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New York, NY - The Equitable Companies Incorporated (NYSE-EQ)
achieved record operating results for the year ended December 31, 1998, Edward D. Miller, President &
Chief Executive Officer, announced today. For the year, after-tax operating earnings rose 14% to $755.0
million, or $3.27 per diluted share, compared with $660.6 million, or $2.92 per diluted
share, reported for 1997. Revenues for 1998 were $10.9 billion, up 12.9% from last year
and total assets under management rose 27% to a record $348 billion at year-end 1998.
“This record performance was achieved despite major disruptions in U.S. capital
markets during the year, and is indicative of Equitable’s diverse business base and
the strength of our demographically driven markets,” said Mr. Miller.
“Outstanding growth in our insurance and asset management businesses more than made
up for a modest shortfall in investment banking operations, caused by the volatile market
environment. Notwithstanding volatile markets, we remain committed to our strategies for
growth and are focused on their continual implementation. We entered 1999 with significant
momentum and our focus intact.”
After-tax operating earnings for the year exclude after-tax investment gains of $75.4
million – net of deferred acquisition cost (DAC) and related costs and discontinued
operations. Results for 1997 exclude after-tax investment losses of $22.8 million –
net of DAC and related costs – after-tax restructuring charges of $27.6 million, a
benefit of $97.5 million related to the release of tax reserves, an after-tax charge of
$59.5 million related to a writedown of intangible assets at Alliance Capital Management
and discontinued operations. When these items are included, the Company’s 1998
after-tax net income totaled $833.1 million, or $3.62 per diluted share, compared with
$561.0 million, or $2.47 per diluted share for 1997.
After-tax operating earnings for the 1998 fourth quarter totaled $167.2 million, or 74
cents per diluted share, versus $167.4 million, or 73 cents per diluted share, reported for the final period of
1997. Results for the 1998 quarter exclude after-tax investment gains of $10.5 million,
net of DAC and related costs and discontinued operations. Excluded from the 1997 quarter
were $197.7 million of after-tax investment losses – net of DAC and related costs
– an after-tax benefit of $97.5 million related to the release of tax reserves and
discontinued operations. When these items are included, after-tax net income for the 1998
fourth quarter totaled $177.9 million, or 79 cents per diluted share, versus a net loss of
$14.1 million, or 9 cents per diluted share for the final period of 1997.
Equitable purchased 1.9 million of its own shares in the 1998 fourth quarter, bringing
total purchases for the year to 4.6 million shares out of an authorized program of 15
million shares.
As part of the implementation of FASB 131 on segment reporting, The Equitable is now
attributing the entire corporate segment to its three main operating segments. All segment earnings numbers have
been restated using the new reporting method to facilitate comparisons.
Insurance Operations Continue Strong Performance
The after-tax operating earnings contribution from The Equitable’s Insurance
Segment rose 43% for 1998 to a record $429.2 million, versus $301.1 million for 1997. For
the 1998 fourth quarter, the after-tax contribution totaled $102.9 million, up 33%
from the $77.6 million reported for the similar period a year ago.
“All key factors affecting profitability remained very favorable,” said Michael
Hegarty, President and COO of The Equitable Life Assurance Society. “Simultaneous
with achieving these record results, we also rapidly moved forward at implementing our
integrated financial planning strategy, expanding distribution, and creating a technology and
service platform that will provide a competitive advantage.
“Also in 1998, we made outstanding progress at culling the balance sheet of
under-performing assets and freeing up unproductive capital,” Mr. Hegarty continued. “
Through our accelerated program, we sold $1.4 billion of equity real estate from the General Account investment
portfolio for a modest aggregate gain. The effort will continue in 1999, as capital is
reallocated to optimize growth and return potential.
“Sales continued to show strong year-to-year growth, with total life, annuity and
mutual fund sales volume rising 24% to $11.7 billion,” Mr. Hegarty continued.
“Key to this increase was a 43% gain first year individual annuity sales and a 39%
rise in mutual fund sales.”
“Equitable’s distribution strength was clearly evident in the fourth
quarter,” said Mr. Hegarty. “While the adversity in the stock market did cause some temporary
slowdown, sales grew stronger each month and ended the year with significant momentum. For the quarter,
new individual annuity sales were up
21% while total individual annuity premium increased 18%. Total life premium increased 2%.”
Allliance Operating Earnings Up 17.2%
After-tax operating earnings – before minority interests and other expenses – at
Alliance Capital Management rose to a record $292.9 million for 1998, a gain of 17% above the year ago level.
“Substantial growth in assets under management and cash inflows, which resulted in record advisory fees, were the
primary reason for this performance,” said Mr. Miller. “Revenues for the year rose to a new high of $1.3
billion or 36% higher than the previous year, and total assets under management rose 31% to $287 billion at year-end.
Mutual fund sales for the year increased 69% to $22 billion.”
For the fourth quarter, Alliance’s after-tax operating earnings – before
minority interests and other expenses – rose 6% to $77.8 million, versus the year ago
period.
DLJ Turns In Strong Showing In Tough Environment
“Despite a difficult industry environment during the 1998 third quarter, Donaldson,
Lufkin & Jenrette (DLJ) – Equitable’s investment banking arm – turned
in its second best year ever,” Mr. Miller said. For the year, after-tax operating earnings – before minority
interest and other expenses – totaled $367.8 million, second only to the record
$408.3 million reported for 1997.
“Offsetting the impact of the market turmoil were record fee revenues (up 55% over
the previous year), record underwriting revenues (up 19%), and record commission income (up 24%),” Mr. Miller
said. “The company’s Pershing Division and DLJ Direct operation also achieved
record performance and DLJ made major progress in expanding its presence
internationally.”
For the fourth quarter, DLJ’s after-tax operating earnings – before minority
interest and other expenses – totaled $68.6 million, a decrease of 32% compared to
last year’s record results.
The Equitable Companies Incorporated is one of the world’s premier financial services
organizations through its primary businesses: The Equitable Life Assurance Society; Alliance Capital
Management; and Donaldson, Lufkin & Jenrette. The Equitable is a member of the global AXA Group –
one of the world’s largest insurer/asset managers, with operations in over 50 countries and assets under
management exceeding $600 billion.
Condensed Consolidated Statement of Earnings
After-tax Operating Earnings
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