrument at December 31, 1997:
<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>
ACCOUNTING TREATMENT
The Company has recorded amortization of the deferred premiums related to the
instruments of $5,844,000 and $3,081,000 for 1997 and 1996, respectively.
Unrealized gains and losses on the caps and swaptions and related assets or
liabilities will not be recorded in income until realized. The call options
are carried at market value.
Equitable Life Insurance Company of Iowa
Notes to Financial Statements (continued)
4. FINANCIAL INSTRUMENTS - RISK MANAGEMENT (CONTINUED)
Any unrealized gain or loss on the caps and swaptions is off-balance sheet
and therefore, is not reflected in the financial statements. The effect of
changes in the market value of the call options will be reflected in the
financial statements in the period of change. During 1997, the Company
increased investment income by recording a market value adjustment of
$3,793,000 on the call options. The following table summarizes the carrying
value, amortized cost, gross unrealized gains and losses and estimated fair
value on these instruments as of December 31, 1997:
<TABLE>
<CAPTION>
Gross Gross Estimated
Carrying Amortized Unrealized Unrealized Fair
Value Cost Gains Losses Value
__________________________________________________________
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Interest rate caps $4,073 $4,073 -- ($3,571) $502
Cash settled put
swaptions 9,048 9,048 -- (7,039) 2,009
S&P 500 call options 20,267 16,474 $3,967 (174) 20,267
__________________________________________________________
Total $33,388 $29,595 $3,967 ($10,784) $22,778
==========================================================
</TABLE>
The differences between fair value from amortized cost for the instruments
reflect 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 plus the market value adjustment, if any, for these instruments
because no additional payments are required by the Company on these
instruments after the initial premium. Counterparty non-performance would
result in an economic loss if interest rates exceeded the specified fixed
rate for caps and swaptions, or for the call options, the average closing
price at maturity exceeded the specified strike price. 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, if more than
one quote is available, 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 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
Equitable Life Insurance Company of Iowa
Notes to Financial Statements (continued)
4. FINANCIAL INSTRUMENTS - RISK MANAGEMENT (CONTINUED)
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, 1997, the ratings
assigned by Standard & Poors' Rating Services by instrument with respect to
the net replacement value (fair value) of the Company's instruments were as
follows:
<TABLE>
<CAPTION>
Net Replacement Value
_______________________________________________________
Interest Cash S&P 500
Rate Settled Put Call
Caps Swaptions Options Total
_______________________________________________________
(Dollars in thousands)
<S> <C> <C> <C> <C>
Counterparties
credit quality:
AAA $321 $990 -- $1,311
AA+ to AA- 181 620 $14,108 14,909
A+ to A- -- 399 6,159 6,558
_______________________________________________________
Total $502 $2,009 $20,267 $22,778
=======================================================
</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, investment
contracts and debt fall within the standards' definition of a financial
instrument. Fair values for the Company's insurance contracts other than
investment contracts are not required to be disclosed. In cases where quoted
market prices are not available, estimated fair values are based on estimates
using present value or other valuation techniques. These techniques are
significantly affected by the assumptions used, including the discount rate
and estimates of future cash flows. 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.
Equitable Life Insurance Company of Iowa
Notes to Financial Statements (continued)
5. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
The Company closely monitors the composition and yield of its invested
assets, the duration and interest credited on insurance liabilities and
resulting interest spreads and timing of cash flows. 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 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 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 1997 1996
_______________________________________________________________________________
(Dollars in thousands) Estimated | Estimated
Carrying Fair | Carrying Fair
Value Value | Value Value
_________________________| ________________________
<S> <C> <C> | <C> <C>
ASSETS |
Bonds $1,993,913 $2,102,564 | $1,756,936 $1,804,468
Common stocks of affiliated |
mutual funds 214 214 | 15,792 15,792
Common stocks of |
unaffiliated companies 7,617 12,804 | 7,089 12,351
Mortgage loans on |
real estate 505,116 535,248 | 402,358 407,169
Policy loans 165,161 165,161 | 164,659 164,659
Cash and short-term |
investments 52,474 52,474 | 8,212 8,212
Derivative financial |
instruments 33,388 22,778 | 18,041 14,080
Separate account assets 1,142,251 1,142,251 | 450,623 450,623
|
LIABILITIES |
Annuity products 1,599,860 1,379,668 | 1,117,690 952,789
Borrowed money from parent 50,000 50,000 | -- --
Separate account |
liabilities 1,142,251 1,008,699 | 450,623 405,086
</TABLE>
Equitable Life Insurance Company of Iowa
Notes to Financial Statements (continued)
5. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
The following methods and assumptions are used by the Company in estimating
fair values:
BONDS: 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.
COMMON STOCKS OF AFFILIATED MUTUAL FUNDS: Estimated fair values of the
Company's investment in affiliated mutual funds are based upon the latest
quoted market price.
COMMON STOCKS OF UNAFFILIATED COMPANIES: Estimated fair values are based
upon the latest quoted market prices, where available. For securities not
actively traded, estimated fair values are based upon values of issues of
comparable yield and quality or conversion value where applicable.
MORTGAGE LOANS ON REAL ESTATE: Fair values are estimated by discounting
expected cash flows using interest rates currently being offered for
similar loans.
POLICY LOANS: Carrying values approximate the estimated fair value for
policy loans.
CASH AND SHORT-TERM INVESTMENTS: Carrying values reported in the Company's
balance sheet approximate estimated fair value for these instruments due to
their short-term nature.
DERIVATIVE FINANCIAL INSTRUMENTS: The estimated fair values are the
average of quotes, if more than one quote is available, obtained from
related and unrelated counterparties.
SEPARATE ACCOUNT ASSETS: Separate account assets are based upon the quoted
fair values of the individual securities in the separate account.
ANNUITY PRODUCTS: Estimated fair values of the Company's liabilities for
future policy benefits for annuity products, including supplemental
contracts without life contingencies 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.
BORROWED MONEY FROM PARENT: Carrying value reported in the Company's
balance sheet approximates estimated fair value for this instrument which
is callable upon demand.
Equitable Life Insurance Company of Iowa
Notes to Financial Statements (continued)
5. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
SEPARATE ACCOUNT LIABILITIES: Separate account liabilities are reported at
estimated fair values of separate account liabilities and 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.
6. INCOME TAXES
Prior to October 25, 1997, the Company and its subsidiaries filed a
consolidated federal income tax return with Equitable. After October 24,
1997, the Company will file a consolidated federal income tax return with its
wholly owned life insurance subsidiaries. Under the Internal Revenue Code,
newly acquired insurance companies must file a separate return for five
years. Under these arrangements, each company reports current income tax
expense as allocated under the consolidated tax allocation agreement. Taxes
receivable under this agreement was $22,904,000 and $4,612,000 at December
31, 1997 and 1996, 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.
The Company has established deferred income taxes on its tax-basis deferred
policy acquisition costs. The effect of this was to decrease income tax
expense by $365,000, $2,980,000 and $2,169,000 for the years ended December
31, 1997, 1996 and 1995, respectively. The corresponding deferred tax asset
has been non-admitted and, as a result, capital and surplus has not been
impacted by this accounting treatment. At December 31, 1997, 1996 and 1995,
this is the only item to which deferred income tax accounting has been
applied.
The Company is taxed at usual corporate rates on taxable income based on
existing laws that may result in a provision for federal income taxes that
does not have the customary relationship of taxes to income. These
differences are principally related to differences in the handling of policy
reserves, deferred acquisition costs, writedowns of investments prior to
disposal, certain compensation related accruals, equity investee income or
losses, and the accrual for market discounts for tax and financial reporting
purposes.
The Internal Revenue Service ("IRS") has examined Equitable's consolidated
income tax returns through 1992. The 1993 consolidated income tax return was
not examined by the IRS. The 1994, 1995 and 1996 consolidated income tax
returns remain open to examination. Management does not believe any
adjustments that have been raised by the IRS will be material to the
financial statements.
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, 1997 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
Equitable Life Insurance Company of Iowa
Notes to Financial Statements (continued)
6. INCOME TAXES (CONTINUED)
Company to the parent company in excess of $335,000,000, such excess would be
subject to federal income taxes at rates then effective.
7. EMPLOYEE STOCK COMPENSATION AND RETIREMENT PLANS
Certain key employees of the Company participated in stock incentive plans
sponsored by Equitable which provided for the award of stock options or
shares of stock of Equitable through three means: qualified incentive stock
options (as defined in the Internal Revenue Code), non-qualified stock
options and restricted shares. As the result of the merger with ING, these
plans became fully vested, were terminated and fully settled as of the date
of the merger. The Parent incurred all costs of the final settlement of such
plans as of the merger date.
The incentive stock options were granted from 1983 to October 24, 1997 with
option prices ranging from $3.50 to $55.38, which represents the market value
at the date of grant. Options became exercisable over the five year period
following the date of grant. Prior to the merger, 60,258 options were
exercised under this plan with option prices ranging from $5.31 to $36.75
during 1997.
The non-qualified stock options were compensatory and required the accrual of
compensation expense over the period of service from the date the options are
granted until they became fully exercisable if market values exceeded the
option price on the measurement date. No expense was recognized in 1997 and
1996. During the year ended December 31, 1995, compensation income of $4,000
was recognized related to these options.
The Company also awarded restricted common stock of Equitable to certain key
employees. These shares were subject to forfeiture to Equitable 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 vested over three to five
years from the date of grant. As a result of the merger, all unvested shares
became vested and were issued. Compensation expense recognized during the
years ended December 31, 1997, 1996 and 1995 aggregated $170,000, $2,697,000
and $1,871,000, respectively. As a result of the merger, the Parent
reimbursed the Company for $2,436,000 for restricted stock previously
expensed which vested at October 24, 1997.
The Company also participated in a discretionary stock award plan under which
employees and agents were awarded shares of Equitable's stock for superior
performance. During the years ended December 31, 1997, 1996 and 1995, awards
of 700, 620 and 1,370 shares of stock resulted in charges to income of
$41,200, $22,000 and $42,000, respectively. This plan was also terminated as
of the date of the merger.
Prior to the merger, the Company sponsored a long-term incentive compensation
plan which allowed certain agents to earn units equal to shares of
Equitable's common stock based on personal production and the maintenance of
specific levels of assets under management. At December 31, 1996, the
Company held 112,000 shares of common stock of Equitable with a market value
of $5,138,000 (cost - $618,000) to provide for projected distributions based
on current performance levels under this plan. Due to the merger, the plan
Equitable Life Insurance Company of Iowa
Notes to Financial Statements (continued)
7. EMPLOYEE STOCK COMPENSATION AND RETIREMENT PLANS (CONTINUED)
was terminated and the Company did not hold any shares related to this plan
at December 31, 1997. This program resulted in expense of $3,014,000,
$1,195,000 and $736,000 in the years ended December 31, 1997, 1996 and 1995,
respectively.
Substantially all full-time employees of the Company and its subsidiaries 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 also sponsors an unfunded
deferred compensation plan providing benefits to certain former employees.
The Company's funding policy with respect to the plan is consistent with the
funding requirements of federal law and regulations.
As of the merger date, the Company's pension assets were revalued. This
revaluation resulted in a $14,006,000 adjustment to surplus.
Equitable Life Insurance Company of Iowa
Notes to Financial Statements (continued)
7. EMPLOYEE STOCK COMPENSATION AND RETIREMENT PLANS (CONTINUED)
The following table sets forth the plans' funded status and amounts
recognized in the Company's balance sheet:
<TABLE>
<CAPTION>
December 31
1997 1996
________________________
(Dollars in thousands)
<S> <C> <C>
Accumulated benefit obligation, including vested
benefits of $61,109 at December 31, 1997 and
$56,780 at December 31, 1996 $62,037 $57,711
========================
Plan assets at fair value, primarily bonds, common
stocks (including 173,932 shares of the ING
bearer receipts in 1997 and 400,000 shares of
Equitable common stock in 1996), mortgage loans
and short-term investments $122,344 $101,025
Projected benefit obligation for service rendered
to date 69,563 64,764
________________________
Plan assets in excess of projected benefit
obligation 52,781 36,261
Unrecognized net gain from past experience
different from that assumed and effects of changes
in assumptions (1,001) (1,544)
Prior service cost not yet recognized -- 477
Unrecognized net liability at the transition
date, net of amortization -- 344
________________________
Prepaid pension cost $51,780 $35,538
========================
</TABLE>
Equitable Life Insurance Company of Iowa
Notes to Financial Statements (continued)
7. EMPLOYEE STOCK COMPENSATION AND RETIREMENT PLANS (CONTINUED)
Net periodic pension benefit included the following components:
<TABLE>
<CAPTION>
Year ended December 31
1997 1996 1995
__________________________________
(Dollars in thousands)
<S> <C> <C> <C>
Actual return on plan assets $25,139 $11,801 $18,201
Service cost-benefits earned
during the period (1,654) (1,594) (1,052)
Interest cost on projected
benefit obligation (4,594) (4,253) (4,110)
Net amortization and deferral (16,942) (3,599) (9,945)
__________________________________
Net periodic pension benefit $1,949 $2,355 $3,094
==================================
</TABLE>
The discount rate and rate of increase in future compensation levels used in
determining the actuarial present value of the projected benefit obligation
were 7.25% and 5.0%, respectively, at December 31, 1997. The discount rate
and rate of increase in future compensation levels used in determining the
actuarial present value of the projected benefits obligation were 7.0% and
5.0%, respectively, at December 31, 1996. The average expected long-term
rate of return on plan assets was 9.0% in 1997 and 8.0% in 1996 and 1995.
In addition to benefits offered under the aforementioned defined benefit
plan, 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 Company accounts for the cost of the retiree benefit plans on the accrual
method, whereby the Company has elected to amortize its transition obligation
of retirees and fully eligible or vested employees over 20 years. The
Company has chosen not to fund any amounts in excess of current benefits.
Equitable Life Insurance Company of Iowa
Notes to Financial Statements (continued)
7. EMPLOYEE STOCK COMPENSATION AND RETIREMENT PLANS (CONTINUED)
The following tables sets forth the amounts recognized in the Company's
balance sheet:
<TABLE>
<CAPTION>
Life
Medical Insurance
Plans Plans Total
_____________________________
December 31, 1997 (Dollars in thousands)
_____________________________________________________________________________
<S> <C> <C> <C>
Accumulated postretirement benefit obligations:
Retirees $2,331 $1,724 $4,055
Fully eligible active plan participants 248 106 354
_____________________________
2,579 1,830 4,409
Unrecognized net obligation at transition (3,045) (1,512) (4,557)
Prior service cost not yet recognized in net
postretirement benefit cost 998 1 999
Unrecognized net gain 442 227 669
_____________________________
Accrued postretirement benefit cost $974 $546 $1,520
=============================
December 31, 1996
_____________________________________________________________________________
Accumulated postretirement benefit obligations:
Retirees $3,978 $2,230 $6,208
Fully eligible active plan participants 1,051 155 1,206
_____________________________
5,029 2,385 7,414
Unrecognized net obligation at transition (3,248) (1,612) (4,860)
Prior service cost not yet recognized in net
postretirement benefit cost 5 -- 5
Unrecognized net loss (883) (313) (1,196)
_____________________________
Accrued postretirement benefit cost $903 $460 $1,363
=============================
</TABLE>
Equitable Life Insurance Company of Iowa
Notes to Financial Statements (continued)
7. EMPLOYEE STOCK COMPENSATION AND RETIREMENT PLANS (CONTINUED)
Net periodic postretirement benefit costs in the statements of operations are
as follows:
<TABLE>
<CAPTION>
Life
Medical Insurance
Plans Plans Total
_____________________________
December 31, 1997 (Dollars in thousands)
_____________________________________________________________________________
<S> <C> <C> <C>
Service cost $117 $10 $127
Interest cost 171 126 297
Net amortization of prior service cost and
amortization of unrecognized loss 106 96 202
_____________________________
Net periodic postretirement benefit cost $394 $232 $626
=============================
December 31, 1996
_____________________________________________________________________________
Service cost $14 -- $14
Interest cost 340 $161 501
Amortization of unrecognized net obligation 203 102 305
Net amortization of prior service cost and
amortization of unrecognized loss 26 9 35
_____________________________
Net periodic postretirement benefit cost $583 $272 $855
=============================
December 31, 1995
_____________________________________________________________________________
Service cost $13 -- $13
Interest cost 351 $150 501
Amortization of unrecognized net obligation 204 100 304
Net amortization of prior service cost and
amortization of unrecognized loss (1) -- (1)
_____________________________
Net periodic postretirement benefit cost $567 $250 $817
=============================
</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 10.8% at December 31, 1997 and 11.5% at December 31,
1996 for employees under 65 and 7.5% at December 31, 1997 and 8.0% at
December 31, 1996 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, 1997 by
Equitable Life Insurance Company of Iowa
Notes to Financial Statements (continued)
7. EMPLOYEE STOCK COMPENSATION AND RETIREMENT PLANS (CONTINUED)
$356,000 and net periodic postretirement benefit costs for the year ended
December 31, 1997 by $40,000. The discount rate used in determining the
accumulated postretirement benefit obligation was 7.25% at December 31, 1997
and 7.0% at December 31, 1996.
Substantially all full-time employees of the Company also are eligible to
participate in a defined contribution pension plan that is qualified under
Internal Revenue Code Section 401(k). Employees may contribute a portion of
their annual salary, subject to limitation, to the plan. 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 this plan during the years ended December 31, 1997,
1996 and 1995 were $403,000, $372,000 and $292,000, respectively.
The Company also sponsors an unfunded deferred compensation plan providing
benefits to certain former employees. The Company recognized benefits
(costs) of $24,000, $(10,000) and $20,000 for the years ended December 31,
1997, 1996 and 1995, respectively.
The Company also has non-contributory defined contribution pension plans tax
qualified and non-qualified for its agents. Contributions charged to expense
under these plans during the years ended December 31, 1997, 1996 and 1995
were $1,189,000, $710,000 and $729,000, respectively.
Certain of the assets related to these plans are on deposit with the Company
and amounts relating to these plans are included in these financial
statements.
Equitable Life Insurance Company of Iowa
Notes to Financial Statements (continued)
8. POLICY AND CONTRACT ATTRIBUTES
A portion of the Company's policy reserves and other policyholders' funds
relate to liabilities established on a variety of the Company's products that
are not subject to significant mortality or morbidity risk (i.e., annuities,
supplementary contracts and separate account reserves); however, there may be
certain restrictions placed upon the amount of funds that can be withdrawn
without penalty. The reserves on these products, by withdrawal
characteristics for annuities, supplementary contracts and separate account
reserves are summarized as follows:
<TABLE>
<CAPTION>
December 31 1997 1996
_______________________________________________________________________________
Percent Percent
Amount of Total Amount of Total
_______________________ _______________________
(Dollars in thousands)
<S> <C> <C> <C> <C>
Subject to discretionary
withdrawal with market
value adjustment $679,532 24% $314,309 17%
Subject to discretionary
withdrawal at book value
less surrender charge
(charges of 5% or more) 334,468 12 390,271 21
Subject to discretionary
withdrawal at market
value 1,085,268 39 427,809 23
Subject to discretionary
withdrawal at book value
(charges of less than 5%) 566,359 20 581,314 32
Not subject to discretionary
withdrawal provision 143,816 5 128,092 7
_______________________ _______________________
2,809,443 100% 1,841,795 100%
Less reinsurance ceded 152,627 ========== 182,496 ==========
___________ ___________
Total policy reserves on
annuities and deposit
fund liabilities $2,656,816 $1,659,299
=========== ===========
</TABLE>
Equitable Life Insurance Company of Iowa
Notes to Financial Statements (continued)
8. POLICY AND CONTRACT ATTRIBUTES (CONTINUED)
Reserves on the Company's traditional life products are computed using mean
reserving methodologies. These methodologies result in the establishment of
assets for the amount of the net valuation premiums that are anticipated to
be received between the policy's paid-through date to the policy's next
anniversary date. At December 31, 1997 and 1996, these assets (which are
reported as premiums deferred and uncollected) and the amounts of the related
gross premiums and loadings are as follows:
<TABLE>
<CAPTION>
Gross Loading Net
__________________________________________
(Dollars in thousands)
<S> <C> <C> <C>
December 31, 1997
Ordinary direct first year business $585 $358 $227
Ordinary direct renewal business 10,991 1,163 9,828
Group life direct business 1 -- 1
Reinsurance ceded (842) -- (842)
__________________________________________
$10,735 $1,521 $9,214
==========================================
December 31, 1996
Ordinary direct first year business $651 $451 $200
Ordinary direct renewal business 11,742 1,212 10,530
Group life direct business 1 -- 1
Reinsurance ceded (909) -- (909)
__________________________________________
$11,485 $1,663 $9,822
==========================================
December 31, 1995
Ordinary direct first year business $687 $476 $211
Ordinary direct renewal business 12,119 1,164 10,955
Group life direct business 1 -- 1
Reinsurance ceded (679) -- (679)
__________________________________________
$12,128 $1,640 $10,488
==========================================
</TABLE>
At December 31, 1997 and 1996, the Company had insurance in force aggregating
$156,883,000 and $206,617,000, respectively, in which the gross premiums are
less than the net premiums required by the standard valuation standards
established by the Insurance Division, Department of Commerce, of the State
of Iowa. The Company established policy reserves of $1,504,000 and
$1,790,000 to cover these deficiencies at December 31, 1997 and 1996,
respectively.
In 1995, the NAIC adopted Guideline XXXIII, which requires the Company to
increase annuity reserves in its statutory-basis financial statements by
approximately $2.5 million. The Company received approval from the Insurance
Division, Department of Commerce, of the State of Iowa to phase this increase
in over a three year period beginning in 1995. A direct charge to surplus of
Equitable Life Insurance Company of Iowa
Notes to Financial Statements (continued)
8. POLICY AND CONTRACT ATTRIBUTES (CONTINUED)
$653,000, $828,000 and $1,011,000 was made for the years ended December 31,
1997, 1996 and 1995, respectively, related to the change in reserve
methodology.
9. SEPARATE ACCOUNT
The separate account held by the Company represents funds backing the
Company's defined benefit pension plan and its variable annuity product. The
assets of this account are carried at market value. Information regarding
the separate account of the Company as of and for the years ended December
31, 1997, 1996 and 1995 is as follows:
Equitable Life Insurance Company of Iowa
Notes to Financial Statements (continued)
9. SEPARATE ACCOUNT (CONTINUED)
<TABLE>
<CAPTION>
Nonindexed Non-
Guarantee guaranteed
More than Separate
4% Account Total
__________________________________________
(Dollars in thousands)
<S> <C> <C> <C>
1997
______________________________________________________________________________
Premiums, considerations or
deposits for the year ended
December 31, 1997 -- $618,924 $618,924
==========================================
Reserves at December 31, 1997:
For accounts with assets at
market value $129,184 $956,085 $1,085,269
==========================================
Reserves at December 31, 1997:
By withdrawal characteristics:
Subject to discretionary
withdrawal at market value $129,184 $956,085 $1,085,269
==========================================
1996
______________________________________________________________________________
Premiums, considerations or
deposits for the year ended
December 31, 1996 -- $250,985 $250,985
==========================================
Reserves at December 31, 1996:
For accounts with assets at
market value $106,789 $321,020 $427,809
==========================================
Reserves at December 31, 1996:
By withdrawal characteristics:
Subject to discretionary
withdrawal at market value $106,789 $321,020 $427,809
==========================================
1995
______________________________________________________________________________
Premiums, considerations or
deposits for the year ended
December 31, 1995 -- $65,987 $65,987
==========================================
Reserves at December 31, 1995:
For accounts with assets at
market value $98,018 $68,868 $166,886
==========================================
Reserves at December 31, 1995:
By withdrawal characteristics:
Subject to discretionary
withdrawal at market value $98,018 $68,868 $166,886
==========================================
</TABLE>
Equitable Life Insurance Company of Iowa
Notes to Financial Statements (continued)
9. SEPARATE ACCOUNT (CONTINUED)
A reconciliation of the amounts transferred to and from the separate account
is presented below:
<TABLE>
<CAPTION>
Year ended December 31
1997 1996 1995
__________________________________________
(Dollars in thousands)
<S> <C> <C> <C>
Transfers as reported in summary
of operations of the separate
account statement:
Transfers to separate account $619,052 $251,010 $66,029
Transfers from separate account 79,206 29,549 9,127
__________________________________________
Net transfers to separate account 539,846 221,461 56,902
Reconciling adjustments:
Surrender and annual charges
received by the general account (26) (220) (13)
1994 admin fees paid to general
account in 1995 -- -- (1)
__________________________________________
Transfers as reported in the
summary of operations of the
life, accident and health
annual statement $539,820 $221,241 $56,888
==========================================
</TABLE>
10. RELATED PARTY TRANSACTIONS
The Company purchases investment management services from an affiliate.
Payments for these services aggregated $6,194,000, $2,740,000 and $2,469,000
during the years ended December 31, 1997, 1996 and 1995, respectively.
Golden American provides certain advisory, computer and other resources and
services to the Company. Expenses for these services incurred by the Company
totaled $4,330,000 for the year ending December 31, 1997. No services were
provided by Golden American in 1996.
The Company has a service agreement with Golden American and its subsidiary
in which the Company provides administrative and financial related services.
For the year ending December 31, 1997, revenues of $29,000 were recorded
which reduced general expenses as a result of this agreement.
The Company guarantees all contractual policy claims of USG. Also, the
Company has a guaranty agreement with Golden American. In consideration of
an annual fee, payable June 30, the Company guarantees to Golden American
that it will make the funds available, if needed, to Golden American to pay
the contractual claims made under the provisions of Golden American's life
insurance and annuity contracts. The agreement is not, and nothing contained
Equitable Life Insurance Company of Iowa
Notes to Financial Statements (continued)
10. RELATED PARTY TRANSACTIONS (CONTINUED)
therein or done pursuant thereto by the Company shall deemed to constitute, a
direct or indirect guaranty by the Company of the payment of any debt or
other obligation, indebtedness or liability, of any kind or character
whatsoever, of Golden American. The agreement does not guarantee the value
of the underlying assets held in separate accounts in which funds of variable
life insurance and variable annuity policies have been invested. The
calculation of the annual fee is based on risk based capital. As Golden
American's risk based capital level was above required amounts, no annual fee
was received in 1997.
The Company maintained a line of credit agreement with Equitable to
facilitate the handling of unusual and/or unanticipated short-term cash
requirements. Under the agreement which expired on December 31, 1997, the
Company could borrow up to $30,000,000. Interest on any outstanding
borrowings was charged at the rate of Equitable's monthly average aggregate
cost of short-term funds plus 1.00%. Under this agreement, the Company
incurred interest expense on the note totaling $4,000, $288,000 and $358,000
for the years ended December 31, 1997, 1996 and 1995, respectively. At
December 31, 1997, no amounts were outstanding under the line of credit.
On April 15, 1997, the Company issued a promissory note in the amount of
$50,000,000 to Equitable. Interest is charged at an annual rate of 8.75%.
The Company incurred interest of $3,088,000 on this note for the year ended
December 31, 1997. As of December 31, 1997, the Company's liability for
borrowed money amounted to $50,000,000.
The Company maintains a reciprocal loan agreement with ING America Insurance
Holdings, Inc. ("ING America"), a Delaware corporation and affiliate of EIC,
to facilitate the handling of unusual and/or unanticipated short-term cash
requirements. Under this agreement, which became effective January 1, 1998
and expires December 31, 2007, the Company and ING America can borrow up to
$30,000,000 from one another. Interest on any Company borrowings is charged
at the rate of ING America's cost of funds for the interest period plus
0.15%. Interest on any ING America borrowings is charged at a rate based on
the prevailing interest rate of U.S. commercial paper available for purchase
with a similar arrangement.
Certain investments accounted for by the equity method currently have
mortgage loans outstanding with the Company. Generally, these loans were
made on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
unrelated parties. At December 31, 1996 and 1995, $433,000 and $458,000,
respectively, were outstanding under these arrangements and have been
reported herein as mortgage loans on real estate.
Equitable Life Insurance Company of Iowa
Notes to Financial Statements (continued)
11. REINSURANCE
Policy reserves, premiums and expenses are stated net of amounts related to
reinsurance agreements. Annuity and life policy reserves have been reduced
by $160,737,000 at December 31, 1997 and $189,976,000 at December 31, 1996,
for reinsurance ceded to other companies, including USG (see below). To the
extent reinsuring companies are later unable to meet obligations under
reinsurance agreements, the Company would be liable. Annuity and life
premiums have likewise been reduced by $6,287,000, $5,845,000 and $15,537,000
and insurance benefits have been reduced by $7,985,000, $4,301,000 and
$8,131,000 in 1997, 1996 and 1995, respectively, for the cession agreements.
The amount of reinsurance assumed is not significant.
Reinsurance coverages for life insurance vary according to the age of the
insured and risk classification with retention limits ranging up to $500,000
of coverage per individual life. At December 31, 1997, life insurance in
force ceded amounted to $1,282,369,000 or approximately 15.04% of total life
insurance in force.
In addition, the Company cedes certain annuity policies to its wholly owned
subsidiary, USG, under an agreement that pays the Company a commission of
5.0% of premiums ceded. Under this reinsurance agreement, the Company cedes
renewal premiums on deferred annuity policies issued prior to January 1,
1994, and immediate annuity policies issued prior to January 1, 1996. During
the years ended December 31, 1997, 1996 and 1995, the Company ceded
(recaptured) net premiums to (from) USG of $529,000, $(280,000) and
$8,988,000 resulting in commissions of $10,000, $15,000 and $504,000,
respectively. Reserves ceded under this agreement aggregated $152,627,000
and $182,496,000 at December 31, 1997 and 1996, respectively. In 1996,
approximately $24,000,000 of reserves were transferred to the Company as a
result of the recapture of supplementary contracts previously reinsured by
USG.
Effective January 1, 1997, the Company entered into a coinsurance agreement
with USG. Under this agreement the Company assumes all of USG's Choice Index
Annuity policies and pays USG an allowance equal to commissions paid plus a
fee of 0.1% of premiums. At December 31, 1997, the Company had assumed
premiums and reserves of $135,458,000 and $140,121,000, respectively. For
the year ending December 31, 1997, the Company incurred $8,213,000 of
commissions plus fees.
A wholly owned subsidiary of USG, USGL Service Corporation, services policies
ceded by the Company under the above reinsurance agreement. Under this
agreement, USGL Service Corporation receives from the ceding company a
commission and expense allowance of 4.9% of premiums ceded by the Company.
The Company paid $12,000, $14,000 and $494,000 during the years ended
December 31, 1997, 1996 and 1995, respectively.
Equitable Life Insurance Company of Iowa
Notes to Financial Statements (continued)
12. COMMITMENTS AND CONTINGENCIES
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. Additionally, many states allow companies to establish
admitted assets when paid and amortize such assets over periods of time
dictated by the individual states at the time of payment. The Company
accrues for such assessments only when notice of such assessment is received
from a state guaranty fund; accordingly, no amounts have been provided in the
accompanying financial statements for estimated future assessments. However,
such assessments may be material in the future.
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, 1997, 1996 and 1995, rent expense totaled $4,138,000, $2,570,000
and $2,001,000, respectively. At December 31, 1997, minimum rental payments
due under all non-cancelable operating leases are: 1998 - $5,713,000; 1999 -
$4,440,000; 2000 - $3,876,000; 2001- $2,852,000; 2002 - $2,645,000; and
thereafter - $38,428,000.
At December 31, 1997, outstanding commitments to fund equity investments
totaled $2,521,000.
LITIGATION
USG, a wholly owned subsidiary of the Company, is a defendant in a class
action complaint filed in the state circuit court of Kentucky in September
1997. The suit claims unspecified damages and injunctive relief as a result
of alleged improper actions related to the interest rate adjustment
provisions of USG's fixed annuity contracts. The Company believes the
allegations are without merit. The original plaintiff punitive class
representative has been joined by an additional named plaintiff who claims
also to be a class representative. The suit is in the early procedural
stage. The Company intends to defend the suit vigorously, including
vigorously contesting its class action status. The amount of any liability
which may arise as a result of this suit, if any, cannot be reasonably
estimated and no provision for loss has been made in the accompanying
financial statements.
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 ("Florida action") and in the
Superior court of the State of Arizona in and for Pima county ("Arizona
action"). These suits claimed unspecified damages as a result of alleged
improper life insurance sales practices. The Company denies the allegations
in these class action lawsuits but entered into a settlement to limit
additional expense and burden on its operations. The settlement has been
approved by the federal court in the Florida action and by the Arizona court
in the Arizona action. Approximately $1,600,000 of incremental costs were
Equitable Life Insurance Company of Iowa
Notes to Financial Statements (continued)
12. COMMITMENTS AND CONTINGENCIES (CONTINUED)
incurred in 1997 related to this matter. The Company has not established a
reserve for the settlement and expects to incur total incremental costs of
$20,500,000, of which, a substantial portion will be incurred in 1998.
Owners of approximately 130,000 universal and whole life insurance policies
issued by the Company from 1984 through 1996 may be eligible to receive the
following benefits provided by the settlement: 1) one time enhancement to
the interest component of the policy; 2) one time enhancement to the dividend
component of the policy; 3) optional premium loans that would allow
policyholders to borrow at reduced rates; 4) enhanced value deferred
annuities to holders of affected policies; 5) enhanced value immediate
annuities to affected policyholders; and 6) enhanced value life policies to
affected policyholders. In addition, the settlement provides Individual
Claim-Review Relief (an arbitration-type process) for policyholders who
believe they may have been misled or otherwise harmed in connection with
their policies.
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 flows 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.
YEAR 2000 (UNAUDITED)
Based on a study of its computer software and hardware, EIC, the Company's
parent, has determined the Company's exposure to the Year 2000 change of the
century date issue. EIC has developed a plan to modify its information
technology to be ready for the Year 2000. Efforts began in 1997 to modify
its systems. This project is expected to be substantially completed by the
second quarter of 1999. The projected cost of the Year 2000 project is
approximately $4,000,000 to $6,000,000. During 1997, the Company incurred
costs of $1,027,000 for the Year 2000 project. While additional testing will
be conducted on its systems through the Year 2000, the Company does not
expect this project to have a significant effect on operations.
To mitigate the effect of outside influences and other dependencies relative
to the Year 2000, the Company will be contacting significant customers,
suppliers and other third parties. To the extent these third parties would
be unable to transact business in the Year 2000 and thereafter, the Company's
operations could be adversely affected.
Equitable Life Insurance Company of Iowa
Notes to Financial Statements (continued)
13. CONDENSED FINANCIAL INFORMATION OF SUBSIDIARIES
Summarized financial information - statutory-basis of USG is summarized as
follows:
<TABLE>
<CAPTION>
December 31
1997 1996
_________________________________
(Dollars in thousands)
<S> <C> <C>
ADMITTED ASSETS
Cash and investments $7,243,763 $6,743,918
Investment income due and accrued 98,483 95,012
Other assets 17,698 16,834
_________________________________
Total admitted assets $7,359,944 $6,855,764
=================================
LIABILITIES AND CAPITAL AND SURPLUS
Liabilities:
Annuity and life policy reserves $6,463,224 $6,083,650
Other policy liabilities 216,707 174,987
Interest maintenance reserve 46,991 41,874
Other liabilities 83,785 83,877
Asset valuation reserve 72,779 60,635
_________________________________
Total liabilities 6,883,486 6,445,023
Capital and surplus 476,458 410,741
_________________________________
Total liabilities and capital and surplus $7,359,944 $6,855,764
=================================
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31
1997 1996 1995
_______________________________________
(Dollars in thousands)
<S> <C> <C> <C>
Premiums, policy proceeds and
other considerations $1,142,107 $1,178,006 $1,361,405
Investment income, less
investment expenses 550,805 516,686 459,572
Other income 37,185 20,693 15,502
Benefits (1,504,198) (1,467,525) (1,611,882)
Insurance expenses (102,275) (136,273) (135,186)
Federal income taxes (43,341) (43,415) (27,158)
_______________________________________
Gain from operations before net
realized capital gains (losses) 80,283 68,172 62,253
Net realized capital gains (losses) 484 113 (2,527)
_______________________________________
Net income $80,767 $68,285 $59,726
=======================================
</TABLE>
Equitable Life Insurance Company of Iowa
Notes to Financial Statements (continued)
13. CONDENSED FINANCIAL INFORMATION OF SUBSIDIARIES (CONTINUED)
The Company also owns 100% of the outstanding stock of Equitable American and
Equitable Companies. At December 31, 1997 and 1996, the Company's investment
in Equitable American aggregated $149,086,000 and $140,268,000, respectively.
At December 31, 1997 and 1996, the Company's investment in Equitable
Companies aggregated $2,073,000 and $1,938,000, respectively. Operations of
these subsidiaries are considered immaterial to the Company's financial
statements.
Equitable Life Insurance Company of Iowa - Statutory-Basis
Schedule I
Summary of Investments-
Other Than Investments in Related Parties
(Dollars in thousands)
<TABLE>
<CAPTION>
Balance
Sheet
December 31, 1997 Cost 1 Value Amount
_______________________________________________________________________________
<S> <C> <C> <C>
TYPE OF INVESTMENT
Fixed maturities:
Bonds:
United States government and govern-
mental agencies and authorities $56,311 $59,094 $56,311
States, municipalities and
political subdivisions 252 256 252
Public utilities 312,166 332,164 312,166
All other corporate bonds 1,625,184 1,711,050 1,625,184
_______________________________________
Total fixed maturities 1,993,913 2,102,564 1,993,913
Equity securities:
Common stocks:
Affiliates 408,837 631,814 631,814
Industrial, miscellaneous and
all other 7,806 7,617 7,617
_______________________________________
Total equity securities 416,643 639,431 639,431
Mortgage loans on real estate 505,116 505,116
Real estate 3,449 3,449
Policy loans 165,161 165,161
Cash and short-term investments 52,474 52,474
Derivative financial instruments 16,474 33,388
Funds in transit 7,746 7,746
Other invested assets 5,959 5,959
___________ ___________
Total cash and investments $3,166,935 $3,406,637
=========== ===========
<FN>
Note 1: Cost is defined as amortized cost for bonds and short-term
investments adjusted for amortization of premiums and
accrual of discounts.
