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New York- AXA Financial, Inc. (NYSE:AXF) today reported after-tax results from continuing operations applicable to common shares for the third quarter ended September 30, 2000. For the quarter, these earnings were $241.0 million, or $0.55 per diluted share, an increase of 45% compared with $165.8 million, or $0.38 per diluted share, reported for the third quarter of 1999.
These earnings exclude DLJ, which is now reported in net income as a discontinued operation in accordance with U.S. GAAP. All historical results have been restated to achieve comparability. On August 30, 2000, AXA Financial announced the sale of DLJ to Credit Suisse Group, which closed on November 3.
For the third quarter, net revenues from continuing operations reached $1.23 billion, an increase of 24% from $992.2 million in the third quarter of 1999. Operating margins improved by 510 basis points to 36.7% in the quarter over the comparable 1999 quarter. Total assets under management rose to a record $417.4 billion or 22% above the year-ago level. The overall annualized return-on-equity (ROE) was 22.5% for the latest quarter compared with 17.3% in the year-ago quarter.
"Our results in the third quarter continue to reflect strong execution and leadership in systemic growth markets in each of our core activities: financial planning, advice, and asset management," commented Edward D. Miller, President and Chief Executive Officer of AXA Financial, Inc. "The third quarter was also perhaps one of our most important periods for repositioning AXA Financial. The acquisition of Sanford C. Bernstein, a value-style manager, complements Alliance Capital's growth style, adds more than $80 billion in assets, including a big footprint in the Private Client business, expands our distribution network and allows us to compete for any new investment mandate worldwide. The sale of DLJ to the Credit Suisse Group allows us to focus capital on more rapid growth in our core activities. And two other key actions included reaching an agreement with AXA Group to purchase the AXA Financial minority interest and disposing of our Disability Income business.
"AXA Financial continues to deliver strong earnings growth during these transformational events. I'm extremely pleased with the persistent dedication, energy and performance of our management team and employees through this period of significant change. Our management team is excited about the opportunities surrounding these changes and about continuing to pursue our growth strategy," Mr. Miller said.
Other third quarter highlights included:
- Consolidated gross product sales for the quarter reached $19.6 billion, up 31% from last year's comparable quarter.
- Alliance Capital maintains the number three rank in non-proprietary U.S mutual fund net sales.
- New separately managed accounts at Alliance Capital totaled 52 accounts adding $3.5 billion in new assets in the quarter.
- Completed the national rollout of fee-based planning and the training program of AXA Advisors involving approximately 380,000 hours of training.
- New AMA client assets at the third quarter were $2.6 billion with 23,572 funded AMA accounts.
- Equitable Life paid a second dividend of $100 million to AXA Financial from its operations, bringing this year's total payment to $250 million.
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For the third quarter of 2000, AXA Financial's reported earnings (which include discontinued operations, net realized gains and losses, and a one-time charge of approximately $407 million, representing part of the taxes related to the sale of DLJ) were a net loss of $106.4 million, or $0.26 per diluted share, compared with a gain of $231.6 million, or $0.51 per diluted share reported in the 1999 third quarter. The gain on the sale of DLJ, as well as the remaining taxes on the gain, will be reported in the fourth quarter.
Record Nine Month Continuing Operations Results
For the nine months ended September 30, 2000, after-tax earnings from continuing operations applicable to common shares rose to a record $679.9 million, or $1.55 per diluted share, compared with $488.0 million, or $1.10 per diluted share reported in the comparable period last year. Net revenues for the first nine months of 2000 rose 24% to $3.62 billion compared with $2.91 billion in the comparable period. Operating margins for the first nine months of 2000 were 35.6%, a 350 basis points improvement over the comparable period last year. Annualized ROE was 21.7% for the first nine months of 2000, up from 17.4% in the first nine months of 1999.
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For the nine-month period, AXA Financial's reported net income was $483.3 million, after a $407.0 million charge for taxes related to the sale of DLJ, compared with $833.7 million in the first nine months of 1999. Further details about the discontinued operations will be available after DLJ reports its third quarter earnings later this month.
AXA Advisors/Equitable Achieves Second Best Quarter
After-tax operating earnings from the financial advisory/insurance segment were 41% above last year's level, reaching $192.1 million compared with $135.8 million in the comparable quarter in 1999. Third quarter annualized ROE improved to 18.9% from 14.8% in the comparable period last year. For the first nine months of 2000, earnings from these operations grew 32% to $534.7 million, compared to the similar period of 1999.
Total sales of life insurance, annuity and mutual fund products reached $3.32 billion for the third quarter of 2000, up 2% from $3.24 billion in the year-earlier quarter. In the first full year of AMA Accounts, AMA client assets were $2.6 billion as of the third quarter this year compared with $1.7 billion at the end of the second quarter.
"The persistency of our business continues to exceed expectations and we continue to enjoy strong net cash flow," commented Michael Hegarty, Senior Vice Chairman and Chief Operating Officer, AXA Financial. "The surrender rate on annuities declined for the second consecutive quarter and is the lowest rate in the past four quarters. The combination of 12% net revenue growth and higher margins supported the strong earnings growth in the quarter. Our revenue mix continues to shift towards fee income activities, as these grew 39% in the quarter. Fee income from separate accounts grew 40% to $169.9 million.
