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New York, NY - The Equitable Companies Incorporated (NYSE-EQ) today
reported financial results for the third quarter and nine months
ended September 30, 1998. For the quarter, after-tax operating earnings
totaled $141.0 million, or 63 cents per diluted share, compared
with after-tax operating earnings of $183.2 million, or 82 cents
per fully diluted share, for the 1997 third quarter. Total assets
under management at the end of the third quarter rose to $305 billion,
compared with $273 billion a year ago, and through the first nine
months of 1998 The Equitable's annualized return-on-equity was 15.7%.
"Despite unprecedented market turmoil, The Equitable was solidly
profitable as our insurance and asset management businesses turned
in double-digit growth for the third quarter," said Edward D. Miller,
President and CEO. "This is a strong indication of the balance and
diversity of our businesses.
"Market volatility and the disruption in capital markets had a
significant impact on Donaldson, Lufkin & Jenrette's (DLJ) revenue
streams," Mr. Miller continued. "Underwriting activity came to a
halt and extreme illiquidity in fixed income markets, as well as
turmoil in emerging markets, resulted in marked losses. However,
in part due to its relatively conservative risk management, manageable
inventories and strength in other areas, DLJ was able to maintain
profitability. There are no "black holes" to fill.
"While there still may be bumps in the road as far as capital markets
are concerned, the basic growth drivers of our three major operating
businesses remain intact," Mr. Miller said. "This gives us a high
degree of optimism about our future prospects. We intend to maintain
our focus and sense of urgency on executing our strategic initiatives
which will enable us to more fully capitalize on the numerous opportunities
ahead."
After-tax operating earnings for the 1998 and 1997 periods exclude
after-tax investment losses of $3.4 million and $1.8 million, respectively,
net of deferred acquisition cost (DAC) amortization and related
costs, and results from discontinued operations. When these items
are included, after-tax net income for the 1998 quarter totaled
$138.3 million, or 62 cents per diluted share, and after-tax net
income for the 1997 quarter totaled $181.2 million or 81 cents per
diluted share.
After-tax operating earnings for the first nine months of 1998
were up 18.6% to $574.4 million, or $2.55 per diluted share, versus
after-tax operating earnings of $484.4 million, or $2.18 per diluted
share, for the first nine months of 1997. Results for the 1998 nine
months exclude after-tax investment gains - net of DAC and related
costs - of $64.9 million, and results from discontinued operations.
Results for the 1997 nine months exclude after-tax investment gains
of $12.5 million, an after-tax gain of $162.4 million from the sale
of Equitable Real Estate Investment Management, an after-tax charge
of $59.5 million related to the write down of intangible assets
at Alliance Capital Management, after-tax restructuring charges
of $27.6 million and discontinued operations.
When the above items are included, after-tax net income for the
first nine months of 1998 totaled $641.8 million, or $2.85 per diluted
share, compared with after-tax net income of $569.9 million, or
$2.57 per diluted share, for the 1997 nine month period.
Continued Growth In Insurance Operations
The after-tax operating earnings contribution for The Equitable's
insurance and annuity operations rose 15.4% to $118.6 million, versus
$102.8 million for the third quarter of 1997. For the nine months,
earnings are up 32.7% to $371.5 million. "Favorable mortality experience,
excellent persistency, growth in Separate Account fee income over
the prior year's quarter, and further improvement in the company's
expense-to-premium ratio were the primary factors in this earnings
growth," said Michael Hegarty, President and COO of Equitable Life.
"These positives more than offset some investment spread erosion
during the period - caused by market volatility - which impacted
investment income. The low interest rate environment has enabled
us to adjust crediting rates in the fourth quarter, and this climate
provides us with the flexibility to take further steps in the future
should they be required.
"Although some slowdown in sales was experienced in the final weeks
of the quarter - which we believe resulted from market conditions
- we continued to meet our 20% premium growth target while aggressively
pursuing our strategic initiatives," Mr. Hegarty continued. "Overall,
total premiums were up 21% over the prior year period - rising to
$2.18 billion. First year individual annuity premiums and deposits
grew 38% to $1.19 billion, versus $862 million for the third period
of 1997."
"First year life premiums increased 15.1% for the quarter to $104.2
million. In addition, sales of mutual funds by the Company's sales
force rose to $605.4 million, an increase of 39% over the level
during last year's third quarter." Total sales volume, which includes
premiums and mutual fund sales, totaled $2.78 billion for the quarter
and for the nine months amounted to $8.51 billion up 29% over the
same period last year.
"Clearly, customers consider our financial products and services
as important to their savings and retirement needs, and view them
with a long term time horizon," Mr. Hegarty said. "While market
turbulence may cause some impact on sales and asset allocations,
we believe our financial planning strategy, expanding distribution
channels and client service enhancements will help mitigate its
effect."
Results From Investment Operations
The combined after-tax operating earnings contribution for The
Equitable's investment businesses totaled $39.9 million, compared
with $102.9 million for the third quarter of 1997. "This decline
reflects the overall harsh conditions in capital markets which acted
to limit earnings at DLJ," said Mr. Miller. "However, this operation
remains one of the nation's premier securities and investment banking
firms, with strong fundamentals and a history of turning this type
of turmoil into a long term advantage. Alliance Capital, our other
major investment services company, continued to benefit from the
growth in its individual and institutional asset management businesses
while posting higher year-to-year earning for the third quarter."
For the quarter, DLJ's after-tax earnings - before minority interest
and other expenses - totaled $25.8 million, compared with a record
$120.3 million for the 1997 third quarter. This decline resulted
primarily from lower dealer and trading revenue, and an industrywide
decline in underwriting activity, which more than offset growth
in commission and fee income.
Alliance Capital's after-tax operating earnings - before minority
interest and other expenses - rose to $70.3 million, versus $66.2
million for the year ago period. Total assets under management at
Alliance increased to $241.9 billion at the end of the 1998 third
quarter, versus $217.3 billion at the same time last year. Mutual
fund sales grew to $20.2 billion for the first nine months of 1998,
or 116% ahead of the year ago period.
The
Equitable Companies Incorporated is one of the nation's premier
financial services organizations through it primary businesses:
The Equitable Life Assurance Society of the U.S.; Alliance Capital
Management and Donaldson, Lufkin & Jenrette. The Equitable is a
member of the global AXA group, the world's largest insurer/asset
manager with over $600 billion in assets under management.
Condensed Consolidated Statement of Earnings
After-tax Operating Earnings
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