10-Q 1 eqh2q201910q.htm Document

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2019
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission File No. 001-38469
 
AXA Equitable Holdings, Inc.
(Exact name of registrant as specified in its charter) 
Delaware
 
90-0226248
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
1290 Avenue of the Americas, New York, New York
 
10104
(Address of principal executive offices)
 
(Zip Code)
(212) 554-1234
(Registrant’s telephone number, including area code)
Not applicable
(Former name, former address, and former fiscal year if changed since last report.)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an “emerging growth company”. See definition of “accelerated filer,” “large accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
¨
Accelerated filer
¨
Non-accelerated filer
x
Smaller reporting company
¨
Emerging growth company
¨
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13 (a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading symbol
 
Name of exchange on which registered
Common Stock
 
EQH
 
New York Stock Exchange
As of August 8, 2019, 491,148,524 shares of the registrant’s Common Stock, $0.01 par value, were outstanding.




TABLE OF CONTENTS

 
 
Page
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
 
 
 
 
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
 
 
 



NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INFORMATION
Certain of the statements included or incorporated by reference in this Quarterly Report on Form 10-Q constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “expects,” “believes,” “anticipates,” “intends,” “seeks,” “aims,” “plans,” “assumes,” “estimates,” “projects,” “should,” “would,” “could,” “may,” “will,” “shall” or variations of such words are generally part of forward-looking statements. Forward-looking statements are made based on management’s current expectations and beliefs concerning future developments and their potential effects upon AXA Equitable Holdings, Inc. (“Holdings”) and its consolidated subsidiaries. “We,” “us” and “our” refer to Holdings and its consolidated subsidiaries, unless the context refers only to Holdings as a corporate entity. There can be no assurance that future developments affecting Holdings will be those anticipated by management. Forward-looking statements include, without limitation, all matters that are not historical facts.
These forward-looking statements are not a guarantee of future performance and involve risks and uncertainties, and there are certain important factors that could cause actual results to differ, possibly materially, from expectations or estimates reflected in such forward-looking statements, including, among others: (i) conditions in the financial markets and economy, including equity market declines and volatility, interest rate fluctuations, impacts on our goodwill and changes in liquidity and access to and cost of capital; (ii) operational factors, including reliance on the payment of dividends to Holdings by its subsidiaries, remediation of our material weaknesses, fulfilling our obligations related to being a public company, indebtedness, elements of our business strategy not being effective in accomplishing our objectives, protection of confidential customer information or proprietary business information, information systems failing or being compromised and strong industry competition; (iii) credit, counterparties and investments, including counterparty default on derivative contracts, failure of financial institutions, defaults, errors or omissions by third parties and affiliates and gross unrealized losses on fixed maturity and equity securities; (iv) our reinsurance and hedging programs; (v) our products, structure and product distribution, including variable annuity guaranteed benefits features within certain of our products, complex regulation and administration of our products, variations in statutory capital requirements, financial strength and claims-paying ratings and key product distribution relationships; (vi) estimates, assumptions and valuations, including risk management policies and procedures, potential inadequacy of reserves, actual mortality, longevity and morbidity experience differing from pricing expectations or reserves, amortization of deferred acquisition costs and financial models; (vii) our Investment Management and Research segment, including fluctuations in assets under management, the industry-wide shift from actively-managed investment services to passive services and potential termination of investment advisory agreements; (viii) legal and regulatory risks, including federal and state legislation affecting financial institutions, insurance regulation and tax reform; (ix) risks related to our continuing relationship with AXA, including conflicts of interest, waiver of corporate opportunities and costs associated with separation and rebranding; and (x) risks related to our common stock and future offerings, including the market price for our common stock being volatile and potential stock price declines due to future sales of shares by existing stockholders.
Forward-looking statements should be read in conjunction with the other cautionary statements, risks, uncertainties and other factors identified in Holdings’ Annual Report on Form 10-K for the year ended December 31, 2018, as amended or supplemented in our subsequently filed Quarterly Report on Form 10-Q, including in the section entitled “Risk Factors,” and elsewhere in this Quarterly Report on Form 10-Q. Further, any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as otherwise may be required by law.




1

PART I FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
AXA EQUITABLE HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)



 
June 30, 2019
 
December 31, 2018
 
(in millions, except share data)
ASSETS
 
 
 
Investments:
 
 
 
Fixed maturities available-for-sale, at fair value (amortized cost of $54,641 and $46,801)
$
57,572

 
$
46,279

Mortgage loans on real estate (net of valuation allowance of $0 and $7)
12,288

 
11,835

Real estate held for production of income (1)
48

 
52

Policy loans
3,740

 
3,779

Other equity investments (1)
1,309

 
1,334

Trading securities, at fair value
9,646

 
16,017

Other invested assets (1)
2,298

 
2,037

Total investments
86,901

 
81,333

Cash and cash equivalents (1)
4,734

 
4,469

Cash and securities segregated, at fair value
1,110

 
1,170

Broker-dealer related receivables
2,156

 
2,209

Deferred policy acquisition costs
6,080

 
6,745

Goodwill and other intangible assets, net
4,776

 
4,780

Amounts due from reinsurers
4,740

 
4,895

GMIB reinsurance contract asset, at fair value
1,896

 
1,732

Other assets
3,760

 
3,127

Separate Accounts assets
122,444

 
110,337

Total Assets
$
238,597

 
$
220,797

LIABILITIES
 
 
 
Policyholders’ account balances
$
53,211

 
$
49,923

Future policy benefits and other policyholders' liabilities
32,381

 
30,998

Broker-dealer related payables
443

 
431

Securities sold under agreements to repurchase

 
573

Customer related payables
2,686

 
3,095

Amounts due to reinsurers
1,390

 
1,438

Short-term and long-term debt
4,852

 
4,955

Current and deferred income taxes
689

 
68

Other liabilities (1)
3,856

 
3,360

Separate Accounts liabilities
122,444

 
110,337

Total Liabilities
$
221,952

 
$
205,178

Redeemable noncontrolling interest (1) (2)
$
257

 
$
187

Commitments and contingent liabilities

 

