DEF 14A 1 d704752ddef14a.htm DEF 14A DEF 14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

 

Filed by the Registrant  ☒                            Filed by a Party other than the Registrant  ☐

Check the appropriate box:

 

  Preliminary Proxy Statement
  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
  Definitive Proxy Statement
  Definitive Additional Materials
  Soliciting Material under Rule 14a-12

AXA EQUITABLE HOLDINGS, INC.

(Name of Registrant as Specified In Its Charter)

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MESSAGE FROM

OUR CEO

  

LOGO

April 9, 2019

Dear AXA Equitable Holdings Stockholder:

On behalf of my fellow directors on the AXA Equitable Holdings Board, and the more than 12,000 employees and advisors at our two principal franchises, AXA Equitable Life and AllianceBernstein, we are pleased to hold our first annual meeting of stockholders on May 22, 2019. The attached 2019 proxy statement contains important information about the agenda for the 2019 annual meeting of stockholders and voting instructions.

2018 was an extraordinary year for our company. We completed our initial public offering in May (which was the largest IPO of the year), and established AXA Equitable Holdings as a listed company on the New York Stock Exchange (NYSE: EQH). We also delivered on our commitments, reporting full-year financial results for 2018 that reflected solid business performance and sustained momentum, as we continue to provide financial security for our clients, backed by high standards of capital strength and stability.

As of March 25, 2019, following secondary offerings that reduced AXA S.A.’s ownership of outstanding shares of AXA Equitable Holdings to below 50 percent, AXA Equitable Holdings is no longer a controlled company. Accordingly, the Nominating and Corporate Governance Committee identified, and the Board appointed, two highly qualified, independent directors to our Board, replacing two directors from AXA S.A. I would like to welcome these two newest members, Kristi A. Matus and Bertram L. Scott, and am pleased at the breadth of skills and experience and diversity they bring to our Board.

The AXA Equitable Holdings Board of Directors is committed to building upon its corporate governance framework with highly qualified directors, an independent Board Chairman, a majority independent Board and independent leadership of Board Committees.

We believe engaging with our stakeholders is an important foundational component of an effective corporate governance framework. As part of these efforts, we conducted significant investor outreach, including discussions with our top institutional stockholders and a proxy advisory firm. We look forward to continuing these discussions and the opportunity to receive additional feedback to continue to inform and enhance our corporate governance framework.

We appreciate your important vote on the matters contained in this proxy statement. Thank you for your support of AXA Equitable Holdings.

Sincerely,

 

 

LOGO

Mark Pearson

President and

Chief Executive Officer

AXA Equitable Holdings, Inc.

       
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

On behalf of the Board of Directors (the “Board”), I cordially invite you to attend the 2019 Annual Meeting of Stockholders (the “Annual Meeting”) of AXA Equitable Holdings, Inc.

 

 

DATE

May 22, 2019

 

TIME

9:00 a.m., Eastern Daylight Time

 

LOCATION

The Michelangelo Hotel, 152 West 51st Street, New York,

New York, 10019

 

     

AGENDA

 

At the meeting, stockholders will consider and vote on the following matters:

 

1. Proposal 1: Election of nine directors for a one-year term ending at the
2020 Annual Meeting of Stockholders;

 

2. Proposal 2: Ratification of the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for fiscal year 2019;

 

3. Proposal 3: Advisory vote to approve the compensation paid to our named executive officers;

 

4. Proposal 4: Advisory vote on the frequency of future advisory votes to approve the compensation paid to our named executive officers; and

 

5. Any such other business as may properly come before the Annual Meeting or any adjournments or postponements thereof.

Our Board recommends that you vote “FOR” the election of each of the nominees named in Proposal 1 of this Proxy Statement, “FOR” each of Proposals 2 and 3, and for a frequency of “ONE YEAR” for future advisory votes to approve compensation paid to our named executive officers in Proposal 4. Information about the matters to be acted upon at the Annual Meeting is contained in the accompanying Proxy Statement.

 

Voting Your Shares

Stockholders of record holding shares of common stock, par value $0.01 per share, of AXA Equitable Holdings, Inc. (“Shares”) as of the close of business on March 25, 2019 (the “Record Date”) are entitled to vote at the Annual Meeting.

 

 

 

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Internet

Please log on to www.proxyvote.com and submit a proxy to vote your Shares by 11:59 p.m., Eastern Daylight Time, on May 21, 2019.

 

 

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Telephone

Please call the number on your proxy card until 11:59 p.m., Eastern Daylight Time, on May 21, 2019.

 

 

 

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Mail

If you received printed copies of the proxy materials, please complete, sign, date and return your proxy card by mail to Vote Processing c/o Broadridge, 51 Mercedes Way, Edgewood, New York 11717 so that it is received prior to the Annual Meeting.

 

 

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In Person

You may attend the Annual Meeting and cast your vote.

 

 

Beneficial owners whose Shares are held at a brokerage firm or by a bank or other nominee should follow the voting instructions that they received from the nominee.

This notice is being delivered to the holders of Shares as of the close of business on March 25, 2019, the record date fixed by the Board for the purposes of determining the stockholders entitled to receive notice of and to vote at the Annual Meeting, and constitutes notice of the Annual Meeting under Delaware law. Proxy materials or a Notice of Internet Availability were first made available, sent or given to stockholders on or about April 9, 2019.

By Order of the Board of Directors,

LOGO

Dave S. Hattem

Senior Executive Vice President,

General Counsel and Secretary

 

 

Important Notice Regarding the Availability of Proxy Materials

for the Annual Meeting of Stockholders to be Held on May 22, 2019.

The accompanying Proxy Statement, our 2018 Annual Report to Stockholders and directions to the location of our Annual Meeting are available at https://ir.axaequitableholdings.com.


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TABLE OF CONTENTS

 

 

 

 

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CERTAIN IMPORTANT TERMS

 

  Corporate Entities

 

As used in this Proxy Statement, “we,” “us,” “our” and the “Company” mean AXA Equitable Holdings, Inc. and its consolidated subsidiaries, unless the context refers only to AXA Equitable Holdings, Inc. (which we refer to as “Holdings”) as a corporate entity. We also use the following capitalized terms:

 

  “AB” or “AllianceBernstein” means AB Holding and ABLP.

 

  “AB Holding” means AllianceBernstein Holding L.P., a Delaware limited partnership.

 

  “AB Holding Units” means units representing assignments of beneficial ownership of limited partnership interests in AB Holding.

 

  “AB Units” means units of limited partnership interests in ABLP.

 

  “ABLP” means AllianceBernstein L.P., a Delaware limited partnership and the operating partnership for the AB business.

 

  “AXA” means AXA S.A., a société anonyme organized under the laws of France, our former parent.

 

  “AXA Advisors” means AXA Advisors, LLC, a Delaware limited liability company, our retail broker/dealer for our retirement and protection businesses and a wholly-owned indirect subsidiary of Holdings.

 

  “AXA Equitable FMG” means AXA Equitable Funds Management Group, LLC, a Delaware limited liability company and a wholly-owned indirect subsidiary of Holdings.

 

  “AXA Equitable Life” means AXA Equitable Life Insurance Company, a New York corporation, a life insurance company and a wholly-owned indirect subsidiary of Holdings.

 

  “AXA Financial” means AXA Financial, Inc., formerly a Delaware corporation and a wholly-owned direct subsidiary of Holdings. On October 1, 2018, AXA Financial merged with and into Holdings, with Holdings assuming the obligations of AXA Financial.

 

  “AXA RE Arizona” means AXA RE Arizona Company, formerly an Arizona corporation and a wholly-owned indirect subsidiary of Holdings, which merged with and into AXA Equitable Life in April 2018.

 

  “AXA Tech” means AXA Technology Services America, Inc.

 

  The “General Partner” means AllianceBernstein Corporation, a Delaware corporation and the general partner of AB Holding and ABLP.

 

  “MLOA” means MONY Life Insurance Company of America, an Arizona corporation and a wholly-owned indirect subsidiary of Holdings.

 

  Other Items

 

  “Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

  “FASB” means the Financial Accounting Standards Board.

 

  “Independent” means, with respect to a director, that the director is “independent” as determined in accordance with applicable NYSE and SEC listing standards, rules and regulations unless otherwise indicated.

 

  “Internal Revenue Code” means the Internal Revenue Code of 1986, as amended.

 

  “IPO” means the initial public offering of shares of common stock of Holdings.

 

  “NYSE” means the New York Stock Exchange.

 

  “PCAOB” means the Public Company Accounting Oversight Board.

 

  “Reorganization” means a series of reorganization transactions executed prior to the IPO to ensure that (i) we held, at the time of the IPO, all of AXA’s U.S. retirement and protection businesses and AXA’s interests in AB and (ii) certain AXA U.S. P&C business was extracted from us and held by AXA outside of us.

 

  “SEC” means the United States Securities and Exchange Commission.

 

  “Securities Act” means the Securities Act of 1933, as amended.

 

  “Shareholder Agreement” means the Shareholder Agreement, dated May 4, 2018, entered into between Holdings and AXA.

 

  “Tax Reform Act” means the Tax Cuts and Jobs Act of 2017.

 

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Proxy Summary

 

 

PROXY SUMMARY

This section summarizes important information contained in this Proxy Statement and in our 2018 Annual Report to Stockholders (the “Annual Report”), but does not contain all the information that you should consider when casting your vote. Please review the entire Proxy Statement and Annual Report carefully before voting.

Proposals for Your Vote

 

Proposal

     Board Recommendation      Page(s)

  1.  Election of nine directors for a one-year term ending at the 2020 Annual Meeting of Stockholders

    

FOR

each of the Board’s

nominees

     7
   

  2.  Ratification of the appointment of PricewaterhouseCoopers as our independent registered public accounting firm for fiscal year 2019

     FOR      12
   

  3.  Advisory vote to approve the compensation paid to our named executive officers (the “Say-on-Pay vote”)

     FOR      16

  4.  Advisory vote on frequency of future Say-on-Pay votes

     ONE YEAR      71

Mission and Strategy

Our mission is to help Americans retire with dignity, protect their families and secure their financial futures with confidence. We have been steadfast in this purpose since our journey began as The Equitable Life Assurance Society nearly 160 years ago.

Our strategy is to become the most trusted partner to our clients by providing advice, products and services that help them navigate complex financial decisions by delivering on our promises to clients over the long term.

We are one of the largest financial services companies in the United States and are uniquely positioned through our two principal franchises – AXA Equitable Life and AllianceBernstein – at the intersection of advice, protection and asset management.

We operate through four business segments including Individual Retirement, Group Retirement, Protection Solutions and Investment Management & Research (which comprises our 65% economic interest in AllianceBernstein).

We maintain well-developed risk management capabilities that inform our decision making and deepen our commitment to the highest levels of capital strength and stability.

Business Performance Highlights

In a transformational year, our historic listing on the NYSE on May 10, 2018 began our journey as a public company. We supported two secondary offerings by our former parent AXA, including a sale on March 25, 2019 that decreased AXA’s ownership to below 50% so that Holdings is no longer a controlled company.

We executed well against our long-term strategic priorities that were articulated at the time of our IPO, with strong performance and disciplined management. And by repositioning our businesses toward less capital-intensive segments of the market, we enhanced our ability to generate robust levels of cash flow and solid returns on capital.

 

   

We generated $1.8 billion in net income and $2.2 billion of Non-GAAP Operating Earnings.1

 

   

We maintained $619 billion of assets under management as of December 31, 2018.

 

1 

This Proxy Statement includes certain non-GAAP financial measures which are used as performance measures in our incentive compensation programs, including non-GAAP Operating Earnings and Pro Forma Non-GAAP Operating Return on Equity. More information on these measures and reconciliations to the most comparable U.S. GAAP measures can be found in Appendix A.

 

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Proxy Summary

 

 

 

   

As a result of our business performance, ability to generate significant cash flow, and balance sheet strength, we began returning capital immediately after our IPO.

 

 

Over $1.6 billion Returned to Stockholders

Since IPO

 

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Board of Directors Composition

The fundamental duty of our Board is to oversee the strategy and management of our Company for the benefit of our stockholders. It is essential that the Board be composed of directors who are qualified to conduct this oversight. Accordingly, the Board seeks directors who possess a broad range of skills, expertise and perspectives. The composition of our Board, as reflected in the tables and charts below, demonstrates our commitment to these principles.

Board Composition Summary

 

Name

   Age      Principal Professional
Experience
     Expiration
of Term
     Independent

Thomas Buberl

   46      Chief Executive Officer of AXA      2020      No

Gérald Harlin

   63     

Deputy Chief Executive

Officer and Chief Financial

Officer of AXA

     2020      No

Daniel G. Kaye

   64     

Partner at Ernst & Young

(retired)

     2020      Yes

Kristi A. Matus

   51      Executive Vice President and
Chief Financial & Administrative Officer of athenahealth, Inc. (retired)
     2020      Yes

Ramon de Oliveira (Independent Chairman)

   64      Co-founder of Investment
Audit Practice, LLC
     2020      Yes

Mark Pearson

   60      President and Chief Executive
Officer of Holdings
     2020      No

Bertram L. Scott

  

68

     Senior Vice President of population health of Novant Health, Inc.      2020      Yes

George Stansfield

   59     

Deputy Chief Executive

Officer and Group General

Secretary of AXA

     2020      No

Charles G.T. Stonehill

   61     

Founding Partner of Green &

Blue Advisors, LLC

     2020      Yes

 

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Proxy Summary

 

 

Corporate Governance Highlights

Corporate Governance Profile

Our corporate governance profile generally aligns with that of other newly public companies, and our proactive stance on investor outreach, even when we were a controlled company, demonstrates the value we place on dialogue with stakeholders. As outlined in more detail in “Certain Relationships and Related Party Transactions – Shareholder Agreement”, as AXA decreases its stake in Holdings, we expect the number of independent directors on our Board will increase. The Board will be in the best position to consider and support the evolution of our governance profile over time. Our corporate governance profile includes:

 

 Independent Chairperson

 

 Majority independent board of directors

 

 Independent committees2

 

 Annual election of all directors

 

 Single class of shares

 

 Proactive launch of investor outreach program to our largest stockholders; engagement with holders representing a significant number of shares outstanding (other than AXA)

 

Board Skills and Experience

 

The Board seeks directors who possess a broad range of skills, experience, expertise and perspectives that position the Board to effectively oversee the Company’s strategies and risks. Our directors were carefully selected for their mix of skills and expertise, which align with, and facilitate effective oversight of, the Company’s strategy. Our directors possess substantive skills and experience in key areas which are relevant to the Board’s oversight of the Company, including the financial services and insurance industries; senior management; audit and accounting; public company board service; risk management; investments; capital markets; compensation and human resources.

Board Diversity

 

The Board believes that a diverse board is better able to effectively oversee our management and strategy, and position the Company to deliver long-term value for our stockholders. Our Board considers diversity, including gender and ethnic diversity as adding to the overall mix of perspectives of our Board as a whole. Through reports from its Nominating and Corporate Governance Committee and management, our Board receives updates on trends in board composition, including on director diversity.

 

 

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2 

The Audit Committee will be comprised solely of independent directors no later than May 9, 2019. See “Information about our Board Committees”.

 

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Proxy Summary

 

 

Executive Compensation Highlights

The overriding goal of our compensation program (the “EQH Compensation Program”) has always been, and continues to be, to attract, retain and motivate top-performing executives dedicated to our long-term financial and operational success. Prior to the IPO, we changed some of our specific compensation plans and policies to ensure that our program was consistent with Holdings’ transition to a standalone public company. We engaged an independent compensation consultant to assist us in this work which included:

 

 

Step #1:

Peer Group

Establishing a peer group based on industry, geography, assets and other factors to inform – but not determine – compensation-related decisions

 

 

¾

 

 

 

Step #2:

Plan Design

Designing new plans and policies consistent with our pay-for-performance culture, industry practice and good governance practices

 

 

¾

 

 

 

Step #3:

Target Review

Reviewing the target compensation levels for our executives against competitive data prepared by the independent compensation consultant and adjusting as appropriate based on our pay philosophy

 

 

¾

 

 

 

Step #4:

Governance

Enhancing certain existing governance practices and implementing new practices to ensure a robust governance structure for the EQH Compensation Program

 

 

2018 Total Direct Compensation

2018 total direct compensation under the EQH Compensation Program consisted of a mix of fixed (base salary) and variable (annual cash incentive and equity-based awards) components that base a substantial majority of a participant’s compensation on the success of the Company as well as an assessment of the participant’s overall contribution to that success.

 

2018 Variable Compensation Components

 

 
Short-Term
Incentive
Compensation
  

Annual cash incentive award based on performance relative to corporate and individual goals. Performance metrics included:

  Non-GAAP Operating Earnings (50% weighting)

  Premiums and Flows (25% weighting)

  Strategic Initiatives – the critical activities necessary to ensure Holdings’ successful transition to a standalone public company (25% weighting)

 

 
Equity-Based
Awards
  

Annual equity-based award consisting of performance shares (50%), stock options (25%) and restricted stock units (25%). Performance metrics for the performance shares include:

  Non-GAAP Operating Return on Equity measured over a three-year period (50%)

  Relative Total Shareholder Return measured from IPO to December 31, 2020 (50%)

 

 
Transaction
Incentive
Awards
  

One-time awards of restricted stock units granted to key executives who were critical to the IPO’s success. Fifty percent (50%) of the restricted stock units will vest based on continued service and fifty percent (50%) will vest based on the performance of Holdings’ share price.

 

The Company’s above-target performance on Non-GAAP Operating Earnings coupled with management’s successful execution of 2018 goals for the Strategic Initiatives, as discussed above in “Business and Strategic Highlights” resulted in a funding percentage for short-term incentive compensation awards of 114% of target.

 

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Proxy Summary

 

 

Compensation-Related Governance Practices

 

What We Do

         

What We Don’t Do

 Link a substantial majority of executive pay to performance criteria

 

 Require executives and directors to meet stock ownership guidelines

 

 Require clawbacks for incentive awards, including for conduct that causes reputational harm

 

 Provide equity-based awards that are balanced between full value awards and appreciation-only awards and incorporate absolute and relative performance metrics

 

 Receive advice from an independent consultant

 

 Require a minimum vesting period of at least one year for annual equity-based awards

 

       

×  Reprice underwater stock options without stockholder approval

 

×  Allow executives and directors to hedge or pledge Company securities

 

×  Provide dividends or dividend equivalents with respect to stock options

 

×  Provide executives with excessive perquisites

 

×  Provide multi-year guaranteed incentive awards

 

×  Provide excise tax gross-ups upon change in control

Looking Forward

We are proud of the work we have done in establishing the EQH Compensation Program. We are committed to reviewing our program each year to ensure that it reflects stockholder feedback and continues to comport with strong governance principles, incentivizes excellent performance and aligns executives’ financial interests with those of our stockholders.

 

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PROPOSAL 1: Election of Directors

 

 

PROPOSAL 1: ELECTION OF DIRECTORS

The Board has nominated each of our nine directors, Thomas Buberl, Gérald Harlin, Daniel G. Kaye, Kristi A. Matus, Ramon de Oliveira, Mark Pearson, Bertram L. Scott, George Stansfield and Charles G.T. Stonehill for election at the Annual Meeting to serve until the 2020 annual meeting or until their successors are elected or have been qualified. The Board believes that each of these nominees continue to have the necessary skills and experience to effectively oversee our business. Each of these nominees currently serves as a director, and each has consented to being named in this Proxy Statement and agreed to serve if elected.

 

 

 

 

 

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The Board recommends that you vote FOR the election of each of Thomas Buberl, Gérald Harlin, Daniel G. Kaye, Kristi A. Matus, Ramon de Oliveira, Mark Pearson, Bertram L. Scott, George Stansfield and Charles G.T. Stonehill.

Our Board is currently composed of nine directors. A biography of each director nominee and a description of each director’s skills and qualifications, follow this proposal.

All director nominees will stand for election for a one-year term that expires at the following annual meeting.

Unless otherwise instructed, the proxyholders will vote proxies FOR the nominees of the Board. The Board has no reason to believe that any of its nominees will be unable or unwilling to serve if elected. However, if any of the Board’s nominees should become unable for any reason or unwilling for good cause to serve as a director at any point before the Annual Meeting or any adjournment or postponement of the meeting, the Board may reduce the size of the Board or nominate another candidate for election as a director. If the Board nominates a new candidate, the proxyholders will use their discretion to vote for that candidate.

The Board of Directors

Nominees for Election as Directors for a Term Expiring in 2020

 

  Thomas Buberl   

 

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Age: 46

 

Director since: 2016

 

Committee

memberships:

  Executive

 

  

Professional Experience: Mr. Buberl has been a director since September 2016 and was Chairman of the Board from November 2017 to March 2019. He has been a director of AXA Equitable Life and MLOA since May 2016. Mr. Buberl has served as Chief Executive Officer of AXA and a member of its Board since September 2016. From March 2016 to August 2016, Mr. Buberl served as Deputy Chief Executive Officer (Directeur Général Adjoint) of AXA. Prior thereto, Mr. Buberl served as Chief Executive Officer of AXA Konzern AG (May 2012 to April 2016), Chief Executive Officer for the global business line for the Health Business (March 2015 to March 2016) and Chief Executive Officer for the global business line for the Life and Savings Business (January 2016 to March 2016). From November 2008 to April 2012, Mr. Buberl served as Chief Executive Officer for Switzerland of Zurich Financial Services (“Zurich”). Prior to joining Zurich, Mr. Buberl held various management positions with Boston Consulting Group (February 2000 to October 2005) and Winterthur Group (November 2005 to October 2008). Mr. Buberl is also Chairman of the Board of Directors of XL Group Ltd. (Bermuda) and a member of the Supervisory Board of Bertelsmann SE & Co. KGaA (Germany).