</TABLE>
Equitable Life Insurance Company of Iowa - Statutory-Basis
Schedule III
Supplementary Insurance Information
(Dollars in thousands)
<TABLE>
<CAPTION>
Future
Policy Other
Benefits, Policy
Losses, Claims
Claims and
and Un- Bene-
Loss earned fits Premium
Segment Expenses Premiums Payable Revenue
______________________________________________________________________________
<S> <C> <C> <C> <C>
Year ended December 31, 1997:
Life insurance $2,637,144 -- $8,949 $1,155,513
Year ended December 31, 1996:
Life insurance $2,260,773 -- $6,148 $569,866
Year ended December 31, 1995:
Life insurance $2,028,318 -- $6,232 $354,601
</TABLE>
<TABLE>
<CAPTION>
Benefits
Claims,
Losses
Net and Other
Invest- Settle- Opera-
ment ment ting Premium
Segment Income Expenses Expenses Written
______________________________________________________________________________
<S> <C> <C> <C> <C>
Year ended December 31, 1997:
Life insurance $282,745 $681,645 $675,809 --
Year ended December 31, 1996:
Life insurance $252,120 $445,383 $300,601 --
Year ended December 31, 1995:
Life insurance $234,864 $364,993 $130,927 --
</TABLE>
Equitable Life Insurance Company of Iowa - Statutory-Basis
Schedule IV
Reinsurance
(Dollars in thousands)
<TABLE>
<CAPTION>
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, 1997:
Life insurance in
force $9,808,737 $1,282,369 -- $8,526,368 --
Insurance premiums
and charges $1,026,478 $6,950 $135,985 $1,155,513 11.77%
Year ended December
31, 1996:
Life insurance in
force $9,676,791 $1,199,227 -- $8,477,564 --
Insurance premiums
and charges $575,412 $6,574 $1,027 $569,865 0.18%
Year ended December
31, 1995:
Life insurance in
force $9,282,614 $1,170,058 -- $8,112,556 --
Insurance premiums
and charges $370,395 $15,794 -- $354,601 --
</TABLE>
Financial Statements
Equitable Life Insurance Company of Iowa
For the Periods October 25, 1997 through December 31,
1997 and January 1, 1997 through October 24, 1997 and
the Years ended
December 31, 1996 and 1995
with Report of Independent Auditors
Equitable Life Insurance Company of Iowa
Financial Statements
For the Periods October 25, 1997 through
December 31, 1997 and January 1, 1997 through
October 24, 1997 and the Years ended
December 31, 1996 and 1995
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,
Inc.) as of December 31, 1997 and 1996, and the related consolidated
statements of income, changes in stockholder's equity, and cash flows for the
periods from October 25, 1997 through December 31, 1997 and January 1, 1997
through October 24, 1997 and the years ended December 31, 1996 and 1995. 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, 1997 and 1996,
and the consolidated results of their operations and their cash flows for the
periods from October 25, 1997 through December 31, 1997 and January 1, 1997
through October 24, 1997 and the years ended December 31, 1996 and 1995, 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.
/S/ Ernst & Young LLP
February 12, 1998
Equitable Life Insurance Company of Iowa
Consolidated Balance Sheets
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
POST-MERGER PRE-MERGER
__________________________
December 31,| December 31,
1997 | 1996
____________| ____________
<S> <C> | <C>
ASSETS |
Investments |
Fixed maturities, available for sale, |
at fair value (cost: 1997 - $8,097,413; |
1996 - $7,282,582) $8,181,037 | $7,456,401
Equity securities of unaffiliated companies, at |
fair value (cost: 1997 - $57,172; 1996 - $48,821) 63,712 | 77,148
Equity securities of affiliated company, at fair |
value (cost: 1997 - $4,159; 1996 - $618) 3,982 | 5,138
Mortgage loans on real estate 2,087,057 | 1,689,088
Real estate, less allowance for depreciation |
of $48 in 1997 and $4,588 in 1996 16,419 | 8,613
Policy loans 191,375 | 185,853
Short-term investments 86,185 | 15,852
____________| ____________
Total investments 10,629,767 | 9,438,093
|
Cash and cash equivalents 35,383 | 11,741
Securities and indebtedness of related parties 12,397 | 7,872
Accrued investment income 137,238 | 131,152
Notes and other receivables 27,799 | 21,062
Deferred policy acquisition costs 27,592 | 721,690
Present value of in force acquired 315,469 | --
Property and equipment, less allowance for |
depreciation of $666 in 1997 and $13,105 in 1996 14,204 | 9,620
Intangible assets, less accumulated amortization |
of $5,307 in 1997 and $632 in 1996 1,268,484 | 2,343
Other assets 97,492 | 82,031
Due from affiliates 23,115 | 5,039
Separate account assets 1,142,251 | 450,632
____________| ____________
Total assets $13,731,191 | $10,881,275
==========================
</TABLE>
See accompanying notes.
Equitable Life Insurance Company of Iowa
Consolidated Balance Sheets (continued)
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
POST-MERGER PRE-MERGER
__________________________
December 31,| December 31,
1997 | 1996
____________| ____________
<S> <C> | <C>
LIABILITIES AND STOCKHOLDER'S EQUITY |
Policy liabilities and accruals: |
Future policy benefits: |
Annuity and interest sensitive life products $9,177,107 | $8,389,888
Traditional life insurance products 703,671 | 712,296
Unearned revenue reserve 15,996 | 18,398
Other policy claims and benefits 11,720 | 7,481
____________| ____________
9,908,494 | 9,128,063
|
Other policyholders' funds: |
Advance premiums and other deposits 203 | 597
Accrued dividends 12,404 | 12,807
____________| ____________
12,607 | 13,404
|
Deferred income taxes 31,335 | 43,201
Note payable to parent 50,000 | --
Due to affiliates 20,491 | 8,518
Other liabilities 203,843 | 188,493
Separate account liabilities 1,142,251 | 450,632
____________| ____________
Total liabilities 11,369,021 | 9,832,311
|
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 2,287,046 | 274,009
Unrealized appreciation (depreciation) of |
securities at fair value 54,299 | 108,968
Retained earnings 15,825 | 660,987
____________| ____________
Total stockholder's equity 2,362,170 | 1,048,964
____________| ____________
Total liabilities and stockholder's equity $13,731,191 | $10,881,275
==========================
</TABLE>
See accompanying notes.
Equitable Life Insurance Company of Iowa
Consolidated Statements of Income
(Dollars in thousands)
<TABLE>
<CAPTION>
POST-MERGER PRE-MERGER
________________________________________________
For the | For the
period | period
October 25, | January 1,
1997 through| 1997 through Year ended
December 31,| October 24, December 31
1997 | 1997 1996 1995
____________| __________________________________
<S> <C> | <C> <C> <C>
Revenues: |
Annuity and interest sensitive |
life product charges $14,022 | $70,404 $62,638 $51,466
Traditional life |
insurance premiums 6,498 | 32,105 39,566 43,425
Net investment income 120,466 | 624,122 705,074 638,056
Realized gains on investments 4,051 | 18,775 16,213 9,524
Other income 122 | 433 730 8,883
____________| __________________________________
145,159 | 745,839 824,221 751,354
Benefits and expenses: |
Annuity and interest sensitive |
life benefits: |
Interest credited to |
account balances 81,956 | 390,722 437,702 390,039
Benefit claims incurred in |
excess of account balances 3,166 | 10,000 7,892 10,396
Traditional life |
insurance benefits 7,076 | 37,797 44,316 68,338
Decrease in future |
traditional policy benefits (618)| (3,812) (1,243) (6,867)
Distributions to participating |
policyholders 3,779 | 21,087 25,209 25,125
Underwriting, acquisition and |
insurance expenses: |
Commissions 23,888 | 129,924 130,379 146,224
General expenses 9,525 | 74,740 48,461 40,867
Insurance taxes 1,119 | 7,428 7,391 45,472
Policy acquisition costs |
deferred (29,649)| (150,887) (156,041) (178,133)
Amortization: |
Deferred policy acquisition |
costs 1,823 | 81,119 79,306 72,537
Present value in force |
acquired 6,669 | -- -- --
Goodwill 5,308 | 62 74 74
____________| __________________________________
114,042 | 598,180 623,446 614,072
</TABLE>
See accompanying notes.
Equitable Life Insurance Company of Iowa
Consolidated Statements of Income (continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
POST-MERGER PRE-MERGER
________________________________________________
For the | For the
period | period
October 25, | January 1,
1997 through| 1997 through Year ended
December 31,| October 24, December 31
1997 | 1997 1996 1995
____________| __________________________________
<S> <C> | <C> <C> <C>
Interest expense $724 | $2,514 $1,880 $2,565
Other expenses -- | 2 1 (9)
____________| __________________________________
114,766 | 600,696 625,327 616,628
____________| __________________________________
30,393 | 145,143 198,894 134,726
Income taxes 14,497 | 44,775 69,486 47,233
____________| __________________________________
15,896 | 100,368 129,408 87,493
Equity income (loss), net of |
related income taxes (71)| 355 (87) 17
____________| __________________________________
Net income $15,825 | $100,723 $129,321 $87,510
================================================
</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
____________________________________________________
PRE-MERGER
____________________________________________________
<S> <C> <C> <C> <C> <C>
Balance at January 1,
1995 $5,000 $224,009 ($24,320) $468,156 $672,845
Net income -- -- -- 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 -- -- -- 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
Net income -- -- -- 100,723 100,723
Unrealized appreciation
of securities at fair
value -- -- 48,751 -- 48,751
____________________________________________________
Balance at October 24,
1997 $5,000 $274,009 $157,719 $761,710 $1,198,438
====================================================
POST-MERGER
____________________________________________________
Balance at October 25,
1997 $5,000 $2,287,046 -- -- $2,292,046
Net income -- -- -- $15,825 15,825
Unrealized appreciation
of securities at fair
value -- -- $54,299 -- 54,299
____________________________________________________
Balance at December 31,
1997 $5,000 $2,287,046 $54,299 $15,825 $2,362,170
====================================================
</TABLE>
See accompanying notes.
Equitable Life Insurance Company of Iowa
Consolidated Statements of Cash Flows
(Dollars in thousands)
<TABLE>
<CAPTION>
POST-MERGER PRE-MERGER
________________________________________________
For the | For the
period | period
October 25, | January 1,
1997 through| 1997 through Year ended
December 31,| October 24, December 31
1997 | 1997 1996 1995
____________| __________________________________
<S> <C> | <C> <C> <C>
OPERATING ACTIVITIES |
Net income $15,825 | $100,723 $129,321 $87,510
Adjustments to reconcile net |
income to net cash provided by |
operations: |
Adjustments related to |
annuity and interest sensi- |
tive life products: |
Interest credited to account |
balances 81,225 | 385,908 434,621 390,039
Charges for mortality and |
administration (12,787)| (63,006) (63,398) (54,308)
Change in unearned revenues 666 | 237 1,226 (293)
Increase (decrease) in |
traditional life policy |
liabilities, and accruals 1,634 | (735) (3,582) 2,758
Decrease in other policy- |
holders' funds (629)| (168) (2) (756)
Decrease (increase) in accrued |
investment income 1,055 | (7,141) (8,318) (16,875)
Policy acquisition costs |
deferred (29,649)| (150,887) (156,041) (178,133)
Amortization of present value |
of in force acquired 6,669 | -- -- --
Amortization of deferred policy |
acquisition costs 1,823 | 81,119 79,306 72,537
Change in other assets, other |
liabilities and accrued |
income taxes 24,122 | (33,779) (13,270) 42,496
Provision for depreciation and |
amortization 15,381 | 3,243 982 (8,449)
Provision for deferred income |
taxes 5,344 | 9,181 -- 1,117
Share of losses (equity in |
earnings) of related |
parties 80 | (546) 133 (27)
Realized gains on investments (4,051)| (18,775) (16,213) (9,524)
____________| __________________________________
Net cash provided by operating |
activities 106,708 | 305,374 384,765 328,092
</TABLE>
See accompanying notes.
Equitable Life Insurance Company of Iowa
Consolidated Statements of Cash Flows (continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
POST-MERGER PRE-MERGER
_________________________________________________
For the | For the
period | period
October 25, | January 1,
1997 through|1997 through Year ended
December 31,|October 24, December 31
1997 | 1997 1996 1995
____________|____________________________________
<S> <C> | <C> <C> <C>
INVESTING ACTIVITIES |
Sale, maturity or repayment |
of investments: |
Fixed maturities |
- available for sale $138,039 | $755,639 $525,164 $145,173
Fixed maturities |
- held for investment -- | -- -- 203,395
Equity securities 3,834 | 16,782 16,358 6,572
Mortgage loans on real estate 27,725 | 70,623 80,257 53,544
Real estate -- | 3,007 7,414 2,030
Policy loans 4,568 | 26,511 32,417 28,436
Short-term investments - net -- | -- 19,431 10,514
____________|____________________________________
174,166 | 872,562 681,041 449,664
Acquisition of investments: |
Fixed maturities |
- available for sale (190,030)| (1,165,709) (902,978) (943,285)
Fixed maturities |
- held for investment -- | -- -- (59,759)
Equity securities (362)| (2,498) (14,523) (32,097)
Mortgage loans on real estate (81,105)| (326,322) (599,802) (612,449)
Real estate (36)| (112) (710) (1,018)
Policy loans (4,896)| (31,705) (35,847) (34,411)
Short-term investments - net (2,822)| (67,504) -- --
____________|____________________________________
(279,251)| (1,593,850) (1,553,860) (1,683,019)
Disposal of investments account- |
ed for by the equity method 103 | 3,770 790 498
Additions to investments |
accounted for by the |
equity method (641)| (5,669) (2,500) --
Proceeds from sale of interest |
in Equitable of Iowa Companies 6,155 | -- -- --
Purchase of ING Groep N.V. shares |
from separate account (2,774)| -- -- --
Repayments of notes receivable -- | 200 200 1,317
Sales of property and equipment 546 | 2,477 177 109
Purchases of property and |
equipment (2,570)| (9,544) (5,592) (3,397)
____________|____________________________________
Net cash used in investing |
activities (104,266)| (730,054) (879,744) (1,234,828)
</TABLE>
See accompanying notes.
Equitable Life Insurance Company of Iowa
Consolidated Statements of Cash Flows (continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
POST-MERGER PRE-MERGER
________________________________________________
For the | For the
period | period
October 25, | January 1,
1997 through| 1997 through Year ended
December 31,| October 24, December 31
1997 | 1997 1996 1995
____________| __________________________________
<S> <C> | <C> <C> <C>
FINANCING ACTIVITIES |
Proceeds from line of credit |
borrowings -- | $183,296 $592,289 $754,104
Repayment of line of credit |
borrowings -- | (183,296) (592,289) (754,104)
Issuance of note payable |
to parent -- | 50,000 -- --
____________| __________________________________
-- | 50,000 -- --
Receipts from annuity and |
interest sensitive life |
policies credited to policy- |
holder account balances $229,040 | 1,444,453 1,498,885 1,691,189
Return of policyholder account |
balances on annuity policies |
and interest sensitive life |
policies (208,384)| (1,068,426) (978,555) (835,893)
Net reallocations to |
separate accounts (489)| (314) -- --
Contributions from parent -- | -- -- 50,000
Dividends paid to parent -- | -- (24,000) --
____________| __________________________________
Net cash provided by financing |
activities 20,167 | 425,713 496,330 905,296
____________| __________________________________
Increase (decrease) in cash |
and cash equivalents 22,609 | 1,033 1,351 (1,440)
|
Cash and cash equivalents at |
beginning of period 12,774 | 11,741 10,390 11,830
____________| __________________________________
Cash and cash equivalents at |
end of period $35,383 | $12,774 $11,741 $10,390
============| ==================================
</TABLE>
See accompanying notes.
Equitable Life Insurance Company of Iowa
Consolidated Statements of Cash Flows (continued)
(Dollars in thousands)
<TABLE>
<CAPTION>
POST-MERGER PRE-MERGER
________________________________________________
For the | For the
period | period
October 25, | January 1,
1997 through| 1997 through Year ended
December 31,| October 24, December 31
1997 | 1997 1996 1995
____________| __________________________________
<S> <C>| <C> <C> <C>
SUPPLEMENTAL DISCLOSURES OF |
CASH FLOW INFORMATION |
Cash paid during the period for: |
Interest -- | $2,156 $1,876 $2,567
Income taxes -- | 51,337 69,171 33,490
Non-cash investing and |
financing activities: |
Foreclosure of mortgage loans, |
including taxes and costs |
capitalized (1997: $50 and |
1996: $15) -- | 7,913 690 --
</TABLE>
See accompanying notes.
Equitable Life Insurance Company of Iowa
Notes to Consolidated Financial Statements
December 31, 1997
1. SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Equitable Life Insurance Company of Iowa (the "Company") is a wholly owned
subsidiary of Equitable of Iowa Companies, Inc. The Company and its
subsidiary, 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.
On October 24, 1997, PFHI Holdings, Inc. ("PFHI"), a Delaware corporation,
acquired all of the outstanding capital stock of Equitable of Iowa Companies
("Equitable"), pursuant to an Agreement and Plan of Merger ("Merger
Agreement") among Equitable, PFHI and ING Groep N.V. ("ING"). PFHI is a
wholly owned subsidiary of ING, a global financial services holding company
based in The Netherlands. As a result of the merger, Equitable was merged
into PFHI which was simultaneously renamed Equitable of Iowa Companies, Inc.
("EIC" or the "Parent"), a Delaware corporation.
For financial statement purposes, the merger was accounted for as a purchase
effective October 25, 1997. The merger resulted in a new basis of accounting
reflecting estimated fair value of assets and liabilities at the merger date.
As a result, the Company's financial statements for the period subsequent to
October 24, 1997, are presented on the Post-Merger new basis of accounting
and for October 24, 1997 and prior periods on the Pre-Merger basis of
accounting.
CONSOLIDATION
The consolidated financial statements include the Company and its
subsidiaries. The Company's principal subsidiaries are USG, Equitable
American Insurance Company and Equitable Companies. At December 31, 1997 and
1996, all subsidiaries are wholly owned. All significant intercompany
accounts and transactions have been eliminated.
INVESTMENTS
FIXED MATURITIES: Statement of Financial Accounting Standards ("SFAS") No.
115, "Accounting for Certain Investments in Debt and Equity Securities,"
requires fixed maturity securities to be 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
("DPAC"), present value of in force acquired ("PVIF"), policy reserves and
deferred income taxes. At December 31, 1997 and 1996, 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 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 Statements 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 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. 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 securities' new
cost basis by a charge to realized losses in the Company's Statements 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 are 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 discounted
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 in which the Company has a less than controlling interest.
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 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
The premiums paid for interest rate caps ("caps") and cash settled put
swaptions ("swaptions") are deferred and reported at amortized cost and
included in other assets. The premiums paid for Standard & Poors' ("S&P")
500 ([email protected].) Index Call Options ("call options," or
collectively with the caps and swaptions, "instruments") are deferred and
reported at amortized cost plus intrinsic value, if any and included in other
assets. The deferred premiums are amortized over the term of the instruments
on a straight-line basis. Amortization of the deferred premium and any
payments received in accordance with the terms of the instruments are recorded
as an adjustment to interest credited. The instruments do not require any
additional payments by the Company. Unrealized gains and losses on the caps
and swaptions are not recorded in income until realized. For the call options,
the unrealized gains and losses related to the change in their intrinsic value
will be an adjustment to interest credited.
The call options were purchased to hedge potential increases in policyholder
account balances for equity-indexed annuity policies resulting from increases
in the index to which the product is linked. The call options used are
designated as a hedge and reduce the indicated risk by having a high
correlation of changes in the value of the call options and the policy
benefits being hedged at both the inception of the hedge and throughout the
hedge period. Should such criteria not be met, hedge accounting would be
discontinued and the call options would be marked-to-market with the change
recorded in net income.
CASH AND CASH EQUIVALENTS
For purposes of the consolidated statements 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
"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. DPAC is 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.
PRESENT VALUE OF IN FORCE ACQUIRED
As a result of the merger, a portion of the acquisition cost was allocated to
the right to receive future cash flows from existing insurance contracts.
This allocated cost represents the present value of in force acquired which
reflects the value of those purchased policies calculated by discounting
actuarially determined expected future cash flows at the discount rate
determined by the purchaser. Amortization of PVIF is charged to expense in
proportion to expected gross profits. This amortization is "unlocked" when
the Company revises its estimate of current or future gross profits to be
realized from the insurance contracts acquired. PVIF is adjusted to reflect
the pro forma impact of unrealized gains and losses on available for sale
fixed maturities.
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
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 goodwill established as result of the merger.
Goodwill established as a result of the merger is being amortized over 40
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 11.40% during 1997, 3.00% to 11.00%
during 1996 and 3.35% to 11.35% during 1995. For equity-indexed annuity
policies, such future policy benefits are increased to reflect the intrinsic
value of the liability option (i.e., increases in the index to which the
product is linked).
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 1.26% of premiums and 8.17% of life insurance in force in 1997) are
provided for in the liability for future policy benefits.
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 DPAC.
SEPARATE ACCOUNT
Assets and liabilities of the separate account 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 account invests the premiums from the sale
of variable annuity products in shares of specified mutual funds. The assets
and liabilities of the separate account 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 account. Variable separate account liabilities represent account
balances for the variable annuity contracts invested in the separate
account. The Company's separate account assets and liabilities for its
pension plan 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.
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 DPAC.
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 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 Equitable of $24,000,000. During 1998,
the Company could pay dividends to its Parent of approximately $104,322,000
without prior approval of regulatory authorities.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
affecting the amounts reported in the financial statements and accompanying
notes. Actual results 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 and present value of in force acquired, (4)
fair values of assets and liabilities recorded as a result of the merger, (5)
net assets for pension and liabilities for postretirement benefits, (6) asset
valuation allowances, (7) guaranty fund assessment accruals, (8) deferred tax
benefits (liabilities) and (9) 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.
2. BASIS OF FINANCIAL REPORTING
The financial statements of the Company differ from related statutory-basis
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) an asset
representing the present value of future cash flows from insurance contracts
acquired was established as a result of the merger and is amortized and
charged to expense; (3) 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; (4) 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; (5)
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; (6) 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), present value of in
force acquired and deferred policy acquisition costs, credited/charged
directly to stockholder's equity rather than valued at amortized cost; (7)
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; (8)
deferred income taxes are provided for the difference between the financial
statement and income tax bases of assets and liabilities; (9) 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; (10) gains arising from sale-leaseback transactions are deferred and
amortized over the life of the lease rather than recognized in the period of
sale; (11) 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; (12) 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; (13) 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; (14) the financial statements
of the Company's wholly owned subsidiaries are consolidated rather than
recorded at the equity in net assets; (15) 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; (16) 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; (17) amortization of the cost
of interest rate caps and cash settlement put swaptions purchased in
conjunction with the Company's hedging program are recorded in interest
credited rather than as a deduction from net investment income; (18) the S&P
500 call options are carried at amortized cost plus intrinsic value, if any,
reporting amortization in interest credited rather than recorded at market
value with changes in the market value reported in net investment income; and
(19) certain contingent liabilities (i.e. class action lawsuits) are expensed
when the amount of the loss is probable and estimable rather than provided
for as incurred.
Net income for the Company as determined in accordance with statutory
accounting practices was $111,932,000 in 1997, $96,841,000 in 1996, and
$87,179,000 in 1995. Total statutory capital and surplus was $647,622,000 at
December 31, 1997 and $567,316,000 at December 31, 1996.
3. INVESTMENT OPERATIONS
INVESTMENT RESULTS
Major categories of net investment income are summarized below:
<TABLE>
<CAPTION>
POST-MERGER PRE-MERGER
________________________________________________
For the | For the
period | period
October 25, | January 1,
1997 through| 1997 through Year ended
December 31,| October 24, December 31
1997 | 1997 1996 1995
____________| __________________________________
| (Dollars in thousands)
<S> <C> | <C> <C> <C>
Fixed maturities $96,165 | $506,533 $576,781 $558,903
Equity securities 1,153 | 3,687 3,080 1,255
Mortgage loans on real estate 24,688 | 124,037 125,144 76,382
Real estate 404 | 1,481 2,588 2,747
Policy loans 1,745 | 8,983 10,414 10,049
Short-term investments 840 | 2,610 1,397 1,275
Other - net 425 | 1,234 1,007 996
____________| __________________________________
125,420 | 648,565 720,411 651,607
|
Less investment expenses (4,954)| (24,443) (15,337) (13,551)
____________| __________________________________
Net investment income $120,466 | $624,122 $705,074 $638,056
================================================
</TABLE>
Realized gains (losses) on investments are as follows:
<TABLE>
<CAPTION>
POST-MERGER PRE-MERGER
________________________________________________
For the | For the
period | period
October 25, | January 1,
1997 through| 1997 through Year ended
December 31,| October 24, December 31
1997 | 1997 1996 1995
____________| __________________________________
| (Dollars in thousands)
<S> <C> | <C> <C> <C>
Fixed maturities: |
Available for sale $1,217 | $13,939 $13,557 ($3,401)
Held for investment -- | -- -- 9,330
Equity securities 3,664 | 3,258 869 912
Mortgage loans on real estate (830)| -- -- --
Real estate -- | (43) 1,218 (161)
Equity investments -- | 1,621 569 2,844
____________| __________________________________
Realized gains on investments $4,051 | $18,775 $16,213 $9,524
================================================
</TABLE>
The change in unrealized appreciaiton (depreciation) on securities at fair
value is as follows:
<TABLE>
<CAPTION>
POST-MERGER PRE-MERGER
________________________________________________
For the | For the
period | period
October 25, | January 1,
1997 through| 1997 through Year ended
December 31,| October 24, December 31
1997 | 1997 1996 1995
____________| __________________________________
| (Dollars in thousands)
<S> <C> | <C> <C> <C>
Fixed maturities |
Available for sale $83,624 | $165,128 ($293,555) $507,971
Held for investment -- | -- -- 334,708
Equity securities 6,363 | (6,737) 29,060 1,614
____________| __________________________________
Unrealized appreciation |
(depreciation) of |
investments $89,987 | $158,391 ($264,495) $844,293
================================================
</TABLE>
FIXED MATURITY AND EQUITY SECURITIES
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.
At December 31, 1997 and 1996, amortized cost, gross unrealized gains and
losses and estimated fair value of the Company's fixed maturity securities,
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)
December 31, 1997 POST-MERGER
_____________________________________________________________________________
<S> <C> <C> <C> <C>
U.S. government and
governmental agencies
and authorities:
Mortgage-backed
securities $217,909 $1,083 ($86) $218,906
Other 31,265 88 -- 31,353
States, municipalities
and political
subdivisions 16,095 117 (99) 16,113
Foreign governments 13,738 528 -- 14,266
Public utilities 1,183,863 18,758 (688) 1,201,933
Investment grade
corporate 3,290,428 44,010 (931) 3,333,507
Below investment grade
corporate 802,539 7,237 (4,741) 805,035
Mortgage-backed
securities 2,541,194 20,787 (2,439) 2,559,542
Redeemable preferred
stocks 382 -- -- 382
__________________________________________________
Total $8,097,413 $92,608 ($8,984) $8,181,037
==================================================
December 31, 1996 PRE-MERGER
_____________________________________________________________________________
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>
Short-term investments, all with maturities of 30 days or less, have been
excluded from the above schedules. Amortized cost approximates estimated
fair value for these securities.
At December 31, 1997, net unrealized investment gains on fixed maturity
securities designated as available for sale totaled $83,624,000. This
appreciation caused an increase in stockholder's equity of $50,163,000 at
December 31, 1997 (net of deferred income taxes of $27,011,000, an adjustment
of $234,000 to DPAC and an adjustment of $6,216,000 to PVIF).
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 DPAC).
At December 31, 1997, net unrealized appreciation of equity securities of
$6,363,000 was comprised of net unrealized depreciation of $186,000 on the
Company's investment in affiliated common stock and its registered separate
account, gross unrealized appreciation of $6,550,000 on an investment in a
real estate investment trust and gross unrealized depreciation of $1,000 on
other equity securities. The Company's investment in the real estate
investment trust had an estimated fair value of $63,431,000 and a cost basis
of $56,881,000 at December 31, 1997. The estimated fair value of the
Company's 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.
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 amortized cost and estimated fair value of fixed maturity securities, by
contractual maturity, at December 31, 1997, 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>
POST-MERGER
_________________________
Estimated
Amortized Fair
Cost Value
_________________________
(Dollars in thousands)
<S> <C> <C>
December 31, 1997
Due within one year $3,493 $3,488
Due after one year through five years 379,009 379,958
Due after five years through ten years 2,535,562 2,555,500
Due after ten years 2,420,246 2,463,643
_________________________
5,338,310 5,402,589
Mortgage-backed securities 2,759,103 2,778,448
_________________________
Total $8,097,413 $8,181,037
=========================
</TABLE>
An analysis of sales, maturities and principal repayments of the Company's
fixed maturities portfolio for the years ended December 31, 1997, 1996 and
1995 is as follows:
<TABLE>
<CAPTION>
Gross Gross Proceeds
Amortized Realized Realized from
Cost Gains Losses Sale
______________________________________________
(Dollars in thousands)
<S> <C> <C> <C> <C>
For the period October 25, 1997
through December 31, 1997
Scheduled principal repayments,
calls and tenders $75,003 $250 ($102) $75,151
Sales 61,819 1,076 (7) 62,888
______________________________________________
Total $136,822 $1,326 ($109) $138,039
==============================================
For the period January 1, 1997
through October 24, 1997
Scheduled principal repayments,
calls and tenders $384,567 $10,779 ($319) $395,027
Sales 357,133 9,797 (6,318) 360,612
______________________________________________
Total $741,700 $20,576 ($6,637) $755,639
==============================================
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
==============================================
</TABLE>
MORTGAGE-BACKED SECURITIES
The amortized cost and estimated fair value of mortgage-backed securities,
which comprise 34% of the Company's investment in fixed maturity securities
at December 31, 1997, by type, are as follows:
<TABLE>
<CAPTION>
POST-MERGER
_________________________
Estimated
Amortized Fair
Cost Value
_________________________
(Dollars in thousands)
<S> <C> <C>
December 31, 1997
Mortgage-backed securities:
Government and agency guaranteed pools:
Very accurately defined maturities $18,239 $18,553
Planned amortization class 74,971 75,350
Targeted amortization class 18,934 19,032
Sequential pay 56,312 56,424
Pass through 49,453 49,548
Private label CMOs and REMICs:
Very accurately defined maturities 31,559 31,601
Planned amortization class 26,944 27,158
Targeted amortization class 400,168 405,119
Sequential pay 2,019,288 2,032,176
Mezzanines 38,191 38,565
Private placements and subordinate issues 25,044 24,922
_________________________
Total mortgage-backed securities $2,759,103 $2,778,448
=========================
</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 is 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. At December 31, 1997,
unamortized premium on mortgage-backed securities totaled $28,346,000 and
unaccrued discounts on mortgage-backed securities totaled $27,485,000.
OTHER INVESTMENT INFORMATION
INVESTMENT VALUATION ANALYSIS: The Company analyzes its investment portfolio
at least quarterly in order to determine if the carrying value of any 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.
At December 31, 1997, two mortgage loans with a total carrying value of
$649,000 were delinquent by 90 days or more. During the first quarter of
1997, the value of a mortgage loan with a book value of $4,021,000 was
determined to be impaired other than temporary. At that time, a valuation
allowance was established to reduce the carrying value of this mortgage loan
to its estimated fair value, resulting in a charge to investment income of
$245,000. The Company foreclosed on the property in June 1997 and based upon
an appraisal, recorded a permanent write-down on the real estate investment
of $430,000 resulting in a charge to realized losses. During the second
quarter of 1997, the Company foreclosed on a mortgage loan with a book value
of $3,892,000. At this time the Company does not believe any permanent
impairment exists on this property. At December 31, 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.
The carrying value of investments which have been non-income producing for
the year ending December 31, 1997 and 1996 totaled $750,000 and $239,000,
respectively, related to a real estate property.
INVESTMENTS ON DEPOSIT: At December 31, 1997, affidavits of deposits
covering bonds with a par value of $2,010,634,000 (1996 - $1,780,482,000),
mortgage loans with an unpaid principal balance of $505,419,000 (1996 -
$402,911,000) and policy loans with an unpaid balance of $165,161,000 (1996 -
$164,659,000) were on deposit with state agencies to meet regulatory
requirements. In addition, at December 31, 1997, pursuant to a reinsurance
agreement, the Company had investments with a carrying value of $36,228,000
(1996 - $56,314,000) and estimated market value of $37,395,000 (1996 -
$53,833,000) 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 (31% in 1997, 24% in
1996), basic industrials (24% in 1997, 26% in 1996), public utilities (15% in
1997, 19% in 1996) and consumer products (12% in 1997, 14% in 1996).
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 1997 and 1996. Mortgage loans on real estate have also been
analyzed by collateral type with significant concentrations identified in
industrial buildings (29% in 1997 and 1996), retail facilities (26% in 1997,
28% in 1996), office buildings, (26% in 1997, 22% in 1996) and multi-family
residential buildings (17% in 1997, 20% in 1996). Equity securities (which
represent 0.6% of the Company's investments) consist primarily of investments
in the Company's registered separate accounts and an investment of
$63,431,000 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, 1997.
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, caps
and swaptions, 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 caps and swaptions, all during the second quarter of 1996, with
notional amounts totaling $600,000,000 and $1,300,000,000, respectively, all
of which were outstanding at December 31, 1997. The Company paid
approximately $21,100,000 in premiums for these caps and swaptions in 1996.
The cost of this program has been incorporated into the Company's product
pricing. The caps and swaptions do not require any additional payments by
the Company.
The agreements for the caps and swaptions 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.
In January 1997, the Company introduced an equity-indexed annuity product
which provides a guaranteed base rate of return with a higher potential
return linked to the performance of a broad based equity index.
Concurrently, the Company implemented a hedging program to purchase S&P call
options. Call options are purchased to hedge potential increases in
policyholder account balances for equity-indexed annuity policies resulting
from increases in the index to which the product is linked. During 1997, the
Company paid approximately $17,400,000 in premiums for call options, which
mature beginning in 2002 through 2004. The cost of this program has been
incorporated into the Company's pricing of its equity-indexed annuity
product. The call options do not require any additional payments by the
Company.
The agreements for the call options entitle the Company to receive payments
from the counterparty if the S&P 500 Index exceeds the specified strike price
on the maturity date. The amount of such payments to be received by the
Company for the call options, if any, will be calculated by taking the excess
of the average closing price (as defined in the contract) at maturity over
the specified strike price and multiplying this excess by the number of S&P
500 units defined in the contract. 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, 1997:
<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>
ACCOUNTING TREATMENT: The Company has recorded amortization of the deferred
premiums related to the instruments of $704,000, $4,602,000 and $3,081,000
for the period October 25, 1997 through December 31, 1997, January 1, 1997
through October 24, 1997 and for the year ended December 31, 1996.
The Financial Accounting Standards Board ("FASB") is evaluating the
accounting and disclosure requirements for these instruments. 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.
Any unrealized gain or loss on the caps and swaptions is off-balance sheet
and therefore, is not reflected in the financial statements. The effect of
changes in the intrinsic value (which may vary from estimated market value)
of the call options and future policy benefits will be reflected in the
financial statements in the period of change.
The following table summarizes the amortized cost, gross unrealized gains and
losses and estimated fair value on these instruments as of December 31, 1997:
<TABLE>
<CAPTION>
POST-MERGER
__________________________________________________
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
December 31, 1997 Cost Gains Losses Value
______________________________________________________________________________
(Dollars in thousands)
<S> <C> <C> <C> <C>
Interest rate caps $847 -- ($345) $502
Cash settled put swaptions 3,040 -- (1,031) 2,009
S&P 500 call options 18,118 $2,315 (166) 20,267
__________________________________________________
Total $22,005 $2,315 ($1,542) $22,778
==================================================
</TABLE>
The differences between fair value and amortized cost for the instruments
reflect 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 non-performance will be limited to the unamortized premium
(remaining amortized cost) paid to purchase the instrument plus the recorded
intrinsic value, if any, for the call options because no additional payments
are required by the Company on these instruments after the initial premium.
