The Company leases its headquarters building which is located at 1740 Broadway, New York, New York and consists of approximately 264,570 square feet. The Company also occupies facilities in Syracuse, New York, for use in its insurance operations, which consist of approximately 578,970 square feet in the aggregate. The Company also leases all 110 of its agency and its subsidiary offices, which consist of approximately 573,636 square feet in the aggregate. The Company believes that such properties are suitable and adequate for its current and anticipated business operations.
The conversion of the predecessor to MONY Life to a stock life 	insurance company and the establishment of the Closed Block have 	significantly affected the presentation of our consolidated 	financial statements. The most significant effects are as 	follows:
Prior to its reorganization on November 16, 1998, the 	Company had no common stock outstanding and, accordingly, did 	not report per share earnings. See “Management’s 	Discussion and Analysis of Financial Condition and Results of 	Operations.” In accordance with GAAP, per share amounts 	presented for 1998 include only the results of operations for 	the period from November 16, 1998 (the effective date of 	our reorganization) through December 31, 1998. On a pro 	forma basis, assuming the reorganization occurred 	January 1, 1998, basic and diluted earnings per share would 	have been $4.05 and $3.99 respectively. See Note 4 to 	the Consolidated Financial Statements.
Includes Closed Block assets of $6,251.2 million, $6,182.1 	million and $6,161.2 million at December 31, 2000, 1999 and 	1998, respectively. See “Management’s Discussion 	and Analysis of Financial Condition and Results of 	Operations” and Note 3 and Note 20 to the 	Consolidated Financial Statements.
Shareholders’ equity at December 31, 1998 includes 	approximately $248.7 million which represents the remaining net 	proceeds from MONY Group’s initial public offering after 	deducting cash used to pay cash to certain eligible 	policyholders and cash used to fund policy credits given to 	certain eligible policyholders in connection with the 	Demutualization. See “Management’s Discussion and 	Analysis of Financial Condition and Results of 	Operations” and Note 1 to the Consolidated 	Financial Statements.
MONY’s conversion to a stock life insurance company and the establishment of the Closed Block, as discussed in the Notes to the Consolidated Financial Statements and “Item 1 - Organization and Business” have significantly affected the presentation of the consolidated financial statements of the Company. The most significant effects are as follows:
The Company’s profitability depends in large part upon (i) the amount of its assets, (ii) the adequacy of its product pricing (which is primarily a function of competitive conditions, management’s ability to assess and manage trends in
mortality and morbidity experience as compared to the level of benefit payments, and its ability to maintain expenses within pricing assumptions), (iii) the maintenance of the Company’s target spreads between credited rates on policyholders’ account balances and the rate of earnings on its investments, (iv) the persistency of its policies (which affects the ability of the Company to recover the costs incurred to sell a policy) and (v) its ability to manage the market and credit risks associated with its invested assets (vi) returns on venture capital investments and (vii) the investment performance of its mutual fund and variable product offerings. External factors, such as legislation and regulation of the insurance marketplace and products, may also affect the Company’s profitability.
See Note 4 to Consolidated Financial Statements “Summary of Significant Accounting Policies (Demutualization and New Accounting Pronouncements).”
Premium revenue was $700.5 million for 2000, a decrease of $16.6 million, or 2.3%, from $717.1 million reported for 1999. Substantially all of the decrease related to traditional life insurance products offered through the Company’s Protection Products segment. The decrease was comprised of (i) lower new premiums of $10.6 million, and (ii) lower renewal premiums of $30.5 million due to the reduction of the in-force block of business, offset by (i) higher single premium of $2.8 million, and (ii) an increase in USFL premiums of $21.3 million of which $17.6 represented new premiums on special risk term insurance products. The increase in new premiums written by USFL is primarily attributable to the expansion of its distribution, the improvement of its financial strength ratings since being acquired by the Company and a product shift towards its term insurance product. Management believes that the decrease in traditional life insurance premiums is consistent with industry trends, particularly the continuing shift by consumers from traditional protection products to asset accumulation products. See “New Business Information” for a discussion regarding period to period sales and related trends.
Net investment income and net realized gains on investments are allocated to the Company’s segments based on the assets allocated to such segments to support the associated liabilities of each segment and to maintain a targeted regulatory risk-based capital level for each segment. See Note 5 to the Consolidated Financial Statements.
