10-Q 1 eqh3q201910q.htm EQH 3Q 2019 10-Q 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 September 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 November 5, 2019, 489,329,559 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 Reports 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)

 
September 30, 2019
 
December 31, 2018
 
(in millions, except share data)
ASSETS
 
 
 
Investments:
 
 
 
Fixed maturities available-for-sale, at fair value (amortized cost of $61,951 and $46,801)
$
66,300

 
$
46,279

Mortgage loans on real estate (net of valuation allowance of $0 and $7)
12,022

 
11,835

Real estate held for production of income (1)
27

 
52

Policy loans
3,750

 
3,779

Other equity investments (1)
1,330

 
1,334

Trading securities, at fair value
8,939

 
16,017

Other invested assets (1)
2,349

 
2,037

Total investments
94,717

 
81,333

Cash and cash equivalents (1)
4,471

 
4,469

Cash and securities segregated, at fair value
958

 
1,170

Broker-dealer related receivables
1,935

 
2,209

Deferred policy acquisition costs
5,787

 
6,745

Goodwill and other intangible assets, net
4,765

 
4,780

Amounts due from reinsurers
4,656

 
4,895

GMIB reinsurance contract asset, at fair value
2,452

 
1,732

Other assets
3,882

 
3,127

Separate Accounts assets
121,023

 
110,337

Total Assets
$
244,646

 
$
220,797

LIABILITIES
 
 
 
Policyholders’ account balances
$
56,719

 
$
49,923

Future policy benefits and other policyholders' liabilities
36,310

 
30,998

Broker-dealer related payables
519

 
431

Securities sold under agreements to repurchase

 
573

Customer related payables
2,381

 
3,095

Amounts due to reinsurers
1,387

 
1,438

Short-term and long-term debt
4,794

 
4,955

Current and deferred income taxes
864

 
68

Other liabilities (1)
3,833

 
3,360

Separate Accounts liabilities
121,023

 
110,337

Total Liabilities
$
227,830

 
$
205,178

Redeemable noncontrolling interest (1) (2)
$
338

 
$
187

Commitments and contingent liabilities (Note 14)

 

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, respectively; 489,325,547 and 528,861,758 shares outstanding, respectively
$
5

 
$
5

Additional paid-in capital
1,897

 
1,908

Treasury stock, at cost, 63,570,781 and 32,138,242 shares, respectively
(1,269
)
 
(640
)
Retained earnings
12,835

 
13,989

Accumulated other comprehensive income (loss)
1,468

 
(1,396
)
Total equity attributable to Holdings
14,936

 
13,866

Noncontrolling interest
1,542

 
1,566

Total Equity
16,478

 
15,432

Total Liabilities, Redeemable Noncontrolling Interest and Equity
$
244,646

 
$
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 September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
 
(in millions, except per share data)
REVENUES
 
 
 
 
 
 
 
Policy charges and fee income
$
929

 
$
951

 
$
2,801

 
$
2,881

Premiums
284

 
269

 
847

 
823

Net derivative gains (losses)
(451
)
 
(2,006
)
 
(2,317
)
 
(2,288
)
Net investment income (loss)
824

 
681

 
2,815

 
1,868

Investment gains (losses), net:
 
 
 
 
 
 
 
Total other-than-temporary impairment losses

 
(4
)
 

 
(4
)
Other investment gains (losses), net
199

 
(31
)
 
176

 
49

Total investment gains (losses), net
199

 
(35
)
 
176

 
45

Investment management and service fees
1,101

 
1,088

 
3,172

 
3,218

Other income
142

 
135

 
408

 
376

Total revenues
3,028

 
1,083

 
7,902

 
6,923

 
 
 
 
 
 
 
 
BENEFITS AND OTHER DEDUCTIONS
 
 
 
 
 
 
 
Policyholders’ benefits
1,757

 
318

 
3,533

 
1,812

Interest credited to policyholders’ account balances
304

 
278

 
922

 
817

Compensation and benefits
502

 
507

 
1,523

 
1,606

Commissions and distribution-related payments
317

 
286

 
905

 
864

Interest expense
54

 
65

 
167

 
171

Amortization of deferred policy acquisition costs
85

 
(183
)
 