Counterparty non-performance would result in an economic loss if interest
rates exceeded the specified fixed rate for the caps and swaptions, or for the
call options, the average closing price at maturity exceeded the specified
strike price. 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, if more than one quote is available, 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 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, 1997, the ratings
assigned by Standard & Poors' Rating Services by instrument with respect to
the net replacement value (fair value) of the Company's instruments were as
follows:
<TABLE>
<CAPTION>
POST-MERGER
_______________________________________________________
Net Replacement Value
_______________________________________________________
Interest Rate Cash Settled S&P 500
December 31, 1997 Caps Put Swaptions Call Options Total
______________________________________________________________________________
(Dollars in thousands)
<S> <C> <C> <C> <C>
Counterparties
credit quality:
AAA $321 $990 -- $1,311
AA+ to AA- 181 620 $14,108 14,909
A+ to A- -- 399 6,159 6,558
_______________________________________________________
Total $502 $2,009 $20,267 $22,778
=======================================================
</TABLE>
5. MERGER
TRANSACTION: On October 23, 1997, Equitable shareholders approved the Merger
Agreement dated as of July 7, 1997, among Equitable, PFHI and ING. On
October 24, 1997, PFHI, a Delaware corporation, acquired all of the
outstanding capital stock of Equitable pursuant to the Merger Agreement.
PFHI is a wholly owned subsidiary of ING, a global financial services holding
company based in The Netherlands. Equitable, an Iowa corporation, in turn,
owned all the outstanding capital stock of the Company and Golden American
Life Insurance Company ("Golden American") and their wholly owned subsidiaries.
Equitable also owned all the outstanding capital stock of Locust Street
Securities, Inc., Equitable Investment Services, Inc., Directed Services,
Inc., Equitable of Iowa Companies Capital Trust, Equitable of Iowa Companies
Capital Trust II and Equitable of Iowa Securities Network, Inc. In exchange
for the outstanding capital stock of Equitable, ING paid total consideration of
approximately $2.1 billion in cash and stock plus the assumption of
approximately $400 million in debt according to the Merger Agreement. As a
result of the merger, Equitable was merged into PFHI which was simultaneously
renamed Equitable of Iowa Companies, Inc. ("EIC" or "Parent"), a Delaware
corporation. All costs of the merger, including expenses to terminate certain
benefit plans, were paid by the Parent.
ACCOUNTING TREATMENT: The merger was accounted for as a purchase resulting
in a new basis of accounting, reflecting estimated fair values for assets and
liabilities at October 24, 1997. The purchase price was allocated to EIC and
its subsidiaries. Goodwill was established for the excess of the merger cost
over the fair value of the net assets and pushed down to EIC and its
subsidiaries including the Company. The merger cost is preliminary with
respect to estimated expenses and, as a result, the PVIF and related
amortization and deferred taxes may change. The allocation of the purchase
price to the Company was approximately $2,292,046,000. The amount of
goodwill allocated to the Company relating to the merger was $1,273,791,000
at the merger date and is being amortized over 40 years on a straight-line
basis. The carrying value of goodwill will be reviewed periodically for any
indication of impairment in value. The Company's DPAC and unearned revenue
as of the merger date were eliminated and an asset of $328,354,000
representing PVIF was established for all policies in force at the merger
date.
PRESENT VALUE OF IN FORCE ACQUIRED: As part of the merger, a portion of
the acquisition cost was allocated to the right to receive future cash
flows from insurance contracts existing with the Company at the date of
merger. This allocated cost represents the present value of in force
acquired reflecting the value of those purchased policies calculated by
discounting the actuarially determined expected future cash flow at the
discount rate determined by ING.
An analysis of the PVIF asset is as follows:
<TABLE>
<CAPTION>
POST-MERGER
______________________
For the period
October 25, 1997
through
December 31, 1997
______________________
(Dollars in thousands)
<S> <C>
Beginning balance $328,354
Imputed interest 3,000
Amortization (9,669)
Adjustment for unrealized gains
on available for sale securities (6,216)
______________________
Ending balance $315,469
======================
</TABLE>
Interest is imputed on the unamortized balance of PVIF at rates of 5.98% and
5.34% for the period October 25, 1997 through December 31, 1997. The
amortization of PVIF net of imputed interest is charged to expense. PVIF is
also adjusted for the unrealized gains (losses) on available for sale
securities; such changes are included directly in stockholder's equity.
Based on current conditions and assumptions as to future events on acquired
policies in force, the expected approximate net amortization for the next
five years, relating to the balance of PVIF as of December 31, 1997, is
$40,300,000 in 1998, $38,700,000 in 1999, $35,400,000 in 2000, $31,100,000 in
2001 and $26,700,000 in 2002. Actual amortization may vary based upon final
purchase price allocation and changes in assumptions and experience.
6. 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, investment
contracts and debt fall within the standards' definition of a financial
instrument. Fair values for the Company's insurance contracts other than
investment contracts are not required to be disclosed. In cases where quoted
market prices are not available, estimated fair values are based on estimates
using present value or other valuation techniques. These techniques are
significantly affected by the assumptions used, including the discount rate
and estimates of future cash flows. 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 composition and yield of its invested
assets, the duration and interest credited on insurance liabilities and
resulting interest spreads and timing of cash flows. 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 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 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>
POST-MERGER PRE-MERGER
___________________________________________________
December 31 1997 | 1996
_____________________________________________________| ________________________
(Dollars in thousands) Estimated | Estimated
Carrying Fair | Carrying Fair
Value Value | Value Value
_________________________| ________________________
<S> <C> <C> | <C> <C>
ASSETS |
Fixed maturities, |
available for sale $8,181,037 $8,181,037 | $7,456,401 $7,456,401
Equity securities of |
unaffiliated companies 63,712 63,712 | 77,148 77,148
Mortgage loans on real |
estate 2,087,057 2,111,410 | 1,689,088 1,708,464
Policy loans 191,375 191,375 | 185,853 185,853
Short-term investments 86,185 86,185 | 15,852 15,852
Cash and cash equivalents 35,383 35,383 | 11,741 11,741
Notes and other |
receivables 149,118 149,118 | 137,949 137,949
Separate account assets 1,142,251 1,142,251 | 450,632 450,632
Derivative financial |
instruments 22,005 22,778 | 18,041 14,080
|
LIABILITIES |
Annuity products 8,614,681 7,643,356 | 7,761,840 6,473,411
Note payable to parent 50,000 50,000 | -- --
Separate account |
liabilities 1,142,251 1,008,669 | 450,632 405,083
</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.
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 where applicable.
MORTGAGE LOANS ON REAL ESTATE: Fair values are estimated by discounting
expected cash flows, using interest rates currently being offered for similar
loans.
POLICY LOANS: Carrying values approximate the estimated fair value for
policy 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.
SEPARATE ACCOUNT ASSETS: Separate account assets are based upon the quoted
fair values of the individual securities in the separate account.
DERIVATIVE FINANCIAL INSTRUMENTS: The estimated fair values of the
instruments are the average of quotes, if more than one quote is available,
obtained from related and unrelated counterparties.
ANNUITY PRODUCTS: Estimated fair values of the Company's liabilities for
future policy benefits for annuity 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.
NOTE PAYABLE TO PARENT: Carrying value reported in the Company's historical
cost basis balance sheet approximates estimated fair value for this
instrument which is callable upon demand.
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
reflects the present value of future revenues from product charges or
surrender charges.
7. INCOME TAXES
Prior to October 25, 1997, the Company and all of its subsidiaries filed a
consolidated federal income tax return with Equitable. After October 24,
1997, the Company will file a consolidated federal income tax return with its
wholly owned life insurance subsidiaries. Under the Internal Revenue Code,
newly acquired insurance companies must file a separate return for five
years. Under these arrangements, each company reports current income tax
expense as allocated under the consolidated tax allocation agreement. Taxes
payable (receivable) under this agreement was $(2,991,000) and $3,417,000 at
December 31, 1997 and 1996, 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.
Income tax expenses (credits) are included in the consolidated financial
statements as follows:
<TABLE>
<CAPTION>
POST-MERGER PRE-MERGER
________________________________________________
For the | For the
period | period
October 25, | January 1,
1997 through| 1997 through Year ended
December 31,| October 24, December 31
1997 | 1997 1996 1995
____________| __________________________________
| (Dollars in thousands)
<S> <C> | <C> <C> <C>
Taxes provided in consolidated |
statements of income on: |
Income before equity |
income (loss): |
Current $9,162 | $35,637 $69,538 $46,168
Deferred 5,335 | 9,138 (52) 1,065
____________| __________________________________
14,497 | 44,775 69,486 47,233
Equity income (loss): |
Current (17)| 148 (99) (43)
Deferred 9 | 43 52 52
____________| __________________________________
(8)| 191 (47) 9
|
Taxes provided in consolidated |
statements of changes in |
stockholder's equity on |
unrealized gains and losses 29,238 | 41,392 (69,970) 113,503
____________| __________________________________
$43,727 | $86,358 ($531) $160,745
</TABLE> ================================================
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>
POST-MERGER PRE-MERGER
________________________________________________
For the | For the
period | period
October 25, | January 1,
1997 through| 1997 through Year ended
December 31,| October 24, December 31
1997 | 1997 1996 1995
____________| __________________________________
| (Dollars in thousands)
<S> <C> | <C> <C> <C>
Income before income taxes |
and equity income (loss) $30,393 | $145,143 $198,894 $134,726
============| ==================================
|
Income tax at federal |
statutory rate $10,638 | $50,800 $69,613 $47,154
Compensatory stock option and |
restricted stock expense -- | (14,347) -- --
Taxes provided for future |
contingency 2,000 | 5,000 -- --
Adjustment for prior years -- | 3,369 -- --
Goodwill amortization 1,857 | -- -- --
Tax effect (decrease) of |
other items 2 | (47) (127) 79
____________| __________________________________
Income tax expense $14,497 | $44,775 $69,486 $47,233
================================================
</TABLE>
The Internal Revenue Service ("IRS") has examined Equitable's consolidated
income tax returns through 1992. The 1993 consolidated income tax return was
not examined by the IRS. The 1994, 1995 and 1996 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 liabilities at December 31, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
POST-MERGER PRE-MERGER
_________________________
December 31 1997 | 1996
_________________________________________________________________| ___________
(Dollars in thousands) |
<S> <C> | <C>
Deferred tax assets: |
Future policy benefits $240,634 | $231,465
Accrued investment income 4,215 | 1,624
Accrued dividends 4,445 | 4,393
Guaranty fund assessment accruals 14,911 | 16,103
Deferred policy acquisition costs 28,956 | --
Other 17,649 | 8,530
____________| ___________
310,810 | 262,115
Deferred tax liabilities: |
Fixed maturity securities (118,149)| --
Net unrealized appreciation of available for |
sale fixed maturity securities (29,269)| (60,992)
Deferred policy acquisition costs -- | (221,889)
Prepaid pension costs (18,116)| (12,441)
Unamortized cost assigned to present value of |
in force acquired (112,590)| --
Equity securities (9,138)| --
Net unrealized appreciation of equity securites |
at fair value (2,227)| --
Mortgage loans (34,495)| --
Other (18,161)| (9,994)
____________| ___________
(342,145)| (305,316)
____________| ___________
Deferred income tax liability ($31,335)| ($43,201)
=========================
</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, 1997 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 in excess of $335,000,000, 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.
8. EMPLOYEE STOCK COMPENSATION PLANS
Certain key employees of the Company participated in stock incentive plans
sponsored by Equitable, which provided for the award of stock options or
shares of stock of Equitable through three means: qualified incentive stock
options (as defined in the Internal Revenue Code), non-qualified stock
options and restricted shares. As a result of the merger with ING, these
plans became fully vested, were terminated and fully settled as of the date
of the merger. The Parent incurred all costs of the final settlement of such
plans as of the merger date.
The incentive stock options were granted from 1983 to October 24, 1997 with
option prices ranging from $3.50 to $55.38, which represent the market value at
the date of grant. Options became exercisable over the five year period
following the date of grant. Prior to the merger, 60,258 options were exercised
under this plan with option prices ranging from $5.31 to $36.75 during 1997.
The non-qualified stock options were compensatory and required the accrual of
compensation expense over the period of service from the date the options
were granted until they became fully exercisable if market values exceeded
the option price on the measurement date. No expense was recognized in 1997
and 1996. During the year ended December 31, 1995 compensation income of
$4,000 was recognized related to these options.
The Company also awarded restricted common stock of Equitable to certain key
employees. These shares were subject to forfeiture to Equitable 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 vested over three to five
years from the date of grant. As a result of the merger, all unvested shares
became vested and were issued. The Company amortized 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
period January 1, 1997 through October 24, 1997 and for the years ended
December 31, 1996 and 1995 aggregated $2,002,000, $953,000 and $533,000,
respectively. As a result of the merger, the Parent reimbursed the Company
for the remaining unamortized restricted stock asset that vested at the
merger date.
The Company also participated in a discretionary stock award plan under which
employees and agents were awarded shares of Equitable's stock for superior
performance. During the period January 1, 1997 through October 24, 1997 and
for the years ended December 31, 1996 and 1995, awards of 700, 620 and 1,370
shares of stock resulted in charges to income of $41,200, $22,000 and
$42,000, respectively. This plan was also terminated as of the date of the
merger.
Prior to the merger, the Company sponsored a long-term incentive compensation
plan which allowed certain agents to earn units equal to shares of
Equitable's common stock based on personal production and the maintenance of
specific levels of assets under management. At December 31, 1996 the Company
held 112,000 shares of common stock of Equitable, with a market value of
$5,138,000 (cost - $618,000), to provide for projected distributions based on
current performance levels, under this plan. Due to the merger, the plan was
terminated and the Company did not hold any shares related to this plan at
December 31, 1997. This program resulted in expense of $3,014,000,
$1,195,000 and $736,000 in the years ended December 31, 1997, 1996 and 1995,
respectively.
9. 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.
The following table sets forth the plan's funded status and amounts
recognized in the Company's consolidated balance sheet:
<TABLE>
<CAPTION>
POST-MERGER PRE-MERGER
____________ ____________
December 31,| December 31,
1997 | 1996
____________| ____________
(Dollars in thousands)
<S> <C> | <C>
Accumulated benefit obligation, including vested |
benefits of $61,109 in 1997 and $56,470 in 1996 $62,037 | $57,401
============| ============
|
Plan assets at fair value, primarily bonds, common |
stocks (including 173,932 shares of the ING |
bearer receipts in 1997 and 400,000 of Equitable |
shares in 1996), mortgage loans and short-term |
investments $122,344 | $101,025
Projected benefit obligation for service rendered |
to date 69,563 | 64,454
____________| ____________
Plan assets in excess of projected benefit |
obligation 52,781 | 36,571
|
Unrecognized net gain from past experience |
different from that assumed and effects of changes |
in assumptions (1,001) | (899)
Prior service cost not yet recognized -- | 477
Unrecognized net liability at the transition |
date, net of amortization -- | 82
____________| ____________
Prepaid pension cost $51,780 | $36,231
=========================
</TABLE>
Net periodic pension benefit included the following components:
<TABLE>
<CAPTION>
POST-MERGER PRE-MERGER
________________________________________________
For the | For the
period | period
October 25, | January 1,
1997 through| 1997 through Year ended
December 31,| October 24, December 31
1997 | 1997 1996 1995
____________| __________________________________
| (Dollars in thousands)
<S> <C> | <C> <C> <C>
Actual return on plan assets $2,799 | $22,340 $11,801 $18,201
Service cost-benefits earned |
during the period (274)| (1,379) (1,402) (1,052)
Interest cost on projected |
benefit obligation (831)| (3,763) (4,233) (4,096)
Net amortization and deferral (1,001)| (15,942) (3,619) (9,979)
____________| __________________________________
Net periodic pension benefit $693 | $1,256 $2,547 $3,074
================================================
</TABLE>
The discount rate and rate of increase in future compensation levels used in
determining the actuarial present value of the projected benefit obligation
were 7.25% and 5.0%, respectively, at December 31, 1997. 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% at December 31, 1996. The average expected long-term rate of return on
plan assets was 9.0% in 1997 and 8.0% in 1996 and 1995.
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.
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>
POST-MERGER
_____________________________
December 31, 1997
_____________________________
Life
Medical Insurance
Plans Plans Total
_____________________________
(Dollars in thousands)
<S> <C> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $2,373 $1,708 $4,081
Fully eligible active plan participants 130 97 227
Other active plan participants 1,046 59 1,105
_____________________________
Accumulated postretirement benefit obligation
in excess of plan assets 3,549 1,864 5,413
Unrecognized net loss (91) -- (91)
_____________________________
Accrued postretirement benefit cost $3,458 $1,864 $5,322
=============================
</TABLE>
<TABLE>
<CAPTION>
PRE-MERGER
_____________________________
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>
Net periodic postretirement benefit costs include the following components:
<TABLE>
<CAPTION>
POST-MERGER
_________________________________
For the period October 25, 1997
through
December 31, 1997
_________________________________
Life
Medical Insurance
Plans Plans Total
_________________________________
(Dollars in thousands)
<S> <C> <C> <C>
Service cost $16 $1 $17
Interest cost 41 23 64
_________________________________
Net periodic postretirement benefit cost $57 $24 $81
=================================
</TABLE>
<TABLE>
<CAPTION>
PRE-MERGER
_________________________________
For the period January 1, 1997
through
October 24, 1997
_________________________________
Life
Medical Insurance
Plans Plans Total
_________________________________
(Dollars in thousands)
<S> <C> <C> <C>
Service cost $83 $8 $91
Interest cost 196 107 303
Net amortization of prior service cost (184) (11) (195)
_________________________________
Net periodic postretirement benefit cost $95 $104 $199
=================================
</TABLE>
<TABLE>
<CAPTION>
PRE-MERGER
_________________________________
For the year
ended
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>
<TABLE>
<CAPTION>
PRE-MERGER
_________________________________
For the year
ended
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>
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 10.8% at December 31, 1997 and 11.5% at December 31,
1996 for employees under 65 and 7.5% at December 31, 1997 and 8.0% at
December 31, 1996 for employees over 65, with the rates for both groups to be
graded down to 5.0% for 2008 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, 1997 by
$349,000 and net periodic postretirement benefit costs for the year ended
December 31, 1997 by $40,000. The discount rate used in determining the
accumulated postretirement benefit obligation was 7.25% at December 31, 1997
and 7.0% at December 31, 1996.
OTHER BENEFIT PLANS
The Company also sponsors an unfunded deferred compensation plan providing
benefits to certain former employees. The Company recognized benefits
(costs) of $(3,000), $27,000, $(10,000) and $20,000 for the periods October 25,
1997 through December 31, 1997, for January 1, 1997 through October 24, 1997
and for the years ended December 31, 1996 and 1995, respectively.
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 plan. 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 this plan during the periods October 25, 1997 through
December 31, 1997 and January 1, 1997 through October 24, 1997 and for the
years ended December 31, 1996 and 1995 were $66,000, $337,000, $372,000 and
$292,000, 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 periods October 25, 1997 through December 31, 1997 and January 1, 1997
through October 24, 1997 and for the years ended December 31, 1996 and 1995
amounted to $130,000, $1,059,000, $710,000 and $729,000, respectively.
Certain of the assets related to the plans discussed above are on deposit
with the Company and amounts relating to these plans are included in these
consolidated financial statements.
10. 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 December 31, 1997, life insurance
in force ceded on a consolidated basis amounted to $1,569,159,000, or
approximately 13.4% 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, 1997 and 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 $17,434,000 and $14,885,000, respectively, for reserve credits,
reinsurance claims and other receivables from these reinsurers. No allowance
for uncollectible amounts has been established since none of the receivables
are deemed to be uncollectible. The Company's liability for future policy
benefits and notes and other receivables has been increased by $15,919,000 at
December 31, 1997 ($14,265,000 in 1996) for reserve 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 $1,921,000, $5,685,000, $6,850,000
and $6,271,000 and insurance benefits have been reduced by $1,004,000,
$4,131,000, $5,916,000 and $8,281,000 for the periods October 25, 1997
through December 31, 1997 and January 1, 1997 through October 24, 1997 and
for the years ended December 31, 1996 and 1995, 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 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 information from the NOLGHA annual report. 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 $36,492,000 for the year ended December 31, 1995. At
December 31, 1997, the Company has an undiscounted reserve of $42,563,000 to
cover estimated future assessments (net of related anticipated premium tax
credits) and has established an asset totaling $16,761,000 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 premiums, and known insolvencies at this
time.
LITIGATION
USG, a wholly owned subsidiary of the Company, is a defendant in a class
action complaint filed in the state circuit court of Kentucky in September
1997. The suit claims unspecified damages in injunctive relief as a result
of alleged improper actions related to the interest rate adjustment
provisions of USG's fixed annuity contracts. The Company believes the
allegations are without merit. The original plaintiff putative class
representative has been joined by an additional named plaintiff who claims to
also be a class representative. The suit is in the early procedural stage.
The Company intends to defend the suit vigorously, including vigorously
contesting its class action status. The amount of any liability which may
arise as a result of this suit, if any, cannot be reasonably estimated and no
provision for loss has been made in the accompanying financial statements.
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 ("Florida action") and in the
Superior Court of the State of Arizona in and for Pima County ("Arizona
action"). These suits claim unspecified damages as a result of alleged
improper life insurance sales practices. The Company denies the allegations
in these class action lawsuits, but entered into a settlement to limit
additional expense and burden on its operations. The settlement has been
approved by the federal court in the Florida action and by the Arizona court
in the Arizona action.
In the second quarter of 1997, the Company established a reserve and accrued
a pre-tax expense of approximately $20.5 million for policy liabilities and
administrative and other costs anticipated with the settlement. At December
31, 1997, the reserve was $18.9 million. Owners of approximately 130,000
universal and whole life insurance policies issued by the Company from 1984
through 1996 may be eligible to receive the following benefits provided by
the settlement: 1) one time enhancement to the interest component of the
policy; 2) one time enhancement to the dividend component of the policy; 3)
optional premium loans that would allow policyholders to borrow at reduced
rates; 4) enhanced value deferred annuities to holders of affected policies;
5) enhanced value immediate annuities to affected policyholders; and 6)
enhanced value life policies to affected policyholders. In addition, the
proposed settlement provides Individual Claim-Review Relief (an arbitration-
type process) for policyholders who believe they may have been misled or
otherwise harmed in connection with their policies.
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. For the periods October 25, 1997
through December 31, 1997 and January 1, 1997 through October 24, 1997 and
for the years ended December 31, 1996 and 1995, rent expense totaled
$1,063,000, $3,015,000, $2,570,000 and $2,001,000, respectively. At
December 31, 1997, minimum rental payments due under all non-cancelable
operating leases with initial terms of one year or more are: 1998 -
$5,713,000; 1999 - $4,440,000; 2000 - $3,876,000; 2001 - $2,852,000; 2002 -
$2,645,000; and thereafter - $38,428,000.
At December 31, 1997, outstanding commitments to fund mortgage loans on real
estate and equity investments totaled $8,550,000 and $7,689,000, respectively.
YEAR 2000 (UNAUDITED): Based on a study of its computer software and
hardware, EIC, the Company's parent, has determined the Company's exposure to
the Year 2000 change of the century date issue. EIC has developed a plan to
modify its information technology to be ready for the Year 2000. Efforts
began in 1997 to modify its systems. This project is expected to be
substantially completed by the second quarter of 1999. The projected cost of
the Year 2000 project is approximately $4,000,000 to $6,000,000. For the
period October 25, 1997 through December 31, 1997 and January 1, 1997 through
October 24, 1997, the Company incurred costs of $275,000 and $752,000,
respectively, for the Year 2000 project. While additional testing will be
conducted on its systems through the Year 2000, the Company does not expect
this project to have a significant effect on operations.
To mitigate the effect of outside influences and other dependencies relative
to the Year 2000, the Company will be contacting significant customers,
suppliers and other third parties. To the extent these third parties would
be unable to transact business in the Year 2000 and thereafter, the Company's
operations could be adversely affected.
11. RELATED PARTY TRANSACTIONS
SERVICE AGREEMENTS: The Company purchases investment management services
from an affiliate. Payments for these services aggregated $4,236,000,
$19,783,000, $9,257,000 and $8,143,000 for the periods October 25, 1997
through December 31, 1997 and January 1, 1997 through October 24, 1997 and
for the years ended December 31, 1996 and 1995, respectively.
Golden American provides certain advisory, computer and other resources and
services to the Company. The Company incurred general expenses for these
services which totaled $1,338,000 and $2,992,000 for the periods October 25,
1997 through December 31, 1997 and January 1, 1997 through October 24, 1997,
respectively. No services were provided by Golden American in 1996.
The Company has a service agreement with Golden American and its subsidiary
in which the Company provides administrative and financial related services.
For the period October 25, 1997 through December 31, 1997 and January 1, 1997
through October 24, 1997, the Company had revenues of $13,000 and $16,000,
respectively, which reduced general expenses as a result of this agreement.
GUARANTY AGREEMENT: The Company has a guaranty agreement with Golden
American. In consideration of an annual fee, payable June 30, the Company
guarantees to Golden American that it will make funds available, if needed,
to Golden American to pay the contractual claims made under the provisions of
Golden American's life insurance and annuity contracts. The agreement is not,
and nothing contained therein or done pursuant thereto by the Company shall
be deemed to constitute, a direct or indirect guaranty by the Company of the
payment of any debt or other obligation, indebtedness or liability, of any
kind or character whatsoever, of Golden American. The agreement does not
guarantee the value of the underlying assets held in separate accounts in
which funds of variable life insurance and variable annuity policies have
been invested. The calculation of the annual fee is based on risk based
capital. As Golden American's risk based capital level was above required
amounts, no annual fee was paid in 1997.
LINE OF CREDIT: The Company maintained a line of credit agreement with
Equitable to facilitate the handling of unusual and/or unanticipated short-
term cash requirements. Under the agreement which expired on December 31,
1997, the Company could borrow up to $130,000,000. Interest on any
outstanding borrowings was charged at a rate of Equitable's monthly average
aggregate cost of short-term funds plus 1.00%. Under this agreement, the
Company incurred interest expense on the note totaling $150,000, $1,880,000
and $2,527,000 for the period January 1, 1997 through October 24, 1997 and
for the years ended December 31, 1996 and 1995, respectively. At December
31, 1997, no amounts were outstanding under the line of credit.
PROMISSORY NOTE: On April 15, 1997, the Company issued a promissory note in
the amount of $50,000,000 to Equitable. Interest is charged at an annual
rate of 8.75%. The Company incurred interest totaling $724,000 and $2,364,000
for the periods October 25, 1997 through December 31, 1997 and April 15, 1997
through October 24, 1997.
RECIPROCAL LOAN AGREEMENTS: The Company and USG (collectively "the
parties"), maintain reciprocal loan agreements with ING America Insurance
Holdings, Inc. ("ING America"), a Delaware corporation and affiliate of EIC,
to facilitate the handling of unusual and/or unanticipated short-term cash
requirements. Under this agreement, which became effective January 1, 1998
and expires December 31, 2007, for the Company (January 1, 1998 and December
31, 1998, respectively, for USG), the parties and ING America can borrow up
to $130,000,000 from one another. Interest on any of the parties' borrowings
is charged at the rate of ING America's cost of funds for the interest period
plus 0.15%. Interest on any ING America borrowings is charged at a rate based
on the prevailing interest rate of U.S. commercial paper available for purchase
with a similar arrangement.
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, 1997 Cost 1 Value Amount
_______________________________________________________________________________
<S> <C> <C> <C>
TYPE OF INVESTMENT
Fixed maturities, available for sale:
Bonds:
United States government and govern-
mental agencies and authorities $249,174 $250,259 $250,259
States, municipalities and
political subdivisions 16,095 16,113 16,113
Foreign governments 13,738 14,266 14,266
Public utilities 1,183,863 1,201,933 1,201,933
Investment grade corporate 3,290,428 3,333,507 3,333,507
Below investment grade corporate 802,539 805,035 805,035
Mortgage-backed securities 2,541,194 2,559,542 2,559,542
Redeemable preferred stocks 382 382 382
______________________________________
Total fixed maturities, available
for sale 8,097,413 8,181,037 8,181,037
Equity securities:
Common stocks:
Affiliates 4,159 3,982 3,982
Industrial, miscellaneous and
all other 57,172 63,712 63,712
______________________________________
Total equity securities 61,331 67,694 67,694
Mortgage loans on real estate 2,087,057 2,087,057
Real estate:
Investment properties 6,179 6,179
Acquired in satisfaction of debt 10,240 10,240
____________ ____________
Total real estate 16,419 16,419
Policy loans 191,375 191,375
Short-term investments 86,185 86,185
____________ ____________
Total investments $10,539,780 $10,629,767
============ ============
<FN>
Note 1: Cost is defined as original cost for stocks and other invested assets,
amortized cost for bonds and unpaid principal loans on real estate,
adjusted for amortization of premiums, accrual of discounts and cost
less allowances for depreciation for real estate.
</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>
POST-MERGER
_______________________________________________________________________________
Period October 25, 1997 through
December 31, 1997:
Life insurance $27,592 $9,880,778 $15,996 $11,720 $20,520
PRE-MERGER
_______________________________________________________________________________
Period January 1, 1997 through
October 24, 1997:
Life insurance N/A N/A N/A N/A 102,509
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
</TABLE>
Equitable Life Insurance Company of Iowa
SCHEDULE III
SUPPLEMENTARY INSURANCE INFORMATION
(Continued)
(Dollars in thousands)
<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 sition ting Premiums
Segment Income Expenses Costs Expenses Written
_______________________________________________________________________________
<S> <C> <C> <C> <C> <C>
POST-MERGER
_______________________________________________________________________________
Period October 25, 1997 through
December 31, 1997:
Life insurance $120,466 $95,359 $1,823 $16,860 --
PRE-MERGER
_______________________________________________________________________________
Period January 1, 1997 through
October 24, 1997:
Life insurance 624,122 455,794 81,119 61,267 --
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 --
</TABLE>
Equitable Life Insurance Company of Iowa
SCHEDULE IV
REINSURANCE
(Dollars in thousands)
<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, 1997:
Life insurance in
force $11,684,447 $1,569,159 -- $10,115,288 --
==========================================================
Period October 25, 1997
through December 31, 1997:
Insurance premiums
and charges 22,432 1,921 $9 20,520 --
==========================================================
Period January 1, 1997
through October 24, 1997:
Insurance premiums
and charges 108,142 5,685 52 102,509 --
==========================================================
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 --
==========================================================
</TABLE>
Financial Statements
Equitable Life Insurance Company of Iowa
Separate Account A
Years ended December 31, 1997 and 1996
with Report of Independent Auditors
Equitable Life Insurance Company of Iowa
Separate Account A
Financial Statements
Years ended December 31, 1997 and 1996
CONTENTS
Report of Independent Auditors
Audited Financial Statements
Statement of Net Assets
Statement 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 statement of net assets of Equitable Life
Insurance Company of Iowa Separate Account A as of December 31, 1997, and the
related statements of operations for the year then ended and the changes in net
assets for each of the two years in the period then ended. 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,
1997, 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 Separate Account A at December
31, 1997, and the results of its operations for the year then ended and the
changes in its net assets for each of the two years in the period then ended
in conformity with generally accepted accounting principles.
