Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
(Mark One)
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2018 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(I.R.S. Employer
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  x¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post 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  (Do not check if a smaller reporting company)
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 classTrading symbolName of exchange on which registered
Common StockEQHNew York Stock Exchange
As of June 19, 2018, 561,000,000August 8, 2019, 491,148,524 shares of the registrant’s Common Stock, $0.01 par value, were outstanding.


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TABLE OF CONTENTS

  Page
PART I
- FINANCIAL INFORMATION
 
Item 1.
Consolidated Financial Statements
 
 •
Unaudited Consolidated Balance Sheets, March 31, 2018June 30, 2019 and December 31, 20172018
42
 •
Unaudited Consolidated Statements of Income (Loss), QuartersThree and Six Months Ended March, 31,June 30, 2019 and 2018 and 2017
63
 •
Unaudited Consolidated Statements of Comprehensive Income (Loss), QuartersThree and Six Months Ended March, 31,June 30, 2019 and 2018 and 2017
74
 •
Unaudited Consolidated Statements of Equity, QuartersThree and Six Months Ended March, 31,June 30, 2019 and 2018 and 2017
85
 •
Unaudited Consolidated Statements of Cash Flows, QuartersSix Months Ended March 31,June 30, 2019 and 2018 and 2017
97
 •
Notes to Consolidated Financial Statements (Unaudited)
119
 
Note 1 - Organization
119
 
Note 2 - Significant Accounting Policies
129
 
Note 3 - Investments
1915
 
Note 4 - Closed BlockDerivatives
4222
 
Note 5 - Insurance LiabilitiesClosed Block
4328
 
Note 6 - Reinsurance AgreementsInsurance Liabilities
4829
 
Note 7 - Fair Value Disclosures
4833
 
Note 8 - Revenue RecognitionLeases
6348
 
Note 9 - Employee Benefit Plans
6350
 
Note 10 - Share-Based Compensation ProgramsIncome Taxes
6550
 
Note 11 - Income Taxes
66
Note 12 - Related Party Transactions
6650
 
Note 12 - Equity
51
 
Note 13 - Accumulated Other Comprehensive Income (Loss)Redeemable Noncontrolling Interest
6753
 
Note 14 - Commitments and Contingent Liabilities
6853
 
Note 15 - Business Segment Information
7356
 
Note 16 - Earnings Per Share
7659
 
Note 17 - Revision Tablesof Prior Period Financial Statements
7759
 
Note 18 - Subsequent Events
8164
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
8265
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
132104
Item 4.
Controls and Procedures
133105
   
PART II
 - OTHER INFORMATION
 
Item 1.
Legal Proceedings
135107
Item 1A.
Risk Factors
135107
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
135107
Item 3.
Defaults Upon Senior Securities
135107
Item 4.
Mine Safety Disclosures
135107
Item 5.
Other Information
135107
Item 6.
Exhibits
137109
  
SIGNATURES
139110

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NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INFORMATION
Certain of the statements included or incorporated by reference in this Quarterly Report on Form 10-Q including but not limited to those in Management’s Discussion and Analysis of Financial Condition and Results of Operations, 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. The term “ABLP” refers to AllianceBernstein L.P., a Delaware limited partnership and “AB Holding” refers to AllianceBernstein Holding L.P., a Delaware limited partnership (ABLP and AB Holding, together, “AB”). 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.
Forward-looking statements are subject to known and unknown risks and uncertainties, many of which may be beyond our control. We caution you thatThese forward-looking statements are not guaranteesa guarantee of future performance or outcomes and that actual performanceinvolve risks and outcomes, including, without limitation, our actual results of operations or financial condition, may differ materially from those made in or suggested by the forward-looking statements contained herein. In addition, even if our results of operations, financial conditionuncertainties, and cash flowsthere are consistent with the forward-looking statements contained herein, those results may not be indicative of results in subsequent periods. Newcertain important factors emerge from time to time that may cause our business not to develop as we expect, and it is not possible for us to predict all of them. Factors that could cause actual results and outcomes to differ, possibly materially, from thoseexpectations or estimates reflected in such forward-looking statements, include, without limitation:
Adverseincluding, among others: (i) conditions in the global capitalfinancial 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 economy;
Variablepayment 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;
Inadequacyproducts, complex regulation and administration of our reinsuranceproducts, variations in statutory capital requirements, financial strength and hedging programs;
Competitionclaims-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 other insurance companies, banks, asset managerspricing expectations or reserves, amortization of deferred acquisition costs and other financial institutions;
The failure of our new business strategy in accomplishing our objectives;
Risks related tomodels; (vii) our Investment Management and Research segment, including significant fluctuations in AB’s assets under management, (“AUM”), the industry-wide shift from actively-managed investment services to passive services and potential termination of investment advisory agreement, inability to deliver consistent performance, the quantitative models AB uses in certain of its investment services containing errors, and fluctuations in exchange rates;
Inability to recruit, motivate and retain key employees and experienced and productive financial professionals;
The amount of statutory capital we have and must hold to meet our statutory capital requirements and our financial strength and credit ratings varying significantly from time to time;
Holdings’ dependence on the ability of its subsidiaries to pay dividends and other distributions to Holdings, and the failure of its insurance subsidiaries to generate sufficient statutory earnings or have sufficient statutory surplus to enable them to pay ordinary dividends;
Operational failures, failure of information systems or failure to protect the confidentiality of customer information, including by service providers, or losses due to defaults, errors or omissions by third parties and affiliates;
Risks related to strategic transactions;
The occurrence of a catastrophe, including natural or man-made disasters;
Failure to protect our intellectual property and infringement claims by a third party;
Our investment advisory agreements with clients, and selling and distribution agreements with various financial intermediaries and consultants, being subject to termination or non-renewal on short notice;


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Failure of our insurance to fully cover potential exposures;
Changes in accounting standards;
Risks and increased complianceagreements; (viii) legal and regulatory costs due to certain of our administrative operations and offices being located internationally;
Our counterparties’ requirements to pledge collateral or make payments related to declines in estimated fair value of specified assets and changes in the actual or perceived soundness or condition of other financial institutions and market participants;
Gross unrealized losses on fixed maturity and equity securities, illiquid investments and defaults on investments;
Changes to policyholder behavior assumptions under the contracts reinsured to our affiliated captives, the performance of their hedging program, their liquidity needs, their overall financial results and changes in regulatory requirements regarding the use of captives;
The failure to administer or meet any of the complex product and regulatory requirements of our retirement and protection products;
Changes in statutory reserve or other requirements;
A downgrade in our financial strength and claims-paying ratings;
Consolidation of or a loss of, or significant change in, key product distribution relationships;
The failure of our risk management policies and procedures to be adequate to identify, monitor and manage risks;
Inadequate reserves due to differences between our actual experience and management’s estimates and assumptions;
Mortality, longevity and morbidity rates or persistency rates differing significantly from our pricing expectations;
The acceleration of the amortization of deferred acquisition costs (“DAC”);
Inherent uncertainty in our financial models that rely on a number of estimates, assumptions and projections;
Subjective determination of the amount of allowances and impairments taken on our investments;
Changes in the partnership structure of AB Holding and ABLP or changes in the tax law governing partnerships;
U.S.risks, including federal and state legislative and regulatory actionlegislation affecting financial institutions, insurance regulation and changes in supervisorytax reform; (ix) risks related to our continuing relationship with AXA, including conflicts of interest, waiver of corporate opportunities and enforcement policies;
The Tax Cutscosts associated with separation and Jobs Act, enacted on December 22, 2017 (the “Tax Reform Act”)rebranding; and (x) risks related to our common stock and future changes in U.S. tax lawsofferings, including the market price for our common stock being volatile and regulations or interpretations thereof;
Adverse outcomes of legal or regulatory actions;
Conflicts of interest that arise because our controlling stockholder and its affiliates have continuing agreements and business relationships with us;
Our failurepotential stock price declines due to effectively remediate the material weaknesses in our internal control over financial reporting;
Costs associated with any rebranding that we expect to undertake after AXA S.A. (“AXA”) ceases to own at least a majority of our outstanding common stock;
Failure to replicate or replace functions, systems and infrastructure provided by AXA or certain of its affiliates and loss of benefits from AXA’s global contracts; and
Futurefuture sales of shares by existing stockholders could cause our stock price to decline.stockholders.


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Forward-looking statements should be read in conjunction with the other cautionary statements, included and the risks, uncertainties and other factors identified in Holdings’ prospectus dated May 9,Annual Report on Form 10-K for the year ended December 31, 2018 filed on May 11, 2018 with the U.S. Securities and Exchange Commission pursuant to Rule 424(b)(4) under the Securities Act of 1933, , 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.




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PART I FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements

AXA EQUITABLE HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
 March 31,
2018		 December 31,
2017
 (Unaudited)  
 (in millions, except
share amounts)
    
ASSETS   
Investments: 
Fixed maturities available for sale, at fair value (amortized cost of $43,268 and $45,068)$43,484
 $46,941
Mortgage loans on real estate (net of valuation allowance of $7 and $8)11,333
 10,952
Real estate held for production of income(1)
52
 390
Policy loans3,776
 3,819
Other equity investments(1)
1,258
 1,392
Trading securities, at fair value14,919
 14,170
Other invested assets(1)
4,061
 4,118
Total investments78,883
 81,782
Cash and cash equivalents(1)
6,091
 4,814
Cash and securities segregated, at fair value1,025
 825
Broker-dealer related receivables2,300
 2,158
Deferred policy acquisition costs6,288
 5,969
Goodwill and other intangible assets, net4,813
 4,824
Amounts due from reinsurers4,953
 5,023
Loans to affiliates885
 1,230
GMIB reinsurance contract asset, at fair value1,734
 1,894
Current and deferred tax assets225
 67
Other assets(1)
3,239
 2,510
Separate Accounts assets121,858
 124,552
Total assets$232,294
 $235,648
    
LIABILITIES   
Policyholders’ account balances$47,666
 $47,171
Future policy benefits and other policyholders’ liabilities29,586
 30,299
Broker-dealer related payables466
 783
Securities sold under agreements to repurchase1,904
 1,887
Customers related payables2,549
 2,229
Amounts due to reinsurers1,396
 1,436
Short-term and Long-term debt(1)
2,373
 2,408
(UNAUDITED)


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AXA EQUITABLE HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS—CONTINUED


March 31,
2018		 December 31,
2017		June 30, 2019 December 31, 2018
(Unaudited)  (in millions, except share data)
(in millions, except
share amounts)
Loans from affiliates2,530
 3,622
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 loans3,740
 3,779
Other equity investments (1)1,309
 1,334
Trading securities, at fair value9,646
 16,017
Other invested assets (1)2,298
 2,037
Total investments86,901
 81,333
Cash and cash equivalents (1)4,734
 4,469
Cash and securities segregated, at fair value1,110
 1,170
Broker-dealer related receivables2,156
 2,209
Deferred policy acquisition costs6,080
 6,745
Goodwill and other intangible assets, net4,776
 4,780
Amounts due from reinsurers4,740
 4,895
GMIB reinsurance contract asset, at fair value1,896
 1,732
Other assets3,760
 3,127
Separate Accounts assets122,444
 110,337
Total Assets$238,597
 $220,797
LIABILITIES   
Policyholders’ account balances$53,211
 $49,923
Future policy benefits and other policyholders' liabilities32,381
 30,998
Broker-dealer related payables443
 431
Securities sold under agreements to repurchase—
 573
Customer related payables2,686
 3,095
Amounts due to reinsurers1,390
 1,438
Short-term and long-term debt4,852
 4,955
Current and deferred income taxes689
 68
Other liabilities(1)
4,342
 4,053
3,856
 3,360
Separate Accounts liabilities121,858
 124,552
122,444
 110,337
Total liabilities$214,670
 $218,440
Redeemable noncontrolling interest(1)
$1,024
 $626
Commitments and contingent liabilities (Note 14)
 
   
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 and 561,000,000 issued and outstanding$6
 $6
Capital in excess of par value2,050
 1,298
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 capital1,901
 1,908
Treasury stock, at cost, 61,747,804 and 32,138,242 shares, respectively(1,232) (640)
Retained earnings12,455
 12,289
13,293
 13,989
Accumulated other comprehensive income (loss)(946) (108)876
 (1,396)
Total equity attributable to Holdings13,565
 13,485
14,843
 13,866
Noncontrolling interest3,035
 3,097
1,545
 1,566
Total equity16,600
 16,582
Total Equity16,388
 15,432
Total Liabilities, Redeemable Noncontrolling Interest and Equity$232,294
 $235,648
$238,597
 $220,797

______________
(1)    See Note 2 for details of balances with variable interest entities.

(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).


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


Three Months Ended
March 31,		Three Months Ended June 30, Six Months Ended June 30,
2018 20172019 2018 2019 2018
(in millions, except earnings per share amounts)(in millions, except per share data)
REVENUES          
Policy charges and fee income$972
 $956
$941
 $964
 $1,872
 $1,930
Premiums279
 281
280
 275
 563
 554
Net derivative gains (losses)(281) (235)(236) (46) (1,866) (282)
Net investment income (loss)591
 780
976
 596
 1,991
 1,187
Investment gains (losses), net:   
Total other-than-temporary impairment losses—
 (1)
Other investment gains (losses), net102
 (23)
Total investment gains (losses), net102
 (24)
Investment gains (losses), net(12) (22) (23) 80
Investment management and service fees1,055
 954
1,072
 1,075
 2,071
 2,130
Other income117
 118
139
 124
 266
 241
Total revenues2,835
 2,830
3,160
 2,966
 4,874
 5,840
       
BENEFITS AND OTHER DEDUCTIONS          
Policyholders’ benefits608
 1,093
896
 900
 1,776
 1,494
Interest credited to policyholders’ account balances271
 246
314
 268
 618
 539
Compensation and benefits (includes $40 and $41 of deferred acquisition costs)620
 539
Commissions and distribution related payments (includes $120 and $132 of deferred acquisition costs)411
 395
Compensation and benefits512
 520
 1,021
 1,099
Commissions and distribution-related payments307
 287
 588
 578
Interest expense46
 35
57
 60
 113
 106
Amortization of deferred policy acquisition costs, net (net of capitalization of $160 and $173)15
 (55)
Amortization of deferred policy acquisition costs177
 185
 375
 357
Other operating costs and expenses494
 744
456
 424
 866
 917
Total benefits and other deductions2,465
 2,997
2,719
 2,644
 5,357
 5,090
Income (loss) from continuing operations, before income taxes370
 (167)441
 322
 (483) 750
Income tax (expense) benefit(79) (30)(11) (61) 204
 (152)
Net income (loss)291
 (197)430
 261
 (279) 598
Less: net (income) loss attributable to the noncontrolling interest(123) (93)
Less: Net income (loss) attributable to the noncontrolling interest67
 97
 133
 220
Net income (loss) attributable to Holdings$168
 $(290)$363
 $164
 $(412) $378
          
EARNINGS PER SHARE          
Earnings per share - Common stock   
Earnings per share - Common stock:       
Basic$0.30
 $(0.52)$0.74
 $0.29
 $(0.82) $0.67
Diluted$0.30
 $(0.52)$0.74
 $0.29
 $(0.82) $0.67
Weighted average common shares outstanding561
 561
Weighted average common shares outstanding:       
Basic491.1
 561.0
 504.5
 561.0
Diluted491.9
 561.1
 504.5
 561.1

See Notes to Consolidated Financial Statements (Unaudited).


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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 adjustment18
 1
 67
 134
Foreign currency translation adjustment (1)1
 (8) —
 (11)
Total other comprehensive income (loss), net of income taxes1,388
 (356) 2,270
 (1,188)
Comprehensive income (loss)1,818
 (95) 1,991
 (590)
Less: Comprehensive income (loss) attributable to the noncontrolling interest66
 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).



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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


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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).


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

 Three Months Ended
March 31,
 2018 2017
 (in millions)
COMPREHENSIVE INCOME (LOSS)   
Net income (loss)$291
 $(197)
Other comprehensive income (loss) net of income taxes:   
Foreign currency translation adjustment(5) 8
Change in unrealized gains (losses), net of reclassification adjustment(960) 104
Changes in defined benefit plan related items not yet recognized in periodic benefit cost, net of reclassification adjustment133
 25
Total other comprehensive income (loss), net of income taxes(832) 137
Comprehensive income (loss)(541) (60)
Less: Comprehensive (income) loss attributable to noncontrolling interest(129) (100)
Comprehensive income (loss) attributable to Holdings$(670) $(160)

See Notes to Consolidated Financial Statements (Unaudited).



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

 Three Months Ended
March 31,
 2018 2017
 (in millions)
Equity attributable to Holdings:  
Common stock, at par value, beginning of year and end of period$6
 $6
    
Capital in excess of par value, beginning of year$1,298
 $931
Capital contribution from parent695
 —
Changes in capital in excess of par value57
 11
Capital in excess of par value, end of period$2,050
 $942
    
Retained earnings, beginning of year$12,289
 $11,439
Impact of adoption of revenue recognition standard ASC 60613
 —
Net income (loss)168
 (290)
Stockholder dividends(15) —
Retained earnings, end of period$12,455
 $11,149
    
Accumulated other comprehensive income (loss), beginning of year$(108) $(921)
Other comprehensive income (loss)(838) 130
Accumulated other comprehensive income (loss), end of period(946) (791)
Total Holdings’ equity, end of period$13,565
 $11,306
    
Noncontrolling interest, beginning of year$3,097
 $3,142
Impact of adoption of revenue recognition standard ASC 60619
 —
Repurchase of AB Holding units(1) —
Net income (loss) attributable to noncontrolling interest103
 77
Dividends paid to noncontrolling interest(135) (108)
Other comprehensive income (loss) attributable to noncontrolling interest6
 7
Other changes in noncontrolling interest(54) (13)
Noncontrolling interest, end of period3,035
 3,105
Total Equity, End of Period$16,600
 $14,411

See Notes to Consolidated Financial Statements (Unaudited).



