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Table of Contents
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM 10-Q
 
 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 30, 2002
 
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGEACT OF 1934
 
For the transition period from                 to                
 
Commission file number: 1-14603
 
THE MONY GROUP INC.
(Exact name of Registrant as specified in its charter)
 
Delaware
  
13-3976138
(State or other jurisdiction of
incorporation or organization)
  
(I.R.S. Employer
Identification No.)
 
1740 Broadway
New York, New York 10019
(212) 708-2000
(Address, including zip code, and telephone number, including area code,  of Registrant’s principal executive offices)
 
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    ¨
 
As of November 6, 2002 there were 46,904,739 shares of the Registrant’s common stock, par value $0.01, outstanding.
 
 

Table of Contents
THE MONY GROUP INC.
FORM 10-Q
 
TABLE OF CONTENTS
 
         
Page
PART I    FINANCIAL INFORMATION
     
Item 1:
      
3
       
3
       
4
       
5
       
6
       
7
       
8
Item 2:
      
26
Item 3:
      
60
Item 4:
      
61
PART II    OTHER INFORMATION
     
Item 1:
      
62
Item 6:
      
62
  
63
  
64

1

Table of Contents
FORWARD-LOOKING STATEMENTS
 
The Company’s management has made in this report, and from time to time may make in its public filings and press releases as well as in oral presentations and discussions, forward-looking statements concerning the Company’s operations, economic performance, prospects and financial condition. Forward-looking statements include, among other things, discussions concerning the Company’s potential exposure to market risks, as well as statements expressing management’s expectations, beliefs, estimates, forecasts, projections and assumptions. The Company claims the protection afforded by the safe harbor for forward-looking statements as set forth in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to many risks and uncertainties. Actual results could differ materially from those anticipated by forward-looking statements due to a number of important factors including the following: we could have further venture capital losses; we could be subjected to further downgrades by rating agencies of our senior debt ratings and the claims-paying and financial-strength ratings of our insurance subsidiaries; we could be required to take a goodwill impairment charge relating to our investment in Advest if the market deteriorates further; we could have to accelerate amortization of deferred policy acquisition costs if market conditions continue to deteriorate; we could have to write off investments in certain securities if the issuers’ financial condition deteriorates; actual death-claim experience could differ from our mortality assumptions; the Company could have liability from as-yet-unknown litigation and claims; larger settlements or judgments than we anticipate could result in pending cases due to unforeseen developments; and changes in laws, including tax laws, could affect the demand for the Company’s products. The Company does not undertake to update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.
 

2

Table of Contents
ITEM 1: FINANCIAL STATEMENTS
 
THE MONY GROUP INC. AND SUBSIDIARIES
 
UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
As of September 30, 2002 and December 31, 2001
 
    
September 30, 2002
     
December 31, 2001
  
    
($ in millions)
  
ASSETS
                  
Investments:
                  
Fixed maturity securities available-for-sale, at fair value
   
$
7,854.6
 
   
$
6,976.0
 
Fixed maturity securities held to maturity, at amortized cost
   
 
0.1
 
   
 
0.1
 
Trading account securities, at fair value
   
 
851.0
 
   
 
378.5
 
Securities pledged as collateral
   
 
—  
 
   
 
345.5
 
Equity securities available-for-sale, at fair value
   
 
252.4
 
   
 
299.2
 
Mortgage loans on real estate
   
 
1,741.3
 
   
 
1,809.7
 
Policy loans
   
 
1,206.7
 
   
 
1,229.0
 
Other invested assets
   
 
353.6
 
   
 
347.5
 
    
  
    
 
12,259.7
 
   
 
11,385.5
 
    
  
Cash and cash equivalents
   
 
439.2
 
   
 
441.0
 
Accrued investment income
   
 
220.5
 
   
 
192.9
 
Debt service coverage account (Note 1):
                  
Sub-account OB
   
 
61.5
 
   
 
—  
 
Sub-account CBB
   
 
10.6
 
   
 
—  
 
Amounts due from reinsurers
   
 
589.3
 
   
 
595.8
 
Premiums receivable
   
 
6.8
 
   
 
11.1
 
Deferred policy acquisition costs
   
 
1,199.4
 
   
 
1,233.8
 
Securities borrowed
   
 
0.2
 
   
 
601.0
 
Receivable from brokerage customers, net
   
 
—  
 
   
 
452.1
 
Other assets
   
 
894.5
 
   
 
897.8
 
Assets transferred in Group Pension Transaction (Note 4)
   
 
4,641.5
 
   
 
4,650.4
 
Separate account assets
   
 
4,018.6
 
   
 
5,195.2
 
    
  
Total assets
   
$
24,341.8
 
   
$
25,656.6
 
    
  
LIABILITIES AND SHAREHOLDERS’ EQUITY
                  
Future policy benefits
   
$
7,928.9
 
   
$
7,870.0
 
Policyholders’ account balances
   
 
2,604.0
 
   
 
2,337.1
 
Other policyholders’ liabilities
   
 
273.2
 
   
 
281.1
 
Amounts due to reinsurers
   
 
79.2
 
   
 
74.6
 
Securities loaned
   
 
—  
 
   
 
392.4
 
Securities sold, not yet purchased, at fair value
   
 
638.5
 
   
 
539.2
 
Payable to brokerage customers
   
 
—  
 
   
 