     Skills and Qualifications: Extensive experience and key leadership skills developed through service as an executive of financial services and insurance companies, including invaluable perspective as the Chief Executive Officer of AXA.

 

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PROPOSAL 1: Election of Directors

 

 

 

  Gérald Harlin   

 

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Age: 63

 

Director since: 2016

 

Committee

memberships:

  Audit

 

  

Professional Experience: Mr. Harlin has been a director since September 2016 and was Chairman and Chief Executive Officer from September 2016 to November 2017. He has been a director of AXA Equitable Life and MLOA since May 2018. Mr. Harlin has been AXA’s Deputy Chief Executive Officer (Directeur Général Adjoint) since December 2017, Chief Financial Officer since 2010, a member of AXA’s Executive Committee since July 2008 and a member of AXA’s Management Committee since July 2016. He holds various directorships within AXA: Chairman & Chief Executive Officer of AXA China (France), Chief Executive Officer and a member of the Management Board of Vinci B.V. (the Netherlands), Chairman of the Board of Directors of AXA Holdings Belgium SA (Belgium) and AXA Mediterranean Holdings, S.A.U. (Spain), Chairman of AXA Oeuvres d’Art (France) and Lor Patrimoine (France), Chairman of the Management Committee of AXA ASIA (France), a member of the Supervisory Board of AXA Liabilities Managers (France) and director of AXA Real Estate Investment Managers (France). Mr. Harlin is also AXA’s permanent representative to the board of AXA Investment Managers (France). From 2003 to 2009, Mr. Harlin served as Executive Vice President, Finance & Control of AXA. From 1979 to 1990, Mr. Harlin held various positions with the Total Group. He was Head of Corporate Finance Department for North America, Mining & Chemical Subsidiaries from 1989 to 1990.

 

Skills and Qualifications: Expertise as audit committee financial expert; extensive financial and accounting experience and key leadership skills developed through his service as an executive, including invaluable perspective as the Chief Financial Officer of AXA.

 

  Daniel G. Kaye   

 

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Age: 64

 

Director since: 2018

 

Committee

memberships:

  Audit (Chair)

  Finance and Risk

 

  

Professional Experience: Mr. Kaye has been a director since April 2018. He has been a director of AXA Equitable Life and MLOA since September 2015 and AllianceBernstein Corporation since May 2017. Mr. Kaye was a member of the Board of Directors of AXA Insurance Company from April 2017 to December 2018. From January 2013 to May 2014, Mr. Kaye served as Interim Chief Financial Officer and Treasurer of HealthEast Care System (“HealthEast”). Prior to joining HealthEast, Mr. Kaye spent 35 years with Ernst & Young LLP (“Ernst & Young”) from which he retired in 2012. Throughout his time at Ernst & Young, where he was an audit partner for 25 years, Mr. Kaye enjoyed a track record of increasing leadership and responsibilities, including serving as the New England Managing Partner and the Midwest Managing Partner of Assurance. Mr. Kaye was a member of the Board of Directors of Ferrellgas Partners L.P. (“Ferrellgas”) from August 2012 to November 2015.

 

Skills and Qualifications: Certified Public Accountant and National Association of Corporate Directors (NACD) Board Leadership Fellow; expertise as an audit committee financial expert; extensive financial services and insurance industry experience; extensive knowledge and experience in accounting, auditing and financial matters developed through leadership roles at Ernst & Young and HealthEast; experience as a director of other public companies.

 

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PROPOSAL 1: Election of Directors

 

 

 

  Kristi A. Matus   

 

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Age: 51

 

Director since: 2019

 

Committee

memberships:

  Compensation (Chair)

  Nominating and Corporate Governance (Chair)

  

Professional Experience: Ms. Matus has been a director since March 2019. She has been a director of AXA Equitable Life since September 2015 and of MLOA since March 2019. From July 2014 to May 2016, Ms. Matus served as Executive Vice President and Chief Financial & Administrative Officer of athenahealth, Inc. (“athenahealth”). Prior to joining athenahealth, Ms. Matus served as Executive Vice President and Head of Government Services of Aetna, Inc. (“Aetna”) from February 2012 to July 2013. Prior to Aetna, she held several senior leadership roles at United Services Automobile Association (“USAA”), including Executive Vice President and Chief Financial Officer from 2008 to 2012. She began her career at the Aid Association for Lutherans, where she held various financial and operational roles for over a decade. Ms. Matus is currently a member of the Board of Directors of Tru Optik Data Corp. (“Tru Optik”), and was a member of the Board of Directors of Jordan Health Services, Inc. (“Jordan Health”) from November 2016 to December 2018. She is an Executive Advisor for Thomas H. Lee Partners L.P since October 2017.

 

Skills and Qualifications: Extensive insurance industry and management expertise; finance, corporate governance and key leadership skills developed through roles at athenahealth, Aetna and USAA; experience as a director of Tru Optik and Jordan Health.

 

  Ramon de Oliveira    Independent Chairman of the Board of Directors

 

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Age: 64

 

Director since: 2018

 

Committee

memberships:

  Compensation

  Executive (Chair)

  Nominating and Corporate Governance

 

  

Professional Experience: Mr. de Oliveira has been a director since April 2018 and Independent Chairman of the Board since March 2019. He is a director of AXA Equitable Life and of MLOA since March 2019. Mr. de Oliveira has been a member of AXA’s Board of Directors since April 2010, and from April 2009 to May 2010, he was a member of AXA’s Supervisory Board. Mr. de Oliveira’s current term of service on AXA’s Supervisory Board expires in 2021. He is also currently a member of the Board of Directors of AllianceBernstein Corporation since May 2017. He is a founder of the consulting firm Investment Audit Practice, LLC, based in New York, NY. From 2002 to 2006, Mr. de Oliveira was an adjunct professor of Finance at Columbia University. Starting in 1977, he spent 24 years at JP Morgan & Co. where he founded and led J.P. Morgan Global Equities and served as Chairman and Chief Executive Officer of JP Morgan Investment Management and Private Bank. He was also a member of the firm’s Management Committee since its inception in 1995. Upon the merger with Chase Manhattan Bank in 2001, Mr. de Oliveira was the only executive from JP Morgan & Co. asked to join the Executive Committee of the new firm with operating responsibilities. Previously, he served as a director of JP Morgan Suisse, American Century Company, Inc., SunGard Data Systems, JACCAR Holdings and The Hartford Insurance Company.

 

Skills and Qualifications: Extensive financial services and investment experience in key leadership roles; analytical skills developed through roles within the financial services industry and academia. The Board will also benefit from his public company board experience.

 

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PROPOSAL 1: Election of Directors

 

 

 

  Mark Pearson   

 

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Age: 60

 

Director since: 2011

 

Committee

memberships:

  Executive

 

  

Professional Experience: Mr. Pearson has been a director since January 2011 and currently serves as our President and Chief Executive Officer. He has been a director of AXA Equitable Life and MLOA since January 2011 and AllianceBernstein Corporation since February 2011. Mr. Pearson also serves as AXA Equitable Life’s Chairman of the Board and Chief Executive Officer. Mr. Pearson has been a member of the Executive Committee of AXA since 2008. From 2008 to 2011, he was the President and Chief Executive Officer of AXA Japan Holding Co. Ltd. (“AXA Japan”). Mr. Pearson joined AXA in 1995 with the acquisition of National Mutual Holdings and was appointed Regional Chief Executive of AXA Asia Life in 2001. Before joining AXA, Mr. Pearson spent approximately 20 years in the insurance sector, assuming several senior manager positions at Hill Samuel, Schroders, National Mutual Holdings and Friends Provident. Mr. Pearson is a Fellow of the Chartered Association of Certified Accountants and is a member of the Board of Directors of the American Council of Life Insurers.

 

Skills and Qualifications: Diverse financial services experience developed through service as an executive including as a Chief Executive Officer, to AXA Equitable Life, AXA Japan and other AXA affiliates; extensive insurance industry experience.

 

  Bertram L. Scott

 

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Age: 68

 

Director since: 2019

 

Committee

memberships:

  Audit

  Finance and Risk

  

Professional Experience: Mr. Scott has been a director since March 2019. Mr. Scott has served as Senior Vice President of population health of Novant Health, Inc. since February 2015. From November 2012 through December 2014, Mr. Scott served as President and Chief Executive Officer of Affinity Health Plan. From June 2010 to December 2011, Mr. Scott served as President, U.S. Commercial of CIGNA Corporation. Prior thereto, he served as Executive Vice President of TIAA-CREF from 2000 to June 2010 and as President and Chief Executive Officer of TIAA-CREF Life Insurance Company from 2000 to 2007. Mr. Scott is currently a member of the Board of Directors of Becton, Dickinson and Company and Lowe’s Companies, Inc. Mr. Scott is also a director of MLOA since May 2012, and a director of AXA Equitable Life since March 2019.

 

Skills and Qualifications: Expertise as an audit committee financial expert, and strong strategic and operational expertise acquired through the variety of executive roles, including insurance industry and financial services experience; experience as a director of public companies.

 

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PROPOSAL 1: Election of Directors

 

 

 

  George Stansfield

 

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Age: 59

 

Director since: 2017

 

Committee

memberships:

  None

 

  

Professional Experience: Mr. Stansfield has been a director since November 2017. He has been a director of AXA Equitable Life and MLOA since May 2017. Since December 2017, Mr. Stansfield has been Deputy Chief Executive Officer (Directeur Général Adjoint) of AXA, and since July 2016, Mr. Stansfield has been Group General Secretary and a member of AXA’s Management Committee. Mr. Stansfield was previously Head of AXA’s Group Human Resources from 2010 to 2016 and was AXA’s Group General Counsel from 2004 to 2016. Prior to 2004, Mr. Stansfield was an attorney in the AXA Group Legal Department (1996-2004) and the legal department of AXA Equitable Life (1985-1996). Mr. Stansfield holds various directorships within AXA: Chairman of the Supervisory Board of AXA Liabilities Managers (France), GIE AXA (France) and Kamet (France), Chairman of the Management Committee of AXA Venture Partners (France) and director or Management Committee member of AXA ASIA (France) and AXA Life Insurance Co Ltd. (Japan). Mr. Stansfield is also a Trustee of the American Library of Paris, a non-profit organization and the largest English language lending library on the European mainland.

 

Skills and Qualifications: Extensive experience and knowledge and key leadership skills developed through service as an executive, including experience as Group General Secretary and Head of Group Human Resources and perspective as a member of AXA’s Management Committee.

 

  Charles G.T. Stonehill

 

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Age: 61

 

Director since: 2018

 

Committee

memberships:

  Audit

  Compensation

  Executive

  Finance and Risk (Chair)

  Nominating and Corporate Governance

  

Professional Experience: Mr. Stonehill has been a director since April 2018. Mr. Stonehill is Founding Partner of Green & Blue Advisors LLC. He also serves as nonexecutive Vice Chairman of the Board of Directors of Julius Baer Group Ltd. and Bank Julius Baer & Co. Ltd. Mr. Stonehill is a member of the Board of Directors of CommonBond, LLC and of PlayMagnus A/S. During his financial services career, Mr. Stonehill served as the Managing Director of Lazard Frères & Co., LLC, and global head of Lazard Capital Markets from 2002 to 2004. He served as Head of Investment Banking for the Americas of Credit Suisse First Boston from 1997 to 2002 and as Head of European Equities and Equity Capital Markets at Morgan Stanley & Co., Inc., from 1984 to 1997. Mr. Stonehill began his career at JP Morgan in the oil and gas investment banking group, where he worked from 1978 to 1984. Mr. Stonehill is also a director of AXA Equitable Life since November 2017 and a director of MLOA since March 2019.

 

Skills and Qualifications: Expertise as an audit committee financial expert; expertise and distinguished track record of success in the financial services industry and over 40 years’ experience in energy markets, investment banking and capital markets; experience as a director of other public companies.

 

 

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PROPOSAL 2: Ratification of Appointment of Independent Registered Public Accounting Firm

 

 

PROPOSAL 2: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Audit Committee is responsible for the appointment, compensation, retention and oversight of our independent registered public accounting firm (“independent auditor”) and annually evaluates the independent auditor’s qualifications, performance and independence.

The Audit Committee has appointed PricewaterhouseCoopers LLP (“PwC”) as our independent auditor for the fiscal year ending December 31, 2019. PwC has served as the independent auditor for the Company since 1993. PwC’s background knowledge of the Company, combined with its industry expertise, has enabled it to carry out its audits of our financial statements with effectiveness and efficiency. The members of the Audit Committee believe that the continued retention of PwC as our independent auditor is in the best interest of Holdings and its stockholders. In determining whether to reappoint PwC, the Audit Committee considered factors such as:

 

   

PwC’s independence and objectivity;

 

   

PwC’s and the lead engagement partner’s capability and expertise in handling the breadth and complexity of our operations;

 

   

PwC’s tenure as independent auditor for the Company;

 

   

historical and recent performance of PwC, including the extent and quality of communications with members of the Audit Committee; and

 

   

the impact of a change in the independent auditor.

The Audit Committee is involved in the selection of PwC’s lead engagement partner and ensures that the lead partner’s engagement is limited to no more than five consecutive years of service (in accordance with SEC rules). The current lead PwC engagement partner was designated commencing with the 2018 audit and is eligible to serve in that capacity through the end of the 2022 audit.

We request that our stockholders ratify the appointment of PwC as our independent auditor for fiscal year 2019. If the stockholders do not ratify such appointment, the Audit Committee will take note and may reconsider its retention of PwC. If such appointment is ratified, the Audit Committee will still have the discretion to replace PwC at any time during the year. Representatives of PwC are expected to be present at the Annual Meeting and will have the opportunity to make a statement. They will also be available to respond to questions from stockholders regarding their audit of our consolidated financial statements for fiscal year 2018.

 

 

 

 

 

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The Board recommends that stockholders vote FOR the ratification of the appointment of PwC as our independent registered public accounting firm for fiscal year 2019.

 

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PROPOSAL 2: Ratification of Appointment of Independent Registered Public Accounting Firm

 

 

Fees Paid to PricewaterhouseCoopers LLP

The following table sets forth the fees paid by the Company to PwC for professional services rendered for the fiscal year ending December 31, 2018. Audit amounts are presented on an accrual basis and cover services performed for the year under audit, regardless of the calendar year in which they were performed. All other fees are presented on an as incurred basis.

 

Fees (in Millions)

     2018        2017  

Audit Fees(1)

     $ 22.9        $ 47.7  

Audit-Related Fees(2)

     $ 7.0        $ 5.7  

Tax Fees(3)

     $ 2.1        $ 2.2  

All Other Fees(4)

     $ 0        $ 2.6  

Total

     $ 32.0        $ 58.2  

 

(1)

Audit Fees. Fees and related expenses billed for annual financial statement audit and quarterly review services that are customary for the independent auditor to render an opinion. Fees for 2017 reflect amounts related to the audit of newly prepared historical financials in anticipation of the IPO. The amounts also include audit fees of $4.8 million and $4.7 million for 2018 and 2017, respectively that were paid directly by AB to PwC.

 

(2)

Audit-Related Fees. Fees and related expenses billed for assurance and related services that are reasonably related to the audit or review of the Company’s financial statements and for other services that are traditionally performed by the independent auditor. These services include statutory audits, employee benefit plan audits, due diligence procedures, comfort letters and accounting advisory services. The amounts also include audit-related fees and related expenses of $4.7 million and $4.7 million for 2018 and 2017, respectively that were paid directly by AB to PwC.

 

(3)

Tax Fees. Fees and related expenses billed for permitted tax services, including tax compliance, tax advice, and tax planning and preparation. The amounts also include tax fees of $2.0 million and $2.1 million for 2018 and 2017, respectively, that were paid directly by AB to PwC.

 

(4)

All Other Fees. Fees and related expenses billed for other permitted non-audit services. The amounts also include fees of $0.01 million and $0.2 million for 2018 and 2017, respectively, that were paid directly by AB to PwC.

Audit Committee Pre-Approval Policy

The charter of the Audit Committee requires its pre-approval of all audit and permitted non-audit services provided to the Company by the independent auditor to ensure that the provision of such services does not impair the auditor’s independence. Accordingly, the Audit Committee has adopted the AXA Equitable Holdings, Inc. Audit Committee Pre-Approval of Independent Auditors Services Policy (the “Pre-Approval Policy”) which sets forth pre-approval procedures. Pursuant to the Pre-Approval Policy, the committee will pre-approve the annual audit services and may also pre-approve audit-related, tax and permissible non-audit services that it believes would not impair the independence of the auditor.

The Pre-Approval Policy delegates authority to the Audit Committee of the Board of Directors of AllianceBernstein Corporation, which consists entirely of independent directors and for which Mr. Kaye serves as Chair, to pre-approve audit and non-audit services provided to AB. In addition, the policy delegates authority to the Audit Committee Chair to pre-approve audit and non-audit services provided to the Company where the amounts involved do not exceed $200,000. Each quarter, the specific details and related fees for the audit and non-audit service projects completed in the prior quarter and any pre-approval decisions made pursuant to delegated authority under the Pre-Approval Policy are reported to the Audit Committee.

The Company is also subject to the AXA Group Policy on Auditor Independence and the Provision of Non-Audit Services (the “AXA Policy”) while AXA owns 20% or more of the outstanding shares of Holdings’ common stock. Under the AXA Policy, no services may be provided to the Company by the independent auditor unless they are permitted audit services or approved by the AXA Board. The AXA Board has generally pre-approved certain categories of non-audit services that it believes do not impair independence. However, further approval may be required from the AXA Group Chief Financial Officer or the AXA board of directors based on the amount of the related fees.

Audit Committee Report

The Audit Committee operates under a written charter adopted by the Board. The Audit Committee currently consists of four directors, three of whom are independent directors (Daniel G. Kaye, Bertram L. Scott and Charles G.T. Stonehill) and one of whom is an executive officer of AXA (Gérald Harlin). Since NYSE listing standards require that the Audit Committee consist

 

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PROPOSAL 2: Ratification of Appointment of Independent Registered Public Accounting Firm

 

 

entirely of independent directors within one year of the effectiveness of the registration statement for the IPO, Mr. Harlin will resign from the committee on or before May 9, 2019.

The Board has determined that all four members of the Audit Committee have the requisite experience to be designated an audit committee financial expert as such term is defined under Item 407(d)(5) of Regulation S-K under the Securities Act and the applicable standards of the NYSE.

Management is responsible for the preparation and presentation of the Company’s financial statements and the reporting process, for its accounting policies and procedures, and for the establishment of effective internal controls and procedures.

The primary duties of the Audit Committee are to (i) assist the Board in overseeing (a) the quality and integrity of our financial statements, (b) the qualifications, independence and performance of our independent auditor, (c) our accounting, financial and external reporting policies and practices, (d) the performance of our internal audit function and (e) our compliance with legal and regulatory requirements, including without limitation any requirements promulgated by PCAOB and FASB; (ii) prepare the report of the Audit Committee required to be included in our annual proxy statement; and (iii) exercise an oversight function, as contemplated by the Implementation Guide of the National Association of Insurance Commissioners for the Annual Financial Reporting Model Regulation, over the statutory financial reporting (or other accepted financial reporting practice permitted by the applicable regulator) of certain insurance and captive reinsurance company subsidiaries.

The independent auditor is responsible for performing an independent audit of our financial statements in accordance with standards established by the PCAOB, and the independent auditor issues a report with respect to the audit. The independent auditor must also express an opinion as to the conformity of our financial statements with generally accepted accounting principles. The independent auditor regularly affirms to the Audit Committee that it remains independent from the Company. The Audit Committee regularly meets with the independent auditor, both in general session and in executive session, to discuss our financial reporting processes, internal control over financial reporting, disclosure controls and procedures, required communications to the Audit Committee, fraud risks and any other matters that the Committee or the independent auditor deem appropriate.

As previously reported, the Company has identified two material weaknesses in the design and operation of the Company’s internal control over financial reporting. Management continues to execute its plan moving towards remediation of the material weaknesses. The Audit Committee is providing oversight and advice to management and monitoring its progress during this process, including reviewing management’s remediation plan and receiving regular reports from management and input from PwC.

More information on the Audit Committee and its responsibilities is included in the Audit Committee Charter available on our website at https://ir.axaequitableholdings.com.

In the performance of its oversight function, the Audit Committee has reviewed and discussed our audited consolidated financial statements for fiscal year 2018 with each of management and the independent auditor. The Audit Committee and the independent auditor have also discussed the matters required to be discussed by them under the applicable rules of the PCAOB.

The Audit Committee has received from our independent auditor the written disclosures and the letters required by the applicable rules of the PCAOB, as currently in effect, regarding the firm’s communications with the Audit Committee relating to independence, and it has discussed the independent auditor’s independence with the independent auditor.

Based on the review and discussions described in this Audit Committee Report, the Audit Committee recommended to the Board that the audited financial statements for fiscal year 2018 be included in our Annual Report on Form 10-K for the year ended December 31, 2018 for filing with the SEC.

 

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PROPOSAL 2: Ratification of Appointment of Independent Registered Public Accounting Firm

 

 

Audit Committee

Daniel G. Kaye (Chair)

Ramon de Oliveira

Charles G.T. Stonehill

Gérald Harlin

Note: As of March 26, 2019, Mr. de Oliveira no longer serves on the Audit Committee. Also, Mr. Harlin will resign from the committee on or before May 9, 2019.

 

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PROPOSAL 3: Advisory Vote on Executive Compensation

 

 

PROPOSAL 3: ADVISORY VOTE ON EXECUTIVE COMPENSATION

In accordance with Section 14A of the Exchange Act, we are providing our stockholders with a non-binding advisory vote on the compensation paid to our named executive officers. This advisory vote is also referred to as the “say-on-pay” advisory vote. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our named executive officers and the philosophy, policies and practices described in this proxy statement. Details on our compensation approach are described in the Compensation Discussion and Analysis and the accompanying compensation tables and the narrative discussion.