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


Three Months Ended
March 31,		Six Months Ended June 30,
2018 20172019 2018
(in millions)(in millions)
Cash flows from operating activities:   
Net income (loss)$291
 $(197)$(279) $598
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:   
Adjustments to reconcile Net income (loss) to Net cash provided by (used in) operating activities:   
Interest credited to policyholders’ account balances271
 246
618
 539
Policy charges and fee income(972) (956)(1,872) (1,930)
Realized and unrealized gains (losses) on trading securities120
 (91)
Net derivative (gains) losses281
 235
1,866
 282
Investment (gains) losses, net(102) 24
23
 (80)
Non-cash pension restructuring102
 —
Amortization of deferred compensation12
 8
Amortization of deferred sales commission7
 9
Other depreciation and amortization(20) (42)
Amortization of deferred cost of reinsurance asset5
 5
Change in goodwill—
 369
Distribution from joint ventures and limited partnerships25
 26
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/payables283
 297
(384) 479
Reinsurance recoverable32
 27
Reinsurance recoverable (1)(65) 29
Segregated cash and securities, net(208) (310)60
 (473)
Deferred policy acquisition costs15
 (55)
Capitalization of deferred policy acquisition costs (1)(362) (332)
Future policy benefits(254) 296
1
 (186)
Current and deferred income taxes103
 252
23
 182
Other, net(255) (71)
Other, net (1)(58) (77)
Net cash provided by (used in) operating activities(264) 72
$(425) $(342)
      
Cash flows from investing activities:      
Proceeds from the sale/maturity/prepayment of:      
Fixed maturities, available for sale4,288
 1,033
Fixed maturities, available-for-sale$5,201
 $6,307
Mortgage loans on real estate68
 209
288
 153
Trading account securities1,629
 2,844
7,662
 4,866
Real estate joint ventures2
 139
Short-term investments (1)1,613
 2,756
Other54
 56
115
 122
Payment for the purchase/origination of:      
Fixed maturities, available for sale(3,245) (1,428)
Fixed maturities, available-for-sale(12,916) (6,031)
Mortgage loans on real estate(447) (632)(757) (1,004)
Trading account securities(2,613) (3,928)(715) (5,075)
Short-term investments (1)(1,598) (1,586)
Other(48) (28)(113) (110)
Cash settlements related to derivative instruments(54) (1,400)(1,112) (970)
Decrease in loans to affiliates346
 12
Change in short-term investments876
 573
Repayments of loans to affiliates—
 1,230
Investment in capitalized software, leasehold improvements and EDP equipment(39) (46)
Other, net (1)(73) 480
Net cash provided by (used in) investing activities$(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 Accounts831
 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 liabilities1,483
 455


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


 Three Months Ended
March 31,
 2018 2017
Investment in capitalized software, leasehold improvements and EDP equipment(24) (19)
Other, net(371) (191)
Net cash provided by (used in) investing activities459
 (2,899)
    
Cash flows from financing activities:   
Policyholders’ account balances:   
Deposits2,532
 2,790
Withdrawals(1,384) (1,342)
       Transfer (to) from Separate Accounts(102) 186
Change in short-term financings167
 95
Repayment of loans from affiliates—
 (56)
Proceeds from loans from affiliates—
 109
Change in collateralized pledged assets17
 347
Change in collateralized pledged liabilities56
 967
(Decrease) increase in overdrafts payable7
 50
Cash Contribution from Parent8
 —
Shareholder dividend paid(15) —
Repurchase of AB Holding units(1) (31)
Redemptions of non-controlling interests of consolidated VIEs, net373
 (3)
Distribution to noncontrolling interests in consolidated subsidiaries(135) (112)
Increase (decrease) in Securities sold under agreement to repurchase17
 (370)
Increase (decrease) in loans from affiliates(470) —
Other, net4
 —
Net cash provided by (used in) financing activities1,074
 2,630
Effect of exchange rate changes on cash and cash equivalents8
 8
Change in cash and cash equivalents1,277
 (189)
Cash and cash equivalents, beginning of year4,814
 5,654
Cash and Cash Equivalents, End of Period$6,091
 $5,465
    
Non-cash transactions during the Period   
Capital contribution from Parent$630
 $—
Repayment of Loans from affiliates$(622) $—
Contribution of 0.5% minority interest in AXF$65
 $—
Repayment of long-term debt$202
 $—
 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 funds59
 (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 equivalents265
 2,019
Cash and cash equivalents, beginning of year4,469
 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).


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


1)    ORGANIZATION
Business
AXA Equitable Holdings, Inc. (“Holdings” and, collectively with its consolidated subsidiaries, the “Company”) is the holding company for a diversified financial services organization. In May 2017,As of June 30, 2019 and December 31, 2018, AXA S.A. (“AXA”), a French holding company for the AXA Group, a worldwide leader in life, propertyowned approximately 40% and casualty and health insurance and asset management, announced its intention to pursue the sale of a minority stake in Holdings through an initial public offering (the “IPO”). On May 14, 2018, Holdings completed the IPO in which AXA sold 157,837,500 shares of Holdings common stock to the public. Following the IPO, AXA owns approximately 71.9%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. AB’s results of operations are reflected in the Investment Management
At bothJune 30, 2019 and Research segment. Accordingly, Corporate and Other does not include any items applicable to AB.
At MarchDecember 31, 2018 and March 31, 2017, the Company’s economic interest in AB was 46.5% and 45.8%, respectively. At March 31, 2018 and March 31, 2017, respectively, AXA and its subsidiaries’ economic interest in AB was 64.4% and 63.8%.
In March 2018, AXA contributed the 0.5% minority interest in AXA Financial, Inc. (“AXA Financial”) to Holdings so that Holdings now owns 100% of AXA Financial.


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

On April 23, 2018, Holdings entered into a Purchase Agreement (the “Purchase Agreement”) with Coliseum Reinsurance Company (“Coliseum”), an affiliate, relating to the purchase and sale of all of the units of limited partnership of ABLP (the “AB Units”) owned by Coliseum. Pursuant to the Purchase Agreement, Holdings purchased from Coliseum 8,160,000 AB Units owned by Coliseum at a purchase price of $26.54 per AB Unit.
On April 23, 2018, Holdings entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) with AXA Investment Managers S.A., an affiliate, relating to the purchase and sale of all of the issued and outstanding shares of common stock of AXA-IM Holding U.S., Inc. As a result of the transactions contemplated by the Stock Purchase Agreement, Holdings acquired beneficial ownership to the 41,934,582 AB Units owned by AXA-IM Holding U.S., Inc.
As a result of these transactions, at April 30, 2018, the Company’s economic interest in AB was approximately 65.0%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.statements for all periods.
See Note 18 to the Notes to Consolidated Financial Statements for additional information on these subsequent events.
2)    SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The Unaudited Interim Consolidated Financial Statementsunaudited 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


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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 Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.2018.
The terms “first“second quarter 2018”2019” and “first“second quarter 2017”2018” refer to the three months ended March 31,June 30, 2019 and 2018, and 2017, respectively. The terms “first threesix months of 2019” and “first six months of 2018” and “first three months of 2017” refer to the threesix months ended March 31,June 30, 2019 and 2018, and 2017, respectively.

2)    SIGNIFICANT ACCOUNTING POLICIES
Adoption of New Accounting Pronouncements
In May 2014,
DescriptionEffect on the Financial Statement or Other Significant Matters
ASU 2017-12: Derivatives and Hedging (Topic 815), as clarified and amended byASU 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
DescriptionEffective Date and Method of AdoptionEffect 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.


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

DescriptionEffective Date and Method of AdoptionEffect 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.


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

DescriptionEffective Date and Method of AdoptionEffect 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 byASU 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 andASU 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 Financial Accounting Standards Board (“FASB”) issued new guidance that revises the recognition criteria for revenue arising from contracts with customers to provide goods or services, except when those revenue streams are from insurance andCompany held approximately $1.2 billion of investment contracts, leases, rights and obligations that areassets in the scopeform of certainequity 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 (i.e., derivative contracts) and guarantees other than product or service warranties,obligations.
At June 30, 2019, the Company consolidated one real estate joint venture for which existing revenue recognition requirements are not supersededit was identified as primary beneficiary under the VIE model. The consolidated entity is jointly owned by this guidance. On January 1, 2018, theAXA Equitable Life Insurance Company adopted the new revenue recognition guidance on(“AXA Equitable Life”) and AXA France and holds an investment in a modified retrospective basis and is providingreal estate venture. Included in its first quarter 2018 reporting the additional disclosures required by the new standard. Adoption of this new guidance did not change the amounts or timing of the Company’s revenue recognitionconsolidated balance sheet at June 30, 2019 related to this VIE is $34 million of Real estate held for base investment management and advisory fees, distribution revenues, shareholder servicing revenues, and broker-dealer revenues. However, some performance-based fees and carried-interest distributions that priorproduction of income. In addition, Real estate held for production of income reflects $14 million as related to adoption were recognized when no risk of reversal remained, in certain instances under the new standard may be recognized earlier if it is probable that significant reversal will not occur. As a result, on January 1, 2018, the Company recognized a cumulative effect adjustment, net of tax, to increase opening equity attributable to Holdings and the noncontrolling interest by approximately $13 million and $19 million,two non-consolidated joint ventures at June 30, 2019.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

respectively, reflectingIncluded in the impactCompany’s consolidated balance sheet at June 30, 2019 are assets of carried-interest distributions previously received$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 approximately $78$13 million net of revenue sharing paymentsat June 30, 2019. The Company has no further commitments to investment team members of approximately $43 million, for which it is probable that significant reversal will not occuror economic interest in these VIEs.
Assumption Updates and for which incremental tax is provided at Holdings.Model Changes
In January 2016, the FASB issued new guidance related to the recognition and measurement of financial assets and financial liabilities. The new guidance primarily affects the accounting for equity investments, financial liabilities under the fair value option, and presentation and disclosure requirements for financial instruments. In addition, the FASB clarified guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale (“AFS”) debt securities.  The new guidance requires equity investments in unconsolidated entities, except those accounted for under the equity method, to be measured at fair value through earnings, thereby eliminating the AFS classification for equity securities with readily determinable fair values for which changes in fair value currently are reported in Accumulated Other Comprehensive Income (Loss) (“AOCI”). On January 1, 2018, the Company adoptedbegan conducting its annual review of the new recognition requirements on a modified retrospective basisCompany’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 fair valuethree or six months ended June 30, 2019 or 2018.
Reclassification of AFS equity securities, resulting in no material reclassification adjustment from AOCI to opening retained earnings forDAC Capitalization
During the net unrealized gains, netfourth quarter of tax, related to approximately $46 million common stock securities and eliminated their designation as AFS equity securities. The new guidance does not apply to FHLB common stock and prohibits such investments from being classified as equity securities subject to the new guidance. Accordingly,2018, the Company has classified its investment in the FHLB common stock as other invested assets at March 31, 2018. The Company’s investment assets held in the form of equity interests in unconsolidated entities, such as limited partnerships and limited liability companies, including hedge funds, private equity funds, and real estate-related funds, generally are accounted for under the equity method and were not impacted by this new guidance.  The Company does not currently report any of its financial liabilities under the fair value option. 
In March 2017, the FASB issued new guidance onchanged the presentation of net periodic pensionthe 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 post-retirement benefitbenefits, Commissions and distribution-related payments and Other operating costs that requires retrospective disaggregationand 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 service cost componentthree 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 other componentsAmortization of net benefitdeferred policy acquisition costs on the income statement. The service cost component is required to be presented with other employee compensation costs in “income from operations,” and the remaining components are to be reported separately outside of income from operations. While this standard did not change how net periodic pension and post-retirement benefit costs are measured, it limits the amount eligible for capitalization on a prospective basis to the service cost component. On January 1, 2018, the Company adopted the change in the income statement presentation utilizing the practical expedient for determining the historical components of net benefit costs, resulting in no material impact to the consolidated financial statements. In addition, no changes to the Company’s capitalization policies with respect to benefit costs resulted from the adoption of the new guidance.
In May 2017, the FASB issued guidance on share-based payments. The amendment provides clarity intended to reduce diversity in practice and the cost and complexity of accounting for changes to the terms or conditions of share-based payment awards. The new guidance is effective for interim and annual periods beginning after December 15, 2017 and requires prospective application to awards modified on or after the date of adoption. Adoption of this amendment on January 1, 2018 did not have a material impact on the Company’s consolidated financial statements.
In August 2016, the FASB issued new guidance to simplify elements of cash flow classification. The new guidance is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. The new guidance is effective for interim and annual periods beginning after December 15, 2017 and requires application of a retrospective transition method. Adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.
Future Adoption of New Accounting Pronouncements
In February 2018, the FASB issued new guidanceline item increases that will permit, but not require, entities to reclassify to retained earnings tax effects “stranded” in AOCI resulting from the change in federal tax rate enacted by the Tax Cuts and Jobs Act (the “Tax Reform Act”) on December 22, 2017. An entity that elects this option must reclassify these stranded tax effects for all items in AOCI, including, but not limited to, AFS securities and employee benefits. Tax effects stranded in AOCI for other reasons, such as prior changes in tax law, may not be reclassified. While the new guidance provides entities the option to reclassify these amounts, new disclosures are required regardless of whether entities elect to doexpense line item.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

so. The new guidance is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. Election can be made either to apply the new guidance retrospectively to each period in which the effect of the Tax Reform Act is recognized or in the period of adoption. Management currently is evaluating the options provided for adopting this guidance and the potential impacts on the Company’s consolidated financial statements.
In August 2017, the FASB issued new guidance on accounting for hedging activities, intended to more closely align the financial statement reporting of hedging relationships to the economic results of an entity’s risk management activities. In addition, the new guidance makes certain targeted modifications to simplify the application of current hedge accounting guidance. The new guidance is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years, with early application permitted. The effect of adoption should be reflected as of the beginning of the fiscal year of adoption (that is, the initial application date). All transition requirements and elections should be applied to derivatives positions and hedging relationships existing on the date of adoption.  Management currently is evaluating the impact that adoption of this guidance will have on the Company’s consolidated financial statements.
 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 payments81
 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
In March 2017, the FASB issued guidance that 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.  The new guidance is effective for interim and annual periods beginning after December 15, 2018 with early adoption permitted and is to be applied on a modified retrospective basis. Management currently is evaluating the impact that adoption of this guidance will have on the Company’s consolidated financial statements.
In June 2016, the FASB issued new guidance related to the accounting for credit losses on financial instruments. The new guidance 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. The new guidance is effective for interim and annual periods beginning after December 15, 2019 with early adoption permitted for annual periods beginning after December 15, 2018. Management currently is evaluating the impact that adoption of this guidance will have on the Company’s consolidated financial statements.
In February 2016, the FASB issued 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. The new lease accounting model will continue to distinguish between capital and operating leases. The current straight-line pattern for the recognition of rent expense on an operating lease is expected to remain substantially unchanged by the new guidance but instead will be comprised of amortization of the right-of-use asset and interest cost on the related lease obligation, thereby resulting in an income statement presentation similar to a financing arrangement or capital lease. Lessor accounting will remain substantially unchanged from the current model but has been updated to align with certain changes made to the lessee model. The new guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. The transition provisions require application on a modified retrospective approach at the beginning of the earliest comparative period presented in the financial statements (that is, January 1, 2017).  Extensive quantitative and qualitative disclosures, including significant judgments made by management, will be required to provide greater insight into the extent of revenue and expense recognized and expected to be recognized from existing lease contracts and arrangements. Management currently is evaluating the impact that adoption of this guidance will have on the Company’s consolidated financial statements.
Revenue RecognitionAssumption Updates and Model Changes
Investment ManagementIn 2018, the Company began conducting its annual review of the Company’s assumptions and Service Feesmodels 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 Related Expenses
Reported as Investment management and service feesdeferred sales inducement (“DSI”) assets. Accordingly, there were no material assumption changes in the Company’sthree 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, 2018are investment advisorypresented in the table below. Capitalization of DAC reclassified to Compensation and service fees, distribution revenues,benefits, Commissions and institutional research services revenues principally emergingdistribution-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 Investment Management and Research segment. Also included are investment management and administrative service fees earned by AXA Equitable Funds Management Group, LLC (“AXA Equitable FMG”) andAmortization of deferred policy acquisition costs line item increases that expense line item.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

reported in the Retirement and Protection segments as well as certain asset-based fees associated with insurance contracts.
Investment management, advisory, and service fees
AB provides asset management services by managing customer assets and seeking to deliver returns to investors. Similarly, AXA Equitable FMG provides investment management and administrative services, such as fund accounting and compliance services, to AXA Premier VIP Trust (“VIP Trust”), EQ Advisors Trust (“EQAT”) and 1290 Funds as well as two private investment trusts established in the Cayman Islands, AXA Allocation Funds Trust and AXA Offshore Multimanager Funds Trust (collectively, the “Other AXA Trusts”). The contracts supporting these revenue streams create a distinct, separately identifiable performance obligation for each day the assets are managed for the performance of a series of services that are substantially the same and have the same pattern of transfer to the customer. Accordingly, these investment management, advisory, and administrative service base fees are recorded over time as services are performed and entitle the Company to variable consideration. Base fees, generally calculated as a percentage of assets under management (“AUM”), are recognized as revenue at month-end when the transaction price no longer is variable and the value of the consideration is determined. These fees are not subject to claw back and there is minimal probability that a significant reversal of the revenue recorded will occur.
Certain investment advisory contracts of AB, including those associated with hedge funds or other alternative investments, provide for a performance-based fee (including carried interest), in addition to a base advisory fee, calculated either as a percentage of absolute investment results or a percentage of investment results in excess of a stated benchmark over a specified period of time. These performance-based fees are forms of variable consideration and, therefore, are excluded from the transaction price until it becomes probable there will not be significant reversal of the cumulative revenue recognized. At each reporting date, the Company evaluates constraining factors surrounding the variable consideration to determine the extent to which, if any, revenues associated with the performance-based fee can be recognized. Constraining factors impacting the amount of variable consideration included in the transaction price include contractual claw-back provisions, the length of time of the uncertainty, the number and range of possible amounts, the probability of significant fluctuations in fund’s market value, and the level in which the fund’s value exceeds the contractual threshold required to earn such a fee and the materiality of the amount being evaluated. Prior to adoption of the new revenue recognition guidance on January 1, 2018, the Company recognized performance-based fees at the end of the applicable measurement period when no risk of reversal remained, and carried-interest distributions received as deferred revenues until no risk of reversal remained.
Sub-advisory and sub-administrative expenses associated with these services are calculated and recorded as the related services are performed in Other operating costs and expense in the consolidated statements of income (loss) as the Company is acting in a principal capacity in these transactions and, as such, reflects these revenues and expenses on a gross basis.
Research services
Research services revenue principally consists of brokerage transaction charges received by Sanford C. Bernstein & Co. LLC (“SCB LLC”) and Sanford C. Bernstein Limited (“SCBL”) for providing equity research services to institutional clients. Brokerage commissions for trade execution services and related expenses are recorded on a trade-date basis when the performance obligations are satisfied. Generally, the transaction price is agreed upon at the point of each trade and based upon the number of shares traded or the value of the consideration traded. Research revenues are recognized when the transaction price is quantified, collectability is assured, and significant reversal of such revenue is not probable.
Distribution services
Revenues from distribution services include fees received as partial reimbursement of expenses incurred in connection with the sale of certain AB sponsored mutual funds and the 1290 Funds and for the distribution primarily of EQAT and VIP Trust shares to separate accounts in connection with the sale of variable life and annuity contracts. The amount


