UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2006
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________________ to _________________
Commission File No. 0-25280
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AXA EQUITABLE LIFE INSURANCE COMPANY
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(Exact name of registrant as specified in its charter)
New York 13-5570651
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1290 Avenue of the Americas, New York, New York 10104
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(Address of principal executive offices) (Zip Code)
(212) 554-1234
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Registrant's telephone number, including area code
Not applicable
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(Former name, former address, and former fiscal year if changed
since last report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one):
Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [X]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
As of May 11, 2006, 2,000,000 shares of the registrant's $1.25 par value Common
Stock were outstanding.
REDUCED DISCLOSURE FORMAT:
Registrant meets the conditions set forth in General Instruction H(1)(a) and (b)
of Form 10-Q and is therefore filing this form with the Reduced Disclosure
Format.
Page 1 of 28
AXA EQUITABLE LIFE INSURANCE COMPANY
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2006
TABLE OF CONTENTS
Page
PART I FINANCIAL INFORMATION
Item 1: Financial Statements
o Consolidated Balance Sheets as of March 31, 2006 and December 31, 2005............... 4
o Consolidated Statements of Earnings for the Quarters Ended
March 31, 2006 and 2005........................................................... 5
o Consolidated Statements of Shareholder's Equity and Comprehensive
(Loss) Income for the Quarters Ended March 31, 2006 and 2005...................... 6
o Consolidated Statements of Cash Flows for the Quarters Ended
March 31, 2006 and 2005........................................................... 7
o Notes to Consolidated Financial Statements........................................... 8
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations ("Management Narrative")..................................... 23
Item 3: Quantitative and Qualitative Disclosures About Market Risk*............................ 26
Item 4: Controls and Procedures................................................................ 26
PART II OTHER INFORMATION
Item 1: Legal Proceedings...................................................................... 27
Item 1A: Risk Factors .......................................................................... 27
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds............................ 27
Item 3: Defaults Upon Senior Securities........................................................ 27
Item 4: Submission of Matters to a Vote of Security Holders.................................... 27
Item 5: Other Information...................................................................... 27
Item 6: Exhibits .............................................................................. 27
SIGNATURES............................................................................................. 28
*Omitted pursuant to General Instruction H to Form 10-Q.
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FORWARD-LOOKING STATEMENTS
Some of the statements made in this report, including statements made in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", may constitute forward-looking statements. Forward-looking
statements include, among other things, discussions concerning potential
exposure of AXA Equitable Life Insurance Company and its subsidiaries to market
risks, as well as statements expressing management's expectations, beliefs,
estimates, forecasts, projections and assumptions, as indicated by words such as
"believes," "estimates," "intends," "anticipates," "plans," "expects,"
"projects," "should," "probably," "risk," "target," "goals," "objectives," or
similar expressions. AXA Equitable Life Insurance Company claims the protection
afforded by the safe harbor for forward-looking statements contained in Section
21E of the Securities Exchange Act of 1934, and assumes no duty to update any
forward-looking statement. Forward-looking statements are based on management's
expectations and beliefs concerning future developments and their potential
effects and are subject to risks and uncertainties. Forward-looking statements
are not a guarantee of future performance. Actual results could differ
materially from those anticipated by forward-looking statements due to a number
of important factors, including those discussed under "Risk Factors" in Part I,
Item 1A of AXA Equitable Life Insurance Company's Annual Report on Form 10-K
for the year ended December 31, 2005 and elsewhere in this report.
-3-
PART I FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS.
AXA EQUITABLE LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
MARCH 31, December 31,
2006 2005
----------------- -----------------
(IN MILLIONS)
ASSETS
Investments:
Fixed maturities available for sale, at estimated fair value.............. $ 29,077.7 $ 30,034.8
Mortgage loans on real estate............................................. 3,196.0 3,233.9
Equity real estate, held for the production of income..................... 657.5 658.2
Policy loans.............................................................. 3,835.6 3,824.2
Other equity investments.................................................. 1,183.7 1,122.1
Other invested assets..................................................... 1,527.3 1,290.9
----------------- -----------------
Total investments..................................................... 39,477.8 40,164.1
Cash and cash equivalents................................................... 1,463.7 1,112.1
Cash and securities segregated, at estimated fair value..................... 1,629.8 1,720.8
Broker-dealer related receivables........................................... 3,204.9 2,929.1
Deferred policy acquisition costs........................................... 7,942.0 7,557.3
Goodwill and other intangible assets, net................................... 3,746.0 3,758.8
Amounts due from reinsurers................................................. 2,595.4 2,604.4
Loans to affiliates......................................................... 400.0 400.0
Other assets................................................................ 3,728.8 3,723.5
Separate Accounts' assets................................................... 75,239.4 69,997.0
----------------- -----------------
TOTAL ASSETS................................................................ $ 139,427.8 $ 133,967.1
================= =================
LIABILITIES
Policyholders' account balances............................................. $ 27,093.3 $ 27,194.0
Future policy benefits and other policyholders liabilities.................. 13,912.2 13,997.8
Broker-dealer related payables.............................................. 1,426.0 1,226.9
Customers related payables.................................................. 3,142.1 2,924.3
Amounts due to reinsurers................................................... 1,026.7 1,028.3
Short-term and long-term debt............................................... 894.4 855.4
Loans from affiliates....................................................... 325.0 325.0
Income taxes payable........................................................ 2,754.4 2,821.9
Other liabilities........................................................... 1,826.7 1,786.6
Separate Accounts' liabilities.............................................. 75,239.4 69,997.0
Minority interest in equity of consolidated subsidiaries.................... 2,112.6 2,096.4
Minority interest subject to redemption rights.............................. 271.2 271.6
----------------- -----------------
Total liabilities..................................................... 130,024.0 124,525.2
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Commitments and contingencies (Note 10)
SHAREHOLDER'S EQUITY
Common stock, $1.25 par value, 2.0 million shares authorized,
issued and outstanding.................................................... 2.5 2.5
Capital in excess of par value.............................................. 5,002.9 4,976.3
Retained earnings........................................................... 4,265.9 4,030.8
Accumulated other comprehensive income...................................... 132.5 432.3
----------------- -----------------
Total shareholder's equity............................................ 9,403.8 9,441.9
----------------- -----------------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY.................................. $ 139,427.8 $ 133,967.1
================= =================
See Notes to Consolidated Financial Statements.
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AXA EQUITABLE LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF EARNINGS
QUARTERS ENDED MARCH 31, 2006 AND 2005
(UNAUDITED)
2006 2005
----------------- -----------------
(IN MILLIONS)
REVENUES
Universal life and investment-type product policy fee income................ $ 523.6 $ 442.3
Premiums.................................................................... 202.3 224.8
Net investment income....................................................... 516.0 661.7
Investment gains, net....................................................... 31.8 4.1
Commissions, fees and other income.......................................... 975.2 879.7
----------------- -----------------
Total revenues........................................................ 2,248.9 2,212.6
----------------- -----------------
BENEFITS AND OTHER DEDUCTIONS
Policyholders' benefits..................................................... 452.8 469.9
Interest credited to policyholders' account balances........................ 273.3 258.5
Compensation and benefits................................................... 474.4 427.6
Commissions................................................................. 333.4 245.0
Distribution plan payments.................................................. 71.0 91.4
Amortization of deferred sales commissions.................................. 26.4 36.5
Interest expense............................................................ 17.9 17.8
Amortization of deferred policy acquisition costs........................... 83.3 184.3
Capitalization of deferred policy acquisition costs......................... (314.8) (259.0)
Rent expense................................................................ 44.5 42.6
Amortization of other intangible assets..................................... 5.9 5.9
Other operating costs and expenses.......................................... 283.7 219.6
----------------- -----------------
Total benefits and other deductions................................... 1,751.8 1,740.1
----------------- -----------------
Earnings from continuing operations before income taxes
and minority interest..................................................... 497.1 472.5
Income taxes ............................................................... (138.8) (117.8)
Minority interest in net income of consolidated subsidiaries................ (123.0) (89.6)
----------------- -----------------
Earnings from continuing operations......................................... 235.3 265.1
Loss from discontinued operations, net of income taxes...................... (0.2) (.1)
----------------- -----------------
Net Earnings................................................................ $ 235.1 $ 265.0
================= =================
See Notes to Consolidated Financial Statements.