The Board and Compensation Committee have implemented an executive compensation program that is intended to align the interests of our executive officers with those of our stockholders. A substantial majority of our named executive officers’ compensation is in the form of variable, at-risk compensation that requires us to achieve performance objectives that are intended to create long-term stockholder value. Furthermore, we align our executives’ interests with those of our stockholders by utilizing metrics in our short- and long-term incentive programs that are tied to performance outcomes that will enhance stockholder value.

As a newly public company, we believe it is important to understand the views of our stockholders with respect to how we compensate our named executive officers.

We are asking stockholders to approve the following resolution:

RESOLVED, that the compensation paid to our named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative disclosure, is hereby APPROVED.

Although this vote is advisory, the Board and the Compensation Committee intend to consider the results of the vote, as well as other relevant factors, as we continue to develop our executive compensation program.

 

 

 

 

 

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The Board recommends that stockholders vote FOR the approval of the compensation of our named executive officers, as disclosed in this Proxy Statement.

 

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Executive Compensation

 

 

EXECUTIVE COMPENSATION

Table of Contents

 

2018 Performance Highlights

     18  

2018 Compensation Highlights

     19  

Compensation Discussion and Analysis

     23  

EQH Compensation Program

     23  

• Compensation Philosophy

     23  

• Compensation Decision-Making Process

     23  

• Compensation Components

     26  

Mr. Bernstein’s Compensation

     43  

• Compensation Philosophy

     43  

• Compensation Decision-Making Process

     43  

• Compensation Components

     44  

Compensation-Related Policies

     47  

• Clawbacks

     47  

• Stock Ownership Guidelines

     47  

• Hedging and Pledging

     48  

10b5-1 Trading Plan Policy

     48  

Accounting and Tax Considerations

     48  

Consideration of Most Recent “Say on Pay” Vote

     49  

Compensation Committee Report

     49  

Compensation Committee Interlocks

     49  

Consideration of Risk Matters in Determining Compensation

     49  

Compensation Tables

     50  

 

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Executive Compensation

 

 

2018 Performance Highlights

OUR BUSINESS

We are one of America’s leading financial services companies and our mission is to help Americans retire with dignity, protect their families and secure their financial futures with confidence. We have been steadfast in this purpose since our journey began as The Equitable Life Assurance Society nearly 160 years ago. We operate through four business segments including Individual Retirement, Group Retirement, Protection Solutions and Investment Management & Research.

2018 PERFORMANCE

2018 was a transformational year for us as Holdings became a New York Stock Exchange listed company upon the IPO in May 2018. We executed well against our long-term strategic priorities that were articulated at the time of our IPO, with strong performance and disciplined management. Also, by repositioning our businesses toward less capital-intensive segments of the market, we enhanced our ability to generate robust levels of cash flow and solid returns on capital. Specific accomplishments include:

 

  We generated $1.8 billion in net income and $2.2 billion of Non-GAAP Operating Earnings3

 

 

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  We generated Return on Equity of 13.7% and Pro-Forma Non-GAAP Operating Return on Equity of 14.9%

 

 

LOGO

 

 

3 

This Proxy Statement includes certain non-GAAP financial measures which are used as performance measures in our incentive compensation programs, including Non-GAAP Operating Earnings and Pro Forma Non-GAAP Return on Equity. More information on these measures and reconciliations to the most comparable U.S. GAAP measures can be found in Appendix A.

 

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Executive Compensation

 

 

 

  We experienced positive momentum across all business segments

 

   

Individual Retirement operating earnings increased 24% to $1.6 billion

 

   

Group Retirement operating earnings increased 37% to $389 million and net flows of $96 million marked the sixth straight year of positive flows

 

   

Investment Management and Research adjusted operating margin increased by 140 basis points to 29.1%4

 

   

Protection Solutions saw continued sales momentum as annualized premiums increased 8% year-over-year

 

   We returned more than $1.6 billion to stockholders in the form of dividends and share repurchases

 

 

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2018 Compensation Highlights

The overriding goal of the EQH Compensation Program has always been, and continues to be, to attract, retain and motivate top-performing executives dedicated to our long-term financial and operational success. Prior to the IPO, we changed some of our specific plans and policies to ensure that our program was consistent with Holdings’ transition to a standalone public company. We engaged an independent compensation consultant to assist us in this work which included:

 

 

Step #1:

Peer Group

Establishing a peer group based on industry, geography, assets and other factors to inform – but not determine – compensation-related decisions

 

 

¾

 

 

 

Step #2:

Plan Design

Designing new plans and policies consistent with our pay-for-performance culture and industry practice

 

 

¾

 

 

 

Step #3:

Target Review

Reviewing the target compensation levels for our executives against competitive data prepared by the independent compensation consultant and adjusting as appropriate based on our pay philosophy

 

 

¾

 

 

 

Step #4:

Governance

Enhancing certain existing governance practices and implementing new practices to ensure a robust governance structure for the EQH Compensation Program

 

 

4 

Adjusted Operating Margin is a non-GAAP financial measure used by AB’s management in evaluating AB’s financial performance on a standalone basis and to compare its performance, as reported by AB in its public filings. It is not comparable to any other non-GAAP financial measure used by the Company.

 

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Executive Compensation

 

 

Step #1: Peer Group

 

 

Compensation Peer Group

 

The Allstate Corporation

Ameriprise Financial, Inc.

Brighthouse Financial, Inc.

The Hartford Financial Services Group, Inc.

Lincoln National Corporation

 

 

Manulife Financial Corporation

Principal Financial Group, Inc.

Prudential Financial, Inc.

Sun Life Financial, Inc.

Unum Group

Voya Financial, Inc.

 

Step #2: Plan Design

 

Component   Description        Purpose
Total Direct Compensation

Base Salary

 

Fixed compensation based on a variety of factors including career experience, scope of responsibilities and individual performance

 

      Fairly and competitively compensate executives for their positions and the scope of their responsibilities

Short-Term Incentive

Compensation

 

Variable annual cash incentive award determined based on performance relative to corporate and individual goals

 

      Focus executives on annual corporate and business unit goals that, when attained, drive our success

Equity-Based Awards

 

Variable awards consisting of equity grants subject to performance and time-based vesting requirements determined based on the importance of retention, market data and other factors

 

      Reward long-term value creation and ensure alignment with our long-term financial success
Other Compensation and Benefits

Retirement, Health and Welfare and other Plans and Programs

 

Retirement savings, financial protection and other compensation and benefits providing long-term financial support and security for employees

 

      Attract and retain high caliber executives by offering programs to all employees that assist with long-term financial support and security
Termination Benefits

Severance Benefits

 

Temporary income payments and other benefits for certain terminations of employment

 

      Provide competitive total compensation packages

Change-in-Control Benefits

 

Benefits in the event of a termination related to a change in control

   

Retain executives and incent efforts to maximize stockholder value during a change in control

 

 

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Executive Compensation

 

 

Step #3: Target Review

 

 

Target Pay Philosophy

 

To provide competitive compensation opportunities by setting total target direct compensation for executive positions at the median for total compensation with respect to the pay for comparable positions at our peer companies, taking into account certain individual factors such as the specific characteristics and responsibilities of a particular executive’s position as compared to similarly situated executives at our peer companies.

 

Step #4: Governance

 

 

EQH Compensation Program

What We Do

         

 

EQH Compensation Program

What We Don’t Do

 Link a substantial majority of executive pay to performance criteria

 

 Require executives and directors to meet stock ownership guidelines

 

 Require clawbacks for incentive awards, including for conduct that causes reputational harm

 

 Provide equity-based awards that are balanced between full value awards and appreciation-only awards and incorporate absolute and relative performance metrics

 

 Receive advice from an independent consultant

 

 Require a minimum vesting period of at least one year for annual equity-based awards

 

       

×  Reprice underwater stock options without stockholder approval

 

×  Allow executives and directors to hedge or pledge Company securities

 

×  Provide dividends or dividend equivalents with respect to stock options

 

×  Provide executives with excessive perquisites

 

×  Provide multi-year guaranteed incentive awards

 

×  Provide excise tax gross-ups upon change in control

 

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Executive Compensation

 

 

2018 TOTAL DIRECT COMPENSATION

Consistent with our pay-for-performance culture, the 2018 total direct compensation under the EQH Compensation Program consisted of a mix of fixed (base salary) and variable (annual cash incentive and equity-based awards) components that based a substantial majority of a participant’s compensation on the success of the Company as well as an assessment of the participant’s overall contribution to that success.

The following charts show the pay mix for our CEO and the other participants in the 2018 EQH Compensation Program.

 

CEO Compensation

 

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Other Participants’ Compensation

 

LOGO

 

 

 

Annual equity-based awards granted in 2018 consisted of a mix of equity vehicles including both “full value” (restricted stock units and performance shares) and “appreciation only” (stock options) vehicles. All vehicles contain vesting requirements related to service and the performance shares also require the satisfaction of certain performance criteria related to corporate performance to obtain a payout.

2018 Annual Equity-Based Awards

 

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Stock Options 25% PerF. Shares (Relative TSR) 25% PerF. Shares (Absolute ROE) 25% RSUs 25% Full value 75% Service and performance-Based 50% Service Based only 50% Appreciation only 25%

STOCKHOLDER ENGAGEMENT

As discussed in “Board and Corporate Governance Practices—Stockholder Engagement” below, our investor and proxy advisory firm outreach and engagement program included discussions regarding our compensation programs with a proxy advisory firm and many of our top holders.

 

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Executive Compensation

 

 

Compensation Discussion and Analysis

Our 2018 Named Executive Officers are:

 

Mark Pearson  

President and  

Chief Executive Officer  

 

Anders Malmström

Senior Executive Vice

President and

Chief Financial Officer

 

Jeffrey Hurd

Senior Executive Vice

President and

Chief Operating Officer

 

Dave Hattem

Senior Executive Vice President, General

Counsel and Secretary

 

Seth Bernstein

Senior Executive Vice

President and Head of Investment Management

and Research

As President and Chief Executive Officer of Holdings, Mr. Pearson is responsible for the business strategy and operations of the entire Company. The other 2018 Named Executive Officers assist him in his oversight of the Company as members of the Holdings Management Committee (the “Management Committee”). In addition to their responsibilities as members of the Management Committee, Messrs. Malmström, Hurd and Hattem are responsible for day-to-day management of various functions for our retirement and protection businesses as executives of AXA Equitable Life while Mr. Bernstein is responsible for day-to-day management of our investment management and research (“IM&R”) business as the Chief Executive Officer of AB.

Messrs. Pearson, Malmström, Hurd and Hattem participate in the EQH Compensation Program (collectively, the “EQH Program Participants”). Since AB has historically maintained its own plans and programs as a publicly-traded company, Mr. Bernstein participates in AB’s executive compensation program rather than the EQH Compensation Program. AB’s executive compensation is overseen by the AB Board and AB Compensation Committee as further described below.

EQH COMPENSATION PROGRAM

Compensation Philosophy

The overriding goal of the EQH Compensation Program is to attract, retain and motivate top-performing executives dedicated to our long-term financial and operational success. To achieve this goal, the program incorporates metrics to measure our success and fosters a pay-for-performance culture by:

 

   

providing total compensation opportunities competitive with the levels of total compensation available at the companies with which we most directly compete for talent;

 

   

making performance-based variable compensation the principal component of executive pay to ensure that the financial success of executives is based on corporate financial and operational success;

 

   

setting performance objectives and targets for variable compensation arrangements that provide individual executives with the opportunity to earn above-target compensation by achieving above-target results;

 

   

establishing equity-based arrangements that align executives’ financial interests with those of our stockholders by ensuring the executives have a material financial stake in Holdings’ common stock; and

 

   

structuring compensation packages and outcomes to foster internal equity.

Compensation Decision-Making Process

Prior to the IPO

Prior to the IPO, Holdings was a wholly-owned indirect subsidiary of AXA, a French company. Accordingly, the EQH Program Participants’ compensation prior to 2018 was primarily based on AXA’s policies and related compensation plans and programs which were not geared toward standard practices for United States public companies in similar businesses.

 

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Executive Compensation

 

In anticipation of the IPO, we engaged an independent compensation consultant, Pay Governance LLC (“Pay Governance”), in August 2017 to provide support in understanding industry practice in the United States and to assist in developing compensation policies and programs consistent with Holdings’ transition to a standalone public company. Since Holdings had not yet formed the Compensation Committee, Pay Governance’s work was overseen by management and certain members of the Board and was reviewed with the AXA Equitable Life Organization and Compensation Committee (the “OCC”), which consisted solely of independent directors. Prior to the IPO, the Board approved a number of compensation-related plans, policies and programs based on its review of the Pay Governance analyses discussed below and input from management and the OCC.

Compensation Peer Group Analysis

The first step in developing our compensation policies and programs was to establish a peer group against which those policies and programs would be assessed. Pay Governance assisted in the establishment of a peer group using a screening process under which nine potential peers were initially identified based on objective factors such as industry, geography and assets. This group was then supplemented by companies identified by management as competitors for talent and business. Finally, Pay Governance conducted a review of the peer groups used by others in our sector. The resulting Compensation Peer Group includes:

 

 

Compensation Peer Group

 

The Allstate Corporation

Ameriprise Financial, Inc.

Brighthouse Financial, Inc.

The Hartford Financial Services Group, Inc.

Lincoln National Corporation

 

 

Manulife Financial Corporation

Principal Financial Group, Inc.

Prudential Financial, Inc.

Sun Life Financial, Inc.

Unum Group

Voya Financial, Inc.

 

The purpose of the Compensation Peer Group is to inform – but not determine – compensation-related decisions. Specifically, we view a well-constructed peer group as a key part of a sound benchmarking process, but only a starting point since judgment is critical during both the benchmarking and compensation decision-making processes. We intend to review the Compensation Peer Group on an annual basis.

Compensation Practices Analysis

After the Compensation Peer Group was determined, Pay Governance conducted a comprehensive analysis of executive compensation practices and design features at the companies in the Compensation Peer Group as well as in the broader financial services sector (the “Pay Governance Practices Analysis”). The Pay Governance Practices Analysis focused on:

 

    short-term incentive plan design

 

    long-term incentive plan design

 

    stock ownership guidelines

 

    perquisites
    clawback policies

 

    severance practices

 

    retirement plan design
 

 

Competitive Compensation Analysis

In addition to the Pay Governance Practices Analysis, in October 2017, Pay Governance performed a competitive compensation analysis for a number of executive positions, including the positions of Messrs. Pearson, Malmström and Hattem (the “Pay Governance Compensation Analysis”). Mr. Hurd’s position was not included in the Pay Governance Compensation Analysis since, at that time, he was not yet employed by the Company and the terms of his 2018 target direct compensation were under negotiation.

 

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Executive Compensation

 

 

The Pay Governance Compensation Analysis was undertaken in accordance with our pre-existing target pay philosophy which Pay Governance confirmed was consistent with U.S. practice:

 

Target Pay Philosophy

To provide competitive compensation opportunities by setting total target direct compensation for executive positions at the median for total compensation with respect to the pay for comparable positions at our peer companies, taking into account certain individual factors such as the specific characteristics and responsibilities of a particular executive’s position as compared to similarly situated executives at our peer companies.

Consistent with our target pay philosophy, the base salaries, annual cash incentive awards and equity-based awards of our executives are targeted at the median with respect to those of comparable positions at our peers, unless individual factors require otherwise. For example, an executive’s experience and tenure may warrant a lower initial amount with an adjustment to the median over time. Base salaries and targets are reviewed each year.

The Pay Governance Compensation Analysis focused on the components of direct compensation and included a review of two market reference points other than the Compensation Peer Group to provide a broad perspective of the market and ensure a more comprehensive view of practices both within and outside our more direct comparators. These market reference points include:

 

    a broader group of diverse financial services companies with assets of $50 billion or more – this market data was used when reviewing compensation for positions for which the likely talent market is broader than the Compensation Peer Group
    a broad group of companies with revenues ranging from $6 billion to $20 billion – this market data was used when reviewing compensation for positions that could be sourced across industries
 

 

Pay Governance measured and compared actual pay levels not only on a total direct compensation basis but also by component to review and compare specific compensation elements as well as the particular mix of fixed versus variable, short-term versus long-term and cash versus equity-based compensation at the peer companies.

Following the IPO

Since its formation at the time of the IPO, the Compensation Committee has been, and continues to be, responsible for the general oversight of our compensation programs. Accordingly, the Compensation Committee is responsible for discharging the Board’s responsibilities relating to compensation of our executives including:

 

    reviewing and approving corporate goals and objectives relevant to the compensation of the executives

 

    evaluating the executives’ performance in light of those goals and objectives and determining their compensation level based on this evaluation

 

    reviewing and approving all compensation arrangements with executives
 

 

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Executive Compensation

 

 

The Compensation Committee is supported in its work by the Chief Executive Officer, our Human Resources Department and Pay Governance. Other than the Chief Executive Officer, no Named Executive Officer plays a decision-making role in determining the compensation of any other Named Executive Officer. Mr. Hurd plays an administrative role as described in the table below.

 

  Roles and Responsibilities

Chief Executive Officer    As Chief Executive Officer of Holdings, Mr. Pearson assists the Compensation Committee in its review of executive compensation other than his own. Mr. Pearson provides the Compensation Committee with his assessment of executive performance relative to the corporate and individual goals and other expectations set for the executives. Based on these assessments, he then provides his recommendations for the executives’ total compensation and the appropriate goals for each in the upcoming year. However, the Compensation Committee is not bound by his recommendations.
Human Resources    Human Resources performs many of the organizational and administrative tasks that underlie the Compensation Committee’s review and determination process and makes presentations on various topics. As Chief Operating Officer, Mr. Hurd oversees this work.
Pay Governance    In addition to its work prior to the IPO as described above, Pay Governance regularly attends Compensation Committee meetings and assists and advises the Committee in connection with its ongoing review of executive compensation policies and practices. The Compensation Committee considered and confirmed Pay Governance’s independence pursuant to the listing standards of the New York Stock Exchange in November 2018. Pay Governance does not perform any work for management.

COMPENSATION COMPONENTS

The EQH Compensation Program includes the following key components:

 

  Total Direct Compensation
Base Salary       

What is it?

Fixed compensation for services.

 

What is the purpose of it?

For executives, base salary is intended to provide a fair level of fixed compensation based on the position held, the executive’s career experience, the scope of the position’s responsibilities and the executive’s own performance.

 

Short-Term Incentive Compensation       

What is it?

Variable annual cash incentive awards determined based on performance relative to corporate and individual goals.

 

What is the purpose of it?

Short-term incentive compensation is intended to:

 

  align cash incentive awards with corporate financial results and strategic objectives and reward executives based on corporate and individual performance;

 

  enhance the performance assessment process with a focus on accountability;

 

  differentiate compensation based on individual performance; and

 

  provide competitive total annual compensation opportunities.

 

 

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  Total Direct Compensation (continued)
Equity-Based Awards     

What is it?

Incentive awards consisting of equity vehicles subject to multi-year vesting requirements based on performance requirements and continued service.

 

What is the purpose of it?

Equity-based awards are intended to:

 

  align long-term interests of award recipients with those of stockholders;

 

  provide competitive total compensation opportunities; and

 

  ensure focus on achievement of long-term strategic business objectives.

 

  Other Compensation and Benefits
Retirement, Health and other Plans and Programs     

What is it?

A comprehensive program offering retirement savings, financial protection and other compensation and benefits.

 

What is the purpose of it?

Our compensation and benefits program is intended to attract and retain high caliber executives and other employees by offering programs that assist with their long-term financial support and security.

 

  Termination Benefits
Severance Benefits       

What is it?

Temporary income payments and other benefits provided for certain types of terminations of employment.

 

What is the purpose of it?

Severance benefits are intended to treat employees fairly at termination and provide competitive total compensation packages.

 

Change-in-Control Benefits       

What is it?

Benefits in the event of a termination related to a change in control.

 

What is the purpose of it?

Change-in-control benefits are intended to retain executives and incent efforts to maximize stockholder value during a change in control.

 

Compensation Arrangements

Mr. Pearson is the only EQH Program Participant with an employment agreement. Under Mr. Pearson’s agreement, his employment will continue until he is age 65 unless the employment agreement is terminated earlier by Mr. Pearson or the Company on 30 days’ prior written notice.

As a new hire, Mr. Hurd entered into a letter agreement with AXA Equitable Life dated November 3, 2017 containing the terms of his 2018 target direct compensation. The terms of Mr. Hurd’s letter agreement were negotiated in the fall of 2017 and took into consideration his compensation from his previous employer as well as the importance of establishing the Chief Operating Officer position to facilitate the IPO. Prior to the IPO, the Board approved the terms contained in Mr. Hurd’s letter agreement, including a sign-on bonus of $300,000 that was paid to induce him to join the Company.

 

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Executive Compensation

 

 

Base Salary

The Board reviewed the base salaries of the EQH Program Participants prior to the IPO and made certain adjustments in light of its review of the Pay Governance Compensation Analysis and input from management and the OCC. The following table shows the annual rate of base salary of the EQH Program Participants both before and after adjustment:

 

EQH Program Participant

  

Annual Rate of Base

Salary Prior to

Adjustment

     Adjustment    

2018 Annual Rate

of Base Salary

 

Mr. Pearson

   $ 1,252,000        N/A     $ 1,252,000  

Mr. Malmström

   $ 660,000      $ 50,000     $ 710,000  

Mr. Hurd

   $ 900,000        N/A     $ 900,000  

Mr. Hattem

   $ 609,000      $ 91,000     $ 700,000  

None of the EQH Program Participants other than Mr. Pearson is entitled to a minimum rate of base salary. Under Mr. Pearson’s employment agreement, he is entitled to a minimum rate of base salary of $1,225,000 per year, except that his rate of base salary may be decreased in the case of across-the-board salary reductions similarly affecting all AXA Equitable Life officers with the title of Executive Director or higher.