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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 payments81
 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
and timing of revenues recognized from performance of these distribution services often is dependent upon the contractual arrangements with the customer and the specific product sold as further described below.
Most open-end management investment companies, such as U.S. funds and the EQAT and VIP Trusts and the 1290 Funds, have adopted a plan under Rule 12b-1 of the Investment Company Act that allows for certain share classes to pay out of assets, distribution and service fees for the distribution and sale of its shares (“12b-1 Fees”). These open-end management investment companies have such agreements with the Company, and the Company has selling and distribution agreements pursuant to which it pays sales commissions to the financial intermediaries that distribute the shares. These agreements may be terminated by either party upon notice (generally 30 days) and do not obligate the financial intermediary to sell any specific amount of shares.
The Company records 12b-1 fees monthly based upon a percentage of the net asset value (“NAV”) of the funds. At month-end, the variable consideration of the transaction price is no longer constrained as the NAV can be calculated and the value of consideration is determined. These services are separate and distinct from other asset management services as the customer can benefit from these services independently of other services. The Company accrues the corresponding 12b-1 fees paid to sub-distributors monthly as the expenses are incurred. The Company is acting in a principal capacity in these transactions; as such, these revenues and expenses are recorded on a gross basis in the consolidated statements of income (loss).
AB sponsored mutual funds offer back-end load shares in limited instances and charge the investor a contingent deferred sales charge (“CDSC”) if the investment is redeemed within a certain period. The variable consideration for these contracts is contingent upon the timing of the redemption by the investor and the value of the sales proceeds. Due to these constraining factors, the Company excludes the CDSC fee from the transaction price until the investor redeems the investment. Upon redemption, the cash consideration received for these contractual arrangements is recorded as a reduction of unamortized deferred sales commissions.
AB’s Luxembourg subsidiary, the management company for most of its non-U.S. funds, earns a management fee which is accrued daily and paid monthly, at an annual rate, based on the average daily net assets of the fund. With respect to certain share classes, the management fee also may contain a component paid to distributors and other financial intermediaries and service providers to cover shareholder servicing and other administrative expenses (also referred to as an “All-in-Fee”). Based on the conclusion that asset management is distinct from distribution, the Company allocates a portion of the investment and advisory fee to distribution revenues for the servicing component based on standalone selling prices.
Other revenues
Also reported as Investment management and service fees in the Company’s consolidated statements of income (loss) are other revenues from contracts with customers, primarily consisting of shareholder servicing fees, mutual fund reimbursements, and other brokerage income.
Shareholder services, including transfer agency, administration, and record-keeping are provided by AB to company-sponsored mutual funds. The consideration for these services is based on a percentage of the NAV of the fund or a fixed-fee based on the number of shareholder accounts being serviced. The revenues are recorded at month-end when the constraining factors involved with determining NAV or the numbers of shareholders’ accounts are resolved.
Other income
Revenues from contracts with customers reported as Other income in the Company’s consolidated statements of income (loss) primarily consist of advisory account fees and brokerage commissions from the Company’s subsidiary broker-dealer operations and sales commissions from the Company’s general agent for the distribution of non-affiliate insurers’ life insurance and annuity products. These revenues are recognized at month-end when constraining factors, such as AUM and product mix, are resolved and the transaction pricing no longer is variable such that the value of consideration can be determined.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Contract assets and liabilities
The Company applies the practical expedient for contracts that have an original duration of one year or less. Accordingly, the Company accrues the incremental costs of obtaining a contract when incurred and does not consider the time value of money. At March 31, 2018, there are no material balances of contract assets and contract liabilities; as such, no further disclosures are necessary.
Accounting and Consolidation of VIEs
A VIE must be consolidated by its primary beneficiary, which generally is defined as the party that has a controlling financial interest in the VIE. The Company is deemed to have a controlling financial interest in a VIE if it has (i) the power to direct the activities of the VIE that most significantly affect the VIE’s economic performance, and (ii) the obligation to absorb losses of the VIE or the right to receive income from the VIE that potentially could be significant to the VIE. For purposes of evaluating (ii) above, fees paid to the Company as a decision maker or service provider are excluded if the fees are compensation for services provided commensurate with the level of effort required to be performed and the arrangement includes only customary terms, conditions or amounts present in arrangements for similar services negotiated at arm’s length.
If the Company has a variable interest in an entity that is determined not to be a VIE, the entity then is evaluated for consolidation under the voting interest entity (“VOE”) model. For limited partnerships and similar entities, the Company is deemed to have a controlling financial interest in a VOE, and would be required to consolidate the entity, if the Company owns a majority of the entity’s kick-out rights through voting limited partnership interests and other limited partners do not hold substantive participating rights (or other rights that would indicate that the Company does not control the entity). For entities other than limited partnerships, the Company is deemed to have a controlling financial interest in a VOE if it owns a majority voting interest in the entity.
The analysis performed to identify variable interests held, determine whether entities are VIEs or VOEs, and evaluate whether the Company has a controlling financial interest in such entities requires the exercise of judgment and is updated on a continuous basis as circumstances change or new entities are developed. The primary beneficiary evaluation generally is performed qualitatively based on all facts and circumstances, including consideration of economic interests in the VIE held directly and indirectly through related parties and entities under common control, as well as quantitatively, as appropriate.
At March 31, 2018, the Company held approximately $1,137 million of investment assets in the form of equity interests issued by non-corporate legal entities determined under the new 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 sheet 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 $163,434 million, and the Company’s maximum exposure to loss from its direct involvement with these VIEs is the carrying value of its investment of $1,137 million at March 31, 2018. Except for approximately $798 million of unfunded commitments at March 31, 2018, the Company has no further economic interest in these VIEs in the form of guarantees, derivatives, credit enhancements or similar instruments and obligations.
At March 31, 2018, 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 March 31, 2018, are total assets of $36 million related to this VIE, primarily resulting from the consolidated presentation of $36 million of real estate held for production of income. In addition, real estate held for production of income reflects $16 million as related to two non-consolidated joint ventures at March 31, 2018.


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

Included in the Company’s consolidated balance sheet at March 31, 2018 are assets of $2,447 million, liabilities of $1,219 million and redeemable non-controlling interest of $982 million associated with the consolidation of AB-sponsored investment funds under the VIE model. Also included in the Company’s consolidated balance sheets are assets of $135 million, liabilities of $4 million and redeemable non-controlling interest of $10 million from consolidation of AB-sponsored investment funds under the VOE model. The assets of these consolidated funds are presented within Other invested assets and cash and cash equivalents, and liabilities of these consolidated funds are presented with other liabilities on the face of the Company’s consolidated balance sheet at March 31, 2018; 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 March 31, 2018, the net assets of investment products sponsored by AB that are nonconsolidated VIEs are approximately $83.9 billion and the Company’s maximum exposure to loss from its direct involvement with these VIEs is its investment of $8 million at March 31, 2018. The Company has no further commitments to or economic interest in these VIEs.
Impact of the Tax Reform Act
On December 22, 2017, President Trump signed into law the Tax Reform Act, a broad overhaul of the U.S. Internal Revenue Code that changes long-standing provisions governing the taxation of U.S. corporations, including life insurance companies.
The Tax Reform Act reduces the federal corporate income tax rate to 21% beginning in 2018 and repeals the corporate alternative minimum tax (“AMT”) while keeping existing AMT credits. It also includes changes to the dividends received deduction (“DRD”), insurance reserves and tax DAC, and measures affecting our international operations, such as a one-time transitional tax on some of the accumulated earnings of our foreign subsidiaries (within our Investment Management and Research segment).
As a result of the Tax Reform Act, our new effective tax rate is expected to be approximately 19%, driven mainly by the new federal corporate tax rate of 21% and the DRD benefit.
We expect the Tax Reform Act to have both positive and negative impacts on our consolidated balance sheet. On the one hand, as a one-time effect, the lower tax rate resulted in a reduction to the value of our deferred tax assets. On the other hand, the Tax Reform Act repeals the corporate AMT and, subject to certain limitations, allows us to use our AMT credits going forward, which will result in a reduction of our tax liability.
We expect the tax liability on the earnings of our foreign subsidiaries will decrease going forward. In 2017, we recorded a one-time estimated decrease to net income of $23 million due to the estimated transitional tax on some of the accumulated earnings of these subsidiaries.
Overall, we expect the Tax Reform Act to have a net positive economic impact on us. At December 31, 2017, we recorded a provisional estimate of the income tax effects related to Tax Reform. During the period ended March 31, 2018, we have not recorded any changes to this estimate. We continue to evaluate this new and complicated piece of legislation, assess the magnitude of the various impacts and monitor potential regulatory changes related to this reform.
Assumption Updates and Model Changes
ThereIn 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 first quarters of 2018three or 2017.
Revision of Prior Period Financial Statements
During the first quarter of 2018, management identified an error in its previously issued financial statements related to a misclassification between interest credited and net derivative gains/losses. The impact of this error to the consolidated financial statements for the six months ended June 30, 2017, nine2019 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 SeptemberJune 30, 20172018 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 years ended December 31, 2017 and 2016 was not considered to be material. In order to improveamounts previously reported in those expense line items, while the consistency andcapitalization of DAC reclassified from the Amortization of deferred policy acquisition costs line item increases that expense line item.


1813
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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 payments81
 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 fees12
 35
 16
 41
Research services106
 107
 196
 221
Distribution services180
 183
 352
 363
Shareholder services19
 18
 37
 38
Other5
 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 income (loss) andcash flows. The Company has determined that these misclassifications were not material to the financial statements of cash flows to include the revisions discussed herein. See Note 17 to the Notes to Consolidated Financial Statements for details of the revisions.
3)    INVESTMENTSany period.
Fixed Maturities
The following table provides information relating to fixed maturities securities classified as AFS:
Available-for-Sale Securities by Classification 
 Amortized
Cost		 Gross Unrealized
Gains		 Gross Unrealized
Losses		 Fair
Value		 
OTTI
in AOCI (3)
 (in millions)
March 31, 2018:         
Fixed Maturity Securities:         
Public corporate$18,513
 $501
 $298
 $18,716
 $—
Private corporate7,394
 117
 107
 7,404
 —
U.S. Treasury, government and agency14,772
 387
 506
 14,653
 —
States and political subdivisions422
 56
 1
 477
 —
Foreign governments405
 23
 9
 419
 —
Residential mortgage-backed(1)
614
 16
 3
 627
 —
Asset-backed(2)
675
 4
 4
 675
 2
Redeemable preferred stock473
 44
 4
 513
 —
Total at March 31, 2018$43,268
 $1,148
 $932
 $43,484
 $2


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

As a resultThe impact of items included in the adoptionrevision tables included in Note 17 on the consolidated statement of cash flows for the Recognitionsix 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 Measurement of Financial Assetsfor the three and Financial Liabilities standard on January 1, 2018 (Financial Instruments Recognition and Measurement Standard), equity securities are no longernine 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 and accounted for as available for sale securities.available-for-sale (“AFS”).
Available-for-Sale Fixed Maturities by Classification
 Amortized
Cost		 Gross Unrealized
Gains		 Gross Unrealized
Losses		 Fair
Value		 
OTTI
in AOCI (3)
 (in millions)
December 31, 2017:         
Fixed Maturity Securities:         
Public corporate$17,181
 $806
 $33
 $17,954
 $—
Private corporate7,299
 225
 32
 7,492
 —
U.S. Treasury, government and agency17,759
 1,000
 251
 18,508
 —
States and political subdivisions422
 67
 —
 489
 —
Foreign governments395
 29
 5
 419
 —
Residential mortgage-backed(1)
797
 22
 1
 818
 —
Asset-backed(2)
745
 5
 1
 749
 2
Redeemable preferred stock470
 43
 1
 512
 —
Total Fixed Maturities45,068
 2,197
 324
 46,941
 2
Equity securities188
 2
 —
 190
 —
Total at December 31, 2017$45,256
 $2,199
 $324
 $47,131
 $2
 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 agency12,648
 1,108
 39
 13,717
 —
States and political subdivisions495
 70
 —
 565
 —
Foreign governments467
 36
 5
 498
 —
Residential mortgage-backed (2)208
 13
 —
 221
 —
Asset-backed (3)617
 3
 2
 618
 2
Redeemable preferred stock419
 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 agency14,004
 295
 470
 13,829
 —
States and political subdivisions415
 47
 1
 461
 —
Foreign governments524
 19
 13
 530
 —
Residential mortgage-backed (2)225
 10
 1
 234
 —
Asset-backed (3)612
 1
 12
 601
 2
Redeemable preferred stock449
 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.
(2)(3)Includes credit-tranched securities collateralized by sub-prime mortgages and other asset types and credit tenant loans.
(3)(4)Amounts represent OTTI losses in AOCI, which were not included in Net income (loss) in accordance with current accounting guidance..

The contractual maturities of AFS fixed maturities at March 31, 2018June 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.
Available-for-Sale Fixed Maturities
Contractual Maturities at March 31, 2018 
 
Amortized
Cost
 Fair Value
 (in millions)
Due in one year or less$2,499
 $2,517
Due in years two through five8,727
 8,862
Due in years six through ten13,290
 13,114
Due after ten years16,990
 17,176
Subtotal41,506
 41,669
Residential mortgage-backed securities614
 627
Asset-backed securities675
 675
Redeemable preferred stock473
 513
Total$43,268
 $43,484


2015
Table of Contents
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 five14,384
 14,765
Due in years six through ten19,124
 20,179
Due after ten years17,008
 18,465
Subtotal53,397
 56,308
Residential mortgage-backed208
 221
Asset-backed617
 618
Redeemable preferred stock419
 425
Total at June 30, 2019$54,641
 $57,572
The following table shows proceeds from sales, gross gains (losses) from sales and OTTI for AFS fixed maturities during the three and six months ended March 31,June 30, 2019 and 2018.
Proceeds and 2017: Gains (Losses) on Sales for Available-for-Sale Fixed Maturities
 Three Months Ended March 31,
 2018 2017
 (in millions)
Proceeds from sales$3,880
 $440
Gross gains on sales$155
 $25
Gross losses on sales$(52) $(23)
Total OTTI$—
 $—
Non-credit losses recognized in OCI—
 —
Credit losses recognized in net income (loss)$—
 $—


21
Table of Contents
AXA EQUITABLE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
 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 maturity securitiesmaturities held by the Company at the dates indicated and the corresponding changes in such amounts:amounts.
Available-for-Sale Fixed Maturities - Credit Loss Impairments
Three Months Ended March 31,Three Months Ended June 30, Six Months Ended June 30,
2018 20172019 2018 2019 2018
(in millions)(in millions)
Balances, beginning of period$(18) $(239)$(26) $(18) $(58) $(18)
Previously recognized impairments on securities that matured, paid, prepaid or sold—
 55
1
 1
 33
 1
Recognized impairments on securities impaired to fair value this period(1)
—
 —
—
 —
 —
 —
Impairments recognized this period on securities not previously impaired—
 —
—
 —
 —
 —
Additional impairments this period on securities previously impaired—
 —
—
 —
 —
 —
Increases due to passage of time on previously recorded credit losses—
 —
—
 —
 —
 —
Accretion of previously recognized impairments due to increases in expected cash flows—
 —
—
 —
 —
 —
Balances at March 31,$(18) $(184)
Balances at June 30,$(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 and equity securities classified as AFS are included in the consolidated balance sheets as a component of AOCI. The table below presents these amounts as of the dates indicated:
 March 31,
2018		 December 31, 2017
 (in millions)
AFS Securities:   
Fixed maturities:   
With OTTI loss$—
 $2
All other216
 1,871
Equity securities—
 2
Net Unrealized Gains (Losses)$216
 $1,875
As a result of the adoption of the Recognition and Measurement of Financial Assets and Financial Liabilities standard on January 1, 2018 (Financial Instruments Recognition and Measurement Standard), equity securities are no longer classified and accounted for as available for sale securities.