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AXA EQUITABLE LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
AND COMPREHENSIVE (LOSS) INCOME
QUARTERS ENDED MARCH 31, 2006 AND 2005
(UNAUDITED)
2006 2005
----------------- -----------------
(IN MILLIONS)
SHAREHOLDER'S EQUITY
Common stock, at par value, beginning of year and end of period............. $ 2.5 $ 2.5
----------------- -----------------
Capital in excess of par value, beginning of year........................... 4,976.3 4,890.9
Other changes in capital in excess of par value............................. 26.6 12.0
----------------- -----------------
Capital in excess of par value, end of period............................... 5,002.9 4,902.9
----------------- -----------------
Retained earnings, beginning of year........................................ 4,030.8 3,457.0
Net earnings................................................................ 235.1 265.0
----------------- -----------------
Retained earnings, end of period............................................ 4,265.9 3,722.0
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Accumulated other comprehensive income, beginning of year................... 432.3 874.1
Other comprehensive income loss ............................................ (299.8) (263.0)
----------------- -----------------
Accumulated other comprehensive income, end of period....................... 132.5 611.1
----------------- -----------------
TOTAL SHAREHOLDER'S EQUITY, END OF PERIOD................................... $ 9,403.8 $ 9,238.5
================= =================
COMPREHENSIVE (LOSS) INCOME
Net earnings................................................................ $ 235.1 $ 265.0
----------------- -----------------
Change in unrealized losses net of reclassification adjustments............. (299.8) (263.0)
----------------- -----------------
Other comprehensive loss.................................................... (299.8) (263.0)
----------------- -----------------
COMPREHENSIVE (LOSS) INCOME................................................. $ (64.7) $ 2.0
================= =================
See Notes to Consolidated Financial Statements.
-6-
AXA EQUITABLE LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
QUARTERS ENDED MARCH 31, 2006 AND 2005
(UNAUDITED)
2006 2005
----------------- -----------------
(IN MILLIONS)
Net earnings................................................................ $ 235.1 $ 265.0
Adjustments to reconcile net earnings to net cash provided
by (used in) operating activities:
Interest credited to policyholders' account balances.................... 273.3 258.5
Universal life and investment-type product policy fee income............ (523.6) (442.2)
Net change in broker-dealer and customer related receivables/payables... (65.0) (12.5)
Investment gains, net................................................... (31.8) (4.1)
Change in income tax payable............................................ 116.2 58.4
Change in future policy benefits........................................ (27.2) 27.3
Change in property and equipment........................................ (7.0) (15.3)
Change in deferred policy acquisition costs............................. (231.5) (74.7)
Change in segregated cash and securities, net........................... 91.0 (201.3)
Minority interest in net income of consolidated subsidiaries............ 123.0 89.6
Change in fair value of guaranteed minimum income
benefit reinsurance contracts........................................ 38.3 (40.1)
Amortization of deferred sales commissions.............................. 26.4 36.5
Amortization of other intangible assets, net............................ 5.9 5.9
Change in accounts payable and accrued expenses......................... 112.8 (124.2)
Other, net.............................................................. 20.0 (121.7)
----------------- -----------------
Net cash provided by (used in) operating activities......................... 155.9 (294.9)
----------------- -----------------
Cash flows from investing activities:
Maturities and repayments of fixed maturities and mortgage loans.......... 709.5 706.4
Sales..................................................................... 623.7 497.1
Purchases................................................................. (1,099.7) (1,293.5)
Change in short-term investments.......................................... (2.1) (65.5)
Other, net................................................................ (87.9) 78.0
----------------- -----------------
Net cash provided by (used in) investing activities........................ 143.5 (77.5)
----------------- -----------------
Cash flows from financing activities:
Policyholders' account balances:
Deposits................................................................ 953.4 929.4
Withdrawals and transfers to Separate Accounts.......................... (838.4) (668.6)
Net increase in short-term financings..................................... 43.3 213.5
Other, net................................................................ (106.1) (98.0)
----------------- -----------------
Net cash provided by financing activities................................... 52.2 376.3
----------------- -----------------
Change in cash and cash equivalents......................................... 351.6 3.9
Cash and cash equivalents, beginning of year................................ 1,112.1 1,680.8
----------------- -----------------
Cash and Cash Equivalents, End of Period.................................... $ 1,463.7 $ 1,684.7
================= =================
Supplemental cash flow information
Interest Paid............................................................. $ 25.9 $ 26.5
================= =================
Income Taxes Paid......................................................... $ 8.9 $ 97.1
================= =================
See Notes to Consolidated Financial Statements.
-7-
AXA EQUITABLE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1) BASIS OF PRESENTATION
The preparation of the accompanying unaudited consolidated financial
statements in conformity with GAAP requires management to make estimates
and assumptions (including normal, recurring accruals) that affect the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates. The accompanying
unaudited interim consolidated financial statements reflect all
adjustments necessary in the opinion of management to present fairly
the consolidated financial position of AXA Equitable and its consolidated
results of operations and cash flows for the periods presented. All
significant intercompany transactions and balances have been eliminated in
consolidation. These statements should be read in conjunction with the
audited consolidated financial statements of AXA Equitable for the year
ended December 31, 2005. The results of operations for the three months
ended March 31, 2006 are not necessarily indicative of the results to be
expected for the full year.
The terms "first quarter 2006" and "first quarter 2005" refer to the three
months ended March 31, 2006 and 2005, respectively.
Certain reclassifications have been made in the amounts presented for
prior periods to conform those periods to the current presentation.
2) NEW ACCOUNTING PRONOUNCEMENTS
On January 1, 2006, the Company adopted SFAS No. 123(R). To effect its
adoption, the Company elected the "modified prospective method" of
transition and, therefore, prior-period results were not restated. Prior
to the adoption of SFAS 123(R), the Company had elected to continue to
account for stock-based compensation in accordance with APB No. 25, and,
as a result, the recognition of stock-based compensation expense generally
was limited to amounts attributed to awards of restricted shares, stock
appreciation rights and other cash-settled programs. SFAS No. 123(R)
requires the cost of all share-based payments to employees to be
recognized in the financial statements based on their fair values,
resulting in compensation expense for certain types of the Company's
equity-classified award programs for which no cost previously would have
been charged to net earnings under APB No. 25, most notably for employee
options to purchase AXA American Depository Receipts ("ADRs") and AXA
ordinary shares and for employee stock purchase plans. As a result of
adopting SFAS No. 123(R) on January 1, 2006, consolidated earnings from
continuing operations before income taxes and minority interest and
consolidated net earnings for first quarter 2006 were $6.5 million and
$4.2 million lower, respectively, than if these plans had continued to be
accounted for under APB No. 25.
Under the modified prospective method, the Company applied the
measurement, recognition, and attribution requirements of SFAS No. 123(R)
to stock-based compensation awards granted, modified, repurchased or
cancelled on or after January 1, 2006. In addition, beginning in first
quarter 2006, costs associated with unvested portions of outstanding
employee stock option awards at January 1, 2006 that prior to adoption of
SFAS 123(R) would have been reflected by the Company only in pro forma
disclosures, are recognized in the consolidated statement of earnings over
the awards' remaining future service-vesting periods. Liability-classified
awards outstanding at January 1, 2006, such as performance units and stock
appreciation rights, were remeasured to fair value and resulted in no
adjustment to their intrinsic value basis, including the cumulative effect
of differences between actual and expected forefeitures, primarily due to
the de minimis time remaining to expected settlement of these awards.
Effective with its adoption of SFAS No. 123(R), the Company elected the
"short-cut" transition alternative provided by FSP No. 123(R)-3 for
approximating the historical pool of windfall tax benefits (tax benefits
arising from tax deductions in excess of compensation costs recognized
under GAAP) available at January 1, 2006 that is used in determining the
tax effects of stock-based compensation in the results of operations and
cash flow reporting for awards outstanding at adoption of SFAS No. 123(R).
Additional windfall tax benefits resulted from exercises of stock option
awards in first quarter 2006.
-8-
3) INVESTMENTS
Investment valuation allowances for mortgage loans and changes thereto
follow:
THREE MONTHS ENDED
MARCH 31,
-----------------------------------
2006 2005
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(IN MILLIONS)
Balances, beginning of year............................................... $ 11.8 $ 11.3
Additions charged to income............................................... .1 -
Deductions for writedowns and asset dispositions.......................... (.3) (.1)
-------------- ---------------
Balances, End of Period................................................... $ 11.6 $ 11.2
============== ===============
For the first quarters of 2006 and 2005, investment income is shown net of
investment expenses of $63.6 million and $50.4 million, respectively.
As of March 31, 2006 and December 31, 2005, fixed maturities classified as
available for sale had amortized costs of $28,848.9 million and $29,094.9
million, respectively. Also at March 31, 2006 and December 31, 2005,
respectively, Other equity investments included the General Account's
investments in Separate Accounts and other trading securities having
carrying values of $126.9 million and $120.0 million and costs of $105.5
million and $103.7 million and other equity securities with carrying
values of $48.6 million and $47.4 million and costs of $45.3 million and
$45.7 million.
In the first quarters of 2006 and 2005, respectively, net unrealized and
realized holding gains (losses) on trading account equity securities of
$5.1 million and $(3.3) million were included in Net investment income in
the consolidated statements of earnings.
For the first quarters of 2006 and 2005, proceeds received on sales of
fixed maturities classified as available for sale amounted to $ 597.2
million and $496.7 million, respectively. Gross gains of $12.3 million and
$8.9 million and gross losses of $8.7 million and $7.3 million were
realized on these sales for the first quarters of 2006 and 2005,
respectively. Unrealized net investment gains related to fixed maturities
classified as available for sale decreased by $711.1 million during first
quarter 2006, resulting in a balance of $228.8 million at March 31, 2006.