EQUITY
 
 
 
Equity attributable to Holdings:
 
 
 
Common stock, $0.01 par value, 2,000,000,000 shares authorized, 552,896,328 and 561,000,000 shares issued, 491,148,524 and 528,861,758 shares outstanding, respectively
$
5

 
$
5

Additional paid-in capital
1,901

 
1,908

Treasury stock, at cost, 61,747,804 and 32,138,242 shares, respectively
(1,232
)
 
(640
)
Retained earnings
13,293

 
13,989

Accumulated other comprehensive income (loss)
876

 
(1,396
)
Total equity attributable to Holdings
14,843

 
13,866

Noncontrolling interest
1,545

 
1,566

Total Equity
16,388

 
15,432

Total Liabilities, Redeemable Noncontrolling Interest and Equity
$
238,597

 
$
220,797

______________
(1)
See Note 2 for details of balances with variable interest entities.
(2)
See Note 13 for details of Redeemable noncontrolling interest.
See Notes to Consolidated Financial Statements (Unaudited).


2

AXA EQUITABLE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(UNAUDITED)


 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
 
(in millions, except per share data)
REVENUES
 
 
 
 
 
 
 
Policy charges and fee income
$
941

 
$
964

 
$
1,872

 
$
1,930

Premiums
280

 
275

 
563

 
554

Net derivative gains (losses)
(236
)
 
(46
)
 
(1,866
)
 
(282
)
Net investment income (loss)
976

 
596

 
1,991

 
1,187

Investment gains (losses), net
(12
)
 
(22
)
 
(23
)
 
80

Investment management and service fees
1,072

 
1,075

 
2,071

 
2,130

Other income
139

 
124

 
266

 
241

Total revenues
3,160

 
2,966

 
4,874

 
5,840

 
 
 
 
 
 
 
 
BENEFITS AND OTHER DEDUCTIONS
 
 
 
 
 
 
 
Policyholders’ benefits
896

 
900

 
1,776

 
1,494

Interest credited to policyholders’ account balances
314

 
268

 
618

 
539

Compensation and benefits
512

 
520

 
1,021

 
1,099

Commissions and distribution-related payments
307

 
287

 
588

 
578

Interest expense
57

 
60

 
113

 
106

Amortization of deferred policy acquisition costs
177

 
185

 
375

 
357

Other operating costs and expenses
456

 
424

 
866

 
917

Total benefits and other deductions
2,719

 
2,644

 
5,357

 
5,090

Income (loss) from continuing operations, before income taxes
441

 
322

 
(483
)
 
750

Income tax (expense) benefit
(11
)
 
(61
)
 
204

 
(152
)
Net income (loss)
430

 
261

 
(279
)
 
598

Less: Net income (loss) attributable to the noncontrolling interest
67

 
97

 
133

 
220

Net income (loss) attributable to Holdings
$
363

 
$
164

 
$
(412
)
 
$
378

 
 
 
 
 
 
 
 
EARNINGS PER SHARE
 
 
 
 
 
 
 
Earnings per share - Common stock:
 
 
 
 
 
 
 
Basic
$
0.74

 
$
0.29

 
$
(0.82
)
 
$
0.67

Diluted
$
0.74

 
$
0.29

 
$
(0.82
)
 
$
0.67

Weighted average common shares outstanding:
 
 
 
 
 
 
 
Basic
491.1

 
561.0

 
504.5

 
561.0

Diluted
491.9

 
561.1

 
504.5

 
561.1


See Notes to Consolidated Financial Statements (Unaudited).


3

AXA EQUITABLE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)

 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
 
(in millions)
COMPREHENSIVE INCOME (LOSS)
 
 
 
 
 
 
 
Net income (loss)
$
430

 
$
261

 
$
(279
)
 
$
598

Other comprehensive income (loss) net of income taxes:
 
 
 
 

 

Change in unrealized gains (losses), net of reclassification adjustment (1)
1,369

 
(349
)
 
2,203

 
(1,311
)
Changes in defined benefit plan related items not yet recognized in periodic benefit cost, net of reclassification adjustment
18

 
1

 
67

 
134

Foreign currency translation adjustment (1)
1

 
(8
)
 

 
(11
)
Total other comprehensive income (loss), net of income taxes
1,388

 
(356
)
 
2,270

 
(1,188
)
Comprehensive income (loss)
1,818

 
(95
)
 
1,991

 
(590
)
Less: Comprehensive income (loss) attributable to the noncontrolling interest
66

 
105

 
131

 
234

Comprehensive income (loss) attributable to Holdings
$
1,752

 
$
(200
)
 
$
1,860

 
$
(824
)
______________
(1)
A reclassification of $1 million and $3 million has been made to the previously reported amounts for the three and six months ended June 30, 2018, respectively, to conform to the current period’s presentation.

See Notes to Consolidated Financial Statements (Unaudited).