2216
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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 rollforwardroll-forward of net unrealized investment gains (losses) recognized in AOCI, split between amounts related to fixed maturity securities on which an OTTI loss has been recognized and all other:AOCI:
Net Unrealized Gains (Losses) on Available-for-Sale Fixed Maturities with OTTI Losses
 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)
Balance, January 1, 2018$2
 $—
 $(1) $(7) $(6)
Net investment gains (losses) arising during the period—
 —
 —
 —
 —
Reclassification adjustment for OTTI losses:         
Included in Net income (loss)(2) —
 —
 —
 (2)
Excluded from Net income (loss)(1)
—
 —
 —
 —
 —
Impact of net unrealized investment gains (losses) on:         
DAC—
 —
 —
 —
 —
Deferred income taxes—
 —
 —
 7
 7
Policyholders’ liabilities—
 —
 1
 —
 1
Balance, March 31, 2018$—
 $—
 $—
 $—
 $—
Balance, January 1, 2017$19
 $1
 $(10) $(4) $6
Net investment gains (losses) arising during the period63
 —
 —
 —
 63
Reclassification adjustment for OTTI losses:         
Included in Net income (loss)(65) —
 —
 —
 (65)
Excluded from Net income (loss)(1)
—
 —
 —
 —
 —
Impact of net unrealized investment gains (losses) on:         
DAC—
 (4) —
 —
 (4)
Deferred income taxes—
 —
 —
 —
 —
Policyholders’ liabilities—
 —
 6
 —
 6
Balance, March 31, 2017$17
 $(3) $(4) $(4) $6
(1)Represents “transfers in” related to the portion of OTTI losses recognized during the period that were not recognized in income (loss) for securities with no prior OTTI loss.

 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 period1,746
 —
 —
 —
 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 losses2,929
 (552) (88) (481) 1,808
Net unrealized investment gains (losses) with OTTI losses2
 —
 —
 —
 2
Balances at June 30, 2019$2,931
 $(552) $(88) $(481) $1,810
          
Balances at April 1, 2018$216
 $(17) $(128) $(144) $(73)
Net investment gains (losses) arising during the period(503) —
 —
 —
 (503)
Reclassification adjustment:         
Included in Net income (loss)19
 —
 —
 —
 19
Excluded from Net income (loss) (1)—
 —
 —
 —
 —
Impact of net unrealized investment gains (losses) on:         
DAC—
 104
 —
 —
 104
Deferred income taxes—
 —
 —
 78
 78
Policyholders’ liabilities—
 —
 8
 —
 8
Net unrealized investment gains (losses) excluding OTTI losses(268) 87
 (120) (66) (367)
Net unrealized investment gains (losses) with OTTI losses2
 —
 1
 (1) 2
Balances at June 30, 2018$(266) $87
 $(119) $(67) $(365)


23
Table of Contents
AXA EQUITABLE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

All Other Net Unrealized Investment Gains (Losses) In AOCI
 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)
Balance, January 1, 2018$1,871
 $(358) $(238) $(383) $892
Net investment gains (losses) arising during the period(109) —
 —
 —
 (109)
Reclassification adjustment for OTTI losses:
 
 
 
  
Included in Net income (loss)(1,546) —
 —
 —
 (1,546)
Excluded from Net income (loss)(1)
—
 —
 —
 —
 —
Impact of net unrealized investment gains (losses) on:
 
 
 
  
DAC—
 341
 —
 —
 341
Deferred income taxes—
 —
 —
 239
 239
Policyholders’ liabilities—
 —
 110
 —
 110
Balance, March 31, 2018$216

$(17)
$(128)
$(144)
$(73)
Balance, January 1, 2017$528
 $(45) $(192) $(95) $196
Net investment gains (losses) arising during the period176
 —
 —
 —
 176
Reclassification adjustment for OTTI losses:
 
 
 
  
Included in Net income (loss)29
 —
 —
 —
 29
Excluded from Net income (loss)(1)


 —
 —
 —
 —
Impact of net unrealized investment gains (losses) on:
 
 
 
  
DAC—
 (68) —
 —
 (68)
Deferred income taxes—
 —
 —
 (60) (60)
Policyholders’ liabilities—
 —
 14
 —
 14
Balance, March 31, 2017$733
 $(113) $(178) $(155) $287
______________
(1)Represents “transfers out” related to the portion of OTTI losses during the period that were not recognized in Net income (loss) for securities with no prior OTTI loss.losses.



2417
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AXA EQUITABLE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

 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 January 1, 2019$(522) $100
 $(73) $104
 $(391)
Net investment gains (losses) arising during the period3,456
 —
 —
 —
 3,456
Reclassification adjustment:         
Included in Net income (loss)(5) —
 —
 —
 (5)
Excluded from Net income (loss) (1)—
 —
 —
 —
 —
Impact of net unrealized investment gains (losses) on:         
DAC—
 (652) —
 —
 (652)
Deferred income taxes—
 —
 —
 (585) (585)
Policyholders’ liabilities—
 —
 (15) —
 (15)
Net unrealized investment gains (losses) excluding OTTI losses2,929
 (552) (88) (481) 1,808
Net unrealized investment gains (losses) with OTTI losses2
 —
 —
 —
 2
Balances at June 30, 2019$2,931

$(552)
$(88)
$(481)
$1,810
          
Balances at January 1, 2018$1,871
 $(358) $(238) $(397) $878
Net investment gains (losses) arising during the period(2,049) —
 —
 —
 (2,049)
Reclassification adjustment:         
Included in Net income (loss)(90) —
 —
 —
 (90)
Excluded from Net income (loss) (1)—
 —
 —
 —
 —
Impact of net unrealized investment gains (losses) on:         
DAC—
 445
 —
 —
 445
Deferred income taxes—
 —
 —
 331
 331
Policyholders’ liabilities—
 —
 118
 —
 118
Net unrealized investment gains (losses) excluding OTTI losses(268) 87
 (120) (66) (367)
Net unrealized investment gains (losses) with OTTI losses2
 —
 1
 (1) 2
Balances at June 30, 2018$(266) $87
 $(119) $(67) $(365)
______________
(1)Represents “transfers out” related to the portion of OTTI losses during the period that were not recognized in Net income (loss) for securities with no prior OTTI losses.
The following tables disclose the fair values and gross unrealized losses of the 1,411 issues331 securities at March 31, 2018June 30, 2019 and the 752 issues1,700 securities at December 31, 2017 of fixed maturities2018 that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position for the specified periods at the dates indicated:


18
Table of Contents
AXA EQUITABLE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Continuous Gross Unrealized Losses for Available-for-Sale Fixed Maturities
Less Than 12 Months 12 Months or Longer TotalLess Than 12 Months 12 Months or Longer Total
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value Gross Unrealized Losses
(in millions)(in millions)
March 31, 2018:           
Fixed Maturity Securities:           
Public corporate$8,539
 $263
 $605
 $35
 $9,144
 $298
Private corporate2,457
 63
 660
 44
 3,117
 107
June 30, 2019:           
Fixed Maturities:           
Corporate$331
 $4
 $1,884
 $60
 $2,215
 $64
U.S. Treasury, government and agency—
 —
 2,432
 39
 2,432
 39
Foreign governments—
 —
 47
 5
 47
 5
Residential mortgage-backed—
 —
 —
 —
 —
 —
Asset-backed295
 1
 42
 1
 337
 2
Redeemable preferred stock120
 2
 21
 2
 141
 4
Total at June 30, 2019$746
 $7
 $4,426
 $107
 $5,172
 $114
           
December 31, 2018:           
Fixed Maturities:           
Corporate$8,964
 $313
 $8,244
 $487
 $17,208
 $800
U.S. Treasury, government and agency3,129
 81
 4,325
 425
 7,454
 506
1,077
 53
 4,306
 417
 5,383
 470
States and political subdivisions19
 1
 —
 —
 19
 1
—
 —
 19
 1
 19
 1
Foreign governments57
 2
 70
 7
 127
 9
109
 3
 76
 10
 185
 13
Residential mortgage-backed145
 2
 76
 1
 221
 3
—
 —
 29
 1
 29
 1
Asset-backed81
 4
 1
 —
 82
 4
563
 11
 13
 1
 576
 12
Redeemable preferred stock116
 2
 12
 2
 128
 4
165
 13
 33
 5
 198
 18
Total$14,543
 $418

$5,749

$514

$20,292

$932
December 31, 2017:           
Fixed Maturity Securities:           
Public corporate$2,123
 $15
 $690
 $18
 $2,813
 $33
Private corporate780
 8
 641
 24
 1,421
 32
U.S. Treasury, government and agency2,718
 6
 4,506
 245
 7,224
 251
States and political subdivisions20
 —
 —
 —
 20
 —
Foreign governments11
 —
 73
 5
 84
 5
Residential mortgage-backed62
 —
 76
 1
 138
 1
Asset-backed15
 1
 12
 —
 27
 1
Redeemable preferred stock10
 —
 13
 1
 23
 1
Total$5,739
 $30
 $6,011
 $294
 $11,750
 $324
Total at December 31, 2018$10,878
 $393
 $12,720
 $922
 $23,598
 $1,315

The Company’s investments in fixed maturity securitiesmaturities do not include concentrations of credit risk of any single issuer greater than 10% of the consolidated equity of the Company, other than securities of the U.S. government, U.S. government agencies, and certain securities guaranteed by the U.S. government. The Company maintains a diversified portfolio of corporate securities across industries and issuers and does not have exposure to any single issuer in excess of 0.5%0.6% of total investments.corporate securities. The largest exposures to a single issuer of corporate securities held at March 31, 2018June 30, 2019 and December 31, 20172018 were $219$267 million and $207$226 million, respectively. respectively, representing 1.6% and 1.5% of the consolidated equity of the Company.
Corporate high yield securities, consisting primarily of public high yield bonds, are classified as other than investment grade by the various rating agencies, i.e., a rating below Baa3/BBB- or the National Association of Insurance Commissioners (“NAIC”) designation of 3 (medium investment grade), 4 or 5 (below investment grade) or 6 (in or near default). At March 31, 2018June 30, 2019 and December 31, 2017,2018, respectively, approximately $1,335$1,349 million and $1,372$1,268 million, or 3.1%2.5% and 3.0%2.7%, of the $43,268$54,641 million and $45,068$46,801 million aggregate amortized cost of fixed maturities held by the Company were considered to be other than investment grade. These securities had net unrealized losses of $14$17 million and $5$31 million at March 31, 2018June 30, 2019 and December 31, 2017,2018, respectively.
At March 31, 2018June 30, 2019 and December 31, 2017,2018, respectively, the $514$107 million and $294$922 million of gross


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

unrealized losses of twelve months or more were concentrated in corporate and U.S. Treasury, government and agency securities. In accordance with the policy described in Note 2, the Company concluded that an adjustment to income for OTTI for these securities was not warranted at either March 31, 2018June 30, 2019 or 2017.2018. At March 31, 2018June 30, 2019 and December 31, 2017,2018, the Company did not intend to sell the securities nor will it likely be required to dispose of the securities before the anticipated recovery of their remaining amortized cost basis.
The Company does not originate, purchase or warehouse residential mortgagesAt June 30, 2019 and is not in the mortgage servicing business. At MarchDecember 31, 2018, the carryingfair value of fixed maturities that were non-income producing for the twelve months preceding that date was $3 million.
For the three months ended March 31, 2018 and 2017, investment income is shown net of investment expenses of $19 million and $19 million respectively.
At March 31, 2018 and December 31, 2017, respectively, the fair values of the Company’s trading account securities were $14,919was $9,646 million and $14,170$16,017 million, respectively. Also at March 31, 2018At June 30, 2019 and December 31, 2017,2018, trading account securities


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

included the General Account’s investment in Separate Accounts which had carrying values of $49$53 million and $50$49 million, respectively.
Net unrealized and realized gains (losses) on trading account equity securities are included in Net investment income (loss) in the Consolidated Statements of Income (Loss). The table below shows a breakdown of Net investment income (loss) from trading account securities during the three and six months ended March 31, 2018June 30, 2019 and 2017:2018:
Net Investment Income (Loss) from Trading Account Securities 
Three Months Ended March 31,Three Months Ended June 30, Six Months Ended June 30,
2018 20172019 2018 2019 2018
(in millions)(in millions)
Net investment gains (losses) recognized during the period on securities held at the end of the period$(121) $87
$159
 $(99) $477
 $(220)
Net investment gains (losses) recognized on securities sold during the period1
 4
3
 (18) (21) (17)
Unrealized and realized gains (losses) on trading securities arising during the period(120) 91
Net investment gains (losses) on trading securities arising during the period162
 (117) 456
 (237)
Interest and dividend income from trading securities76
 63
73
 83
 165
 159
Net investment income (loss) from trading securities$(44) $154
$235
 $(34) $621
 $(78)
Mortgage Loans
The payment terms of mortgage loans may from time to time be restructured or modified.
Mortgage loans on real estate are placed on nonaccrual status once management determines the collection of accrued interest is doubtful. Once mortgage loans on real estate are classified as nonaccrual loans, interest income is recognized under the cash basis of accounting and the resumption of the interest accrual would commence only after all past due interest has been collected or the mortgage loan on real estate has been restructured to where the collection of interest is considered likely. At March 31, 2018June 30, 2019 and December 31, 2017,2018, the carrying values of commercial mortgage loans on real estate that had been classified as nonaccrualnon-accrual loans were $19 million$0 and $19 million, respectively.


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

Valuation Allowances for Mortgage Loans:
Allowance for credit losses for commercial mortgage loans were $0 and $7 million for the first quarters ofsix months ended June 30, 2019 and 2018 and 2017 are as follows:
 Three Months Ended March 31,
 2018 2017
 (in millions)
Allowance for credit losses: 
Beginning balance, January 1,$8
 $8
Charge-offs—
 —
Recoveries(1) —
Provision—
 —
Ending balance, March 31,$7
 $8
    
March 31, Individually Evaluated for Impairment$7
 $8
, respectively. There were no allowances for credit losses for agricultural mortgage loans for the first quarters ofsix months ended June 30, 2019 and 2018 and 2017.
Real Estate:
In March 2018, the Company sold its interest in two consolidated real estate joint ventures to AXA France for a total purchase price of approximately $143 million, which resulted in a pre-tax loss of $0.2 million and the reduction of $203 million of long-term debt on the Company’s balance sheet for the first quarter of 2018..
The following tables provide information relating to the loan-to-value and debt service coverage ratios for commercial and agricultural mortgage loans at March 31, 2018June 30, 2019 and December 31, 2017.2018. The values used in these ratio calculations were developed as part of the periodic review of the commercial and agricultural mortgage loan portfolio, which includes an evaluation of the underlying collateral value.
Mortgage Loans by Loan-to-Value and Debt Service Coverage Ratios
 Debt Service Coverage Ratio (1) Total Mortgage Loans
Loan-to-Value Ratio (2):Greater than 2.0x 1.8x to 2.0x 1.5x to 1.8x 1.2x to 1.5x 1.0x to 1.2x Less than 1.0x 
 (in millions)
June 30, 2019:             
Commercial Mortgage Loans:             
0% - 50%$783
 $21
 $215
 $24
 $—
 $—
 $1,043
50% - 70%4,929
 834
 1,191
 637
 48
 —
 7,639
70% - 90%359
 —
 71
 248
 136
 —
 814
90% plus—
 —
 46
 —
 —
 —
 46
Total Commercial Mortgage Loans$6,071
 $855
 $1,523
 $909
 $184
 $—
 $9,542
Agricultural Mortgage Loans:             
0% - 50%$287
 $114
 $264
 $555
 $333
 $47
 $1,600
50% - 70%114
 77
 240
 395
 268
 33
 1,127
70% - 90%—
 —
 —
 19
 —
 —
 19
90% plus—
 —
 —
 —
 —
 —
 —
Total Agricultural Mortgage Loans$401
 $191
 $504
 $969
 $601
 $80
 $2,746


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Mortgage Loans by Loan-to-Value and Debt Service Coverage Ratios
March 31, 2018
Debt Service Coverage Ratio(1)
  Debt Service Coverage Ratio (1) Total Mortgage Loans
Loan-to-Value Ratio:(2)
Greater than 2.0x 1.8x to 2.0x 1.5x to 1.8x 1.2x to 1.5x 1.0x to 1.2x Less than 1.0x 
Total Mortgage
Loans
Loan-to-Value Ratio (2):Greater than 2.0x 1.8x to 2.0x 1.5x to 1.8x 1.2x to 1.5x 1.0x to 1.2x Less than 1.0x Total Mortgage Loans
(in millions)(in millions)
Commercial Mortgage Loans(1)
             
Total Mortgage Loans:             
0% - 50%$1,070
 $135
 $479
 $579
 $333
 $47
 $2,643
50% - 70%5,043
 911
 1,431
 1,032
 316
 33
 8,766
70% - 90%359
 —
 71
 267
 136
 —
 833
90% plus—
 —
 46
 —
 —
 —
 46
Total Mortgage Loans$6,472
 $1,046
 $2,027
 $1,878
 $785
 $80
 $12,288
December 31, 2018:             
Commercial Mortgage Loans:             
0% - 50%$737
 $21
 $321
 $73
 $—
 $—
 $1,152
$797
 $21
 $247
 $24
 $—
 $—
 $1,089
50% - 70%4,477
 643
 1,122
 399
 178
 —
 6,819
4,908
 656
 1,146
 325
 151
 —
 7,186
70% - 90%169
 110
 144
 307
 27
 —
 757
260
 —
 117
 370
 98
 —
 845
90% plus—
 —
 27
 —
 —
 —
 27
—
 —
 —
 27
 —
 —
 27
Total Commercial Mortgage Loans$5,383
 $774
 $1,614
 $779
 $205
 $—
 $8,755
$5,965
 $677
 $1,510
 $746
 $249
 $—
 $9,147
Agricultural Mortgage Loans(1)
             
Agricultural Mortgage Loans:             
0% - 50%$275
 $153
 $276
 $496
 $321
 $29
 $1,550
$282
 $147
 $267
 $543
 $321
 $51
 $1,611
50% - 70%111
 46
 219
 360
 228
 48
 1,012
112
 46
 246
 379
 224
 31
 1,038
70% - 90%—
 —
 —
 23
 —
 —
 23
—
 —
 —
 19
 27
 —
 46
90% plus—
 —
 —
 —
 —
 —
 —
—
 —
 —
 —
 —
 —
 —
Total Agricultural Mortgage Loans$386
 $199
 $495
 $879
 $549
 $77
 $2,585
$394
 $193
 $513
 $941
 $572
 $82
 $2,695
Total Mortgage Loans(1)
             
Total Mortgage Loans:             
0% - 50%$1,012
 $174
 $597
 $569
 $321
 $29
 $2,702
$1,079
 $168
 $514
 $567
 $321
 $51
 $2,700
50% - 70%4,588
 689
 1,341
 759
 406
 48
 7,831
5,020
 702
 1,392
 704
 375
 31
 8,224
70% - 90%169
 110
 144
 330
 27
 —
 780
260
 —
 117
 389
 125
 —
 891
90% plus—
 —
 27
 —
 —
 —
 27
—
 —
 —
 27
 —
 —
��27
Total Mortgage Loans$5,769
 $973
 $2,109
 $1,658
 $754
 $77
 $11,340
$6,359
 $870
 $2,023
 $1,687
 $821
 $82
 $11,842
______________
(1)The debt service coverage ratio is calculated using the most recently reported operating income results from property operations divided by annual debt service.
(2)The loan-to-value ratio is derived from current loan balance divided by the most recent fair market value estimate of the property. The fair market value of the underlying commercial properties is updated annually.