Other income (which consists primarily of fees earned by the Company’s mutual fund management, broker-dealer, and insurance brokerage operations, as well as revenues from interest on deposits held under financial reinsurance arrangements, certain other asset management fees, and other miscellaneous revenues) was $223.3 million for 2000, an increase of $26.1 million, or 13.2%, from $197.2 million reported in 1999. The increase was primarily due to higher income of $4.0 million and $25.1 million in the Protection Products and Accumulation Products segments, respectively, offset in part by lower income of $3.3 million in the Other Products segment. The increase in income recorded in the Accumulation Products segment was primarily attributable to higher fees earned by the Company’s mutual fund management operations. The Company’s mutual fund management operations reported $106.9 million in fees from advisory, underwriting and distribution services in 2000 compared to $84.9 million in 1999. The decrease in income recorded in the Other Products segment was primarily due to lower commissions earned by the Company’s broker-dealer operations of $3.6 million due to unfavorable market conditions. During 2000, the Company’s broker-dealer operations reported commission earnings of $59.8 million, as compared to $63.4 million reported in 1999.
Benefits to policyholders were $787.8 million for 2000, an increase of $0.7 million, from $787.1 million reported for 1999. The increase consisted primarily of: higher benefits of approximately $2.8 million and $3.1 million in the Accumulation Products segment and the Company’s benefit plans, respectively, offset by lower benefits of approximately $5.2 million in the Protection Products segment. The increase of $2.8 million in the Accumulation Products segment was primarily due to an increase in the issuance of supplementary contracts during 1999. The decrease in the Protection Products segment of $5.2 million was primarily due to a decrease in policy benefits related to the Company’s non-USFL business of $17.6 million, offset by $12.4 million of benefits related to USFL.
Dividends to policyholders were $235.5 million for 2000, an increase of $4.8 million, or 2.1%, from $230.7 million reported for 1999. The increase, substantially all of which occurred in the Protection Products segment, resulted primarily from the continuation of the dividend scale and the increasing Closed Block reserves.
The increase of $14.4 million in costs directly attributable to the Accumulation Products segment primarily consisted of higher sub-advisory fees and other expenses incurred by the Company’s mutual fund management operations, which directly corresponded with an increase in revenues from such operations (see discussion and analysis of other income above). The increase of $12.3 million in costs directly attributable to the Other Products segment was primarily due to $6.7 million in higher costs in connection with the Company’s investment in its international brokerage operations.
The Company’s provision for federal income taxes in 2000 was $133.8 million, compared to $132.0 million in 1999. The Company’s effective tax rate before extraordinary item was approximately 33.8% in 2000, as compared to approximately 34.5% in 1999.
For a description of Group Pension Transaction, the Group Pension Profits and certain summary financial information relating thereto, refer to Note 10 of the Consolidated Financial Statements included herein. Management believes that Group Pension Profits will define in future periods consistent with the continuing run-off of the underlying business until they terminate as of December 31, 2002.
Amortization of deferred policy acquisition costs (“DAC”) was $137.8 million for 1999, an increase of $6.8 million, or 5.2%, from $131.0 million reported for 1998. The increase primarily resulted from higher amortization in both the Protection Products and Accumulation Products segments of approximately $5.7 million and $1.1 million, respectively. The increase in DAC amortization in the Protection Products segment primarily consisted of: (i) $1.1 million related to the consolidation of Sagamore, (ii) $6.6 million of higher amortization related to the Company’s VUL business as a result of better mortality and rapid growth in this product, (iii) $5.9 million of higher amortization related to the Company’s international business as a result of poor persistency, offset in part by, (iv) a decrease in amortization of approximately $8.3 million related to traditional life products. The increase in DAC of $1.1 million in the Accumulation Products segment was primarily due to the aging block of FPVA business.
Dividends to policyholders were $230.7 million for 1999, an increase of $12.5 million, or 5.7%, from $218.2 million reported for 1998. The increase, substantially all of which occurred in the Protection Products segment, resulted primarily the accrual of an additional dividend liability in the Closed Block of approximately $9.5 million reflecting results that were more favorable than assumed in the funding of the Closed Block. As further discussed in Note 3 to the Consolidated Financial Statements included elsewhere herein, all the assets in the Closed Block inure solely to the benefit of the Closed Block policyholders, and to the extent that the results of the Closed Block are more favorable than assumed in establishing the Closed Block, total dividends paid to Closed Block policyholders will be increased and are, accordingly, accrued as an additional dividend liability. Only the excess of the Closed Block liabilities over the Closed Block assets at the date of the establishment of the Closed Block (November 16, 1998) will be recognized in the Company’s income over the period the policies and contracts in the Closed Block remain in force.