/S/ Ernst & Young LLP
Des Moines, Iowa
February 12, 1998
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENT OF NET ASSETS
December 31, 1997
<TABLE>
<CAPTION>
Advantage
Account
____________
<S> <C>
ASSETS
Investments at net asset value:
Equi-Select Series Trust:
Advantage Portfolio,
1,694,430 shares (cost - $18,108,961) $17,828,042
International Fixed Income Portfolio,
1,144,498 shares (cost - $12,724,228)
Money Market Portfolio,
35,584,814 shares (cost - $35,584,814)
Mortgage-Backed Securities Portfolio,
1,617,870 shares (cost - $17,616,297)
OTC Portfolio,
5,648,116 shares (cost - $83,367,263)
Research Portfolio,
11,398,759 shares (cost - $184,647,089)
Total Return Portfolio,
9,691,999 shares (cost - $131,573,390)
Growth & Income Portfolio,
6,070,023 shares (cost - $80,996,144)
Value + Growth Portfolio,
4,265,584 shares (cost - $55,051,249)
Warburg Pincus Trust:
International Equity Portfolio,
3,690,504 shares (cost - $43,663,623)
The GCG Trust:
Fully Managed Series,
537,580 shares (cost - $8,575,226)
Rising Dividends Series,
1,565,605 shares (cost - $29,772,355)
Small Cap Series,
860,484 shares (cost - $10,749,103)
Travelers Series Fund, Inc.:
Smith Barney Income and Growth Portfolio,
3,923,947 shares (cost - $63,259,789)
Smith Barney International Equity Portfolio,
1,827,368 shares (cost - $22,969,530)
Smith Barney High Income Portfolio,
1,571,999 shares (cost - $19,290,483)
Smith Barney Money Market Portfolio,
12,538,824 shares (cost - $12,538,824)
Greenwich Street Series Fund:
Appreciation Portfolio,
1,629,501 shares (cost - $29,402,696)
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENT OF NET ASSETS
December 31, 1997
(Continued)
<TABLE>
<CAPTION>
Advantage
Account
____________
<S> <C>
ASSETS
Investments at net asset value:
Smith Barney Concert Allocation Series, Inc.:
Select High Growth Portfolio,
1,842,669 shares (cost - $20,177,874)
Select Growth Portfolio,
2,732,523 shares (cost - $29,674,589)
Select Balanced Portfolio,
2,634,510 shares (cost - $28,388,533)
Select Conservative Portfolio,
662,723 shares (cost - $7,183,159)
Select Income Portfolio,
247,661 shares (cost - $2,665,691)
____________
TOTAL NET ASSETS (cost - $947,980,910) $17,828,042
============
NET ASSETS REPRESENTED BY:
Units 1,505,743
Unit Value 11.84
____________
Net Assets $17,828,042
============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENT OF NET ASSETS
December 31, 1997
(Continued)
<TABLE>
<CAPTION>
Inter-
national
Fixed
Income
Account
____________
<S> <C>
ASSETS
Investments at net asset value:
Equi-Select Series Trust:
Advantage Portfolio,
1,694,430 shares (cost - $18,108,961)
International Fixed Income Portfolio,
1,144,498 shares (cost - $12,724,228) $11,904,652
Money Market Portfolio,
35,584,814 shares (cost - $35,584,814)
Mortgage-Backed Securities Portfolio,
1,617,870 shares (cost - $17,616,297)
OTC Portfolio,
5,648,116 shares (cost - $83,367,263)
Research Portfolio,
11,398,759 shares (cost - $184,647,089)
Total Return Portfolio,
9,691,999 shares (cost - $131,573,390)
Growth & Income Portfolio,
6,070,023 shares (cost - $80,996,144)
Value + Growth Portfolio,
4,265,584 shares (cost - $55,051,249)
Warburg Pincus Trust:
International Equity Portfolio,
3,690,504 shares (cost - $43,663,623)
The GCG Trust:
Fully Managed Series,
537,580 shares (cost - $8,575,226)
Rising Dividends Series,
1,565,605 shares (cost - $29,772,355)
Small Cap Series,
860,484 shares (cost - $10,749,103)
Travelers Series Fund, Inc.:
Smith Barney Income and Growth Portfolio,
3,923,947 shares (cost - $63,259,789)
Smith Barney International Equity Portfolio,
1,827,368 shares (cost - $22,969,530)
Smith Barney High Income Portfolio,
1,571,999 shares (cost - $19,290,483)
Smith Barney Money Market Portfolio,
12,538,824 shares (cost - $12,538,824)
Greenwich Street Series Fund:
Appreciation Portfolio,
1,629,501 shares (cost - $29,402,696)
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENT OF NET ASSETS
December 31, 1997
(Continued)
<TABLE>
<CAPTION>
Inter-
national
Fixed
Income
Account
____________
<S> <C>
ASSETS
Investments at net asset value:
Smith Barney Concert Allocation Series, Inc.:
Select High Growth Portfolio,
1,842,669 shares (cost - $20,177,874)
Select Growth Portfolio,
2,732,523 shares (cost - $29,674,589)
Select Balanced Portfolio,
2,634,510 shares (cost - $28,388,533)
Select Conservative Portfolio,
662,723 shares (cost - $7,183,159)
Select Income Portfolio,
247,661 shares (cost - $2,665,691)
____________
TOTAL NET ASSETS (cost - $947,980,910) $11,904,652
============
NET ASSETS REPRESENTED BY:
Units 1,003,152
Unit Value 11.87
____________
Net Assets $11,904,652
============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENT OF NET ASSETS
December 31, 1997
(Continued)
<TABLE>
<CAPTION>
Money
Market
Account
____________
<S> <C>
ASSETS
Investments at net asset value:
Equi-Select Series Trust:
Advantage Portfolio,
1,694,430 shares (cost - $18,108,961)
International Fixed Income Portfolio,
1,144,498 shares (cost - $12,724,228)
Money Market Portfolio,
35,584,814 shares (cost - $35,584,814) $35,584,814
Mortgage-Backed Securities Portfolio,
1,617,870 shares (cost - $17,616,297)
OTC Portfolio,
5,648,116 shares (cost - $83,367,263)
Research Portfolio,
11,398,759 shares (cost - $184,647,089)
Total Return Portfolio,
9,691,999 shares (cost - $131,573,390)
Growth & Income Portfolio,
6,070,023 shares (cost - $80,996,144)
Value + Growth Portfolio,
4,265,584 shares (cost - $55,051,249)
Warburg Pincus Trust:
International Equity Portfolio,
3,690,504 shares (cost - $43,663,623)
The GCG Trust:
Fully Managed Series,
537,580 shares (cost - $8,575,226)
Rising Dividends Series,
1,565,605 shares (cost - $29,772,355)
Small Cap Series,
860,484 shares (cost - $10,749,103)
Travelers Series Fund, Inc.:
Smith Barney Income and Growth Portfolio,
3,923,947 shares (cost - $63,259,789)
Smith Barney International Equity Portfolio,
1,827,368 shares (cost - $22,969,530)
Smith Barney High Income Portfolio,
1,571,999 shares (cost - $19,290,483)
Smith Barney Money Market Portfolio,
12,538,824 shares (cost - $12,538,824)
Greenwich Street Series Fund:
Appreciation Portfolio,
1,629,501 shares (cost - $29,402,696)
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENT OF NET ASSETS
December 31, 1997
(Continued)
<TABLE>
<CAPTION>
Money
Market
Account
____________
<S> <C>
ASSETS
Investments at net asset value:
Smith Barney Concert Allocation Series, Inc.:
Select High Growth Portfolio,
1,842,669 shares (cost - $20,177,874)
Select Growth Portfolio,
2,732,523 shares (cost - $29,674,589)
Select Balanced Portfolio,
2,634,510 shares (cost - $28,388,533)
Select Conservative Portfolio,
662,723 shares (cost - $7,183,159)
Select Income Portfolio,
247,661 shares (cost - $2,665,691)
____________
TOTAL NET ASSETS (cost - $947,980,910) $35,584,814
============
NET ASSETS REPRESENTED BY:
Units 3,178,723
Unit Value 11.19
____________
Net Assets $35,584,814
============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENT OF NET ASSETS
December 31, 1997
(Continued)
<TABLE>
<CAPTION>
Mortgage-
Backed
Securities
Account
____________
<S> <C>
ASSETS
Investments at net asset value:
Equi-Select Series Trust:
Advantage Portfolio,
1,694,430 shares (cost - $18,108,961)
International Fixed Income Portfolio,
1,144,498 shares (cost - $12,724,228)
Money Market Portfolio,
35,584,814 shares (cost - $35,584,814)
Mortgage-Backed Securities Portfolio,
1,617,870 shares (cost - $17,616,297) $17,673,788
OTC Portfolio,
5,648,116 shares (cost - $83,367,263)
Research Portfolio,
11,398,759 shares (cost - $184,647,089)
Total Return Portfolio,
9,691,999 shares (cost - $131,573,390)
Growth & Income Portfolio,
6,070,023 shares (cost - $80,996,144)
Value + Growth Portfolio,
4,265,584 shares (cost - $55,051,249)
Warburg Pincus Trust:
International Equity Portfolio,
3,690,504 shares (cost - $43,663,623)
The GCG Trust:
Fully Managed Series,
537,580 shares (cost - $8,575,226)
Rising Dividends Series,
1,565,605 shares (cost - $29,772,355)
Small Cap Series,
860,484 shares (cost - $10,749,103)
Travelers Series Fund, Inc.:
Smith Barney Income and Growth Portfolio,
3,923,947 shares (cost - $63,259,789)
Smith Barney International Equity Portfolio,
1,827,368 shares (cost - $22,969,530)
Smith Barney High Income Portfolio,
1,571,999 shares (cost - $19,290,483)
Smith Barney Money Market Portfolio,
12,538,824 shares (cost - $12,538,824)
Greenwich Street Series Fund:
Appreciation Portfolio,
1,629,501 shares (cost - $29,402,696)
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENT OF NET ASSETS
December 31, 1997
(Continued)
<TABLE>
<CAPTION>
Mortgage-
Backed
Securities
Account
____________
<S> <C>
ASSETS
Investments at net asset value:
Smith Barney Concert Allocation Series, Inc.:
Select High Growth Portfolio,
1,842,669 shares (cost - $20,177,874)
Select Growth Portfolio,
2,732,523 shares (cost - $29,674,589)
Select Balanced Portfolio,
2,634,510 shares (cost - $28,388,533)
Select Conservative Portfolio,
662,723 shares (cost - $7,183,159)
Select Income Portfolio,
247,661 shares (cost - $2,665,691)
____________
TOTAL NET ASSETS (cost - $947,980,910) $17,673,788
============
NET ASSETS REPRESENTED BY:
Units 1,427,178
Unit Value 12.38
____________
Net Assets $17,673,788
============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENT OF NET ASSETS
December 31, 1997
(Continued)
<TABLE>
<CAPTION>
OTC
Account
____________
<S> <C>
ASSETS
Investments at net asset value:
Equi-Select Series Trust:
Advantage Portfolio,
1,694,430 shares (cost - $18,108,961)
International Fixed Income Portfolio,
1,144,498 shares (cost - $12,724,228)
Money Market Portfolio,
35,584,814 shares (cost - $35,584,814)
Mortgage-Backed Securities Portfolio,
1,617,870 shares (cost - $17,616,297)
OTC Portfolio,
5,648,116 shares (cost - $83,367,263) $89,356,864
Research Portfolio,
11,398,759 shares (cost - $184,647,089)
Total Return Portfolio,
9,691,999 shares (cost - $131,573,390)
Growth & Income Portfolio,
6,070,023 shares (cost - $80,996,144)
Value + Growth Portfolio,
4,265,584 shares (cost - $55,051,249)
Warburg Pincus Trust:
International Equity Portfolio,
3,690,504 shares (cost - $43,663,623)
The GCG Trust:
Fully Managed Series,
537,580 shares (cost - $8,575,226)
Rising Dividends Series,
1,565,605 shares (cost - $29,772,355)
Small Cap Series,
860,484 shares (cost - $10,749,103)
Travelers Series Fund, Inc.:
Smith Barney Income and Growth Portfolio,
3,923,947 shares (cost - $63,259,789)
Smith Barney International Equity Portfolio,
1,827,368 shares (cost - $22,969,530)
Smith Barney High Income Portfolio,
1,571,999 shares (cost - $19,290,483)
Smith Barney Money Market Portfolio,
12,538,824 shares (cost - $12,538,824)
Greenwich Street Series Fund:
Appreciation Portfolio,
1,629,501 shares (cost - $29,402,696)
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENT OF NET ASSETS
December 31, 1997
(Continued)
<TABLE>
<CAPTION>
OTC
Account
____________
<S> <C>
ASSETS
Investments at net asset value:
Smith Barney Concert Allocation Series, Inc.:
Select High Growth Portfolio,
1,842,669 shares (cost - $20,177,874)
Select Growth Portfolio,
2,732,523 shares (cost - $29,674,589)
Select Balanced Portfolio,
2,634,510 shares (cost - $28,388,533)
Select Conservative Portfolio,
662,723 shares (cost - $7,183,159)
Select Income Portfolio,
247,661 shares (cost - $2,665,691)
____________
TOTAL NET ASSETS (cost - $947,980,910) $89,356,864
============
NET ASSETS REPRESENTED BY:
Units 4,824,991
Unit Value 18.52
____________
Net Assets $89,356,864
============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENT OF NET ASSETS
December 31, 1997
(Continued)
<TABLE>
<CAPTION>
Research
Account
______________
<S> <C>
ASSETS
Investments at net asset value:
Equi-Select Series Trust:
Advantage Portfolio,
1,694,430 shares (cost - $18,108,961)
International Fixed Income Portfolio,
1,144,498 shares (cost - $12,724,228)
Money Market Portfolio,
35,584,814 shares (cost - $35,584,814)
Mortgage-Backed Securities Portfolio,
1,617,870 shares (cost - $17,616,297)
OTC Portfolio,
5,648,116 shares (cost - $83,367,263)
Research Portfolio,
11,398,759 shares (cost - $184,647,089) $204,520,177
Total Return Portfolio,
9,691,999 shares (cost - $131,573,390)
Growth & Income Portfolio,
6,070,023 shares (cost - $80,996,144)
Value + Growth Portfolio,
4,265,584 shares (cost - $55,051,249)
Warburg Pincus Trust:
International Equity Portfolio,
3,690,504 shares (cost - $43,663,623)
The GCG Trust:
Fully Managed Series,
537,580 shares (cost - $8,575,226)
Rising Dividends Series,
1,565,605 shares (cost - $29,772,355)
Small Cap Series,
860,484 shares (cost - $10,749,103)
Travelers Series Fund, Inc.:
Smith Barney Income and Growth Portfolio,
3,923,947 shares (cost - $63,259,789)
Smith Barney International Equity Portfolio,
1,827,368 shares (cost - $22,969,530)
Smith Barney High Income Portfolio,
1,571,999 shares (cost - $19,290,483)
Smith Barney Money Market Portfolio,
12,538,824 shares (cost - $12,538,824)
Greenwich Street Series Fund:
Appreciation Portfolio,
1,629,501 shares (cost - $29,402,696)
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENT OF NET ASSETS
December 31, 1997
(Continued)
<TABLE>
<CAPTION>
Research
Account
______________
<S> <C>
ASSETS
Investments at net asset value:
Smith Barney Concert Allocation Series, Inc.:
Select High Growth Portfolio,
1,842,669 shares (cost - $20,177,874)
Select Growth Portfolio,
2,732,523 shares (cost - $29,674,589)
Select Balanced Portfolio,
2,634,510 shares (cost - $28,388,533)
Select Conservative Portfolio,
662,723 shares (cost - $7,183,159)
Select Income Portfolio,
247,661 shares (cost - $2,665,691)
______________
TOTAL NET ASSETS (cost - $947,980,910) $204,520,177
==============
NET ASSETS REPRESENTED BY:
Units 10,840,733
Unit Value 18.87
______________
Net Assets $204,520,177
==============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENT OF NET ASSETS
December 31, 1997
(Continued)
<TABLE>
<CAPTION>
Total
Return
Account
_____________
<S> <C>
ASSETS
Investments at net asset value:
Equi-Select Series Trust:
Advantage Portfolio,
1,694,430 shares (cost - $18,108,961)
International Fixed Income Portfolio,
1,144,498 shares (cost - $12,724,228)
Money Market Portfolio,
35,584,814 shares (cost - $35,584,814)
Mortgage-Backed Securities Portfolio,
1,617,870 shares (cost - $17,616,297)
OTC Portfolio,
5,648,116 shares (cost - $83,367,263)
Research Portfolio,
11,398,759 shares (cost - $184,647,089)
Total Return Portfolio,
9,691,999 shares (cost - $131,573,390) $148,851,655
Growth & Income Portfolio,
6,070,023 shares (cost - $80,996,144)
Value + Growth Portfolio,
4,265,584 shares (cost - $55,051,249)
Warburg Pincus Trust:
International Equity Portfolio,
3,690,504 shares (cost - $43,663,623)
The GCG Trust:
Fully Managed Series,
537,580 shares (cost - $8,575,226)
Rising Dividends Series,
1,565,605 shares (cost - $29,772,355)
Small Cap Series,
860,484 shares (cost - $10,749,103)
Travelers Series Fund, Inc.:
Smith Barney Income and Growth Portfolio,
3,923,947 shares (cost - $63,259,789)
Smith Barney International Equity Portfolio,
1,827,368 shares (cost - $22,969,530)
Smith Barney High Income Portfolio,
1,571,999 shares (cost - $19,290,483)
Smith Barney Money Market Portfolio,
12,538,824 shares (cost - $12,538,824)
Greenwich Street Series Fund:
Appreciation Portfolio,
1,629,501 shares (cost - $29,402,696)
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENT OF NET ASSETS
December 31, 1997
(Continued)
<TABLE>
<CAPTION>
Total
Return
Account
_____________
<S> <C>
ASSETS
Investments at net asset value:
Smith Barney Concert Allocation Series, Inc.:
Select High Growth Portfolio,
1,842,669 shares (cost - $20,177,874)
Select Growth Portfolio,
2,732,523 shares (cost - $29,674,589)
Select Balanced Portfolio,
2,634,510 shares (cost - $28,388,533)
Select Conservative Portfolio,
662,723 shares (cost - $7,183,159)
Select Income Portfolio,
247,661 shares (cost - $2,665,691)
_____________
TOTAL NET ASSETS (cost - $947,980,910) $148,851,655
=============
NET ASSETS REPRESENTED BY:
Units 9,244,077
Unit Value 16.10
_____________
Net Assets $148,851,655
=============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENT OF NET ASSETS
December 31, 1997
(Continued)
<TABLE>
<CAPTION>
Growth &
Income
Account
____________
<S> <C>
ASSETS
Investments at net asset value:
Equi-Select Series Trust:
Advantage Portfolio,
1,694,430 shares (cost - $18,108,961)
International Fixed Income Portfolio,
1,144,498 shares (cost - $12,724,228)
Money Market Portfolio,
35,584,814 shares (cost - $35,584,814)
Mortgage-Backed Securities Portfolio,
1,617,870 shares (cost - $17,616,297)
OTC Portfolio,
5,648,116 shares (cost - $83,367,263)
Research Portfolio,
11,398,759 shares (cost - $184,647,089)
Total Return Portfolio,
9,691,999 shares (cost - $131,573,390)
Growth & Income Portfolio,
6,070,023 shares (cost - $80,996,144) $87,808,343
Value + Growth Portfolio,
4,265,584 shares (cost - $55,051,249)
Warburg Pincus Trust:
International Equity Portfolio,
3,690,504 shares (cost - $43,663,623)
The GCG Trust:
Fully Managed Series,
537,580 shares (cost - $8,575,226)
Rising Dividends Series,
1,565,605 shares (cost - $29,772,355)
Small Cap Series,
860,484 shares (cost - $10,749,103)
Travelers Series Fund, Inc.:
Smith Barney Income and Growth Portfolio,
3,923,947 shares (cost - $63,259,789)
Smith Barney International Equity Portfolio,
1,827,368 shares (cost - $22,969,530)
Smith Barney High Income Portfolio,
1,571,999 shares (cost - $19,290,483)
Smith Barney Money Market Portfolio,
12,538,824 shares (cost - $12,538,824)
Greenwich Street Series Fund:
Appreciation Portfolio,
1,629,501 shares (cost - $29,402,696)
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENT OF NET ASSETS
December 31, 1997
(Continued)
<TABLE>
<CAPTION>
Growth &
Income
Account
____________
<S> <C>
ASSETS
Investments at net asset value:
Smith Barney Concert Allocation Series, Inc.:
Select High Growth Portfolio,
1,842,669 shares (cost - $20,177,874)
Select Growth Portfolio,
2,732,523 shares (cost - $29,674,589)
Select Balanced Portfolio,
2,634,510 shares (cost - $28,388,533)
Select Conservative Portfolio,
662,723 shares (cost - $7,183,159)
Select Income Portfolio,
247,661 shares (cost - $2,665,691)
____________
TOTAL NET ASSETS (cost - $947,980,910) $87,808,343
============
NET ASSETS REPRESENTED BY:
Units 5,699,245
Unit Value 15.41
____________
Net Assets $87,808,343
============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENT OF NET ASSETS
December 31, 1997
(Continued)
<TABLE>
<CAPTION>
Value +
Growth
Account
____________
<S> <C>
ASSETS
Investments at net asset value:
Equi-Select Series Trust:
Advantage Portfolio,
1,694,430 shares (cost - $18,108,961)
International Fixed Income Portfolio,
1,144,498 shares (cost - $12,724,228)
Money Market Portfolio,
35,584,814 shares (cost - $35,584,814)
Mortgage-Backed Securities Portfolio,
1,617,870 shares (cost - $17,616,297)
OTC Portfolio,
5,648,116 shares (cost - $83,367,263)
Research Portfolio,
11,398,759 shares (cost - $184,647,089)
Total Return Portfolio,
9,691,999 shares (cost - $131,573,390)
Growth & Income Portfolio,
6,070,023 shares (cost - $80,996,144)
Value + Growth Portfolio,
4,265,584 shares (cost - $55,051,249) $56,373,954
Warburg Pincus Trust:
International Equity Portfolio,
3,690,504 shares (cost - $43,663,623)
The GCG Trust:
Fully Managed Series,
537,580 shares (cost - $8,575,226)
Rising Dividends Series,
1,565,605 shares (cost - $29,772,355)
Small Cap Series,
860,484 shares (cost - $10,749,103)
Travelers Series Fund, Inc.:
Smith Barney Income and Growth Portfolio,
3,923,947 shares (cost - $63,259,789)
Smith Barney International Equity Portfolio,
1,827,368 shares (cost - $22,969,530)
Smith Barney High Income Portfolio,
1,571,999 shares (cost - $19,290,483)
Smith Barney Money Market Portfolio,
12,538,824 shares (cost - $12,538,824)
Greenwich Street Series Fund:
Appreciation Portfolio,
1,629,501 shares (cost - $29,402,696)
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENT OF NET ASSETS
December 31, 1997
(Continued)
<TABLE>
<CAPTION>
Value +
Growth
Account
____________
<S> <C>
ASSETS
Investments at net asset value:
Smith Barney Concert Allocation Series, Inc.:
Select High Growth Portfolio,
1,842,669 shares (cost - $20,177,874)
Select Growth Portfolio,
2,732,523 shares (cost - $29,674,589)
Select Balanced Portfolio,
2,634,510 shares (cost - $28,388,533)
Select Conservative Portfolio,
662,723 shares (cost - $7,183,159)
Select Income Portfolio,
247,661 shares (cost - $2,665,691)
____________
TOTAL NET ASSETS (cost - $947,980,910) $56,373,954
============
NET ASSETS REPRESENTED BY:
Units 4,326,368
Unit Value 13.03
____________
Net Assets $56,373,954
============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENT OF NET ASSETS
December 31, 1997
(Continued)
<TABLE>
<CAPTION>
Inter-
national
Equity
Account
____________
<S> <C>
ASSETS
Investments at net asset value:
Equi-Select Series Trust:
Advantage Portfolio,
1,694,430 shares (cost - $18,108,961)
International Fixed Income Portfolio,
1,144,498 shares (cost - $12,724,228)
Money Market Portfolio,
35,584,814 shares (cost - $35,584,814)
Mortgage-Backed Securities Portfolio,
1,617,870 shares (cost - $17,616,297)
OTC Portfolio,
5,648,116 shares (cost - $83,367,263)
Research Portfolio,
11,398,759 shares (cost - $184,647,089)
Total Return Portfolio,
9,691,999 shares (cost - $131,573,390)
Growth & Income Portfolio,
6,070,023 shares (cost - $80,996,144)
Value + Growth Portfolio,
4,265,584 shares (cost - $55,051,249)
Warburg Pincus Trust:
International Equity Portfolio,
3,690,504 shares (cost - $43,663,623) $38,713,392
The GCG Trust:
Fully Managed Series,
537,580 shares (cost - $8,575,226)
Rising Dividends Series,
1,565,605 shares (cost - $29,772,355)
Small Cap Series,
860,484 shares (cost - $10,749,103)
Travelers Series Fund, Inc.:
Smith Barney Income and Growth Portfolio,
3,923,947 shares (cost - $63,259,789)
Smith Barney International Equity Portfolio,
1,827,368 shares (cost - $22,969,530)
Smith Barney High Income Portfolio,
1,571,999 shares (cost - $19,290,483)
Smith Barney Money Market Portfolio,
12,538,824 shares (cost - $12,538,824)
Greenwich Street Series Fund:
Appreciation Portfolio,
1,629,501 shares (cost - $29,402,696)
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENT OF NET ASSETS
December 31, 1997
(Continued)
<TABLE>
<CAPTION>
Inter-
national
Equity
Account
____________
<S> <C>
ASSETS
Investments at net asset value:
Smith Barney Concert Allocation Series, Inc.:
Select High Growth Portfolio,
1,842,669 shares (cost - $20,177,874)
Select Growth Portfolio,
2,732,523 shares (cost - $29,674,589)
Select Balanced Portfolio,
2,634,510 shares (cost - $28,388,533)
Select Conservative Portfolio,
662,723 shares (cost - $7,183,159)
Select Income Portfolio,
247,661 shares (cost - $2,665,691)
____________
TOTAL NET ASSETS (cost - $947,980,910) $38,713,392
============
NET ASSETS REPRESENTED BY:
Units 3,908,832
Unit Value 9.90
____________
Net Assets $38,713,392
============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENT OF NET ASSETS
December 31, 1997
(Continued)
<TABLE>
<CAPTION>
Fully
Managed
Account
___________
<S> <C>
ASSETS
Investments at net asset value:
Equi-Select Series Trust:
Advantage Portfolio,
1,694,430 shares (cost - $18,108,961)
International Fixed Income Portfolio,
1,144,498 shares (cost - $12,724,228)
Money Market Portfolio,
35,584,814 shares (cost - $35,584,814)
Mortgage-Backed Securities Portfolio,
1,617,870 shares (cost - $17,616,297)
OTC Portfolio,
5,648,116 shares (cost - $83,367,263)
Research Portfolio,
11,398,759 shares (cost - $184,647,089)
Total Return Portfolio,
9,691,999 shares (cost - $131,573,390)
Growth & Income Portfolio,
6,070,023 shares (cost - $80,996,144)
Value + Growth Portfolio,
4,265,584 shares (cost - $55,051,249)
Warburg Pincus Trust:
International Equity Portfolio,
3,690,504 shares (cost - $43,663,623)
The GCG Trust:
Fully Managed Series,
537,580 shares (cost - $8,575,226) $8,456,130
Rising Dividends Series,
1,565,605 shares (cost - $29,772,355)
Small Cap Series,
860,484 shares (cost - $10,749,103)
Travelers Series Fund, Inc.:
Smith Barney Income and Growth Portfolio,
3,923,947 shares (cost - $63,259,789)
Smith Barney International Equity Portfolio,
1,827,368 shares (cost - $22,969,530)
Smith Barney High Income Portfolio,
1,571,999 shares (cost - $19,290,483)
Smith Barney Money Market Portfolio,
12,538,824 shares (cost - $12,538,824)
Greenwich Street Series Fund:
Appreciation Portfolio,
1,629,501 shares (cost - $29,402,696)
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENT OF NET ASSETS
December 31, 1997
(Continued)
<TABLE>
<CAPTION>
Fully
Managed
Account
___________
<S> <C>
ASSETS
Investments at net asset value:
Smith Barney Concert Allocation Series, Inc.:
Select High Growth Portfolio,
1,842,669 shares (cost - $20,177,874)
Select Growth Portfolio,
2,732,523 shares (cost - $29,674,589)
Select Balanced Portfolio,
2,634,510 shares (cost - $28,388,533)
Select Conservative Portfolio,
662,723 shares (cost - $7,183,159)
Select Income Portfolio,
247,661 shares (cost - $2,665,691)
___________
TOTAL NET ASSETS (cost - $947,980,910) $8,456,130
===========
NET ASSETS REPRESENTED BY:
Units 430,012
Unit Value 19.66
___________
Net Assets $8,456,130
===========
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENT OF NET ASSETS
December 31, 1997
(Continued)
<TABLE>
<CAPTION>
Rising
Dividends
Account
____________
<S> <C>
ASSETS
Investments at net asset value:
Equi-Select Series Trust:
Advantage Portfolio,
1,694,430 shares (cost - $18,108,961)
International Fixed Income Portfolio,
1,144,498 shares (cost - $12,724,228)
Money Market Portfolio,
35,584,814 shares (cost - $35,584,814)
Mortgage-Backed Securities Portfolio,
1,617,870 shares (cost - $17,616,297)
OTC Portfolio,
5,648,116 shares (cost - $83,367,263)
Research Portfolio,
11,398,759 shares (cost - $184,647,089)
Total Return Portfolio,
9,691,999 shares (cost - $131,573,390)
Growth & Income Portfolio,
6,070,023 shares (cost - $80,996,144)
Value + Growth Portfolio,
4,265,584 shares (cost - $55,051,249)
Warburg Pincus Trust:
International Equity Portfolio,
3,690,504 shares (cost - $43,663,623)
The GCG Trust:
Fully Managed Series,
537,580 shares (cost - $8,575,226)
Rising Dividends Series,
1,565,605 shares (cost - $29,772,355) $31,374,717
Small Cap Series,
860,484 shares (cost - $10,749,103)
Travelers Series Fund, Inc.:
Smith Barney Income and Growth Portfolio,
3,923,947 shares (cost - $63,259,789)
Smith Barney International Equity Portfolio,
1,827,368 shares (cost - $22,969,530)
Smith Barney High Income Portfolio,
1,571,999 shares (cost - $19,290,483)
Smith Barney Money Market Portfolio,
12,538,824 shares (cost - $12,538,824)
Greenwich Street Series Fund:
Appreciation Portfolio,
1,629,501 shares (cost - $29,402,696)
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENT OF NET ASSETS
December 31, 1997
(Continued)
<TABLE>
<CAPTION>
Rising
Dividends
Account
____________
<S> <C>
ASSETS
Investments at net asset value:
Smith Barney Concert Allocation Series, Inc.:
Select High Growth Portfolio,
1,842,669 shares (cost - $20,177,874)
Select Growth Portfolio,
2,732,523 shares (cost - $29,674,589)
Select Balanced Portfolio,
2,634,510 shares (cost - $28,388,533)
Select Conservative Portfolio,
662,723 shares (cost - $7,183,159)
Select Income Portfolio,
247,661 shares (cost - $2,665,691)
____________
TOTAL NET ASSETS (cost - $947,980,910) $31,374,717
============
NET ASSETS REPRESENTED BY:
Units 1,561,703
Unit Value 20.09
____________
Net Assets $31,374,717
============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENT OF NET ASSETS
December 31, 1997
(Continued)
<TABLE>
<CAPTION>
Small
Cap
Account
____________
<S> <C>
ASSETS
Investments at net asset value:
Equi-Select Series Trust:
Advantage Portfolio,
1,694,430 shares (cost - $18,108,961)
International Fixed Income Portfolio,
1,144,498 shares (cost - $12,724,228)
Money Market Portfolio,
35,584,814 shares (cost - $35,584,814)
Mortgage-Backed Securities Portfolio,
1,617,870 shares (cost - $17,616,297)
OTC Portfolio,
5,648,116 shares (cost - $83,367,263)
Research Portfolio,
11,398,759 shares (cost - $184,647,089)
Total Return Portfolio,
9,691,999 shares (cost - $131,573,390)
Growth & Income Portfolio,
6,070,023 shares (cost - $80,996,144)
Value + Growth Portfolio,
4,265,584 shares (cost - $55,051,249)
Warburg Pincus Trust:
International Equity Portfolio,
3,690,504 shares (cost - $43,663,623)
The GCG Trust:
Fully Managed Series,
537,580 shares (cost - $8,575,226)
Rising Dividends Series,
1,565,605 shares (cost - $29,772,355)
Small Cap Series,
860,484 shares (cost - $10,749,103) $11,401,411
Travelers Series Fund, Inc.:
Smith Barney Income and Growth Portfolio,
3,923,947 shares (cost - $63,259,789)
Smith Barney International Equity Portfolio,
1,827,368 shares (cost - $22,969,530)
Smith Barney High Income Portfolio,
1,571,999 shares (cost - $19,290,483)
Smith Barney Money Market Portfolio,
12,538,824 shares (cost - $12,538,824)
Greenwich Street Series Fund:
Appreciation Portfolio,
1,629,501 shares (cost - $29,402,696)
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENT OF NET ASSETS
December 31, 1997
(Continued)
<TABLE>
<CAPTION>
Small
Cap
Account
____________
<S> <C>
ASSETS
Investments at net asset value:
Smith Barney Concert Allocation Series, Inc.:
Select High Growth Portfolio,
1,842,669 shares (cost - $20,177,874)
Select Growth Portfolio,
2,732,523 shares (cost - $29,674,589)
Select Balanced Portfolio,
2,634,510 shares (cost - $28,388,533)
Select Conservative Portfolio,
662,723 shares (cost - $7,183,159)
Select Income Portfolio,
247,661 shares (cost - $2,665,691)
____________
TOTAL NET ASSETS (cost - $947,980,910) $11,401,411
============
NET ASSETS REPRESENTED BY:
Units 885,024
Unit Value 12.88
____________
Net Assets $11,401,411
============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENT OF NET ASSETS
December 31, 1997
(Continued)
<TABLE>
<CAPTION>
Smith
Barney
Income and
Growth
Account
____________
<S> <C>
ASSETS
Investments at net asset value:
Equi-Select Series Trust:
Advantage Portfolio,
1,694,430 shares (cost - $18,108,961)
International Fixed Income Portfolio,
1,144,498 shares (cost - $12,724,228)
Money Market Portfolio,
35,584,814 shares (cost - $35,584,814)
Mortgage-Backed Securities Portfolio,
1,617,870 shares (cost - $17,616,297)
OTC Portfolio,
5,648,116 shares (cost - $83,367,263)
Research Portfolio,
11,398,759 shares (cost - $184,647,089)
Total Return Portfolio,
9,691,999 shares (cost - $131,573,390)
Growth & Income Portfolio,
6,070,023 shares (cost - $80,996,144)
Value + Growth Portfolio,
4,265,584 shares (cost - $55,051,249)
Warburg Pincus Trust:
International Equity Portfolio,
3,690,504 shares (cost - $43,663,623)
The GCG Trust:
Fully Managed Series,
537,580 shares (cost - $8,575,226)
Rising Dividends Series,
1,565,605 shares (cost - $29,772,355)
Small Cap Series,
860,484 shares (cost - $10,749,103)
Travelers Series Fund, Inc.:
Smith Barney Income and Growth Portfolio,
3,923,947 shares (cost - $63,259,789) $74,829,676
Smith Barney International Equity Portfolio,
1,827,368 shares (cost - $22,969,530)
Smith Barney High Income Portfolio,
1,571,999 shares (cost - $19,290,483)
Smith Barney Money Market Portfolio,
12,538,824 shares (cost - $12,538,824)
Greenwich Street Series Fund:
Appreciation Portfolio,
1,629,501 shares (cost - $29,402,696)
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENT OF NET ASSETS
December 31, 1997
(Continued)
<TABLE>
<CAPTION>
Smith
Barney
Income and
Growth
Account
____________
<S> <C>
ASSETS
Investments at net asset value:
Smith Barney Concert Allocation Series, Inc.:
Select High Growth Portfolio,
1,842,669 shares (cost - $20,177,874)
Select Growth Portfolio,
2,732,523 shares (cost - $29,674,589)
Select Balanced Portfolio,
2,634,510 shares (cost - $28,388,533)
Select Conservative Portfolio,
662,723 shares (cost - $7,183,159)
Select Income Portfolio,
247,661 shares (cost - $2,665,691)
____________
TOTAL NET ASSETS (cost - $947,980,910) $74,829,676
============
NET ASSETS REPRESENTED BY:
Units 4,211,810
Unit Value 17.77
____________
Net Assets $74,829,676
============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENT OF NET ASSETS
December 31, 1997
(Continued)
<TABLE>
<CAPTION>
Smith
Barney
International
Equity
Account
_____________
<S> <C>
ASSETS
Investments at net asset value:
Equi-Select Series Trust:
Advantage Portfolio,
1,694,430 shares (cost - $18,108,961)
International Fixed Income Portfolio,
1,144,498 shares (cost - $12,724,228)
Money Market Portfolio,
35,584,814 shares (cost - $35,584,814)
Mortgage-Backed Securities Portfolio,
1,617,870 shares (cost - $17,616,297)
OTC Portfolio,
5,648,116 shares (cost - $83,367,263)
Research Portfolio,
11,398,759 shares (cost - $184,647,089)
Total Return Portfolio,
9,691,999 shares (cost - $131,573,390)
Growth & Income Portfolio,
6,070,023 shares (cost - $80,996,144)
Value + Growth Portfolio,
4,265,584 shares (cost - $55,051,249)
Warburg Pincus Trust:
International Equity Portfolio,
3,690,504 shares (cost - $43,663,623)
The GCG Trust:
Fully Managed Series,
537,580 shares (cost - $8,575,226)
Rising Dividends Series,
1,565,605 shares (cost - $29,772,355)
Small Cap Series,
860,484 shares (cost - $10,749,103)
Travelers Series Fund, Inc.:
Smith Barney Income and Growth Portfolio,
3,923,947 shares (cost - $63,259,789)
Smith Barney International Equity Portfolio,
1,827,368 shares (cost - $22,969,530) $23,573,048
Smith Barney High Income Portfolio,
1,571,999 shares (cost - $19,290,483)
Smith Barney Money Market Portfolio,
12,538,824 shares (cost - $12,538,824)
Greenwich Street Series Fund:
Appreciation Portfolio,
1,629,501 shares (cost - $29,402,696)
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENT OF NET ASSETS
December 31, 1997
(Continued)
<TABLE>
<CAPTION>
Smith
Barney
International
Equity
Account
_____________
<S> <C>
ASSETS
Investments at net asset value:
Smith Barney Concert Allocation Series, Inc.:
Select High Growth Portfolio,
1,842,669 shares (cost - $20,177,874)
Select Growth Portfolio,
2,732,523 shares (cost - $29,674,589)
Select Balanced Portfolio,
2,634,510 shares (cost - $28,388,533)
Select Conservative Portfolio,
662,723 shares (cost - $7,183,159)
Select Income Portfolio,
247,661 shares (cost - $2,665,691)
_____________
TOTAL NET ASSETS (cost - $947,980,910) $23,573,048
=============
NET ASSETS REPRESENTED BY:
Units 1,734,132
Unit Value 13.59
_____________
Net Assets $23,573,048
=============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENT OF NET ASSETS
December 31, 1997
(Continued)
<TABLE>
<CAPTION>
Smith
Barney
High
Income
Account
____________
<S> <C>
ASSETS
Investments at net asset value:
Equi-Select Series Trust:
Advantage Portfolio,
1,694,430 shares (cost - $18,108,961)
International Fixed Income Portfolio,
1,144,498 shares (cost - $12,724,228)
Money Market Portfolio,
35,584,814 shares (cost - $35,584,814)
Mortgage-Backed Securities Portfolio,
1,617,870 shares (cost - $17,616,297)
OTC Portfolio,
5,648,116 shares (cost - $83,367,263)
Research Portfolio,
11,398,759 shares (cost - $184,647,089)
Total Return Portfolio,
9,691,999 shares (cost - $131,573,390)
Growth & Income Portfolio,
6,070,023 shares (cost - $80,996,144)
Value + Growth Portfolio,
4,265,584 shares (cost - $55,051,249)
Warburg Pincus Trust:
International Equity Portfolio,
3,690,504 shares (cost - $43,663,623)
The GCG Trust:
Fully Managed Series,
537,580 shares (cost - $8,575,226)
Rising Dividends Series,
1,565,605 shares (cost - $29,772,355)
Small Cap Series,
860,484 shares (cost - $10,749,103)
Travelers Series Fund, Inc.:
Smith Barney Income and Growth Portfolio,
3,923,947 shares (cost - $63,259,789)
Smith Barney International Equity Portfolio,
1,827,368 shares (cost - $22,969,530)
Smith Barney High Income Portfolio,
1,571,999 shares (cost - $19,290,483) $21,190,553
Smith Barney Money Market Portfolio,
12,538,824 shares (cost - $12,538,824)
Greenwich Street Series Fund:
Appreciation Portfolio,
1,629,501 shares (cost - $29,402,696)
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENT OF NET ASSETS
December 31, 1997
(Continued)
<TABLE>
<CAPTION>
Smith
Barney
High
Income
Account
____________
<S> <C>
ASSETS
Investments at net asset value:
Smith Barney Concert Allocation Series, Inc.:
Select High Growth Portfolio,
1,842,669 shares (cost - $20,177,874)
Select Growth Portfolio,
2,732,523 shares (cost - $29,674,589)
Select Balanced Portfolio,
2,634,510 shares (cost - $28,388,533)
Select Conservative Portfolio,
662,723 shares (cost - $7,183,159)
Select Income Portfolio,
247,661 shares (cost - $2,665,691)
____________
TOTAL NET ASSETS (cost - $947,980,910) $21,190,553
============
NET ASSETS REPRESENTED BY:
Units 1,544,897
Unit Value 13.72
____________
Net Assets $21,190,553
============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENT OF NET ASSETS
December 31, 1997
(Continued)
<TABLE>
<CAPTION>
Smith
Barney
Money
Market
Account
____________
<S> <C>
ASSETS
Investments at net asset value:
Equi-Select Series Trust:
Advantage Portfolio,
1,694,430 shares (cost - $18,108,961)
International Fixed Income Portfolio,
1,144,498 shares (cost - $12,724,228)
Money Market Portfolio,
35,584,814 shares (cost - $35,584,814)
Mortgage-Backed Securities Portfolio,
1,617,870 shares (cost - $17,616,297)
OTC Portfolio,
5,648,116 shares (cost - $83,367,263)
Research Portfolio,
11,398,759 shares (cost - $184,647,089)
Total Return Portfolio,
9,691,999 shares (cost - $131,573,390)
Growth & Income Portfolio,
6,070,023 shares (cost - $80,996,144)
Value + Growth Portfolio,
4,265,584 shares (cost - $55,051,249)
Warburg Pincus Trust:
International Equity Portfolio,
3,690,504 shares (cost - $43,663,623)
The GCG Trust:
Fully Managed Series,
537,580 shares (cost - $8,575,226)
Rising Dividends Series,
1,565,605 shares (cost - $29,772,355)
Small Cap Series,
860,484 shares (cost - $10,749,103)
Travelers Series Fund, Inc.:
Smith Barney Income and Growth Portfolio,
3,923,947 shares (cost - $63,259,789)
Smith Barney International Equity Portfolio,
1,827,368 shares (cost - $22,969,530)
Smith Barney High Income Portfolio,
1,571,999 shares (cost - $19,290,483)
Smith Barney Money Market Portfolio,
12,538,824 shares (cost - $12,538,824) $12,538,824
Greenwich Street Series Fund:
Appreciation Portfolio,
1,629,501 shares (cost - $29,402,696)
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENT OF NET ASSETS
December 31, 1997
(Continued)
<TABLE>
<CAPTION>
Smith
Barney
Money
Market
Account
____________
<S> <C>
ASSETS
Investments at net asset value:
Smith Barney Concert Allocation Series, Inc.:
Select High Growth Portfolio,
1,842,669 shares (cost - $20,177,874)
Select Growth Portfolio,
2,732,523 shares (cost - $29,674,589)
Select Balanced Portfolio,
2,634,510 shares (cost - $28,388,533)
Select Conservative Portfolio,
662,723 shares (cost - $7,183,159)
Select Income Portfolio,
247,661 shares (cost - $2,665,691)
____________
TOTAL NET ASSETS (cost - $947,980,910) $12,538,824
============
NET ASSETS REPRESENTED BY:
Units 1,142,815
Unit Value 10.97
____________
Net Assets $12,538,824
============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENT OF NET ASSETS
December 31, 1997
(Continued)
<TABLE>
<CAPTION>
Appreciation
Account
____________
<S> <C>
ASSETS
Investments at net asset value:
Equi-Select Series Trust:
Advantage Portfolio,
1,694,430 shares (cost - $18,108,961)