The following table provides information relating to the aging analysis of past due mortgage loans at June 30, 2019 and December 31, 2018.
Age Analysis of Past Due Mortgage Loans
 30-59 Days 60-89 Days 90 Days or More Total Current Total Financing Receivables Recorded Investment 90 Days or More and Accruing
       (in millions)    
June 30, 2019:             
Commercial$—
 $—
 $—
 $—
 $9,542
 $9,542
 $—
Agricultural46
 9
 22
 77
 2,669
 2,746
 20
Total Mortgage Loans$46
 $9
 $22
 $77
 $12,211
 $12,288
 $20


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Mortgage Loans by Loan-to-Value and Debt Service Coverage Ratios
December 31, 2017
 
Debt Service Coverage Ratio(1)
  
Loan-to-Value Ratio:(2)
Greater than 2.0x 1.8x to 2.0x 1.5x to 1.8x 1.2x to1.5x 1.0x to 1.2x Less than 1.0x Total Mortgage Loans
 (in millions)
Commercial Mortgage Loans(1)
             
0% - 50%$759
 $—
 $320
 $74
 $—
 $—
 $1,153
50% - 70%4,088
 682
 1,066
 428
 145
 —
 6,409
70% - 90%169
 110
 196
 272
 50
 —
 797
90% plus—
 —
 27
 —
 —
 —
 27
Total Commercial Mortgage Loans$5,016
 $792
 $1,609
 $774
 $195
 $—
 $8,386
Agricultural Mortgage Loans(1)
             
0% - 50%$272
 $149
 $275
 $515
 $316
 $30
 $1,557
50% - 70%111
 46
 227
 359
 221
 49
 1,013
70% - 90%—
 —
 —
 4
 —
 —
 4
90% plus—
 —
 —
 —
 —
 —
 —
Total Agricultural Mortgage Loans$383
 $195
 $502
 $878
 $537
 $79
 $2,574
Total Mortgage Loans(1)
             
0% - 50%$1,031
 $149
 $595
 $589
 $316
 $30
 $2,710
50% - 70%4,199
 728
 1,293
 787
 366
 49
 7,422
70% - 90%169
 110
 196
 276
 50
 —
 801
90% plus—
 —
 27
 —
 —
 —
 27
Total Mortgage Loans$5,399
 $987
 $2,111
 $1,652
 $732
 $79
 $10,960
(1)The debt service coverage ratio is calculated using the most recently reported operating income results from property operations divided by annual debt service.
(2)The loan-to-value ratio is derived from current loan balance divided by the fair market value of the property. The fair market value of the underlying commercial properties is updated annually.

 30-59 Days 60-89 Days 90 Days or More Total Current Total Financing Receivables Recorded Investment 90 Days or More and Accruing
       (in millions)    
December 31, 2018:             
Commercial$—
 $—
 $27
 $27
 $9,120
 $9,147
 $—
Agricultural18
 8
 42
 68
 2,627
 2,695
 40
Total Mortgage Loans$18
 $8
 $69
 $95
 $11,747
 $11,842
 $40

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

The following table provides information relating to the aging analysis of past due mortgage loans at March 31, 2018 and December 31, 2017, respectively.
Age Analysis of Past Due Mortgage Loan
 
30-59
    Days    
 
60-89
    Days    
 
90
    Days    
or >
 Total     Current     
Total
Financing
Receivables
 
Recorded
Investment 90 Days or >
and
Accruing
       (in millions)    
March 31, 2018             
Commercial$—
 $—
 $27
 $27
 $8,728
 $8,755
 $—
Agricultural10
 5
 39
 54
 2,531
 2,585
 39
Total Mortgage Loans$10
 $5
 $66
 $81
 $11,259
 $11,340
 $39
December 31, 2017             
Commercial$27
 $—
 $—
 $27
 $8,359
 $8,386
 $—
Agricultural49
 3
 22
 74
 2,500
 2,574
 22
Total Mortgage Loans$76
 $3
 $22
 $101
 $10,859
 $10,960
 $22



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

The following table provides information relating to impaired mortgage loans at March 31, 2018 and December 31, 2017, respectively.
Impaired Mortgage Loans
 
Recorded
Investment
 
Unpaid
Principal
Balance
 
Related
Allowance
 
Average
Recorded
Investment(1)
 
Interest
Income
Recognized
 (in millions)
March 31, 2018:         
With no related allowance recorded:         
Commercial mortgage loans - other$—
 $—
 $—
 $—
 $—
Agricultural mortgage loans—
 —
 —
 —
 —
Total$—
 $—
 $—
 $—
 $—
With related allowance recorded:         
Commercial mortgage loans - other$27
 $27
 $(7) $27
 $—
Agricultural mortgage loans—
 —
 —
 —
 —
Total$27
 $27
 $(7) $27
 $—
December 31, 2017:         
With no related allowance recorded:         
Commercial mortgage loans - other$—
 $—
 $—
 $—
 $—
Agricultural mortgage loans—
 —
 —
 —
 —
Total$—
 $—
 $—
 $—
 $—
With related allowance recorded:         
Commercial mortgage loans - other$27
 $27
 $(8) $27
 $2
Agricultural mortgage loans—
 —
 —
 —
 —
Total$27
 $27
 $(8) $27
 $2
(1)Represents a two-quarter average of recorded amortized cost.

Derivatives and Offsetting Assets and Liabilities4)    DERIVATIVES
The Company uses derivatives as part of its overall asset/liability risk management primarily to reduce exposures to equity market and interest rate risks. Derivative hedging strategies are designed to reduce these risks from an economic perspective and are all executed within the framework of a Derivative“Derivative Use Plan (“DUP”)Plan” approved by applicable states’ insurance law. Derivatives are generally not accounted for using hedge accounting, with the exception of Treasury Inflation-Protected Securities (“TIPS”), which is discussed further below. Operation of these hedging programs is based on models involving numerous estimates and assumptions, including, among others, mortality, lapse, surrender and withdrawal rates, election rates, fund performance, market volatility and interest rates. A wide range of derivative contracts are used in these hedging programs, including exchange traded equity, currency and interest rate futures contracts, total return and/or other equity swaps, interest rate swap and floor contracts, bond and bond-index total return swaps, swaptions, variance swaps and equity options, credit and foreign exchange derivatives, as well as bond and repo transactions to support the hedging. The Company bought interest rate swaptions during the second quarter of 2019 to reduce the impact of unfavorable changes in interest rates. The derivative contracts are collectively managed in an effort to reduce the economic impact of unfavorable changes in guaranteed benefits’ exposures attributable to movements in capital markets. In addition, as part of ourits hedging strategy, the Company holds static hedge positions to maintain a targettargets an asset level for all variable annuity products at or above a CTE98 level under most economic scenarios (CTE is a statistical measure of tail risk which quantifies the total asset requirement to sustain a loss if an event outside a given probability level has


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

occurred. CTE 98CTE98 denotes the financial resources a company would need to cover the average of the worst 2% of scenarios).scenarios.)
Derivatives utilizedUtilized to hedge exposureHedge Exposure to Variable Annuities with Guarantee Features
The Company has issued and continues to offer variable annuity products with variable annuity guaranteed benefits (“GMxB”), including guaranteed minimum living benefits (“GMLBs”) (such as guaranteed minimum income benefits (“GMIBs”), guaranteed minimum withdrawal benefits (“GMWBs”) and guaranteed minimum accumulation benefits (“GMABs”), and guaranteed minimum death benefits (“GMDBs”) (inclusive of return of premium death benefit guarantees).GMxB features. The risk associated with the GMDB feature is that under-performance of the financial markets could result in GMDB benefits, in the event of death, being higher than what accumulated policyholders’ account balances would support. The risk associated with the GMIB feature is that under-performance of the financial markets could result in the present value of GMIB, in the event of annuitization, being higher than what accumulated policyholders’ account balances would support, taking into account the relationship between current annuity purchase rates and the GMIB guaranteed annuity purchase rates. The risk associated with products that have a GMxB derivative features liability is that under-performance of the financial markets could result in the GMxB derivative features’ benefits being higher than what accumulated policyholders’ account balances would support.
For GMxB features, the Company retains certain risks including basis, credit spread and some volatility risk and risk associated with actual versus expected actuarial assumptions for mortality, lapse and surrender, withdrawal and policyholder election rates, among other things. The derivative contracts are managed to correlate with changes in the value of the GMxB features that result from financial markets movements. A portion of exposure to realized equity volatility is hedged using equity options and variance swaps and a portion of exposure to credit risk is hedged using total return swaps on fixed income indices. Additionally, the Company is party to total return swaps for which the reference U.S. Treasury securities are contemporaneously purchased from the market and sold to the swap counterparty. As these transactions result in a transfer of control of the U.S. Treasury securities to the swap counterparty, the Company derecognizes these securities with consequent gain or loss from the sale. The Company has also purchased reinsurance contracts to mitigate the risks associated with GMDB features and the impact of potential market fluctuations on future policyholder elections of GMIB features contained in certain annuity contracts issued by the Company.
The Company has implemented static hedge positions to maintain a target asset level for all variable annuities at a CTE98 level under most scenarios, and at a CTE95 level in extreme scenarios. This program was implemented beginning in December 2017.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Derivatives usedUtilized to hedge crediting rate exposureHedge Crediting Rate Exposure on SCS, SIO, MSO and IUL products/investment optionsProducts/Investment Options
The Company hedges crediting rates in the Structured Capital Strategies (“SCS”) variable annuity, Structured Investment Option in the EQUI-VEST variable annuity series (“SIO”), Market Stabilizer Option (“MSO”) in the variable life insurance products and Indexed Universal Life (“IUL”) insurance products. These products permit the contract owner to participate in the performance of an index, ETF or commodity price movement up to a cap for a set period of time. They also contain a protection feature, in which the Company will absorb, up to a certain percentage, the loss of value in an index, ETF or commodity price, which varies by product segment.
In order to support the returns associated with these features, the Company enters into derivative contracts whose payouts, in combination with fixed income investments, emulate those of the index, ETF or commodity price, subject to caps and buffers, without any basis risk due to market exposures, thereby substantially reducing any exposure to market-related earnings volatility.
Derivatives usedUsed to Hedge Equity Market Risks Associated with the General Account’s Seed Money Investments in Retail Mutual Funds
The Company’s General Account seed money investments in retail mutual funds expose us to market risk, including equity market risk which is partially hedged through equity-index futures contracts to minimize such risk.
Derivatives Used for General Account Investment Portfolio
The Company maintains a strategy in its General Account investment portfolio to replicate the credit exposure of fixed maturity securities otherwise permissible for investment under its investment guidelines through the sale of credit default swaps (“CDSs”). Under the terms of these swaps, the Company receives quarterly fixed premiums that, together with any initial amount paid or received at trade inception, replicate the credit spread otherwise currently obtainable


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

by purchasing the referenced entity’s bonds of similar maturity. These credit derivatives generally have remaining terms of five years or less and are recorded at fair value with changes in fair value, including the yield component that emerges from initial amounts paid or received, reported in Net investment income (loss)derivative gains (losses).
The Company manages its credit exposure taking into consideration both cash and derivatives basedderivatives-based positions and selects the reference entities in its replicated credit exposures in a manner consistent with its selection of fixed maturities. In addition, the Company generally transacts the sale of CDSs in single name reference entities of investment grade credit quality and with counterparties subject to collateral posting requirements. If there is an event of default by the reference entity or other such credit event as defined under the terms of the swap contract, the Company is obligated to perform under the credit derivative and, at the counterparty’s option, either pay the referenced amount of the contract less an auction-determined recovery amount or pay the referenced amount of the contract and receive in return the defaulted or similar security of the reference entity for recovery by sale at the contract settlement auction.
To date, there have been no events of default or circumstances indicative of a deterioration in the credit quality of the named referenced entities to require or suggest that the Company will have to perform under these CDSs. The maximum potential amount of future payments the Company could be required to make under these credit derivatives is limited to the par value of the referenced securities which is the U.S. dollar or euro-equivalent of the derivativederivative’s notional amount. The Standard North American CDS Contract (“SNAC”) or Standard European Corporate Contract (“STEC”) under which the Company executes these CDS sales transactions does not contain recourse provisions for recovery of amounts paid under the credit derivative.
The Company purchased 30-year TIPS and other sovereign bonds, both inflation linked and non-inflation linked, as General Account investments and enters into asset or cross-currency basis swaps, to result in payment of the given bond’s coupons and principal at maturity in the bond’s specified currency to the swap counterparty in return for fixed dollar amounts. These swaps, when considered in combination with the bonds, together result in a net position that is intended to replicate a dollar-denominated fixed-coupon cash bond with a yield higher than a term-equivalent U.S. Treasury bond. At March 31, 2018 and December 31, 2017, the Company’s unrealized gains (losses) related to this program were $(88) million and $(86) million, respectively, and reported in AOCI.
The Company implemented a strategy to hedge a portion of the credit exposure in its General Account investment portfolio by buying protection through a swap. These are swaps on the “super senior tranche” of the investment grade CDX index. Under the terms of these swaps,In June 2019, the Company pays quarterly fixed premiums that, together with any initial amount paid or received at trade inception, serve as premiums paid to hedge the risk arising from multiple defaults of bonds referenced in the CDX index. These credit derivatives have terms of five years or less and are recorded at fair value with changes in fair value, including the yield component that emerges from initial amounts paid or received, reported in Net derivative gains (losses).
In 2016, the Company implementedterminated a program to mitigate its duration gap using total return swaps for which the reference U.S. Treasury securities are sold to the swap counterparty under arrangements economically similar to repurchase agreements. As these transactions resultThe Company terminated $3,881 million, in a transfernotional, of control of the U.S. Treasury securities to the swap counterparty, the Company derecognizes these securities with consequent gain or loss from the sale. Under this program the Company derecognized approximately $3,905 million U.S. Treasury securities for which the Company received proceeds of approximately $3,906 million at inception of the total return swap contract.  Under the terms of these swaps the Company retains ongoing exposure to the total returns of the underlying U.S. Treasury securitiesreported in exchange for a financing cost. At March 31, 2018, the aggregate fair value of U.S. Treasury securities derecognized under this program was approximately $3,673 million. Reported in Otherother invested assets in the Company’s balance sheet at March 31, 2018 is approximately $16 million, representing the fair value of thesheet. The terminated total return swap contracts.
Derivatives used to hedge currency fluctuations on affiliated loans
The Company uses foreign exchange derivatives to reduce exposure to currency fluctuations that may arise from non-U.S.-dollar denominated financial instruments. The Company has currency swap contracts with AXA to hedge foreign exchange exposure from affiliated loans.

swaps had a gain of $121 million.