The base salaries earned by the EQH Program Participants in 2018, 2017 and 2016 are reported in the Summary Compensation Table included below.

Short-Term Incentive Compensation

Variable cash incentive awards are generally available for the EQH Program Participants under the AXA Equitable Holdings, Inc. Short-Term Incentive Compensation Plan (the “STIC Plan”) which was approved by the Board prior to the IPO. The STIC Plan is an ongoing “umbrella” plan that allows the Compensation Committee or Board to establish annual programs setting forth performance goals and other terms and conditions applicable to cash incentive awards for employees.

The Board approved performance objectives and their relative weightings for a 2018 variable cash incentive award program under the STIC Plan (the “2018 STIC Program”) prior to the IPO. The EQH Program Participants were all eligible for awards under the 2018 STIC Program. The amount of an EQH Program Participant’s individual award under the 2018 STIC Program was determined by multiplying his 2018 STIC Program award target (his “STIC Target”) by a funding percentage (the “Final Funding Percentage”) and by his “Individual Assessment Percentage” as further described below. The calculation is as follows, subject to a maximum award of 200% of an executive’s STIC Target:

 

2018 STIC

Target

  X   

Final

Funding

Percentage

  X   

Individual Assessment

Percentage

   =    2018 STIC Program Award

This section describes each element of the award calculation.

STIC Targets

The Board reviewed the STIC Targets of the EQH Program Participants prior to the IPO and made certain adjustments in light of its review of the Pay Governance Compensation Analysis and input from management and the OCC. The following table shows the STIC Targets of the EQH Program Participants both before and after adjustment:

 

EQH Program Participant

   STIC Target Prior to
Adjustment
     Adjustment      2018 STIC
Target
 

Mr. Pearson

   $ 2,128,400        N/A      $ 2,128,400  

Mr. Malmström

   $ 800,000      $ 200,000      $ 1,000,000  

Mr. Hurd

   $ 1,500,000        N/A      $ 1,500,000  

Mr. Hattem

   $ 650,000      $ 100,000      $ 750,000  

 

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Executive Compensation

 

 

We generally do not provide guaranteed annual incentive awards for any executives, except for certain limited guarantees for new hires. For example, Mr. Hurd was guaranteed a 2018 STIC Program award equal to his STIC Target of $1.5 million. Other than Mr. Hurd, no EQH Program Participant was guaranteed a cash incentive award under the 2018 STIC Program.

Final Funding Percentage

Performance Objectives

A preliminary funding percentage (the “Initial Funding Percentage”) for the 2018 STIC Program for the EQH Program Participants was determined by measuring corporate performance with respect to certain financial and other performance objectives reflecting our key performance indicators. Multiple key performance objectives were chosen to incent performance across a range of activities and balance different types of metrics.

The 2018 STIC Program performance objectives and their relative weightings were:

 

   

Non-GAAP Operating Earnings – 50%

 

   

Premiums and Flows – 25%

 

   

Strategic Initiatives – 25%

 

  Non-GAAP Operating Earnings

What is it?

  

Non-GAAP Operating Earnings is an after-tax financial measure used to evaluate our financial performance that is determined by making certain adjustments to our after-tax net income attributable to Holdings. Specifically, it excludes items that can be distortive or unpredictable from the results of operations and focuses on corporate performance with respect to ongoing operations. Accordingly, it is used as the basis for management’s decision-making.

 

Non-GAAP Operating Earnings is a financial measure that is not computed in accordance with U.S. GAAP. Please see Appendix A for a more complete description of the calculation of Non-GAAP Operating Earnings.

Why do we use it?

   Non-GAAP Operating Earnings was chosen as a performance objective for the 2018 STIC Program, and is the most highly weighted performance objective for 2018, due to our belief that it is the strongest indicator of corporate performance for a year.
  Premiums and Flows

What is it?

   The Premiums and Flows performance objective measured the 2018 premiums of our Protection Solutions business, the 2018 net cash flows of our Group Retirement, IM&R and AXA Advisors broker-dealer (“Advisors B/D”) businesses and the 2018 net cash flows of our Individual Retirement business, excluding flows related to fixed rate GMxB products.

Why do we use it?

   Premiums and Flows was chosen as a performance objective for the 2018 STIC Program due to our belief that it is a strong indicator of future profitability and the competitiveness of our products.

 

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  Strategic Initiatives

What is it?

  

The Strategic Initiatives performance objective measured corporate performance with respect to specific 2018 goals set for certain ongoing initiatives required to ensure Holdings’ successful transition to a standalone public company, including:

 

  creation and augmentation of the operational and technological capabilities necessary for a standalone public entity;

 

  execution of general account optimization and growth and expense initiatives;

 

  reallocation of our real estate footprint;

 

  unwind of reinsurance provided to AXA Equitable Life by a captive reinsurer for certain variable annuities with guarantees (the “GMxB Unwind“);

 

  execution of Holdings’ bond issuance;

 

  implementation of a new hedging program;

 

  achievement of our annualized premium equivalent sales budget;

 

  augmentation of key leadership and staff; and

 

  achievement of our target payout ratio of at least 40-60% of Non-GAAP Operating Earnings on an annualized basis.

Why do we use it?

   Strategic Initiatives was chosen as a performance objective for the 2018 STIC Program to ensure employees’ focus on the critical activities required to ensure our future success.

The performance objectives were determined based on our strategy and focus at the time of the program’s design. Accordingly, the performance objectives and their weightings for future years may vary as different metrics become more relevant.

Calculation of Initial Funding Percentage

The Initial Funding Percentage was determined based on corporate performance with respect to targets approved by the Compensation Committee for each performance objective. For Non-GAAP Operating Earnings and Premiums and Flows, the targets were numerical. For each Strategic Initiative, the target was set as the accomplishment of the 2018 goal for that initiative. Once set, the targets for each performance objective were not permitted to change during the course of the year except for exceptional circumstances as determined by the Compensation Committee. The Compensation Committee did not make any changes to the targets.

Performance at target for a performance objective results in a contribution to the Initial Funding Percentage equal to that performance objective’s weighting. Accordingly, performance at target for all of the performance objectives would result in an Initial Funding Percentage of 100%. Performance below target for a performance objective results in a decreased contribution to the Initial Funding Percentage down to a minimum of 0%. Performance above target for a performance objective results in an increased contribution to the Initial Funding Percentage up to a maximum of twice the performance objective’s weighting. Accordingly, the Initial Funding Percentage could range from 0% to 200%.

The Non-GAAP Operating Earnings and Premiums and Flows performance objectives were also assigned caps and floors that were approved by the Compensation Committee. The cap and floor for the Non-GAAP Operating Earnings performance objective were set at +/- 20% of target while the caps and floors for the Premiums and Flows performance objective were set at +/- 15% of target. Performance at the cap or higher for a performance objective results in that performance objective’s maximum contribution to the Initial Funding Percentage. Performance at the floor or lower results in no contribution to the Initial Funding Percentage by the performance objective.

The Strategic Initiatives’ performance objective was not assigned specific caps or floors. Rather, its contribution to the Initial Funding Percentage (which could range from 0% to 50% as described above) was determined by Mr. Pearson’s qualitative assessment of performance with respect to each goal.

 

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The Initial Funding Percentage was 120%. The following table presents the target and actual results for each of the performance objectives, along with their floors, caps, relative weightings and ultimate contribution to the Initial Funding Percentage. All amounts listed for floors, caps, target and actual results are in millions of U.S. dollars.

 

Performance Objective

   Floor      Target      Cap      Weight     Actual
Results
    Contribution
to Initial
Funding
Percentage
 

Non-GAAP Operating Earnings

   $ 1,597      $ 1,996      $ 2,395        50   $ 2,166       71

Premiums and Flows

                                                   

  IM&R

   $ 2,550      $ 3,000      $ 3,450        5   $ (8,168     0

  Individual Retirement

   $ 2,566      $ 3,019      $ 3,472        8.75   $ 2,913       7

  Group Retirement

   $ 188      $ 222      $ 255        5   $ 96       0

  Protection Solutions

   $ 213      $ 251      $ 289        5   $ 246       4

  Advisors B/D

   $ 1,893      $ 2,227      $ 2,561        1.25   $ 3,023       3

Strategic Initiatives

     N/A       
2018 goals
met
 
 
     N/A        25    

2018 goals
met/
exceeded
 
 
 
    35

Initial Funding Percentage

                                                120

 

Note:

For results in between the floor and target and target and cap, the contribution to the Initial Funding Percentage is determined by linear interpolation.

Mr. Pearson determined that the Strategic Initiatives performance objective’s contribution to the Initial Funding Percentage would be 35% since all goals were met or exceeded. Mr. Pearson noted, among other items, that:

 

   

the general account optimization initiative finished the year ahead of plan with investment income above its 2018 goal in spite of a flat yield curve;

 

   

the structuring and execution of the GMxB Unwind resulted in a more positive impact to the total company risk-based capital ratio than expected;

 

   

the execution of Holdings’ bond issuance enabled us to lock in lower cost over a longer period than peers; and

 

   

the actual payout ratio for 2018 exceeded guidance.

Determination of Final Funding Percentage

Once the Initial Funding Percentage was calculated as described above, it was reviewed by the Compensation Committee which had responsibility for determining the Final Funding Percentage. In making its determination, the Compensation Committee had discretion to increase or decrease the Initial Funding Percentage by twenty percentage points based on any relevant circumstances determined by the committee, provided that it could not increase the Initial Funding Percentage above the maximum of 200%.

Upon the recommendation of management, the Compensation Committee decreased the Initial Funding Percentage by six percentage points to determine the Final Funding Percentage of 114%. The decrease was made to eliminate the positive impact to Non-GAAP Operating Earnings of actuarial assumptions related to certain annuity business written under prior management since the impacts of those actuarial assumption changes were not reflective of any current management decisions.

 

Initial Funding Percentage

     120%  

Compensation Committee Adjustment

     (6%)  

Final Funding Percentage

     114%  

 

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Individual Assessment Percentage and Approval of Awards

An EQH Program Participant’s Individual Assessment Percentage is based on his individual performance and demonstrated leadership behaviors and can range from 0% to 130%. The Compensation Committee reviewed the 2018 performance of each EQH Program Participant as well as Mr. Pearson’s recommendations for each EQH Program Participant’s Individual Assessment Percentage and 2018 STIC Program award. Based on its assessment of each EQH Program Participant’s performance, the Compensation Committee approved the amount of the 2018 STIC Program awards for each EQH Program Participant.

In making its recommendations, the Compensation Committee took into account the factors that it deemed relevant, including the following accomplishments achieved in 2018 by the EQH Program Participants.

 

  Mr. Pearson      

Accomplishments

  

  Ensured the Company met or exceeded its key core metrics, including:

 

   delivered Non-GAAP Operating Earnings of $2,166 million with a Pro Forma Non-GAAP Operating Return on Equity of 14.9%, both ahead of target

 

   returned $791 million of capital to stockholders, including $649 million through our share repurchase program and $142 million in the form of dividends

 

   delivered earnings per share of $3.89

 

  Drove improved results for each business segment, including:

 

   Individual Retirement operating earnings increased 24.2% to $1.6 billion

 

   Group Retirement operating earnings increased 37.5% to $389 million and net flows of $96 million marked the sixth straight year of positive flows

 

   Investment Management and Research adjusted operating margin increased by 140 basis points to 29%5

 

   Protection Solutions saw continued sales momentum as annualized premiums increased 8% year-over-year

 

  Provided overall leadership and direction for successful IPO and debut bond offering

 

  Established public company leadership and corporate governance framework including recruitment of key hires and promotion of internal talent

 

  Ensured on-track delivery of our strategic priorities including our general account optimization and productivity and growth initiatives

 

  Established strong relationships with investor community

 

  Continued to ensure a culture of inclusion, professional excellence and continuous learning, resulting in external recognitions for consecutive years from the Great Place to Work Institute and the Disability Equality Index

  2018 STIC Program Award    $2,911,651

 

 

5 

Adjusted Operating Margin is a non-GAAP financial measure used by AB’s management in evaluating AB’s financial performance on a standalone basis and to compare its performance, as reported by AB in its public filings. It is not comparable to any other non-GAAP financial measure used by the Company.

 

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  Mr. Malmström      

Accomplishments

  

  Provided leadership and direction for Finance activities related to the IPO, including preparation of historical financial statements, roadshow presentations, negotiations with underwriters and other parties

 

  Effectively oversaw Finance activities related to the recapitalization of Holdings and GMxB Unwind, including execution of bond issuance and new credit facilities

 

  Restructured the Finance organization, including streamlining the reporting structure, making key hires, creating new Investor Relations team and supporting the company’s efforts to reduce footprint in metro New York

 

  Drove risk management strategy, including development and implementation of new hedging strategy, maintaining hedge efficiency ratio at high levels and establishing new economic model and risk framework to operationalize and produce results across segments

 

  Established strong relationships with investor community, playing a key role in communications with investors, analysts and ratings agencies

  2018 STIC Program Award    $1,299,600

 

  Mr. Hurd      

Accomplishments

  

  Provided leadership and direction for the IPO, including the building of stand-alone public company capabilities throughout the organization

 

  Implemented program to evaluate, enhance and continuously improve the end-to-end financial reporting process across the enterprise, focusing on people, process and technology

 

  Played a key role in recruitment and hiring of leaders in critical roles to augment and enhance the organization’s leadership capability

 

  Led planning and execution of activities around the separation from AXA Group, including management of the transition services agreement, development of critical IT capabilities and evaluation and amendment of critical third-party contracts

 

  Provided direction for the governance and oversight of the full portfolio of strategic company investments and projects, leading to $42 million in efficiency benefits on a target of $38 million

  Drove a refreshed strategy and approach to diversity and inclusion to ensure we reflect a trusting, inclusive and empowering culture with concrete actionable initiatives tailored to our organization

  2018 STIC Program Award    $2,080,000

 

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  Mr. Hattem      

Accomplishments

  

  Provided leadership and direction for Law Department activities related to the IPO, including drafting of registration statement and amendments, obtaining required regulatory approvals and implementing corporate restructuring

 

  Effectively oversaw Law Department activities related to the recapitalization of Holdings, including negotiation of bond issuance and new credit facilities and approval of the New York State Department of Financial Services regarding the GMxB Unwind

 

  Played key role in establishment of public company corporate governance framework for Holdings and negotiation of stockholder and other agreements with AXA

 

  Supported company’s efforts to reallocate its real estate footprint by overseeing related legal work and moving legal positions to Charlotte while maintaining high quality of legal advice

 

  Supported company’s diversity and inclusion efforts by actively participating in Tandem Sponsorship Program designed to increase the exposure and visibility of female employees to executive management and sponsoring Law Department initiatives designed to maintain the department’s diversity of experience, background, expertise and perspective

2018 STIC Program Award

   $1,040,000

The annual cash incentive awards and bonuses earned by the EQH Program Participants in 2018, 2017 and 2016 are reported in the Summary Compensation Table included below.

Equity-Based Awards

In 2017 and prior years, annual equity-based awards for the EQH Program Participants other than Mr. Hurd were available under the umbrella of AXA’s global equity program. Equity-based awards were also granted from time to time to executives outside of AXA’s global equity program as part of a sign-on package or as a retention vehicle. The value of the equity-based awards granted in 2017 and prior years was linked to the performance of AXA’s stock.

Following the IPO, the Compensation Committee has granted and will continue to grant equity-based awards under the AXA Equitable Holdings, Inc. 2018 Omnibus Incentive Plan (the “2018 Equity Plan”). The 2018 Equity Plan is an umbrella plan approved by the Board and our stockholder prior to the IPO that allows the Compensation Committee to approve the grant of equity-based awards under annual programs with varying terms and conditions.

The Compensation Committee approves annual grants of equity-based awards at its regularly scheduled February meeting. Equity-based awards may also be granted from time to time as part of a sign-on package or retention vehicle. The Compensation Committee has not delegated any authority to management to grant equity-based awards.

This section describes the terms of:

 

   

annual equity-based awards that were granted to the EQH Program Participants by the Compensation Committee (and approved by a subcommittee of the Compensation Committee composed entirely of independent directors) after the IPO;

 

   

certain one-time equity-based awards (“Transaction Incentive Awards”) granted to the EQH Program Participants by the Board prior to the IPO; and

 

   

certain payouts Messrs. Pearson, Malmström and Hattem received in 2018 under a prior AXA equity-based award plan.

2018 Annual Equity-Based Awards

The equity-based awards for the EQH Program Participants granted under the 2018 equity program established under the 2018 Equity Plan (the “2018 Equity Program”) consisted of a mix of equity vehicles including both “full value” (restricted stock units and performance shares) and “appreciation only” (stock options) vehicles. All vehicles contain vesting requirements

 

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related to service and the performance shares also require the satisfaction of certain performance criteria related to corporate performance to obtain a payout. This mix of equity vehicles was chosen to ensure alignment with corporate performance while retaining the ability to retain, motivate and reward the executives in the event of changes in the business environment or cycle.

The dollar value of the awards to each EQH Program Participant were approved by the Board prior to the IPO. This dollar value was then allocated between the different equity vehicles. Performance shares received the highest allocation in accordance with our pay-for-performance culture. All individual equity grants were approved by the Compensation Committee at its regularly-scheduled meeting on May 16, 2018, with a grant date of May 17, 2018 for restricted stock units and performance shares and June 11, 2018 for stock options. The following table provides an overview of the different equity vehicles.

 

Vehicle    Description    Type    Payout Requirements    Allocation
Percentage
EQH RSUs    Restricted stock units that will be settled in shares of Holdings’ common stock.    Full Value    Service    25%
EQH Stock Options    Stock options entitling the executives to purchase shares of Holdings’ common stock.    Appreciation Only    Service    25%
EQH Performance Shares    Performance shares that will be settled in shares of Holdings’ common stock.    Full Value    Service and Satisfaction of Performance Criteria    50%

EQH RSUs. EQH RSUs have a vesting schedule of approximately three years, with one-third of the grant vesting on each of March 1, 2019, March 1, 2020 and March 1, 2021. EQH RSUs receive dividend equivalents with the same vesting schedule as their related units. The value of EQH RSUs will increase or decrease depending entirely on the price of Holdings’ common stock.

EQH Stock Options. EQH Stock Options have a term of approximately ten years and a vesting schedule of approximately three years, with one-third of the grant vesting on each of March 1, 2019, March 1, 2020 and March 1, 2021. The exercise price for the EQH Stock Options is $21.34, which was the closing price for Holdings’ common stock on the grant date. The value of the EQH Stock Options depends entirely on increases in the price of Holdings’ common stock.

EQH Performance Shares. EQH Performance Shares cliff vest after approximately three years on March 1, 2021. EQH Performance Shares receive dividend equivalents with the same vesting schedule as their related shares and were granted unearned. Two types of EQH Performance Shares were granted:

 

   

ROE Performance Shares. EQH Performance Shares that may be earned based on the Company’s performance against certain targets for its Non-GAAP Operating Return on Equity6 (“Non-GAAP Operating ROE”) and

 

   

TSR Performance Shares. EQH Performance Shares that may be earned based on Holdings’ total shareholder return relative to its performance peer group (“Relative TSR”).

 

6 

Since the Company does not yet report Non-GAAP Operating ROE, the target for 2018 was based on Pro Forma Non-GAAP Operating ROE. Both of these measures are not computed in accordance with U.S. GAAP. More information on these measures and reconciliations to the most comparable U.S. GAAP measures can be found in Appendix A.

 

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Non-GAAP Operating ROE and Relative TSR were chosen as the performance metrics for the EQH Performance Shares because they are important to our stockholders and critical to value creation. When approving these performance metrics, the Compensation Committee considered that, as a best practice, the performance shares should contain metrics that differ from the performance objectives contained in the 2018 STIC Program and that reflect both relative and absolute results.

 

Non-GAAP Operating ROE

What is it?    Non-GAAP Operating ROE is a financial measure used to evaluate our capital efficiency and recurrent profitability. It is determined by dividing Non-GAAP Operating Earnings by the consolidated average equity attributable to Holdings, excluding accumulated other comprehensive income.
Why do we use it?    Non-GAAP Operating ROE was selected as a performance metric because it measures how well we use our capital to generate earnings growth, a critical component of value creation for our stockholders.

Relative TSR

What is it?    Relative TSR compares the total amount a company returns to investors during a designated period, including both capital gains and dividends, to such amounts returned by the company’s peers.
Why do we use it?    Relative TSR was selected as a performance metric to ensure that payouts are aligned with the experience of Holdings’ stockholders and to create incentives to outperform peers.

ROE Performance Shares. The number of ROE Performance Shares that are earned will be determined at the end of the performance period (January 1, 2018 – December 31, 2020) by multiplying the number of unearned ROE Performance Shares granted by the “Final ROE Performance Factor.” The Final ROE Performance Factor will be determined by averaging the “ROE Performance Factor” for each of the three calendar years in the ROE Performance Period. Specifically, the Company will be assigned target, maximum and threshold amounts for Non-GAAP Operating ROE for each of 2019 and 2020 and Pro Forma Non-GAAP Operating ROE for 2018 that will determine the “ROE Performance Factor” for the applicable year as follows:

 

If the actual result for the applicable

year equals....

  

The ROE Performance Factor for

the applicable year will equal....

Maximum Amount (or greater)

   200%

Target Amount

   100%

Threshold Amount

   25%

Below Threshold

   0%

 

Note:

For results in between the threshold and target and target and maximum amounts, the ROE Performance Factor for the applicable year will be determined by linear interpolation.