374.4
 
Accounts payable and other liablities
   
 
1,016.0
 
   
 
867.8
 
Short term debt
   
 
7.0
 
   
 
320.0
 
Long term debt
   
 
883.2
 
   
 
583.1
 
Current federal income taxes payable
   
 
97.9
 
   
 
81.6
 
Deferred federal income taxes
   
 
166.9
 
   
 
93.7
 
Liabilities transferred in Group Pension Transaction (Note 4)
   
 
4,562.8
 
   
 
4,597.1
 
Separate account liabilities
   
 
4,015.8
 
   
 
5,192.3
 
    
  
Total liabilities
   
 
22,273.4
 
   
 
23,604.4
 
    
  
Commitments and contingencies (Note 5)
                  
Common stock, $0.01 par value; 400 million shares authorized; 51.3 and 51.2 million shares issued at September 30, 2002 and December 31, 2001, respectively; 47.0 and 48.1 million shares outstanding at September 30, 2002 and December 31, 2001, respectively
   
 
0.5
 
   
 
0.5
 
Capital in excess of par
   
 
1,761.4
 
   
 
1,760.3
 
Treasury stock at cost: 4.3 million and 3.1 million shares at September 30, 2002, and December 31, 2001 respectively
   
 
(134.7
)
   
 
(104.7
)
Retained earnings
   
 
332.4
 
   
 
359.3
 
Accumulated other comprehensive income
   
 
109.5
 
   
 
38.1
 
Unamortized restricted stock compensation
   
 
(0.7
)
   
 
(1.3
)
    
  
Total shareholders’ equity
   
 
2,068.4
 
   
 
2,052.2
 
    
  
Total liabilities and shareholders’ equity
   
$
24,341.8
 
   
$
25,656.6
 
    
  
 
See accompanying notes to unaudited interim condensed consolidated financial statements.

3

Table of Contents
THE MONY GROUP INC. AND SUBSIDIARIES
 
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME
For the Three-month Periods Ended September 30, 2002 and 2001
 
    
2002
     
2001
  
    
($ in millions, except share data and per share amounts)
  
Revenues:
                  
Premiums
   
$
160.5
 
   
$
162.0
 
Universal life and investment-type product policy fees
   
 
54.6
 
   
 
50.1
 
Net investment income
   
 
170.1
 
   
 
172.9
 
Net realized (losses) gains on investments
   
 
(41.2
)
   
 
0.5
 
Group Pension Profits (Note 4)
   
 
6.8
 
   
 
8.0
 
Retail Brokerage and Investment Banking revenues
   
 
109.1
 
   
 
82.1
 
Other income
   
 
24.9
 
   
 
21.8
 
    
  
    
 
484.8
 
   
 
497.4
 
    
  
Benefits and Expenses:
                  
Benefits to policyholders
   
 
195.3
 
   
 
203.9
 
Interest credited to policyholders’ account balances
   
 
30.0
 
   
 
27.9
 
Amortization of deferred policy acquisition costs
   
 
49.7
 
   
 
32.9
 
Dividends to policyholders
   
 
53.5
 
   
 
54.5
 
Other operating costs and expenses
   
 
202.7
 
   
 
190.0
 
    
  
    
 
531.2
 
   
 
509.2
 
    
  
Loss before income taxes
   
 
(46.4
)
   
 
(11.8
)
Income tax benefit
   
 
(16.2
)
   
 
(3.1
)
    
  
Net loss
   
 
(30.2
)
   
 
(8.7
)
Other comprehensive income, net
   
 
25.4
 
   
 
53.1
 
    
  
Comprehensive (loss)/income
   
$
(4.8
)
   
$
44.4
 
    
  
Net loss per share data:
                  
Basic loss per share
   
$
(0.64
)
   
$
(0.18
)
    
  
Diluted loss per share
   
$
(0.64
)
   
$
(0.18
)
    
  
Share Data:
                  
Weighted-average shares used in basic per share calculation
   
 
47,414,250
 
   
 
48,642,274
 
Plus: incremental shares from assumed conversion of dilutive securities
   
 
—  
 
   
 
—  
 
    
  
Weighted-average shares used in diluted per share calculations
   
 
47,414,250
 
   
 
48,642,274
 
    
  
 
See accompanying notes to unaudited interim condensed consolidated financial statements.

4

Table of Contents
THE MONY GROUP INC. AND SUBSIDIARIES
 
UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME
For the Nine-month Periods Ended September 30, 2002 and 2001
 
    
2002
     
2001
    
($ in millions, except share
data and per share amounts)
Revenues:
                
Premiums
   
$
494.8
 
   
$
500.5
Universal life and investment-type product policy fees
   
 
156.1
 
   
 
152.1
Net investment income
   
 
541.7
 
   
 
546.1
Net realized (losses) gains on investments
   
 
(69.1
)
   
 
6.0
Group Pension Profits (Note 4)
   
 
22.0
 
   
 
27.2
Retail Brokerage and Investment Banking revenues
   
 
297.5
 
   
 
253.0
Other income
   
 
92.4
 
   
 
93.8
    
  
    
 
1,535.4
 
   
 
1,578.7
    
  
Benefits and Expenses:
                
Benefits to policyholders
   
 
585.5
 
   
 
596.1
Interest credited to policyholders’ account balances
   
 
85.8
 
   
 
83.2</