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

The tables below present quantitative disclosures about the Company’s derivative instruments, including those embedded in other contracts required to be accounted for as derivative instruments.
Derivative Instruments by Category
At March 31, 2018 
Gains (Losses)
Reported In Net
Income (Loss)
Three Months Ended March 31, 2018

At June 30, 2019 Gains (Losses) Reported in Net Income (Loss) Six Months Ended June 30, 2019
  Fair Value   Fair Value 
Notional
Amount
 
Asset
Derivatives
 
Liability
Derivatives
 
Notional
Amount
 
Asset
Derivatives
 
Liability
Derivatives
 
(in millions)(in millions)
Freestanding derivatives:       
Freestanding Derivatives (1) (2):       
Equity contracts:(1)
              
Futures$6,629
 $2
 $1
 $(23)$7,385
 $—
 $3
 $(954)
Swaps8,017
 255
 16
 114
9,572
 18
 166
 (1,276)
Options23,013
 3,350
 1,411
 (18)48,236
 3,934
 1,444
 1,289
Interest rate contracts:(1)
              
Swaps29,331
 555
 395
 (671)26,991
 1,134
 240
 1,596
Futures24,015
 —
 —
 40
13,147
 —
 —
 27
Credit contracts:(1)
       
Swaptions2,746
 52
 —
 7
Credit contracts:       
Credit default swaps2,136
 32
 3
 —
1,382
 24
 6
 9
Other freestanding contracts:(1)
       
Other freestanding contracts:       
Foreign currency contracts1,781
 10
 52
 (51)1,503
 7
 22
 (27)
Margin—
 62
 57
 —
—
 61
 —
 —
Collateral—
 17
 2,208
 —
—
 12
 3,299
 —
Embedded derivatives:       
GMIB reinsurance contracts(6)
—
 1,734
 —
 (159)
GMxB derivative features liability(3,6)
—
 —
 3,977
 460
SCS, SIO, MSO and IUL indexed features(5,6)
—
 —
 1,683
 27
Net derivative investment gains (loss)      (281)
Cross currency swaps (2,4)
—
 —
 —
 9
       
Embedded Derivatives (2):       
GMIB reinsurance contracts—
 1,896
 —
 177
GMxB derivative features liability (3)—
 —
 6,941
 (1,126)
SCS, SIO, MSO and IUL indexed features (4)—
 —
 2,321
 (1,588)
Total$94,922
 $6,017
 $9,803
 $(272)$110,962
 $7,138
 $14,442
 $(1,866)
______________
(1)Reported in Other invested assets in the consolidated balance sheets.
(2)Reported in Other assets or Other liabilitiesNet derivative gains (losses) in the consolidated balance sheets.statements of income (loss).
(3)Reported in Future policy benefits and other policyholders’ liabilities in the consolidated balance sheets.
(4)Reported in Other income in the consolidated statements of income (loss).
(5)SCS, and SIO, indexed features are reported in Policyholders’ account balances; MSO and IUL indexed features are reported in the Future policyholders’ benefits and other policyholders’ liabilitiesPolicyholders’ account balances in the consolidated balance sheets.
(6)Reported in Net derivative gains (losses) in the consolidated statements of income (loss).
 At December 31, 2018 Gains (Losses) Reported in Net Income (Loss) Six Months Ended June 30, 2018
   Fair Value 
 
Notional
Amount
 
Asset
Derivatives
 
Liability
Derivatives
 
 (in millions)
Freestanding Derivatives (1) (2):       
Equity contracts:       
Futures$11,143
 $2
 $3
 $(294)
Swaps7,796
 143
 168
 (17)
Options21,821
 2,133
 1,164
 240
Interest rate contracts:       
Swaps27,116
 634
 196
 (716)
Futures11,792
 —
 —
 104
Credit contracts:       


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

 At December 31, 2017 
Gains (Losses)
Reported In Net
Income (Loss)
Three Months Ended March 31, 2017

   Fair Value 
 
Notional
Amount
 
Asset
Derivatives
 
Liability
Derivatives
 
 (in millions)
Freestanding derivatives:       
Equity contracts:(1)
       
Futures$6,716
 $1
 $2
 $(396)
Swaps7,623
 4
 201
 (405)
Options22,223
 3,456
 1,457
 318
Interest rate contracts:(1)
       
Swaps26,769
 604
 193
 143
Futures20,675
 —
 —
 (19)
Credit contracts:(1)
       
Credit default swaps2,131
 35
 3
 6
Other freestanding contracts:(1)
       
Foreign currency contracts1,423
 19
 10
 (1)
Margin—
 24
 4
 —
Collateral—
 4
 2,123
 —
Embedded derivatives:       
GMIB reinsurance contracts(6)
—
 1,894
 —
 (71)
GMxB derivative features liability(3,6)
—
 —
 4,358
 507
SCS, SIO, MSO and IUL indexed features(5,6)
—
 —
 1,786
 (317)
Net derivative investment gains (loss)      (235)
Cross currency swaps(2,4)
354
 5
 —
 (7)
Total$87,914
 $6,046
 $10,137
 $(242)
 At December 31, 2018 Gains (Losses) Reported in Net Income (Loss) Six Months Ended June 30, 2018
   Fair Value 
 
Notional
Amount
 
Asset
Derivatives
 
Liability
Derivatives
 
 (in millions)
Credit default swaps1,376
 20
 3
 (2)
Other freestanding contracts:       
Foreign currency contracts2,184
 35
 22
 14
Margin—
 18
 5
 —
Collateral—
 8
 1,581
 —
        
Embedded Derivatives:       
GMIB reinsurance contracts (2)—
 1,732
 —
 (260)
GMxB derivative features liability (2) (3)—
 —
 5,614
 963
SCS, SIO, MSO and IUL indexed features (2) (4)—
 —
 715
 (314)
Net derivative gains (loss)      (282)
Cross currency swaps (5) (6)—
 —
 —
 9
Total$83,228
 $4,725
 $9,471
 $(273)
______________
(1)Reported in Other invested assets in the consolidated balance sheets.
(2)Reported in Other assets or Other liabilitiesNet derivative gains (losses) in the consolidated balance sheets.statements of income (loss).
(3)Reported in Future policy benefits and other policyholders’ liabilities in the consolidated balance sheets.
(4)Reported in Other income in the consolidated statements of income (loss).
(5)SCS, and SIO, indexed features are reported in Policyholders’ account balances; MSO and IUL indexed features are reported in Policyholders’ account balances in the Future policyholders’ benefits and other policyholders’consolidated balance sheets.
(5)Reported in Other assets or Other liabilities in the consolidated balance sheets.
(6)Reported in Net derivative gains (losses)Other income in the consolidated statements of income (loss).

Equity-Based and Treasury Futures Contracts Margin
All outstanding equity-based and treasury futures contracts at March 31, 2018June 30, 2019 are exchange-traded and net settled daily in cash. At March 31, 2018,June 30, 2019, the Company had open exchange-traded futures positions on: (i) the S&P 500, Russell 2000, and Emerging Market indices, having initial margin requirements of $250$291 million, (ii) the 2-year, 5-year and 10-year U.S. Treasury Notes on U.S. Treasury bonds and ultra-long bonds, having initial margin requirements of $67$29 million and (iii) the Euro Stoxx, FTSE 100, Topix, ASX 200, and European, Australasia, and Far East (“EAFE”) indices as well as corresponding currency futures on the Euro/U.S. dollar, Pound/U.S. dollar, Australian dollar/U.S. dollar, and Yen/U.S. dollar, having initial margin requirements of $24 million.

Collateral Arrangements

35
Table of Contents
AXA EQUITABLE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Credit Risk
Although notional amount is the most commonly used measure of volume in the derivatives market, it is not used as a measure of credit risk. A derivative with positive fair value (a derivative asset) indicates existence of credit risk because the counterparty would owe money to the Company if the contract were closed at the reporting date. Alternatively, a derivative contract with negative fair value (a derivative liability) indicates the Company would owe money to the counterparty if the contract were closed at the reporting date. To reduce credit exposures in Over-the-Counter (“OTC”) derivative transactions the Company generally enters into master agreements that provide for a netting of financial exposures with the counterparty and allow for collateral arrangements as further described below under “ISDA Master Agreements.” The Company further controls and minimizes its counterparty exposure through a credit appraisal and approval process.
ISDA Master Agreements
Netting Provisions. The standardized ISDA Master Agreement under which the Company conducts its OTC derivative transactions includes provisions for payment netting. In the normal course of business activities, if there is more than one derivative transaction with a single counterparty, the Company will set-off the cash flows of those derivatives into a single amount to be exchanged in settlement of the resulting net payable or receivable with that counterparty. In the event of default, insolvency, or other similar event pre-defined under the ISDA Master Agreement that would result in termination of OTC derivatives transactions before their maturity, netting procedures would be applied to calculate a single net payable or receivable with the counterparty.
Collateral Arrangements. The Company generally has executed a CSACredit Support Annex (“CSA”) under the International Swaps and Derivatives Association Master Agreement (“ISDA Master AgreementAgreement”) it maintains with each of its OTCover-the-counter (“OTC”) derivative counterparties that requires both posting and accepting collateral either in the form of cash or high-quality securities, such as U.S. Treasury securities, U.S. government and government agency securities and investment grade corporate bonds. These CSAs are bilateral agreements that require collateral postings by the party “out-of-the-money” or in a net derivative liability position. Various thresholds for the amount and timing of collateralization of net liability positions are applicable. Consequently, the credit exposure of the Company’s OTC derivative contracts is limited to the net positive estimated fair value of those contracts at the reporting date after taking into consideration the existence of netting agreements and any collateral received pursuant to CSAs. Derivatives are recognized at fair value in the consolidated balance sheets and are reported either as assets in Other invested assets or as liabilities in Other liabilities, except for embedded insurance-related derivatives as described above and derivatives transacted with a related counterparty. The Company nets the fair value of all derivative financial instruments with counterparties for which an ISDA Master Agreement and related CSA have been executed.
At March 31, 2018June 30, 2019 and December 31, 2017,2018, respectively, the Company held $2,208$3,299 million and $2,123$1,581 million in cash and securities collateral delivered by trade counterparties, representing the fair value of the related derivative agreements. The unrestricted cash collateral is reported in Other invested assets. The aggregate fair value of all collateralized derivative transactions that were in a liability position with trade counterparties at March 31, 2018 and December 31, 2017, respectively, were $2 million and $2 million, for which the Company posted collateral of $7$12 million and $4$8 million at March 31, 2018June 30, 2019 and December 31, 2017,2018, respectively, in the normal operation of its collateral arrangements. Certain of the Company’s ISDA Master Agreements contain contingent provisions that permit the counterparty to terminate the ISDA Master Agreement if the Company’s credit rating falls below a specified threshold, however, the occurrence of such credit event would not impose additional collateral requirements.
Margin
Effective January 3, 2017, the CME amended its rulebook, resulting in the characterization of variation margin transfers as settlement payments, as opposed to adjustments to collateral. These amendments impacted the accounting treatment of the Company’s centrally cleared derivatives for which the CME serves as the central clearing party. As of the effective date, the application of the amended rulebook reduced gross derivative assets by $1 million.


36
Table of Contents
AXA EQUITABLE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Securities Repurchase and Reverse Repurchase Transactions
Securities repurchase and reverse repurchase transactions are conducted by the Company under a standardized securities industry master agreement, amended to suit the specificitiesrequirements of each respective counterparty. These agreements generally provide detail as to the nature of the transaction, including provisions for payment netting, establish parameters concerning the ownership and custody of the collateral securities, including the right to substitute collateral during the term of the agreement, and provide for remedies in the event of default by either party. Amounts due to/from the same counterparty under these arrangements generally would be netted in the event of default and subject to rights of set-off in bankruptcy. The Company’s securities repurchase and reverse repurchase agreements are accounted for as secured borrowing or lending arrangements, respectively, and are reported in the consolidated balance sheets on a gross basis. The Company obtains or posts collateral generally in the formAt June 30,


25
Table of cash and U.S. Treasury, corporate and government agency securities. The fair value of the securities to be repurchased or resold is monitored on a daily basis with additional collateral posted or obtained as necessary. Securities to be repurchased or resold are the same, or substantially the same, as those initially transacted under the arrangement. At March 31, 2018Contents
AXA EQUITABLE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

2019 and December 31, 2017,2018, the balance outstanding under securities repurchase transactions was $1,904 million$0 and $1,887$573 million, respectively. The Company utilized these repurchase and reverse repurchase agreements for asset liability and cash management purposes. For other instruments used for asset and liability management purposes, see “ObligationNote 14.
The following table presents information about the Company’s offsetting of financial assets and liabilities and derivative instruments at June 30, 2019.
Offsetting of Financial Assets and Liabilities and Derivative Instruments
At June 30, 2019
 Gross Amount Recognized Gross Amount Offset in the Balance Sheets Net Amount Presented in the Balance Sheets
 (in millions)
Assets:     
Total derivatives (1)$5,242
 $5,155
 $87
Other financial instruments2,211
 —
 2,211
Other invested assets$7,453
 $5,155
 $2,298
      
Liabilities:     
Total derivatives (2)$5,155
 $5,130
 $25
Other financial liabilities3,831
 —
 3,831
Other liabilities$8,986
 $5,130
 $3,856
______________
(1)Excludes Investment Management and Research segment’s derivative assets of consolidated VIEs/VOEs.
(2)Excludes Investment Management and Research segment’s derivative liabilities of consolidated VIEs/VOEs.
The following table presents information about the Company’s gross collateral amounts that are not offset in the consolidated balance sheets at June 30, 2019.
Collateral Amounts Not Offset in the Consolidated Balance Sheets
At June 30, 2019
 Net Amount Presented in the Balance Sheets Collateral (Received)/Held  
 Financial Instruments Cash Net Amount
 (in millions)
Assets:      
Total derivatives (1)$3,288
 $238
 $2,963
 $87
Other financial instruments2,211
 —
 —
 2,211
Other invested assets$5,499
 $238
 $2,963
 $2,298
        
Liabilities:      
Total derivatives (2)$25
 $—
 $—
 $25
Other financial liabilities3,831
 —
 —
 3,831
Other liabilities$3,856
 $—
 $—
 $3,856
______________
(1)Excludes Investment Management and Research segment’s derivative assets of consolidated VIEs/VOEs.
(2)Excludes Investment Management and Research segment’s derivative liabilities of consolidated VIEs/VOEs.
The Company had no securities sold under funding agreements” included in Note 14.agreements to repurchase at June 30, 2019.
The following table presents information about the Company’s offsetting financial assets and liabilities and derivative instruments at December 31, 2018.


3726
Table of Contents
AXA EQUITABLE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

The following table presents information about the Company’s offsetting of financial assets and liabilities and derivative instruments at March 31, 2018.
Offsetting of Financial Assets and Liabilities and Derivative Instruments
At MarchDecember 31, 2018
 
Gross
Amounts
Recognized
 
Gross
Amounts
Offset in the
Balance Sheets
 
Net Amounts
Presented in the
Balance Sheets
 (in millions)
ASSETS(1)
     
Description     
Derivatives:     
Equity contracts$3,606
 $1,429
 $2,177
Interest rate contracts555
 395
 160
Credit contracts32
 3
 29
Currency10
 52
 (42)
Collateral17
 2,208
 (2,191)
Margin62
 57
 5
Total Derivatives, subject to an ISDA Master Agreement4,282
 4,144
 138
Other financial instruments3,923
 —
 3,923
Other invested assets$8,205
 $4,144
 $4,061
LIABILITIES(2)
     
Description     
Derivatives:     
Equity contracts$1,429
 $1,429
 $—
Interest rate contracts395
 395
 —
Credit contracts3
 3
 —
Currency52
 52
 —
Collateral2,208
 2,208
 —
Margin57
 57
 —
Total Derivatives, subject to an ISDA Master Agreement4,144
 4,144
 —
Other financial liabilities4,342
 —
 4,342
Other liabilities$8,486
 $4,144
 $4,342
Securities sold under agreement to repurchase(3)
$1,897
 $—
 $1,897
 Gross Amount Recognized Gross Amount Offset in the Balance Sheets Net Amount Presented in the Balance Sheets
 (in millions)
Assets:     
Total derivatives (1)$2,993
 $2,945
 $48
Other financial instruments1,989
 —
 1,989
Other invested assets$4,982
 $2,945
 $2,037
      
Liabilities:     
Total derivatives (2)$3,142
 $2,945
 $197
Other financial liabilities3,163
 —
 3,163
Other liabilities$6,305
 $2,945
 $3,360
      
Securities sold under agreement to repurchase (3)$571
 $—
 $571
______________
(1)Excludes Investment Management and Research segment’s derivative assets of consolidated VIEs/VOEs.
(2)Excludes Investment Management and Research segment’s derivative liabilities of consolidated VIEs/VOEs.
(3)Excludes expense of $7$2 million in securitiesSecurities sold under agreement to repurchase.repurchase on the consolidated balance sheets.




38
Table of Contents
AXA EQUITABLE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

The following table presents information about the Company’s gross collateral amounts that are not offset in the consolidated balance sheets at MarchDecember 31, 2018.
Collateral Amounts Not Offset in the Consolidated Balance Sheets
At MarchDecember 31, 2018
Net Amounts
Presented in the
Balance Sheets		 Collateral (Received)/Held  Net Amount Presented in the Balance Sheets Collateral (Received)/Held  
Financial
Instruments
 Cash 
Net
Amounts
Financial Instruments Cash Net Amount
(in millions)(in millions)
Assets(1)
      
Assets:       
Total derivatives(1)$2,324
 $—
 $(2,186) $138
$1,411
 $—
 $(1,363) $48
Other financial instruments3,923
 —
 —
 3,923
1,989
 —
 —
 1,989
Other invested assets$6,247
 $—
 $(2,186) $4,061
$3,400
 $—
 $(1,363) $2,037
Liabilities:(2)
      
Securities sold under agreement to repurchase(3)(4)(5)
$1,897
 $(1,923) $—
 $(26)
       
Liabilities:       
Total derivatives (2)$197
 $—
 $—
 $197
Other financial liabilities3,163
 —
 —
 3,163
Other liabilities$3,360
 $—
 $—
 $3,360
       
Securities sold under agreement to repurchase (3) (4) (5)$571
 $(588) $—
 $(17)
______________
(1)Excludes Investment Management and Research segment’s derivative assets of consolidated VIEs/VOEs.
(2)Excludes Investment Management and Research segment’s derivative liabilities of consolidated VIEs/VOEs.
(3)Excludes expense of $7 million included in Securities sold under agreements to repurchase on the consolidated balance sheet.
(4)US Treasury and agency securities are included in Fixed maturities available for sale on the consolidated balance sheet.
(5)Cash is reported in Cash and cash equivalents on the consolidated balance sheet.

The following table presents information about repurchase agreements accounted for as secured borrowings in the consolidated balance sheets at March 31, 2018.
Repurchase Agreement Accounted for as Secured Borrowings
 At March 31, 2018
 Remaining Contractual Maturity of the Agreements
 
Overnight and
Continuous
 
Up to 30
days
 
30–90
days
 
Greater Than
90 days
 Total
 (in millions)
Securities sold under agreement to repurchase(1)
         
U.S. Treasury and agency securities$—
 $1,897
 $—
 $—
 $1,897
Total$—
 $1,897
 $—
 $—
 $1,897
(1)Excludes expense accrual of $7 million included in Securities sold under agreements to repurchase on the consolidated balance sheet.