Impaired mortgage loans along with the related investment valuation
allowances for losses follow:
MARCH 31, December 31,
2006 2005
----------------- -----------------
(IN MILLIONS)
Impaired mortgage loans with investment valuation allowances............ $ 77.9 $ 78.3
Impaired mortgage loans without investment valuation allowances......... 0.5 4.5
---------------- ----------------
Recorded investment in impaired mortgage loans.......................... 78.4 82.8
Investment valuation allowances......................................... (11.6) (11.8)
---------------- ----------------
Net Impaired Mortgage Loans............................................. $ 66.8 $ 71.0
================ ================
During the first quarters of 2006 and 2005, respectively, AXA Equitable's
average recorded investment in impaired mortgage loans was $81.2 million
and $108.1 million. Interest income recognized on these impaired mortgage
loans totaled $1.1 million and $1.6 million for the first quarters of 2006
and 2005, respectively.
Mortgage loans on real estate are placed on nonaccrual status once
management believes the collection of accrued interest is doubtful. Once
mortgage loans on real estate are classified as nonaccrual loans, interest
income is recognized under the cash basis of accounting and the resumption
of the interest accrual would commence only after all past due interest
has been collected or the mortgage loan on real estate has been
-9-
restructured to where the collection of interest is considered likely. At
March 31, 2006 and December 31, 2005, respectively, the carrying values of
mortgage loans on real estate that had been classified as nonaccrual loans
were $66.8 million and $71.1 million.
4) CLOSED BLOCK
The excess of Closed Block liabilities over Closed Block assets (adjusted
to exclude the impact of related amounts in accumulated other
comprehensive income) represents the expected maximum future post-tax
earnings from the Closed Block that would be recognized in income from
continuing operations over the period the policies and contracts in the
Closed Block remain in force. As of January 1, 2001, AXA Equitable had
developed an actuarial calculation of the expected timing of the Closed
Block earnings.
If the actual cumulative earnings from the Closed Block are greater than
the expected cumulative earnings, only the expected earnings will be
recognized in net income. Actual cumulative earnings in excess of expected
cumulative earnings at any point in time are recorded as a policyholder
dividend obligation because they will ultimately be paid to Closed Block
policyholders as an additional policyholder dividend unless offset by
future performance that is less favorable than originally expected. If a
policyholder dividend obligation has been previously established and the
actual Closed Block earnings in a subsequent period are less than the
expected earnings for that period, the policyholder dividend obligation
would be reduced (but not below zero). If, over the period the policies
and contracts in the Closed Block remain in force, the actual cumulative
earnings of the Closed Block are less than the expected cumulative
earnings, only actual earnings would be recognized in income from
continuing operations. If the Closed Block has insufficient funds to make
guaranteed policy benefit payments, such payments will be made from assets
outside the Closed Block.
Many expenses related to Closed Block operations, including amortization
of DAC, are charged to operations outside of the Closed Block;
accordingly, net revenues of the Closed Block do not represent the actual
profitability of the Closed Block operations. Operating costs and expenses
outside of the Closed Block are, therefore, disproportionate to the
business outside of the Closed Block.
-10-
Summarized financial information for the Closed Block follows:
MARCH 31, December 31,
2006 2005
-------------------- ------------------
(IN MILLIONS)
CLOSED BLOCK LIABILITIES:
Future policy benefits, policyholders' account balances and other.... $ 8,836.2 $ 8,866.1
Policyholder dividend obligation..................................... - 73.7
Other liabilities.................................................... 33.7 28.6
------------------- ------------------
Total Closed Block liabilities....................................... 8,869.9 8,968.4
------------------- ------------------
ASSETS DESIGNATED TO THE CLOSED BLOCK:
Fixed maturities, available for sale, at estimated fair value
(amortized cost of $5,833.2 and $5,761.5).......................... 5,827.3 5,908.7
Mortgage loans on real estate........................................ 847.8 930.3
Policy loans......................................................... 1,273.6 1,284.4
Cash and other invested assets....................................... 86.6 56.2
Other assets......................................................... 310.9 304.4
------------------- ------------------
Total assets designated to the Closed Block......................... 8,346.2 8,484.0
------------------- ------------------
Excess of Closed Block liabilities over assets designated to
the Closed Block.................................................. 523.7 484.4
Amounts included in accumulated other comprehensive income:
Net unrealized investment gains, net of deferred income tax
(benefit) expense of $(2.1) and $25.7 and policyholder dividend
obligation of $ -0- and $73.7................................... (3.8) 47.8
------------------- ------------------
Maximum Future Earnings To Be Recognized From Closed Block
Assets and Liabilities............................................ $ 519.9 $ 532.2
=================== ==================
Closed Block revenues and expenses follow:
THREE MONTHS ENDED
MARCH 31,
-----------------------------------
2006 2005
---------------- ---------------
(IN MILLIONS)
REVENUES:
Premiums and other income................................................ $ 111.1 $ 115.0
Investment income (net of investment expenses of $.1 and $-0-)........... 131.0 131.9
Investment gains, net.................................................... .9 8.2
-------------- ---------------
Total revenues........................................................... 243.0 255.1
-------------- ---------------
BENEFITS AND OTHER DEDUCTIONS:
Policyholders' benefits and dividends.................................... 220.0 210.4
Other operating costs and expenses....................................... 4.1 1.0
-------------- ---------------
Total benefits and other deductions...................................... 224.1 211.4
-------------- ---------------
Net revenues before income taxes......................................... 18.9 43.7
Income tax expense....................................................... (6.6) (15.3)
-------------- ---------------
Net Revenues............................................................. $ 12.3 $ 28.4
============== ===============
-11-
Reconciliations of the policyholder dividend obligation follow:
THREE MONTHS ENDED
MARCH 31,
-----------------------------------
2006 2005
---------------- ----------------
(IN MILLIONS)
Balance at beginning of year.............................................. $ 73.7 $ 264.3
Unrealized investment losses ............................................. (73.7) (161.1)
---------------- ---------------
Balance at End of Period.................................................. $ - $ 103.2
================ ===============
5) WIND-UP ANNUITIES
Summarized financial information for Wind-up Annuities follows:
MARCH 31, December 31,
2006 2005
---------------- ------------------
(IN MILLIONS)
BALANCE SHEETS
Fixed maturities, available for sale, at estimated fair value
(amortized cost of $781.5 and $769.9)................................... $ 792.2 $ 823.5
Equity real estate........................................................ 197.6 197.5
Mortgage loans on real estate............................................. 6.5 6.7
Other invested assets..................................................... 3.9 3.2
--------------- -----------------
Total investments....................................................... 1,000.2 1,030.9
Cash and cash equivalents................................................. - -
Other assets.............................................................. 12.2 13.6
--------------- -----------------
Total Assets.............................................................. $ 1,012.4 $ 1,044.5
=============== =================
Policyholders liabilities................................................. $ 810.7 $ 817.2
Allowance for future losses............................................... 41.3 60.1
Other liabilities......................................................... 160.4 167.2
--------------- -----------------
Total Liabilities......................................................... $ 1,012.4 $ 1,044.5
=============== =================
THREE MONTHS ENDED
MARCH 31,
-------------------------------------
2006 2005
----------------- -----------------
(IN MILLIONS)
STATEMENTS OF EARNINGS
Investment income (net of investment expenses of $4.6 and $4.6)........... $ 17.7 $ 16.3
Investment gains (losses), net............................................ 0.4 (.1)
---------------- ----------------
Total revenues............................................................ 18.1 16.2
---------------- ----------------
Benefits and other deductions............................................. 21.1 21.2
Losses charged to allowance for future losses............................. (3.0) (5.0)
---------------- ----------------
Pre-tax (losses) from operations.......................................... - -
Pre-tax loss from strengthening/releasing the allowance
for future losses...................................................... (.3) (.2)
Income tax benefit ....................................................... .1 .1
---------------- ----------------
Loss from Wind-up Annuities .............................................. $ (.2) $ (.1)
================ ================
AXA Equitable quarterly process for evaluating the allowance for future
losses applies the current period's results of Wind-up Annuities against
the allowance, re-estimates future losses and adjusts the allowance, if
appropriate. These updated assumptions and estimates resulted in a
strengthening or release of allowance in each of the periods presented
above.
-12-
Management believes the allowance for future losses at March 31, 2006 is
adequate to provide for all future losses; however, the determination of
the allowance involves numerous estimates and subjective judgments
regarding the expected performance of Discontinued Operations Investment
Assets. There can be no assurance the losses provided for will not differ
from the losses ultimately realized. To the extent actual results or
future projections of Wind-up Annuities differ from management's current
estimates and assumptions underlying the allowance for future losses, the
difference would be reflected in the consolidated statements of earnings
in Wind-up Annuities. In particular, to the extent income, sales proceeds
and holding periods for equity real estate differ from management's
previous assumptions, periodic adjustments to the allowance are likely to
result.