International Fixed Income Portfolio,
1,144,498 shares (cost - $12,724,228)
Money Market Portfolio,
35,584,814 shares (cost - $35,584,814)
Mortgage-Backed Securities Portfolio,
1,617,870 shares (cost - $17,616,297)
OTC Portfolio,
5,648,116 shares (cost - $83,367,263)
Research Portfolio,
11,398,759 shares (cost - $184,647,089)
Total Return Portfolio,
9,691,999 shares (cost - $131,573,390)
Growth & Income Portfolio,
6,070,023 shares (cost - $80,996,144)
Value + Growth Portfolio,
4,265,584 shares (cost - $55,051,249)
Warburg Pincus Trust:
International Equity Portfolio,
3,690,504 shares (cost - $43,663,623)
The GCG Trust:
Fully Managed Series,
537,580 shares (cost - $8,575,226)
Rising Dividends Series,
1,565,605 shares (cost - $29,772,355)
Small Cap Series,
860,484 shares (cost - $10,749,103)
Travelers Series Fund, Inc.:
Smith Barney Income and Growth Portfolio,
3,923,947 shares (cost - $63,259,789)
Smith Barney International Equity Portfolio,
1,827,368 shares (cost - $22,969,530)
Smith Barney High Income Portfolio,
1,571,999 shares (cost - $19,290,483)
Smith Barney Money Market Portfolio,
12,538,824 shares (cost - $12,538,824)
Greenwich Street Series Fund:
Appreciation Portfolio,
1,629,501 shares (cost - $29,402,696) $30,520,554
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENT OF NET ASSETS
December 31, 1997
(Continued)
<TABLE>
<CAPTION>
Appreciation
Account
____________
<S> <C>
ASSETS
Investments at net asset value:
Smith Barney Concert Allocation Series, Inc.:
Select High Growth Portfolio,
1,842,669 shares (cost - $20,177,874)
Select Growth Portfolio,
2,732,523 shares (cost - $29,674,589)
Select Balanced Portfolio,
2,634,510 shares (cost - $28,388,533)
Select Conservative Portfolio,
662,723 shares (cost - $7,183,159)
Select Income Portfolio,
247,661 shares (cost - $2,665,691)
____________
TOTAL NET ASSETS (cost - $947,980,910) $30,520,554
============
NET ASSETS REPRESENTED BY:
Units 2,177,729
Unit Value 14.01
____________
Net Assets $30,520,554
============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENT OF NET ASSETS
December 31, 1997
(Continued)
<TABLE>
<CAPTION>
Select
High
Growth
Account
____________
<S> <C>
ASSETS
Investments at net asset value:
Equi-Select Series Trust:
Advantage Portfolio,
1,694,430 shares (cost - $18,108,961)
International Fixed Income Portfolio,
1,144,498 shares (cost - $12,724,228)
Money Market Portfolio,
35,584,814 shares (cost - $35,584,814)
Mortgage-Backed Securities Portfolio,
1,617,870 shares (cost - $17,616,297)
OTC Portfolio,
5,648,116 shares (cost - $83,367,263)
Research Portfolio,
11,398,759 shares (cost - $184,647,089)
Total Return Portfolio,
9,691,999 shares (cost - $131,573,390)
Growth & Income Portfolio,
6,070,023 shares (cost - $80,996,144)
Value + Growth Portfolio,
4,265,584 shares (cost - $55,051,249)
Warburg Pincus Trust:
International Equity Portfolio,
3,690,504 shares (cost - $43,663,623)
The GCG Trust:
Fully Managed Series,
537,580 shares (cost - $8,575,226)
Rising Dividends Series,
1,565,605 shares (cost - $29,772,355)
Small Cap Series,
860,484 shares (cost - $10,749,103)
Travelers Series Fund, Inc.:
Smith Barney Income and Growth Portfolio,
3,923,947 shares (cost - $63,259,789)
Smith Barney International Equity Portfolio,
1,827,368 shares (cost - $22,969,530)
Smith Barney High Income Portfolio,
1,571,999 shares (cost - $19,290,483)
Smith Barney Money Market Portfolio,
12,538,824 shares (cost - $12,538,824)
Greenwich Street Series Fund:
Appreciation Portfolio,
1,629,501 shares (cost - $29,402,696)
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENT OF NET ASSETS
December 31, 1997
(Continued)
<TABLE>
<CAPTION>
Select
High
Growth
Account
____________
<S> <C>
ASSETS
Investments at net asset value:
Smith Barney Concert Allocation Series, Inc.:
Select High Growth Portfolio,
1,842,669 shares (cost - $20,177,874) $20,287,782
Select Growth Portfolio,
2,732,523 shares (cost - $29,674,589)
Select Balanced Portfolio,
2,634,510 shares (cost - $28,388,533)
Select Conservative Portfolio,
662,723 shares (cost - $7,183,159)
Select Income Portfolio,
247,661 shares (cost - $2,665,691)
____________
TOTAL NET ASSETS (cost - $947,980,910) $20,287,782
============
NET ASSETS REPRESENTED BY:
Units 1,866,333
Unit Value 10.87
____________
Net Assets $20,287,782
============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENT OF NET ASSETS
December 31, 1997
(Continued)
<TABLE>
<CAPTION>
Select
Growth
Account
____________
<S> <C>
ASSETS
Investments at net asset value:
Equi-Select Series Trust:
Advantage Portfolio,
1,694,430 shares (cost - $18,108,961)
International Fixed Income Portfolio,
1,144,498 shares (cost - $12,724,228)
Money Market Portfolio,
35,584,814 shares (cost - $35,584,814)
Mortgage-Backed Securities Portfolio,
1,617,870 shares (cost - $17,616,297)
OTC Portfolio,
5,648,116 shares (cost - $83,367,263)
Research Portfolio,
11,398,759 shares (cost - $184,647,089)
Total Return Portfolio,
9,691,999 shares (cost - $131,573,390)
Growth & Income Portfolio,
6,070,023 shares (cost - $80,996,144)
Value + Growth Portfolio,
4,265,584 shares (cost - $55,051,249)
Warburg Pincus Trust:
International Equity Portfolio,
3,690,504 shares (cost - $43,663,623)
The GCG Trust:
Fully Managed Series,
537,580 shares (cost - $8,575,226)
Rising Dividends Series,
1,565,605 shares (cost - $29,772,355)
Small Cap Series,
860,484 shares (cost - $10,749,103)
Travelers Series Fund, Inc.:
Smith Barney Income and Growth Portfolio,
3,923,947 shares (cost - $63,259,789)
Smith Barney International Equity Portfolio,
1,827,368 shares (cost - $22,969,530)
Smith Barney High Income Portfolio,
1,571,999 shares (cost - $19,290,483)
Smith Barney Money Market Portfolio,
12,538,824 shares (cost - $12,538,824)
Greenwich Street Series Fund:
Appreciation Portfolio,
1,629,501 shares (cost - $29,402,696)
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENT OF NET ASSETS
December 31, 1997
(Continued)
<TABLE>
<CAPTION>
Select
Growth
Account
____________
<S> <C>
ASSETS
Investments at net asset value:
Smith Barney Concert Allocation Series, Inc.:
Select High Growth Portfolio,
1,842,669 shares (cost - $20,177,874)
Select Growth Portfolio,
2,732,523 shares (cost - $29,674,589) $30,576,929
Select Balanced Portfolio,
2,634,510 shares (cost - $28,388,533)
Select Conservative Portfolio,
662,723 shares (cost - $7,183,159)
Select Income Portfolio,
247,661 shares (cost - $2,665,691)
____________
TOTAL NET ASSETS (cost - $947,980,910) $30,576,929
============
NET ASSETS REPRESENTED BY:
Units 2,767,613
Unit Value 11.05
____________
Net Assets $30,576,929
============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENT OF NET ASSETS
December 31, 1997
(Continued)
<TABLE>
<CAPTION>
Select
Balanced
Account
____________
<S> <C>
ASSETS
Investments at net asset value:
Equi-Select Series Trust:
Advantage Portfolio,
1,694,430 shares (cost - $18,108,961)
International Fixed Income Portfolio,
1,144,498 shares (cost - $12,724,228)
Money Market Portfolio,
35,584,814 shares (cost - $35,584,814)
Mortgage-Backed Securities Portfolio,
1,617,870 shares (cost - $17,616,297)
OTC Portfolio,
5,648,116 shares (cost - $83,367,263)
Research Portfolio,
11,398,759 shares (cost - $184,647,089)
Total Return Portfolio,
9,691,999 shares (cost - $131,573,390)
Growth & Income Portfolio,
6,070,023 shares (cost - $80,996,144)
Value + Growth Portfolio,
4,265,584 shares (cost - $55,051,249)
Warburg Pincus Trust:
International Equity Portfolio,
3,690,504 shares (cost - $43,663,623)
The GCG Trust:
Fully Managed Series,
537,580 shares (cost - $8,575,226)
Rising Dividends Series,
1,565,605 shares (cost - $29,772,355)
Small Cap Series,
860,484 shares (cost - $10,749,103)
Travelers Series Fund, Inc.:
Smith Barney Income and Growth Portfolio,
3,923,947 shares (cost - $63,259,789)
Smith Barney International Equity Portfolio,
1,827,368 shares (cost - $22,969,530)
Smith Barney High Income Portfolio,
1,571,999 shares (cost - $19,290,483)
Smith Barney Money Market Portfolio,
12,538,824 shares (cost - $12,538,824)
Greenwich Street Series Fund:
Appreciation Portfolio,
1,629,501 shares (cost - $29,402,696)
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENT OF NET ASSETS
December 31, 1997
(Continued)
<TABLE>
<CAPTION>
Select
Balanced
Account
____________
<S> <C>
ASSETS
Investments at net asset value:
Smith Barney Concert Allocation Series, Inc.:
Select High Growth Portfolio,
1,842,669 shares (cost - $20,177,874)
Select Growth Portfolio,
2,732,523 shares (cost - $29,674,589)
Select Balanced Portfolio,
2,634,510 shares (cost - $28,388,533) $29,506,512
Select Conservative Portfolio,
662,723 shares (cost - $7,183,159)
Select Income Portfolio,
247,661 shares (cost - $2,665,691)
____________
TOTAL NET ASSETS (cost - $947,980,910) $29,506,512
============
NET ASSETS REPRESENTED BY:
Units 2,668,341
Unit Value 11.06
____________
Net Assets $29,506,512
============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENT OF NET ASSETS
December 31, 1997
(Continued)
<TABLE>
<CAPTION>
Select
Conservative
Account
____________
<S> <C>
ASSETS
Investments at net asset value:
Equi-Select Series Trust:
Advantage Portfolio,
1,694,430 shares (cost - $18,108,961)
International Fixed Income Portfolio,
1,144,498 shares (cost - $12,724,228)
Money Market Portfolio,
35,584,814 shares (cost - $35,584,814)
Mortgage-Backed Securities Portfolio,
1,617,870 shares (cost - $17,616,297)
OTC Portfolio,
5,648,116 shares (cost - $83,367,263)
Research Portfolio,
11,398,759 shares (cost - $184,647,089)
Total Return Portfolio,
9,691,999 shares (cost - $131,573,390)
Growth & Income Portfolio,
6,070,023 shares (cost - $80,996,144)
Value + Growth Portfolio,
4,265,584 shares (cost - $55,051,249)
Warburg Pincus Trust:
International Equity Portfolio,
3,690,504 shares (cost - $43,663,623)
The GCG Trust:
Fully Managed Series,
537,580 shares (cost - $8,575,226)
Rising Dividends Series,
1,565,605 shares (cost - $29,772,355)
Small Cap Series,
860,484 shares (cost - $10,749,103)
Travelers Series Fund, Inc.:
Smith Barney Income and Growth Portfolio,
3,923,947 shares (cost - $63,259,789)
Smith Barney International Equity Portfolio,
1,827,368 shares (cost - $22,969,530)
Smith Barney High Income Portfolio,
1,571,999 shares (cost - $19,290,483)
Smith Barney Money Market Portfolio,
12,538,824 shares (cost - $12,538,824)
Greenwich Street Series Fund:
Appreciation Portfolio,
1,629,501 shares (cost - $29,402,696)
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENT OF NET ASSETS
December 31, 1997
(Continued)
<TABLE>
<CAPTION>
Select
Conservative
Account
____________
<S> <C>
ASSETS
Investments at net asset value:
Smith Barney Concert Allocation Series, Inc.:
Select High Growth Portfolio,
1,842,669 shares (cost - $20,177,874)
Select Growth Portfolio,
2,732,523 shares (cost - $29,674,589)
Select Balanced Portfolio,
2,634,510 shares (cost - $28,388,533)
Select Conservative Portfolio,
662,723 shares (cost - $7,183,159) $7,429,120
Select Income Portfolio,
247,661 shares (cost - $2,665,691)
____________
TOTAL NET ASSETS (cost - $947,980,910) $7,429,120
============
NET ASSETS REPRESENTED BY:
Units 671,234
Unit Value 11.07
____________
Net Assets $7,429,120
============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENT OF NET ASSETS
December 31, 1997
(Continued)
<TABLE>
<CAPTION>
Select
Income
Account
___________
<S> <C>
ASSETS
Investments at net asset value:
Equi-Select Series Trust:
Advantage Portfolio,
1,694,430 shares (cost - $18,108,961)
International Fixed Income Portfolio,
1,144,498 shares (cost - $12,724,228)
Money Market Portfolio,
35,584,814 shares (cost - $35,584,814)
Mortgage-Backed Securities Portfolio,
1,617,870 shares (cost - $17,616,297)
OTC Portfolio,
5,648,116 shares (cost - $83,367,263)
Research Portfolio,
11,398,759 shares (cost - $184,647,089)
Total Return Portfolio,
9,691,999 shares (cost - $131,573,390)
Growth & Income Portfolio,
6,070,023 shares (cost - $80,996,144)
Value + Growth Portfolio,
4,265,584 shares (cost - $55,051,249)
Warburg Pincus Trust:
International Equity Portfolio,
3,690,504 shares (cost - $43,663,623)
The GCG Trust:
Fully Managed Series,
537,580 shares (cost - $8,575,226)
Rising Dividends Series,
1,565,605 shares (cost - $29,772,355)
Small Cap Series,
860,484 shares (cost - $10,749,103)
Travelers Series Fund, Inc.:
Smith Barney Income and Growth Portfolio,
3,923,947 shares (cost - $63,259,789)
Smith Barney International Equity Portfolio,
1,827,368 shares (cost - $22,969,530)
Smith Barney High Income Portfolio,
1,571,999 shares (cost - $19,290,483)
Smith Barney Money Market Portfolio,
12,538,824 shares (cost - $12,538,824)
Greenwich Street Series Fund:
Appreciation Portfolio,
1,629,501 shares (cost - $29,402,696)
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENT OF NET ASSETS
December 31, 1997
(Continued)
<TABLE>
<CAPTION>
Select
Income
Account
___________
<S> <C>
ASSETS
Investments at net asset value:
Smith Barney Concert Allocation Series, Inc.:
Select High Growth Portfolio,
1,842,669 shares (cost - $20,177,874)
Select Growth Portfolio,
2,732,523 shares (cost - $29,674,589)
Select Balanced Portfolio,
2,634,510 shares (cost - $28,388,533)
Select Conservative Portfolio,
662,723 shares (cost - $7,183,159)
Select Income Portfolio,
247,661 shares (cost - $2,665,691) $2,766,373
___________
TOTAL NET ASSETS (cost - $947,980,910) $2,766,373
===========
NET ASSETS REPRESENTED BY:
Units 250,841
Unit Value 11.03
___________
Net Assets $2,766,373
===========
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENT OF NET ASSETS
December 31, 1997
(Continued)
<TABLE>
<CAPTION>
Combined
_______________
<S> <C>
ASSETS
Investments at net asset value:
Equi-Select Series Trust:
Advantage Portfolio,
1,694,430 shares (cost - $18,108,961) $17,828,042
International Fixed Income Portfolio,
1,144,498 shares (cost - $12,724,228) 11,904,652
Money Market Portfolio,
35,584,814 shares (cost - $35,584,814) 35,584,814
Mortgage-Backed Securities Portfolio,
1,617,870 shares (cost - $17,616,297) 17,673,788
OTC Portfolio,
5,648,116 shares (cost - $83,367,263) 89,356,864
Research Portfolio,
11,398,759 shares (cost - $184,647,089) 204,520,177
Total Return Portfolio,
9,691,999 shares (cost - $131,573,390) 148,851,655
Growth & Income Portfolio,
6,070,023 shares (cost - $80,996,144) 87,808,343
Value + Growth Portfolio,
4,265,584 shares (cost - $55,051,249) 56,373,954
Warburg Pincus Trust:
International Equity Portfolio,
3,690,504 shares (cost - $43,663,623) 38,713,392
The GCG Trust:
Fully Managed Series,
537,580 shares (cost - $8,575,226) 8,456,130
Rising Dividends Series,
1,565,605 shares (cost - $29,772,355) 31,374,717
Small Cap Series,
860,484 shares (cost - $10,749,103) 11,401,411
Travelers Series Fund, Inc.:
Smith Barney Income and Growth Portfolio,
3,923,947 shares (cost - $63,259,789) 74,829,676
Smith Barney International Equity Portfolio,
1,827,368 shares (cost - $22,969,530) 23,573,048
Smith Barney High Income Portfolio,
1,571,999 shares (cost - $19,290,483) 21,190,553
Smith Barney Money Market Portfolio,
12,538,824 shares (cost - $12,538,824) 12,538,824
Greenwich Street Series Fund:
Appreciation Portfolio,
1,629,501 shares (cost - $29,402,696) 30,520,554
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENT OF NET ASSETS
December 31, 1997
(Continued)
<TABLE>
<CAPTION>
Combined
_______________
<S> <C>
ASSETS
Investments at net asset value:
Smith Barney Concert Allocation Series, Inc.:
Select High Growth Portfolio,
1,842,669 shares (cost - $20,177,874) 20,287,782
Select Growth Portfolio,
2,732,523 shares (cost - $29,674,589) 30,576,929
Select Balanced Portfolio,
2,634,510 shares (cost - $28,388,533) 29,506,512
Select Conservative Portfolio,
662,723 shares (cost - $7,183,159) 7,429,120
Select Income Portfolio,
247,661 shares (cost - $2,665,691) 2,766,373
_______________
TOTAL NET ASSETS (cost - $947,980,910) $1,013,067,310
===============
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENT OF OPERATIONS
For the year December 31, 1997, Except as Noted
<TABLE>
<CAPTION>
International
Fixed Money
Advantage Income Market
Account Account Account
______________________________________
<S> <C> <C> <C>
INVESTMENT INCOME (LOSS)
Income:
Dividends $782,675 $542,440 $1,632,508
Capital gains distributions -- 54,527 --
______________________________________
Total investment income 782,675 596,967 1,632,508
Expenses:
Annual contract charges 7,758 6,435 6,084
Transfer charges 138 -- 6,410
Administrative charges 1,932 1,066 2,638
Mortality and expense risk charges 242,386 142,095 454,136
______________________________________
Net investment income (loss) 530,461 447,371 1,163,240
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on investments 256,338 124,849 --
Net unrealized appreciation
(depreciation) of investments (68,673) (614,411) --
______________________________________
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $718,126 ($42,191) $1,163,240
======================================
<FN>
(a) Commencement of Operations, February 5, 1997
(b) Commencement of Operations, February 10, 1997
(c) Commencement of Operations, February 21, 1997
(d) Commencement of Operations, March 6, 1997
(e) Commencement of Operations, March 19, 1997
(f) Commencement of Operations, March 26, 1997
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENT OF OPERATIONS
For the year December 31, 1997, Except as Noted
(Continued)
<TABLE>
<CAPTION>
Mortgage-
Backed
Securities OTC Research
Account Account Account
______________________________________
<S> <C> <C> <C>
INVESTMENT INCOME (LOSS)
Income:
Dividends $782,654 $3,725,445 $2,126,136
Capital gains distributions -- 39,178 4,275,288
______________________________________
Total investment income 782,654 3,764,623 6,401,424
Expenses:
Annual contract charges 8,137 48,350 83,047
Transfer charges (7) 852 796
Administrative charges 1,420 5,537 10,322
Mortality and expense risk charges 191,871 918,764 1,962,985
______________________________________
Net investment income (loss) 581,233 2,791,120 4,344,274
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on investments (49,663) 3,085,650 3,990,034
Net unrealized appreciation
(depreciation) of investments 372,723 4,758,266 12,924,937
______________________________________
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $904,293 $10,635,036 $21,259,245
======================================
<FN>
(a) Commencement of Operations, February 5, 1997
(b) Commencement of Operations, February 10, 1997
(c) Commencement of Operations, February 21, 1997
(d) Commencement of Operations, March 6, 1997
(e) Commencement of Operations, March 19, 1997
(f) Commencement of Operations, March 26, 1997
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENT OF OPERATIONS
For the year December 31, 1997, Except as Noted
(Continued)
<TABLE>
<CAPTION>
Total Growth & Value +
Return Income Growth
Account Account Account
______________________________________
<S> <C> <C> <C>
INVESTMENT INCOME (LOSS)
Income:
Dividends $3,515,543 $7,042,003 $13,977
Capital gains distributions 1,453,371 13,264 --
______________________________________
Total investment income 4,968,914 7,055,267 13,977
Expenses:
Annual contract charges 62,200 27,213 16,215
Transfer charges 36 167 142
Administrative charges 7,854 3,887 1,957
Mortality and expense risk charges 1,420,362 810,049 502,582
______________________________________
Net investment income (loss) 3,478,462 6,213,951 (506,919)
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on investments 637,746 1,221,709 1,030,463
Net unrealized appreciation
(depreciation) of investments 13,098,517 4,340,296 347,125
______________________________________
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $17,214,725 $11,775,956 $870,669
======================================
<FN>
(a) Commencement of Operations, February 5, 1997
(b) Commencement of Operations, February 10, 1997
(c) Commencement of Operations, February 21, 1997
(d) Commencement of Operations, March 6, 1997
(e) Commencement of Operations, March 19, 1997
(f) Commencement of Operations, March 26, 1997
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENT OF OPERATIONS
For the year December 31, 1997, Except as Noted
(Continued)
<TABLE>
<CAPTION>
International Fully Rising
Equity Managed Dividends
Account Account(a) Account(b)
______________________________________
<S> <C> <C> <C>
INVESTMENT INCOME (LOSS)
Income:
Dividends $1,263,347 $250,821 $191,362
Capital gains distributions 1,202,927 366,432 515,186
______________________________________
Total investment income 2,466,274 617,253 706,548
Expenses:
Annual contract charges 20,536 321 2,238
Transfer charges 251 12 761
Administrative charges 2,780 -- --
Mortality and expense risk charges 461,343 49,420 169,295
______________________________________
Net investment income (loss) 1,981,364 567,500 534,254
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on investments 175,065 13,366 689,163
Net unrealized appreciation
(depreciation) of investments (5,059,005) (119,096) 1,602,362
______________________________________
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ($2,902,576) $461,770 $2,825,779
======================================
<FN>
(a) Commencement of Operations, February 5, 1997
(b) Commencement of Operations, February 10, 1997
(c) Commencement of Operations, February 21, 1997
(d) Commencement of Operations, March 6, 1997
(e) Commencement of Operations, March 19, 1997
(f) Commencement of Operations, March 26, 1997
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENT OF OPERATIONS
For the year December 31, 1997, Except as Noted
(Continued)
<TABLE>
<CAPTION>
Smith Barney Smith Barney
Income and International
Small Cap Growth Equity
Account(a) Account Account
_______________________________________
<S> <C> <C> <C>
INVESTMENT INCOME (LOSS)
Income:
Dividends -- -- --
Capital gains distributions -- -- --
_______________________________________
Total investment income -- -- --
Expenses:
Annual contract charges $570 $19,604 $9,423
Transfer charges 45 -- --
Administrative charges -- 3,044 1,449
Mortality and expense risk charges 71,459 645,047 252,207
_______________________________________
Net investment income (loss) (72,074) (667,695) (263,079)
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on investments 250,413 173,271 62,891
Net unrealized appreciation
(depreciation) of investments 652,308 9,763,541 (159,210)
_______________________________________
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $830,647 $9,269,117 ($359,398)
=======================================
<FN>
(a) Commencement of Operations, February 5, 1997
(b) Commencement of Operations, February 10, 1997
(c) Commencement of Operations, February 21, 1997
(d) Commencement of Operations, March 6, 1997
(e) Commencement of Operations, March 19, 1997
(f) Commencement of Operations, March 26, 1997
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENT OF OPERATIONS
For the year December 31, 1997, Except as Noted
(Continued)
<TABLE>
<CAPTION>
Smith Barney
Smith Barney Money
High Income Market Appreciation
Account Account Account
______________________________________
<S> <C> <C> <C>
INVESTMENT INCOME (LOSS)
Income:
Dividends -- $416,443 $355,211
Capital gains distributions -- -- 1,549,430
______________________________________
Total investment income -- 416,443 1,904,641
Expenses:
Annual contract charges $5,629 1,040 5,977
Transfer charges -- -- --
Administrative charges 1,108 498 792
Mortality and expense risk charges 206,204 120,594 214,970
______________________________________
Net investment income (loss) (212,941) 294,311 1,682,902
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on investments 109,408 -- 7,316
Net unrealized appreciation
(depreciation) of investments 1,805,213 -- 1,159,392
______________________________________
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $1,701,680 $294,311 $2,849,610
======================================
<FN>
(a) Commencement of Operations, February 5, 1997
(b) Commencement of Operations, February 10, 1997
(c) Commencement of Operations, February 21, 1997
(d) Commencement of Operations, March 6, 1997
(e) Commencement of Operations, March 19, 1997
(f) Commencement of Operations, March 26, 1997
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENT OF OPERATIONS
For the year December 31, 1997, Except as Noted
(Continued)
<TABLE>
<CAPTION>
Select High Select Select
Growth Growth Balanced
Account(c) Account(d) Account(c)
______________________________________
<S> <C> <C> <C>
INVESTMENT INCOME (LOSS)
Income:
Dividends -- -- --
Capital gains distributions -- -- --
______________________________________
Total investment income -- -- --
Expenses:
Annual contract charges $168 $136 $188
Transfer charges -- -- --
Administrative charges -- -- --
Mortality and expense risk charges 96,196 142,411 150,373
______________________________________
Net investment income (loss) (96,364) (142,547) (150,561)
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on investments 36,105 3,569 3,850
Net unrealized appreciation
(depreciation) of investments 109,908 902,340 1,117,979
______________________________________
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $49,649 $763,362 $971,268
======================================
<FN>
(a) Commencement of Operations, February 5, 1997
(b) Commencement of Operations, February 10, 1997
(c) Commencement of Operations, February 21, 1997
(d) Commencement of Operations, March 6, 1997
(e) Commencement of Operations, March 19, 1997
(f) Commencement of Operations, March 26, 1997
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENT OF OPERATIONS
For the year December 31, 1997, Except as Noted
(Continued)
<TABLE>
<CAPTION>
Select Select
Conservative Income
Account(f) Account(e) Combined
______________________________________
<S> <C> <C> <C>
INVESTMENT INCOME (LOSS)
Income:
Dividends -- -- $22,640,565
Capital gains distributions -- -- 9,469,603
______________________________________
Total investment income -- -- 32,110,168
Expenses:
Annual contract charges $20 $15 331,304
Transfer charges -- -- 9,603
Administrative charges -- -- 46,284
Mortality and expense risk charges 34,177 14,489 9,273,415
______________________________________
Net investment income (loss) (34,197) (14,504) 22,449,562
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS
Net realized gain (loss) on investments 21,770 19,963 11,863,276
Net unrealized appreciation
(depreciation) of investments 245,961 100,682 47,281,155
______________________________________
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $233,534 $106,141 $81,593,993
======================================
<FN>
(a) Commencement of Operations, February 5, 1997
(b) Commencement of Operations, February 10, 1997
(c) Commencement of Operations, February 21, 1997
(d) Commencement of Operations, March 6, 1997
(e) Commencement of Operations, March 19, 1997
(f) Commencement of Operations, March 26, 1997
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
For the years December 31, 1996 and 1997, Except as Noted
<TABLE>
<CAPTION>
Advantage
Account
____________
<S> <C>
NET ASSETS AT JANUARY 1, 1996 $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>
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
For the years December 31, 1996 and 1997, Except as Noted
(Continued)
<TABLE>
<CAPTION>
Advantage
Account
____________
<S> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) $530,461
Net realized gain (loss) on investments 256,338
Net unrealized appreciation (depreciation) of investments (68,673)
____________
Net increase (decrease) in net assets resulting from operations 718,126
Changes from principal transactions:
Purchase payments 8,221,506
Contract distributions and terminations (1,615,795)
Transfer payments from (to) other Accounts and Fixed Account (4,514,744)
____________
Increase in net assets derived from principal transactions 2,090,967
____________
Total increase 2,809,093
____________
NET ASSETS AT DECEMBER 31, 1997 $17,828,042
============
<FN>
(a) Commencement of Operations, April 1, 1996
(b) Commencement of Operations, March 25, 1996
(c) Commencement of Operations, February 5, 1997
(d) Commencement of Operations, February 10, 1997
(e) Commencement of Operations, February 21, 1997
(f) Commencement of Operations, March 6, 1997
(g) Commencement of Operations, March 19, 1997
(h) Commencement of Operations, March 26, 1997
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
For the years December 31, 1996 and 1997, Except as Noted
(Continued)
<TABLE>
<CAPTION>
International
Fixed
Income
Account
_____________
<S> <C>
NET ASSETS AT JANUARY 1, 1996 $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>
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
For the years December 31, 1996 and 1997, Except as Noted
(Continued)
<TABLE>
<CAPTION>
International
Fixed
Income
Account
_____________
<S> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) $447,371
Net realized gain (loss) on investments 124,849
Net unrealized appreciation (depreciation) of investments (614,411)
_____________
Net increase (decrease) in net assets resulting from operations (42,191)
Changes from principal transactions:
Purchase payments 2,503,059
Contract distributions and terminations (603,475)
Transfer payments from (to) other Accounts and Fixed Account 1,607,611
_____________
Increase in net assets derived from principal transactions 3,507,195
_____________
Total increase 3,465,004
_____________
NET ASSETS AT DECEMBER 31, 1997 $11,904,652
=============
<FN>
(a) Commencement of Operations, April 1, 1996
(b) Commencement of Operations, March 25, 1996
(c) Commencement of Operations, February 5, 1997
(d) Commencement of Operations, February 10, 1997
(e) Commencement of Operations, February 21, 1997
(f) Commencement of Operations, March 6, 1997
(g) Commencement of Operations, March 19, 1997
(h) Commencement of Operations, March 26, 1997
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
For the years December 31, 1996 and 1997, Except as Noted
(Continued)
<TABLE>
<CAPTION>
Money
Market
Account
_____________
<S> <C>
NET ASSETS AT JANUARY 1, 1996 $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>
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
For the years December 31, 1996 and 1997, Except as Noted
(Continued)
<TABLE>
<CAPTION>
Money
Market
Account
_____________
<S> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) $1,163,240
Net realized gain (loss) on investments --
Net unrealized appreciation (depreciation) of investments --
_____________
Net increase (decrease) in net assets resulting from operations 1,163,240
Changes from principal transactions:
Purchase payments 180,384,044
Contract distributions and terminations (3,652,032)
Transfer payments from (to) other Accounts and Fixed Account (161,448,810)
_____________
Increase in net assets derived from principal transactions 15,283,202
_____________
Total increase 16,446,442
_____________
NET ASSETS AT DECEMBER 31, 1997 $35,584,814
=============
<FN>
(a) Commencement of Operations, April 1, 1996
(b) Commencement of Operations, March 25, 1996
(c) Commencement of Operations, February 5, 1997
(d) Commencement of Operations, February 10, 1997
(e) Commencement of Operations, February 21, 1997
(f) Commencement of Operations, March 6, 1997
(g) Commencement of Operations, March 19, 1997
(h) Commencement of Operations, March 26, 1997
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
For the years December 31, 1996 and 1997, Except as Noted
(Continued)
<TABLE>
<CAPTION>
Mortgage-
Backed
Securities
Account
____________
<S> <C>
NET ASSETS AT JANUARY 1, 1996 $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>
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
For the years December 31, 1996 and 1997, Except as Noted
(Continued)
<TABLE>
<CAPTION>
Mortgage-
Backed
Securities
Account
____________
<S> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) $581,233
Net realized gain (loss) on investments (49,663)
Net unrealized appreciation (depreciation) of investments 372,723
____________
Net increase (decrease) in net assets resulting from operations 904,293
Changes from principal transactions:
Purchase payments 3,918,784
Contract distributions and terminations (720,003)
Transfer payments from (to) other Accounts and Fixed Account 2,737,467
____________
Increase in net assets derived from principal transactions 5,936,248
____________
Total increase 6,840,541
____________
NET ASSETS AT DECEMBER 31, 1997 $17,673,788
============
<FN>
(a) Commencement of Operations, April 1, 1996
(b) Commencement of Operations, March 25, 1996
(c) Commencement of Operations, February 5, 1997
(d) Commencement of Operations, February 10, 1997
(e) Commencement of Operations, February 21, 1997
(f) Commencement of Operations, March 6, 1997
(g) Commencement of Operations, March 19, 1997
(h) Commencement of Operations, March 26, 1997
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
For the years December 31, 1996 and 1997, Except as Noted
(Continued)
<TABLE>
<CAPTION>
OTC
Account
____________
<S> <C>
NET ASSETS AT JANUARY 1, 1996 $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>
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
For the years December 31, 1996 and 1997, Except as Noted
(Continued)
<TABLE>
<CAPTION>
OTC
Account
____________
<S> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) $2,791,120
Net realized gain (loss) on investments 3,085,650
Net unrealized appreciation (depreciation) of investments 4,758,266
____________
Net increase (decrease) in net assets resulting from operations 10,635,036
Changes from principal transactions:
Purchase payments 25,660,915
Contract distributions and terminations (2,959,153)
Transfer payments from (to) other Accounts and Fixed Account 15,167,244
____________
Increase in net assets derived from principal transactions 37,869,006
____________
Total increase 48,504,042
____________
NET ASSETS AT DECEMBER 31, 1997 $89,356,864
============
<FN>
(a) Commencement of Operations, April 1, 1996
(b) Commencement of Operations, March 25, 1996
(c) Commencement of Operations, February 5, 1997
(d) Commencement of Operations, February 10, 1997
(e) Commencement of Operations, February 21, 1997
(f) Commencement of Operations, March 6, 1997
(g) Commencement of Operations, March 19, 1997
(h) Commencement of Operations, March 26, 1997
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
For the years December 31, 1996 and 1997, Except as Noted
(Continued)
<TABLE>
<CAPTION>
Research
Account
_____________
<S> <C>
NET ASSETS AT JANUARY 1, 1996 $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>
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
For the years December 31, 1996 and 1997, Except as Noted
(Continued)
<TABLE>
<CAPTION>
Research
Account
_____________
<S> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) $4,344,274
Net realized gain (loss) on investments 3,990,034
Net unrealized appreciation (depreciation) of investments 12,924,937
_____________
Net increase (decrease) in net assets resulting from operations 21,259,245
Changes from principal transactions:
Purchase payments 67,831,805
Contract distributions and terminations (5,188,911)
Transfer payments from (to) other Accounts and Fixed Account 43,442,755
_____________
Increase in net assets derived from principal transactions 106,085,649
_____________
Total increase 127,344,894
_____________
NET ASSETS AT DECEMBER 31, 1997 $204,520,177
=============
<FN>
(a) Commencement of Operations, April 1, 1996
(b) Commencement of Operations, March 25, 1996
(c) Commencement of Operations, February 5, 1997
(d) Commencement of Operations, February 10, 1997
(e) Commencement of Operations, February 21, 1997
(f) Commencement of Operations, March 6, 1997
(g) Commencement of Operations, March 19, 1997
(h) Commencement of Operations, March 26, 1997
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
For the years December 31, 1996 and 1997, Except as Noted
(Continued)
<TABLE>
<CAPTION>
Total
Return
Account
_____________
<S> <C>
NET ASSETS AT JANUARY 1, 1996 $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>
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
For the years December 31, 1996 and 1997, Except as Noted
(Continued)
<TABLE>
<CAPTION>
Total
Return
Account
_____________
<S> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) $3,478,462
Net realized gain (loss) on investments 637,746
Net unrealized appreciation (depreciation) of investments 13,098,517
_____________
Net increase (decrease) in net assets resulting from operations 17,214,725
Changes from principal transactions:
Purchase payments 46,890,224
Contract distributions and terminations (5,975,954)
Transfer payments from (to) other Accounts and Fixed Account 31,887,495
_____________
Increase in net assets derived from principal transactions 72,801,765
_____________
Total increase 90,016,490
_____________
NET ASSETS AT DECEMBER 31, 1997 $148,851,655
=============
<FN>
(a) Commencement of Operations, April 1, 1996
(b) Commencement of Operations, March 25, 1996
(c) Commencement of Operations, February 5, 1997
(d) Commencement of Operations, February 10, 1997
(e) Commencement of Operations, February 21, 1997
(f) Commencement of Operations, March 6, 1997
(g) Commencement of Operations, March 19, 1997
(h) Commencement of Operations, March 26, 1997
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
For the years December 31, 1996 and 1997, Except as Noted
(Continued)
<TABLE>
<CAPTION>
Growth &
Income
Account(a)
____________
<S> <C>
NET ASSETS AT JANUARY 1, 1996 --
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
</TABLE>
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
For the years December 31, 1996 and 1997, Except as Noted
(Continued)
<TABLE>
<CAPTION>
Growth &
Income
Account(a)
____________
<S> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) $6,213,951
Net realized gain (loss) on investments 1,221,709
Net unrealized appreciation (depreciation) of investments 4,340,296
____________
Net increase (decrease) in net assets resulting from operations 11,775,956
Changes from principal transactions:
Purchase payments 26,757,151
Contract distributions and terminations (2,887,153)
Transfer payments from (to) other Accounts and Fixed Account 24,332,817
____________
Increase in net assets derived from principal transactions 48,202,815
____________
Total increase 59,978,771
____________
NET ASSETS AT DECEMBER 31, 1997 $87,808,343
============
<FN>
(a) Commencement of Operations, April 1, 1996
(b) Commencement of Operations, March 25, 1996
(c) Commencement of Operations, February 5, 1997
(d) Commencement of Operations, February 10, 1997
(e) Commencement of Operations, February 21, 1997
(f) Commencement of Operations, March 6, 1997
(g) Commencement of Operations, March 19, 1997
(h) Commencement of Operations, March 26, 1997
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
For the years December 31, 1996 and 1997, Except as Noted
(Continued)
<TABLE>
<CAPTION>
Value +
Growth
Account(a)
____________
<S> <C>
NET ASSETS AT JANUARY 1, 1996 --
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
</TABLE>
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
For the years December 31, 1996 and 1997, Except as Noted
(Continued)
<TABLE>
<CAPTION>
Value +
Growth
Account(a)
____________
<S> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) ($506,919)