460

 
174

Other operating costs and expenses
449

 
430

 
1,315

 
1,347

Total benefits and other deductions
3,468

 
1,701

 
8,825

 
6,791

Income (loss) from continuing operations, before income taxes
(440
)
 
(618
)
 
(923
)
 
132

Income tax (expense) benefit
124

 
175

 
328

 
23

Net income (loss)
(316
)
 
(443
)
 
(595
)
 
155

Less: Net income (loss) attributable to the noncontrolling interest
68

 
53

 
201

 
273

Net income (loss) attributable to Holdings
$
(384
)
 
$
(496
)
 
$
(796
)
 
$
(118
)
 
 
 
 
 
 
 
 
EARNINGS PER SHARE
 
 
 
 
 
 
 
Earnings per share - Common stock:
 
 
 
 
 
 
 
Basic
$
(0.78
)
 
$
(0.89
)
 
$
(1.59
)
 
$
(0.21
)
Diluted
$
(0.78
)
 
$
(0.89
)
 
$
(1.59
)
 
$
(0.21
)
Weighted-average common shares outstanding:
 
 
 
 
 
 
 
Basic
490.4

 
560.2

 
499.8

 
560.5

Diluted
490.4

 
560.2

 
499.8

 
560.5


See Notes to Consolidated Financial Statements (Unaudited).


3

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

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
 
(in millions)
COMPREHENSIVE INCOME (LOSS)
 
 
 
 
 
 
 
Net income (loss)
$
(316
)
 
$
(443
)
 
$
(595
)
 
$
155

Other comprehensive income (loss) net of income taxes:
 
 
 
 

 

Change in unrealized gains (losses), net of reclassification adjustment (1)
581

 
(361
)
 
2,784

 
(1,672
)
Changes in defined benefit plan related items not yet recognized in periodic benefit cost, net of reclassification adjustment
18

 
68

 
85

 
202

Foreign currency translation adjustment (1)
(12
)
 
9

 
(12
)
 
(2
)
Total other comprehensive income (loss), net of income taxes
587

 
(284
)
 
2,857

 
(1,472
)
Comprehensive income (loss)
271

 
(727
)
 
2,262

 
(1,317
)
Less: Comprehensive income (loss) attributable to the noncontrolling interest
63

 
54

 
194

 
288

Comprehensive income (loss) attributable to Holdings
$
208

 
$
(781
)
 
$
2,068

 
$
(1,605
)
______________
(1)
A reclassification of $1 million and $2 million has been made to the previously reported amounts for the three and nine months ended September 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 September 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)
July 1, 2019
$
5

 
$
1,901

 
$
(1,232
)
 
$
13,293

 
$
876

 
$
14,843

 
$
1,545

 
$
16,388

Stock compensation

 
(20
)
 

 

 

 
(20
)
 
4

 
(16
)
Purchase of treasury stock

 

 
(37
)
 
(1
)
 

 
(38
)
 

 
(38
)
Retirement of common stock

 

 

 
1

 

 
1

 

 
1

Repurchase of AB Holding units

 

 

 

 

 

 
(9
)
 
(9
)
Dividends paid to noncontrolling interest

 

 

 

 

 

 
(62
)
 
(62
)
Stockholder dividends (cash dividends declared per common share of $0.15 during the three months ended September 30, 2019)

 

 

 
(74
)
 

 
(74
)
 

 
(74
)
Net income (loss)

 

 

 
(384
)
 

 
(384
)
 
61

 
(323
)
Other comprehensive income (loss)

 

 

 

 
592

 
592

 
(5
)
 
587

Other

 
16

 

 

 

 
16

 
8

 
24

September 30, 2019
$
5

 
$
1,897

 
$
(1,269
)
 
$
12,835

 
$
1,468

 
$
14,936

 
$
1,542

 
$
16,478


July 1, 2018
$
5

 
$
2,068

 
$

 
$
12,601

 
$
(1,310
)
 
$
13,364

 
$
1,487

 
$
14,851

Stock compensation

 
15

 

