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New York, NY - The Equitable Companies Incorporated (NYSE-EQ) achieved record operating profits, revenues and
assets under management for the second quarter ended June 30, 1998, Edward D. Miller, President and CEO,
announced today.
For the quarter after-tax operating earnings rose 33% to $222.3 million, or 98 cents per diluted share
compared with after-tax operating earnings of $167.7 million, or 76 cents per diluted share, reported for
the second quarter of 1997. Revenues for the 1998 quarter rose 14% to $3.0 billion, versus revenues
of $2.6 billion a year ago, and total assets under management by The Equitable and its subsidiaries
reached an all-time high of $327.0 billion at quarter's end up 30% over the comparable 1997 level.
"These record results are particularly pleasing since they were achieved during a time when substantial
progress was also made in the development and implementation of new initiatives which are designed to
further enhance the Company's long-term opportunities and performance," said Mr. Miller. "Achieving
this outstanding earnings performance while simultaneously devoting significant attention and resources
to our strategic initiatives is testimony to The Equitable organization's capabilities and flexibility."
"All of our major companies - Equitable Life, Alliance Capital and Donaldson, Lufkin & Jenrette
(DLJ) - continued to benefit from our growth strategy as well as from the favorable economic climate
even though the stock market was flat for the quarter," said Mr. Miller. "We remain tightly focused
on the execution of our strategic blueprint which will be the key determinant of our future success
and ability to capture new growth opportunities."
Operating results for the 1998 second quarter exclude after-tax investment gains of $16.1 million,
net of deferred acquisition cost amortization (DAC) and related costs and a discontinued operations gain
of $1.3 million. Operating results for the 1997 quarter exclude after-tax investment gains of $166.1
million - which are primarily attributed to the sale of Equitable Real Estate Investment Management, after-tax
charge of $59.5 million related to the write down of intangible assets at Alliance Capital, after-tax
restructuring charges of $24.2 million and a discontinued operations gain of $0.6 million.
When these items are included, after-tax net income for the 1998 quarter totaled $239.7 million, or
$1.06 per diluted share and after-tax net income for the 1997 quarter totaled $251.0 million, or
$1.14 per diluted share.
After-tax operating earnings for the first six months of 1998 rose 42% to $428.5 million, or $1.90
per diluted share, versus after-tax operating earnings of $301.3 million or $1.37 per diluted share for
the first six months of 1997. Results for the 1998 six months exclude after-tax investment gains - net
of DAC and related costs - of $68.3 million and a discontinued operations gains of $1.8 million.
Results for the 1997 six months exclude after-tax investment gains of $176.7 million - net of DAC
and related costs - which are primarily related to the sale of Equitable Real Estate Investment, along with
the aforementioned Alliance writedown, after-tax restructuring charges of $27.6 million and a discontinued
operations loss of $2.7 million.
Strong Growth From Insurance Operations
The after-tax operating earnings contribution from The Equitable's insurance and annuity operations
continued to expand during the second quarter of 1998, rising 30% to a record $130.5 million, compared
with $100.1 million for the comparable period a year ago. As a percentage of operating earnings, insurance
accounted for 53% of both the quarterly and year to date operating earnings.
"Those factors which helped us get off to such a strong start in the first quarter of the year continued
during the second, enabling our record performance," said Michael Hegarty, President and COO of Equitable
Life. "These included substantial growth in Separate Account fee income over the prior year's quarter, ongoing
healthy investment spreads, favorable mortality experience, significant sales growth, and expanding margins.
For the quarter, the expense to premium ratio improved to 9.1%, down from 11.5% in second quarter 1997
and 10.7% in first quarter 1998. At quarter's end, Separate Account balances - those funds that back our
variable annuity and variable life products - totaled a record $30.3 billion, 44% higher than at the
end of the 1997 quarter.
"Sales results showed very favorable comparison, with total individual life and annuity premiums and
deposits growing 33% to $2.38 billion, against $1.79 billion for the second quarter of 1997," Mr. Hegarty
continued. "Success in the annuity market place once again led the way, with new sales of annuity
premiums and deposits climbing 73% to $1.29 billion for the 1998 second quarter, versus $746.5 million
for the year ago period. Total annuity premiums increased 52% to $1.66 billion for the quarter versus
$1.09 billion for the year ago period. New life sales for the quarter were $119.8 million, up 13% over
the year ago period.
"Both the retail and wholesale distribution channels had outstanding performance during the second
quarter," said Mr. Hegarty. "Our retail system posted 30% growth in annuity sales, 13% growth in
life sales, 63% growth in mutual funds and provided planning services through Financial Fitness Profiles
and other tools to over 33,000 clients. Our wholesaler, Equitable Distributors, Inc., which serves
banks, brokerage, financial planners and wirehouses continues to expand rapidly. Through six months, it
has produced annuity premium of $742 million, exceeding the $649 million written in all of 1997, its
first full year of operation. In total, our distribution group posted total product sales of $3.05
billion, up 39% and $5.73 billion, up 32% for the quarter and six months, respectively."
"Expanding our career sales force, developing new client service enhancements, growing our distribution
capabilities, and tight expense management will continue to play key roles in our strategy as we
move ahead," said Mr. Hegarty. "Underlying these efforts will be strategic initiatives designed to position
us as the 'trusted advisor' to our clients through our integrated financial planning services."
"We're also happy to report that we have made significant progress in executing our real estate
sales program," said Hegarty. "As of this release, we have closed on $234 million of transactions,
and we have slightly more than $1 billion under contract which are anticipated to close in the third
quarter.
"We are benefiting from the strong real estate market and remain optimistic on our ability to complete
the program as previously announced."
Investment Operations Produce Record Results
The aggregate after-tax operating earnings contribution from The Equitable's investment businesses rose 31%
to a record $117.4 million for the 1998 second quarter, compared with $89.9 million for the similar
period of 1997. "Both DLJ and Alliance continue to perform at exceptional levels relative to their
industries as a whole," said Mr. Miller. "This reflects outstanding execution as well as the capability
of seizing the right new growth opportunities."
DLJ's after-tax operating earnings - before minority interest and other expenses - rose to a record
$142.3 million, compared to $100.2 million for the second quarter of 1997. "The firm continues to
generate tremendous momentum in its investment banking and capital markets businesses," Mr. Miller
continued. "These franchises helped produce overall revenue growth of 47% to nearly $1.6 billion during
the second quarter of 1998, compared with the year ago period."
Alliance Capital's after-tax operating earnings - before minority interest and other expenses -
rose 33% to a record $75.8 million for the 1998 quarter, versus $56.8 million a year ago.
"Ongoing growth in Alliance mutual fund and institutional asset management businesses resulted in this
record performance," said Mr. Miller. "Total assets under management at Alliance stood at a
record $262.5 billion at the end of the 1998 second quarter, up 32% above the level a year ago.
During the quarter mutual funds sales were up 105% over the same period a year ago.
The Equitable Companies Incorporated is one of the nation's premier financial services organizations
through its primary businesses: The Equitable Life Assurance Society of the United States; Alliance
Capital Management LP and Donaldson, Lufkin & Jenrette, Inc. The Equitable is a member of the
global AXA Group, one of the world's largest insurer/asset managers, with over $530 billion in assets under
management.
Condensed Consolidated Statement of Earnings
After-tax Operating Earnings
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