 

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TSR Performance Shares. The number of TSR Performance Shares that are earned will be determined at the end of a performance period (May 17, 2018 – December 31, 2020) by multiplying the number of unearned TSR Performance Shares by the “TSR Performance Factor.” The TSR Performance Factor will be determined as follows, subject to a cap of 100% if Holdings’ total stockholder return for the performance period is negative:

 

 

If Relative TSR for the TSR
Performance Period is...

 

  

 

The TSR Performance Factor

will equal...

 

87.5th percentile or greater (maximum)

   200%

50th percentile (target)

   100%

30th percentile (threshold)

   25%

Below 30th percentile

     0%

 

Note:

For results in between the threshold and target and target and maximum amounts, the TSR Performance Factor will be determined by linear interpolation.

The peer group for determining Relative TSR was chosen to reflect our specific mix of businesses as well as our competitors for capital, business and executive talent. Accordingly, in addition to the Compensation Peer Group, it includes four prominent asset management companies with assets under management similar in scope to that of AB (Eaton Vance Corp, Invesco Ltd., Legg Mason, Inc. and T. Rowe Price) and an additional insurance company (Torchmark) to ensure a 75%/25% retirement and protection to asset management company mix and a robust peer set.

Equity Targets

The Board reviewed the Equity Targets of the EQH Program Participants prior to the IPO and made certain adjustments in light of its review of the Pay Governance Compensation Analysis and input from management and the OCC. The following table shows the Equity Targets of the EQH Program Participants both before and after adjustment:

 

EQH Program Participant

  

Equity
Target
Prior to
Adjustment

 

     Adjustment      2018
Equity
Target
 

Mr. Pearson

   $ 2,350,000      $ 1,500,000      $ 3,850,000  

Mr. Malmström

   $ 800,000      $ 700,000      $ 1,500,000  

Mr. Hurd

   $ 1,800,000        N/A      $ 1,800,000  

Mr. Hattem

   $ 750,000      $ 250,000      $ 1,000,000  

We do not provide guaranteed equity-based awards for any employees, except for certain limited guarantees for new hires. For example, Mr. Hurd was guaranteed a 2018 Equity Program award of $1.8 million. Other than Mr. Hurd, no EQH Program Participant was guaranteed an award under the 2018 Equity Program.

Award Amounts

Each EQH Program Participant received an award under the 2018 Equity Program. The Board determined the U.S. dollar value of each award prior to the IPO based on the EQH Program Participants’ Equity Targets, its review of each executive’s potential future contributions, its consideration of the importance of retaining the executive in his or her current position and its review of the Pay Governance Compensation Analysis.

 

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The amounts granted to the EQH Program Participants were as follows:

 

EQH Program

Participant

  

Total US Dollar
Value of Award

 

Mr. Pearson

   $ 3,850,000  

Mr. Malmström

   $ 1,500,000  

Mr. Hurd

   $ 1,800,000  

Mr. Hattem

   $ 1,000,000  

The amounts granted were determined as follows:

 

   

To determine the amount of EQH RSUs granted to each EQH Program Participant, 25% of his total award value was divided by the fair market value of Holdings’ common stock on the grant date.

 

   

To determine the amount of EQH Stock Options granted to each EQH Program Participant, 25% of his total award value was divided by the value of an EQH Stock Option on the grant date which was determined using a Black-Scholes pricing methodology based on assumptions which may differ from the assumptions used in determining the option’s grant date fair value based on FASB ASC Topic 718.

 

   

To determine the amount of ROE Performance Shares granted to each EQH Program Participant, 25% of his total award value was divided by the fair market value of Holdings’ common stock on the grant date.

 

   

To determine the amount of TSR Performance Shares granted to each EQH Program Participant, 25% of his total award value was divided by a price determined using a Monte Carlo valuation.

Termination of Employment and Restrictive Covenants

Generally, if an EQH Program Participant terminates employment, his 2018 equity-based award will be forfeited with certain exceptions in the case of involuntary termination without cause after March 1, 2019 and termination due to death or disability. Also, in the event that an EQH Program Participant who is at least age 55 with ten years of service terminates employment after March 1, 2019, his equity-based award will continue to vest. Accordingly, since both Mr. Pearson and Mr. Hattem meet these age and service requirements, they will not forfeit their equity-based awards due to any service condition.

In the event that an EQH Program Participant who retains all or a portion of his equity-based award following termination of employment violates certain non-competition and non-solicitation covenants contained in his award agreement, any remaining portion of his award at the time of violation will be immediately forfeited. Also, any portion of his award that vested after termination, and any shares or cash issued upon exercise or settlement of that vested portion, will be immediately forfeited or paid to the Company together with all gains earned or accrued.

Detailed information on the 2018 Equity Program awards for each of the EQH Program Participants is reported in the 2018 Grants of Plan-Based Awards Table included below.

2018 Transaction Incentive Awards

Transaction Incentive Awards for each of the EQH Program Participants were approved by the Board under the 2018 Equity Plan at the time of the IPO. Transaction Incentive Awards were one-time awards granted to key executives who were critical to the success of the IPO to:

 

   

incentivize their performance in connection with the preparation and successful execution of the IPO;

 

   

encourage their retention during and after the IPO;

 

   

establish a meaningful stake in Holdings’ common stock for each executive; and

 

   

further align their interests with those of our stockholders.

 

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All Transaction Incentive Awards were paid in the form of restricted stock units that will be settled in shares of Holdings’ common stock. The amount of the restricted stock units granted to each EQH Program Participant was determined by dividing his award value by the IPO price of $20.

The amounts received by the EQH Program Participants are listed in the table below.

 

EQH Program Participant

  

U.S. Dollar Award Value

 

Mr. Pearson

   $ 3,700,000  

Mr. Malmström

   $ 1,480,000  

Mr. Hurd

   $ 740,000  

Mr. Hattem

   $ 1,480,000  

Vesting

Fifty percent of the restricted stock units will vest based on continued service (the “Service Units”) and fifty percent will vest based on the performance of Holdings’ share price (“Performance Units”) as follows:

 

 

Type Of Units

 

  

 

Vesting Requirements

 

Service Units   

50% of the Service Units vested on November 14, 2018;

25% of the Service Units will vest on May 10, 2019; and

25% of the Service Units will vest on May 10, 2020.

 

Performance Units   

Condition #1 — if, prior to May 10, 2020, the average closing price of a share of Holdings’ common stock for thirty consecutive days is at least equal to $26, all Performance Units will immediately vest;

Condition #2 — if Condition #1 is not met but, prior to May 10, 2023, the average closing price of a share of Holdings’ common stock for thirty consecutive days is at least equal to $30, all Performance Units will immediately vest; and

Condition #3 — if neither Condition #1 nor Condition #2 is met, fifty percent of the Performance Units will vest on May 10, 2023. The remaining 50% of the Performance Units will be forfeited.

 

None of the Performance Units vested in 2018 since the performance conditions were not met.

Termination of Employment

The rules related to termination of employment applicable to the Transaction Incentive Awards are generally identical to those applicable to the annual equity-based awards described above, provided that the Transaction Incentive Awards do not continue to vest based on the satisfaction of any age and service requirements.

Detailed information on the Transaction Incentive Awards granted to each of the EQH Program Participants is reported in the 2018 Grants of Plan-Based Awards Table included below.

2018 Equity-Based Award Payouts

In 2018, Messrs. Pearson, Malmström and Hattem received a payout under the 2014 AXA International Performance Shares Plan (the “2014 AXA Performance Shares Plan”). Under the 2014 AXA Performance Shares Plan, 50% of the AXA performance shares granted to a participant had a cliff vesting schedule of three years (first tranche) and the remaining 50% had a cliff vesting schedule of four years (second tranche).

The number of AXA performance shares earned was determined for the first tranche at the end of a two-year performance period starting on January 1, 2014 and ending on December 31, 2015 and for the second tranche at the end of a three-year

 

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performance period starting on January 1, 2014 and ending on December 31, 2016, by multiplying the number of AXA performance shares granted for the applicable tranche by a performance percentage determined based on the performance of AXA Group and our retirement and protection businesses over the applicable performance period. The performance percentage for the first tranche was 123.77% and the performance percentage for the second tranche was 122.92%.

Detailed information on the payouts of 2014 AXA performance shares in 2018 is reported in the 2018 Option Exercises and Stock Vested Table included below.

Other Compensation and Benefit Programs

Benefit Plans

All AXA Equitable Life employees, including the EQH Program Participants, are offered a benefits program that includes health and disability coverage, life insurance and various deferred compensation and retirement benefits. In addition, certain benefit programs are offered for executives that are not available to non-executive employees. The overall program is periodically reviewed to ensure that the benefits it provides continue to serve business objectives and remain cost-effective and competitive with the programs offered by large diversified financial services companies.

 

 

Qualified Retirement Plans

 

Why do we offer them?

 

   We believe that qualified retirement plans encourage long-term service.
What plans are offered?   

The AXA Equitable 401(k) Plan (the “401(k) Plan”)

The 401(k) Plan is a tax-qualified defined contribution plan offered for eligible employees who may contribute to the 401(k) Plan on a before-tax, after-tax or Roth 401(k) basis (or any combination of the foregoing) up to tax law and plan limits. The 401(k) Plan also provides for discretionary performance-based contributions and employer contributions as follows:

 

  the discretionary performance-based contribution for a calendar year is based on corporate performance for that year and ranges from 0% to 4% of annual eligible compensation (subject to tax law limits). A performance-based contribution of 1.5% of annual eligible compensation was made for the 2018 plan year; and

 

  the employer contribution for a calendar year is: (i) 2.5% of eligible compensation up to the Social Security Wage Base ($128,400 in 2018) plus, (ii) 5.0% of eligible compensation in excess of the Social Security Wage Base, up to the qualified plan compensation limit ($275,000 in 2018).

 

Effective January 1, 2019, a 3% employer matching contribution was added for participants’ voluntary deferrals under the plan. All of the EQH Program Participants were eligible to participate in the 401(k) Plan in 2018.

 

The AXA Equitable Retirement Plan (the “Retirement Plan”)

The Retirement Plan is a tax-qualified defined benefit plan that was previously offered to eligible employees. Prior to its freeze in December 2013, the Retirement Plan provided a cash balance benefit. Mr. Pearson and Mr. Hattem participate in the Retirement Plan.

 

 

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Excess Retirement Plans

 

Why do we offer them?   

We believe that excess plans are an important component of competitive market-based compensation in our Compensation Peer Group and generally.

 

What plans are offered?   

Excess 401(k) Contributions

Excess employer contributions for 401(k) Plan participants with eligible compensation in excess of the qualified plan compensation limit are made to accounts established for participants under the AXA Equitable Post-2004 Variable Deferred Compensation Plan for Executives (the “Post-2004 VDCP”). For 2018, these contributions were equal to 10% of the participant’s eligible compensation. For 2019, this amount has been reduced to 5% of eligible compensation and a 3% excess matching contribution for participants’ voluntary deferrals under the Post-2004 VDCP has been introduced. All the EQH Program Participants were eligible to receive excess employer contributions in 2018.

 

The AXA Equitable Excess Retirement Plan (the “Excess Plan”)

The Excess Plan is a nonqualified defined benefit plan for eligible employees. Prior to its freeze in December 2013, the Excess Plan allowed eligible employees, including Mr. Pearson and Mr. Hattem, to earn retirement benefits in excess of what was permitted under tax law limits with respect to the Retirement Plan.

 

 

 

Voluntary Non-Qualified Deferred Compensation Plans

 

Why do we offer them?

 

   We believe that compensation deferral is a cost-effective method of enhancing the savings of executives.
What plans are offered?   

The Post-2004 Plan

The Post-2004 Plan allows eligible employees to defer the receipt of certain compensation, including base salary and short-term incentive compensation awards. The amount deferred is credited to a bookkeeping account established in the participant’s name and participants may choose from a range of nominal investments according to which their accounts rise or decline. Participants annually elect the amount they want to defer, the date on which payment of their deferrals will begin and the form of payment. All of the EQH Program Participants were eligible to participate in the Post-2004 Plan in 2018.

 

The Variable Deferred Compensation Plan (“VDCP”)

Mr. Hattem also participated in the VDCP, the predecessor plan to the Post-2004 Plan prior to its freeze in 2004.

 

 

 

Financial Protection Plans

 

Why do we offer them?   

We believe that health, life insurance, disability and other financial protection plans are basic benefits that should be provided to all employees.

 

What plans are offered?   

The AXA Equitable Executive Survivor Benefits Plan (the “ESB Plan”)

In addition to our generally available financial protection plans, certain grandfathered employees (including all of the EQH Program Participants), participate in the ESB Plan which offers benefits to a participant’s family in the case of his or her death. Eligible employees may choose up to four levels of coverage and the form of benefit to be paid at each level. Each level provides a benefit equal to one times the participant’s eligible compensation and offers different coverage choices. Generally, the participant can choose between a life insurance death benefit and a deferred compensation benefit payable upon death at each level. The ESB Plan was closed to new participants on January 1, 2019.

 

 

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For additional information on 401(k) Plan benefits and excess 401(k) contributions for the Named Executive Officers as well as amounts voluntarily deferred by Mr. Hattem under the Post-2004 Plan and the VDCP, see the Summary Compensation Table and Non-qualified Deferred Compensation Table included below. For additional information on Retirement Plan, Excess Plan and ESB Plan benefits for the EQH Program Participants, see the Pension Benefits Table included below.

Perquisites

EQH Program Participants receive only de minimis perquisites. Financial planning and tax preparation services were provided in 2018 but have been eliminated for 2019 and future years for the EQH Program Participants other than Mr. Pearson.

Pursuant to his employment agreement, Mr. Pearson is entitled to unlimited personal use of a car and driver, two business class trips to the United Kingdom per year with his spouse, expatriate tax services, a company car for his personal use, excess liability insurance coverage and repatriation costs.

The incremental costs of perquisites for the EQH Program Participants during 2018 are included in the column entitled “All Other Compensation” in the Summary Compensation Table included below.

Termination Benefits

Severance Benefits

The AXA Equitable Severance Benefit Plan (the “Severance Plan”)

The Severance Plan provides temporary income and other severance benefits to all eligible employees following certain involuntary terminations of employment. Temporary income payments are generally based on length of service or base salary. Payments are capped at the lesser of 52 weeks of base salary and $300,000. To obtain benefits under the Severance Plan, participants must execute a general release and waiver of claims against the Company.

The AXA Equitable Supplemental Severance Plan for Executives (the “Supplemental Severance Plan”)

The Supplemental Severance Plan provides additional severance benefits for the EQH Program Participants other than Mr. Pearson. The Supplemental Severance Plan requires a participant’s general release and waiver of claims to include provisions regarding non-competition and non-solicitation of employees and customers for twelve months following termination of employment.

Mr. Pearson’s Employment Agreement

Mr. Pearson waived the right to receive any benefits under the Severance Plan or the Supplemental Severance Plan. Rather, his employment agreement provides that, if his employment is involuntarily terminated prior to his attaining age 65 other than for cause or death, or Mr. Pearson resigns for “good reason,” Mr. Pearson will be entitled to certain severance benefits, including severance pay equal to two times the sum of his salary and short-term incentive compensation. The severance benefits are contingent upon Mr. Pearson releasing all claims against the Company and his entitlement to severance pay will be discontinued if he provides services for a competitor.

Change in Control Benefits

The Supplemental Severance Plan

In the event of a job elimination or voluntary termination for good reason within twelve months after a change in control of Holdings (not including a change in control related to AXA ceasing to own more than 50% of the shares of Holdings’ common stock), the EQH Program Participants, other than Mr. Pearson, are eligible to receive two times the sum of their base salary and short-term incentive compensation.

2018 Equity Plan

Generally, in the event of a change of control of Holdings (not including a change in control related to AXA ceasing to own more than 50% of the shares of Holdings’ common stock), equity awards granted under the 2018 Equity Plan that are not

 

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assumed or replaced with substitute awards having the same or better terms or conditions would fully vest and be cancelled for the same per share payment made to the stockholders in the change in control (less, in the case of options and stock appreciation rights, the applicable exercise or base price).

Mr. Pearson’s Employment Agreement

Under Mr. Pearson’s employment agreement, a change in control of Holdings (not including a change in control related to AXA ceasing to own more than 50% of the shares of Holdings’ common stock) would be deemed to be “good reason” entitling Mr. Pearson to terminate his employment and receive the severance benefits described above in “Mr. Pearson’s Employment Agreement.”

Prior Equity Awards

As mentioned above, the EQH Program Participants other than Mr. Hurd received equity-based awards in 2017 and prior years linked to the performance of AXA’s stock, including both stock options and performance shares. If there is a change in control of Holdings, all of these stock options would become immediately exercisable for their term regardless of the otherwise applicable exercise schedule.

All performance shares granted in 2017 and prior years would be forfeited upon a change in control. However, a change in control will not be deemed to occur for purposes of these performance shares unless AXA ceases to own at least 10% of the capital or voting rights of Holdings.

For additional information on severance and change in control benefits for the EQH Program Participants as of December 31, 2018, see “Potential Payments Upon Termination or Change in Control” below.

MR. BERNSTEIN’S COMPENSATION

Compensation Philosophy

AB structures its executive compensation programs with the intent of enhancing firm-wide and individual performance and unitholder value. AB is also focused on ensuring that its compensation practices are competitive with those of industry peers and provide sufficient potential for wealth creation for its executives and employees generally, which it believes will enable it to meet the following key compensation goals:

 

   

attract, motivate and retain highly-qualified executive talent;

 

   

reward prior year performance;

 

   

incentivize future performance;

 

   

recognize and support outstanding individual performance and behaviors that demonstrate and foster AB’s culture of “Relentless Ingenuity”, which includes the core competencies of relentlessness, ingeniousness, collaboration and accountability; and

 

   

align its executives’ long-term interests with those of its Unitholders and clients.

Compensation Decision-Making Process

In 2018, AB management engaged McLagan Partners (“McLagan”) to provide compensation benchmarking data for Mr. Bernstein (“2018 Benchmarking Data”). The 2018 Benchmarking Data summarized 2017 compensation levels and 2018 salaries at selected asset management companies and banks comparable to AB in terms of size and business mix (“Comparable Companies”). The 2018 Benchmarking Data provided ranges of compensation levels at the Comparable Companies for positions similar to Mr. Bernstein’s, including base salary and total compensation.

The Comparable Companies, which AB management selected with input from McLagan, included:

 

   

Eaton Vance Corporation

 

   

Invesco Ltd.

 

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MFS Investment Management

 

   

Oppenheimer Funds Distributor, Inc.

 

   

T. Rowe Price Group, Inc.

 

   

Franklin Resources, Inc.

 

   

JPMorgan Asset Management Inc.

 

   

Morgan Stanley Investment Management Inc.

 

   

PIMCO LLC

 

   

TIAA Group / Nuveen Investments

 

   

Goldman Sachs Asset Management

 

   

Legg Mason, Inc.

 

   

Neuberger Berman LLC

 

   

Prudential Investments

 

   

The Vanguard Group, Inc.

The AB Compensation Committee considered the 2018 Benchmarking Data in concluding that Mr. Bernstein’s 2018 compensation was appropriate and reasonable.

Compensation Components

Under his employment agreement with AB (the “Bernstein Employment Agreement”), Mr. Bernstein serves as the President and Chief Executive Officer of AB for a term that commenced on May 1, 2017 and ends on May 1, 2020, provided that the term shall automatically extend for one additional year on May 1, 2020 and each anniversary thereafter, unless the Bernstein Employment Agreement is terminated in accordance with its terms.

The terms of the Bernstein Employment Agreement were the result of arm’s length negotiations between Mr. Bernstein and senior AXA executives. The AB Board then approved the Bernstein Employment Agreement after having considered, among other things, the compensation package provided to Mr. Bernstein’s predecessor, the 2016 compensation and 2017 expected compensation of AB’s other executive officers and Mr. Bernstein’s compensation at his former employer.

Base Salary

Under the Bernstein Employment Agreement, Mr. Bernstein is entitled to a minimum base salary of $500,000 that is reviewed each year by the AB Compensation Committee. The AB Compensation Committee has not made any adjustments to Mr. Bernstein’s base salary, consistent with AB’s policy to keep executive base salaries low in relation to their total compensation.

Short-Term Incentive Compensation

A 2018 variable cash incentive award was available for Mr. Bernstein under AB’s 2018 Incentive Compensation Program (the “2018 AB STIC Program”). Mr. Bernstein’s annual award is not correlated with any specific targets for AB performance but is primarily is a function of AB’s financial performance and the AB Compensation Committee’s assessment of Mr. Bernstein’s performance.

Adjusted Compensation Ratio

For the 2018 AB STIC Program, the AB Compensation Committee approved the use of the “Adjusted Compensation Ratio” as the metric to consider in determining the total amount of incentive compensation paid to all of AB’s employees, including Mr. Bernstein. The Adjusted Compensation Ratio is the ratio of “adjusted employee compensation and benefits expense” to “adjusted net revenues.”

 

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Adjusted employee compensation and benefits expense is AB’s total employee compensation and benefits expense minus other employment costs such as recruitment, training, temporary help and meals, and excludes the impact of mark-to-market vesting expense, as well as dividends and interest expense, associated with employee long-term incentive compensation-related investments.

 

   

Adjusted net revenues is a financial measure that is not computed in accordance with U.S. GAAP and makes certain adjustments to net revenues.7 Specifically, adjusted net revenues:

 

   

excludes investment gains and losses and dividends and interest on employee long-term incentive compensation-related investments;

 

   

offsets distribution-related payments to third parties as well as amortization of deferred sales commissions against distribution revenues;

 

   

excludes additional pass-through expenses incurred (primarily through AB’s transfer agent) that are reimbursed and recorded as fees in revenues; and

 

   

eliminates the revenues of consolidated AB-sponsored investment funds but includes AB’s fees from such funds and AB’s investment gains and losses on its investments in such funds.