 

 

 
15

 

 
15

Purchase of treasury stock

 

 
(57
)
 

 

 
(57
)
 

 
(57
)
Reissuance of treasury stock

 

 
1

 
(1
)
 

 

 

 

Repurchase of AB Holding units

 

 

 

 

 

 
(17
)
 
(17
)
Dividends paid to noncontrolling interest

 

 

 

 

 

 
(68
)
 
(68
)
Stockholder dividends (cash dividends declared per common share of $0.13 during the three months ended September 30, 2018)

 

 

 
(73
)
 

 
(73
)
 

 
(73
)
Net income (loss)

 

 

 
(496
)
 

 
(496
)
 
65

 
(431
)
Other comprehensive income (loss)

 

 

 

 
(284
)
 
(284
)
 

 
(284
)
Other

 
(57
)
 

 

 
(1
)
 
(58
)
 
(7
)
 
(65
)
September 30, 2018
$
5

 
$
2,026

 
$
(56
)
 
$
12,031

 
$
(1,595
)
 
$
12,411

 
$
1,460

 
$
13,871



5

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



 
Nine Months Ended September 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

 
(11
)
 
8

 

 

 
(3
)
 
16

 
13

Purchase of treasury stock

 

 
(637
)
 
(1
)
 

 
(638
)
 

 
(638
)
Retirement of common stock

 

 

 
(142
)
 

 
(142
)
 

 
(142
)
Repurchase of AB Holding units

 

 

 

 

 

 
(30
)
 
(30
)
Dividends paid to noncontrolling interest

 

 

 

 

 

 
(186
)
 
(186
)
Stockholder dividends (cash dividends declared per common share of $0.43 in 2019)

 

 

 
(215
)
 

 
(215
)
 

 
(215
)
Net income (loss)

 

 

 
(796
)
 

 
(796
)
 
175

 
(621
)
Other comprehensive income (loss)

 

 

 

 
2,864

 
2,864

 
(7
)
 
2,857

Other

 

 

 

 

 

 
8

 
8

September 30, 2019
$
5

 
$
1,897

 
$
(1,269
)
 
$
12,835

 
$
1,468

 
$
14,936

 
$
1,542

 
$
16,478


January 1, 2018
$
5

 
$
1,299

 
$

 
$
12,225

 
$
(108
)
 
$
13,421

 
$
3,097

 
$
16,518

Stock compensation

 
15

 

 

 

 
15

 

 
15

Purchase of treasury stock

 

 
(57
)
 

 

 
(57
)
 

 
(57
)
Reissuance of treasury stock

 

 
1

 
(1
)
 

 

 

 

Repurchase of AB Holding units

 

 

 

 

 

 
(29
)
 
(29
)
Dividends paid to noncontrolling interest

 

 

 

 

 

 
(284
)
 
(284
)
Stockholder dividends (cash dividends declared per common share of $0.13 in 2018)

 

 

 
(88
)
 

 
(88
)
 

 
(88
)
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)

 

 

 
(118
)
 

 
(118
)
 
251

 
133

Other comprehensive income (loss)

 

 

 

 
(1,487
)
 
(1,487
)
 
15

 
(1,472
)
Other

 

 

 

 

 

 
(88
)
 
(88
)
September 30, 2018
$
5

 
$
2,026

 
$
(56
)
 
$
12,031

 
$
(1,595
)
 
$
12,411

 
$
1,460

 
$
13,871


See Notes to Consolidated Financial Statements (Unaudited).