Other operating costs and expenses were $547.3 million for 1999, an increase of $94.0 million, or 20.7%, from $453.3 million reported for 1998. The increase of $94.0 million consisted primarily of approximately $27.1 million, $19.1 million, and $19.7 million of costs directly attributable to the Protection Products, Accumulation Products and Other Products segment, respectively, as well as higher allocable and other miscellaneous direct cost of approximately $28.1 million. To the extent that costs are not directly identifiable with an operating segment, such cost are allocated to the Company’s operating segments based on cost allocations utilizing time studies, and cost estimates included in the Company’s product pricing (see Note 5 to the Consolidated Financial Statements). As further discussed below, the increase in operating costs and expenses in 1999 as compared to 1998 was primarily attributable to: (i) higher commissions and other selling costs associated with the increase in revenues reported by the Company’s mutual fund and broker-dealer operation, (ii) the consolidation of USFL, (iii) the Company’s continuing investment in its international operations and (iv) certain strategic initiatives, offset by (v) certain operating efficiencies and other cost reductions. Following sets forth additional information with respect to the increase in operating costs in 1999, as compared to 1998:
The increase of $27.1 million in costs directly attributable to the Protection Products segment consisted of $16.3 million from the consolidation of USFL and an increase of $10.8 million in costs related to the Company’s international
operations, which was primarily due to increased compensation costs associated with the recruitment of additional international sales representatives and costs incurred to develop and administer new products. During 1999, the number of international field representatives increased by 139 to 318 at December 31, 1999, as compared to 179 at December 31, 1998. The increase of $19.1 million in costs directly attributable to the Accumulation Products segment primarily consisted of higher sub-advisory fees and other expenses incurred by the Company’s mutual fund management operations, which directly corresponded with an increase in revenues from such operations (see discussion and analysis of other income above). The increase of $19.7 million in costs directly attributable to the Other Products segment primarily consisted of higher commissions and other expenses incurred by the Company’s broker-dealer operations, which directly corresponded with an increase in revenues from such operations (see discussion and analysis of other income above). The net increase in other allocable operating costs and expenses primarily consisted of (i) a one-time restructuring charge of $59.7 million relating to the Company’s voluntary early retirement program - see “Early Retirement Program” discussion below, (ii) $3.3 million of transfer agent fees, (iii) $7.1 million related to and increase in company benefit plan expenses, offset by (iv) $10.8 million of lower costs associated with addressing the Year 2000 issue, and (v) $25.8 million of lower cost associated with restructuring the Company’s career agency sales force, savings resulting from the early retirement program and other strategic initiatives
The Company’s provision for federal income taxes in 1999 was $132.0 million, compared to $103.0 million in 1998. The Company’s effective tax rate before extraordinary item was approximately 34.5% in 1999, as compared to approximately 35.0% in 1998.
New Business Information for the year ended December 31, 	2000 compared to the year ended December 31, 1999
Total new annualized and single life insurance premiums for the year ended December 31, 2000 increased $71.7 million, or 36.9%, to $266.0 million from $194.3 million in 1999. New life insurance premiums from the company’s complementary network increased 81% to $168.8 million for the year, which accounted for 63% of total protection sales, The increase in premiums for the year was driven by strong sales of the company’s COLI as well as sales from its USFL subsidiary.
For the year ended December 31, 2000, COLI sales increased 87% to $126.8 million from $66.6 million in 1999. Recurring premiums were $31.8 million for the year, compared with $26.5 million for 1999. Corporate sales are large-premium cases that typically generate revenues that can fluctuate considerably from quarter-to-quarter.
New Business Information for the year ended December 31, 	1999 compared to the year ended December 31, 1998
The following tables set forth assets under management at December 31, 2000, 1999, and 1998, as well as the changes in the primary components of assets under management during the years then ended:
For the years ended December 31, 2000, 1999 and 1998, the Company reported extraordinary charges of $37.7 ($58.1 million pre-tax). The charge represents the cost incurred by the company in connection with the repurchase of the
In 2000, MONY Life paid a dividend to MONY Group in the amount of $100.0 million.