6) GMDB, GMIB, AND NO LAPSE GUARANTEE FEATURES
A) Variable Annuity Contracts - GMDB and GMIB
------------------------------------------
The Company has certain variable annuity contracts with GMDB and GMIB
features in-force that guarantee one of the following:
o Return of Premium: the benefit is the greater of current account value
or premiums paid (adjusted for withdrawals);
o Ratchet: the benefit is the greatest of current account value, premiums
paid (adjusted for withdrawals), or the highest account value on any
anniversary up to contractually specified ages (adjusted for
withdrawals);
o Roll-Up: the benefit is the greater of current account value or premiums
paid (adjusted for withdrawals) accumulated at contractually specified
interest rates up to specified ages; or
o Combo: the benefit is the greater of the ratchet benefit or the roll-up
benefit.
The following table summarizes the GMDB and GMIB liabilities, before
reinsurance ceded, reflected in the General Account in future policy
benefits and other policyholders liabilities:
GMDB GMIB Total
----------------- ----------------- -----------------
(IN MILLIONS)
Balance at December 31, 2004....................... $ 67.6 $ 117.6 $ 185.2
Paid guarantee benefits.......................... (10.0) - (10.0)
Other changes in reserve......................... 25.3 17.0 42.3
---------------- ---------------- ----------------
Balance at March 31, 2005.......................... $ 82.9 $ 134.6 $ 217.5
================ ================ ================
Balance at December 31, 2005....................... $ 115.2 $ 173.6 $ 288.8
Paid guarantee benefits.......................... (7.9) (2.4) (10.3)
Other changes in reserve......................... 11.5 (13.6) (2.1)
---------------- ---------------- ----------------
Balance at March 31, 2006.......................... $ 118.8 $ 157.6 $ 276.4
================ ================ ================
Related GMDB reinsurance ceded amounts were:
-13-
GMDB
-------------------
(IN MILLIONS)
Balance at December 31, 2004....................... $ 10.3
Paid guarantee benefits.......................... (2.9)
Other changes in reserve......................... 9.8
-------------------
Balance at March 31, 2005.......................... $ 17.2
===================
Balance at December 31, 2005....................... $ 22.7
Paid guarantee benefits.......................... (2.0)
Other changes in reserve......................... 2.3
-------------------
Balance at March 31, 2006.......................... $ 23.0
===================
The GMIB reinsurance contracts are considered derivatives and are reported
at fair value.
The March 31, 2006 values for those variable annuity contracts with GMDB
and GMIB features currently in-force are presented in the following table.
For contracts with the GMDB feature, the net amount at risk in the event
of death is the amount by which the GMDB benefits exceed related account
values. For contracts with the GMIB feature, the net amount at risk in the
event of annuitization is the amount by which the present value of the
GMIB benefits exceeds related account values, taking into account the
relationship between current annuity purchase rates and the GMIB
guaranteed annuity purchase rates. Since variable annuity contracts with
GMDB guarantees may also offer GMIB guarantees in the same contract, the
GMDB and GMIB amounts listed are not mutually exclusive:
RETURN
OF
PREMIUM RATCHET ROLL-UP COMBO TOTAL
-------------- ------------- -------------- ------------- ---------------
(DOLLARS IN MILLIONS)
GMDB:
----
Account values invested in:
General Account.................. $ 11,579 $ 242 $ 118 $ 582 $ 12,521
Separate Accounts................ $ 22,760 $ 7,366 $ 7,970 $ 17,573 $ 55,669
Net amount at risk, gross........... $ 415 $ 349 $ 1,603 $ 37 $ 2,404
Net amount at risk, net of amounts
reinsured......................... $ 414 $ 239 $ 971 $ 37 $ 1,661
Average attained age of
contractholders................... 49.9 60.7 63.7 60.9 52.9
Percentage of contractholders
over age 70....................... 7.8% 22.3% 31.6% 21.1% 11.6%
Range of contractually specified
interest rates................... N/A N/A 3%-6% 3%-6%
GMIB:
----
Account values invested in:
General Account.................. N/A N/A $ - $ 811 $ 811
Separate Accounts................ N/A N/A $ 5,596 $ 24,177 $ 29,773
Net amount at risk, gross........... N/A N/A $ 305 - $ 305
Net amount at risk, net of amounts
reinsured......................... N/A N/A $ 76 - $ 76
Weighted average years remaining
until annuitization............... N/A N/A 2.8 8.7 7.3
Range of contractually specified
interest rates.................... N/A N/A 3%-6% 3%-6%
-14-
B) Separate Account Investments by Investment Category Underlying GMDB
-------------------------------------------------------------------
and GMIB Features
-----------------
The total account values of variable annuity contracts with GMDB and
GMIB features include amounts allocated to the guaranteed interest
option which is part of the General Account and variable investment
options which invest through Separate Accounts in variable insurance
trusts. The following table presents the aggregate fair value of assets,
by major investment category, held by Separate Accounts that support
variable annuity contracts with GMDB and GMIB benefits and guarantees.
The investment performance of the assets impacts the related account
values and, consequently, the net amount of risk associated with the
GMDB and GMIB benefits and guarantees. Since variable annuity contracts
with GMDB benefits and guarantees may also offer GMIB benefits and
guarantees in each contract, the GMDB and GMIB amounts listed are not
mutually exclusive:
INVESTMENT IN VARIABLE INSURANCE TRUST MUTUAL FUNDS
MARCH 31, December 31,
2006 2005
---------------- ------------------
(IN MILLIONS)
GMDB:
Equity............................................................... $ 38,620 $ 35,857
Fixed income......................................................... 4,315 4,353
Balanced............................................................. 10,537 9,121
Other................................................................ 2,197 1,813
---------------- ------------------
Total................................................................ $ 55,669 $ 43,133
================ ==================
GMIB:
Equity............................................................... $ 19,428 $ 17,540
Fixed income......................................................... 2,611 2,608
Balanced............................................................. 7,006 5,849
Other................................................................ 728 680
---------------- ------------------
Total................................................................ $ 29,773 $ 26,677
================ ==================
C) Hedging Programs for GMDB and GMIB Features
-------------------------------------------
In 2003, AXA Equitable initiated a program intended to hedge certain
risks associated with the GMDB feature of the Accumulator(R) series of
variable annuity products sold beginning in April 2002. In 2004, the
program was expanded to include hedging for certain risks associated
with the GMIB feature of the Accumulator(R) series of variable annuity
products sold beginning in 2004. This program currently utilizes
exchange-traded futures contracts that are dynamically managed in an
effort to reduce the economic impact of unfavorable changes in GMDB and
GMIB exposures attributable to movements in the equity and fixed income
markets. At March 31, 2006, the total account value and net amount at
risk of the hedged Accumulator(R) series of variable annuity contracts
were $32,784 million and $48 million, respectively, with the GMDB
feature and $16,903 million and zero, respectively, with the GMIB
feature.
Although these programs are designed to provide economic protection
against the impact adverse market conditions may have with respect to
GMDB and GMIB guarantees, they do not qualify for hedge accounting
treatment under SFAS No. 133. Gains or losses on the futures contracts
used in these programs, including current period changes in fair value,
are recognized in investment income in the period in which they occur,
and may contribute to earnings volatility.
-15-
D) Variable and Interest-Sensitive Life Insurance Policies - No Lapse
------------------------------------------------------------------
Guarantee
---------
The no lapse guarantee feature contained in variable and
interest-sensitive life insurance policies keeps them in force in
situations where the policy value is not sufficient to cover monthly
charges then due. The no lapse guarantee remains in effect so long as
the policy meets a contractually specified premium funding test and
certain other requirements.
The following table summarizes the no lapse guarantee liabilities
reflected in the General Account in future policy benefits and other
policyholders liabilities, and related reinsurance ceded:
DIRECT REINSURANCE
LIABILITY CEDED NET
----------------------- ------------------ ------------------
(IN MILLIONS)
Balance at December 31, 2004....................... $ 20.5 $ (6.1) $ 14.4
Paid guarantee benefits......................... - - -
Other changes in reserves....................... 4.1 (4.2) (.1)
-------------------- ------------------ -----------------
Balance at March 31, 2005.......................... $ 24.6 $ (10.3) $ 14.3
==================== ================== =================
Balance at December 31, 2005....................... $ 34.8 $ (20.4) $ 14.4
Paid guarantee benefits......................... - - -
Other changes in reserves....................... 6.0 (5.2) 0.8
-------------------- ------------------ -----------------
Balance at March 31, 2006.......................... $ 40.8 $ (25.6) $ 15.2
==================== ================== =================
7) EMPLOYEE BENEFIT PLANS
Components of net periodic pension expense follow:
THREE MONTHS ENDED
MARCH 31,
-------------------------------------
2006 2005
----------------- -------------------
(IN MILLIONS)
Service cost............................................................ $ 9.4 $ 8.8
Interest cost on projected benefit obligation........................... 30.0 30.4
Expected return on assets............................................... (45.2) (42.9)
Net amortization and deferrals.......................................... 18.8 19.0
----------------- -------------------
Net Periodic Pension Expense............................................ $ 13.0 $ 15.3
================= ===================
8) ACCOUNTING FOR SHARED-BASED COMPENSATION
AXA and AXA Financial sponsor various share-based compensation plans for
eligible employees and associates of AXA Financial and its subsidiaries,
including the Company. AllianceBernstein also sponsors its own unit option
plans for certain of its employees. Activity in these share-based plans in
the discussions that follow relates to awards granted to eligible
employees and associates of AXA Financial and its subsidiaries under each
of these plans in the aggregate, except where otherwise noted.