"We continue to introduce new annuity and life offerings that have strong appeal with customers, including the launch in New York of Extra Credit and the Special DCA annuity product, and the November launch of the enhanced death-benefit annuity rider," said Mr. Hegarty. "Additionally, Equitable Distributors Inc., signed a contract with Prudential Securities to expand our wholesale distribution channel. The national rollout of fee-based planning was completed in the quarter and we have sold more than 2,000 plans year-to-date, with more than half of those sold in the third quarter alone. The AMA results are ongoing evidence of a successful re-engineering of our complete sales process. These achievements, along with the ongoing development of our retail force, through an enhanced hiring, training and licensing program, continue to transform AXA Financial into a premier advice and planning organization.
"Technology continues to be a key strategic enabler of our transformation process and we are excited about our advanced e-commerce initiatives soon to be introduced. We are close to introducing an advanced e-commerce initiative that will enhance productivity and client relationships through our wholesale and retail channels and become an important recruiting tool for AXA Financial. For example, our Internet portal strategy is designed to improve business through the intermediary channel by offering features that will help them generate high net worth leads and prospects, weigh competitor product offerings, and take advantage of customer relationship management software and sales productivity tools. We are planning to begin our pilot program in the first quarter of 2001, and we expect to realize new capabilities that will make our distribution channels more efficient and strengthen relationships with customers." said Mr. Hegarty.
Alliance Capital Investment Management Reports Record Income
for Third Quarter and Nine Months
Alliance Capital Management's operating partnership after-tax earnings (before minority interests and other expenses) reached $195.5 million, up 92% from $101.7 million in the third quarter of 1999. Total assets under management at the end of the period totaled $388.4 billion, 22% above 1999's third quarter. Alliance's contribution to AXA Financial's third quarter results was the second best ever with $51.1 million, versus $30.9 million last year.
"Mutual fund sales were $18.5 billion, or up 50% from the prior year's quarter, as Alliance remains among the leaders in non-proprietary U.S. sales as of August 2000. Sales in the institutional business exceeded $3.5 billion in the quarter while winning 52 new mandates in the quarter," commented Mr. Miller.
"On October 2, 2000, Alliance closed the transaction to purchase the business of Sanford C. Bernstein. Alliance Capital's combination with Bernstein is a logical fit for both organizations and increases our asset gathering and distribution capabilities. The merger also brings Alliance Capital's total assets under management to $474 billion and boosts its network of research analysts to 260 worldwide. Together, these two leaders in growth and value investing allow us to more effectively compete for virtually any investment assignment worldwide. While the transaction increases opportunity, we are excited about exploiting the synergies that result from this combination, like expanding distribution of AXA Advisors to serve Bernstein's 15,000 high net-worth clients with a broader spectrum of investment services and products," Mr. Miller said.
After tax operating earnings (before minority interests and other expenses) for the nine months ended September 30, 2000 was $520.5 million versus pro forma $296.9 million a year earlier. For the first nine months of 1999, the contribution from Alliance was also a record at $151.1 million, versus $85.5 million in the comparable period a year ago.
Other Events
On October 18, 2000, AXA Financial announced that the Board of Directors, acting upon a unanimous recommendation by a Special Committee of independent directors, approved an enhanced tender offer and merger agreement for AXA Group to acquire the approximately 40% of AXA Financial's outstanding shares it does not already own. AXA Group has agreed to make a tender offer for all the publicly held shares of AXF common stock comprised of $35.75 in cash and 0.295 of an AXA Group American Depositary Share (ADS listed on NYSE) per AXA Financial share.
Conference Call
Additional financial information is available in AXA Financial's Quarterly Financial Supplement, which can be obtained on the company's Web site at www.axa-financial.com. A conference call to discuss third quarter results will be broadcast on the Investor Relations section of the Company's Web site at 9:45 am EST on Tuesday, November 7, 2000. To participate in "listen only" mode, dial 1-800 304-2249 (U.S. callers). International callers, dial 1-212 478-3020. After dialing, hold for the operator. You will need to reference the AXA Financial Conference with access code 326383. A replay of the conference call will be available on the Web site 2 hours after the call and for the following three months.
About AXA Financial and AXA Group (After the DLJ Sale)
AXA Financial, Inc., with nearly half a trillion dollars in assets under management, is one of the world 's premier financial service organizations through its strong brands: The Equitable Life Assurance Society, AXA Advisors, Equitable Distributors, Alliance Capital Management and Sanford C. Bernstein. AXA Financial is a member of the global AXA Group. For more information visit www.axa-financial.com.
AXA Group is one of the world's largest international insurance and related financial services companies. AXA's operations are diverse geographically, with activities in approximately 60 countries, principally Western Europe, North America and the Asia/Pacific area. In the United States, AXA is represented through its holdings in AXA Financial, Inc. and its subsidiaries: Equitable Life Assurance Society, AXA Advisors, Equitable Distributors and Alliance Capital Management.
AXA has approximately $900 billion in assets under management and $52 billion in market capitalization. The AXA American Depositary Share (ADS) is listed on the NYSE under the ticker symbol AXA, on the Paris Stock Exchange under the same symbol and trades on the SEAQ International in London. For more information, visit www.axa.com.
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