Net realized gain (loss) on investments 1,030,463
Net unrealized appreciation (depreciation) of investments 347,125
____________
Net increase (decrease) in net assets resulting from operations 870,669
Changes from principal transactions:
Purchase payments 18,435,971
Contract distributions and terminations (1,778,873)
Transfer payments from (to) other Accounts and Fixed Account 24,710,222
____________
Increase in net assets derived from principal transactions 41,367,320
____________
Total increase 42,237,989
____________
NET ASSETS AT DECEMBER 31, 1997 $56,373,954
============
<FN>
(a) Commencement of Operations, April 1, 1996
(b) Commencement of Operations, March 25, 1996
(c) Commencement of Operations, February 5, 1997
(d) Commencement of Operations, February 10, 1997
(e) Commencement of Operations, February 21, 1997
(f) Commencement of Operations, March 6, 1997
(g) Commencement of Operations, March 19, 1997
(h) Commencement of Operations, March 26, 1997
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
For the years December 31, 1996 and 1997, Except as Noted
(Continued)
<TABLE>
<CAPTION>
International
Equity
Account(a)
_____________
<S> <C>
NET ASSETS AT JANUARY 1, 1996 --
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
</TABLE>
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
For the years December 31, 1996 and 1997, Except as Noted
(Continued)
<TABLE>
<CAPTION>
International
Equity
Account(a)
_____________
<S> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) $1,981,364
Net realized gain (loss) on investments 175,065
Net unrealized appreciation (depreciation) of investments (5,059,005)
_____________
Net increase (decrease) in net assets resulting from operations (2,902,576)
Changes from principal transactions:
Purchase payments 11,101,209
Contract distributions and terminations (2,232,677)
Transfer payments from (to) other Accounts and Fixed Account 11,923,178
_____________
Increase in net assets derived from principal transactions 20,791,710
_____________
Total increase 17,889,134
_____________
NET ASSETS AT DECEMBER 31, 1997 $38,713,392
=============
<FN>
(a) Commencement of Operations, April 1, 1996
(b) Commencement of Operations, March 25, 1996
(c) Commencement of Operations, February 5, 1997
(d) Commencement of Operations, February 10, 1997
(e) Commencement of Operations, February 21, 1997
(f) Commencement of Operations, March 6, 1997
(g) Commencement of Operations, March 19, 1997
(h) Commencement of Operations, March 26, 1997
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
For the years December 31, 1996 and 1997, Except as Noted
(Continued)
<TABLE>
<CAPTION>
Fully
Managed
Account(c)
____________
<S> <C>
NET ASSETS AT JANUARY 1, 1996 --
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, 1996 --
</TABLE>
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
For the years December 31, 1996 and 1997, Except as Noted
(Continued)
<TABLE>
<CAPTION>
Fully
Managed
Account(c)
____________
<S> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) $567,500
Net realized gain (loss) on investments 13,366
Net unrealized appreciation (depreciation) of investments (119,096)
____________
Net increase (decrease) in net assets resulting from operations 461,770
Changes from principal transactions:
Purchase payments 3,479,979
Contract distributions and terminations (75,626)
Transfer payments from (to) other Accounts and Fixed Account 4,590,007
____________
Increase in net assets derived from principal transactions 7,994,360
____________
Total increase 8,456,130
____________
NET ASSETS AT DECEMBER 31, 1997 $8,456,130
============
<FN>
(a) Commencement of Operations, April 1, 1996
(b) Commencement of Operations, March 25, 1996
(c) Commencement of Operations, February 5, 1997
(d) Commencement of Operations, February 10, 1997
(e) Commencement of Operations, February 21, 1997
(f) Commencement of Operations, March 6, 1997
(g) Commencement of Operations, March 19, 1997
(h) Commencement of Operations, March 26, 1997
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
For the years December 31, 1996 and 1997, Except as Noted
(Continued)
<TABLE>
<CAPTION>
Rising
Dividends
Account(d)
____________
<S> <C>
NET ASSETS AT JANUARY 1, 1996 --
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, 1996 --
</TABLE>
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
For the years December 31, 1996 and 1997, Except as Noted
(Continued)
<TABLE>
<CAPTION>
Rising
Dividends
Account(d)
____________
<S> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) $534,254
Net realized gain (loss) on investments 689,163
Net unrealized appreciation (depreciation) of investments 1,602,362
____________
Net increase (decrease) in net assets resulting from operations 2,825,779
Changes from principal transactions:
Purchase payments 10,120,021
Contract distributions and terminations (591,899)
Transfer payments from (to) other Accounts and Fixed Account 19,020,816
____________
Increase in net assets derived from principal transactions 28,548,938
____________
Total increase 31,374,717
____________
NET ASSETS AT DECEMBER 31, 1997 $31,374,717
============
<FN>
(a) Commencement of Operations, April 1, 1996
(b) Commencement of Operations, March 25, 1996
(c) Commencement of Operations, February 5, 1997
(d) Commencement of Operations, February 10, 1997
(e) Commencement of Operations, February 21, 1997
(f) Commencement of Operations, March 6, 1997
(g) Commencement of Operations, March 19, 1997
(h) Commencement of Operations, March 26, 1997
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
For the years December 31, 1996 and 1997, Except as Noted
(Continued)
<TABLE>
<CAPTION>
Small Cap
Account(c)
____________
<S> <C>
NET ASSETS AT JANUARY 1, 1996 --
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, 1996 --
</TABLE>
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
For the years December 31, 1996 and 1997, Except as Noted
(Continued)
<TABLE>
<CAPTION>
Small Cap
Account(c)
____________
<S> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) ($72,074)
Net realized gain (loss) on investments 250,413
Net unrealized appreciation (depreciation) of investments 652,308
____________
Net increase (decrease) in net assets resulting from operations 830,647
Changes from principal transactions:
Purchase payments 4,226,747
Contract distributions and terminations (466,764)
Transfer payments from (to) other Accounts and Fixed Account 6,810,781
____________
Increase in net assets derived from principal transactions 10,570,764
____________
Total increase 11,401,411
____________
NET ASSETS AT DECEMBER 31, 1997 $11,401,411
============
<FN>
(a) Commencement of Operations, April 1, 1996
(b) Commencement of Operations, March 25, 1996
(c) Commencement of Operations, February 5, 1997
(d) Commencement of Operations, February 10, 1997
(e) Commencement of Operations, February 21, 1997
(f) Commencement of Operations, March 6, 1997
(g) Commencement of Operations, March 19, 1997
(h) Commencement of Operations, March 26, 1997
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
For the years December 31, 1996 and 1997, Except as Noted
(Continued)
<TABLE>
<CAPTION>
Smith
Barney
Income and
Growth
Account
____________
<S> <C>
NET ASSETS AT JANUARY 1, 1996 $3,554,954
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) 331,124
Net realized gain (loss) 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
</TABLE>
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
For the years December 31, 1996 and 1997, Except as Noted
(Continued)
<TABLE>
<CAPTION>
Smith
Barney
Income and
Growth
Account
____________
<S> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) ($667,695)
Net realized gain (loss) on investments 173,271
Net unrealized appreciation (depreciation) of investments 9,763,541
____________
Net increase (decrease) in net assets resulting from operations 9,269,117
Changes from principal transactions:
Purchase payments 32,706,984
Contract distributions and terminations (1,296,354)
Transfer payments from (to) other Accounts and Fixed Account 11,679,049
____________
Increase in net assets derived from principal transactions 43,089,679
____________
Total increase 52,358,796
____________
NET ASSETS AT DECEMBER 31, 1997 $74,829,676
============
<FN>
(a) Commencement of Operations, April 1, 1996
(b) Commencement of Operations, March 25, 1996
(c) Commencement of Operations, February 5, 1997
(d) Commencement of Operations, February 10, 1997
(e) Commencement of Operations, February 21, 1997
(f) Commencement of Operations, March 6, 1997
(g) Commencement of Operations, March 19, 1997
(h) Commencement of Operations, March 26, 1997
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
For the years December 31, 1996 and 1997, Except as Noted
(Continued)
<TABLE>
<CAPTION>
Smith
Barney
International
Equity
Account
_____________
<S> <C>
NET ASSETS AT JANUARY 1, 1996 $1,785,234
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) (71,888)
Net realized gain (loss) 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
</TABLE>
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
For the years December 31, 1996 and 1997, Except as Noted
(Continued)
<TABLE>
<CAPTION>
Smith
Barney
International
Equity
Account
_____________
<S> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) ($263,079)
Net realized gain (loss) on investments 62,891
Net unrealized appreciation (depreciation) of investments (159,210)
_____________
Net increase (decrease) in net assets resulting from operations (359,398)
Changes from principal transactions:
Purchase payments 10,522,332
Contract distributions and terminations (391,223)
Transfer payments from (to) other Accounts and Fixed Account 2,996,275
_____________
Increase in net assets derived from principal transactions 13,127,384
_____________
Total increase 12,767,986
_____________
NET ASSETS AT DECEMBER 31, 1997 $23,573,048
=============
<FN>
(a) Commencement of Operations, April 1, 1996
(b) Commencement of Operations, March 25, 1996
(c) Commencement of Operations, February 5, 1997
(d) Commencement of Operations, February 10, 1997
(e) Commencement of Operations, February 21, 1997
(f) Commencement of Operations, March 6, 1997
(g) Commencement of Operations, March 19, 1997
(h) Commencement of Operations, March 26, 1997
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
For the years December 31, 1996 and 1997, Except as Noted
(Continued)
<TABLE>
<CAPTION>
Smith
Barney
High
Income
Account
____________
<S> <C>
NET ASSETS AT JANUARY 1, 1996 $790,940
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) 399,698
Net realized gain (loss) 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
</TABLE>
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
For the years December 31, 1996 and 1997, Except as Noted
(Continued)
<TABLE>
<CAPTION>
Smith
Barney
High
Income
Account
____________
<S> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) ($212,941)
Net realized gain (loss) on investments 109,408
Net unrealized appreciation (depreciation) of investments 1,805,213
____________
Net increase (decrease) in net assets resulting from operations 1,701,680
Changes from principal transactions:
Purchase payments 9,444,101
Contract distributions and terminations (348,882)
Transfer payments from (to) other Accounts and Fixed Account 2,199,023
____________
Increase in net assets derived from principal transactions 11,294,242
____________
Total increase 12,995,922
____________
NET ASSETS AT DECEMBER 31, 1997 $21,190,553
============
<FN>
(a) Commencement of Operations, April 1, 1996
(b) Commencement of Operations, March 25, 1996
(c) Commencement of Operations, February 5, 1997
(d) Commencement of Operations, February 10, 1997
(e) Commencement of Operations, February 21, 1997
(f) Commencement of Operations, March 6, 1997
(g) Commencement of Operations, March 19, 1997
(h) Commencement of Operations, March 26, 1997
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
For the years December 31, 1996 and 1997, Except as Noted
(Continued)
<TABLE>
<CAPTION>
Smith
Barney
Money
Market
Account
____________
<S> <C>
NET ASSETS AT JANUARY 1, 1996 $1,279,525
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) 86,557
Net realized gain (loss) 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
</TABLE>
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
For the years December 31, 1996 and 1997, Except as Noted
(Continued)
<TABLE>
<CAPTION>
Smith
Barney
Money
Market
Account
____________
<S> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) $294,311
Net realized gain (loss) on investments --
Net unrealized appreciation (depreciation) of investments --
____________
Net increase (decrease) in net assets resulting from operations 294,311
Changes from principal transactions:
Purchase payments 72,869,826
Contract distributions and terminations (272,427)
Transfer payments from (to) other Accounts and Fixed Account (64,046,876)
____________
Increase in net assets derived from principal transactions 8,550,523
____________
Total increase 8,844,834
____________
NET ASSETS AT DECEMBER 31, 1997 $12,538,824
============
<FN>
(a) Commencement of Operations, April 1, 1996
(b) Commencement of Operations, March 25, 1996
(c) Commencement of Operations, February 5, 1997
(d) Commencement of Operations, February 10, 1997
(e) Commencement of Operations, February 21, 1997
(f) Commencement of Operations, March 6, 1997
(g) Commencement of Operations, March 19, 1997
(h) Commencement of Operations, March 26, 1997
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
For the years December 31, 1996 and 1997, Except as Noted
(Continued)
<TABLE>
<CAPTION>
Appreciation
Account(b)
____________
<S> <C>
NET ASSETS AT JANUARY 1, 1996 --
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) $407,946
Net realized gain (loss) 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
</TABLE>
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
For the years December 31, 1996 and 1997, Except as Noted
(Continued)
<TABLE>
<CAPTION>
Appreciation
Account(b)
____________
<S> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) $1,682,902
Net realized gain (loss) on investments 7,316
Net unrealized appreciation (depreciation) of investments 1,159,392
____________
Net increase (decrease) in net assets resulting from operations 2,849,610
Changes from principal transactions:
Purchase payments 17,038,981
Contract distributions and terminations (366,425)
Transfer payments from (to) other Accounts and Fixed Account 5,412,224
____________
Increase in net assets derived from principal transactions 22,084,780
____________
Total increase 24,934,390
____________
NET ASSETS AT DECEMBER 31, 1997 $30,520,554
============
<FN>
(a) Commencement of Operations, April 1, 1996
(b) Commencement of Operations, March 25, 1996
(c) Commencement of Operations, February 5, 1997
(d) Commencement of Operations, February 10, 1997
(e) Commencement of Operations, February 21, 1997
(f) Commencement of Operations, March 6, 1997
(g) Commencement of Operations, March 19, 1997
(h) Commencement of Operations, March 26, 1997
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
For the years December 31, 1996 and 1997, Except as Noted
(Continued)
<TABLE>
<CAPTION>
Select
High
Growth
Account(e)
____________
<S> <C>
NET ASSETS AT JANUARY 1, 1996 --
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, 1996 --
</TABLE>
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
For the years December 31, 1996 and 1997, Except as Noted
(Continued)
<TABLE>
<CAPTION>
Select
High
Growth
Account(e)
____________
<S> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) ($96,364)
Net realized gain (loss) on investments 36,105
Net unrealized appreciation (depreciation) of investments 109,908
____________
Net increase (decrease) in net assets resulting from operations 49,649
Changes from principal transactions:
Purchase payments 15,566,252
Contract distributions and terminations (243,694)
Transfer payments from (to) other Accounts and Fixed Account 4,915,575
____________
Increase in net assets derived from principal transactions 20,238,133
____________
Total increase 20,287,782
____________
NET ASSETS AT DECEMBER 31, 1997 $20,287,782
============
<FN>
(a) Commencement of Operations, April 1, 1996
(b) Commencement of Operations, March 25, 1996
(c) Commencement of Operations, February 5, 1997
(d) Commencement of Operations, February 10, 1997
(e) Commencement of Operations, February 21, 1997
(f) Commencement of Operations, March 6, 1997
(g) Commencement of Operations, March 19, 1997
(h) Commencement of Operations, March 26, 1997
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
For the years December 31, 1996 and 1997, Except as Noted
(Continued)
<TABLE>
<CAPTION>
Select
Growth
Account(f)
____________
<S> <C>
NET ASSETS AT JANUARY 1, 1996 --
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, 1996 --
</TABLE>
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
For the years December 31, 1996 and 1997, Except as Noted
(Continued)
<TABLE>
<CAPTION>
Select
Growth
Account(f)
____________
<S> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) ($142,547)
Net realized gain (loss) on investments 3,569
Net unrealized appreciation (depreciation) of investments 902,340
____________
Net increase (decrease) in net assets resulting from operations 763,362
Changes from principal transactions:
Purchase payments 22,739,599
Contract distributions and terminations (161,932)
Transfer payments from (to) other Accounts and Fixed Account 7,235,900
____________
Increase in net assets derived from principal transactions 29,813,567
____________
Total increase 30,576,929
____________
NET ASSETS AT DECEMBER 31, 1997 $30,576,929
============
<FN>
(a) Commencement of Operations, April 1, 1996
(b) Commencement of Operations, March 25, 1996
(c) Commencement of Operations, February 5, 1997
(d) Commencement of Operations, February 10, 1997
(e) Commencement of Operations, February 21, 1997
(f) Commencement of Operations, March 6, 1997
(g) Commencement of Operations, March 19, 1997
(h) Commencement of Operations, March 26, 1997
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
For the years December 31, 1996 and 1997, Except as Noted
(Continued)
<TABLE>
<CAPTION>
Select
Balanced
Account(e)
____________
<S> <C>
NET ASSETS AT JANUARY 1, 1996 --
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, 1996 --
</TABLE>
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
For the years December 31, 1996 and 1997, Except as Noted
(Continued)
<TABLE>
<CAPTION>
Select
Balanced
Account(e)
____________
<S> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) ($150,561)
Net realized gain (loss) on investments 3,850
Net unrealized appreciation (depreciation) of investments 1,117,979
____________
Net increase (decrease) in net assets resulting from operations 971,268
Changes from principal transactions:
Purchase payments 20,980,292
Contract distributions and terminations (142,490)
Transfer payments from (to) other Accounts and Fixed Account 7,697,442
____________
Increase in net assets derived from principal transactions 28,535,244
____________
Total increase 29,506,512
____________
NET ASSETS AT DECEMBER 31, 1997 $29,506,512
============
<FN>
(a) Commencement of Operations, April 1, 1996
(b) Commencement of Operations, March 25, 1996
(c) Commencement of Operations, February 5, 1997
(d) Commencement of Operations, February 10, 1997
(e) Commencement of Operations, February 21, 1997
(f) Commencement of Operations, March 6, 1997
(g) Commencement of Operations, March 19, 1997
(h) Commencement of Operations, March 26, 1997
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
For the years December 31, 1996 and 1997, Except as Noted
(Continued)
<TABLE>
<CAPTION>
Select
Conservative
Account(h)
____________
<S> <C>
NET ASSETS AT JANUARY 1, 1996 --
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, 1996 --
</TABLE>
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
For the years December 31, 1996 and 1997, Except as Noted
(Continued)
<TABLE>
<CAPTION>
Select
Conservative
Account(h)
____________
<S> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) ($34,197)
Net realized gain (loss) on investments 21,770
Net unrealized appreciation (depreciation) of investments 245,961
____________
Net increase (decrease) in net assets resulting from operations 233,534
Changes from principal transactions:
Purchase payments 5,636,991
Contract distributions and terminations (77,916)
Transfer payments from (to) other Accounts and Fixed Account 1,636,511
____________
Increase in net assets derived from principal transactions 7,195,586
____________
Total increase 7,429,120
____________
NET ASSETS AT DECEMBER 31, 1997 $7,429,120
============
<FN>
(a) Commencement of Operations, April 1, 1996
(b) Commencement of Operations, March 25, 1996
(c) Commencement of Operations, February 5, 1997
(d) Commencement of Operations, February 10, 1997
(e) Commencement of Operations, February 21, 1997
(f) Commencement of Operations, March 6, 1997
(g) Commencement of Operations, March 19, 1997
(h) Commencement of Operations, March 26, 1997
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
For the years December 31, 1996 and 1997, Except as Noted
(Continued)
<TABLE>
<CAPTION>
Select
Income
Account(g)
____________
<S> <C>
NET ASSETS AT JANUARY 1, 1996 --
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, 1996 --
</TABLE>
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
For the years December 31, 1996 and 1997, Except as Noted
(Continued)
<TABLE>
<CAPTION>
Select
Income
Account(g)
____________
<S> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) ($14,504)
Net realized gain (loss) on investments 19,963
Net unrealized appreciation (depreciation) of investments 100,682
____________
Net increase (decrease) in net assets resulting from operations 106,141
Changes from principal transactions:
Purchase payments 2,217,986
Contract distributions and terminations (55,407)
Transfer payments from (to) other Accounts and Fixed Account 497,653
____________
Increase in net assets derived from principal transactions 2,660,232
____________
Total increase 2,766,373
____________
NET ASSETS AT DECEMBER 31, 1997 $2,766,373
============
<FN>
(a) Commencement of Operations, April 1, 1996
(b) Commencement of Operations, March 25, 1996
(c) Commencement of Operations, February 5, 1997
(d) Commencement of Operations, February 10, 1997
(e) Commencement of Operations, February 21, 1997
(f) Commencement of Operations, March 6, 1997
(g) Commencement of Operations, March 19, 1997
(h) Commencement of Operations, March 26, 1997
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
For the years December 31, 1996 and 1997, Except as Noted
(Continued)
<TABLE>
<CAPTION>
Combined
_______________
<S> <C>
NET ASSETS AT JANUARY 1, 1996 $67,131,685
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) 7,662,474
Net realized gain (loss) on investments 1,140,512
Net unrealized appreciation (depreciation) of investments 15,142,811
_______________
Net increase in net assets resulting from operations 23,945,797
Changes from principal transactions:
Purchase payments 251,088,215
Contract distributions and terminations (5,077,202)
Transfer payments from (to) other Accounts and Fixed Account 6,745,513
_______________
Increase in net assets derived from principal transactions 252,756,526
_______________
Total increase 276,702,323
_______________
NET ASSETS AT DECEMBER 31, 1996 343,834,008
</TABLE>
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
STATEMENTS OF CHANGES IN NET ASSETS
For the years December 31, 1996 and 1997, Except as Noted
(Continued)
<TABLE>
<CAPTION>
Combined
_______________
<S> <C>
INCREASE IN NET ASSETS
Operations:
Net investment income (loss) $22,449,562
Net realized gain (loss) on investments 11,863,276
Net unrealized appreciation (depreciation) of investments 47,281,155
_______________
Net increase (decrease) in net assets resulting from operations 81,593,993
Changes from principal transactions:
Purchase payments 619,254,759
Contract distributions and terminations (32,105,065)
Transfer payments from (to) other Accounts and Fixed Account 489,615
_______________
Increase in net assets derived from principal transactions 587,639,309
_______________
Total increase 669,233,302
_______________
NET ASSETS AT DECEMBER 31, 1997 $1,013,067,310
===============
<FN>
(a) Commencement of Operations, April 1, 1996
(b) Commencement of Operations, March 25, 1996
(c) Commencement of Operations, February 5, 1997
(d) Commencement of Operations, February 10, 1997
(e) Commencement of Operations, February 21, 1997
(f) Commencement of Operations, March 6, 1997
(g) Commencement of Operations, March 19, 1997
(h) Commencement of Operations, March 26, 1997
</TABLE>
See accompanying notes.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
NOTE 1 - INVESTMENT AND ACCOUNTING POLICIES
Equitable Life Insurance Company of Iowa Separate Account A (the "Separate
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 Separate 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 Contractowners. Investments
are stated at the closing net asset values per share on December 31, 1997.
The Separate Account is a unit investment trust, registered with the
Securities and Exchange Commission under the Investment Company Act of 1940,
as amended. As of December 31, 1997, the Separate Account consisted of
twenty-three investment accounts. The assets in each account are invested
in shares of a designated Series ("Series," which may also be referred to as
a "Portfolio") of mutual funds of the Equi-Select Series Trust, the Warburg
Pincus Trust, The GCG Trust, Travelers Series Fund, Inc., the Greenwich
Street Series Fund (formerly the Smith Barney Series Fund, Inc.), or Smith
Barney Concert Allocation Series, Inc. (the "Trusts"). The Trusts are open
ended management investment companies. Nine of the accounts (the
Advantage, International Fixed Income, Money Market, Mortgage-Backed Securities,
OTC, Research, Total Return, Growth & Income and Value + Growth) are invested
in specified portfolios of the Equi-Select Series Trust, one of which
(International Equity) is invested in the International Equity Portfolio of the
Warburg Pincus Trust and three of which (the Fully Managed Series, Rising
Dividends Series, and Small Cap Series) are invested in specific series of
the GCG Trust as directed by eligible Contractowners. Activity in these
thirteen investment accounts is available to Contractowners of the
Equi-Select Variable Annuity product.
The remaining ten investment accounts are invested in specific portfolios,
four of which (Smith Barney Income and Growth, Smith Barney International
Equity, Smith Barney High Income, and Smith Barney Money Market) are invested
in the Travelers Series Fund, Inc., one of which (Appreciation) is invested in
the Greenwich Street Series Fund, and five of which (Select High Growth, Select
Growth, Select Balanced, Select Conservative, and Select Income) are invested
in the Smith Barney Concert Allocation Series, Inc. These ten investment
accounts and the Research, OTC, and Total Return Accounts, which invest in the
Equi-Select Series Trust, are available to Contractowners of the PrimeElite
Variable Annuity product.
In 1997, the Separate Account began offering certain accounts in The GCG
Trust. These accounts include the Fully Managed and Small Cap Series which
commenced operations in the Separate Account on February 5, 1997 and the
Rising Dividends on February 10, 1997. Also in 1997, the Separate 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 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 1 - INVESTMENT AND ACCOUNTING POLICIES - CONTINUED
Investments are made in shares of a Series or Portfolio of the Trusts and are
valued at the net asset value per share of the respective Series or Portfolio
of the Trusts. Investment transactions in each Series or Portfolio of the
Trusts are recorded on the trade date. Distributions of net investment
income and capital gains of each Series or Portfolio of the Trusts are
recognized on the ex-distribution date. Realized gains and losses on
redemptions of the shares of the Series or Portfolio of the Trusts are
determined on the specific identification basis.
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 $9,273,415 and $46,284, respectively, for the period ended December
31, 1997 ($2,218,969 and $266,096, respectively, for the year ended December
31, 1996).
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, 1997, annual contract charges amounted to
$331,304, and for the year ended December 31, 1996, these charges
amounted to $71,621.
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,
1997, transfer charges amounted to $9,603, and for the year ended
December 31, 1996 these charges amounted to $622. 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 Separate 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 Separate 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 ended
December 31, 1997
____________________________
Purchases Sales
____________________________
<S> <C> <C>
Equi-Select Series Trust:
Advantage Portfolio $12,290,477 $9,124,418
International Fixed Income Portfolio 7,088,301 2,619,891
Money Market Portfolio 104,148,794 87,620,830
Mortgage-Backed Securities Portfolio 8,725,334 1,628,960
OTC Portfolio 55,385,944 12,741,646
Research Portfolio 124,115,511 11,674,173
Total Return Portfolio 79,757,256 1,933,369
Growth & Income Portfolio 60,425,134 5,940,764
Value + Growth Portfolio 45,480,583 4,477,639
Warburg Pincus Trust:
International Equity Portfolio 27,122,604 4,349,530
The GCG Trust:
Fully Managed Series 8,851,683 289,823
Rising Dividends Series 33,451,931 4,368,739
Small Cap Series 12,148,404 1,649,714
Travelers Series Fund, Inc.:
Smith Barney Income and Growth Portfolio 42,878,168 456,184
Smith Barney International Equity Portfolio 13,044,815 180,510
Smith Barney High Income Portfolio 11,885,456 804,155
Smith Barney Money Market Portfolio 32,473,459 23,622,410
Greenwich Street Series Fund:
Appreciation Portfolio 23,836,834 69,152
Smith Barney Concert
Allocation Series, Inc.:
Select High Growth Portfolio 20,497,724 355,955
Select Growth Portfolio 29,748,889 77,869
Select Balanced Portfolio 28,437,186 52,503
Select Conservative Portfolio 7,503,480 342,091
Select Income Portfolio 2,914,165 268,437
____________________________
Total $792,212,132 $174,648,762
============================
</TABLE>
NOTE 4 - PURCHASES AND SALES OF INVESTMENT SECURITIES - CONTINUED
<TABLE>
<CAPTION>
Period ended
December 31, 1996
____________________________
Purchases Sales
____________________________
<S> <C> <C>
Equi-Select Series Trust:
Advantage Portfolio $13,475,395 $2,445,892
International Fixed Income Portfolio 5,234,780 557,676
Money Market Portfolio 43,852,637 30,504,481
Mortgage-Backed Securities Portfolio 8,065,695 1,682,068
OTC Portfolio 28,902,017 341,386
Research Portfolio 54,653,079 1,744,943
Total Return Portfolio 39,063,198 532,334
Growth & Income Portfolio 25,439,201 179,200
Value + Growth Portfolio 13,221,408 208,125
Warburg Pincus Trust:
International Equity Portfolio 21,093,357 367,519
The GCG Trust:
Fully Managed Series -- --
Rising Dividends Series -- --
Small Cap Series -- --
Travelers Series Fund, Inc.:
Smith Barney Income and Growth Portfolio 17,726,592 542,555
Smith Barney International Equity Portfolio 8,397,915 126,647
Smith Barney High Income Portfolio 7,606,805 320,692
Smith Barney Money Market Portfolio 11,135,757 8,725,874
Greenwich Street Series Fund:
Appreciation Portfolio 5,719,716 100,280
Smith Barney Concert
Allocation Series, Inc.:
Select High Growth Portfolio -- --
Select Growth Portfolio -- --
Select Balanced Portfolio -- --
Select Conservative Portfolio -- --
Select Income Portfolio -- --
____________________________
Total $303,587,552 $48,379,672
============================
</TABLE>
NOTE 5 - SUMMARY OF CHANGES FROM UNIT TRANSACTIONS
Transactions in units were as follows:
<TABLE>
<CAPTION>
Period ended
December 31, 1997
____________________________
Purchases Sales
____________________________
<S> <C> <C>
Equi-Select Series Trust:
Advantage Account 988,376 805,145
International Fixed Income Account 511,014 213,732
Money Market Account 9,788,350 8,382,113
Mortgage-Backed Securities Account 637,610 141,260
OTC Account 2,986,261 763,994
Research Account 6,629,166 633,673
Total Return Account 5,022,503 132,764
Growth & Income Account 3,939,022 468,665
Value + Growth Account 3,422,916 334,897
Warburg Pincus Trust:
International Equity Account 2,309,409 427,281
The GCG Trust:
Fully Managed Account 445,585 15,573
Rising Dividends Account 1,786,818 225,115
Small Cap Account 1,013,794 128,770
Travelers Series Fund, Inc.:
Smith Barney Income and Growth Account 2,652,067 19,906
Smith Barney International Equity Account 939,196 10,039
Smith Barney High Income Account 935,447 61,286
Smith Barney Money Market Account 3,064,438 2,270,529
Greenwich Street Series Fund:
Appreciation Account 1,684,041 3,346
Smith Barney Concert
Allocation Series, Inc.:
Select High Growth Account 1,899,205 32,872
Select Growth Account 2,774,943 7,330
Select Balanced Account 2,672,747 4,406
Select Conservative Account 702,940 31,706
Select Income Account 275,346 24,505
</TABLE>
NOTE 5 - SUMMARY OF CHANGES FROM UNIT TRANSACTIONS - CONTINUED
<TABLE>
<CAPTION>
Period ended
December 31, 1996
____________________________
Purchases Sales
____________________________
<S> <C> <C>
Equi-Select Series Trust:
Advantage Account 1,374,019 396,282
International Fixed Income Account 502,939 108,758
Money Market Account 9,656,473 8,432,754
Mortgage-Backed Securities Account 806,213 255,416
OTC Account 2,002,398 159,271
Research Account 3,947,429 357,941
Total Return Account 3,298,269 256,496
Growth & Income Account 2,280,154 51,266
Value + Growth Account 1,294,691 56,342
Warburg Pincus Trust:
International Equity Account 2,094,800 68,096
The GCG Trust:
Fully Managed Account -- --
Rising Dividends Account -- --
Small Cap Account -- --
Travelers Series Fund, Inc.:
Smith Barney Income and Growth Account 1,330,977 46,462
Smith Barney International Equity Account 663,194 12,607
Smith Barney High Income Account 623,760 25,307
Smith Barney Money Market Account 1,696,660 1,472,802
Greenwich Street Series Fund:
Appreciation Account 509,854 12,820
Smith Barney Concert
Allocation Series, Inc.:
Select High Growth Account -- --
Select Growth Account -- --
Select Balanced Account -- --
Select Conservative Account -- --
Select Income Account -- --
</TABLE>
NOTE 6 - NET ASSETS
Net assets at December 31, 1997 consisted of the following:
<TABLE>
<CAPTION>
International Mortgage-
Fixed Money Backed
Advantage Income Market Securities
Account Account Account Account
________________________________________________________
<S> <C> <C> <C> <C>
Unit transactions $16,689,180 $11,557,842 $34,338,801 $16,420,839
Accumulated net invest-
ment income (loss) 1,419,781 1,166,386 1,246,013 1,195,458
Net unrealized appre-
ciation (depreciation)
of investments (280,919) (819,576) -- 57,491
________________________________________________________
$17,828,042 $11,904,652 $35,584,814 $17,673,788
========================================================
</TABLE>
<TABLE>
<CAPTION>
Total Growth &
OTC Research Return Income
Account Account Account Account
________________________________________________________
<S> <C> <C> <C> <C>
Unit transactions $74,852,626 $174,593,032 $126,121,822 $73,610,074
Accumulated net invest-
ment income (loss) 8,514,637 10,054,057 5,451,568 7,386,070
Net unrealized appre-
ciation (depreciation)
of investments 5,989,601 19,873,088 17,278,265 6,812,199
________________________________________________________
$89,356,864 $204,520,177 $148,851,655 $87,808,343
========================================================
</TABLE>
<TABLE>
<CAPTION>
Value + International Fully Rising
Growth Equity Managed Dividends
Account Account Account Account
________________________________________________________
<S> <C> <C> <C> <C>
Unit transactions $54,449,097 $41,191,310 $7,994,360 $28,548,938
Accumulated net invest-
ment income (loss) 602,152 2,472,313 580,866 1,223,417
Net unrealized appre-
ciation (depreciation)
of investments 1,322,705 (4,950,231) (119,096) 1,602,362
________________________________________________________
$56,373,954 $38,713,392 $8,456,130 $31,374,717
========================================================
</TABLE>
NOTE 6 - NET ASSETS - CONTINUED
<TABLE>
<CAPTION>
Smith Smith Smith
Barney Barney Barney
Small Income and International High
Cap Growth Equity Income
Account Account Account Account
________________________________________________________
<S> <C> <C> <C> <C>
Unit transactions $10,570,764 $63,380,035 $23,245,235 $18,963,957
Accumulated net invest-
ment income (loss) 178,339 (120,246) (275,705) 326,526
Net unrealized appre-
ciation (depreciation)
of investments 652,308 11,569,887 603,518 1,900,070
________________________________________________________
$11,401,411 $74,829,676 $23,573,048 $21,190,553
========================================================
</TABLE>
<TABLE>
<CAPTION>
Smith
Barney Select
Money High Select
Market Appreciation Growth Growth
Account Account Account Account
________________________________________________________
<S> <C> <C> <C> <C>
Unit transactions $12,226,693 $27,304,532 $20,238,133 $29,813,567
Accumulated net invest-
ment income (loss) 312,131 2,098,164 (60,259) (138,978)
Net unrealized appre-
ciation (depreciation)
of investments -- 1,117,858 109,908 902,340
________________________________________________________
$12,538,824 $30,520,554 $20,287,782 $30,576,929
========================================================
</TABLE>
<TABLE>
<CAPTION>
Select
Select Conser- Select
Balanced vative Income
Account Account Account Combined
________________________________________________________
<S> <C> <C> <C> <C>
Unit transactions $28,535,244 $7,195,586 $2,660,232 $904,501,899
Accumulated net invest-
ment income (loss) (146,711) (12,427) 5,459 43,479,011
Net unrealized appre-
ciation (depreciation)
of investments 1,117,979 245,961 100,682 $65,086,400
________________________________________________________
$29,506,512 $7,429,120 $2,766,373 $1,013,067,310
========================================================
</TABLE>
NOTE 7 - YEAR 2000 (UNAUDITED):
Based on a study of its computer software and hardware, Equitable of Iowa
Companies, Inc. ("EIC"), the Company's parent, has determined the Company's
exposure to the Year 2000 change of the century date issue. EIC has
developed a plan to modify its information technology to be ready for the
Year 2000. Efforts began in 1997 to modify its systems. This project is
expected to be substantially completed by the second quarter of 1999. While
additional testing will be conducted on its systems through the Year 2000,
the Company does not expect this project to have a significant effect on
operations. To mitigate the effect of outside influences and other
dependencies relative to the Year 2000, the Company will be contacting
significant customers, suppliers and other third parties. To the extent
these third parties would be unable to transact business in the Year 2000 and
thereafter, the Company's operations could be adversely affected.