4

AXA EQUITABLE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(UNAUDITED)

 
Three Months Ended June 30,
 
Equity Attributable to Holdings
 
 
 
 
 
Common Stock
 
Additional Paid-in Capital
 
Treasury Stock
 
Retained Earnings
 
Accumulated Other Comprehensive Income (Loss)
 
Total Holdings Equity
 
Non-controlling Interest
 
Total Equity
 
(in millions)
April 1, 2019
$
5

 
$
1,881

 
$
(1,234
)
 
$
13,004

 
$
(513
)
 
$
13,143

 
$
1,539

 
$
14,682

Stock compensation

 
28

 
2

 

 

 
30

 
3

 
33

Retirement of common stock

 

 

 
(1
)
 

 
(1
)
 

 
(1
)
Dividends paid to noncontrolling interest

 

 

 

 

 

 
(56
)
 
(56
)
Stockholder dividends (cash dividends declared per common share of $0.15 during the three months ended June 30, 2019)

 

 

 
(73
)
 

 
(73
)
 

 
(73
)
Net income (loss)

 

 

 
363

 

 
363

 
60

 
423

Other comprehensive income (loss)

 

 

 

 
1,389

 
1,389

 
(1
)
 
1,388

Other

 
(8
)
 

 

 

 
(8
)
 

 
(8
)
June 30, 2019
$
5

 
$
1,901

 
$
(1,232
)
 
$
13,293

 
$
876

 
$
14,843

 
$
1,545

 
$
16,388


April 1, 2018
$
5

 
$
2,051

 
$

 
$
12,437

 
$
(946
)
 
$
13,547

 
$
3,035

 
$
16,582

Repurchase of AB Holding units

 

 

 

 

 

 
(11
)
 
(11
)
Dividends paid to noncontrolling interest

 

 

 

 

 

 
(81
)
 
(81
)
Purchase of AB Units by Holdings

 

 

 

 

 

 
(1,521
)
 
(1,521
)
Purchase of AllianceBernstein Units from noncontrolling interest

 
17

 

 

 

 
17

 

 
17

Net income (loss)

 

 

 
164

 

 
164

 
83

 
247

Other comprehensive income (loss)

 

 

 

 
(364
)
 
(364
)
 
8

 
(356
)
Other

 

 

 

 

 

 
(26
)
 
(26
)
June 30, 2018
$
5

 
$
2,068

 
$

 
$
12,601

 
$
(1,310
)
 
$
13,364

 
$
1,487

 
$
14,851



5

AXA EQUITABLE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF EQUITY — CONTINUED
(UNAUDITED)



 
Six Months Ended June 30,
 
Equity Attributable to Holdings
 
 
 
 
 
Common Stock
 
Additional Paid-in Capital
 
Treasury Stock
 
Retained Earnings
 
Accumulated Other Comprehensive Income (Loss)
 
Total Holdings Equity
 
Non-controlling Interest
 
Total Equity
 
(in millions)
January 1, 2019
$
5

 
$
1,908

 
$
(640
)
 
$
13,989

 
$
(1,396
)
 
$
13,866

 
$
1,566

 
$
15,432

Stock compensation

 
9

 
2

 

 

 
11

 
12

 
23

Purchase of treasury stock

 

 
(594
)
 

 

 
(594
)
 

 
(594
)
Retirement of common stock

 

 

 
(143
)
 

 
(143
)
 

 
(143
)
Repurchase of AB Holding units

 

 

 

 

 

 
(21
)
 
(21
)
Dividends paid to noncontrolling interest

 

 

 

 

 

 
(124
)
 
(124
)
Stockholder dividends (cash dividends declared per common share of $0.28 in 2019)

 

 

 
(141
)
 

 
(141
)
 

 
(141
)
Net income (loss)

 

 

 
(412
)
 

 
(412
)
 
114

 
(298
)
Other comprehensive income (loss)

 

 

 

 
2,272

 
2,272

 
(2
)
 
2,270

Other

 
(16
)
 

 

 

 
(16
)
 

 
(16
)
June 30, 2019
$
5

 
$
1,901

 
$
(1,232
)
 
$
13,293

 
$
876

 
$
14,843

 
$
1,545

 
$
16,388


January 1, 2018
$
5

 
$
1,299

 
$

 
$
12,225

 
$
(108
)
 
$
13,421

 
$
3,097

 
$
16,518

Stock compensation

 
57

 

 

 

 
57

 

 
57

Repurchase of AB Holding units

 

 

 

 

 

 
(12
)
 
(12
)
Dividends paid to noncontrolling interest

 

 

 

 

 

 
(216
)
 
(216
)
Stockholder dividends

 

 

 
(15
)
 

 
(15
)
 

 
(15
)
Capital contribution from parent

 
695

 

 

 

 
695

 

 
695

Purchase of AB Units by Holdings

 

 

 

 

 

 
(1,521
)
 
(1,521
)
Purchase of AllianceBernstein Units from noncontrolling interest

 
17

 

 

 

 
17

 

 
17

Cumulative effect of adoption of revenue recognition standard ASC 606

 

 

 
13

 

 
13

 
19

 
32

Net income (loss)

 

 

 
378

 

 
378

 
186

 
564

Other comprehensive income (loss)

 

 

 

 
(1,202
)
 
(1,202
)
 
14

 
(1,188
)
Other

 

 

 

 

 

 
(80
)
 
(80
)
June 30, 2018
$
5

 
$
2,068

 
$

 
$
12,601

 
$
(1,310
)
 
$
13,364

 
$
1,487

 
$
14,851


See Notes to Consolidated Financial Statements (Unaudited).


6

AXA EQUITABLE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)


 
Six Months Ended June 30,
2019
 
2018
 
(in millions)
Cash flows from operating activities:
 
 
 
Net income (loss)
$
(279
)
 
$
598

Adjustments to reconcile Net income (loss) to Net cash provided by (used in) operating activities:
 
 
 
Interest credited to policyholders’ account balances
618

 
539

Policy charges and fee income
(1,872
)
 
(1,930
)
Net derivative (gains) losses
1,866

 
282

Investment (gains) losses, net
23

 
(80
)
Realized and unrealized (gains) losses on trading securities
(456
)
 
237

Non-cash long term incentive compensation expense (1)
68

 

Non-cash pension plan restructuring

 
101

Amortization and depreciation (1)
433

 
348

Equity (income) loss from limited partnerships
(41
)
 
(59
)
Changes in:
 
 


Net broker-dealer and customer related receivables/payables
(384
)
 