The events most likely to cause an adjustment in the Company’s investment policies are: (i) a significant change in its product mix, (ii) a significant change in the outlook for either the economy in general or for interest rates in particular and (iii) a significant reevaluation of the prospective risks and returns of various asset classes. See “Investments - General.”
decrease from prior year is primarily due to higher operating expenses, higher benefit payments, lower payments from the Group Pension Transaction (see Note 10 to the Consolidated Financial Statements), and higher federal income tax payments.
Among the assets allocated to the Closed Block are the Series A Notes received as part of the Group Pension Transaction. MONY Life has undertaken to reimburse the Closed Block from its general account assets outside the Closed Block for any reduction in principal payments on the Series A Notes pursuant to the terms thereof, as described in Note 10 to the Consolidated Financial Statements.
In accordance with its ongoing strategy to strengthen the Company’s financial position, management expects to continue to selectively sell equity real estate. At December 31, 2000, 1999 and 1998, the carrying value of real estate to be disposed of was $171.3 million, $322.9 million and $312.9 million, respectively, or 1.5%, 3.0% and 2.8% of invested assets at such dates, respectively. The aforementioned carrying values are net of valuation allowances of $4.5 million, $22.0 million and $30.6 million, respectively. In addition, the carrying value of real estate to be disposed of at such dates is net of $20.2 million, $62.3 million and $79.1 million of impairment adjustments, respectively. For the years ended December 31, 2000, 1999, and 1998, such increases in valuation allowances aggregated $0.7 million, $12.1 million and $6.7 million, respectively.
Separate account assets are managed in accordance with the prescribed investment strategy that applies to the specific separate account. Separate accounts are established in conformity with insurance laws and are generally not chargeable with liabilities that arise from any other business of the Company. Separate account assets are subject to general account claims only to the extent that the value of such assets exceeds the separate account liabilities. Investments held in separate accounts and liabilities of the separate accounts are reported separately as assets and liabilities. Substantially all separate account assets are reported at estimated fair value. Investment income and gains or losses on the investments of separate accounts accrue directly to contractholders and, accordingly, are not reflected in the Company’s consolidated statements of income and cash flows. Fees charged to the separate accounts by the Company (including mortality charges, policy administration fees and surrender charges) are reflected in the Company’s revenues.
The following discussion analyzes the results of the major categories of general account invested assets, which includes invested assets of the Closed Block.
The yield on general account invested assets (including net realized gains and losses on investments) was 9.1%, 9.4% and 8.6% for the years ended December 31, 2000, 1999 and 1998, respectively.
Fixed maturities consist of publicly traded debt securities, privately placed debt securities and small amounts of redeemable preferred stock, and represented 59.6% and 60.4% of total invested assets at December 31, 2000 and 1999, respectively.
2000, the percentage, based on estimated fair value, of total private placement fixed maturities that were investment grade (NAIC Designation 1 or 2) was 88.2% compared to 90.3% for December 31, 1999. Generally, private placements provide the Company with broader access to management information, negotiated loan covenants, call protection features and, where applicable, a high level of collateral. Nevertheless, privately placed securities are generally not freely tradable because of restrictions under federal and state securities laws and the absence of a liquid trading market.
The Company defines problem securities in the fixed maturity category as securities (i) as to which principal and/or interest payments are in default or are to be restructured pursuant to commenced negotiations or (ii) issued by a company that went into bankruptcy subsequent to the acquisition of such securities or (iii) are deemed to have other than temporary impairments to value. The fair value of problem fixed maturities was $54.1 million and $45.9 million at December 31, 2000 and 1999, respectively. For the years ended December 31, 2000, 1999 and 1998, $0.9 million, $1.5 million and $0.9 million respectively of interest income was not accrued on problem fixed maturities.
At December 31, 2000, the Company’s largest unaffiliated single concentration of fixed maturities consists of $250.9 million of carrying value of Federal National Mortgage Association (FNMA) fixed maturities which represent approximately 2.2% of total invested assets at December 31, 2000. The largest non-government issuer consists of $198.8 of AEGON notes purchased in connection with the Group Pension Transaction. These notes represent approximately 1.8% of total invested assets at December 31, 2000. (See Note 10 to the Consolidated Financial Statements.) No other individual non-government issuer represents more than 0.4% of invested assets.