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
A. FINANCIAL STATEMENTS
The following audited financial statements of the Company prepared in
accordance with statutory accounting practices for the years ended
December 31, 1997, 1996 and 1995 (as well as the auditors' report thereon)
are included in Part B hereof:
Audited Consolidated Financial Statements:
1. Report of Independent Auditors
2. Balance Sheets (Statutory Basis) - as of December 31, 1997 and 1996.
3. Statements of Operations (Statutory Basis) - for the years ended
December 31, 1997, 1996, and 1995.
4. Statements of Changes in Capital and Surplus (Statutory Basis) - for
the years ended December 31, 1997, 1996, and 1995.
5. Statements of Cash Flows (Statutory Basis) - for the years ended
December 31, 1997, 1996, and 1995.
6. Notes to Financial Statements - December 31, 1997.
Schedules to Consolidated Financial Statements - December 31, 1997:
Schedule I - Summary of Investments Other Than Investment in
Related Parties
Schedule III - Supplementary Insurance Information
Schedule IV - Reinsurance
The following audited financial statements of the Company prepared in
accordance with generally accepted accounting principles for the years ended
December 31, 1997, 1996 and 1996 (as well as the auditors' report thereon)
are included in Part B hereof:
Audited Consolidated Financial Statements:
1. Report of Independent Auditors
2. Consolidated Balance Sheets - Post-Merger as of December 31,
1997 and Pre-Merger as of December 31, 1996
3. Consolidated Statements of Income - Post-Merger for the period
October 25, 1997 through December 31, 1997, Pre-Merger for
the period January 1, 1997 through October 24, 1997, and
and for the year ended December 31, 1996
4. Consolidated Statements of Changes in Stockholder's Equity -- Post-
Merger for the period October 25, 1997 through December 31,
1997, Pre-Merger for the periods January 1, 1997 through
October 24, 1997, and for the year ended December 31, 1996
5. Consolidated Statements of Cash Flows - for the years ended December
31, 1997, 1996, and 1995.
6. Notes to Consolidated Financial Statements - December 31, 1997.
Consolidated Statements of Cash Flows -- Post-Merger for the period
October 25, 1997 through December 31, 1997, Post-Acquisition
for the periods January 1, 1997 through October 24, 1997, and
August 14, 1996 through December 31, 1996 and Pre-Acquisition
for the period January 1, 1996 through August 13, 1996 and for
the year ended December 31, 1995
Notes to Consolidated Financial Statements --December 31, 1997
Schedules to Consolidated Financial Statements - December 31, 1997:
Schedule I - Summary of Investments Other Than Investment in
Related Parties
Schedule III - Supplementary Insurance Information
Schedule IV - Reinsurance
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under
the related instructions or are inapplicable and therefore have been omitted.
The following financial statements of the Separate Account are included in
Part B hereof:
Audited Financial Statements:
1. Statements of Net Assets December 31, 1997.
2. Statements of Operations For the year ended December 31, 1997.
3. Statements of Changes in Net Assets For the years ended
December 31, 1996 and 1997.
4. Notes to Financial Statements December 31, 1997.
B. EXHIBITS
1. Resolution of Board of Directors of the Company authorizing the
establishment of the Separate Account.**
2. Not Applicable.
3. Principal Underwriter's Agreement dated October 1, 1994 between
Equitable Life Insurance Company of Iowa on behalf of the Registrant
and Equitable of Iowa Securities Network, Inc.**
4. Individual Flexible Purchase Payment Deferred Variable Annuity
Contract.**
5. Application Form.**
6. (i) Copy of Restated Articles of Incorporation of the Company.*
(ii) Copy of the Restated Bylaws of the Company.*
7. Not Applicable.
8. (i) Form of Fund Participation Agreement between the Company and
Smith Barney/Travelers Series Fund, Inc.*
(ii) Form of Fund Participation Agreement between the Company
and Warburg Pincus Trust.***
(iii)Form of Fund Participation Agreement between the Company and
Smith Barney Concert Allocation Series Inc. (to be filed by
Amendment).
(iv) Form of Participation Agreement between the Company and PIMCO
Variable Insurance Trust.
9. Opinion and Consent of Counsel.
10. Consent of Independent Auditors.
11. Not Applicable.
12. (i) Agreement Governing Initial Contribution to Equi-Select Series
Trust by Equitable Life Insurance Company of Iowa dated
September 15, 1994.**
(ii) Agreement Governing Contribution of Working Capital to
Equi-Select Series Trust by Equitable Life Insurance Company of
Iowa dated October 4, 1994.**
(iii) Agreement Governing Initial Contribution to Equi-Select Series
Trust by Equitable Life Insurance Company of Iowa dated March
20, 1996.**
(iv) Agreement Governing Contribution of Working Capital to
Equi-Select Series Trust by Equitable Life Insurance Company of
Iowa dated April 1, 1996.**
13. Performance Calculation Information
(i) SEC Standard Total Return Calculations for Money Market
SubAccounts****
(ii) Nonstandard Total Return Calculations****
(iii) SEC Standard Total Return Calculations for Non Money Market
SubAccounts and Yield Calculations for Money Market
SubAccounts***
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
The following are the Executive Officers and Directors of the
Company:
<TABLE>
<CAPTION>
<S> <C>
Name and Principal Position and Offices
Business Address with Depositor
- ------------------------ ----------------------------------------
Frederick S. Hubbell Chairman of the Board and Director
909 Locust Street
Des Moines, Iowa 50309
Paul E. Larson Director and President
909 Locust Street
Des Moines, Iowa 50309
Thomas L. May Executive Vice President, Chief
909 Locust Street Marketing Officer and Director
Des Moines, Iowa 50309
James R. Mumford General Counsel, Secretary,
909 Locust Street Assistant Treasurer and Director
Des Moines, Iowa 50309
Doug Lourens Vice President, Corporate Actuary
909 Locust Street and Assistant Secretary
Des Moines, Iowa 50309
Beth B. Neppl Vice President-
909 Locust Street Human Resources and Director
Des Moines, Iowa 50309
Dennis D. Hargens Treasurer
909 Locust Street
Des Moines, Iowa 50309
Jerome L. Sychowski Senior Vice President and Chief
909 Locust Street Information Officer and Director
Des Moines, Iowa 50309
David A. Terwilliger Vice President, Controller, Assistant
909 Locust Street Treasurer and Assistant Secretary and
Des Moines, Iowa 50309 Director
Christopher R. Welp Vice President and Director
909 Locust Street
Des Moines, Iowa 50309
Marvin W. Alexander Vice President and Director
909 Locust Street
Des Moines, Iowa 50309
Susan B. Watson Senior Vice President and Chief
909 Locust Street Financial Officer and Director
Des Moines, Iowa 50309
</TABLE>
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
As of December 31, 1997, the subsidiaries of ING Groep, N.V. the Company's
ultimate parent, are as follows:
ING GROUP - U.S.A. Holding Company System
As of December 31, 1997
ING Groep, N.V. (The Netherlands) - No FEIN (non-insurer)
ING Bank N.V. (The Netherlands) - No FEIN (non-insurer)
ING Verzekeringen N.V. (The Netherlands) - No FEIN (non-insurer)
ING Insurance International B.V. (The Netherlands) - No FEIN
(non-insurer)
Nederlands Reassurantie Groep Holding N.V. (The Netherlands)
(non-insurer)
NRG America Holding Company (Pennsylvania) (non-insurer)
(23-2074221)
NRG America Syndicate (New York) (non-insurer) (22-2281839)
NRG America Management Corporation (Pennsylvania) (23-1667532)
Philadelphia Reinsurance Corporation (Pennsylvania) (23-1620930)
Nationale-Nederlanden Intertrust B.V. (The Netherlands) (non-insurer)
NNUS Realty Corporation (Delaware) (non-insurer) (13-3062172)
ING America Insurance Holdings, Inc. (Delaware) (non-insurer)
(02-0333654)
Equitable of Iowa Companies, Inc. (Delaware) (non-insurer)
Directed Services, Inc. (New York) (non-insurer)
Equitable Investment Services, Inc. (Iowa) (non-insurer)
Equitable Life Insurance Company of Iowa (Iowa) (insurer)
Equitable American Insurance Company(Iowa) (insurer)
Equitable Creative Services, Ltd. (Iowa) (non-insurer)
Equitable Companies (Iowa) (non-insurer)
CLC, Ltd. (75%) (Iowa) (non-insurer)
Equitable American Marketing Services, Inc. (Iowa)
(non-insurer)
Equitable Marketing Services, Inc. (Iowa)
(non-insurer)
Younkers Insurance & Investments, Ltd. (Iowa)
(non-insurer)
USG Annuity & Life Company (Oklahoma) (insurer)
USGL Service Corporation (Iowa) (non-insurer)
Equitable of Iowa Companies Capital Trust (Delaware)
(non-insurer)
Equitable of Iowa Companies Capital Trust II (Delaware)
(non-insurer)
Equitable of Iowa Securities Network, Inc. (Iowa) (non-insurer)
Golden American Life Insurance Company (Delaware) (insurer)
First Golden American Life Insurance Company of New York
(New York) (insurer)
Locust Street Securities, Inc. (Iowa) (non-insurer)
Shiloh Farming Company (Louisiana) (non-insurer)
Tower Locust, Ltd. (Iowa) (non-insurer)
ING America Life Corporation (Georgia) (non-insurer) (58-1360182)
GAC Capital, Inc. (Delaware) (non-insurer) (51-0266924)
Life Insurance Company of Georgia (Georgia) (insurer)
(58-0298930)
Southland Life Insurance Company (Texas) (insurer)
(75-0572420)
Springstreet Associates, Inc. (Georgia) (non-insurer)
(58-1822054)
Security Life of Denver Insurance Company (Colorado) (insurer)
(84-0499703)
First ING Life Insurance Company of New York (New York)
(13-2740556)
First Secured Mortgage Deposit Corporation (Colorado)
(non-insurer) (84-1086427)
ING America Equities, Inc. (Colorado) (non-insurer)
(84-0499703)
Midwestern United Life Insurance Company (Indiana) (insurer)
(35-0838945)
Wilderness Associates (Colorado) (non-insurer)
Afore Bital ING, S. A. de C. V. (Mexico) (non-insurer)
Columbine Life Insurance Company (Colorado) (insurer) (52-1222820)
ING Investment Management LLC (Delaware) (non-insurer)
(58-1515059)
ING North America Insurance Corporation (Delaware)
(non-insurer) (52-1317217)
ING Seguros Sociedad Anonima de Capital Variable (Mexico)
(insurer)
Lion Custom Investments LLC (Delaware) (non-insurer)
MIA Office Americas, Inc. (Georgia) (non-insurer)
Orange Investment Enterprises, Inc. (Delaware) (non-insurer)
Security Life Assignment Corp. (Colorado) (insurer)
Security Life of Denver International, Ltd. (Bermuda) (insurer)
SLR Management, Ltd. (Bermuda) (non-insurer)
VESTAX Capital Corporation (Ohio) (non-insurer)
PMG Agency, Inc. (Ohio) (non-insurer)
VESTAX Securities Corp. (Ohio) (non-insurer)
VTX Agency Inc. (Ohio) (non-insurer)
VTX Agency of Michingan, Inc. (Michigan) (non-insurer)
ING U S P&C Corporation, Inc. (Delaware) (non-insurer) (51-0290450)
Alabama First Insurance Company (Alabama) (insurer) (63-0830057)
America First Insurance Company (New Hampshire) (insurer)
(58-0953149)
Cooling Grumme Mumford Company, Inc. (Indiana) (non-insurer)
(35-6018566)
Diversified Settlements, Inc. (New Hampshire) (non-insurer)
(02-0424648)
Excelsior Insurance Company (New Hampshire) (insurer)
(15-0302550)
Indiana Insurance Company (Indiana) (insurer) (35-0410010)
Consolidated Insurance Company (Indiana) (insurer)
(35-6018568)
Peerless Insurance Company (New Hampshire) (insurer)
(02-0177030)
The Netherlands Insurance Company (New Hampshire) (insurer)
(02-0342937)
ITEM 27. NUMBER OF CONTRACT OWNERS
As of March 31, 1997, there were 6,538 Qualified Contract Owners and 8,042
Non-Qualified Contract Owners.
ITEM 28. INDEMNIFICATION
The Restated Articles of Incorporation of the Company (Article VII)
provide, in part, that:
Section 1. In the manner and to the fullest extent permitted by the Iowa
Business Corporation Act as the same now exists or may hereafter be amended,
the Corporation shall indemnify directors, officers, employees and agents and
shall pay or reimburse them for reasonable expenses in any proceeding to which
said person is or was a party.
Section 2. A director of this Corporation shall not be personally liable to
the Corporation or its shareholders for monetary damages for breach of
fiduciary duty as a Director, except for liability (i) for any breach of any
duty of the Director of loyalty to the Corporation or its shareholders, (ii)
for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) for any transaction from which
the Director derived an improper personal benefit, or (iv) under Section
490.833 of the Iowa Business Corporation Act for assenting to or voting for an
unlawful distribution. If Chapter 490 of the Code of Iowa, is subsequently
amended to authorize corporate action further eliminating or limiting personal
liability of directors, then the liability of a director to the Corporation
shall be eliminated or limited to the fullest extent permitted by Chapter 490
of the Code of Iowa, as so amended. Any repeal or modification of the
provisions of this Article shall not adversely affect any right or protection
of a director of the Corporation existing at the time of such repeal or
modification.
The Restated Bylaws of the Company (Article VI, Section 2) provide that:
Any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceedings, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Corporation) by reason of the fact that he is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or enterprise, shall be
indemnified to the following extent and under the following circumstances:
(a) In an action, suit or proceeding other than an action by or in the
right of the Corporation, such person shall be indemnified against expenses
(including attorney's fees), judgments, fines, and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit
or proceeding if he acted in good faith and in a manner he reasonably believed
to be in the best interests of the Corporation, in the case of conduct in his
official capacity with the Corporation, or, in all other cases, at least not
opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, if he had no reasonable cause to believe his
conduct was unlawful. The termination of any action, suit or proceeding
judgment, order, settlement, conviction or upon a plea of nolo contendere or
its equivalent shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he reasonably believed to be in or
not opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful.
(b) In an action, suit or proceedings by or in the right of the
Corporation, notwithstanding any provision precluding liability in the
Articles of Incorporation, such person shall nonetheless be indemnified
against expenses (including attorney's fees) actually and reasonably incurred
by him in connection with the defense or settlement of such action or suit if
he acted in good faith and in a manner he reasonably believed to be in the
best interests of the Corporation, in the case of conduct in his official
capacity with the Corporation, or, in all other cases, at least not opposed to
the best interests of the Corporation, except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable for negligence or misconduct in the
performance of his duty to the Corporation unless and only to the extent that
the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability, but in view of all
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which such court shall deem proper.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted directors and officers or controlling persons of the
Company pursuant to the foregoing, or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the Company will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Not Applicable.
(b) Equitable of Iowa Securities Network, Inc. is the principal underwriter
for the Contracts. The following persons are the officers and directors of
Equitable of Iowa Securities Network, Inc. The principal business address
for each officer and director following is 909 Locust Street, Des Moines,
Iowa 50309.
<TABLE>
<CAPTION>
<S> <C>
Name and Principal Positions and Offices
Business Address with Underwriter
- ------------------- ---------------------
William L. Lowe President
Frederick S. Hubbell Director
Paul E. Larson Director
James R. Mumford Director and Secretary
Jerome L. Sychowski Director
Thomas L. May Director
Edward J. Berkson Vice President
Susan K. Wheat Treasurer
Beth B. Neppl Director
</TABLE>
(c) Not Applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
David A. Terwilliger, Vice President and Controller, whose address is 909
Locust Street, Des Moines, Iowa 50309, maintains physical possession of the
accounts, books or documents of the Separate Account required to be maintained
by Section 31(a) of the Investment Company Act of 1940 and the rules
promulgated thereunder.
ITEM 31. MANAGEMENT SERVICES
Not Applicable.
ITEM 32. UNDERTAKINGS
a. Registrant hereby undertakes to file a post-effective amendment to
this registration statement as frequently as is necessary to ensure that the
audited financial statements in the registration statement are never more than
sixteen (16) months old for so long as payment under the variable annuity
contracts may be accepted.
b. Registrant hereby undertakes to include either (1) as part of any
application to purchase a contract offered by the Prospectus, a space that an
applicant can check to request a Statement of Additional Information, or (2) a
postcard or similar written communication affixed to or included in the
Prospectus that the applicant can remove to send for a Statement of Additional
Information.
c. Registrant hereby undertakes to deliver any Statement of Additional
Information and any financial statement required to be made available under
this Form promptly upon written or oral request.
d. Equitable Life Insurance Company of Iowa ("Company") hereby
represents that the fees and charges deducted under the Contract described in
the Prospectus, in the aggregate, are reasonable in relation to the services
rendered, the expenses to be incurred and the risks assumed by the Company.
REPRESENTATIONS
The Company hereby represents that it is relying upon a No-Action Letter
issued to the American Council of Life Insurance dated November 28, 1988
(Commission ref. IP-6-88) and that the following provisions have been complied
with:
1. Include appropriate disclosure regarding the redemption restrictions
imposed by Section 403(b)(11) in each registration statement, including the
prospectus, used in connection with the offer of the contract;
2. Include appropriate disclosure regarding the redemption restrictions
imposed by Section 403(b)(11) in any sales literature used in connection with
the offer of the contract;
3. Instruct sales representatives who solicit participants to purchase
the contract specifically to bring the redemption restrictions imposed by
Section 403(b)(11) to the attention of the potential participants;
4. Obtain from each plan participant who purchases a Section 403(b)
annuity contract, prior to or at the time of such purchase, a signed statement
acknowledging the participant's understanding of (1) the restrictions on
redemption imposed by Section 403(b)(11), and (2) other investment
alternatives available under the employer's Section 403(b) arrangement to
which the participant may elect to transfer his contract value.
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant certifies that it meets the requirements of Securities
Act Rule 485(b) for effectiveness of this Registration Statement and has
caused this Registration Statement to be signed on its behalf in the City of
Wilmington, and State of Delaware on this 30th day of April, 1998.
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
SEPARATE ACCOUNT A
Registrant
By: EQUITABLE LIFE INSURANCE COMPANY OF IOWA
By:
___________________________________________
Paul E. Larson*, President
By: EQUITABLE LIFE INSURANCE COMPANY OF IOWA
Depositor
By:
___________________________________________
Paul E. Larson*, President
By: /s/ Marilyn Talman
-----------------------
Marilyn Talman, Attorney-in-Fact
_______________________
* Executed by Marilyn Talman on behalf of those indicated pursuant
to Power of Attorney.
As required by the Securities Act of 1933, this Registration Statement has
been signed by the following persons in the capacities and on the dates
indicated.
Signature Title
- --------- -----
- ----------------------------
Frederick S. Hubbell* Chairman of the Board and Director
- ----------------------------
Paul E. Larson* President and Director
- ----------------------------
Thomas L. May* Executive Vice President, Chief
Marketing Officer and Director
- ----------------------------
James R. Mumford* General Counsel, Secretary,
Assistant Treasurer and Director
- ----------------------------
Beth B. Neppl* Vice President-
Human Resources and Director
- ----------------------------
Jerome L. Sychowski Senior Vice President and Chief
Information Officer and Director
- ----------------------------
David A. Terwilliger* Vice President, Controller, Assistant
Treasurer and Assistant Secretary and
Director
- ----------------------------
Christopher R. Welp* Vice President and Director
- ----------------------------
Marvin W. Alexander* Vice President and Director
- ----------------------------
Susan B. Watson* Senior Vice President and Chief
Financial Officer and Director
*By: /S/ Marilyn Talman
-------------------------------------
Marilyn Talman, Attorney-in-Fact
_______________________
* Executed by Marilyn Talman on behalf of those indicated pursuant
to Power of Attorney.
EXHIBITS
TO
POST-EFFECTIVE AMENDMENT NO. 8
TO
FORM N-4
FOR
EQUITABLE LIFE INSURANCE COMPANY OF IOWA SEPARATE ACCOUNT A
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
INDEX TO EXHIBITS
EXHIBIT PAGE
99.B9 Opinion and Consent of Counsel
99.B10 Consent of Independent Auditors
99.B8(iv) Form of Participation with PIMCO Variable
Insurance Trust
99.B15 Powers of Attorney
EQUITABLE OF
IOWA COMPANIES
Equitable Life Insurance Company of Iowa
USG Annuity & Life Company/r/
Golden American Life Insurance Company
Equitable Investment Services, Inc.
Locust Street Securities, Inc.
April 28, 1998
Board of Directors
Equitable Life Insurance Company of Iowa
909 Locust Street
Des Moines, Iowa 50309
RE: Opinion and Consent of Counsel, Equitable Life
Insurance Company of Iowa Separate Account A
Gentlemen:
You have requested my Opinion of Counsel in connection with the filing with
the Securities and Exchange Commission of a Registration Statement on Form
N-4 for the Individual Flexible Purchase Payment Deferred Variable and Fixed
Annuity Contracts (the "Contracts") to be issued by Equitable Life Insurance
Company of Iowa and its separate account, Equitable Life Insurance Company
of Iowa Separate Account A.
I have made such examination of the law and have examined such records and
documents as in my judgment are necessary or appropriate to enable me to
render the opinions expressed below.
I am of the opinion that:
1. Equitable Life Insurance Company of Iowa Separate Account A is a Unit
Investment Trust as that term is defined in Section 4(2) of the Investment
Company Act of 1940 (the "Act"), and is currently registered with the
Securities and Exchange Commission, pursuant to Section 8(a) of the Act.
2. Upon the acceptance of purchase payments made by an Owner pursuant to
a Contract issued in accordance with the Prospectus contained in the
Registration Statement and upon compliance with applicable law, such an Owner
will have a legally-issued, fully paid, non-assessable contractual interest
under such Contract.
You may use this opinion letter, or a copy thereof, as an exhibit to the
Registration Statement.
I consent to the reference to my name under the caption "Legal Opinions"
contained in the Statement of Additional Information which forms a part of
the Registration Statement.
Sincerely,
/s/ James R. Mumford
_____________________________________
James R. Mumford
General Counsel and Secretary
604 Locust Street, Des Moines, Iowa 50309-3705
EXHIBIT 10 - CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our reports dated February 12, 1998, with respect to Equitable
Life Insurance Company of Iowa and Equitable Life Insurance Company of
Iowa Separate Account A in Post-Effective Amendment No. 8 to the
Registration Statement (Form N-4 No. 33-79170) and related Prospectuses
of Equitable Life Insurance Company of Iowa Separate Account A.
/s/ ERNST & YOUNG LLP
Des Moines, Iowa
April 24, 1998
<PAGE> EXHIBIT (8)(iv)
FORM OF PARTICIPATION AGREEMENT
AMONG
[INSURANCE COMPANY],
PIMCO VARIABLE INSURANCE TRUST,
AND
PIMCO FUNDS DISTRIBUTORS LLC
THIS AGREEMENT, dated as of the ___ day of , 199__ by
and among __________________, (the "Company"), an [insert state]
life insurance company, on its own behalf and on behalf of each
segregated asset account of the Company set forth on Schedule A
hereto as may be amended from time to time (each account
hereinafter referred to as the "Account"), PIMCO Variable
Insurance Trust (the "Fund"), a Delaware business trust, and
PIMCO Funds Distributors LLC (the "Underwriter"), a Delaware
limited liability company.
WHEREAS, the Fund engages in business as an open-end
management investment company and is available to act as the
investment vehicle for separate accounts established for variable
life insurance and variable annuity contracts (the "Variable
Insurance Products") to be offered by insurance companies which
have entered into participation agreements with the Fund and
Underwriter ("Participating Insurance Companies");
WHEREAS, the shares of beneficial interest of the Fund are
divided into several series of shares, each designated a
"Portfolio" and representing the interest in a particular managed
portfolio of securities and other assets;
WHEREAS, the Fund has obtained an order from the Securities
and Exchange Commission (the "SEC") granting Participating
Insurance Companies and variable annuity and variable life
insurance separate accounts exemptions from the provisions of
sections 9(a), 13(a), 15(a), and 15(b) of the Investment Company
Act of 1940, as amended, (the "1940 Act") and Rules 6e-2(b)(15)
and 6e-3(T)(b)(15) thereunder, if and to the extent necessary to
permit shares of the Fund to be sold to and held by variable
annuity and variable life insurance separate accounts of both
affiliated and unaffiliated life insurance companies (the "Mixed
and Shared Funding Exemptive Order");
WHEREAS, the Fund is registered as an open-end management
investment company under the 1940 Act and shares of the
Portfolios are registered under the Securities Act of 1933, as
amended (the "1933 Act");
WHEREAS, Pacific Investment Management Company (the
"Adviser"), which serves as investment adviser to the Fund, is
duly registered as an investment adviser under the federal
Investment Advisers Act of 1940, as amended;
WHEREAS, the Company has issued or will issue certain
variable life insurance and/or variable annuity contracts
supported wholly or partially by the Account (the "Contracts"),
and said Contracts are listed in Schedule A hereto, as it may be
amended from time to time by mutual written agreement;
WHEREAS, the Account is duly established and maintained as a
segregated asset account, duly established by the Company, on the
date shown for such Account on Schedule A hereto, to set aside
and invest assets attributable to the aforesaid Contracts;
WHEREAS, the Underwriter, which serves as distributor to the
Fund, is registered as a broker dealer with the SEC under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and
is a member in good standing of the National Association of
Securities Dealers, Inc. (the "NASD"); and
WHEREAS, to the extent permitted by applicable insurance
laws and regulations, the Company intends to purchase shares in
the Portfolios listed in Schedule A hereto, as it may be amended
from time to time by mutual written agreement (the "Designated
Portfolios") on behalf of the Account to fund the aforesaid
Contracts, and the Underwriter is authorized to sell such shares
to the Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises,
the Company, the Fund and the Underwriter agree as follows:
ARTICLE I. Sale of Fund Shares
1. This text is hidden, do not remove.
1.1. The Fund has granted to the Underwriter exclusive authority
to distribute the Fund's shares, and has agreed to instruct, and
has so instructed, the Underwriter to make available to the
Company for purchase on behalf of the Account Fund shares of
those Designated Portfolios selected by the Underwriter.
Pursuant to such authority and instructions, and subject to
Article X hereof, the Underwriter agrees to make available to the
Company for purchase on behalf of the Account, shares of those
Designated Portfolios listed on Schedule A to this Agreement,
such purchases to be effected at net asset value in accordance
with Section 1.3 of this Agreement. Notwithstanding the
foregoing, (i) Fund series (other than those listed on Schedule
A) in existence now or that may be established in the future will
be made available to the Company only as the Underwriter may so
provide, and (ii) the Board of Trustees of the Fund (the "Board")
may suspend or terminate the offering of Fund shares of any
Designated Portfolio or class thereof, if such action is required
by law or by regulatory authorities having jurisdiction or if, in
the sole discretion of the Board acting in good faith and in
light of its fiduciary duties under federal and any applicable
state laws, suspension or termination is necessary in the best
interests of the shareholders of such Designated Portfolio.
1.2. The Fund shall redeem, at the Company's request, any full or
fractional Designated Portfolio shares held by the Company on
behalf of the Account, such redemptions to be effected at net
asset value in accordance with Section 1.3 of this Agreement.
Notwithstanding the foregoing, (i) the Company shall not redeem
Fund shares attributable to Contract owners except in the
circumstances permitted in Section 10.3 of this Agreement, and
(ii) the Fund may delay redemption of Fund shares of any
Designated Portfolio to the extent permitted by the 1940 Act, and
any rules, regulations or orders thereunder.
1.3. Purchase and Redemption Procedures
(a) The Fund hereby appoints the Company as an agent of the Fund
for the limited purpose of receiving purchase and redemption
requests on behalf of the Account (but not with respect to any
Fund shares that may be held in the general account of the
Company) for shares of those Designated Portfolios made available
hereunder, based on allocations of amounts to the Account or
subaccounts thereof under the Contracts and other transactions
relating to the Contracts or the Account. Receipt of any such
request (or relevant transactional information therefor) on any
day the New York Stock Exchange is open for trading and on which
the Fund calculates it net asset value pursuant to the rules of
the SEC (a "Business Day") by the Company as such limited agent
of the Fund prior to the time that the Fund ordinarily calculates
its net asset value as described from time to time in the Fund
Prospectus (which as of the date of execution of this Agreement
is 4:00 p.m. Eastern Time) shall constitute receipt by the Fund
on that same Business Day, provided that the Fund receives notice
of such request by 9:30 a.m. Eastern Time on the next following
Business Day.
(b) The Company shall pay for shares of each Designated
Portfolio on the same day that it notifies the Fund of a purchase
request for such shares. Payment for Designated Portfolio shares
shall be made in federal funds transmitted to the Fund by wire to
be received by the Fund by 4:00 p.m. Eastern Time on the day the
Fund is notified of the purchase request for Designated Portfolio
shares (unless the Fund determines and so advises the Company
that sufficient proceeds are available from redemption of shares
of other Designated Portfolios effected pursuant to redemption
requests tendered by the Company on behalf of the Account). If
federal funds are not received on time, such funds will be
invested, and Designated Portfolio shares purchased thereby will
be issued, as soon as practicable and the Company shall promptly,
upon the Fund's request, reimburse the Fund for any charges,
costs, fees, interest or other expenses incurred by the Fund in
connection with any advances to, or borrowing or overdrafts by,
the Fund, or any similar expenses incurred by the Fund, as a
result of portfolio transactions effected by the Fund based upon
such purchase request. Upon receipt of federal funds so wired,
such funds shall cease to be the responsibility of the Company
and shall become the responsibility of the Fund.
(c) Payment for Designated Portfolio shares redeemed by the
Account or the Company shall be made in federal funds transmitted
by wire to the Company or any other designated person on the next
Business Day after the Fund is properly notified of the
redemption order of such shares (unless redemption proceeds are
to be applied to the purchase of shares of other Designated
Portfolio in accordance with Section 1.3(b) of this Agreement),
except that the Fund reserves the right to redeem Designated
Portfolio shares in assets other than cash and to delay payment
of redemption proceeds to the extent permitted under Section
22(e) of the 1940 Act and any Rules thereunder, and in accordance
with the procedures and policies of the Fund as described in the
then current prospectus. The Fund shall not bear any
responsibility whatsoever for the proper disbursement or
crediting of redemption proceeds by the Company, the Company
alone shall be responsible for such action.
(d) Any purchase or redemption request for Designated Portfolio
shares held or to be held in the Company's general account shall
be effected at the net asset value per share next determined
after the Fund's receipt of such request, provided that, in the
case of a purchase request, payment for Fund shares so requested
is received by the Fund in federal funds prior to close of
business for determination of such value, as defined from time to
time in the Fund Prospectus.
1.4. The Fund shall use its best efforts to make the net asset
value per share for each Designated Portfolio available to the
Company by 6:30 p.m. Eastern Time each Business Day, and in any
event, as soon as reasonably practicable after the net asset
value per share for such Designated Portfolio is calculated, and
shall calculate such net asset value in accordance with the
Fund's Prospectus. Neither the Fund, any Designated Portfolio,
the Underwriter, nor any of their affiliates shall be liable for
any information provided to the Company pursuant to this
Agreement which information is based on incorrect information
supplied by the Company or any other Participating Insurance
Company to the Fund or the Underwriter.
1.5. The Fund shall furnish notice (by wire or telephone followed
by written confirmation) to the Company as soon as reasonably
practicable of any income dividends or capital gain distributions
payable on any Designated Portfolio shares. The Company, on its
behalf and on behalf of the Account, hereby elects to receive all
such dividends and distributions as are payable on any Designated
Portfolio shares in the form of additional shares of that
Designated Portfolio. The Company reserves the right, on its
behalf and on behalf of the Account, to revoke this election and
to receive all such dividends and capital gain distributions in
cash. The Fund shall notify the Company promptly of the number
of Designated Portfolio shares so issued as payment of such
dividends and distributions.
1.6. Issuance and transfer of Fund shares shall be by book entry
only. Stock certificates will not be issued to the Company or
the Account. Purchase and redemption orders for Fund shares
shall be recorded in an appropriate ledger for the Account or the
appropriate subaccount of the Account.
1.7. (a) The parties hereto acknowledge that the arrangement
contemplated by this Agreement is not exclusive; the Fund's
shares may be sold to other insurance companies (subject to
Section 1.8 hereof) and the cash value of the Contracts may be
invested in other investment companies, provided, however, that
until this Agreement is terminated pursuant to Article X, the
Company shall promote the Designated Portfolios on the same basis
as other funding vehicles available under the Contracts. Funding
vehicles other than those listed on Schedule A to this Agreement
may be available for the investment of the cash value of the
Contracts, provided, however, (i) any such vehicle or series
thereof, has investment objectives or policies that are
substantially different from the investment objectives and
policies of the Designated Portfolios available hereunder; (ii)
the Company gives the Fund and the Underwriter 45 days written
notice of its intention to make such other investment vehicle
available as a funding vehicle for the Contracts; and (iii)
unless such other investment company was available as a Funding
vehicle for the Contracts prior to the date of this Agreement and
the Company has so informed the Fund and the Underwriter prior to
their signing this Agreement, the Fund or Underwriter consents in
writing to the use of such other vehicle, such consent not to be
unreasonably withheld.
(a) This text is hidden, do not remove.
(b) The Company shall not, without prior notice to the
Underwriter (unless otherwise required by applicable law), take
any action to operate the Account as a management investment
company under the 1940 Act.
(c) The Company shall not, without prior notice to the
Underwriter (unless otherwise required by applicable law), induce
Contract owners to change or modify the Fund or change the Fund's
distributor or investment adviser.
(d) The Company shall not, without prior notice
to the Fund, induce Contract owners to vote on any matter
submitted for consideration by the shareholders of the Fund in a
manner other than as recommended by the Board of Trustees of the
Fund.
1.8. The Underwriter and the Fund shall sell Fund shares only to
Participating Insurance Companies and their separate accounts and
to persons or plans ("Qualified Persons") that communicate to the
Underwriter and the Fund that they qualify to purchase shares of
the Fund under Section 817(h) of the Internal Revenue Code of
1986, as amended (the "Code") and the regulations thereunder
without impairing the ability of the Account to consider the
portfolio investments of the Fund as constituting investments of
the Account for the purpose of satisfying the diversification
requirements of Section 817(h). The Underwriter and the Fund
shall not sell Fund shares to any insurance company or separate
account unless an agreement complying with Article VI of this
Agreement is in effect to govern such sales, to the extent
required. The Company hereby represents and warrants that it and
the Account are Qualified Persons. The Fund reserves the right
to cease offering shares of any Designated Portfolio in the
discretion of the Fund.
ARTICLE II. Representations and Warranties
2. This text is hidden, do not remove.
2.1. The Company represents and warrants that the Contracts (a)
are, or prior to issuance will be, registered under the 1933 Act,
or (b) are not registered because they are properly exempt from
registration under the 1933 Act or will be offered exclusively in
transactions that are properly exempt from registration under the
1933 Act. The Company further represents and warrants that the
Contracts will be issued and sold in compliance in all material
respects with all applicable federal securities and state
securities and insurance laws and that the sale of the Contracts
shall comply in all material respects with state insurance
suitability requirements. The Company further represents and
warrants that it is an insurance company duly organized and in
good standing under applicable law, that it has legally and
validly established the Account prior to any issuance or sale
thereof as a segregated asset account under [insert state]
insurance laws, and that it (a) has registered or, prior to any
issuance or sale of the Contracts, will register the Account as a
unit investment trust in accordance with the provisions of the
1940 Act to serve as a segregated investment account for the
Contracts, or alternatively (b) has not registered the Account in
proper reliance upon an exclusion from registration under the
1940 Act. The Company shall register and qualify the Contracts
or interests therein as securities in accordance with the laws of
the various states only if and to the extent deemed advisable by
the Company.
2.2. The Fund represents and warrants that Fund shares sold
pursuant to this Agreement shall be registered under the 1933
Act, duly authorized for issuance and sold in compliance with
applicable state and federal securities laws and that the Fund is
and shall remain registered under the 1940 Act. The Fund shall
amend the registration statement for its shares under the 1933
Act and the 1940 Act from time to time as required in order to
effect the continuous offering of its shares. The Fund shall
register and qualify the shares for sale in accordance with the
laws of the various states only if and to the extent deemed
advisable by the Fund or the Underwriter.