479

Reinsurance recoverable (1)
(65
)
 
29

Segregated cash and securities, net
60

 
(473
)
Capitalization of deferred policy acquisition costs (1)
(362
)
 
(332
)
Future policy benefits
1

 
(186
)
Current and deferred income taxes
23

 
182

Other, net (1)
(58
)
 
(77
)
Net cash provided by (used in) operating activities
$
(425
)
 
$
(342
)
 
 
 
 
Cash flows from investing activities:
 
 
 
Proceeds from the sale/maturity/prepayment of:
 
 
 
Fixed maturities, available-for-sale
$
5,201

 
$
6,307

Mortgage loans on real estate
288

 
153

Trading account securities
7,662

 
4,866

Real estate joint ventures
2

 
139

Short-term investments (1)
1,613

 
2,756

Other
115

 
122

Payment for the purchase/origination of:
 
 
 
Fixed maturities, available-for-sale
(12,916
)
 
(6,031
)
Mortgage loans on real estate
(757
)
 
(1,004
)
Trading account securities
(715
)
 
(5,075
)
Short-term investments (1)
(1,598
)
 
(1,586
)
Other
(113
)
 
(110
)
Cash settlements related to derivative instruments
(1,112
)
 
(970
)
Repayments of loans to affiliates

 
1,230

Investment in capitalized software, leasehold improvements and EDP equipment
(39
)
 
(46
)
Other, net (1)
(73
)
 
480

Net cash provided by (used in) investing activities
$
(2,442
)
 
$
1,231

 
 
 
 
Cash flows from financing activities:
 
 
 
Policyholders’ account balances:
 
 
 
Deposits
$
4,920

 
$
4,426

Withdrawals
(2,382
)
 
(2,178
)
Transfers (to) from Separate Accounts
831

 
866

Change in short-term financings
(104
)
 
(1,341
)
Issuance of long-term debt

 
4,058

Repayment of loans from affiliates

 
(3,000
)
Change in collateralized pledged assets
(9
)
 
31

Change in collateralized pledged liabilities
1,483

 
455



7

AXA EQUITABLE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS—CONTINUED
(UNAUDITED)

 
Six Months Ended June 30,
2019
 
2018
 
(in millions)
Increase (decrease) in overdrafts payable
(19
)
 
(29
)
Cash contribution from parent company

 
8

Shareholder dividend paid
(141
)
 
(15
)
Purchase of AB Units by Holdings

 
(1,330
)
Cash paid to repurchase common stock
(750
)
 

Repurchase of AB Holding units from noncontrolling interest

 
(19
)
Purchases (redemptions) of noncontrolling interests of consolidated company-sponsored investment funds
59

 
(516
)
Distribution to noncontrolling interest of consolidated subsidiaries
(124
)
 
(216
)
Increase (decrease) in securities sold under agreement to repurchase
(573
)
 
(37
)
Purchase of AB Holding Units to fund long-term incentive compensation plan awards, net
(59
)
 

Other, net

 
(27
)
Net cash provided by (used in) financing activities
$
3,132

 
$
1,136

 
 
 
 
Effect of exchange rate changes on cash and cash equivalents

 
(6
)
Change in cash and cash equivalents
265

 
2,019

Cash and cash equivalents, beginning of year
4,469

 
4,814

Cash and cash equivalents, end of period
$
4,734

 
$
6,833

 
 
 
 
Non-cash transactions during the period:
 
 
 
Capital contribution from parent company
$

 
$
622

(Settlement) issuance of long-term debt
$

 
$
(202
)
Transfer of assets to reinsurer
$

 
$
(604
)
Contribution of 0.5% minority interest in AXA Financial
$

 
$
65

Repayment of loans from affiliates
$

 
$
(622
)
_______________
(1) Prior period amounts have been reclassified to conform to current period’s presentation. See Note 17 for further information.

See Notes to Consolidated Financial Statements (Unaudited).


8

AXA EQUITABLE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


1)    ORGANIZATION
AXA Equitable Holdings, Inc. (“Holdings” and, collectively with its consolidated subsidiaries, the “Company”) is the holding company for a diversified financial services organization. As of June 30, 2019 and December 31, 2018, AXA S.A. (“AXA”), a French holding company for the AXA Group, owned approximately 40% and 59%, respectively, of the outstanding common stock of Holdings. In connection with AXA’s secondary offering in June 2019, the underwriters exercised their option to purchase additional shares, further reducing AXA’s ownership to approximately 39% as of July 8, 2019.
The Company conducts operations in four segments: Individual Retirement, Group Retirement, Investment Management and Research, and Protection Solutions. The Company’s management evaluates the performance of each of these segments independently.
The Individual Retirement segment offers a diverse suite of variable annuity products which are primarily sold to affluent and high net worth individuals saving for retirement or seeking retirement income.
The Group Retirement segment offers tax-deferred investment and retirement services or products to plans sponsored by educational entities, municipalities and not-for-profit entities as well as small and medium-sized businesses.
The Investment Management and Research segment provides diversified investment management, research and related solutions globally to a broad range of clients through three main client channels—Institutional, Retail and Private Wealth Management—and distributes its institutional research products and solutions through Bernstein Research Services. The Investment Management and Research segment reflects the business of AllianceBernstein Holding L.P. (“AB Holding”), AllianceBernstein L.P. (“ABLP”) and their subsidiaries (collectively, “AB”).
The Protection Solutions segment includes the Company’s life insurance and group employee benefits businesses. The life insurance business offers a variety of variable universal life, indexed universal life and term life products to help affluent and high net worth individuals, as well as small and medium-sized business owners, with their wealth protection, wealth transfer and corporate needs. Our group employee benefits business offers a suite of life, short- and long-term disability, dental and vision insurance products to small and medium-size businesses across the United States.
The Company reports certain activities and items that are not included in our segments in Corporate and Other. Corporate and Other includes certain of our financing and investment expenses. It also includes: the AXA Advisors broker-dealer business, closed block of life insurance (the “Closed Block”), run-off variable annuity reinsurance business, run-off group pension business, run-off health business, benefit plans for our employees, certain strategic investments and certain unallocated items, including capital and related investments, interest expense and financing fees and corporate expense.
At both June 30, 2019 and December 31, 2018, the Company’s economic interest in AB was approximately 65%. The general partner of AB, AllianceBernstein Corporation (the “General Partner”), is a wholly-owned subsidiary of the Company. Because the General Partner has the authority to manage and control the business of AB, AB is consolidated in the Company’s financial statements for all periods.
2)    SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) on a basis consistent with reporting interim financial information in accordance with instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (“SEC”). Intercompany balances and transactions have been eliminated.
In the opinion of management, all adjustments necessary for a fair statement of the financial position and results of operations have been made. All such adjustments are of a normal, recurring nature. Interim results are not necessarily