The AB Compensation Committee has approved a 50% limit for the Adjusted Compensation Ratio, except in unexpected or unusual circumstances. For 2018, the Adjusted Compensation Ratio was 47.5%.

Mr. Bernstein’s Award

Mr. Bernstein’s short-term incentive compensation target is $3,000,000, subject to review and increase from time to time by the AB Compensation Committee in its sole discretion. Based on its subjective determination of Mr. Bernstein’s performance, the AB Compensation Committee approved an award of $3,500,000 for Mr. Bernstein under the 2018 AB STIC Program.

In making its determination, the AB Compensation Committee took into account the factors that it deemed relevant, including Mr. Pearson’s recommendations and Mr. Bernstein’s leadership with respect to the progress AB made across its three firm-wide initiatives in 2018, which were:

 

   

deliver differentiated return streams to clients;

 

   

commercialize and scale its suite of services; and

 

   

continue its rigorous focus on expense management.

Highlights during 2018 included active equity net inflows in AB’s retail and institutional channels, the highest amount of gross sales in its private wealth channel in 10 years, and an expansion of AB’s adjusted operating margin by 140 bps to 29.1%. The AB Compensation Committee also considered Mr. Bernstein’s leadership in AB’s continuing process of relocating its headquarters to Nashville.

Equity-Based Awards

Under the Bernstein Employment Agreement, Mr. Bernstein is eligible to receive annual equity-based awards in accordance with AB’s compensation practices and policies generally applicable to the firm’s executive officers as in effect from time to time. The target value for Mr. Bernstein’s annual equity-based awards is $3,500,000, subject to review and increase by the AB Compensation Committee in its sole discretion from time to time. The AB Compensation Committee approved an equity-based award to Mr. Bernstein with a grant date fair value equal to $4,000,000 and four-year pro-rata vesting during its regular meeting held on December 11, 2018 (the “2018 SB Award”).

 

 

7 

Adjusted net revenues is a non-GAAP financial measure used by AB’s management in evaluating AB’s financial performance on a standalone basis and to compare its performance, as reported by AB in its public filings. It is not comparable to any other non-GAAP financial measure used by the Company.

 

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The 2018 SB Award is denominated in restricted AB Holding Units to align Mr. Bernstein’s long-term interests directly with the interests of AB Unitholders and indirectly with the interests of our stockholders and AB clients, as strong performance for AB clients generally contributes directly to increases in AB’s assets under management and improvements in our financial performance.

The AB Holding Units underlying the 2018 SB Award are restricted and are not permitted to be transferred by Mr. Bernstein. Mr. Bernstein has voluntarily elected to defer receipt of any vested portion of the 2018 SB Award until 2023. Quarterly cash distributions on vested and unvested restricted AB Holding Units in respect of the 2018 SB Award will be delivered to Mr. Bernstein when cash distributions generally are paid to all Unitholders.

If Mr. Bernstein resigns or is terminated without cause prior to the vesting date, he will be eligible to continue to vest in the 2018 SB Award, subject to compliance with the restrictive covenants set forth in the applicable award agreement, including restrictions on competition and solicitation of employees and clients. The 2018 SB Award will immediately vest upon a termination due to death or disability. AB is permitted to clawback an award if Mr. Bernstein fails to adhere to risk management policies.

As a member of the Management Committee, Mr. Bernstein received a Transaction Incentive Award in 2018 with a dollar value of $740,000. Mr. Bernstein’s Transaction Incentive Award was granted by the EQH Board in the same form and is subject to the same terms and conditions as described above for the EQH Program Participants.

Other Compensation and Benefits

Under the Bernstein Employment Agreement, Mr. Bernstein is eligible to participate in all benefit plans available to AB executive officers and entitled to a company car and driver for business and personal use.

Mr. Bernstein participates in the Profit Sharing Plan for Employees of AB (as amended and restated as of January 1, 2015, as further amended as of January 1, 2017 and as further amended as of April 1, 2018, the “Profit Sharing Plan”), a tax-qualified retirement plan. The AB Compensation Committee determines the amount of annual company contributions (both the level of annual matching by the firm of an employee’s pre-tax salary deferral contributions and the annual company profit sharing contribution, if any).

With respect to 2018, the AB Compensation Committee determined that employee deferral contributions would be matched on a dollar-for-dollar basis up to 5% of eligible compensation and that there would be no profit-sharing contribution.

AB also pays the premiums associated with a life insurance policy purchased on behalf of Mr. Bernstein.

Termination Benefits

The Bernstein Employment Agreement includes severance and change-in-control provisions. If Mr. Bernstein’s employment is terminated without cause or he resigns for “good reason,” and he signs and does not revoke a waiver and release of claims, he will receive certain severance benefits, including a cash payment equal to the sum of his current base salary and bonus opportunity amount (the “Compensation Amount”). If such a termination occurs during the 12 months following a change in control in AB, he will receive the same severance benefits plus an additional payment equal to the Compensation Amount. For this purpose, a change in control of AB would not include a change in control related to AXA ceasing to own more than 50% of the shares of Holdings’ common stock.

If a change in control occurs prior to January 1, 2020, to the extent that payments to Mr. Bernstein would be subject to the excise tax under Section 4999 of the Internal Revenue Code, Mr. Bernstein will be entitled to a gross-up payment to ensure that he will retain an amount equal to the excise tax imposed upon such payments, but if the payments do not exceed 110% of the statutory limit imposed by Section 280G of the Internal Revenue Code, the payments will be reduced to the maximum amount that does not result in the imposition of such excise tax.

 

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Mr. Bernstein negotiated these severance and change-in-control provisions to have the security and flexibility to focus on the business and preserve the value of his long-term incentive compensation. The AB Board and AXA determined that these provisions were reasonable and appropriate because they were necessary to recruit and retain Mr. Bernstein and provided Mr. Bernstein with effective incentives for future performance. Also, the AB Board and AXA determined to limit the applicability of the excise tax gross-up provision as the application of the excise tax is more burdensome on newly hired employees.

The AB Board and AXA further concluded that the change-in-control and termination provisions in the Bernstein Employment Agreement fit within AB’s overall compensation objectives because these provisions align with AB’s goal of providing executives with effective incentives for future performance and:

 

   

permitted AB to recruit and retain a highly-qualified Chief Executive Officer;

 

   

aligned Mr. Bernstein’s long-term interests with those of AB’s Unitholders, our stockholders and clients;

 

   

were consistent with AXA’s and the AB Board’s expectations with respect to the manner in which AB and AB Holding would be operated during Mr. Bernstein’s tenure; and

 

   

were consistent with the AB Board’s expectations that Mr. Bernstein would not be terminated without cause and that no steps would be taken that would provide him with the ability to terminate the agreement for good reason.

Following his termination of employment for any reason, Mr. Bernstein is subject to covenants with respect to non-competition for six months and non-solicitation of customers and employees for twelve months following termination.

For additional information on severance and change in control benefits for Mr. Bernstein as of December 31, 2018, see “Potential Payments Upon Termination or Change in Control” below.

COMPENSATION-RELATED POLICIES

The Board approved the following compensation-related policies prior to the IPO based on its review of the Pay Governance Practices Analysis and input from management and the OCC.

Clawbacks

Our clawback and forfeiture policy provides that:

 

   

if we are required to prepare an accounting restatement of our financial results due to material noncompliance with any financial reporting requirement under the securities laws caused by the fraud, misconduct or gross negligence of a current or former executive officer, we will use reasonable efforts to recover any incentive compensation paid to the executive officer that would not have been paid if the financial results had been properly reported; and

 

   

if a current or former executive officer commits fraudulent or other wrongful conduct that causes us business, financial or reputational harm, we may seek recovery of performance-based compensation with respect to the period of misconduct.

For this purpose, an “executive officer” includes any officer of Holdings for purposes of Section 16 of the Exchange Act. Currently, this includes the members of the Management Committee and the Chief Accounting Officer.

Stock Ownership Guidelines

The following stock ownership guidelines apply to members of the Management Committee:

 

Executive

 

 

  Requirement

 

Chief Executive Officer

 

6 x base salary

 

Other Management Committee Members

 

3 x base salary

 

 

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For purposes of determining whether the guidelines are met, the following are taken into account:

 

   

Shares;

 

   

AB Holding Units (collectively with Holdings common stock, “Company Stock”); and

 

   

unvested restricted stock or restricted stock units linked to Company Stock that are subject only to service requirements.

The executives are required to retain 75% of any net Company Stock (after the payment of taxes and the costs of exercise and commissions for stock options) received as compensation until the applicable requirement is met. Once an executive satisfies the stock ownership guidelines, the executive will not be deemed to have fallen out of compliance solely by reason of a decline in the value of the Company Stock.

Hedging and Pledging

Holdings believes that, when an individual who owns Company securities engages in certain forms of hedging or monetization transactions, he or she may no longer have the same objectives as other holders of the Company securities. Accordingly, all Company employees and directors are prohibited from engaging in hedging or similar transactions with respect to Company securities that would allow them to continue to own the securities without the full risks and rewards of ownership. This includes transactions such as zero-cost collars and forward sale contracts that could allow them to lock in much of the value of their holdings in exchange for all or part of the potential for upside appreciation in the securities.

Company employees and directors are further prohibited from pledging Company securities as collateral for a loan (whether in a margin account or otherwise).

Rule 10b5-1 Trading Plan Policy

Holdings’ insider trading policy provides that our insiders may trade in Company securities during periods in which they would otherwise be restricted from doing so under the policy due to the possession of material non-public information or otherwise if they enter into a pre-established written trading plan in accordance with Rule 10b5-1 enacted by the SEC.

All trading plans must:

 

   

be in writing and in a form acceptable to the Company;

 

   

acknowledged in writing by the General Counsel prior to becoming effective; and

 

   

not be modified at any time when the insider is in possession of material non-public information.

ACCOUNTING AND TAX CONSIDERATIONS

Internal Revenue Code Section 162(m) (“Section 162(m)”) limits tax deductions relating to executive compensation of certain executives of publicly held companies. For taxable years prior to 2018, neither Holdings nor any of its subsidiaries, including AB, were deemed to be publicly held companies for this purpose.

Following the IPO, Holdings is deemed to constitute a publicly held company for purposes of Section 162(m). Accordingly, the Compensation Committee may consider the deductibility of executive compensation under Section 162(m) when making compensation decisions. However, the Compensation Committee will authorize compensation payments that are not deductible for federal income tax purposes when the committee believes that such payments are appropriate to attract, retain and incent executive talent.

Internal Revenue Code Section 409A (“Section 409A”) imposes stringent requirements that covered nonqualified deferred compensation arrangements must meet to avoid the imposition of additional taxes, including a 20% additional income tax, on the amounts deferred under the arrangements. The Company’s nonqualified deferred compensation arrangements that are subject to Section 409A are designed to comply with the requirements of Section 409A to avoid additional income taxes.

 

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Accounting and other tax impacts not discussed above are also considered in the design of short-term incentive compensation and equity-based award programs.

CONSIDERATION OF MOST RECENT ‘SAY ON PAY’ VOTE

As a newly public company, Holdings has not yet conducted a “Say on Pay” vote.

Compensation Committee Report

The Compensation Committee reviewed the preceding Compensation Discussion and Analysis and discussed it with management. Based on the Compensation Committee’s review and discussion with management, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in Holdings’ annual report on Form 10-K and Holdings’ Proxy Statement.

Compensation Committee

Ramon de Oliveira

Daniel G. Kaye

Charles G. T. Stonehill

George Stansfield

Note: As of March 26, 2019, Mr. Kaye and Mr. Stansfield no longer serve on the Compensation Committee. Also, Ms. Matus has joined the Compensation Committee and replaced Mr. de Oliveira as Chairperson.

Compensation Committee Interlocks and Insider Participation

The following directors served as Compensation Committee members during 2018: Messrs. Kaye, de Oliveira, Stansfield and Stonehill. During 2018, none of our executive officers served as: (a) a member of the compensation committee of any entity for which a member of our Board served as an executive officer or (b) a director of another entity, an executive officer of which serves as member of the Board.

Consideration of Risk Matters in Determining Compensation

Holdings has considered whether its compensation practices are reasonably likely to have a material adverse effect on Holdings and determined that they are not.

To support its analysis, Holdings engaged a compensation consultant to conduct a risk assessment of the 2018 STIC Program, the 2018 LTIC Program and sales incentive plans for the retirement and protection businesses (the “Risk Assessment”). The Risk Assessment confirmed that the programs have a number of features that contribute to prudent decision-making and avoid an incentive to take excessive risk. The Risk Assessment also noted good governance practices, well-defined oversight processes and well-honed day-to-day processes, roles and responsibilities with cross-functional representation.

Holdings also considered that AB generally denominates its equity-based awards in AB Holding Units and defers their delivery to sensitize employees to risk outcomes and discourage them from taking excessive risks, whether relating to investments, operations, regulatory compliance and/or cyber security, that could lead to a decrease in the value of the AB Holding Units and/or an adverse effect on AB’s long-term prospects. Also, all outstanding AB equity-based awards generally include a provision permitting AB to “claw-back” the unvested portion of the award if the AB Compensation Committee determines that (i) the employee failed to adhere to existing risk management policies and (ii) as a result of the employee’s failure, there has been or reasonably could be expected to be a material adverse impact on AB or the employee’s business unit.

 

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Compensation Tables

2018 SUMMARY COMPENSATION TABLE

The following table presents the total compensation of the Named Executive Officers for services performed in the years ended December 31, 2018, December 31, 2017 and December 31, 2016, except that no information is provided for 2017 and 2016 for Mr. Hurd and for 2016 for Mr. Bernstein since they were not Named Executive Officers in those years.

The total compensation reported in the following table includes items such as salary and non-equity incentive compensation as well as the grant date fair value of equity-based compensation. The equity-based compensation may never become payable or may end up with a value that is substantially different from the value reported here. The amounts in the Total column do not represent “Total Direct Compensation” as described in the Compensation Discussion and Analysis.

 

Name and Principal Position

  Fiscal
Year
   

Salary

(1)

   

Bonus

(2)

   

Stock
Awards

(3)

   

Option
Awards

(4)

   

Non-Equity
Incentive
Compensation

(5)

    Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings (6)
    All Other
Compensation
(7)
    Total  

Mark Pearson

President and Chief Executive Officer

    2018     $ 1,250,114     $     $ 6,587,516     $ 962,503     $ 2,911,651     $     $ 426,779     $ 12,138,563  
    2017     $ 1,250,114     $     $ 2,067,378     $ 341,280     $ 2,526,000     $ 1,017,919     $ 370,238     $ 7,572,929  
    2016     $ 1,250,744     $     $ 2,010,449     $ 382,419     $ 2,164,000     $ 393,441     $ 389,201     $ 6,590,254  

Anders Malmström

Senior Executive Vice President and Chief Financial Officer

    2018     $ 688,915     $     $ 2,605,048     $ 375,000     $ 1,299,600     $ 114,890     $ 186,171     $ 5,269,624  
    2017     $ 658,228     $     $ 526,564     $ 106,722     $ 1,047,248     $ 180,070     $ 330,538     $ 2,849,370  
    2016     $ 658,228     $     $ 496,993     $ 116,089     $ 850,000     $ 280,596     $ 172,895     $ 2,574,801  

Jeffrey Hurd

Senior Executive Vice President and Chief Operating Officer

    2018     $ 864,480     $ 300,000     $ 2,090,031     $ 450,001     $ 2,080,000     $     $ 91,439     $ 5,875,951  

Dave Hattem

Senior Executive Vice President, General Counsel and Secretary

    2018     $ 665,182     $     $ 2,230,032     $ 250,000     $ 1,040,000     $     $ 160,812     $ 4,346,026  
    2017     $ 609,333     $     $ 646,471     $ 106,722     $ 788,119     $ 578,537     $ 155,008     $ 2,884,190  
    2016     $ 599,893     $     $ 648,443     $ 123,348     $ 750,000     $ 238,250     $ 134,224     $ 2,494,158  

Seth Bernstein

Senior Executive Vice President and Head of Investment Management and Research

    2018     $ 500,000     $ 3,500,000     $ 4,740,000     $     $     $     $ 344,847     $ 9,084,847  
    2017     $ 334,615     $ 3,000,000     $ 3,500,003     $     $     $     $ 148,274     $ 6,982,892  
                 
                                                                       

 

(1)

For the EQH Program Participants, the amounts in this column reflect actual salary paid in each year. Mr. Bernstein’s annual base salary is $500,000.

 

(2)

No bonuses were paid to the EQH Program Participants in 2018, 2017 or 2016 other than Mr. Hurd’s sign-on bonus of $300,000 in 2018. For Mr. Bernstein, this column includes his annual cash incentive awards paid for performance in 2018 and 2017 respectively.

 

(3)

For the EQH Program Participants, the amounts reported in this column for 2018 represent the aggregate grant date fair value of EQH RSUs, EQH Performance Shares and Transaction Incentive Awards granted to them in 2018 in accordance with FASB ASC Topic 718, and the assumptions made in calculating them can be found in note 14 of the notes to Holdings’ consolidated financial statements for the year ended December 31, 2018. The EQH Performance Shares were valued at target which represents the probable outcome at grant date. A maximum payout for the EQH Performance Shares, valued at the grant date fair value, would result in values of:

 

AEL Named Executive Officer

   Maximum Payout  

Mr. Pearson

   $ 3,850,021  

Mr. Malmström

   $ 1,500,054  

Mr. Hurd

   $ 1,800,039  

Mr. Hattem

   $ 1,000,036  

 

    

For Mr. Bernstein, the amount reported in this column for 2018 represents the aggregate grant date fair value of his Transaction Incentive Award and the 2018 SB Award in accordance with FASB ASC Topic 718, and the assumptions made in calculating this amount can be found in Note 14 of the notes to Holdings’ consolidated financial statements for the year ended December 31, 2018. The EQH RSUs, EQH Performance Shares, Transaction Incentive Awards and 2018 SB Award are described in more detail below in “Supplemental Information for Summary Compensation and Grants of Plan-Based Awards Tables.”

 

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(4)

The amounts reported in this column for 2018 represent the aggregate grant date fair value of EQH Stock Options granted in 2018 in accordance with FASB ASC Topic 718, and the assumptions made in calculating them can be found in note 14 of the notes to Holdings’ consolidated financial statements for the year ended December 31, 2018. EQH Stock Options are described in more detail below in “Supplemental Information for Summary Compensation and Grants of Plan-Based Awards Tables.”

 

(5)

The amounts reported in this column represent the annual cash incentive awards paid for performance in 2018, 2017 and 2016, respectively.

 

(6)

The amounts reported represent the increase in the actuarial present value of accumulated pension benefits for the Named Executive Officer. The actuarial present value of Mr. Pearson’s and Mr. Hattem’s accumulated pension benefits decreased by $712,215 and $216,816 respectively, primarily due to an increase in the discount rate used to determine the present value. The Named Executive Officers did not have any above-market earnings on non-qualified deferred compensation in 2018, 2017 or 2016. For more information regarding the pension benefits for each Named Executive Officer, see the Pension Benefits as of December 31, 2018 Table below.

 

(7)

The following table provides additional details for the 2018 amounts in the All Other Compensation column.

 

Name

  

Auto

(a)

    

Excess
Liability
Insurance

(b)

    

Financial
Advice

(c)

    

Profit
Sharing/401k
Plan
Contributions

(d)

    

Excess 401(k)
Contributions

(e)

    

Other
Perquisites/
Benefits

(f)

     Total  

Mark Pearson

   $ 28,992      $ 8,201      $ 24,891      $ 14,665      $ 349,964      $ 66      $ 426,779  

Anders Malmström

   $      $      $ 24,891      $ 14,665      $ 146,116      $ 499      $ 186,171  

Jeffrey Hurd

   $      $      $ 17,535      $ 14,665      $ 58,806      $ 433      $ 91,439  

Dave Hattem

   $      $      $ 15,000      $ 14,665      $ 128,329      $ 2,818      $ 160,812  

Seth Bernstein

   $ 320,685      $      $ 9,340      $ 12,500      $      $ 2,322      $ 344,847  

 

  (a)

Pursuant to his employment agreement, Mr. Pearson is entitled to the business and personal use of a dedicated car and driver. The personal use of this vehicle was valued based on a formula considering the annual lease value of the vehicle, the compensation of the driver and the cost of fuel. For Mr. Bernstein, the amount listed includes auto lease costs ($16,689), driver compensation and other car-related expenses ($303,996).

 

  (b)

AXA Equitable Life pays the premiums for excess liability insurance coverage for Mr. Pearson pursuant to his employment agreement. The amount in this column reflects the actual amount of premiums paid.

 

  (c)

AXA Equitable Life paid for financial planning services for each of the EQH Program Participants in 2018. These payments have been discontinued for 2019 and future years for EQH Program Participants other than Mr. Pearson. This column also includes payments for expatriate tax services for Mr. Pearson and Mr. Malmström.

 

  (d)

This column includes the amount of company contributions received by each EQH Program Participant under the 401(k) Plan and by Mr. Bernstein under the Profit Sharing Plan.

 

  (e)

This column includes the amount of excess 401(k) contributions received by each EQH Program Participant under the Post-2004 Plan.

 

  (f)

This column includes amounts related to guests accompanying the EQH Program Participants to company events. It also includes life insurance premiums for Mr. Bernstein and a $66 health premium refund for both Mr. Pearson and Mr. Malmström.

 

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2018 GRANTS OF PLAN-BASED AWARDS

The following table provides additional information about plan-based compensation disclosed in the Summary Compensation Table. This table includes both equity and non-equity awards granted during 2018.