6

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


 
Nine Months Ended September 30,
2019
 
2018
 
(in millions)
Cash flows from operating activities:
 
 
 
Net income (loss)
$
(595
)
 
$
155

Adjustments to reconcile Net income (loss) to Net cash provided by (used in) operating activities:
 
 
 
Interest credited to policyholders’ account balances
922

 
817

Policy charges and fee income
(2,801
)
 
(2,881
)
Net derivative (gains) losses
2,317

 
2,288

Investment (gains) losses, net
(176
)
 
(45
)
Realized and unrealized (gains) losses on trading securities
(485
)
 
266

Non-cash long term incentive compensation expense (1)
90

 

Non-cash pension plan restructuring

 
105

Amortization and depreciation (1)
535

 
153

Equity (income) loss from limited partnerships (1)
(67
)
 
(82
)
Changes in:
 
 
 
Net broker-dealer and customer related receivables/payables
(504
)
 
415

Reinsurance recoverable (1)
(70
)
 
90

Segregated cash and securities, net
211

 
(438
)
Capitalization of deferred policy acquisition costs (1)
(544
)
 
(512
)
Future policy benefits (1)
925

 
(664
)
Current and deferred income taxes (1)
36

 
193

Other, net (1)
(86
)
 
5

Net cash provided by (used in) operating activities
$
(292
)
 
$
(135
)
 
 
 
 
Cash flows from investing activities:
 
 
 
Proceeds from the sale/maturity/prepayment of:
 
 
 
Fixed maturities, available-for-sale
$
9,850

 
$
7,476

Mortgage loans on real estate
708

 
375

Trading account securities
8,762

 
6,937

Real estate joint ventures (1)
3

 
139

Short-term investments (1)
2,011

 
4,745

Other (1)
162

 
196

Payment for the purchase/origination of:
 
 
 
Fixed maturities, available-for-sale
(24,448
)
 
(7,513
)
Mortgage loans on real estate
(912
)
 
(1,485
)
Trading account securities
(1,072
)
 
(8,103
)
Short-term investments (1)
(2,148
)
 
(4,513
)
Other (1)
(302
)
 
(166
)
Cash settlements related to derivative instruments (1)
179

 
(1,277
)
Repayments of loans to affiliates

 
1,230

Investment in capitalized software, leasehold improvements and EDP equipment
(72
)
 
(84
)
Other, net (1)
(132
)
 
314

Net cash provided by (used in) investing activities
$
(7,411
)
 
$
(1,729
)
 
 
 
 
Cash flows from financing activities:
 
 
 
Policyholders’ account balances:
 
 
 
Deposits
$
9,944

 
$
6,653

Withdrawals
(3,551
)
 
(3,324
)
Transfers (to) from Separate Accounts
1,358

 
1,313

Change in short-term financings
(163
)
 
(1,458
)
Issuance of long-term debt

 
4,057

Repayment of loans from affiliates

 
(3,000
)
Change in collateralized pledged assets
3

 
(31
)
Change in collateralized pledged liabilities
1,900

 
36



7

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

 
Nine Months Ended September 30,
2019
 
2018
 
(in millions)
Increase (decrease) in overdrafts payable
(73
)
 
(39
)
Cash contribution from parent company

 
8

Shareholder dividend paid
(215
)
 
(88
)
Purchase of AB Units by Holdings

 
(1,330
)
Cash paid to repurchase common stock
(787
)
 
(57
)
Repurchase of AB Holding units from noncontrolling interest

 
(29
)
Purchases (redemptions) of noncontrolling interests of consolidated company-sponsored investment funds
138

 
(519
)
Distribution to noncontrolling interest of consolidated subsidiaries
(186
)
 
(284
)
Increase (decrease) in securities sold under agreement to repurchase
(573
)
 
13

Purchase of AB Holding Units to fund long-term incentive compensation plan awards, net
(82
)
 
(83
)
Other, net

 
(2
)
Net cash provided by (used in) financing activities
$
7,713

 
$
1,836

 
 
 
 
Effect of exchange rate changes on cash and cash equivalents
(8
)
 
(9
)
Change in cash and cash equivalents
2

 
(37
)
Cash and cash equivalents, beginning of year
4,469

 
4,814

Cash and cash equivalents, end of period
$
4,471

 
$
4,777

 
 
 
 
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 September 30, 2019 and December 31, 2018, AXA S.A. (“AXA”), a French holding company for the AXA Group, owned approximately 39% and 59%, respectively, of the outstanding common stock of Holdings.
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. The Company’s 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 its 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 September 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 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.