9

AXA EQUITABLE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

indicative of the results that may be expected for the full year. These financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.
The terms “second quarter 2019” and “second quarter 2018” refer to the three months ended June 30, 2019 and 2018, respectively. The terms “first six months of 2019” and “first six months of 2018” refer to the six months ended June 30, 2019 and 2018, respectively.
Adoption of New Accounting Pronouncements
Description
Effect on the Financial Statement or Other Significant Matters
ASU 2017-12: Derivatives and Hedging (Topic 815), as clarified and amended by ASU 2019-04: Codification Improvements to Topic 326, Financial Instruments—Credit Losses; Topic 815, Derivatives and Hedging; and Topic 825, Financial Instruments
The amendments in these ASUs better align an entity’s risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results.
On January 1, 2019, the Company adopted the new hedging guidance. Adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.
ASU 2017-08: Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20)
This ASU requires certain premiums on callable debt securities to be amortized to the earliest call date and is intended to better align interest income recognition with the manner in which market participants price these instruments.
On January 1, 2019, the Company adopted the new guidance on accounting for certain premiums on callable debt securities. As the Company’s existing accounting practices aligned with the guidance in the ASU, adoption of the new standard did not have a material impact on the Company’s consolidated financial statements.
ASU 2016-02: Leases (Topic 842)
This ASU contains revised guidance to lease accounting that will require lessees to recognize on the balance sheet a “right-of-use” asset and a lease liability for virtually all lease arrangements, including those embedded in other contracts. Lessor accounting will remain substantially unchanged from the current model but has been updated to align with certain changes made to the lessee model.
On January 1, 2019, the Company adopted the new leases standard using the simplified modified retrospective transition method, as of the adoption date. Prior comparable periods will not be adjusted or presented under this method. We applied several practical expedients offered by ASC 842 upon adoption of this standard. These included continuing to account for existing leases based on judgment made under legacy U.S. GAAP as it relates to determining classification of leases, unamortized initial direct costs and whether contracts are leases or contain leases. We also used the practical expedient to use hindsight in determining lease terms (using knowledge and expectations as of the standard’s adoption date instead of the previous assumptions under legacy U.S. GAAP) and evaluated impairment of our right-of-use (“RoU”) assets in the transition period (using most up-to-date information.) Adoption of this standard resulted in the recognition, as of January 1, 2019, of additional RoU operating lease assets of $799 million reported in Other assets and operating lease liabilities of $1,024 million reported in Other liabilities in accompanying consolidated balance sheets. The operating RoU assets recognized as of January 1, 2019 are net of deferred rent of $105 million and liabilities associated with previously recognized impairments of $120 million. See Note 8 for additional information.
Future Adoption of New Accounting Pronouncements
Description
Effective Date and Method of Adoption
Effect on the Financial Statement or Other Significant Matters
ASU 2018-17: Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities
This ASU provides guidance requiring that indirect interests held through related parties in common control arrangements be considered on a proportional basis for determining whether fees paid to decision makers and service providers are variable interests.
Effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted. All entities are required to apply the amendments in this update retrospectively with a cumulative-effect adjustment to retained earnings at the beginning of the earliest period presented.
Management currently is evaluating the impact that adoption of this guidance will have on the Company’s consolidated financial statements and related disclosures.


10

AXA EQUITABLE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Description
Effective Date and Method of Adoption
Effect on the Financial Statement or Other Significant Matters
ASU 2018-13: Fair Value Measurement (Topic 820)
This ASU improves the effectiveness of fair value disclosures in the notes to financial statements. Amendments in this ASU modify disclosure requirements in Topic 820, including the removal or modification of certain disclosure requirements, and the addition of new disclosure requirements.
Effective for fiscal years beginning after December 15, 2019. Early adoption is permitted, with the option to early adopt amendments to remove or modify disclosures, with full adoption of additional requirements delayed until their effective date. Amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively. All other amendments should be applied retrospectively.
Management currently is evaluating the impact of the guidance on the Company’s financial statement disclosures but has concluded that this guidance will not impact the Company’s consolidated financial position or results of operations.
ASU 2018-12: Financial Services—Insurance (Topic 944)
This ASU provides targeted improvements to existing recognition, measurement, presentation, and disclosure requirements for long-duration contracts issued by an insurance entity. The ASU primarily impacts four key areas, including:

Measurement of the liability for future policy benefits for traditional and limited payment contracts. The ASU requires companies to review, and if necessary update, cash flow assumptions at least annually for non-participating traditional and limited-payment insurance contracts.  Interest rates used to discount the liability will need to be updated quarterly using an upper medium grade (low credit risk) fixed-income instrument yield.