39
Table of Contents
AXA EQUITABLE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

The following table presents information about the Company’s offsetting financial assets and liabilities and derivative instruments at December 31, 2017.
Offsetting of Financial Assets and Liabilities and Derivative Instruments
At December 31, 2017
 
Gross
Amounts
Recognized
 
Gross
Amounts
Offset in the
Balance Sheets
 
Net Amounts
Presented in the
Balance Sheets
 (in millions)
ASSETS(1)
     
Description     
Derivatives:     
Equity contracts$3,461
 $1,660
 $1,801
Interest rate contracts604
 193
 411
Credit contracts35
 3
 32
Currency19
 10
 9
Collateral4
 2,123
 (2,119)
Margin24
 4
 20
Total Derivatives, subject to an ISDA Master Agreement4,147
 3,993
 154
Other financial instruments3,964
 —
 3,964
Other invested assets$8,111
 $3,993
 $4,118
Total Derivatives, not subject to an ISDA Master Agreement(4)
$5
 $—
 $5
LIABILITIES(2)
     
Description     
Derivatives:     
Equity contracts$1,660
 $1,660
 $—
Interest rate contracts193
 193
 —
Credit contracts3
 3
 —
Currency10
 10
 —
Collateral2,123
 2,123
 —
Margin4
 4
 —
Total Derivatives, subject to an ISDA Master Agreement3,993
 3,993
 —
Other financial liabilities4,053
 —
 4,053
Other liabilities$8,046
 $3,993
 $4,053
Securities sold under agreement to repurchase(3)
$1,882
 $—
 $1,882
(1)Excludes Investment Management and Research segment’s derivative assets of consolidated VIEs/VOEs.
(2)Excludes Investment Management and Research segment’s derivative liabilities of consolidated VIEs/VOEs.
(3)Excludes expense of $5 million included in Securities sold under agreements to repurchase on the consolidated balance sheets.
(4)This amount is reflected in Other assets.



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

The following table presents information about the Company’s gross collateral amounts that are not offset in the consolidated balance sheet at December 31, 2017.
Collateral Amounts Offset in the Consolidated Balance Sheets
At December 31, 2017
 Net Amounts Presented in the Balance Sheets Collateral (Received)/Held  
 
Financial
Instruments
 Cash 
Net
Amounts
 (in millions)
Assets(1)
       
Total Derivatives$2,253
 $—
 $(2,099) $154
Other financial assets3,964
 —
 —
 3,964
Other invested assets$6,217
 $—
 $(2,099) $4,118
Liabilities:(2)
       
Other financial liabilities$4,053
 $—
 $—
 $4,053
Other liabilities$4,053
 $—
 $—
 $4,053
Securities sold under agreement to repurchase(3)(4)(5)
$1,882
 $(1,988) $(21) $(127)
(1)Excludes Investment Management and Research segment’s derivative assets of consolidated VIEs/VOEs.
(2)Excludes Investment Management and Research segment’s derivative liabilities of consolidated VIEs/VOEs.
(3)Excludes expense of $5$2 million in securitiesSecurities sold under agreement to repurchase.
(4)USU.S. Treasury and agency securities are in fixedFixed maturities available for saleavailable-for-sale on the consolidated balance sheet.sheets.
(5)Cash is included in cashCash and cash equivalents on consolidated balance sheet.sheets.
The following table presents information about repurchase agreements accounted for as secured borrowings in the consolidated balance sheets at December 31, 2017.
Repurchase Agreement Accounted for as Secured Borrowings
 At December 31, 2017
 Remaining Contractual Maturity of the Agreements
 
Overnight and
Continuous
 
Up to 30
days
 
30–90
days
 
Greater 
Than
90 days
 Total
 (in millions)
Securities sold under agreement to repurchase(1)
         
U.S. Treasury and agency securities$—
 $1,882
 $—
 $—
 $1,882
Total$—
 $1,882
 $—
 $—
 $1,882
(1)Excludes expense of $5 million in securities sold under agreement to repurchase.

2018.


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

4)    CLOSED BLOCK
Summarized financial information for the Company’s Closed Block is as follows:
 March 31,
2018		 December 31,
2017
 (in millions)
CLOSED BLOCK LIABILITIES:   
Future policy benefits, policyholders’ account balances and other$6,904
 $6,958
Policyholder dividend obligation—
 19
Other liabilities269
 271
Total Closed Block liabilities7,173
 7,248
ASSETS DESIGNATED TO THE CLOSED BLOCK:   
Fixed maturities, available for sale, at fair value (amortized cost of $3,864 and $3,923)3,908
 4,070
Mortgage loans on real estate1,837
 1,720
Policy loans772
 781
Cash and other invested assets235
 351
Other assets192
 182
Total assets designated to the Closed Block6,944
 7,104
Excess of Closed Block liabilities over assets designated to the Closed Block229
 144
Amounts included in accumulated other comprehensive income (loss):   
Net unrealized investment gains (losses), net of policyholder dividend obligation of $0 and $1955
 138
Maximum Future Earnings To Be Recognized From Closed Block Assets and Liabilities$284
 $282
The Company’s Closed Block revenues and expenses follows:
  Three Months Ended March 31,
  2018 2017
 (in millions)
REVENUES:    
Premiums and other income $51
 $54
Net investment income (loss) 73
 83
Net investment gains (losses) 1
 (15)
Total revenues 125
 122
BENEFITS AND OTHER DEDUCTIONS:    
Policyholders’ benefits and dividends 126
 151
Other operating costs and expenses 1
 —
Total benefits and other deductions 127
 151
Net revenues (loss) before income taxes (2) (29)
Income tax (expense) benefit —
 10
Net Revenues (Losses) $(2) $(19)


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

A reconciliationRepurchase Agreement Accounted for as Secured Borrowings
At December 31, 2018
 Remaining Contractual Maturity of the Agreements
 
Overnight 
and
 Continuous
 Up to 30 days 30–90 days 
Greater 
Than 90 days
 Total
 (in millions)
Securities sold under agreement to repurchase (1):
         
U.S. Treasury and agency securities$—
 $571
 $—
 $—
 $571
Total$—
 $571
 $—
 $—
 $571
______________
(1)Excludes expense of $2 million in Securities sold under agreement to repurchase on the consolidated balance sheets.
5)    CLOSED BLOCK
Summarized financial information for the Company’s policyholder dividend obligationClosed Block is as follows:
 Three Months Ended March 31,
 2018 2017
 (in millions)
Balances, beginning of year$19
 $52
Unrealized investment gains (losses), net of DAC(19) (14)
Balances, End of Period$—
 $38
 June 30, 2019 December 31, 2018
 (in millions)
Closed Block Liabilities:   
Future policy benefits, policyholders’ account balances and other$6,611
 $6,709
Other liabilities45
 47
Total Closed Block liabilities6,656
 6,756
    
Assets Designated to the Closed Block:   
Fixed maturities, available-for-sale, at fair value (amortized cost of $3,648 and $3,680)3,818
 3,672
Mortgage loans on real estate, net of valuation allowance of $0 and $01,803
 1,824
Policy loans721
 736
Cash and other invested assets47
 76
Other assets168
 179
Total assets designated to the Closed Block6,557
 6,487
    
Excess of Closed Block liabilities over assets designated to the Closed Block99
 269
Amounts included in accumulated other comprehensive income (loss):   
Net unrealized investment gains (losses), net of policyholders' dividend obligation of $0 and $0184
 8
Maximum future earnings to be recognized from Closed Block assets and liabilities$283
 $277


28
Table of Contents
AXA EQUITABLE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

The Company’s Closed Block revenues and expenses are as follows:
 Three Months Ended June 30, Six Months Ended June 30,
 2019 2018 2019 2018
 (in millions)
Revenues:       
Premiums and other income$46
 $49
 $94
 $100
Net investment income (loss)72
 73
 139
 146
Investment gains (losses), net—
 —
 (1) 1
Total revenues118
 122
 232
 247
        
Benefits and Other Deductions:       
Policyholders’ benefits and dividends114
 123
 235
 249
Other operating costs and expenses—
 —
 1
 2
Total benefits and other deductions114
 123
 236
 251
Net income (loss) before income taxes4
 (1) (4) (4)
Income tax (expense) benefit(1) —
 (2) 1
Net income (loss)$3
 $(1) $(6) $(3)
5)6)    INSURANCE LIABILITIES
A) Variable Annuity Contracts – GMDB, GMIB, GIB and GWBL and Other Features
The Company has certain variable annuity contracts with GMDB, GMIB, GIB and GWBL and other features in-force that guarantee one of the following:
Return of Premium: the benefit is the greater of current account value or premiums paid (adjusted for withdrawals);
Ratchet: the benefit is the greatest of current account value, premiums paid (adjusted for withdrawals), or the highest account value on any anniversary up to contractually specified ages (adjusted for withdrawals);
Roll-Up: the benefit is the greater of current account value or premiums paid (adjusted for withdrawals) accumulated at contractually specified interest rates up to specified ages;
Combo: the benefit is the greater of the ratchet benefit or the roll-up benefit, which may include either a five year or an annual reset; or
Withdrawal: the withdrawal is guaranteed up to a maximum amount per year for life.
The following table summarizes the directLiabilities for Variable Annuity Contracts with GMDB and GMIB with no no-lapse guarantee riderFeatures without No-Lapse Guarantee Rider (“NLG”) Feature
The change in the liabilities for variable annuity contracts with GMDB and GMIB features liabilities, beforeand no NLG feature are summarized in the tables below. The amounts for the direct contracts (before reinsurance ceded,ceded) and assumed contracts are reflected in the consolidated balance sheets in Future policy benefits and other policyholders’ liabilities:liabilities. The amounts for the ceded contracts are reflected in the consolidated balance sheets in Amounts due from reinsurers.
 GMDB     GMIB     Total    
 (in millions)
Balance at January 1, 2018$4,085
 $4,800
 $8,885
Paid guarantee benefits(101) (32) (133)
Other changes in reserve97
 (136) (39)
Balance at March 31, 2018$4,081
 $4,632
 $8,713
Balance at January 1, 2017$3,170
 $3,868
 $7,038
Paid guarantee benefits(89) (32) (121)
Other changes in reserve187
 1,919
 2,106
Balance at March 31, 2017$3,268
 $5,755
 $9,023
Change in Liability for Variable Annuity Contracts with GMDB Features and No NLG Feature


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

The following table summarizes the ceded GMDB liabilities, reflectedThree and Six Months Ended June 30, 2019 and 2018
 Three Months Ended June 30,
 2019 2018
 Direct Assumed Ceded Direct Assumed Ceded
 (in millions)
Beginning balance$4,670
 $77
 $(109) $4,081
 $82
 $(106)
Paid guarantee benefits(108) (5) 4
 (99) (6) 6
Other changes in reserve152
 4
 (1) 147
 6
 (2)
Ending balance$4,714
 $76
 $(106) $4,129
 $82
 $(102)
            
 Six Months Ended June 30,
 2019 2018
 Direct Assumed Ceded Direct Assumed Ceded
 (in millions)
Beginning balance$4,659
 $82
 $(113) $4,059
 $95
 $(108)
Paid guarantee benefits(226) (11) 8
 (200) (12) 10
Other changes in reserve281
 5
 (1) 270
 (1) (4)
Ending balance$4,714
 $76
 $(106) $4,129
 $82
 $(102)

Change in the consolidated balance sheets in Amounts due from reinsurers:Liability for Variable Annuity Contracts with GMIB Features and No NLG Feature
Three and Six Months Ended June 30, 2019 and 2018
Three Months Ended March 31,Three Months Ended June 30,
2018 20172019 2018
(in millions)Direct Assumed Ceded Direct Assumed Ceded
Balance, beginning of year$108
 $90
(in millions)
Beginning balance$3,742
 $182
 $(1,740) $4,632
 $173
 $(1,735)
Paid guarantee benefits(5) (3)(56) 11
 14
 (32) (15) 19
Other changes in reserve2
 2
75
 (1) (170) 102
 —
 78
Balance, End of Period$105
 $89
Ending balance$3,761
 $192
 $(1,896) $4,702
 $158
 $(1,638)
           
Six Months Ended June 30,
2019 2018
Direct Assumed Ceded Direct Assumed Ceded
(in millions)
Beginning balance$3,743
 $184
 $(1,732) $4,752
 $195
 $(1,894)
Paid guarantee benefits(112) 10
 35
 (65) (36) 30
Other changes in reserve130
 (2) (199) 15
 (1) 226
Ending balance$3,761
 $192
 $(1,896) $4,702
 $158
 $(1,638)
The following table summarizes the assumed GMDB liabilities, reflected in the consolidated balance sheets in Future policy benefitsLiabilities for Embedded and other policyholders’ liabilities:Freestanding Insurance Related Derivatives
 Three Months Ended March 31,
 2018 2017
 (in millions)
Balance, beginning of year$95
 $121
Paid guarantee benefits(6) (5)
Other changes in reserve(7) (8)
Balance, End of Period$82
 $108
The liability for the GMxB derivative features liability, the liability for SCS, SIO, MSO and IUL indexed features and the asset and liability for the GMIB reinsurance contract assetcontracts are considered embedded or freestanding insurance derivatives and are reported at fair value. Summarized in the table below is a summary ofFor the fair value of the assets and liabilities associated with these liabilities at March 31, 2018 and December 31, 2017:
 March 31,
2018		 December 31,
2017
 (in millions)  
    
GMIBNLG(1)
$3,715
 $4,056
SCS, SIO, MSO, IUL indexed features(2)
1,683
 1,786
Assumed GMIB reinsurance Contracts(1)
173
 194
GWBL/GMWB(1)
121
 130
GIB(1)
(36) (27)
GMAB(1)
4
 5
Total embedded and freestanding derivative liabilities$5,660
 $6,144
    
GMIB reinsurance contract asset(3)
$1,734
 $1,894
(1)Reported in Future policyholders’ benefits and other policyholders’ liabilities in the consolidated balance sheets.
(2)Reported in Policyholders’ account balances in the consolidated balance sheets.
(3)Reported in GMIB reinsurance contract asset, at fair value in the consolidated balance sheets.

embedded or freestanding insurance derivatives, seeNote 7.


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

The March 31, 2018 valuesAccount Values and Net Amount at Risk
Account Values and Net Amount at Risk (“NAR”) for direct and assumed variable annuity contracts in-force on such date with GMDB and GMIB features as of June 30, 2019 are presented in the following table.tables by guarantee type. For contracts with the GMDB feature, the net amount at riskNAR in the event of death is the amount by which the GMDB exceedfeature exceeds the related account values.Account Values. For contracts with the GMIB feature, the net amount at riskNAR in the event of annuitization is the amount by which the present value of the GMIB benefits exceedsexceed the related account values,Account Values, taking into account the relationship between current annuity purchase rates and the GMIB guaranteed annuity purchase rates. Since variable annuity contracts with GMDB guaranteesfeatures may also offer GMIB guarantees in the same contract, the GMDB and GMIB amounts listed are not mutually exclusive:exclusive.
Direct Variable Annuity Contract ValuesContracts with GMDB and GMIB Features
At June 30, 2019
Return of
Premium
 Ratchet Roll-Up Combo TotalGuarantee Type
(Dollars in millions)
Return of
Premium
 Ratchet Roll-Up Combo Total
GMDB:         
Account values invested in:         
(in millions, except age and interest rate)
Variable annuity contracts with GMDB features         
Account Values invested in:         
General Account$13,848
 $107
 $64
 $194
 $14,213
$14,359
 $98
 $60
 $181
 $14,698
Separate Accounts$45,136
 $9,319
 $3,381
 $34,668
 $92,504
46,724
 9,102
 3,147
 32,812
 91,785
Total Account Values$61,083
 $9,200
 $3,207
 $32,993
 $106,483
         
Net amount at risk, gross$186
 $117
 $2,016
 $16,388
 $18,707
$119
 $61
 $1,959
 $18,185
 $20,324
Net amount at risk, net of amounts reinsured$186
 $111
 $1,378
 $16,388
 $18,063
$119
 $58
 $1,367
 $18,185
 $19,729
Average attained age of policyholders51
 67
 73
 68
 55
         
Average attained age of policyholders (in years)51.4
 67.3
 73.9
 69.4
 55.3
Percentage of policyholders over age 709.7% 40.9% 63.7% 47.4% 18.3%10.3% 44.3% 66.8% 51.6% 19.1%
Range of contractually specified interest ratesN/A
 N/A
 3%-6%
 3%-6.5%
 3%-6.5%
N/A
 N/A
 3% - 6%
 3% - 6.5%
 3% - 6.5%
GMIB:         
Account values invested in:         
         
Variable annuity contracts with GMIB features         
Account Values invested in:         
General AccountN/A
 N/A
 $24
 $285
 $309
$—
 $—
 $21
 $240
 $261
Separate AccountsN/A
 N/A
 $20,855
 $39,604
 $60,459
—
 —
 22,504
 35,730
 58,234
Total Account Values$—
 $—
 $22,525
 $35,970
 $58,495
         
Net amount at risk, grossN/A
 N/A
 $883
 $6,322
 $7,205
$—
 $—
 $908
 $9,154
 $10,062
Net amount at risk, net of amounts reinsuredN/A
 N/A
 $268
 $5,738
 $6,006
$—
 $—
 $286
 $8,297
 $8,583
Average attained age of policyholdersN/A
 N/A
 70
 69
 69
         