 

Name

  Grant
Date
    Approval
Date (1)
   

Estimated Future

Payouts Under

Non-Equity Incentive

Plan Awards (2)

   

Estimated Future

Payouts Under

Equity Incentive

Plan Awards (3)

    All Other
Stock
Awards:
Number of
Shares of
Stock or
Units (#)
(3)
    All Other
Option
Awards:
Number of
Securities
Underlying
Options (#)
(3)
    Exercise
or Base
Price of
Option
Awards
($/Sh)
    Grant
Date Fair
Value of
Stock and
Option
Awards
(4)
 
  Threshold
($)
   

Target

($)

    Maximum
($)
    Threshold
(#)
    Target
(#)
    Maximum
(#)
 

Mark Pearson

                  $     $ 2,128,400     $ 4,256,800                                                          
    06/11/2018       05/16/2018                                                               208,786     $ 21.34     $ 962,503  
    05/17/2018       05/16/2018                                                       44,396                     $ 962,505  
    05/17/2018       05/16/2018                                       41,541       83,082                             $ 962,505  
    05/17/2018       05/16/2018                                       44,396       88,792                             $ 962,505  
    05/09/2018       04/25/2018                               46,250       92,500       92,500       92,500                     $ 3,700,000  

Anders Malmström

                  $     $ 1,000,000     $ 2,000,000                                                          
    06/11/2018       05/16/2018                                                               81,345     $ 21.34     $ 375,000  
    05/17/2018       05/16/2018                                                       17,298                     $ 375,021  
    05/17/2018       05/16/2018                                       16,185       32,370                             $ 375,006  
    05/17/2018       05/16/2018                                       17,298       34,596                             $ 375,021  
    05/09/2018       04/25/2018                               18,500       37,000       37,000       37,000                     $ 1,480,000  

Jeff Hurd

                  $     $ 1,500,000     $ 3,000,000                                                          
    06/11/2018       05/16/2018                                                               97,614     $ 21.34     $ 450,001  
    05/17/2018       05/16/2018                                                       20,757                     $ 450,012  
    05/17/2018       05/16/2018                                       19,422       23,306                             $ 450,008  
    05/17/2018       05/16/2018                                       20,757       24,908                             $ 450,012  
    05/09/2018       04/25/2018                               9,250       18,500       18,500       18,500                     $ 740,000  

Dave Hattem

                  $     $ 750,000     $ 1,500,000                                                          
    06/11/2018       05/16/2018                                                               54,230     $ 21.34     $ 250,000  
    05/17/2018       05/16/2018                                                       11,532                     $ 250,014  
    05/17/2018       05/16/2018                                       10,790       21,580                             $ 250,004  
    05/17/2018       05/16/2018                                       11,532       23,064                             $ 250,014  
    05/09/2018       04/25/2018                               18,500       37,000       37,000       37,000                     $ 1,480,000  

Seth Bernstein

    12/11/2018       12/11/2018                                                       149,868                     $ 4,000,000  
    05/09/2018       04/25/2018                               9,250       18,500       18,500       18,500                     $ 740,000  

 

(1)

On May 16, 2018, the Compensation Committee approved the grant of the EQH RSUs and EQH Performance Shares with a grant date of May 17, 2018 and the grant of the EQH Stock Options with a grant date of June 11, 2018. On April 25, 2018, the Board approved the grant of the Transaction Incentive Awards with a grant date of May 9, 2018. On December 11, 2018, the AB Compensation Committee approved the grant of the 2018 SB Award with a grant date of December 11, 2018.

 

(2)

For the EQH Program Participants, the target column shows the target award under the 2018 STIC Program assuming the plan was 100% funded. The actual awards paid to the EQH Program Participants are listed in the Non-Equity Incentive Compensation column of the Summary Compensation Table.

 

(3)

For the EQH Program Participants, the second row shows the EQH Stock Options granted on June 11, 2018. The third, fourth and fifth rows show the EQH RSUs, the TSR Performance Shares and the ROE Performance Shares granted on May 17, 2018, respectively. The sixth row shows the Transaction Incentive Awards granted on May 9, 2018. For Mr. Bernstein, the first row shows the 2018 SB Award granted on December 11, 2018 and the second row shows the Transaction Incentive Award granted on May 9, 2018.

 

(4)

The amounts in this column represent the aggregate grant date fair value of all equity-based awards granted to the Named Executive Officers in 2018 in accordance with ASC Topic 718. The EQH Performance Shares were valued at target which represents the probable outcome at grant date.

 

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SUPPLEMENTAL INFORMATION FOR SUMMARY COMPENSATION AND GRANTS OF PLAN-BASED AWARDS TABLES

2018 Annual Equity-Based Awards for EQH Program Participants

EQH RSUs. EQH RSUs were granted on May 17, 2018 with a vesting schedule of approximately three years, with one-third of the grant vesting on each of March 1, 2019, March 1, 2020 and March 1, 2021. EQH RSUs receive dividend equivalents with the same vesting schedule as their related units.

EQH Stock Options. EQH Stock Options were granted on June 11, 2018 with a term of approximately ten years and a vesting schedule of approximately three years, with one-third of the grant vesting on each of March 1, 2019, March 1, 2020 and March 1, 2021. The exercise price for the EQH Stock Options is $21.34, which was the closing price for Holdings’ common stock on the grant date.

EQH Performance Shares. EQH Performance Shares were granted on May 17, 2018 and will cliff vest after approximately three years. EQH Performance Shares will receive dividend equivalents with the same vesting schedule as their related shares and were granted unearned. Two types of EQH Performance Shares were granted:

 

   

ROE Performance Shares – EQH Performance Shares that may be earned based on the Company’s performance against certain targets for its Non-GAAP Operating ROE8; and

 

   

TSR Performance Shares – EQH Performance Shares that may be earned based on Holdings’ Relative TSR.

ROE Performance Shares. The number of ROE Performance Shares that are earned will be determined at the end of the performance period (January 1, 2018 – December 31, 2020) by multiplying the number of unearned ROE Performance Shares granted by the “Final ROE Performance Factor.” The Final ROE Performance Factor will be determined by averaging the “ROE Performance Factor” for each of the three calendar years in the ROE Performance Period. Specifically, the Company will be assigned target, maximum and threshold amounts for Non-GAAP Operating ROE for each of 2019 and 2020 and Pro Forma Non-GAAP Operating ROE for 2018 that will determine the “ROE Performance Factor” for the applicable year as follows:

 

The actual result for the

applicable year equals....

  

The ROE Performance Factor for the

applicable year will equal....

Maximum Amount (or greater)

   200%

Target Amount

   100%

Threshold Amount

   25%

Below Threshold

   0%

Note: For results in between the threshold and target and target and maximum amounts, the ROE Performance Factor for the applicable year will be determined by linear interpolation.

 

 

8 

This Proxy Statement includes certain non-GAAP financial measures which are used as performance measures in our incentive compensation programs, including non-GAAP Operating Earnings and Pro Forma Non-GAAP Operating ROE. More information on these measures and reconciliations to the most comparable U.S. GAAP measures can be found in Appendix A.

 

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TSR Performance Shares. The number of TSR Performance Shares that are earned will be determined at the end of a performance period (May 17, 2018—December 31, 2020) by multiplying the number of unearned TSR Performance Shares by the “TSR Performance Factor.” The TSR Performance Factor will be determined as follows, subject to a cap of 100% if Holdings’ total stockholder return for the performance period is negative:

 

If Relative TSR for the TSR

Performance Period is...

  

The TSR Performance Factor will

equal...

87.5th percentile or greater (maximum)

   200%

50th percentile (target)

   100%

30th percentile (threshold)

   25%

Below 30th percentile

   0%

Note: For results in between the threshold and target and target and maximum amounts, the TSR Performance Factor will be determined by linear interpolation.

2018 Transaction Incentive Awards

All Transaction Incentive Awards were paid in the form of restricted stock units that will be settled in shares of Holdings’ common stock. The amount of restricted stock units granted to each Named Executive Officer was determined by dividing his award value by the IPO price of $20. The restricted stock units vest as follows:

 

Type Of Units     Vesting Requirements

Service Units

(50% of award)

 

  50% of the Service Units vested on November 14, 2018;

 

  25% of the Service Units will vest on May 10, 2019; and

 

  25% of the Service Units will vest on May 10, 2020.

Performance Units

(50% of award)

 

  Condition #1 – if, prior to May 10, 2020, the average closing price of a share of Holdings’ common stock for thirty consecutive days is at least equal to $26, all Performance Units will immediately vest;

 

  Condition #2 – if Condition #1 is not met but, prior to May 10, 2023, the average closing price of a share of Holdings’ common stock for thirty consecutive days is at least equal to $30, all Performance Units will immediately vest; and

 

  Condition #3 – if neither Condition #1 nor Condition #2 is met, fifty percent of the Performance Units will vest on May 10, 2023. The remaining 50% of the Performance Units will be forfeited.

2018 SB Award

The 2018 SB Award is denominated in restricted AB Holding Units and has a four-year pro-rata vesting schedule. The AB Holding Units underlying the 2018 SB Award are restricted and are not permitted to be transferred by Mr. Bernstein. Mr. Bernstein has voluntarily elected to defer receipt of any vested portion of the 2018 SB Award until 2023. Quarterly cash distributions on vested and unvested restricted AB Holding Units in respect of the 2018 SB Award will be delivered to Mr. Bernstein when cash distributions generally are paid to all Unitholders. If Mr. Bernstein resigns or is terminated without cause prior to the vesting date, he is eligible to continue to vest in the 2018 SB Award, subject to compliance with the restrictive covenants set forth in the applicable award agreement, including restrictions on competition, and restrictions on employee and client solicitation. The 2018 SB Award will immediately vest upon a termination due to death or disability. AB is permitted to claw-back an award if Mr. Bernstein fails to adhere to risk management policies.

 

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OUTSTANDING EQUITY AWARDS AS OF DECEMBER 31, 2018

The following table lists outstanding equity grants for each Named Executive Officer as of December 31, 2018. The table includes outstanding equity grants from past years as well as the current year. For the EQH Program Participants, equity grants in 2017 and prior years were awarded in respect of AXA ordinary shares.

 

OPTION AWARDS

 

     STOCK AWARDS  

Name

   Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
(1)
     Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
(1)
     Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options  (#)
(1)
     Option
Exercise
Price ($)
(2)
     Option
Expiration
Date
     Number of
Shares or
Units of
Stock That
Have Not
Vested (#)
(3)
     Market
Value of
Shares or
Units of
Stock That
Have Not
Vested ($)
     Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other Rights
That Have
Not Vested
(#) (4)
     Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested ($)
 

Mark Pearson

                       41,134      $ 25.74        03/24/2024        182,967      $ 3,500,876        426,303      $ 8,099,120  
     48,486                 96,972      $ 26.12        06/19/2025                                      
                       186,069      $ 24.00        06/06/2026                                      
                       170,004      $ 26.69        06/21/2027                                      
              208,786               $ 21.34        03/01/2028                                      

Anders Malmström

     24,414                 12,206      $ 25.74        03/24/2024        59,395      $ 1,104,837        150,435      $ 2,812,649  
     12,393        12,393        12,393      $ 26.12        06/19/2025                                      
              37,656        18,828      $ 24.00        06/06/2026                                      
              35,442        17,720      $ 26.69        06/21/2027                                      
              81,345               $ 21.34        03/01/2028                                      

Jeff Hurd

              97,614               $ 21.34        03/01/2028        30,007      $ 499,016        79,436      $ 1,321,021  

Dave Hattem

     22,626                 11,314      $ 25.74        03/24/2024        53,629      $ 1,008,948        135,525      $ 2,574,705  
     12,393        12,393        12,393      $ 26.12        06/19/2025                                      
              40,012        20,004      $ 24.00        06/06/2026                                      
              35,442        17,720      $ 26.69        06/21/2027                                      
              54,230               $ 21.34        03/01/2028                                      

Seth Bernstein

                                                  9,250      $ 153,828        18,500      $ 307,655  
                                                  273,398      $ 7,469,243                    

 

(1)

All options with expiration dates prior to March 1, 2028 are AXA stock options. All AXA stock options have ten-year terms and a vesting schedule of five years, with one-third of the grant vesting on each of the third, fourth and fifth anniversaries of the grant; provided that the last third will vest only if the AXA ordinary share performs at least as well as the SXIP Index during a specified period (this condition applies to all AXA stock options granted to Mr. Pearson).

 

(2)

All AXA stock options have euro exercise prices. All euro exercise prices have been converted to U.S. dollars based on the euro to U.S. dollar exchange rate on the day prior to the grant date. The actual U.S. dollar equivalent of the exercise price will depend on the exchange rate at the date of exercise.

 

(3)

For the EQH Program Participants, this column reflects earned but unvested EQH RSUs granted in 2018, AXA performance shares granted in 2015 and the remaining unvested 50% of the Service Units received under their Transaction Incentive Awards as follows:

 

     2015 AXA Performance
Shares Vesting 6/19/19
   2018 Transaction Incentive Awards –
Service Units Vesting Ratably on
5/10/19 and 5/10/20
   2018 EQH RSUs – Vesting Ratably on
3/1/19, 3/1/20 and 3/1/21

Mr. Pearson

  92,321    46,250    44,396

Mr. Malmström

  23,597    18,500    17,298

Mr. Hurd

       9,250    20,757

Mr. Hattem

  23,597    18,500    11,532

 

    

For Mr. Bernstein, the first row reflects the remaining unvested 50% of the Service Units he received under his Transaction Incentive Award and the second row reflects unvested restricted AB Holding Units granted in 2017 (which vest ratably on May 1 of each of 2019, 2020 and 2021) and unvested restricted AB Holding Units granted in 2018 (which vest ratably on December 1 of each of 2019, 2020, 2021 and 2022).

 

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(4)

This column includes:

 

      2016 AXA Performance
Shares Vesting 6/6/20
   2017 AXA Performance
Shares Vesting 6/21/21
   2018 EQH Performance
Shares Vesting 3/1/21
   2018 Transaction
Incentive Awards –
Performance Units

Mr. Pearson

   106,326    97,144   

TSR – 41,541

ROE – 88,792

   92,500

Mr. Malmström

   32,277    30,377   

TSR – 16,185

ROE – 34,596

   37,000

Mr. Hurd

        

TSR – 19,422

ROE – 41,514

   18,500

Mr. Hattem

   34,294    30,377   

TSR – 10,790

ROE – 23,064

   37,000

Mr. Bernstein

            18,500

TSR Performance Shares are reported at target. ROE Performance Shares are reported at maximum.

OPTION EXERCISES AND STOCK VESTED IN 2018

The following table summarizes the value received from stock option exercises and stock awards vested during 2018.

 

     OPTION AWARDS        STOCK AWARDS  

Name

   Number of
Shares
Acquired on
Exercise (1)
     Value
Realized on
Exercise (2)
     Number of
Shares
Acquired on
Vesting (3)
     Value
Realized on
Vesting (4)
 

Mark Pearson

     570,840      $ 5,455,816        91,929      $ 2,155,632  

Anders Malmström

     11,644      $ 120,296        32,002      $ 737,973  

Jeffrey Hurd

          $        9,302      $ 194,418  

Dave Hattem

          $        31,019      $ 712,357  

Seth Bernstein

          $        50,479      $ 1,310,301  

 

(1)

This column reflects the number of AXA stock options exercised in 2018 by Mr. Pearson and Mr. Malmström.

 

(2)

All shares acquired upon the option exercises were immediately sold. This column reflects the actual sale price received less the exercise price.

 

(3)

For Messrs. Pearson, Malmström and Hattem, this column reflects the vesting of the second tranche of their 2014 AXA performance shares in 2018. For all of the Named Executive Officers, this column reflects the vesting of a portion of their Transaction Incentive Awards (and related dividend equivalents) in November 2018. For Mr. Bernstein, this column also reflects the vesting of 41,177 of his 2017 AB Holding Units. The delivery of Mr. Bernstein’s 41,177 AB Holding Units (minus any AB Holding Units withheld to cover applicable taxes) is deferred pursuant to the terms of his employment agreement until May 1, 2021, subject to accelerated delivery upon circumstances set forth in his employment agreement. Mr. Bernstein will receive the cash distributions payable with respect to the vested but undelivered portion of his AB Holding Units on the same basis as cash distributions are paid to AB Holding Unitholders generally.

 

(4)

The value of the AXA performance shares that vested in 2018 was determined based on the average of the high and low AXA ordinary share price on the vesting date, converted to US dollars using the European Central Bank reference rate on the vesting date.

 

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PENSION BENEFITS AS OF DECEMBER 31, 2018

The following table lists the pension program participation and actuarial present value of each Named Executive Officer’s defined benefit pension at December 31, 2018. Note that Messrs. Malmström and Hurd did not participate in the Retirement Plan or the Excess Plan since they were not eligible to participate in these plans prior to their freeze. Mr. Bernstein does not have any pension benefits.

 

Name

   Plan Name (1)    Number of
Years
Credited
Service (2)
     Present Value of
Accumulated
Benefit
     Payments
during the
last fiscal
year
 

Mark Pearson

   AXA Equitable Retirement Plan      3      $ 70,561      $  
   AXA Equitable Excess Retirement Plan      3      $ 696,507      $  
   AXA Equitable Executive Survivor Benefit Plan      24      $ 3,591,990      $  

Anders Malmström

   AXA Equitable Retirement Plan           $      $  
   AXA Equitable Excess Retirement Plan           $      $  
   AXA Equitable Executive Survivor Benefit Plan      7      $ 626,356      $  

Jeffrey Hurd

   AXA Equitable Retirement Plan           $      $  
   AXA Equitable Excess Retirement Plan           $      $  
   AXA Equitable Executive Survivor Benefit Plan           $      $  

Dave Hattem

   AXA Equitable Retirement Plan      19      $ 526,399      $  
   AXA Equitable Excess Retirement Plan      19      $ 1,090,680      $  
   AXA Equitable Executive Survivor Benefit Plan      25      $ 2,206,955      $  

Seth Bernstein

   AXA Equitable Retirement Plan           $      $  
   AXA Equitable Excess Retirement Plan           $      $  
   AXA Equitable Executive Survivor Benefit Plan           $      $   —  

 

(1)

The December 31, 2018 liabilities for the Retirement Plan, the Excess Plan, and the ESB Plan were calculated using the same participant data, plan provisions and actuarial methods and assumptions used for financial reporting purposes, except that a retirement age of 65 is assumed for all calculations. The assumptions used can be found in note 13 of the notes to Holdings’ consolidated financial statements for the year ended December 31, 2018.

 

(2)

Credited service for purposes of the Retirement Plan and the Excess Plan does not include an executive’s first year of service and does not include any service after the freeze of the plans on December 31, 2013. Pursuant to his employment agreement, Mr. Pearson’s credited service for purposes of the ESB Plan includes approximately 16 years of service with AXA Equitable Life affiliates. However, this additional credited service does not result in any benefit augmentation for Mr. Pearson.

The Retirement Plan

The Retirement Plan is a tax-qualified defined benefit plan for eligible employees. The Retirement Plan was frozen effective December 31, 2013.

Participants became vested in their benefits under the Retirement Plan after three years of service. Participants are eligible to retire and begin receiving benefits under the Retirement Plan: (a) at age 65 (the “normal retirement date”) or (b) if they are at least age 55 with at least 5 full years of service (an “early retirement date”).

Prior to the freeze, the Retirement Plan provided a cash balance benefit whereby AXA Equitable Life established a notional account for each Retirement Plan participant. This notional account was credited with deemed pay credits equal to 5% of eligible compensation up to the Social Security wage base plus 10% of eligible compensation above the Social Security wage base. Eligible compensation included base salary and short-term incentive compensation and was subject to limits imposed by the Internal Revenue Code. These notional accounts continue to be credited with deemed interest credits. For pay credits earned on or after April 1, 2012 up to December 31, 2013, the interest rate is determined annually based on the average discount rates for one-year Treasury Constant Maturities. For pay credits earned prior to April 1, 2012, the annual interest rate is the greater of 4% and a rate derived from the average discount rates for one-year Treasury Constant Maturities. For 2018, pay credits earned prior to April 1, 2012 received an interest crediting rate of 4% while pay credits earned on or after April 1, 2012 received an interest crediting rate of 1.25%.

 

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Participants elect the time and form of payment of their cash balance account after they separate from service. The normal form of payment depends on a participant’s marital status as of the payment commencement date. If the participant is unmarried, the normal form will be a single life annuity. If the participant is married, the normal form will be a 50% joint and survivor annuity. Subject to spousal consent requirements, participants may elect the following optional forms of payment for their cash balance account:

 

   

Single life annuity;

 

   

Optional joint and survivor annuity of any whole percentage between 1% and 100%; and

 

   

Lump sum.

Messrs. Pearson and Hattem are each entitled to a frozen cash balance benefit under the Retirement Plan and are currently eligible for early retirement under the plan.

For certain grandfathered participants, the Retirement Plan provides benefits under a traditional defined benefit formula based on final average pay, estimated Social Security benefits and years of service. None of the Named Executive Officers are grandfathered participants.

The Excess Plan

The purpose of the Excess Plan, which was frozen as of December 31, 2013 was to allow eligible employees to earn retirement benefits in excess of those permitted under the Retirement Plan. Specifically, the Retirement Plan is subject to rules under the Internal Revenue Code that cap both the amount of eligible earnings that may be taken into account for determining benefits under the Retirement Plan and the amount of benefits that the Retirement Plan may pay annually. Prior to the freeze of the Retirement Plan, the Excess Plan permitted participants to accrue and be paid benefits that they would have earned and been paid under the Retirement Plan but for these limits. The Excess Plan is an unfunded plan and no assets are actually set aside in participants’ names.