Measurement of market risk benefits (“MRBs”). MRBs, as defined under the ASU, will encompass certain GMxB features associated with variable annuity products and other general account annuities with other than nominal market risk. The ASU requires MRBs to be measured at fair value with changes in value attributable to changes in instrument-specific credit risk recognized in OCI.
Effective for fiscal years beginning after December 31, 2020. Early adoption is permitted.

At the July 17, 2019 FASB Board Meeting, the Board decided to add a project to the technical agenda to amend the effective dates for ASU 2018-12. The Board tentatively decided ASU 2018-12 will be effective for fiscal years beginning after December 15, 2021.

For the liability for future policyholder benefits for traditional and limited payment contracts, companies can elect one of two adoption methods. Companies can either elect a modified retrospective transition method applied to contracts in force as of the beginning of the earliest period presented on the basis of their existing carrying amounts, adjusted for the removal of any related amounts in AOCI or a full retrospective transition method using actual historical experience information as of contract inception.  The same adoption method must be used for deferred policy acquisition costs.

For MRBs, the ASU should be applied retrospectively as of the beginning of the earliest period presented.
Management currently is evaluating the impact that adoption of this guidance will have on the Company’s consolidated financial statements, however the adoption of the ASU is expected to have a significant impact on our consolidated financial condition, results of operations, cash flows and required disclosures, as well as processes and controls.
Amortization of deferred policy acquisition costs. The ASU simplifies the amortization of deferred policy acquisition costs and other balances amortized in proportion to premiums, gross profits, or gross margins, requiring such balances to be amortized on a constant level basis over the expected term of the contracts. Deferred costs will be required to be written off for unexpected contract terminations but will not be subject to impairment testing.
 
 


11

AXA EQUITABLE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Description
Effective Date and Method of Adoption
Effect on the Financial Statement or Other Significant Matters
ASU 2018-12: Financial Services—Insurance (Topic 944), Continued
Expanded footnote disclosures. The ASU requires additional disclosures including disaggregated rollforwards of beginning to ending balances of the liability for future policy benefits, policyholder account balances, MRBs, Separate Accounts liabilities and deferred policy acquisition costs. Companies will also be required to disclose information about significant inputs, judgements, assumptions and methods used in measurement.
For deferred policy acquisition costs, companies can elect one of two adoption methods. Companies can either elect a modified retrospective transition method applied to contracts in force as of the beginning of the earliest period presented on the basis of their existing carrying amounts, adjusted for the removal of any related amounts in AOCI or a full retrospective transition method using actual historical experience information as of contract inception. The same adoption method must be used for the liability for future policyholder benefits for traditional and limited payment contracts.


ASU 2016-13: Financial Instruments—Credit Losses (Topic 326), as clarified and amended by ASU 2018-19: Codification Improvements to Topic 326, Financial Instruments—Credit Losses, ASU 2019-04: Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments and ASU 2019-05: Financial Instruments—Credit Losses (Topic 326) Targeted Transition Relief
ASU 2016-13 contains new guidance which introduces an approach based on expected losses to estimate credit losses on certain types of financial instruments. It also modifies the impairment model for available-for-sale debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination.
ASU 2019-05 provides entities that have instruments within the scope of Subtopic 326-20 an option to irrevocably elect the fair value option on an instrument-by instrument basis upon adoption of Topic 326. ASU 2018-19 and ASU 2019-05, clarified the codification guidance and did not materially change the standards.
Effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted as of the fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. These amendments should be applied through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective.
Management currently is evaluating the impact that adoption of this guidance will have on the Company’s consolidated financial statements.
Accounting and Consolidation of Variable Interest Entities (“VIEs”)
At June 30, 2019, the Company held approximately $1.2 billion of investment assets in the form of equity interests issued by non-corporate legal entities determined under the guidance to be VIEs, such as limited partnerships and limited liability companies, including hedge funds, private equity funds and real estate-related funds. As an equity investor, the Company is considered to have a variable interest in each of these VIEs as a result of its participation in the risks and/or rewards these funds were designed to create by their defined portfolio objectives and strategies. Primarily through qualitative assessment, including consideration of related party interests or other financial arrangements, if any, the Company was not identified as primary beneficiary of any of these VIEs, largely due to its inability to direct the activities that most significantly impact their economic performance. Consequently, the Company continues to reflect these equity interests in the consolidated balance sheets as Other equity investments and to apply the equity method of accounting for these positions. The net assets of these non-consolidated VIEs are approximately $169.7 billion at June 30, 2019. The Company’s maximum exposure to loss from its direct involvement with these VIEs is the carrying value of its investment of $1.2 billion and approximately $964 million of unfunded commitments at June 30, 2019. The Company has no further economic interest in these VIEs in the form of guarantees, derivatives, credit enhancements or similar instruments and obligations.
At June 30, 2019, the Company consolidated one real estate joint venture for which it was identified as primary beneficiary under the VIE model. The consolidated entity is jointly owned by AXA Equitable Life Insurance Company (“AXA Equitable Life”) and AXA France and holds an investment in a real estate venture. Included in the Company’s consolidated balance sheet at June 30, 2019 related to this VIE is $34 million of Real estate held for production of income. In addition, Real estate held for production of income reflects $14 million as related to two non-consolidated joint ventures at June 30, 2019.