For the quarter ended March 31, 2006, the Company recognized $6.5 million
of compensation costs under SFAS No. 123(R) for employee stock options,
including $5.2 million resulting from unvested awards at January 1, 2006.
A summary of the activity in the AXA, AXA Financial and AllianceBernstein
option plans follows, including the award made on March 31, 2006 of 3.8
million nonstatutory stock options to purchase AXA ordinary shares. The
cost of that award is attributed over the shorter of the employees' 4-year
service-vesting term or to the date at which retirement eligibility is
achieved and subsequent service no longer is required for continued
vesting of the award. Information about options outstanding and
exercisable at March 31, 2006 also is presented in the table below. The
number of AXA ADRs authorized to be issued pursuant to option and, as
further described below, restricted stock grants under the Stock Incentive
Plan is approximately 124.5 million less the number of shares issued
pursuant to option grants under The AXA Financial, Inc. 1991 Stock
Incentive Plan (the predecessor plan to the Stock Incentive Plan).
-16-
Options Outstanding
---------------------------------------------------------------------------------------------------
AllianceBernstein
AXA Ordinary Shares AXA ADRs Holding Units
------------------------------- ---------------------------------- --------------------------------
Weighted Weighted Weighted
Number Average Number Average Number Average
Outstanding Exercise Outstanding Exercise Outstanding Exercise
(In Millions) Price (In Millions) Price (In Millions) Price
--------------- --------------- ------------------ --------------- --------------- ----------------
Options outstanding at
December 31, 2005... 3.5 (euro) 20.87 38.6 $ 24.06 7.5 $ 40.45
Options granted(1)..... 3.8 (euro) 29.22 - - - -
Options exercised...... - - (2.1) $ 19.69 (1.0) $ 38.36
Options forfeited...... (0.3) (euro) 29.22 (2.6) $ 34.70 (.1) $ 38.53
Options expired........ - - - - - -
--------------- ----------------- ---------------
Options Outstanding at
March 31, 2006...... 7.0 (euro) 25.21 33.9 $ 23.49 6.4 $ 40.80
=============== =============== ================= =============== =============== ===============
Aggregate Intrinsic
Value(2)............ (euro) 29.50 $ 388.6 $ 157.2
=============== =============== ===============
Weighted Average
Remaining
Contractual Term
(in years).......... 9.52 4.97 4.87
=============== ================= ==============
Options Exercisable at
March 31, 2006...... 0.0 - 25.2 $ 23.88 5.3 $ 41.27
=============== =============== ================= =============== ============== ===============
Aggregate Intrinsic
Value(2)............ - $ 279.3 $ 129.3
=============== =============== ===============
Weighted Average
Remaining
Contractual Term
(in years).......... - 3.86 4.71
=============== ================= ===============
(1) Approximately 2.6 million of the AXA ordinary share options granted
on March 31, 2006 have a 4-year graded vesting schedule, with
one-third vesting on each of the second, third and fourth
anniversaries of the grant date. The remaining approximately 1.2
million options have a 4-year cliff-vesting term. All of the options
granted on March 31, 2006 have a 10-year contractual term.
(2) Intrinsic value is calculated as the excess of the closing price on
March 31, 2006 of the respective underlying shares over the strike
prices of the option awards.
Cash proceeds received in first quarter 2006 from the exercise of employee
stock options to purchase AXA ADRs were $42.2 million. The intrinsic value
related to exercises during first quarter 2006 and 2005 of employee stock
options to purchase AXA ADRs were $31.4 million and $22.2 million,
respectively, resulting in amounts currently deductible for tax purposes
of $10.4 million and $7.2 million for the periods then ended. Under SFAS
No. 123(R), $6.9 million windfall tax benefits resulted from exercises of
employee stock options to purchase AXA ADRs during first quarter 2006.
At December 31, 2005, AXA Financial held 14.6 million AXA ADRs in treasury
at a weighted average cost of approximately $24.00 per share, of which
approximately 14.3 million were designated to fund future exercises of
outstanding employee stock options. These AXA ADRs were obtained primarily
by exercise of call options that had been purchased by AXA Financial in
fourth quarter 2004 to mitigate the U.S. dollar price and foreign exchange
risks associated with funding exercises of employee stock options.
Remaining outstanding and unexercised at March 31, 2006 are call options
to purchase 8.7 million AXA ADRs at strike prices ranging from $31.00 to
$33.00, each having a cap equal to approximately 150% of its strike price,
at which time the option automatically would be exercised, and all
expiring on November 23, 2009. During first quarter 2006, AXA Financial
utilized approximately 1.3 million AXA ADRs from treasury to fund
exercises of employee stock options. At March 31, 2006, AXA Financial held
13.4 million AXA ADRs in treasury, of which approximately 13.1 million
were designated to fund future exercises of outstanding employee stock
options and the remainder of approximately 0.3 million were available for
general corporate purpose, including funding other stock-based
compensation programs. Employee options outstanding at March 31, 2006 to
purchase AXA ordinary shares first begin to vest in March 2007 and are
expected to be funded by newly issued AXA ordinary shares.
Prior to adoption of SFAS No. 123(R), the Company had elected to continue
accounting for employee stock option awards under APB No. 25 and,
therefore, no compensation cost for these awards was recognized in the
consolidated statement of earnings in first quarter 2005. The following
table illustrates the effect on net income had compensation expense for
employee stock option awards been measured and recognized by the Company
under the fair-value-based method of SFAS No. 123. These pro forma
disclosures are not adjusted from amounts previously reported and,
therefore, retain the original grant-date fair values of the underlying
awards, continue to attribute cost over the awards' service-vesting
periods and do not include estimates of pre-vesting forfeitures.
-17-
Three Months
Ended
March 31, 2005
----------------
(In Millions)
Net earnings as reported................................................ $ 276.4
Less: Total stock-based employee compensation expense determined
under fair value method, net of income tax benefit... (5.7)
----------------
Pro Forma Net Earnings.................................................. $ 270.7
================
For the purpose of estimating the fair value of employee stock option
awards granted on or after January 1, 2006, the Company continues to apply
the Black-Scholes-Merton formula and the same methodologies for developing
the input assumptions as previously had been used to prepare the pro forma
disclosures required by SFAS No. 123. Shown below are the relevant input
assumptions used by the Company to derive the fair values of options
awarded in first quarter 2006 and 2005. No grants of options to purchase
AXA ADRs were made to employees in first quarter 2006; similarly, no
options on AllianceBernstein Holding Units were granted in first quarter
2006 and 2005. For employee stock options with graded vesting terms and
service conditions granted on or after January 1, 2006, the Company
elected under SFAS No. 123(R) to retain its practice of valuing these as
singular awards and to change to the graded-vesting method of attribution,
whereby the cost is recognized separately over the requisite service
period for each individual third of the options vesting on the second,
third and fourth anniversaries of the grant date.
AXA Ordinary Shares AXA ADRs
--------------------------------- ----------------
Three months ended March 31, 2006 2005 2005
--------------- ----------------- ---------------
Dividend yield...................... 3.15% 3.15% 3.01%
Expected volatility................. 25% 25% 25%
Risk-free interest rate............. 3.59% 3.09% 4.27%
Expected life in years.............. 5 5 5
Weighted average fair value per
option at grant date.............. $ 6.55 $ 5.01 $ 5.65
As of March 31, 2006, approximately $35.4 million of unrecognized
compensation cost related to unvested employee stock option awards, net of
estimated pre-vesting forfeitures, is expected to be recognized by the
Company over a weighted average period of 2.52 years.
Under the Stock Incentive Plan, AXA Financial grants restricted AXA ADRs
to employees of its subsidiaries, including AXA Equitable. AXA ADRs
authorized to be issued pursuant to restricted stock awards may not exceed
20% of the aggregate shares authorized under the Stock Incentive Plan.
Generally, all outstanding restricted AXA ADR grants have a 7-year vesting
schedule with potential accelerated vesting based on performance. Under
the Equity Plan, AXA Financial grants non-officer directors restricted AXA
ADRs and unrestricted AXA ADRs annually. For the quarters ended March 31,
2006 and 2005, the Company recognized compensation cost of $2.4 million
under SFAS No. 123(R) and $4.6 million under APB No. 25, respectively, for
awards outstanding under these plans. Consistent with existing practice of
the Company prior to adoption of SFAS No. 123(R), grant-date fair value
continues to be measured by the closing price of the AXA ADR and the
result generally is attributed over the shorter of the performance period
or to the date at which retirement eligibility is achieved and subsequent
service no longer is required for continued vesting of the award.
The following table summarizes unvested restricted AXA ADR activity for
the first quarter 2006. As of March 31, 2006, approximately $2.0 million
of unrecognized compensation cost related to these unvested awards, net of
estimated pre-vesting forfeitures, is expected to be recognized over a
weighted average period of 0.6 years. Restricted AXA ADRs vested in first
quarter 2006 and 2005 had aggregate vesting-date fair values of
approximately $9.5 million and $12.7 million, respectively. In first
quarter 2005, 244,790 restricted AXA ADRs were granted, having an
aggregate grant-date fair value of $6.6 million.