The Excess Plan was amended effective September 1, 2008 to comply with the provisions of Internal Revenue Code Section 409A. Pursuant to the amendment, a participant’s Excess Plan benefits vested after 2005 will generally be paid in a lump sum on the first day of the month following the month in which separation from service occurs provided that payment will be delayed six months for “specified employees” (generally, the fifty most highly-compensated officers of AXA Equitable Life and its affiliates), unless the participant made a special one-time election with respect to the time and form of payment of those benefits by November 14, 2008. Neither Mr. Pearson or Mr. Hattem made a special election. The time and form of payment of Excess Plan benefits that vested prior to 2005 are the same as the time and form of payment of the participant’s Retirement Plan benefits.

The ESB Plan

The ESB Plan offers financial protection to a participant’s family in the case of his or her death. Eligible employees may choose up to four levels of coverage and the form of benefit to be paid at each level. Each level provides a benefit equal to one times the participant’s eligible compensation (generally, base salary plus the higher of: (a) most recent short-term incentive compensation award and (b) the average of the three highest short-term incentive compensation awards), subject to an overall $25 million cap. Each level offers different coverage choices. Generally, the participant can choose between a life insurance death benefit and a deferred compensation benefit payable upon death at each level. Participants are not required to contribute to the cost of Level 1 or Level 2 coverage but are required to contribute annually to the cost of any options elected under Levels 3 and 4 until age 65.

Level 1 coverage continues after retirement until the participant attains age 65. Levels 2, 3 and 4 coverage continue after retirement until the participant’s death, provided that, for Levels 3 and 4 coverage, all required participant contributions are made.

The ESB Plan was closed to new participants on January 1, 2019.

 

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Level 1

A participant can choose between the following two options at Level 1:

Lump Sum Option. Under the Lump Sum Option, a life insurance policy is purchased on the participant’s life. At the death of the participant, the participant’s beneficiary receives a tax-free lump sum death benefit from the policy. The participant is taxed annually on the value of the life insurance coverage provided.

Survivor Income Option. Upon the participant’s death, the Survivor Income Option provides the participant’s beneficiary with 15 annual payments approximating the value of the Lump Sum Option or a payment equal to the amount of the lump sum. The payments will be taxable but the participant is not subject to annual taxation.

Level 2

At Level 2, a participant can choose among the Lump Sum Option and Survivor Income Option, described above, and the following option:

Surviving Spouse Benefit Option. The Surviving Spouse Benefit Option provides the participant’s spouse with monthly income equal to about 25% of the participant’s monthly compensation (with an offset for social security). The payments are taxable but there is no annual taxation to the participant. The duration of the monthly income depends on the participant’s years of service (with a minimum duration of 5 years).

Levels 3 and 4

At Levels 3 and 4, a participant can choose among the Lump Sum Option and Survivor Income Option, described above and the following option:

Surviving Spouse Income Addition Option. The Surviving Spouse Income Addition Option provides monthly income to the participant’s spouse for life equal to 10% of the participant’s monthly compensation. The payments are taxable but there is no annual taxation to the participant.

NON-QUALIFIED DEFERRED COMPENSATION TABLE AS OF DECEMBER 31, 2018

The following table provides information on the excess 401(k) contributions received by the EQH Program Participants in 2018, as well as their aggregate balances in the Post-2004 Plan and VDCP. It also reflects Mr. Bernstein’s deferral of an equity award granted in 2017.

 

Name

   Plan Name    Executive
Contributions
in Last FY
     Registrant
Contributions
in Last FY (1)
     Aggregate
Earnings in
Last FY (2)
   

Aggregate
Withdrawals/

Distributions

     Aggregate
Balance at
Last FYE (3)
 

Mark Pearson

   The Post-2004 Variable Deferred Compensation Plan    $      $ 349,964      $ (53,972   $ 394,940      $ 1,409,626  

Anders Malmström

   The Post-2004 Variable Deferred Compensation Plan    $      $ 146,116      $ (23,655   $      $ 574,495  

Jeffrey Hurd

   The Post-2004 Variable Deferred Compensation Plan    $      $ 58,806      $ (1,939   $      $ 56,867  

Dave Hattem

   The Post-2004 Variable Deferred Compensation Plan    $      $ 128,329      $ (36,330   $ 106,954      $ 740,634  
   The Variable Deferred Compensation Plan    $      $      $ (73,060   $      $ 1,259,141  

Seth Bernstein (4)

   2017 Equity Award    $ 1,115,883      $      $ 96,766     $      $  
(1)

The amounts reported in this column are also reported in the “All Other Compensation” column of the 2018 Summary Compensation Table above.

 

(2)

The amounts reported in this column are not reported in the 2018 Summary Compensation Table.

 

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Executive Compensation

 

 

 

(3)

The amounts in this column that were previously reported as compensation in the Summary Compensation Table included in AXA Equitable Life’s Forms 10-K for the years ended December 31, 2017, 2016, 2015 and 2014 are:

 

EQH Program Participant

   Amount  

Pearson

   $ 1,311,245  

Malmström

   $ 366,469  

Hattem

   $ 458,674  

 

(4)

For Mr. Bernstein, the executive contributions column reflects the value of 41,177 restricted AB Holding Units that vested on May 1, 2018 and will not be delivered until May 1, 2021. The aggregate earnings in last fiscal year column reflects the change in the AB Holding Unit price between May 1 and December 1, 2018 and cash distributions received by Mr. Bernstein on the deferred units during this period. The grant date fair value of the AB Holding Units was reported in the Summary Compensation Table for 2017.

The Post-2004 Plan

The Post-2004 Plan allows eligible employees to defer the receipt of up to 25% of their base salary and short-term incentive compensation. Deferrals are credited to a bookkeeping account in the participant’s name on the first day of the month following the month in which the compensation otherwise would have been paid to him or her. The account is used solely for record keeping purposes and no assets are actually placed into any account in the participant’s name.

Account balances in the Post-2004 Plan are credited with gains and losses as if invested in the available earnings crediting options chosen by the participant. The Post-2004 Plan currently offers a variety of earnings crediting options.

Each year, participants in the Post-2004 Plan can elect to make deferrals into an account they have already established under the plan or they may open a new account, provided that they may not allocate any new deferrals into an account if they are scheduled to receive payments from the account in the next calendar year.

When participants establish an account, they must elect the form and timing of payments for that account. They may receive payments of their account balance in a lump sum or in any combination of lump sum and/or annual installments paid over consecutive years. They may elect to commence payments from an account in July or December of any year after the year following the deferral election provided that payments must commence by the first July or December following age 71.

In addition, AXA Equitable Life provides excess 401(k) contributions in the Post-2004 Plan for participants in the 401(k) Plan with eligible compensation in excess of the qualified plan compensation limit. These contributions are equal to 10% of the participant’s (i) eligible compensation in excess of the qualified plan compensation limit ($275,000 in 2018) and (ii) voluntary deferrals to the Post-2004 Plan for the applicable year.

The VDCP

Under the VDCP, eligible employees were permitted to defer the receipt of up to 25% of their base salary and short-term incentive compensation. Deferrals were credited to a bookkeeping account in the participant’s name on the first day of the month following the month in which the compensation otherwise would have been paid to him or her. The account is used solely for record keeping purposes and no assets are actually placed into any account in the participant’s name. The VDCP was frozen as of December 31, 2004 so that no amounts earned or vested after 2004 can be deferred under the VDCP.

Account balances in the VDCP that are attributable to deferrals of base salary and short-term incentive compensation are credited with gains and losses as if invested in the available earnings crediting options chosen by the participant. The VDCP currently offers a variety of earnings crediting options.

Participants in the VDCP could elect to credit their deferrals to in-service or retirement distribution accounts. For retirement accounts, payments may be received in any combination of a lump sum and/or annual installments paid in consecutive years. Payments may begin in any January or July following the participant’s termination date, but they must begin by either the first January or the first July following the later of: (a) the participant’s attainment of age 65 and (b) the date that is thirteen months following the participant’s termination date. For in-service accounts, payments are made to the participant in December of the year elected by the participant in a lump sum or in up to five annual installments over consecutive years.

 

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Executive Compensation

 

 

POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL

EQH Program Participants

The table below and the accompanying text present the hypothetical payments and benefits that would have been payable if the EQH Program Participants terminated employment, or a change in control (“CIC”) of Holdings occurred on December 31, 2018 (the “Trigger Date”). The payments and benefits described below are hypothetical only, as no such payments or benefits have been paid or made available. Hypothetical payments or benefits that would be due under arrangements that are generally available on the same terms to all salaried employees are not described.

For purposes of this table:

 

   

“AXA Equity Awards” means all AXA stock options and performance shares awarded to the EQH Program Participants;

 

   

“EQH Equity Awards” means the EQH RSUs, the EQH Performance Shares, the EQH Stock Options and Transaction Incentive Awards; and

 

   

hypothetical payments and benefits related to equity awards are calculated using the closing price of the AXA ordinary share on December 31, 2018, converted to U.S. dollars, or the closing price of the Holdings’ share on December 31, 2018 where applicable.

 

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Executive Compensation

 

 

In all cases included in the table, the EQH Program Participants would have been entitled to the benefits described in the pension and nonqualified deferred compensation tables above with the exception of benefits under the ESB Plan unless otherwise indicated below.

 

Name

   Temporary
Income
Payments
     Lump Sum
Payments
     AXA
Equity
Awards
     EQH
Equity
Awards
 

Mr. Pearson

           

Retirement

   $      $ 2,128,400      $ 6,395,225      $  

Good Reason Termination – no CIC

   $ 7,556,000      $ 2,884,000      $ 6,395,225      $  

Involuntary Termination – no CIC

   $ 7,556,000      $ 2,884,000      $ 6,395,225      $ 179,471  

CIC w/o Termination

   $      $      $ 8,384      $ 3,348,883  

CIC w/ Involuntary or Good Reason Termination

   $ 7,556,000      $ 2,884,000      $ 6,395,225      $ 3,348,883  

Death

   $      $      $ 7,713,268      $ 4,474,850  

Disability

   $      $      $ 6,395,225      $ 4,474,850  

Mr. Malmström

                                   

Involuntary Termination – no CIC

   $ 2,633,013      $ 1,040,000      $      $ 71,792  

CIC w/o Termination

   $      $      $ 2,488      $ 1,328,770  

Involuntary or Good Reason Termination – CIC

   $ 3,510,683      $ 1,040,000      $ 2,488      $ 1,328,770  

Death

   $      $      $ 2,270,749      $ 1,767,453  

Disability

   $      $      $ 1,862,367      $ 1,767,453  

Mr. Hurd

                                   

Involuntary Termination – no CIC

   $ 3,596,375      $ 1,540,000        N/A      $ 35,904  

CIC w/o Termination

   $      $        N/A      $ 948,409  

Involuntary or Good Reason Termination – CIC

   $ 4,795,167      $ 1,540,000        N/A      $ 948,409  

Death

   $      $        N/A      $ 1,474,848  

Disability

   $      $        N/A      $ 1,474,848  

Mr. Hattem

                                   

Retirement

   $      $ 750,000      $ 1,908,225      $  

Involuntary Termination – no CIC

   $ 2,229,358      $ 790,000      $ 1,908,225      $ 71,792  

CIC w/o Termination

   $      $      $ 2,306      $ 1,193,502  

Involuntary or Good Reason Termination – CIC

   $ 2,972,478      $ 790,000      $ 1,908,225      $ 1,193,502  

Death

   $      $      $ 2,327,182      $ 1,485,957  

Disability

   $      $      $ 1,908,225      $ 1,485,957  

Retirement

The only EQH Program Participants eligible to retire on the Trigger Date were Messrs. Pearson and Hattem. For this purpose, “retirement” means termination of service on or after the normal retirement date or any early retirement date under the Retirement Plan. If Messrs. Pearson and Hattem had retired on the Trigger Date:

Lump Sum Payments

They would have received a 2018 STIC Program award equal to the lower of their 2017 cash incentive award and their 2018 STIC Target.

AXA Equity Awards

 

   

Their AXA stock options would have continued to vest and be exercisable until their expiration date, except in the case of misconduct for which the options would be forfeited. The table reflects the value at the Trigger Date of AXA stock options that would have vested after 2018.

 

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They would have been treated as if they continued in the employ of the Company until the end of the vesting period for purposes of their AXA performance share awards. Accordingly, they would have received AXA performance share payouts at the same time and in the same amounts as they would have received such payouts if they had not retired. The estimated values of those payouts at the Trigger Date assume target performance, except for the 2015 performance shares for which actual performance is used.

EQH Equity Awards

Their EQH Equity Awards would have been forfeited.

If the Trigger Date occurred after March 1, 2019, their EQH Equity Awards (other than the Transaction Incentive Awards) would continue to vest pursuant to their terms, including satisfaction of any applicable performance criteria. Any vested options held at the time of termination would remain exercisable until the earlier of five years from the date of termination and their expiration.

Other

They would have been entitled to access to retiree medical coverage without any company subsidy as well as continued participation in the ESB Plan (the “Medical/ESB Benefits”).

Good Reason Termination – No CIC

Under his employment agreement, if Mr. Pearson had voluntarily terminated on the Trigger Date for “good reason” as described below, he would have been entitled to:

 

   

temporary income payments equal to the sum of two years of salary and two times the greatest of: (a) his most recent annual cash incentive award, (b) the average of his last three annual cash incentive awards and (c) his STIC Target;

 

   

a lump sum payment equal to his STIC Target; and

 

   

a lump sum payment equal to the additional excess 401(k) contributions that he would have received if his temporary income payments were eligible for those contributions and were all paid on the Trigger Date.

The temporary income payments would have been paid over a two-year period beginning on the first payroll date of the Company following the 60th day after the date of termination of employment (the “Severance Period”).

For this purpose, “good reason” includes:

 

   

an assignment of duties materially inconsistent with Mr. Pearson’s duties or authority or a material limitation of Mr. Pearson’s powers;

 

   

the removal of Mr. Pearson from his positions;

 

   

Mr. Pearson being required to be based at an office more than 75 miles from New York City,

 

   

a diminution of Mr. Pearson’s titles;

 

   

a material failure by the Company to comply with the agreement’s compensation provisions;

 

   

a failure of the company to secure a written assumption of the agreement by any successor company; and

 

   

a CIC of Holdings as defined below under “Change in Control—EQH Equity Awards” (provided that Mr. Pearson delivers notice of termination within 180 days after the CIC).

The severance benefits are contingent upon Mr. Pearson releasing all claims against the Company and his entitlement to severance pay will be discontinued if he provides services for a competitor.

Mr. Pearson’s equity awards would have been treated as described above under “Retirement” and he would have received the Medical/ESB Benefits. Other than Mr. Pearson, the EQH Program Participants are not entitled to termination payments or benefits in connection with a termination for good reason unrelated to a CIC.

 

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Involuntary Termination – No CIC

Temporary Income and Lump Sum Payments

If they had experienced an involuntary termination of employment unrelated to a CIC on the Trigger Date that satisfied the conditions in the Severance Plan (a “job elimination”), the EQH Program Participants other than Mr. Pearson would have been eligible for severance benefits under the Severance Plan, as supplemented by the Supplemental Severance Plan. To receive benefits, the executives would have been required to sign a separation agreement including a release of all claims against the Company. The agreement would also have included provisions regarding non-competition and non-solicitation of customers and employees for twelve months following termination of employment. The severance benefits would have included:

 

   

temporary income payments equal to 78 weeks of base salary;

 

   

additional temporary income payments equal to 1.5 times the greatest of:

 

   

the most recent annual cash incentive award paid to the executive

 

   

the average of the three most recent annual cash incentive awards paid to the executive and

 

   

the executive’s STIC Target; and

 

   

a lump sum payment equal to the sum of: (a) the executive’s STIC Target; and (b) $40,000.

Under Mr. Pearson’s employment agreement, he waived any right to participate in the Severance Plan or Supplemental Severance Plan. Rather, if Mr. Pearson’s employment had been terminated without “cause” on the Trigger Date, he would have been entitled to the same benefits as termination for good reason as described above, subject to the same conditions, provided that his severance benefits would cease after one year if certain performance conditions were not met for each of the two consecutive fiscal years immediately preceding the year of termination.

“Cause” is generally defined in Mr. Pearson’s employment agreement as: (i) willful failure to perform substantially his duties after reasonable notice of his failure; (ii) willful misconduct that is materially injurious to the company; (iii) conviction of, or plea of nolo contedere to, a felony; or (iv) willful breach of any written covenant or agreement with the company to not disclose information pertaining to the company or to not compete or interfere with the company.

AXA Equity Awards

Mr. Malmström would have had a one-year severance period during which he would have been treated as if he continued in the employ of the Company for purposes of his AXA stock options. Mr. Pearson’s and Mr. Hattem’s AXA Equity Awards would have been treated as described above under “Retirement”.

EQH Equity Awards

The EQH Program Participants would have retained a portion of their Transaction Incentive Awards equal to the amount of their unvested Performance Units as of the Trigger Date multiplied by the quotient of: (a) the number of full months elapsed between the grant date and the Trigger Date; and (b) sixty. The retained Performance Units would remain subject to their vesting conditions. The EQH Program Participants would have forfeited their other EQH Equity Awards upon an involuntary termination without cause on the Trigger Date.

If the involuntary termination without cause occurred after March 1, 2019, provided they signed and did not revoke a release of claims, Mr. Malmström and Mr. Hurd would retain a pro rata portion of the unvested EQH Performance Shares, which would remain outstanding and vest subject to the attainment of performance criteria. If Mr. Pearson and Mr. Hattem signed and did not revoke a release of claims, their EQH Equity Awards (other than the Transaction Incentive Awards) would continue to vest pursuant to their terms, including satisfaction of any applicable performance criteria. Any vested options held at the time of termination would remain exercisable until the earlier of five years from the date of termination and their expiration.

 

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Other

Mr. Pearson and Mr. Hattem would have received the Medical/ESB Benefits.

Change in Control w/o Termination

AXA Equity Awards

If there had been a change in control of Holdings as of the Trigger Date, all unvested AXA stock options would have become immediately exercisable for their term regardless of the otherwise applicable exercise schedule. For the AXA stock options, a CIC would include: (i) a change in the ownership of Holdings such that AXA owns less than 50% of the total voting power of Holdings then outstanding equity securities; or (ii) a sale of all or substantially all of Holdings’ assets to a third party that is not an AXA affiliate.

EQH Equity Awards

Generally, in the event of a CIC, equity awards granted under the 2018 Equity Plan without performance criteria that are not assumed or replaced with substitute awards having the same or better terms or conditions would fully vest and be cancelled for the same per share payment made to the stockholders in the CIC (less, in the case of options and stock appreciation rights, the applicable exercise or base price).

Equity awards granted under the 2018 Equity Plan with performance criteria would be modified into time-vesting awards at the time of the CIC based on either target or actual levels of performance, and the modified awards would then either be replaced or assumed, or cashed out, as described above.

For the EQH Equity Awards, a CIC generally includes the following events:

 

   

any person other than AXA becomes the beneficial owner of 30% or more of Holdings’ common stock and the percentage owned is greater than the percentage held by AXA;

 

   

at any time that AXA holds less than 50% of Holdings’ voting securities, the individuals who constitute the Board at the date the ownership of the voting securities by AXA first drops below 50% cease for any reason to constitute at least a majority of the Board; and

 

   

the consummation of a business combination (e.g., a merger, reorganization or similar transaction involving the Company) unless, following the business combination, substantially all of the persons that were the beneficial owners of Holdings immediately prior to the business combination beneficially own 50% or more of the resulting entity from the business combination in substantially the same proportions as their ownership of Holdings immediately prior to the business combination.

For purposes of the table above, we have assumed that the EQH Equity Awards are not assumed or replaced.

Other

No EQH Program Participant is eligible for an Internal Revenue Code Section 280G excise tax gross-up in connection with a CIC.

Involuntary or Good Reason Termination—CIC

For purposes of the Severance Plan, the Supplemental Severance Plan and Mr. Pearson’s employment agreement, the definition of a CIC is identical to the definition described above for EQH Equity Awards.

EQH Program Participants other than Mr. Pearson

In the event of a job elimination within 12 months after a CIC, the EQH Program Participants other than Mr. Pearson are eligible to receive the following under the Severance Plan and the Supplemental Severance Plan:

 

   

temporary income payments equal to 104 weeks of base salary;

 

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additional temporary income payments equal to two times the greatest of:

 

   

the most recent annual cash incentive award paid to the executive;

 

   

the average of the three most recent annual cash incentive awards paid to the executive and

 

   

the executive’s STIC Target and

 

   

a lump sum payment equal to the sum of: (a) the executive’s STIC Target and (b) $40,000.

For this purpose, a job elimination includes certain voluntary terminations of employment by an executive for “good reason,” including:

 

   

a material diminution of the executive’s duties, authority or responsibilities;

 

   

a material reduction in the executive’s base compensation (other than in connection with, and substantially proportionate to, reductions by the company of the compensation of other similarly situated senior executives) and

 

   

a material change in the geographic location of the executive’s position.

For a voluntary termination of employment for “good reason” to be treated as an involuntary termination, the executive must give notice of the existence of the “good reason” condition within 90 days of its initial existence and the Company must not remedy the condition within 30 days of the notice.

To receive benefits, the executives would have been required to sign a separation agreement including a release of all claims against the Company. The agreement would also have included provisions regarding non-competition and non-solicitation of customers and employees for twelve months following termination of employment.

Mr. Pearson

As mentioned above, Mr. Pearson’s employment agreement provides that “good reason” includes Mr. Pearson’s termination of employment in the event of a CIC (provided that Mr. Pearson delivers notice of termination within 180 days after the CIC). Accordingly, Mr. Pearson would have been entitled to the benefits described above for a voluntary termination for good reason, subject to the same conditions. Also, in the event of Mr. Pearson’s resignation due to a CIC, Mr. Pearson’s severance benefits will cease after one year if certain perform