12

AXA EQUITABLE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Included in the Company’s consolidated balance sheet at June 30, 2019 are assets of $327 million, liabilities of $18 million and redeemable noncontrolling interest of $166 million associated with the consolidation of AB-sponsored investment funds under the VIE model. Also included in the Company’s consolidated balance sheet at June 30, 2019 are assets of $182 million, liabilities of $18 million and redeemable noncontrolling interest of $46 million from consolidation of AB-sponsored investment funds under the Voting Interest Entity (“VOE”) model. Of the assets of these consolidated funds, $181 million are presented within Other invested assets and $2 million are presented in Cash and cash equivalents and $18 million liabilities of these consolidated funds are presented with Other liabilities in the Company’s consolidated balance sheet at June 30, 2019. Ownership interests not held by the Company relating to consolidated VIEs and VOEs are presented either as redeemable or non-redeemable noncontrolling interest, as appropriate. The Company is not required to provide financial support to these company-sponsored investment funds, and only the assets of such funds are available to settle each fund’s own liabilities.
As of June 30, 2019, the net assets of investment products sponsored by AB that are non-consolidated VIEs are approximately $100.9 billion, and the Company’s maximum exposure to loss from its direct involvement with these VIEs is its investment of $13 million at June 30, 2019. The Company has no further commitments to or economic interest in these VIEs.
Assumption Updates and Model Changes
In 2018, the Company began conducting its annual review of the Company’s assumptions and models during the third quarter, consistent with industry practice. The annual review encompasses assumptions underlying the valuation of unearned revenue liabilities, embedded derivatives for the Company’s insurance business, liabilities for future policyholder benefits, deferred policy acquisition cost (“DAC”) and deferred sales inducement (“DSI”) assets. Accordingly, there were no material assumption changes in the three or six months ended June 30, 2019 or 2018.
Reclassification of DAC Capitalization
During the fourth quarter of 2018, the Company changed the presentation of the capitalization of DAC in the consolidated statements of income for all prior periods presented herein by netting the capitalized amounts within the applicable expense line items, such as Compensation and benefits, Commissions and distribution-related payments and Other operating costs and expenses. Previously, the Company had netted the capitalized amounts within the Amortization of DAC. There was no impact on Net income (loss) or Comprehensive income (loss) from this reclassification.
The reclassification adjustments for the three and six months ended June 30, 2018 are presented in the table below. Capitalization of DAC reclassified to Compensation and benefits, Commissions and distribution-related payments, and Other operating costs and expenses reduced the amounts previously reported in those expense line items, while the capitalization of DAC reclassified from the Amortization of deferred policy acquisition costs line item increases that expense line item.


13

AXA EQUITABLE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

 
Three Months Ended June 30, 2018
 
Six Months Ended June 30, 2018
 
Individual Retirement
 
Group Retirement
 
Protection Solutions
 
Consoli-dated
 
Individual Retirement
 
Group Retirement
 
Protection Solutions
 
Consoli-dated
 
(in millions)
Reductions to expense line items:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Compensation and benefits
$
16

 
$
8

 
$
14

 
$
38

 
$
35

 
$
15

 
$
29

 
$
79

Commissions and distribution-related payments
81

 
15

 
36

 
131

 
153

 
29

 
70

 
251

Other operating costs and expenses

 

 
1

 
1

 

 

 
2

 
2

Total reductions
$
97

 
$
23

 
$
51

 
$
170

 
$
188

 
$
44

 
$
101

 
$
332

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Increase to expense line item:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortization of deferred policy acquisition costs
$
97

 
$
23

 
$
51

 
$
170

 
$
188

 
$
44

 
$
101

 
$
332

Revenue Recognition
The table below presents the revenues recognized during the three and six months ended June 30, 2019 and 2018, disaggregated by category:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
 
(in millions)
Investment management and service fees:
 
 
 
 
 
 
 
Base fees
$
742

 
$
720

 
$
1,447

 
$
1,444

Performance-based fees
12

 
35

 
16

 
41

Research services
106

 
107

 
196

 
221

Distribution services
180

 
183

 
352

 
363

Shareholder services
19

 
18

 
37

 
38

Other
5

 
5

 
9

 
11

Total investment management and service fees (1)
$
1,064

 
$
1,068

 
$
2,057

 
$
2,118

 
 
 
 
 
 
 
 
Other income (2)
$
133

 
$
122

 
$
253

 
$
234

_____________
(1)
Total investment management and service fees exclude $8 million, $14 million, $7 million and $12 million of interest and miscellaneous revenues not derived from contracts with customers for the three and six months ended June 30, 2019 and 2018, respectively.
(2)
Other income excludes $6 million, $13 million, $2 million and $7 million of interest and miscellaneous revenues not derived from contracts with customers for the three and six months ended June 30, 2019 and 2018, respectively.
Revision of Prior Period Financial Statements
During the third quarter of 2018, the Company revised its financial statements to reflect the correction of errors identified by the Company in its previously issued financial statements. The impact of these errors was not considered to be material. However, in order to improve the consistency and comparability of the financial statements, management revised the Company’s consolidated financial statements as of and for the three and six months ended March 31, 2018 and June 30, 2018, respectively.
In addition, during the fourth quarter of 2018, the Company identified certain cash flows that were incorrectly classified in the Company’s consolidated statements of cash flows. The Company has determined that these misclassifications were not material to the financial statements of any period.


14

AXA EQUITABLE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

The impact of items included in the revision tables included in Note 17 on the consolidated statement of cash flows for the six months ended June 30, 2018 were corrected in the comparative consolidated statements of cash flows included herein. The items for the nine months ended September 30, 2018 will be corrected in the Company’s comparative consolidated statements of cash flows to be included in the Form 10-Q filing as of and for the three and nine months ended September 30, 2019. See Note 17 for further information.
3)    INVESTMENTS
Fixed Maturities
The following tables provide information relating to fixed maturities classified as available-for-sale (“AFS”).
Available-for-Sale Fixed Maturities by Classification
 
Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair Value
 
OTTI in AOCI (4)
 
(in millions)
June 30, 2019:
 
 
 
 
 
 
 
 
 
Fixed Maturities:
 
 
 
 
 
 
 
 
 
Corporate (1)
$
39,787

 
$
1,805

 
$
64

 
$
41,528

 
$

U.S. Treasury, government and agency
12,648

 
1,108

 
39

 
13,717

 

States and political subdivisions
495

 
70

 

 
565

 

Foreign governments
467

 
36

 
5

 
498

 