9

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

The terms “third quarter 2019” and “third quarter 2018” refer to the three months ended September 30, 2019 and 2018, respectively. The terms “first nine months of 2019” and “first nine months of 2018” refer to the nine months ended September 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 $1.0 billion 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.
The Company will adopt this new standard effective for January 1, 2020. Management does not expect the adoption of this standard to materially impact the Company’s financial position or results of operations.


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 has elected to early adopt the removed disclosures relating to transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels and valuation processes for Level 3 fair value measurements. The Company will delay adoption of the additional disclosures until their effective date.
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.

On October 16, 2019, the FASB affirmed its previous decision to delay the effective date to fiscal years beginning after December 15, 2021, and interim periods within those fiscal years.

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 the Company’s 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.
The Company is continuing to develop, validate and implement its updated expected credit loss models, processes and controls related to the identified financial assets that fall within the scope of the new standard. While Management expects the adoption will not materially impact the Company’s financial position or results of operations, it currently anticipates that the standard will have the most impact to its commercial and agricultural mortgage loan portfolios. However, the extent of the impact will depend on various factors including the economic environment, structure and size of the Company’s loan portfolio and other assets impacted by the standard.
Accounting and Consolidation of Variable Interest Entities (“VIEs”)
At September 30, 2019, the Company held $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 $169.6 billion at September 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 $936 million of unfunded commitments at September 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 September 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 September 30, 2019 related to this VIE is $33 million of Real estate held for production of income. In addition, one non-consolidated real estate joint venture totaling $19 million at September 30, 2019 has been deemed to be “held for sale” and is reported in Other invested assets.


12

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

Included in the Company’s consolidated balance sheet at September 30, 2019 are assets of $408 million, liabilities of $18 million and redeemable noncontrolling interest of $244 million associated with the consolidation of AB-sponsored investment funds under the VIE model. Also included in the Company’s consolidated balance sheet at September 30, 2019 are assets of $182 million, liabilities of $20 million and redeemable noncontrolling interest of $47 million from consolidation of AB-sponsored investment funds under the Voting Interest Entity (“VOE”) model. Of the assets of these consolidated funds, $180 million are presented within Other invested assets and $2 million are presented in Cash and cash equivalents and $20 million liabilities of these consolidated funds are presented with Other liabilities in the Company’s consolidated balance sheet at September 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 September 30, 2019, the net assets of investment products sponsored by AB that are non-consolidated VIEs are approximately $72.0 billion, and the Company’s maximum exposure to loss from its direct involvement with these VIEs is its investment of $11 million at September 30, 2019. The Company has no further commitments to or economic interest in these VIEs.
Assumption Updates and Model Changes
The Company conducts its annual review of its assumptions and models during the third quarter of each year. 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. There was no material impact from model changes during the third quarter of 2019 and 2018 to our Income (loss) from continuing operations, before income taxes or Net income (loss).
The net impact of assumption changes in the third quarter of 2019 increased Policy charges and fee income by $3 million, increased Policyholders’ benefits by $875 million, increased Net derivative losses by $578 million, decreased Interest credited to policyholders’ account balances by $13 million and decreased Amortization of DAC by $46 million. This resulted in a decrease in Income (loss) from operations, before income taxes of $1.4 billion and decreased Net income (loss) by $1.1 billion.
The net impact of assumption changes in the third quarter of 2018 decreased Policy charges and fee income by $24 million, decreased Policyholders’ benefits by $673 million, increased Net derivative losses by $1.1 billion, and decreased the Amortization of DAC by $286 million. This resulted in a decrease in Income (loss) from operations, before income taxes of $160 million and decreased Net income (loss) by $131 million.
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 nine months ended September 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 September 30, 2018
 
Nine Months Ended September 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
$
18

 
$
8

 
$
15

 
$
41

 
$
53

 
$
23

 
$
44

 
$
120

Commissions and distri-bution-related payments
89

 
13

 
36

 
139

 
242

 
42

 
106

 
390

Other operating costs and expenses

 

 

 

 

 

 
2

 
2

Total reductions
$
107

 
$
21

 
$
51

 
$
180

 
$
295

 
$
65

 
$
152

 
$
512

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Increase to expense line item:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortization of deferred policy acquisition costs
$
107

 
$
21

 
$
51

 
$
180

 
$
295

 
$
65

 
$
152

 
$
512

Revision of Prior Period Financial Statements
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 its financial statements of any period.
The impact of items included in the revision tables within Note 17 on the consolidated statement of cash flows for the nine months ended September 30, 2018 were corrected in the comparative consolidated statements of cash flows included herein. 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”).