2.3. The Fund may make payments to finance distribution expenses
pursuant to Rule 12b-1 under the 1940 Act. Prior to financing
distribution expenses pursuant to Rule 12b-1, the Fund will have
the Board, a majority of whom are not interested persons of the
Fund, formulate and approve a plan pursuant to Rule 12b-1 under
the 1940 Act to finance distribution expenses.
2.4. The Fund makes no representations as to whether any aspect
of its operations, including, but not limited to, investment
policies, fees and expenses, complies with the insurance and
other applicable laws of the various states.
2.5. The Fund represents that it is lawfully organized and
validly existing under the laws of the State of Delaware and that
it does and will comply in all material respects with the 1940
Act.
2.6. The Underwriter represents and warrants that it is a member
in good standing of the NASD and is registered as a broker-dealer
with the SEC. The Underwriter further represents that it will
sell and distribute the Fund shares in accordance with any
applicable state and federal securities laws.
2.7. The Fund and the Underwriter represent and warrant that all
of their trustees/directors, officers, employees, investment
advisers, and other individuals or entities dealing with the
money and/or securities of the Fund are and shall continue to be
at all times covered by a blanket fidelity bond or similar
coverage for the benefit of the Fund in an amount not less than
the minimum coverage as required currently by Rule 17g-1 of the
1940 Act or related provisions as may be promulgated from time to
time. The aforesaid bond shall include coverage for larceny and
embezzlement and shall be issued by a reputable bonding company.
2.8. The Company represents and warrants that all of its
directors, officers, employees, and other individuals/entities
employed or controlled by the Company dealing with the money
and/or securities of the Account are covered by a blanket
fidelity bond or similar coverage for the benefit of the Account,
in an amount not less than $5 million. The aforesaid bond
includes coverage for larceny and embezzlement and is issued by a
reputable bonding company. The Company agrees to hold for the
benefit of the Fund and to pay to the Fund any amounts lost from
larceny, embezzlement or other events covered by the aforesaid
bond to the extent such amounts properly belong to the Fund
pursuant to the terms of this Agreement. The Company agrees to
make all reasonable efforts to see that this bond or another bond
containing these provisions is always in effect, and agrees to
notify the Fund and the Underwriter in the event that such
coverage no longer applies.
ARTICLE III. Prospectuses and Proxy Statements; Voting
3. This text is hidden, do not remove.
3.1. The Underwriter shall provide the Company with as many
copies of the Fund's current prospectus (describing only the
Designated Portfolios listed on Schedule A) or, to the extent
permitted, the Fund's profiles as the Company may reasonably
request. The Company shall bear the expense of printing copies
of the current prospectus and profiles for the Contracts that
will be distributed to existing Contract owners, and the Company
shall bear the expense of printing copies of the Fund's
prospectus and profiles that are used in connection with offering
the Contracts issued by the Company. If requested by the Company
in lieu thereof, the Fund shall provide such documentation
(including a final copy of the new prospectus on diskette at the
Fund's expense) and other assistance as is reasonably necessary
in order for the Company once each year (or more frequently if
the prospectus for the Fund is amended) to have the prospectus
for the Contracts and the Fund's prospectus or profile printed
together in one document (such printing to be at the Company's
expense).
3.2. The Fund's prospectus shall state that the current Statement
of Additional Information ("SAI") for the Fund is available, and
the Underwriter (or the Fund), at its expense, shall provide a
reasonable number of copies of such SAI free of charge to the
Company for itself and for any owner of a Contract who requests
such SAI.
3.3. The Fund shall provide the Company with information
regarding the Fund's expenses, which information may include a
table of fees and related narrative disclosure. for use in any
prospectus or other descriptive document relating to a Contract.
The Company agrees that it will use such information in the form
provided. The Company shall provide prior written notice of any
proposed modification of such information, which notice will
describe in detail the manner in which the Company proposes to
modify the information, and agrees that it may not modify such
information in any way without the prior consent of the Fund.
3.4. The Fund, at its expense, shall provide the Company with
copies of its proxy material, reports to shareholders, and other
communications to shareholders in such quantity as the Company
shall reasonably require for distributing to Contract owners.
3.5. The Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with instructions
received from Contract owners; and
(iii) vote Fund shares for which no instructions have been
received in the same proportion as Fund shares of such portfolio
for which instructions have been received,
so long as and to the extent that the SEC continues to interpret
the 1940 Act to require pass-through voting privileges for
variable contract owners or to the extent otherwise required by
law. The Company will vote Fund shares held in any segregated
asset account in the same proportion as Fund shares of such
portfolio for which voting instructions have been received from
Contract owners, to the extent permitted by law.
3.6. Participating Insurance Companies shall be responsible for
assuring that each of their separate accounts participating in a
Designated Portfolio calculates voting privileges as required by
the Shared Funding Exemptive Order and consistent with any
reasonable standards that the Fund may adopt and provide in
writing.
ARTICLE IV. Sales Material and Information
4. This text is hidden, do not remove.
4.1. The Company shall furnish, or shall cause to be furnished,
to the Fund or its designee, each piece of sales literature or
other promotional material that the Company develops and in which
the Fund (or a Designated Portfolio thereof) or the Adviser or
the Underwriter is named. No such material shall be used until
approved by the Fund or its designee, and the Fund will use its
best efforts for it or its designee to review such sales
literature or promotional material within ten Business Days after
receipt of such material. The Fund or its designee reserves the
right to reasonably object to the continued use of any such sales
literature or other promotional material in which the Fund (or a
Designated Portfolio thereof) or the Adviser or the Underwriter
is named, and no such material shall be used if the Fund or its
designee so object.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning
the Fund or the Adviser or the Underwriter in connection with the
sale of the Contracts other than the information or
representations contained in the registration statement or
prospectus or SAI for the Fund shares, as such registration
statement and prospectus or SAI may be amended or supplemented
from time to time, or in reports or proxy statements for the
Fund, or in sales literature or other promotional material
approved by the Fund or its designee or by the Underwriter,
except with the permission of the Fund or the Underwriter or the
designee of either.
4.3. The Fund and the Underwriter, or their designee, shall
furnish, or cause to be furnished, to the Company, each piece of
sales literature or other promotional material that it develops
and in which the Company, and/or its Account, is named. No such
material shall be used until approved by the Company, and the
Company will use its best efforts to review such sales literature
or promotional material within ten Business Days after receipt of
such material. The Company reserves the right to reasonably
object to the continued use of any such sales literature or other
promotional material in which the Company and/or its Account is
named, and no such material shall be used if the Company so
objects.
4.4. The Fund and the Underwriter shall not give any information
or make any representations on behalf of the Company or
concerning the Company, the Account, or the Contracts other than
the information or representations contained in a registration
statement, prospectus (which shall include an offering
memorandum, if any, if the Contracts issued by the Company or
interests therein are not registered under the 1933 Act), or SAI
for the Contracts, as such registration statement, prospectus, or
SAI may be amended or supplemented from time to time, or in
published reports for the Account which are in the public domain
or approved by the Company for distribution to Contract owners,
or in sales literature or other promotional material approved by
the Company or its designee, except with the permission of the
Company.
4.5. The Fund will provide to the Company at least one complete
copy of all registration statements, prospectuses, SAIs, reports,
proxy statements, sales literature and other promotional
materials, applications for exemptions, requests for no-action
letters, and all amendments to any of the above, that relate to
the Fund or its shares, promptly after the filing of such
document(s) with the SEC or other regulatory authorities.
4.6. The Company will provide to the Fund at least one complete
copy of all registration statements, prospectuses (which shall
include an offering memorandum, if any, if the Contracts issued
by the Company or interests therein are not registered under the
1933 Act), SAIs, reports, solicitations for voting instructions,
sales literature and other promotional materials, applications
for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Contracts or
the Account, promptly after the filing of such document(s) with
the SEC or other regulatory authorities. The Company shall
provide to the Fund and the Underwriter any complaints received
from the Contract owners pertaining to the Fund or the Designated
Portfolio.
4.7. The Fund will provide the Company with as much notice as is
reasonably practicable of any proxy solicitation for any
Designated Portfolio, and of any material change in the Fund's
registration statement, particularly any change resulting in a
change to the registration statement or prospectus for any
Account. The Fund will work with the Company so as to enable the
Company to solicit proxies from Contract owners, or to make
changes to its prospectus or registration statement, in an
orderly manner. The Fund will make reasonable efforts to attempt
to have changes affecting Contract prospectuses become effective
simultaneously with the annual updates for such prospectuses.
4.8. For purposes of this Article IV, the phrase "sales
literature and other promotional materials" includes, but is not
limited to, any of the following that refer to the Fund or any
affiliate of the Fund: advertisements (such as material
published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording,
videotape display, signs or billboards, motion pictures, or other
public media), sales literature (i.e., any written communication
distributed or made generally available to customers or the
public, including brochures, circulars, reports, market letters,
form letters, seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published article),
educational or training materials or other communications
distributed or made generally available to some or all agents or
employees, and registration statements, prospectuses, SAIs,
shareholder reports, proxy materials, and any other
communications distributed or made generally available with
regard to the Fund.
ARTICLE V. Fees and Expenses
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5.1. The Fund and the Underwriter shall pay no fee or other
compensation to the Company under this Agreement, except that if
the Fund or any Portfolio adopts and implements a plan pursuant
to Rule 12b-1 to finance distribution expenses, then the Fund or
Underwriter may make payments to the Company or to the
underwriter for the Contracts if and in amounts agreed to by the
Underwriter in writing, and such payments will be made out of
existing fees otherwise payable to the Underwriter, past profits
of the Underwriter, or other resources available to the
Underwriter. Currently, no such payments are contemplated.
5.2. All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund. The Fund shall see to it
that all its shares are registered and authorized for issuance in
accordance with applicable federal law and, if and to the extent
deemed advisable by the Fund, in accordance with applicable state
laws prior to their sale. The Fund shall bear the expenses for
the cost of registration and qualification of the Fund's shares,
preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, setting the prospectus in
type, setting in type and printing the proxy materials and
reports to shareholders (including the costs of printing a
prospectus that constitutes an annual report), the preparation of
all statements and notices required by any federal or state law,
and all taxes on the issuance or transfer of the Fund's shares.
5.3. The Company shall bear the expenses of distributing the
Fund's prospectus to owners of Contracts issued by the Company
and of distributing the Fund's proxy materials and reports to
such Contract owners.
ARTICLE VI. Diversification and Qualification
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6.1. The Fund will invest its assets in such a manner as to
ensure that the Contracts will be treated as annuity or life
insurance contracts, whichever is appropriate, under the Code and
the regulations issued thereunder (or any successor provisions).
Without limiting the scope of the foregoing, each Designated
Portfolio has complied and will continue to comply with Section
817(h) of the Code and Treasury Regulation 1.817-5, and any
Treasury interpretations thereof, relating to the diversification
requirements for variable annuity, endowment, or life insurance
contracts, and any amendments or other modifications or successor
provisions to such Section or Regulations. In the event of a
breach of this Article VI by the Fund, it will take all
reasonable steps (a) to notify the Company of such breach and (b)
to adequately diversify the Fund so as to achieve compliance
within the grace period afforded by Regulation 1.817-5.
6.2. The Fund represents that it is or will be qualified as a
Regulated Investment Company under Subchapter M of the Code, and
that it will make every effort to maintain such qualification
(under Subchapter M or any successor or similar provisions) and
that it will notify the Company immediately upon having a
reasonable basis for believing that it has ceased to so qualify
or that it might not so qualify in the future.
6.3. The Company represents that the Contracts are currently, and
at the time of issuance shall be, treated as life insurance or
annuity insurance contracts, under applicable provisions of the
Code, and that it will make every effort to maintain such
treatment, and that it will notify the Fund and the Underwriter
immediately upon having a reasonable basis for believing the
Contracts have ceased to be so treated or that they might not be
so treated in the future. The Company agrees that any prospectus
offering a contract that is a "modified endowment contract" as
that term is defined in Section 7702A of the Code (or any
successor or similar provision), shall identify such contract as
a modified endowment contract.
ARTICLE VII. Potential Conflicts
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The following provisions shall apply only upon issuance of the
Mixed and Shared Funding Order and the sale of shares of the Fund
to variable life insurance separate accounts, and then only to
the extent required under the 1940 Act.
7.1. The Board will monitor the Fund for the existence of any
material irreconcilable conflict between the interests of the
Contract owners of all separate accounts investing in the Fund.
An irreconcilable material conflict may arise for a variety of
reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities laws or regulations, or a public
ruling, private letter ruling, no-action or interpretative
letter, or any similar action by insurance, tax, or securities
regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference
in voting instructions given by variable annuity contract and
variable life insurance contract owners; or (f) a decision by an
insurer to disregard the voting instructions of contract owners.
The Board shall promptly inform the Company if it determines that
an irreconcilable material conflict exists and the implications
thereof.
7.2. The Company will report any potential or existing conflicts
of which it is aware to the Board. The Company will assist the
Board in carrying out its responsibilities under the Mixed and
Shared Funding Exemptive Order, by providing the Board with all
information reasonably necessary for the Board to consider any
issues raised. This includes, but is not limited to, an
obligation by the Company to inform the Board whenever Contract
owner voting instructions are disregarded.
7.3. If it is determined by a majority of the Board, or a
majority of its disinterested members, that a material
irreconcilable conflict exists, the Company and other
Participating Insurance Companies shall, at their expense and to
the extent reasonably practicable (as determined by a majority of
the disinterested Board members), take whatever steps are
necessary to remedy or eliminate the irreconcilable material
conflict, up to and including: (1) withdrawing the assets
allocable to some or all of the separate accounts from the Fund
or any Portfolio and reinvesting such assets in a different
investment medium, including (but not limited to) another
Portfolio of the Fund, or submitting the question whether such
segregation should be implemented to a vote of all affected
contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., annuity contract owners, life
insurance contract owners, or variable contract owners of one or
more Participating Insurance Companies) that votes in favor of
such segregation, or offering to the affected contract owners the
option of making such a change; and (2) establishing a new
registered management investment company or managed separate
account.
7.4. If a material irreconcilable conflict arises because of a
decision by the Company to disregard Contract owner voting
instructions and that decision represents a minority position or
would preclude a majority vote, the Company may be required, at
the Fund's election, to withdraw the Account's investment in the
Fund and terminate this Agreement with respect to each Account;
provided, however, that such withdrawal and termination shall be
limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the
disinterested members of the Board. Any such withdrawal and
termination must take place within six (6) months after the Fund
gives written notice that this provision is being implemented,
and until the end of that six month period the Fund shall
continue to accept and implement orders by the Company for the
purchase (and redemption) of shares of the Fund.
7.5. If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to the
Company conflicts with the majority of other state regulators,
then the Company will withdraw the affected Account's investment
in the Fund and terminate this Agreement with respect to such
Account within six months after the Board informs the Company in
writing that it has determined that such decision has created an
irreconcilable material conflict; provided, however, that such
withdrawal and termination shall be limited to the extent
required by the foregoing material irreconcilable conflict as
determined by a majority of the disinterested members of the
Board. Until the end of the foregoing six month period, the Fund
shall continue to accept and implement orders by the Company for
the purchase (and redemption) of shares of the Fund.
7.6. For purposes of Section 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Board shall
determine whether any proposed action adequately remedies any
irreconcilable material conflict, but in no event will the Fund
be required to establish a new funding medium for the Contracts.
The Company shall not be required by Section 7.3 to establish a
new funding medium for the Contract if an offer to do so has been
declined by vote of a majority of Contract owners materially
adversely affected by the irreconcilable material conflict. In
the event that the Board determines that any proposed action does
not adequately remedy any irreconcilable material conflict, then
the Company will withdraw the Account's investment in the Fund
and terminate this Agreement within six (6) months after the
Board informs the Company in writing of the foregoing
determination; provided, however, that such withdrawal and
termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of
the disinterested members of the Board.
7.7. If and to the extent the Mixed and Shared Funding Exemption
Order or any amendment thereto contains terms and conditions
different from Sections 3.4, 3.5, 3.6, 7.1, 7.2, 7.3, 7.4, and
7.5 of this Agreement, then the Fund and/or the Participating
Insurance Companies, as appropriate, shall take such steps as may
be necessary to comply with the Mixed and Shared Funding
Exemptive Order, and Sections 3.4, 3.5, 3.6, 7.1, 7.2, 7.3, 7.4
and 7.5 of this Agreement shall continue in effect only to the
extent that terms and conditions substantially identical to such
Sections are contained in the Mixed and Shared Funding Exemptive
Order or any amendment thereto. If and to the extent that Rule
6e-2 and Rule 6e-3(T) are amended, or Rule 6e-3 is adopted, to
provide exemptive relief from any provision of the 1940 Act or
the rules promulgated thereunder with respect to mixed or shared
funding (as defined in the Mixed and Shared Funding Exemptive
Order) on terms and conditions materially different from those
contained in the Mixed and Shared Funding Exemptive Order, then
(a) the Fund and/or the Participating Insurance Companies, as
appropriate, shall take such steps as may be necessary to comply
with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as
adopted, to the extent such rules are applicable; and
(b) Sections 3.5, 3.6, 7.1., 7.2, 7.3, 7.4, and 7.5 of this
Agreement shall continue in effect only to the extent that terms
and conditions substantially identical to such Sections are
contained in such Rule(s) as so amended or adopted.
ARTICLE VIII. Indemnification
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8.1. Indemnification By the Company
8.1(a). The Company agrees to indemnify and hold
harmless the Fund and the Underwriter and each of its
trustees/directors and officers, and each person, if any, who
controls the Fund or Underwriter within the meaning of Section 15
of the 1933 Act or who is under common control with the
Underwriter (collectively, the "Indemnified Parties" for purposes
of this Section 8.1) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the
written consent of the Company) or litigation (including legal
and other expenses), to which the Indemnified Parties may become
subject under any statute or regulation, at common law or
otherwise, insofar as such losses, claims, damages, liabilities
or expenses (or actions in respect thereof) or settlements:
(i) arise out of or are based upon any untrue statement or
alleged untrue statements of any material fact contained in the
registration statement, prospectus (which shall include a written
description of a Contract that is not registered under the 1933
Act), or SAI for the Contracts or contained in the Contracts or
sales literature for the Contracts (or any amendment or
supplement to any of the foregoing), or arise out of or are based
upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified
Party if such statement or omission or such alleged statement or
omission was made in reliance upon and in conformity with
information furnished to the Company by or on behalf of the Fund
for use in the registration statement, prospectus or SAI for the
Contracts or in the Contracts or sales literature (or any
amendment or supplement) or otherwise for use in connection with
the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus, SAI, or sales literature of
the Fund not supplied by the Company or persons under its
control) or wrongful conduct of the Company or its agents or
persons under the Company's authorization or control, with
respect to the sale or distribution of the Contracts or Fund
Shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, prospectus, SAI, or sales literature of the Fund or
any amendment thereof or supplement thereto or the omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading if such a statement or omission was made in reliance
upon information furnished to the Fund by or on behalf of the
Company; or
(iv) arise as a result of any material failure by the Company to
provide the services and furnish the materials under the terms of
this Agreement (including a failure, whether unintentional or in
good faith or otherwise, to comply with the qualification
requirements specified in Article VI of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Company;
(vi) as limited by and in accordance with the provisions of
Sections 8.1(b) and 8.1(c) hereof.
8.1(b). The Company shall not be liable under
this indemnification provision with respect to any losses,
claims, damages, liabilities or litigation to which an
Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance of such Indemnified Party's duties
or by reason of such Indemnified Party's reckless disregard of
its obligations or duties under this Agreement.
8.1(c). The Company shall not be liable under
this indemnification provision with respect to any claim made
against an Indemnified Party unless such Indemnified Party shall
have notified the Company in writing within a reasonable time
after the summons or other first legal process giving information
of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have
received notice of such service on any designated agent), but
failure to notify the Company of any such claim shall not relieve
the Company from any liability which it may have to the
Indemnified Party against whom such action is brought otherwise
than on account of this indemnification provision. In case any
such action is brought against an Indemnified Party, the Company
shall be entitled to participate, at its own expense, in the
defense of such action. The Company also shall be entitled to
assume the defense thereof, with counsel satisfactory to the
party named in the action. After notice from the Company to such
party of the Company's election to assume the defense thereof,
the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Company will not be
liable to such party under this Agreement for any legal or other
expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs
of investigation.
8.1(d). The Indemnified Parties will promptly
notify the Company of the commencement of any litigation or
proceedings against them in connection with the issuance or sale
of the Fund shares or the Contracts or the operation of the Fund.
8.2. Indemnification by the Underwriter
8.2(a). The Underwriter agrees to indemnify and
hold harmless the Company and each of its directors and officers
and each person, if any, who controls the Company within the
meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8.2) against
any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the
Underwriter) or litigation (including legal and other expenses)
to which the Indemnified Parties may become subject under any
statute or regulation, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions
in respect thereof) or settlements:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
registration statement or prospectus or SAI or sales literature
of the Fund (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, provided that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission
or such alleged statement or omission was made in reliance upon
and in conformity with information furnished to the Underwriter
or Fund by or on behalf of the Company for use in the
registration statement, prospectus or SAI for the Fund or in
sales literature (or any amendment or supplement) or otherwise
for use in connection with the sale of the Contracts or Fund
shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the
registration statement, prospectus, SAI or sales literature for
the Contracts not supplied by the Underwriter or persons under
its control) or wrongful conduct of the Fund or Underwriter or
persons under their control, with respect to the sale or
distribution of the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration
statement, prospectus, SAI or sales literature covering the
Contracts, or any amendment thereof or supplement thereto, or the
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statement
or statements therein not misleading, if such statement or
omission was made in reliance upon information furnished to the
Company by or on behalf of the Fund or the Underwriter; or
(iv) arise as a result of any failure by the Fund or the
Underwriter to provide the services and furnish the materials
under the terms of this Agreement (including a failure of the
Fund, whether unintentional or in good faith or otherwise, to
comply with the diversification and other qualification
requirements specified in Article VI of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Underwriter;
as limited by and in accordance with the provisions of Sections
8.2(b) and 8.2(c) hereof.
8.2(b). The Underwriter shall not be liable
under this indemnification provision with respect to any losses,
claims, damages, liabilities or litigation to which an
Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance or such Indemnified Party's duties
or by reason of such Indemnified Party's reckless disregard of
obligations and duties under this Agreement or to the Company or
the Account, whichever is applicable.
8.2(c). The Underwriter shall not be liable
under this indemnification provision with respect to any claim
made against an Indemnified Party unless such Indemnified Party
shall have notified the Underwriter in writing within a
reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been
served upon such Indemnified Party (or after such Indemnified
Party shall have received notice of such service on any
designated agent), but failure to notify the Underwriter of any
such claim shall not relieve the Underwriter from any liability
which it may have to the Indemnified Party against whom such
action is brought otherwise than on account of this
indemnification provision. In case any such action is brought
against the Indemnified Party, the Underwriter will be entitled
to participate, at its own expense, in the defense thereof. The
Underwriter also shall be entitled to assume the defense thereof,
with counsel satisfactory to the party named in the action.
After notice from the Underwriter to such party of the
Underwriter's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Underwriter will not
be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently
in connection with the defense thereof other than reasonable
costs of investigation.
The Company agrees promptly to notify the
Underwriter of the commencement of any litigation or proceedings
against it or any of its officers or directors in connection with
the issuance or sale of the Contracts or the operation of the
Account.
8.3. Indemnification By the Fund
8.3(a). The Fund agrees to indemnify and hold
harmless the Company and each of its directors and officers and
each person, if any, who controls the Company within the meaning
of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this Section 8.3) against any and all
losses, claims, expenses, damages, liabilities (including amounts
paid in settlement with the written consent of the Fund) or
litigation (including legal and other expenses) to which the
Indemnified Parties may be required to pay or may become subject
under any statute or regulation, at common law or otherwise,
insofar as such losses, claims, expenses, damages, liabilities or
expenses (or actions in respect thereof) or settlements, are
related to the operations of the Fund and:
(i) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this
Agreement (including a failure, whether unintentional or in good
faith or otherwise, to comply with the diversification and other
qualification requirements specified in Article VI of this
Agreement); or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this Agreement
or arise out of or result from any other material breach of this
Agreement by the Fund;
as limited by and in accordance with the provisions of Sections
8.3(b) and 8.3(c) hereof.
8.3(b). The Fund shall not be liable under this
indemnification provision with respect to any losses, claims,
damages, liabilities or litigation to which an Indemnified Party
would otherwise be subject by reason of such Indemnified Party's
willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of
such Indemnified Party's reckless disregard of obligations and
duties under this Agreement or to the Company, the Fund, the
Underwriter or the Account, whichever is applicable.
8.3(c). The Fund shall not be liable under this
indemnification provision with respect to any claim made against
an Indemnified Party unless such Indemnified Party shall have
notified the Fund in writing within a reasonable time after the
summons or other first legal process giving information of the
nature of the claim shall have been served upon such Indemnified
Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify
the Fund of any such claim shall not relieve the Fund from any
liability which it may have to the Indemnified Party against whom
such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought
against the Indemnified Parties, the Fund will be entitled to
participate, at its own expense, in the defense thereof. The
Fund also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After
notice from the Fund to such party of the Fund's election to
assume the defense thereof, the Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and
the Fund will not be liable to such party under this Agreement
for any legal or other expenses subsequently incurred by such
party independently in connection with the defense thereof other
than reasonable costs of investigation.
8.3(d). The Company and the Underwriter agree
promptly to notify the Fund of the commencement of any litigation
or proceeding against it or any of its respective officers or
directors in connection with the Agreement, the issuance or sale
of the Contracts, the operation of the Account, or the sale or
acquisition of shares of the Fund.
ARTICLE IX. Applicable Law
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9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of
California.
9.2. This Agreement shall be subject to the provisions of the
1933, 1934 and 1940 Acts, and the rules and regulations and
rulings thereunder, including such exemptions from those
statutes, rules and regulations as the SEC may grant (including,
but not limited to, any Mixed and Shared Funding Exemptive Order)
and the terms hereof shall be interpreted and construed in
accordance therewith. If, in the future, the Mixed and Shared
Funding Exemptive Order should no longer be necessary under
applicable law, then Article VII shall no longer apply.
ARTICLE X. Termination
10. This text is hidden, do not remove.
10.1. This Agreement shall continue in full force and effect
until the first to occur of:
(a) termination by any party, for any reason with respect to
some or all Designated Portfolios, by three (3) months advance
written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Fund and
the Underwriter based upon the Company's determination that
shares of the Fund are not reasonably available to meet the
requirements of the Contracts; or
(c) termination by the Company by written notice to the Fund and
the Underwriter in the event any of the Designated Portfolio's
shares are not registered, issued or sold in accordance with
applicable state and/or federal law or such law precludes the use
of such shares as the underlying investment media of the
Contracts issued or to be issued by the Company; or
(d) termination by the Fund or Underwriter in the event that
formal administrative proceedings are instituted against the
Company by the NASD, the SEC, the Insurance Commissioner or like
official of any state or any other regulatory body regarding the
Company's duties under this Agreement or related to the sale of
the Contracts, the operation of any Account, or the purchase of
the Fund's shares; provided, however, that the Fund or
Underwriter determines in its sole judgment exercised in good
faith, that any such administrative proceedings will have a
material adverse effect upon the ability of the Company to
perform its obligations under this Agreement; or
(e) termination by the Company in the event that formal
administrative proceedings are instituted against the Fund or
Underwriter by the NASD, the SEC, or any state securities or
insurance department or any other regulatory body; provided,
however, that the Company determines in its sole judgment
exercised in good faith, that any such administrative proceedings
will have a material adverse effect upon the ability of the Fund
or Underwriter to perform its obligations under this Agreement;
or
(f) termination by the Company by written notice to the Fund and
the Underwriter with respect to any Designated Portfolio in the
event that such Portfolio ceases to qualify as a Regulated
Investment Company under Subchapter M or fails to comply with the
Section 817(h) diversification requirements specified in Article
VI hereof, or if the Company reasonably believes that such
Portfolio may fail to so qualify or comply; or
(g) termination by the Fund or Underwriter by written notice to
the Company in the event that the Contracts fail to meet the
qualifications specified in Article VI hereof; or
(h) termination by either the Fund or the Underwriter by written
notice to the Company, if either one or both of the Fund or the
Underwriter respectively, shall determine, in their sole judgment
exercised in good faith, that the Company has suffered a material
adverse change in its business, operations, financial condition,
or prospects since the date of this Agreement or is the subject
of material adverse publicity; or
(i) termination by the Company by written notice to the Fund and
the Underwriter, if the Company shall determine, in its sole
judgment exercised in good faith, that the Fund, Adviser, or the
Underwriter has suffered a material adverse change in its
business, operations, financial condition or prospects since the
date of this Agreement or is the subject of material adverse
publicity; or
(j) termination by the Fund or the Underwriter by written notice
to the Company, if the Company gives the Fund and the Underwriter
the written notice specified in Section 1.7(a)(ii) hereof and at
the time such notice was given there was no notice of termination
outstanding under any other provision of this Agreement;
provided, however, any termination under this Section 10.1(j)
shall be effective forty-five days after the notice specified in
Section 1.7(a)(ii) was given; or
(k) termination by the Company upon any substitution of the
shares of another investment company or series thereof for shares
of a Designated Portfolio of the Fund in accordance with the
terms of the Contracts, provided that the Company has given at
least 45 days prior written notice to the Fund and Underwriter of
the date of substitution; or
(l) termination by any party in the event that the Fund's Board
of Trustees determines that a material irreconcilable conflict
exists as provided in Article VII.
10.2. Notwithstanding any termination of this Agreement, the
Fund and the Underwriter shall, at the option of the Company,
continue to make available additional shares of the Fund pursuant
to the terms and conditions of this Agreement, for all Contracts
in effect on the effective date of termination of this Agreement
(hereinafter referred to as "Existing Contracts"), unless the
Underwriter requests that the Company seek an order pursuant to
Section 26(b) of the 1940 Act to permit the substitution of other
securities for the shares of the Designated Portfolios. The
Underwriter agrees to split the cost of seeking such an order,
and the Company agrees that it shall reasonably cooperate with
the Underwriter and seek such an order upon request.
Specifically, the owners of the Existing Contracts may be
permitted to reallocate investments in the Fund, redeem
investments in the Fund and/or invest in the Fund upon the making
of additional purchase payments under the Existing Contracts
(subject to any such election by the Underwriter). The parties
agree that this Section 10.2 shall not apply to any terminations
under Article VII and the effect of such Article VII terminations
shall be governed by Article VII of this Agreement. The parties
further agree that this Section 10.2 shall not apply to any
terminations under Section 10.1(g) of this Agreement.
10.3. The Company shall not redeem Fund shares attributable
to the Contracts (as opposed to Fund shares attributable to the
Company's assets held in the Account) except (i) as necessary to
implement Contract owner initiated or approved transactions, (ii)
as required by state and/or federal laws or regulations or
judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption"),
(iii) upon 45 days prior written notice to the Fund and
Underwriter, as permitted by an order of the SEC pursuant to
Section 26(b) of the 1940 Act, but only if a substitution of
other securities for the shares of the Designated Portfolios is
consistent with the terms of the Contracts, or (iv) as permitted
under the terms of the Contract. Upon request, the Company will
promptly furnish to the Fund and the Underwriter reasonable
assurance that any redemption pursuant to clause (ii) above is a
Legally Required Redemption. Furthermore, except in cases where
permitted under the terms of the Contacts, the Company shall not
prevent Contract owners from allocating payments to a Portfolio
that was otherwise available under the Contracts without first
giving the Fund or the Underwriter 45 days notice of its
intention to do so.
10.4. Notwithstanding any termination of this Agreement, each
party's obligation under Article VIII to indemnify the other
parties shall survive.
ARTICLE XI. Notices
11. This text is hidden, do not remove.
Any notice shall be sufficiently given when sent
by registered or certified mail to the other party at the address
of such party set forth below or at such other address as such
party may from time to time specify in writing to the other
party.
If to the Fund: PIMCO Variable Insurance
Trust
840 Newport Center Drive, Suite 360
Newport Beach, CA 92660
If to the Company:
If to Underwriter: PIMCO Funds Distributors LLC
2187 Atlantic Street
Stamford, CT 06902
ARTICLE XII. Miscellaneous
12. This text is hidden, do not remove.
12.1. All persons dealing with the Fund must look solely to
the property of the Fund, and in the case of a series company,
the respective Designated Portfolios listed on Schedule A hereto
as though each such Designated Portfolio had separately
contracted with the Company and the Underwriter for the
enforcement of any claims against the Fund. The parties agree
that neither the Board, officers, agents or shareholders of the
Fund assume any personal liability or responsibility for
obligations entered into by or on behalf of the Fund.
12.2. Subject to the requirements of legal process and
regulatory authority, each party hereto shall treat as
confidential the names and addresses of the owners of the
Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as
permitted by this Agreement, shall not disclose, disseminate or
utilize such names and addresses and other confidential
information without the express written consent of the affected
party until such time as such information has come into the
public domain.
12.3. The captions in this Agreement are included for
convenience of reference only and in no way define or delineate
any of the provisions hereof or otherwise affect their
construction or effect.
12.4. This Agreement may be executed simultaneously in two or
more counterparts, each of which taken together shall constitute
one and the same instrument.
12.5. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the
remainder of the Agreement shall not be affected thereby.
12.6. Each party hereto shall cooperate with each other party
and all appropriate governmental authorities (including without
limitation the SEC, the NASD, and state insurance regulators) and
shall permit such authorities reasonable access to its books and
records in connection with any investigation or inquiry relating
to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party
hereto further agrees to furnish the [insert state] Insurance
Commissioner with any information or reports in connection with
services provided under this Agreement which such Commissioner
may request in order to ascertain whether the variable annuity
operations of the Company are being conducted in a manner
consistent with the [insert state] variable annuity laws and
regulations and any other applicable law or regulations.
12.7. The rights, remedies and obligations contained in this
Agreement are cumulative and are in addition to any and all
rights, remedies, and obligations, at law or in equity, which the
parties hereto are entitled to under state and federal laws.
12.8. This Agreement or any of the rights and obligations
hereunder may not be assigned by any party without the prior
written consent of all parties hereto.
12.9. The Company shall furnish, or shall cause to be
furnished, to the Fund or its designee copies of the following
reports:
(a) the Company's annual statement (prepared under statutory
accounting principles) and annual report (prepared under
generally accepted accounting principles) filed with any state or
federal regulatory body or otherwise made available to the
public, as soon as practicable and in any event within 90 days
after the end of each fiscal year; and
(b) any registration statement (without exhibits) and financial
reports of the Company filed with the Securities and Exchange
Commission or any state insurance regulatory, as soon as
practicable after the filing thereof.
IN WITNESS WHEREOF, each of the parties hereto has caused
this Agreement to be executed in its name and on its behalf by
its duly authorized representative and its seal to be hereunder
affixed hereto as of the date specified below.
COMPANY:
By its authorized officer
By:
Title:
Date:
PIMCO VARIABLE INSURANCE TRUST
By its authorized officer
By:
Title:
Date:
PIMCO FUNDS DISTRIBUTORS LLC
By its authorized officer
By:
Title:
Date:
8194921.doc
<PAGE>
Exhibit 15
<PAGE>
EXHIBIT 15
EQUITABLE LIFE INSURANCE COMPANY OF IOWA
909 Locust Street, Des Moine, Iowa 50309
Phone: (515) 698-7001
Fax: (515) 698-7615
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned,
being duly elected Directors and officers of Equitable Life
Insurance Company of Iowa ("Equitable Life"), constitute and appoint
Myles R. Tashman, and Marilyn Talman, and each of them, his or
her true and lawful attorneys-in-fact and agents with full power
of substitution and resubstitution for him or her in his or her
name, place and stead, in any and all capacities, to sign Equitable
Life's registration statements and applications for exemptive
relief, and any and all amendments thereto, and to file the same,
with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents full power and authority
to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as
s/he might or could do in person, hereby ratifying and affirming
all that said attorneys-in-fact and agents, or any of them, or
his or her substitute or substitutes, may lawfully do or cause to
be done by virtue thereof.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ Frederick S. Hubbell Director and Chairman April 27, 1998
- ----------------------- --------------------
Frederick S. Hubbell
/s/ Paul E. Larson Director and President April 27, 1998
- ----------------------- --------------------
Paul E. Larson
/s/ Thomas L. May Director, Executive Vice April 27, 1998
- ----------------------- President and Chief
Thomas L. May Marketing Officer
/s/ James R. Mumford Director, General April 27, 1998
- ----------------------- Counsel, Secretary and --------------------
James R. Mumford Assistant Treasurer
/s/ David A. Terwilliger Director, Vice President, April 27, 1998
- ----------------------- Controller, Assistant --------------------
David A. Terwilliger Treasurer and Assistant
Secretary
/s/ Christopher R. Welp Director and Vice President April 24, 1998
- ----------------------- --------------------
Christopher R. Welp
/s/ Beth B. Neppl Director and Vice President April 24, 1998
- ----------------------- --------------------
Beth B. Neppl
/s/ Director, Senior Vice April 27, 1998
- ----------------------- President and Chief --------------------
Jerome L. Sychowski Information Officer
/s/ Marvin W. Alexander Director and Vice President April 27, 1998
- ----------------------- --------------------
Marvin W. Alexander
/s/ Susan B. Watson Director, Senior Vice April 24, 1998
- -------------------- President and Chief --------------------
Susan B. Watson Financial Officer
<PAGE>
