DUFF & PHELPS: THE EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES AND SUBSIDIARY, CLAIMS PAYING ABILITY RATINGS REAFFIRMED AT 'A+'
CHICAGO, July 28 /PRNewswire/ -- Duff & Phelps Credit Rating Co. has reaffirmed the claims paying ability ratings of `A+' (Single-A-Plus) for The Equitable Life Assurance Society of the United States (Equitable Life) and its wholly owned subsidiary, Equitable Variable Life Insurance Company (EVLICO). The ratings reflect: (1) the franchise factor inherent within Equitable Life's career agency force; (2) the continued strong contributions of investment management subsidiaries to Equitable Life's capital base; and (3) continued capital strengthening, including AXA's recent investment in the convertible preferred stock offering of the Equitable Life's parent organization, The Equitable Companies Incorporated (The Equitable). These positive factors are balanced against improving but still weak earnings from insurance operations, the competitive pressures in variable life and annuity markets, and the potential effect on earnings from problem real estate related assets caused by still weak commercial real estate markets. The ratings incorporate The Equitable's recent $800.5 million issue of cumulative convertible preferred stock, 49 percent of which was purchased by AXA. Anticipated use of the proceeds of this issue include increasing the capital of Equitable Life through direct capital contributions and other initiatives related to improving Equitable Life's capital position. Equitable Life experienced losses in 1992 due to weak although improving core insurance operating earnings, restructuring costs, as well as capital losses from reserving and writedowns of underperforming real estate related assets. Earnings improvements in 1993 combined with the recent convertible preferred stock issuance and the resulting anticipated capital initiatives are expected to replenish capital used to absorb these past losses, as well as provide additional capital for possible future reserving and writedowns on underperforming real estate related assets. It is estimated that Equitable Life and its insurance subsidiaries' combined pro forma operating leverage ratio (adjusted liabilities to adjusted surplus) will improve to approximately 14 times when Equitable Life receives the anticipated capital contributions. This compares with approximately 16.5 times at the time of demutualization. For the full year of 1992, Equitable Life and its insurance subsidiaries experienced a statutory net loss of $170.1 million (including realized losses of $125.4 million). We expect Equitable Life's 1993 combined insurance results to show narrowed operating losses. However, the repayment of financial reinsurance and realized investment losses may constrain capital growth. -0- 7/28/93 /CONTACT: Kevin A. Ceurvorst, CFA, of Duff & Phelps, 312-368-3144/
CO: The Equitable Life Assurance Society of the United States ST: IN: INS SU: RTG
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