CMOs are prepaid more rapidly than anticipated, causing early repayment of the CMOs. In rising interest rate environments, the underlying mortgages are prepaid at a slower rate than anticipated, causing CMO principal repayments to be extended. Although early CMO repayments may result in acceleration of income from recognition of any unamortized discount, the proceeds typically are reinvested at lower current yields, resulting in a net reduction of future investment income.
The majority of the securities contained in the Company’s CMO portfolio are traded in the open market. As such, the Company obtains market prices from outside vendors. Any security price not received from such vendors is obtained from the originating broker or internally calculated.
Asset-backed securities (“ABS”) are purchased both to diversify the overall credit risks of the fixed maturity portfolio and to provide attractive returns. The ABS portfolio is diversified both by type of asset and by issuer. The largest asset class exposure in the ABS portfolio is to credit card receivables. These are comprised of pools of both general purpose credit card receivables such as Visa and Mastercard and private label credit card receivable pools. Excluding the exposures to home equity loans (which represented 1.7% and 2.0% of the ABS portfolio as of December 31, 2000 and 1999, respectively), the ABS portfolio is in general insensitive to changes in interest rates. As of December 31, 2000 and 1999, respectively, the ABS portfolio did not contain any pools of assets outside of the United States.
Following is a summary of the Company’s commercial mortgage loans by geographic area and property type as of December 31, 2000, and 1999, respectively.
Below is a summary of the changes in the commercial mortgage portfolio for the years ended December 31, 2000, 1999 and 1998, respectively.
The total number of commercial mortgage loans outstanding at December 31, 2000 and 1999 was 175 and 146, respectively, with an average loan size of $8.2 million and $7.8 million, respectively. The largest amount loaned on any single property at such dates aggregated $46.0 million and $45.5 million, respectively, and represented less than 0.4% and 0.5% of general account invested assets, respectively. At such dates, amounts loaned on twenty and fifteen properties were $20 million or greater, representing in the aggregate 38.4% and 38.0% respectively, of the total carrying value of the commercial mortgage loan portfolio at such dates. Total mortgage loans to the five largest borrowers accounted in the aggregate for approximately 21.8% and 21.6% of the total carrying value of the commercial mortgage loan portfolio at December 31, 2000 and 1999, respectively, and less than 2.8% and 1.8%, respectively, of total invested assets at such dates. All such loans were performing. The Company’s commercial mortgage loan portfolio is managed by a group of experienced real estate professionals. These professionals monitor the performance of the loan collateral, physically inspect properties, collect financial information from borrowers and keep in close contact with borrowers and the local broker communities to assess the market conditions and evaluate the impact of such conditions on property cash flows. The Company’s real estate professionals identify problem and potential problem mortgage assets and develop workout strategies to deal with borrowers’ financial weakness, whether by foreclosing on properties to prevent a deterioration in collateral value, or by restructuring mortgages with temporary cash flow difficulties.
Of the $26.3 million, $124.0 million and $220.1 million, respectively, in maturing loans during the years ended December 31, 2000, 1999 and 1998, 0.0%, 33.9% and 7.6%, respectively, were refinanced, 44.4%, 38.9%, and 58.2%, respectively, were paid off, 0.0%, 0.0% and 2.2%, respectively, were foreclosed, and 0.0%, 15.3% and 0.0%, respectively, were restructured. Of the $1,443.3 million of outstanding commercial mortgage loans in the Company’s investment portfolio at December 31, 2000, $118.0 million, $169.3 million and, $112.4 million and scheduled to mature in 2001, 2002, and 2003, respectively.
Consists of loans which have had their maturity date extended 	for a period of less than one year.
At December 31, 2000, the carrying value of problem, potential problem and restructured loans was $14.8 million, $64.7 million and $75.6 million, respectively, net of valuation allowances of $0.4 million, $14.3 million and $7.7 million, respectively.
Total problem, potential problem and restructured commercial 	mortgages as a percent of total commercial mortgages
Total valuation allowances/writedowns as a percent of problem, 	potential problem and restructured commercial mortgages at 	carrying value before valuation allowances and writedowns
Problem commercial mortgages included mortgage loans in 	foreclosure of $14.8 million and $0.0 million at 	December 31, 2000 and 1999, respectively.
As of December 31, 2000, the Company had two problem commercial mortgages aggregating $14.8 million; $8.0 million in Arizona and $6.8 million in California which are office buildings. As of December 31, 1999, the Company had no problem commercial mortgages.