-18-
SHARES OF Weighted
RESTRICTED Average Grant
STOCK AND Date
PARS Fair Value
--------------- -----------------
Unvested as of December 31, 2005........................................ 867,387 $ 19.94
Granted ................................................................ 67,873 $ 34.96
Vested ................................................................. (381,836) $ 16.98
Forfeited .............................................................. - -
----------------
Unvested as of March 31, 2006 .......................................... 553,424 $ 23.82
================ =================
On March 31, 2006, under the terms of the AXA Performance Unit Plan 2006,
the AXA Management Board awarded 722,854 unearned performance units to
employees of AXA Financial subsidiaries. During each year that the
performance unit awards are outstanding, a pro-rata portion of the units
may be earned based on criteria measuring the performance of AXA and AXA
Financial Group. The extent to which performance targets are met
determines the number of performance units earned, which may vary between
0% and 130% of the number of performance units at stake. Performance units
earned under the 2006 plan cliff-vest on the second anniversary of their
date of award. When fully-vested, the performance units earned will be
settled in cash, or in some cases, a combination of cash (70%) and stock
(30%), the latter equity portion having transfer restrictions for a
two-year period. For 2006 awards, the price used to value the performance
units at settlement will be the average opening price of the AXA ordinary
share for the last 20 trading days of the vesting period converted to U.S.
dollars using the Euro to U.S. dollar exchange rate on March 28, 2008.
For the quarters ended March 31, 2006 and 2005, the Company recognized
compensation cost of $5.0 million under SFAS No. 123(R) and $1.3 million
under APB No. 25, respectively, for performance units earned to date.
Substantially similar to existing practice of the Company prior to
adoption of SFAS No. 123(R), the change in fair value of these awards in
first quarter 2006 was measured by the closing price of the underlying AXA
ordinary shares or AXA ADRs and adjustment was made to reflect the impact
of expected and actual pre-vesting forfeitures. In addition, similar to
adoption of SFAS No. 123(R) for employee stock option awards, the cost of
performance units awarded on or after January 1, 2006, such as those
granted on March 31, 2006, were attributed over the shorter of the
cliff-vesting period or to the date at which retirement eligibility is
achieved. The value of performance units earned and reported in Other
liabilities in the consolidated balance sheets as at March 31, 2006 and
December 31, 2005 was $17.4 million and $9.1 million, respectively,
including incremental awards earned under the 2005 and 2004 plans from
having exceeded the targeted performance criteria established in those
years by 14.6% and 11.1%, respectively. Approximately 720,691 outstanding
performance units are at risk to achievement of 2006 performance criteria,
including approximately 50% of the award granted on March 31, 2006.
Following completion of the merger of AXA Merger Corp. with and into AXA
Financial in January 2001, certain employees exchanged fully-vested
in-the-money AXA ADR options for tandem Stock Appreciation Rights/AXA ADR
nonstatutory options ("tandem SARs/NSOs") of then-equivalent intrinsic
value. The Company recorded compensation expense for these fully-vested
awards of $4.8 million and $6.7 million for the periods ended March 31,
2006 and 2005, respectively, reflecting the impact in those periods of the
change in the market price of the AXA ADR on the cash-settlement value of
the SARs component of the outstanding tandem SARs/NSOs. The value of these
tandem SARs/NSOs at March 31, 2006 and December 31, 2005 was $29.2 million
and $57.5 million, respectively. At March 31, 2006, 1.9 million tandem
SARs/NSOs were outstanding, having weighted average remaining expected and
contractual terms of 1.47 and 2.94 years, respectively, and for which the
SARs component had maximum value of $30.9 million. During first quarter
2006 and 2005, respectively, approximately 2.4 million and 0.1 million of
these awards were exercised at an aggregate cash-settlement value of $35.2
million and $0.6 million.
On March 31, 2006, 59,644 Stock Appreciation Rights with a 4-year cliff
vesting schedule were granted to certain associates of AXA Financial
subsidiaries. These Stock Appreciation Rights entitle the holder to a cash
payment equal to any appreciation in the value of the AXA ordinary share
over 29.22 Euros as of the date of exercise. Similar to the SARs component
of the tandem SARs/NSOs, awards remaining unexercised at expiry of their
10-year contractual term will be automatically exercised on the expiration
date. The accrued value of Stock Appreciation Rights at March 31, 2006 and
December 31, 2005 was $2.1 million and $1.9 million, respectively, and
recorded as liabilities in the consolidated balance sheets. For the
periods ended March 31, 2006 and 2005, respectively, the Company
recorded compensation expense for Stock
-19-
Appreciation Rights of $0.1 million and $0.1 million, reflecting the
impact in those periods of the change in the market price of the
underlying AXA ordinary share or AXA ADR on the value of the outstanding
Stock Appreciation Rights.
Under SFAS No. 123(R), the Company recognized compensation expense for
payroll deductions authorized and applied in first quarter 2006 under the
terms of the AXA Financial, Inc. Qualified Stock Purchase Plan to purchase
AXA ADRs of 74,280 at an aggregate discount of $0.3 million, representing
a discount of 15% from the closing market value of the AXA ADR at the
purchase dates defined in the annual offering document (generally on or
about the close of each month). Prior to adoption of SFAS No. 123(R), no
compensation expense was recorded in connection with this plan, including
the aggregate discount of $0.3 million for the quarter ended March 31,
2005. Under the terms of the AXA Financial, Inc. Non-Qualified Stock
Purchase Plan, total AXA ADRs of 107,556 and 111,937 were purchased during
first quarters 2006 and 2005, respectively, including those purchased with
employer match-funding contributions for which the Company recorded
compensation expense of $0.6 million and $0.3 million for the respective
periods then ended.
9) INCOME TAXES
Income taxes for interim periods have been computed using an estimated
annual effective tax rate. This rate is revised, if necessary, at the end
of each successive interim period to reflect the current estimate of the
annual effective tax rate.
10) LITIGATION
There have been no new material legal proceedings and no material
developments in specific litigations previously reported in the Company's
Notes to Consolidated Financial Statements for the year ended December 31,
2005, except as described below:
In AMERICAN NATIONAL BANK, in March 2006, AXA Equitable's motion for
reconsideration, filed in January 2006, was denied.
In DH2, in March 2006, AXA Equitable filed an answer to DH2's Third
Amended Complaint that alleges claims substantially similar to those
included in the original amended complaint.
ALLIANCE LITIGATION
-------------------
In the ENRON COMPLAINT, in April 2006, AllianceBernstein moved for summary
judgment dismissing the Enron Amended Consolidated Complaint as the
allegations therein pertain to AllianceBernstein. The motion is pending.
In ERB, in March 2006, the case was voluntarily dismissed with prejudice
pursuant to a settlement agreement.
In the MUTUAL FUND MDL, in April 21, 2006, AllianceBernstein and attorneys
for the plaintiffs in the mutual fund shareholder claims, mutual fund
derivative claims, and ERISA claims entered into a confidential memorandum
of understanding containing their agreement to settle these
claims. The agreement will be documented by a stipulation of settlement
and will be submitted for court approval at a later date.
In the WV Securities Commissioners Summary Matter, in April 2006,
defendants' petition for Writ of Prohibition and Order Suspending
Proceedings was denied. In May 2006, defendants appealed the court's
determination.
Although the outcome of litigation generally cannot be predicted with
certainty, management believes that, except as otherwise noted in AXA
Equitable Notes to Consolidated Financial Statements for the year ended
December 31, 2005, the ultimate resolution of the litigations described
above involving AXA Equitable and/or its subsidiaries should not have a
material adverse effect on the consolidated financial position of AXA
Equitable. Except as previously noted, management cannot make an estimate
of loss, if any, or predict whether or not any of such other litigations
described above or in AXA Equitable Notes to Consolidated Financial
Statements for the year ended December 31, 2005 will have a material
adverse effect on AXA Equitable consolidated results of operations in any
particular period.
In addition to the matters previously reported and those described above,
AXA Equitable and its subsidiaries are involved in various legal actions
and proceedings in connection with their businesses. Some of the actions
and proceedings have been brought on behalf of various alleged classes of
claimants and certain of these
-20-
claimants seek damages of unspecified amounts. While the ultimate outcome
of such matters cannot be predicted with certainty, in the opinion of
management no such matter is likely to have a material adverse effect on
AXA Equitable consolidated financial position or results of operations.
However, it should be noted that the frequency of large damage awards,
including large punitive damage awards that bear little or no relation to
actual economic damages incurred by plaintiffs in some jurisdictions,
continues to create the potential for an unpredictable judgment in any
given matter.
11) BUSINESS SEGMENT INFORMATION
The following tables reconcile segment revenues and earnings from
continuing operations before income taxes and minority interest to total
revenues and earnings as reported on the consolidated statements of
earnings and segment assets to total assets on the consolidated balance
sheets, respectively.