14

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

Available-for-Sale Fixed Maturities by Classification
 
Amortized Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair Value
 
OTTI in AOCI (4)
 
(in millions)
September 30, 2019:
 
 
 
 
 
 
 
 
 
Fixed Maturities:
 
 
 
 
 
 
 
 
 
Corporate (1)
$
45,337

 
$
2,417

 
$
51

 
$
47,703

 
$

U.S. Treasury, government and agency
14,286

 
1,890

 
55

 
16,121

 

States and political subdivisions
623

 
83

 
1

 
705

 

Foreign governments
487

 
44

 
6

 
525

 

Residential mortgage-backed (2)
199

 
14

 

 
213

 

Asset-backed (3)
612

 
4

 
2

 
614

 

Redeemable preferred stock
407

 
16

 
4

 
419

 

Total at September 30, 2019
$
61,951

 
$
4,468

 
$
119

 
$
66,300

 
$

 
 
 
 
 
 
 
 
 
 
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 includes 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 September 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.
Contractual Maturities of Available-for-Sale Fixed Maturities
 
Amortized Cost
 
Fair Value
 
(in millions)
September 30, 2019:
 
 
 
Due in one year or less
$
3,530

 
$
3,551

Due in years two through five
14,717

 
15,161

Due in years six through ten
17,866

 
19,093

Due after ten years
24,620

 
27,249

Subtotal
60,733

 
65,054

Residential mortgage-backed
199

 
213

Asset-backed
612

 
614

Redeemable preferred stock
407

 
419

Total at September 30, 2019
$
61,951

 
$
66,300



15

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

The following table shows proceeds from sales, gross gains (losses) from sales for AFS fixed maturities during the three and nine months ended September 30, 2019 and 2018.
Proceeds and Gains (Losses) on Sales for Available-for-Sale Fixed Maturities
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
 
(in millions)
Proceeds from sales
$
3,849

 
$
1,029

 
$
6,913

 
$
6,054

Gross gains on sales
$
205

 
$
6

 
$
223

 
$
178

Gross losses on sales
$
(4
)
 
$
(31
)
 
$
(29
)
 
$
(119
)
 
 
 
 
 
 
 
 
Total OTTI
$

 
$
(4
)
 
$

 
$
(4
)
Non-credit losses recognized in OCI

 

 

 

Credit losses recognized in Net income (loss)
$

 
$
(4
)
 
$

 
$
(4
)

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 September 30,
 
Nine Months Ended September 30,
 
2019
 
2018
 
2019
 
2018
 
(in millions)
Balances, beginning of period
$
(25
)
 
$
(17
)
 
$
(58
)
 
$
(18
)
Previously recognized impairments on securities that matured, paid, prepaid or sold
4

 

 
37

 
1

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

 

 

 

Impairments recognized this period on securities not previously impaired

 
(4
)
 

 
(4
)
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 September 30,
$
(21
)
 
$
(21
)
 
$
(21
)
 
$
(21
)
______________
(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.
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:


16

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

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 July 1, 2019
$
2,929

 
$
(552
)
 
$
(88
)
 
$
(481
)
 
$
1,808

Net investment gains (losses) arising during the period
1,619

 

 

 

 
1,619

Reclassification adjustment:
 
 
 
 
 
 
 
 
 
Included in Net income (loss)
(199
)
 

 

 

 
(199
)
Excluded from Net income (loss) (1)

 

 

 

 

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

 
(390
)
 

 

 
(390
)
Deferred income taxes

 

 

 
(150
)
 
(150
)
Policyholders’ liabilities

 

 
(315
)
 

 
(315
)
Net unrealized investment gains (losses) excluding OTTI losses
4,349