The Company defines problem, potential problem and restructured agricultural mortgages in the same manner as it does for commercial mortgages. Total problem, potential problem and restructured agricultural mortgages as of December 31, 2000 and 1999 were $20.3 million and $18.1 million, respectively.
MONY Life has, from time to time, pooled certain of its agricultural mortgage loans and sold beneficial interests in each of the individual agricultural mortgage loans in such pools (referred to as “participation interests”) to third parties. Under such arrangements, MONY Life retains a specified equity interest in the loans in such pools and sells the remaining participation interest. MONY Life is responsible for servicing the individual agricultural mortgage loans in each pool, for which it receives a servicing fee from the third party participants. As of December 31, 2000, the aggregate amount of agricultural mortgage loans in such pools being serviced by MONY Life was approximately $457.4 million.
Equity real estate is categorized as either “Real estate held for investment” or “Real Estate to be disposed of.” Real estate to be disposed of consists of properties for which the Company has commenced marketing efforts. The carrying value of real estate held for investment totaled $40.7 million and $46.2 million as of December 31, 2000 and 1999, respectively. The carrying value of real estate to be disposed of aggregated $171.3 million and $322.9 million as of December 31, 2000 and 1999, respectively.
The following tables present information concerning the geographic and property type breakdown of the equity real estate portfolio as of December 31, 2000 and 1999.
represented approximately 66.1% of the equity real estate portfolio at December 31, 2000. The Company’s largest equity real estate holding at December 31, 2000 consisted of a hotel property located in Arizona with a carrying value of approximately $116.3 million and representing less than approximately 1.0% of general account invested assets. The ten largest real estate properties as of December 31, 2000 comprise 93.2% of total real estate assets and less than 1.8% of total invested assets.
The limited partnerships in which the Company has invested are investment partnerships which invest in the equity of private companies (generally in the form of common stock). These partnerships will generally hold such equity until the underlying company issues its securities to the public through an initial public offering. At that time or thereafter, at the general partners’ discretion, the partnership will generally distribute the underlying common stock to its partners. Upon distribution, the Company will record the common stock received at fair value, reverse the carrying value of the corresponding limited partnership investment, and record as investment income any excess of the fair value of the common stock distributed over the carrying value of the limited partnership investment. Accordingly, certain of the common stocks owned by the Company at December 31, 2000 and 1999 were acquired through distributions from the Company’s investments in limited partnership interests. However, it has been the Company’s practice to sell such positions shortly after such distributions.
The following table sets forth the carrying value of the Company’s investments in limited partnership interests sorted by the basis upon which the Company accounts for such investments, as well as the amount of such investments attributable to the partnerships’ ownership of public and private common stock at December 31, 2000 and 1999:
At December 31, 2000 and 1999, the Company had investments in approximately 53 and 50 different limited partnerships which represented 2.5% and 2.2%, respectively, of the Company’s general account invested assets. Investment results for the portfolio are dependent upon, among other things, general market conditions for initial and secondary offerings of common stock. For the years ended December 31, 2000, 1999, and 1998, investment income from investments in limited partnership interests (which is comprised primarily of the Company’s pro rata share of income reported by partnerships accounted for under the equity method and income recognized upon distribution for partnership investments accounted for under the cost method) was approximately $236.3 million, $188.9 million and $49.5 million, respectively, representing 24.9%, 20.9%, and 6.7%, respectively, of the net investment income for such periods. For the same periods, the Company achieved total returns on its investments in limited partnership interests of 82.8%, 81.9%, and 28.4%, respectively. There can be no assurance that the recent level of investment returns achieved on limited partnership investments can be sustained in the future, and the failure to do so could have a material adverse effect on the Company’s financial position and results of operations.
All of the Company’s fixed maturity and equity securities are classified as available for sale and, accordingly, are marked to market, with unrealized gains and losses excluded from earnings and reported as a separate component of accumulated other comprehensive income. Securities whose value is deemed other than temporarily impaired are written down to fair value. The writedowns are recorded as realized losses and included in earnings. The cost basis of such securities is adjusted to fair value. The new cost basis is not changed for subsequent recoveries in value. For the years ended December 31, 2000, 1999 and 1998, such writedowns aggregated $16.0 million, $8.3 million and $15.7 million, respectively.