THREE MONTHS ENDED
MARCH 31,
---------------------------------------
2006 2005
------------------ ------------------
(IN MILLIONS)
SEGMENT REVENUES:
Insurance............................................................ $ 1,342.3 $ 1,483.0
Investment Services(1)............................................... 928.8 750.6
Consolidation/elimination............................................ (22.2) (21.1)
----------------- ------------------
Total Revenues....................................................... $ 2,248.9 $ 2,212.5
================= ==================
<FN>
(1) Net of interest expense incurred on securities borrowed.
</FN>
SEGMENT EARNINGS FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES AND MINORITY INTEREST:
Insurance............................................................ $ 230.4 $ 299.4
Investment Services.................................................. 266.7 173.1
Consolidation/elimination............................................ - -
----------------- ------------------
Total Earnings from Continuing Operations before
Income Taxes and Minority Interest............................... $ 497.1 $ 472.5
================= ==================
MARCH 31, December 31,
2006 2005
--------------- ------------------
(IN MILLIONS)
SEGMENT ASSETS:
Insurance............................................................ $ 123,611.5 $ 118,803.7
Investment Services.................................................. 15,816.3 15,161.4
Consolidation/elimination............................................ - 2.0
----------------- ------------------
Total Assets......................................................... $ 139,427.8 $ 133,967.1
================= ==================
In first quarter 2006, AllianceBernstein issued units to its employees
under long-term incentive plans. As a result of this transaction, the
Company recorded a non-cash $29.1 million realized gain. At March 31, 2006
and December 31, 2005, the Company's beneficial ownership in
AllianceBernstein was approximately 45.9% and 46.3%.
-21-
12) RELATED PARTY TRANSACTIONS
AXA Equitable reimburses AXA Financial for expenses relating to the Excess
Retirement Plan, Supplemental Executive Retirement Plan and certain other
employee benefit plans that provide participants with medical, life
insurance, and deferred compensation benefits. Such reimbursement was
based on the cost to AXA Financial of the benefits provided which totaled
$15.1 million and $14.7 million, respectively, for the first quarters 2006
and 2005.
AXA Equitable paid $185.8 million and $159.5 million, respectively, of
commissions and fees to AXA Distribution and its subsidiaries for sales of
insurance products for the first quarters 2006 and 2005. AXA Equitable
charged AXA Distribution's subsidiaries $78.8 million and $73.1 million,
respectively, for their applicable share of operating expenses for the
first quarters 2006 and 2005, pursuant to the Agreements for Services.
-22-
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Management's discussion and analysis is omitted pursuant to General Instruction
H of Form 10-Q. The management narrative for the Company that follows should be
read in conjunction with the Consolidated Financial Statements and the related
Notes to Consolidated Financial Statements included elsewhere herein, with the
information provided under "Forward-looking Statements" and "Risk Factors"
included elsewhere herein and with the management narrative found in the
Management's Discussion and Analysis ("MD&A") section included in the Company's
Annual Report on Form 10-K for the year ended December 31, 2005 ("2005 Form
10-K").
CONSOLIDATED RESULTS OF OPERATIONS
FIRST QUARTER 2006 COMPARED TO FIRST QUARTER 2005
Net earnings for the Company totaled $235.1 million for first quarter 2006,
$29.9 million lower than the $265.0 million reported for first quarter 2005, as
the Insurance segment's net earnings decrease of $62.8 million was partially
offset by a $33.0 million increase for the Investment Services segment. Earnings
from continuing operations before income taxes and minority interest were $497.1
million for first quarter 2006, an increase of $24.6 million from the year
earlier quarter. The Insurance segment's pre-tax earnings decrease of $68.9
million was more than offset by the $93.5 million increase in the Investment
Services segment's earnings. The first quarter 2006 decrease in pre-tax earnings
to $230.4 million in the Insurance segment was primarily due to lower investment
and other income partially offset by lower DAC and VOBA amortization in first
quarter 2006. The Investment Services segment's first quarter 2006 pre-tax
earnings were $266.7 million, $93.5 million higher than in first quarter 2005,
principally due to higher earnings at AllianceBernstein. In first quarter 2006,
the Company adopted the provisions of SFAS No. 123(R) and recognized $6.5
million ($4.2 million after-tax) in compensation cost for employee stock
options.
In 2003, AXA Equitable initiated a program intended to hedge certain risks
associated with the GMDB feature of the Accumulator(R) series of variable
annuity products sold beginning in April 2002. In 2004, the program was expanded
to include hedging for certain risks associated with the GMIB feature of the
Accumulator(R) series of variable annuity products sold beginning in 2004. This
program currently utilizes exchange-traded futures contracts that are
dynamically managed in an effort to reduce the economic impact of unfavorable
changes in GMDB and GMIB exposures attributable to movements in the equity and
fixed income markets.
Although these programs are designed to provide economic protection against the
impact adverse market conditions may have with respect to GMDB and GMIB
guarantees, they do not qualify for hedge accounting treatment under SFAS No.
133. Gains or losses on the futures contracts used in these programs, including
current period changes in fair value, are recognized in investment income in the
period in which they occur, and may contribute to earnings volatility. Unlike
the futures hedge contracts and the GMIB reinsurance contracts, GMDB/GMIB
reserve liabilities are not reported on a fair value basis. Instead, reserves
for GMDB/GMIB obligations are calculated on the basis of actuarial assumptions
related to projected benefits and related contract charges over the lives of the
contracts; they do not reflect the immediate impact of equity and interest rate
market fluctuations. In periods of rising equity and interest rate markets, the
fair value of the futures and GMIB reinsurance contracts will decline while the
GMDB/GMIB reserves will not reflect corresponding changes, resulting in a
decline in pre-tax earnings. Conversely, in periods of equity and interest rate
market declines, the fair value of the futures and GMIB reinsurance contracts
will increase while the GMDB/GMIB reserves will not reflect corresponding
changes, resulting in an increase in pre-tax earnings. Consequently, pre-tax
earnings from continuing operations in any particular period do not fully
reflect the economics of the GMDB/GMIB features and related futures hedge and
reinsurance risk management programs.
Revenues. In first quarter 2006, total revenues increased $36.3 million to $2.25
billion. The Investment Services segment's $178.2 million increase in revenues
to $928.8 million in first quarter 2006 was partially offset by a decrease of
$140.8 million to $1.34 billion for the Insurance segment.
Policy fee income was $523.6 million, $81.3 million higher than first quarter
2005 primarily due to higher average Separate Account balances resulting from
positive net cash flows and market appreciation.
Net investment income decreased $145.7 million to $516.0 million. The $148.9
million decrease for the Insurance segment was primarily due to the $126.6
million decrease in fair value in first quarter 2006 of derivative instruments
related to hedging programs implemented to mitigate certain risks associated
with the GMDB/GMIB features of certain contracts as compared to $30.4 million
increase in fair value in first quarter 2005.
Investment gains totaled $31.8 million in first quarter 2006, as compared to
$4.1 million in first quarter 2005, as the $4.9 million decrease for the
Insurance segment was more than offset by a $32.6 million gain in the Investment
Services segment principally resulting from the increase in AllianceBernstein
equity due to the issuance of units to its employees under long-term
incentive plans in first quarter 2006. The Insurance segment's decrease in the
2006 quarter primarily resulted from lower gains from sales of fixed maturity
securities ($4.9 million in first quarter 2006 as compared to $9.1 million in
first quarter 2005) and higher writedowns on General Account fixed maturities,
$6.0 million in first quarter 2006 as compared to $1.2 million in first quarter
2005.
Commissions, fees and other income increased $95.5 million to $975.2 million in
first quarter 2006 with the $142.4 increase in the Investment Services segment
being partially offset by a $45.8 million decrease in the Insurance segment. The
Investment Management segment increase was principally due to the $109.3 million
and $43.3 million increases in investment advisory and services fees and other
revenues, net at AllianceBernstein in first quarter 2006 as compared to first
quarter 2005. The 21.1% increase of $109.3 million to $626.7 million in
investment advisory and services fees was primarily due to a 12.1% increase in
average assets under management ("AUM") resulting from market appreciation and
net asset inflows and higher performance fees.
-23-
Other revenues, net at AllianceBernstein increased $43.3 million reflecting
mark-to-market gains of $31.9 million on investments related to deferred
compensation plan obligations and other investments, a $4.1 million gain on the
exchange of a NYSE membership seat and $3.5 million in contingent payments
earned in first quarter 2006 related to the Federated cash management
transaction in 2005. The Insurance segment decrease of $45.8 million to $115.8
million in first quarter 2006 was due to the change in the fair value of the
GMIB reinsurance contracts that was partially offset by higher gross investment
management fees received from EQAT and VIP Trust due to a higher asset base. As
required by SFAS No. 133, the GMIB reinsurance contracts are considered
derivatives and are reported at fair value. In first quarter 2006, the fair
value of these contracts decreased $38.3 million as compared to a $40.1 million
increase in fair value during first quarter 2005.
Benefits and Other Deductions. In first quarter 2006, total benefits and other
deductions increased $11.7 million to $1.75 billion as an increase of $84.7
million in the Investment Services segment was partially offset by a $71.9
million decrease in the Insurance segment.
