(2) Includes writedowns for impairment and net changes in valuation allowances on real estate, mortgage loans and investment securities aggregating $24.4 million, $76.0 million, $20.1 million, $54.3 million and $49.3 million for the years ended December 31, 1998, 1997, 1996, 1995, and 1994, respectively.
- SFAS No. 120, Accounting and Reporting by Mutual Life Insurance Enterprises for Certain Long-Duration Participating Contracts, was adopted on a retroactive basis for the year ended December 31, 1992 and subsequent years.
The Company's provision for federal income taxes in 1998, including the tax effect of demutualization expenses, of $103.0 million included no surplus tax, compared to a surplus tax benefit of $5.8 million in 1997. The Company's effective tax rate before the surplus tax and extraordinary item was 35.0% in 1998, as compared to approximately 33.6% in 1997.
Pursuant to the Agreement, the Company receives from AUSA (i) payments on an annual basis through December 31, 2002 (the "Group Pension Payments") equal to all of the earnings, as defined in the Agreement, from the existing deposits on contracts in force and transferred to AUSA on the Group Pension Transaction Date (the "Existing Deposits"), (ii) a final payment (the "Final Value Payment") at December 31, 2002 based on the remaining fair value of the Existing Deposits and (iii) a contingent payment (the "New Business Growth Payment") at December 31, 2002 based on new business growth subsequent to the Group Pension Transaction Date. However, the level of new business growth necessary for MONY to receive the New Business Growth Payment make it unlikely that MONY will ever receive any such payment.
(7) Includes separate account liabilities transferred in the Group Pension Transaction of $3,829.6 million, $3,614.0 million and $3,358.3 million as of December 31, 1998, 1997, and 1996, respectively (see Note 10 to the Consolidated Financial Statements).
Net investment income and net realized gains on investments were $704.5 million for 1998, an increase of $92.6 million, or 15.1%, from $611.9 million reported for 1997. The increase was primarily due to higher gains from sales of real estate, which was partially offset by a decrease in yield on investment of new money.
Dividends to policyholders were $215.2 million for 1998, a decrease of $5.8 million, or 2.6%, from $221.0 million reported in 1997. The decrease primarily resulted from a reduction in the fourth quarter of 1997 in the interest component of the dividend scales on all policies by amounts ranging from 15 to 50 basis points, which was partially offset by an increase in life insurance reserves.
Amortization of DAC was $146.8 million for 1997, an increase of $11.8 million, or 8.7%, from $135.0 million reported for 1996. The increase was primarily the result of charging off approximately $30.7 million of deferred policy acquisition costs relating to the DI Transaction, offset by a decrease in amortization of approximately $21.5 million relating to traditional life business which resulted from revised projections of the ultimate profits expected from such business based on actual results to date.
Interest credited to policyholders' account balances was $10.6 million for 1998, an increase of $0.2 million, or 1.9%, from $10.4 million reported for 1997.
The Company's total capitalization, excluding accumulated comprehensive income, increased $374.5 million, or 23.0%, to $2,000.6 million at December 31, 1998, as compared to $1,626.1 million at December 31, 1997. The increase was primarily the result of net income of $164.0 million and net proceeds from the Offerings of $282.5 million. The Company's debt to equity (excluding accumulated comprehensive income) and debt to total capitalization ratios decreased to 23.1% and 18.8% at December 31, 1998, respectively, from 35.2% and 26.1% at December 31, 1997, respectively.
Of the $886.9 million of currently outstanding commercial mortgage loans in the Company's investment portfolio at December 31, 1998, $124.0 million, $50.7 million and $56.9 million are scheduled to mature in 1999, 2000 and 2001, respectively. See "Investments -- Mortgage Loans -- Commercial Mortgage Loans".
While the RBC guidelines are intended to be a regulatory tool only, and are not intended as a means to rank insurers generally, comparisons of RBC ratios of life insurers have become generally available. The adjusted RBC capital ratios of all the Company's insurance subsidiaries at December 31, 1998 and December 31, 1997 were in excess of the minimum required RBC.
COMMERCIAL MORTGAGE LOAN DISTRIBUTION BY GEOGRAPHIC AREA AND BY PROPERTY TYPE