BUSINESS SEGMENT INFORMATION

The Company has four reportable segments: Individual Retirement, Group Retirement, Investment Management and Research and Protection Solutions.

The Company changed its segment presentation in the fourth quarter 2017. The segment disclosures are based on the intention to provide the users of the financial statements with a view of the business from the Company’s perspective. As a result, the Company determined that it is more useful for a user of the financial statements to assess the historical performance on the basis which management currently evaluates the business. The reportable segments are based on the nature of the business activities.

These segments reflect the manner by which the Company’s chief operating decision maker views and manages the business. A brief description of these segments follows:


•	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 plans to be 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 Protection Solutions segment includes our life insurance and group employee benefits businesses. Our life insurance business offers a variety of variable universal life, 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 dental, vision, life, and short- and long-term disability and other insurance products to small and medium-size businesses across the United States.

Measurement

Operating earnings (loss) is the financial measure which primarily focuses on the Company’s segments’ results of operations as well as the underlying profitability of the Company’s core business. By excluding items that can be distortive and unpredictable such as investment gains (losses) and investment income (loss) from derivative instruments, the Company believes operating earnings (loss) by segment enhances the understanding of the Company’s underlying drivers of profitability and trends in the Company’s segments.

In the second quarter of 2018, the Company revised its Operating earnings definition as it relates to the treatment of certain elements of the profitability of its variable annuity products with indexed-linked features to align to the treatment of its variable annuity products with GMxB features. In addition, adjustments for variable annuity products with index-linked features previously included within Other adjustments in the calculation of Non-GAAP Operating Earnings are now included with the adjustments for variable annuity products with GMxB features in the broader adjustment category, Variable annuity product features. In order to improve the consistency and comparability of the financial statements, management revised the Notes to the Consolidated Financial Statements for the six months ended June 30, 2017, nine months ended September 30, 2017 and the year ended December 31, 2017 to include the revisions discussed herein.

Operating earnings is calculated by adjusting each segment’s Net income (loss) attributable to AXA Equitable for the following items:


•	Items related to Variable annuity product features, which include certain changes in the fair value of the derivatives and other securities we use to hedge these features, the effect of benefit ratio unlock adjustments and changes in the fair value of the embedded derivatives reflected within Variable annuity products’ net derivative results;


•	Investment (gains) losses, which includes other-than-temporary impairments of securities, sales or disposals of securities/investments, realized capital gains/losses and valuation allowances;


•	Loss on the recapture of GMxB business previously ceded to AXA Arizona;


•	Net actuarial (gains) losses, which includes actuarial gains and losses as a result of differences between actual and expected experience on pension plan assets or projected benefit obligation during a given period related to pension, other postretirement benefit obligations and the one-time impact of the settlement of the defined benefit obligation;


•	Other adjustments, which includes restructuring costs related to severance, lease write-offs related to non-recurring restructuring activities and separation costs; and


•	Income tax expense (benefit) related to the above items and non-recurring tax items which includes the effect of uncertain tax positions for a given audit period and the Tax Reform Act.

Revenues derived from any customer did not exceed 10% of revenues for the three and nine months ended September 30, 2018 and 2017.

The table below presents operating earnings (loss) by segment and Corporate and Other and a reconciliation to Net income (loss) attributable to AXA Equitable for the three and nine months ended September 30, 2018 and 2017, respectively:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
	(in millions)
Net income (loss) attributable to AXA Equitable	$	(511	)	$	21		$	(2,858	)	$	1,328
Adjustments related to:
Variable annuity product features ⁽¹⁾	1,393			457			2,580			(387		)
Investment (gains) losses	9			8			(73		)	9
Loss on the recapture of GMxB business previously ceded to AXA Arizona	(24		)	—			2,603			—
Net actuarial (gains) losses related to pension and other postretirement benefit obligations	17			24			130			72
Other adjustments	33			70			141			76
Income tax expense (benefit) related to above adjustments	(312		)	(233		)	(1,130		)	43
Non-recurring tax items	3			(7		)	26			(225		)
Non-GAAP Operating Earnings	$	608		$	340		$	1,419		$	916

Operating earnings (loss) by segment:
Individual Retirement	$	439		$	241		$	1,159		$	831
Group Retirement	121			97			255			210
Investment Management and Research	39			34			143			99
Protection Solutions	58			—			12			(83		)
Corporate and Other⁽¹⁾	(49		)	(32		)	(150		)	(141		)


(1)	Includes interest expense of $12 million, $9 million, $34 million, and $20 million, for the three and nine months ended September 30, 2018 and 2017, respectively.

Segment revenues are a measure of the Company’s revenue by segment as adjusted to exclude certain items. The following table reconciles segment revenues to Total revenues by excluding the following items:


•	Items related to variable annuity product features, which include certain changes in the fair value of the derivatives and other securities we use to hedge these features and changes in the fair value of the embedded derivatives reflected within the net derivative results of variable annuity product features;


•	Investment gains (losses), which include other-than-temporary impairments of securities, sales or disposals of securities/investments, realized capital gains/losses, and valuation allowances; and


•	Other adjustments, which includes the impact of adoption of revenue recognition standard ASC 606.

The table below presents segment revenues for the three and nine months ended September 30, 2018 and 2017.



	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017
	(in millions)
Segment revenues:
Individual Retirement⁽¹⁾	$	1,080		$	841		$	2,761		$	2,679
Group Retirement⁽¹⁾	259			266			745			704
Investment Management and Research⁽²⁾	850			788			2,602			2,303
Protection Solutions⁽¹⁾	610			645			1,870			1,874
Corporate and Other⁽¹⁾	185			240			580			710
Adjustments related to:
Variable annuity product features	(2,120		)	(384		)	(3,299		)	926
Investment gains (losses)	(9		)	(8		)	73			(9		)
Other adjustments to segment revenues	5			24			(42		)	68
Total revenues	$	860		$	2,412		$	5,290		$	9,255

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(1)	Includes investment expenses charged by AB of approximately $12 million, $18 million, $44 million and $42 million for the three and nine months ended September 30, 2018 and 2017, respectively, for services provided to the Company.


(2)	Inter-segment investment management and other fees of approximately $19 million, $29 million, $65 million and $65 million for the three and nine months ended September 30, 2018 and 2017, respectively, are included in total revenues of the Investment Management and Research segment.

The table below presents Total assets by segment as of September 30, 2018 and December 31, 2017:



	September 30, 2018		December 31, 2017
	(in millions)
Total assets by segment:
Individual Retirement	$	110,810	$	120,608
Group Retirement	43,323		40,472
Investment Management and Research	9,052		10,079
Protection Solutions	37,272		34,296
Corporate and Other	21,047		20,475
Total assets	$	221,504	$	225,930