Total compensation and benefits increased $46.8 million to $474.4 million in
first quarter 2006 as an increase of $84.9 million for the Investment Services
segment was offset by a $38.3 million decrease for the Insurance segment. The
increase in first quarter 2006 reflected the $42.3 million increase in incentive
compensation primarily due to higher earnings, the $25.8 million increase in
commission expense due to higher sales volume across all distribution channels
and Institutional Research Services and the $17.2 million increase in base
compensation, fringe benefits and other employment costs due to increased
headcounts, annual merit increases and higher fringe benefits reflecting the
increased compensation levels at AllianceBernstein. The $38.3 million decrease
for the Financial Advisory/Insurance segment was primarily due to the $45.4
million decrease in other benefits due to the announced curtailment of the age
and/or service credits toward the cost sharing rules for retiree health coverage
for active participants effective December 31, 2006.
For first quarter 2006, commissions in the Insurance segment totaled $333.4
million, an increase of $88.4 million when compared to $245.0 million from first
quarter 2005 principally due to higher sales of annuity products.
There was a $20.4 million decrease in distribution plan payments by
AllianceBernstein due to lower amortization of deferred sales commissions as a
result of lower back-end load shares and lower distribution plan payments.
DAC amortization decreased to $83.3 million in first quarter 2006, down $101.0
million as compared to first quarter 2005. This decrease in amortization was
principally related to reactivity to decreases in first quarter 2006 in the fair
value of the derivative instruments related to the GMDB/GMIB hedging programs,
the decrease in fair value of the GMIB reinsurance asset and the unlocking
impact from recognition of higher expected future margins driven by higher fees
related to variable insurance and annuity contracts. These decreases were
partially offset by higher current margins on products that are DAC reactive.
Both years also reflect DAC unlocking associated with higher estimated future
margins due to expectations of life mortality improvement based on emerging
experience, which resulted in a deceleration of DAC amortization. However, the
deceleration of DAC amortization resulting from these revised mortality
projections was lower in 2006 than in 2005.
DAC capitalization increased $55.8 million to $314.8 million, as compared to the
$259.0 million reported in first quarter 2005, primarily due to higher sales of
annuity products.
There was a $64.1 million increase in other operating costs and expenses to
$283.7 million in first quarter 2006. The $43.3 million increase in the
Insurance segment was principally due to higher sub-advisory fees at EQAT and
VIP Trust due to higher average asset balances and increases in advertising,
software, consulting and distribution expense allowance costs. The Investment
Services segment increase of $22.2 million primarily resulted from increases in
legal, market data service and data processing expenses at AllianceBernstein in
first quarter 2006.
Premiums and Deposits. Total premiums and deposits for insurance and annuity
products for first quarter 2006 were $4.04 billion, a $665.4 million increase
from the 2005 quarter with $640.7 million higher first year premiums and
deposits in first quarter 2006 than the prior year's comparable period. The
$14.8 million decrease in first year premiums and deposits for the life products
principally due to lower sales of COLI variable life products in the retail
channel was more than offset by the $654.9 million increase in the annuity
lines' first year premiums and deposits. This increase was primarily due to
higher sales of variable annuity products, $504.5 million in the wholesale
distribution channel and $170.4 million the retail channel.
-24-
Surrenders and Withdrawals. Surrenders and withdrawals increased from $1.57
billion in first quarter 2005 to $2.00 billion for first quarter 2006 with an
increase of $437.5 million reported for the individual annuities product line,
partially offset by a decline of $11.7 million in variable and
interest-sensitive surrenders and withdrawals. The annualized annuities
surrender rate increased to 9.0 % in first quarter 2006 from 8.0% in first
quarter 2005. Conversely, the individual life surrender rates decreased to 3.8%
from 4.1% for the same respective periods. The surrender and withdrawal rates
described above continue to fall within the range of expected experience.
Assets Under Management. Breakdowns of assets under management follow:
ASSETS UNDER MANAGEMENT
(IN MILLIONS)
MARCH 31,
-----------------------------------
2006 2005
----------------- -----------------
Third party..................................................................... $ 552,516 $ 471,157
AXA Equitable General Account, AXA Financial Group
and its other affiliates..................................................... 54,794 54,590
Insurance Group Separate Accounts .............................................. 79,419 64,977
---------------- -----------------
Total Assets Under Management................................................... $ 686,729 $ 590,724
================ =================
Third party assets under management at March 31, 2006 increased $96.0 billion
primarily due to increases at AllianceBernstein. General Account, AXA Equitable
and its other affiliates' assets under management increased $204.0 million from
first quarter 2005. The $14.44 billion increase in Insurance Group Separate
Account assets under management resulted from market appreciation and net new
deposits.
AllianceBernstein assets under management at the end of first quarter 2006
totaled $617.6 billion as compared to $533.9 billion at March 31, 2005 as market
appreciation of $78.3 billion and net inflows across all distribution channels
totaling $33.8 billion were offset by $28.4 billion in dispositions, including
the approximately $18.3 billion of client AUM that were transferred to Federated
during second quarter 2005. Non-US clients accounted for 32.0% of the March 31,
2006 total.
LIQUIDITY AND CAPITAL RESOURCES
AXA Equitable. At March 31, 2006, AXA Equitable had no short-term debt or
commercial paper outstanding.
AllianceBernstein. For the three months ended March 31, 2006 and 2005,
respectively, cash flows included inflows of $39.9 million and $16.7 million due
to the additional investment by AllianceBernstein Holding with proceeds from the
exercise of options to acquire AllianceBernstein Holdings units offset by
outflows of $16.1 million related to purchases of AllianceBernstein Holdings
units totaling $16.1 million and $6.4 million to fund deferred compensation
plans. Cash flows in first quarter 2006 also included $47.2 million from the
issuance of AllianceBernstein Holding units in exchange for cash awards under a
compensation plan and $38.1 million from the issuance of commercial paper.
Capital expenditures at AllianceBernstein were $20.9 million in first quarter
2006 compared to $23.7 million in first quarter 2005 while purchases of
investments totaled $32.9 million in the 2006 quarter as compared to $1.4
million in the year earlier quarter. Available cash flow for cash distributions
from AllianceBernstein totaled $290.8 million and $231.0 million for first
quarter 2006 and 2005, respectively.
At March 31, 2006, AllianceBernstein had $7.5 million of short-term debt and
$39.0 million under its commercial paper program outstanding; no amount was
outstanding under its revolving credit facility at March 31, 2006. In February
2006, AllianceBernstein entered into an $800.0 million five-year revolving
credit facility with a group of commercial banks and other lenders, replacing an
$800.0 million five-year revolving credit facility that was due to expire in
September 2007. Both of these revolving credit facilities have substantially the
same terms. In March 2006, SCB LLC entered into four separate uncommitted line
of credit facility agreements with various banks, each for $100.0 million. At
March 31, 2006, no amounts were outstanding under these credit facilities. In
May 2006, AllianceBernstein increased the credit available under its commercial
paper program from $425.0 million to $800.0 million, reducing the amount
available under its revolving credit facility to zero.
On May 2, 2006, AllianceBernstein purchased the remaining 50% interest in its
Hong Kong joint venture for $24.3 million.
-25-
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Omitted pursuant to General Instruction H to Form 10-Q.
ITEM 4. CONTROLS AND PROCEDURES
An evaluation was performed under the supervision and with the participation of
management, including the Chief Executive Officer and the Chief Financial
Officer, of the effectiveness of the design and operation of the Company's
disclosure controls and procedures as of March 31, 2006. Based on that
evaluation, management, including the Chief Executive Officer and Chief
Financial Officer, concluded that the Company's disclosure controls and
procedures are effective. There has been no change in the Company's internal
control over financial reporting that occurred during the period covered by this
report that has materially affected, or is reasonably likely to materially
affect, the Company's internal control over financial reporting.
-26-
PART II OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
See Note 10 of Notes to Consolidated Financial Statements contained herein.
Except as disclosed in Note 10 of Notes to Consolidated Financial Statements,
there have been no new material legal proceedings and no material developments
in legal proceedings previously reported in the 2005 Form 10-K.
ITEM 1A. RISK FACTORS
There have been no material changes to the risk factors described in Part I,
Item 1A "Risk Factors" included in the 2005 Form 10-K.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS
Number Description and Method of Filing
----------- ---------------------------------------------------------
31.1 Certification of the Registrant's Chief Executive Officer
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification of the Registrant's Chief Financial Officer
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification of the Registrant's Chief Executive Officer
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2 Certification of the Registrant's Chief Financial Officer
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
-27-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, AXA
Equitable Life Insurance Company has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Date: May 12, 2006 AXA EQUITABLE LIFE INSURANCE COMPANY
By: /s/ Stanley B. Tulin
-----------------------------------------
Name: Stanley B. Tulin
Title: Vice Chairman of the Board and
Chief Financial Officer
Date: May 12, 2006 /s/ Richard S. Dziadzio
-----------------------------------------
Name: Richard S. Dziadzio
Title: Executive Vice President and
Deputy Chief Financial Officer
Date: May 12, 2006 /s/ Alvin H. Fenichel
-----------------------------------------
Name: Alvin H. Fenichel
Title: Senior Vice President and
Controller
-28-