Residential mortgage-backed (2)
208

 
13

 

 
221

 

Asset-backed (3)
617

 
3

 
2

 
618

 
2

Redeemable preferred stock
419

 
10

 
4

 
425

 

Total at June 30, 2019
$
54,641

 
$
3,045

 
$
114

 
$
57,572

 
$
2

 
 
 
 
 
 
 
 
 
 
December 31, 2018:
 
 
 
 
 
 
 
 
 
Fixed Maturities:
 
 
 
 
 
 
 
 
 
Corporate (1)
$
30,572

 
$
406

 
$
800

 
$
30,178

 
$

U.S. Treasury, government and agency
14,004

 
295

 
470

 
13,829

 

States and political subdivisions
415

 
47

 
1

 
461

 

Foreign governments
524

 
19

 
13

 
530

 

Residential mortgage-backed (2)
225

 
10

 
1

 
234

 

Asset-backed (3)
612

 
1

 
12

 
601

 
2

Redeemable preferred stock
449

 
15

 
18

 
446

 

Total at December 31, 2018
$
46,801

 
$
793

 
$
1,315

 
$
46,279

 
$
2

______________
(1)
Corporate fixed maturities include both public and private issues.
(2)
Includes publicly traded agency pass-through securities and collateralized obligations.
(3)
Includes credit-tranched securities collateralized by sub-prime mortgages and other asset types and credit tenant loans.
(4)
Amounts represent OTTI losses in AOCI, which were not included in Net income (loss).
The contractual maturities of AFS fixed maturities at June 30, 2019 are shown in the table below. Bonds not due at a single maturity date have been included in the table in the final year of maturity. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.


15

AXA EQUITABLE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Contractual Maturities of Available-for-Sale Fixed Maturities
 
Amortized Cost
 
Fair Value
 
(in millions)
June 30, 2019:
 
 
 
Due in one year or less
$
2,881

 
$
2,899

Due in years two through five
14,384

 
14,765

Due in years six through ten
19,124

 
20,179

Due after ten years
17,008

 
18,465

Subtotal
53,397

 
56,308

Residential mortgage-backed
208

 
221

Asset-backed
617

 
618

Redeemable preferred stock
419

 
425

Total at June 30, 2019
$
54,641

 
$
57,572

The following table shows proceeds from sales, gross gains (losses) from sales for AFS fixed maturities during the three and six months ended June 30, 2019 and 2018.
Proceeds and Gains (Losses) on Sales for Available-for-Sale Fixed Maturities
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
 
(in millions)
Proceeds from sales
$
1,614

 
$
1,145

 
$
3,064

 
$
5,025

Gross gains on sales
$
10

 
$
17

 
$
18

 
$
172

Gross losses on sales
$
(7
)
 
$
(36
)
 
$
(25
)
 
$
(88
)

The following table sets forth the amount of credit loss impairments on AFS fixed maturities held by the Company at the dates indicated and the corresponding changes in such amounts.
Available-for-Sale Fixed Maturities - Credit Loss Impairments
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
 
(in millions)
Balances, beginning of period
$
(26
)
 
$
(18
)
 
$
(58
)
 
$
(18
)
Previously recognized impairments on securities that matured, paid, prepaid or sold
1

 
1

 
33

 
1

Recognized impairments on securities impaired to fair value this period (1)

 

 

 

Impairments recognized this period on securities not previously impaired

 

 

 

Additional impairments this period on securities previously impaired

 

 

 

Increases due to passage of time on previously recorded credit losses

 

 

 

Accretion of previously recognized impairments due to increases in expected cash flows

 

 

 

Balances at June 30,
$
(25
)
 
$
(17
)
 
$
(25
)
 
$
(17
)
______________
(1)
Represents circumstances where the Company determined in the current period that it intends to sell the security, or it is more likely than not that it will be required to sell the security before recovery of the security’s amortized cost.
Net unrealized investment gains (losses) on fixed maturities classified as AFS are included in the consolidated balance sheets as a component of AOCI.


16

AXA EQUITABLE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Changes in net unrealized investment gains (losses) recognized in AOCI include reclassification adjustments to reflect amounts realized in Net income (loss) for the current period that had been part of OCI in earlier periods. The tables that follow below present a roll-forward of net unrealized investment gains (losses) recognized in AOCI:
Net Unrealized Gains (Losses) on Available-for-Sale Fixed Maturities
 
Net Unrealized Gains (Losses) on Investments
 
DAC
 
Policyholders’
Liabilities
 
Deferred
Income
Tax Asset
(Liability)
 
AOCI Gain (Loss) Related to Net Unrealized Investment Gains (Losses)
 
(in millions)
Balances at April 1, 2019
$
1,187

 
$
(601
)
 
$
12

 
$
(126
)
 
$
472

Net investment gains (losses) arising during the period
1,746

 

 

 

 
1,746

Reclassification adjustment:
 
 
 
 
 
 
 
 
 
Included in Net income (loss)
(4
)
 

 

 

 
(4
)
Excluded from Net income (loss) (1)

 

 

 

 

Impact of net unrealized investment gains (losses) on:
 
 
 
 
 
 
 
 
 
DAC

 
49

 

 

 
49

Deferred income taxes

 

 

 
(355
)
 
(355
)
Policyholders’ liabilities

 

 
(100
)
 

 
(100
)
Net unrealized investment gains (losses) excluding OTTI losses
2,929

 
(552
)
 
(88
)
 
(481
)
 
1,808

Net unrealized investment gains (losses) with OTTI losses
2

 

 

 

 
2

Balances at June 30, 2019
$
2,931

 
$
(552
)
 
$
(88
)
 
$
(481
)
 
$
1,810

 
 
 
 
 
 
 
 
 
 
Balances at April 1, 2018
$
216

 
$
(17
)
 
$
(128
)