Average attained age of policyholders (in years)N/A N/A 68.5
 69.1
 69.0
Weighted average years remaining until annuitizationN/A
 N/A
 1.7
 0.7
 0.8
N/A N/A 1.7
 0.4
 0.5
Range of contractually specified interest ratesN/A
 N/A
 3%-6%
 3%-6.5%
 3%-6.5%
N/A N/A 3% - 6%
 3% - 6.5%
 3% - 6.5%


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

The March 31, 2018 values for assumed variable annuity contracts in force on such dateAssumed Variable Annuity Contracts with GMDB and GMIB features are presented in the following table:Features
Assumed Variable Annuity Contract ValuesAt June 30, 2019
 Guarantee Type
 
Return of
Premium
 Ratchet Roll-Up Combo Total
 (in millions, except age and interest rates)
Variable annuity contracts with GMDB features         
Reinsured account values$933
 $5,299
 $272
 $1,159
 $7,663
Net amount at risk assumed$5
 $257
 $19
 $178
 $459
          
Average attained age of policyholders (in years)68
 72
 77
 75
 72
Percentage of policyholders over age 7044.3% 63.2% 79.0% 74.4% 63.2%
Range of contractually specified interest rates (1)N/A N/A 3%-10%
 5%-10%
 3%-10%
          
Variable annuity contracts with GMIB features         
Reinsured account values$906
 $45
 $245
 $1,193
 $2,389
Net amount at risk assumed$1
 $—
 $34
 $302
 $337
          
Average attained age of policyholders (in years)72
 74
 72
 69
 70
Percentage of policyholders over age 7063.7% 64.1% 60.3% 51.5% 57.3%
Range of contractually specified interest rates   N/A    N/A 3.3%-6.5%
 6%-6%
 3.3%-6.5%
 
Return of
Premium
 Ratchet Roll-Up Combo Total
 (Dollars in millions)
GMDB:         
Reinsured Account values$1,023
 $5,849
 $302
 $1,879
 $9,053
Net amount at risk assumed$7
 $314
 $24
 $321
 $666
Average attained age of policyholders67
 72
 77
 75
 72
Percentage of policyholders over age 7041.4% 60.8% 76.6% 74.2% 61.9%
Range of contractually specified interest ratesN/A
 N/A
 3%-10%
 5%-10%
 3%-10%
GMIB:         
Reinsured Account values$978
 $52
 $277
 $1,338
 $2,645
Net amount at risk assumed$2
 $—
 $38
 $215
 $255
Average attained age of policyholders71
 74
 71
 68
 70
Percentage of policyholders over age 7061.6% 63.7% 55.9% 48.1% 54.2%
Range of contractually specified interest rates(1)
N/A
 N/A
 3.3%-6.5%
 6%-6%
 3.3%-6.5%
______________
(1)In general, for policies with the highest contractual interest rate shown (10%), the rate applied only for the first 10 years after issue, which havehas now elapsed.
B) For more information about the reinsurance programs of the Company’s GMDB and GMIB exposure, see “Reinsurance Agreements” in Note 10 of the Notes to the Consolidated Financial Statements included in the Annual Report on Form 10-K for the year ended December 31, 2018.
Separate AccountAccounts Investments by Investment Category Underlying Variable Annuity Contracts with GMDB and GMIB Features
The total account values of variable annuity contracts with GMDB and GMIB features include amounts allocated to the guaranteed interest option, which is part of the General Account and variable investment options that invest through Separate Accounts in variable insurance trusts. The following table presents the aggregate fair value of assets, by major investment category, held by Separate Accounts that support variable annuity contracts with GMDB and GMIB guarantees.features. The investment performance of the assets impacts the related account values and, consequently, the net amount of riskNAR associated with the GMDB and GMIB benefits and guarantees. Because the Company’s variable annuity contracts offer both GMDB and GMIB features, GMDB and GMIB amounts are not mutually exclusive.
Investment in Variable Insurance Trust Mutual Funds
 June 30, 2019 December 31, 2018
Mutual Fund TypeGMDB GMIB GMDB GMIB
 (in millions)
Equity$40,627
 $17,529
 $35,541
 $15,759
Fixed income5,278
 2,788
 5,173
 2,812
Balanced45,023
 37,646
 41,588
 33,974
Other858
 271
 852
 290
Total$91,786
 $58,234
 $83,154
 $52,835


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

Investment in Separate Account Investment Options
 March 31,
2018		 December 31, 2017 (1)
 (in millions)
GMDB:   
Equity$40,678
 $41,658
Fixed income5,384
 5,469
Balanced45,485
 46,577
Other957
 968
Total$92,504
 $94,672
GMIB:   
Equity$19,156
 $19,928
Fixed income3,074
 3,150
Balanced37,918
 38,890
Other311
 318
Total$60,459
 $62,286
(1)Amounts previously reported were as follows in millions: (a) GMDB: Equity $78,069, Fixed Income $2,234, Balanced $14,084, and Other $283; (b) GMIB: Equity $50,429, Fixed Income $1,568, Balanced $10,165, and Other $124.
C) Hedging Programs for GMDB, GMIB, GIB and Other Features
Beginning in 2003, theThe Company establishedhas a program intended to hedge certain risks associated first with the GMDB feature and beginning in 2004, with the GMIB feature of the Accumulator series of variable annuity products. The program has also been extended to cover other guaranteed benefits as they have been made available. This program utilizes derivative contracts, such as exchange-traded equity, currency and interest rate futures contracts, total return and/or equity swaps, interest rate swap and floor contracts, swaptions, variance swaps as well as equity options, that collectively are managed in an effort to reduce the economic impact of unfavorable changes in guaranteed benefits’ exposures attributable to movements in the capital markets. At the present time, this program hedges certain economic risks on products sold from 2001 forward, to the extent such risks are not externally reinsured. At March 31, 2018, the total account value and net amount at risk of the hedged variable annuity contracts were $68,663 million and $17,102 million, respectively, with the GMDB feature and $57,781 million and $$7,236 million, respectively, with the GMIB and GIB feature. A hedge program is also used to manage certain capital markets risks associated with the products the Company has assumed that have GMDB and GMIB features. At March 31, 2018, the total account value and net amount at risk of the hedged assumed variable annuity contracts were $9,053 million and $666 million, respectively, with the GMDB feature and $2,645 million and $255 million, respectively, with the GMIB feature.
These programs do not qualify for hedge accounting treatment. Therefore, gains (losses) on the derivatives contracts used in these programs, including current period changes in fair value, are recognized in net investment income (loss)Net derivative gains (losses) in the period in which they occur, and may contribute to income (loss) volatility.
D) Variable and Interest-Sensitive Life Insurance Policies - NLG
The NLG feature contained in variable and interest-sensitive life insurance policies keeps them in force in situations where the policy value is not sufficient to cover monthly charges then due. The NLG remains in effect so long as the policy meets a contractually specified premium funding test and certain other requirements.


47
TableThe change in the fair value of Contents
AXA EQUITABLE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

The following table summarizes the NLG liabilitiesfeature reflected in the General Account in Future policy benefits and other policyholders’ liabilities the related reinsurance reserve ceded, reflected in Amounts due from reinsurers and deferred cost of reinsurance, reflected in Other assets in the Consolidatedconsolidated balance sheets:sheets, is summarized in the table below.
 
Direct
Liability(1)
 (in millions)
Balance at January 1, 2018$686
Paid Guaranteed Benefits(8)
Other changes in reserves26
Balance at March 31, 2018$704
Balance at January 1, 2017$1,307
Other changes in reserves4
Balance at March 31, 2017$1,311
 Direct Liability (1)
 Three Months Ended June 30, Six Months Ended June 30,
 2019 2018 2019 2018
 (in millions)
Beginning Balance$825
 $704
 $812
 $709
Paid guaranteed benefits(3) (1) (10) (9)
Other changes in reserves21
 26
 41
 29
Ending Balance$843
 $729
 $843
 $729
(1)    There were no amounts of reinsurance ceded in any period presented.______________
(1)There were no amounts of reinsurance ceded in any period presented.

6)    REINSURANCE AGREEMENTS
Effective February 1, 2018, AXA Equitable Life entered into a coinsurance reinsurance agreement (the “Coinsurance Agreement”) to cede 90% of its single premium deferred annuities (SPDA) products issued between 1978-2001 and its Guaranteed Growth Annuity (GGA) single premium deferred annuity products issued between 2001-2014. As a result of this agreement, AXA Equitable Life transferred securities with a market value of $604 million and cash of $31 million to equal the statutory reserves of approximately $635 million. As the risks transferred by AXA Equitable Life to the reinsurer under the Coinsurance Agreement are not considered insurance risks and therefore do not qualify for reinsurance accounting, AXA Equitable Life applied deposit accounting. Accordingly, AXA Equitable Life recorded the transferred assets of $635 million as a deposit asset recorded in Other assets, net of the ceding commissions paid to the reinsurer.
7)    FAIR VALUE DISCLOSURES
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The accounting guidance establishedestablishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value, and identifies three levels of inputs that may be used to measure fair value:
Level 1    Unadjusted quoted prices for identical instruments in active markets. Level 1 fair values generally are supported by market transactions that occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2    Observable inputs other than Level 1 prices, such as quoted prices for similar instruments, quoted prices in markets that are not active, and inputs to model-derived valuations that are directly observable or can be corroborated by observable market data.
Level 3    Unobservable inputs supported by little or no market activity and often requiring significant management judgment or estimation, such as an entity’s own assumptions about the cash flows or other significant components of value that market participants would use in pricing the asset or liability.


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Level 1Unadjusted quoted prices for identical instruments in active markets. Level 1 fair values generally are supported by market transactions that occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2Observable inputs other than Level 1 prices, such as quoted prices for similar instruments, quoted prices in markets that are not active, and inputs to model-derived valuations that are directly observable or can be corroborated by observable market data.
Level 3Unobservable inputs supported by little or no market activity and often requiring significant management judgment or estimation, such as an entity’s own assumptions about the cash flows or other significant components of value that market participants would use in pricing the asset or liability.
The Company uses unadjusted quoted market prices to measure the fair value offor those instruments that are actively traded in financial markets. In cases where quoted market prices are not available, fair values are measured using present value or other valuation techniques. The fair value determinations are made at a specific point in time, based on available market information and judgments about the financial instrument, including estimates of the timing and amount of expected future cash flows and the credit standing of counterparties. Such adjustments do not reflect any


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premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument, nor do they consider the tax impact of the realization of unrealized gains or losses. In many cases, the fair value cannot be substantiated by direct comparison to independent markets, nor can the disclosed value be realized in immediate settlement of the instrument.
Management is responsible for the determination of the value of investments carried at fair value and the supporting methodologies and assumptions. Under the terms of various service agreements, the Company often utilizes independent valuation service providers to gather, analyze, and interpret market information and derive fair values based upon relevant methodologies and assumptions for individual securities. These independent valuation service providers typically obtain data about market transactions and other key valuation model inputs from multiple sources and, through the use of widely accepted valuation models, provide a single fair value measurement for individual securities for which a fair value has been requested. As further described below with respect to specific asset classes, these inputs include, but are not limited to, market prices for recent trades and transactions in comparable securities, benchmark yields, interest rate yield curves, credit spreads, quoted prices for similar securities, and other market-observable information, as applicable. Specific attributes of the security being valued also are considered, including its term, interest rate, credit rating, industry sector, and when applicable, collateral quality and other security- or issuer-specific information. When insufficient market observable information is available upon which to measure fair value, the Company either will request brokers knowledgeable about these securities to provide a non-binding quote or will employ internal valuation models. Fair values received from independent valuation service providers and brokers and those internally modeled or otherwise estimated are assessed for reasonableness.
Assets and liabilities measured at fair value on a recurring basis are summarized below. At March 31, 2018June 30, 2019 and December 31, 2017,2018, no assets were required to be measured at fair value on a non-recurring basis. Fair value measurements are required on a non-recurring basis for certain assets, including goodwill and mortgage loans on real estate, only when an OTTI or other event occurs. When such fair value measurements are recorded, they must be classified and disclosed within the fair value hierarchy. The Company recognizes transfers between valuation levels at the beginning of the reporting period.
Fair Value Measurements at June 30, 2019
 Level 1 Level 2 Level 3 Total
 (in millions)
Assets:       
Investments:       
Fixed maturities, available-for-sale:       
Corporate (1)$—
 $40,226
 $1,302
 $41,528
U.S. Treasury, government and agency—
 13,717
 —
 13,717
States and political subdivisions—
 525
 40
 565
Foreign governments—
 498
 —
 498
Residential mortgage-backed (2)—
 221
 —
 221
Asset-backed (3)—
 84
 534
 618
Redeemable preferred stock159
 266
 —
 425
Total fixed maturities, available-for-sale159
 55,537
 1,876
 57,572
Other equity investments12
 —
 71
 83
Trading securities489
 9,122
 35
 9,646
Other invested assets:       
Short-term investments—
 350
 —
 350
Assets of consolidated VIEs/VOEs123
 340
 28
 491
Swaps—
 731
 —
 731
Credit default swaps—
 18
 —
 18
Futures(3) —
 —
 (3)
Options—
 2,490
 —
 2,490
Swaptions—
 52
 —
 52
Total other invested assets120
 3,981
 28
 4,129


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Fair Value Measurements at March 31, 2018
 Level 1 Level 2 Level 3 Total
 (in millions)
Assets       
Investments       
Fixed maturities, available-for-sale:       
Public Corporate$—
 $18,581
 $135
 $18,716
Private Corporate—
 6,286
 1,118
 7,404
U.S. Treasury, government and agency—
 14,653
 —
 14,653
States and political subdivisions—
 438
 39
 477
Foreign governments—
 419
 —
 419
Residential mortgage-backed(1)
—
 627
 —
 627
Asset-backed(2)
—
 135
 540
 675
Redeemable preferred stock180
 333
 —
 513
Subtotal180
 41,472
 1,832
 43,484
Other equity investments13
 —
 34
 47
Trading securities448
 14,427
 44
 14,919
Other invested assets:       
Short-term investments—
 854
 —
 854
Assets of consolidated VIEs/VOEs1,691
 291
 32
 2,014
Swaps—
 356
 —
 356
Credit Default Swaps—
 29
 —
 29
Options—
 1,939
 —
 1,939
Subtotal1,691
 3,469
 32
 5,192
Cash equivalents4,894
 —
 —
 4,894
Segregated securities—
 1,025
 —
 1,025
GMIB reinsurance contract asset—
 —
 1,734
 1,734
Separate Accounts’ assets118,466
 2,845
 357
 121,668
Total Assets$125,692
 $63,238
 $4,033
 $192,963
Liabilities       
Other invested liabilities       
GMxB derivative features’ liability$—
 $—
 $3,977
 $3,977
SCS, SIO, MSO and IUL indexed features’ liability—
 1,683
 —
 1,683
Liabilities of consolidated VIEs/VOEs1,190
 18
 —
 1,208
Contingent payment arrangements—
 —
 14
 14
Total Liabilities$1,190
 $1,701
 $3,991
 $6,882
 Level 1 Level 2 Level 3 Total
 (in millions)
Cash equivalents3,708
 —
 —
 3,708
Segregated securities—
 1,110
 —
 1,110
GMIB reinsurance contract asset—
 —
 1,896
 1,896
Separate Accounts assets119,004
 2,837
 389
 122,230
Total Assets$123,492
 $72,587
 $4,295
 $200,374
        
Liabilities:       
GMxB derivative features’ liability$—
 $—
 $6,941
 $6,941
SCS, SIO, MSO and IUL indexed features’ liability—
 2,321
 —
 2,321
Liabilities of consolidated VIEs/VOEs1
 5
 —
 6
Contingent payment arrangements—
 —
 25
 25
Total Liabilities$1
 $2,326
 $6,966
 $9,293
______________
(1)Corporate fixed maturities includes both public and private issues.
(2)Includes publicly traded agency pass-through securities and collateralized obligations.
(2)(3)Includes credit-tranched securities collateralized by sub-prime mortgages and other asset types and credit tenant loans.

Fair Value Measurements at December 31, 2018
 Level 1 Level 2 Level 3 Total
 (in millions)
Assets:       
Investments:       
Fixed maturities, available-for-sale:       
Corporate (1)$—
 $28,992
 $1,186
 $30,178
U.S. Treasury, government and agency—
 13,829
 —
 13,829
States and political subdivisions—
 422
 39
 461
Foreign governments—
 530
 —
 530
Residential mortgage-backed (2)—
 234
 —
 234
Asset-backed (3)—
 82
 519
 601
Redeemable preferred stock167
 279
 —
 446
Total fixed maturities, available-for-sale167
 44,368
 1,744
 46,279
Other equity investments11
 —
 74
 85
Trading securities446
 15,507
 64
 16,017
Other invested assets:       
Short-term investments—
 515
 —
 515
Assets of consolidated VIEs/VOEs92
 259
 27
 378
Swaps—
 426
 —
 426
Credit default swaps—
 17
 —
 17
Futures(1) —
 —
 (1)
Options—
 968
 —
 968
Total other invested assets91
 2,185
 27
 2,303
Cash equivalents3,482
 —
 —
 3,482
Segregated securities—
 1,170
 —
 1,170
GMIB reinsurance contracts asset—
 —
 1,732
 1,732
Separate Accounts assets106,994
 2,747
 374
 110,115
Total Assets$111,191
 $65,977
 $4,015
 $181,183


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 Level 1 Level 2 Level 3 Total
 (in millions)
Liabilities:       
GMxB derivative features’ liability$—
 $—
 $5,614
 $5,614
SCS, SIO, MSO and IUL indexed features’ liability—
 715
 —
 715
Liabilities of consolidated VIEs/VOEs—
 7
 —
 7
Contingent payment arrangements—
 —
 7
 7
Total Liabilities$—
 $722
 $5,621
 $6,343
Fair Value Measurements at December 31, 2017______________
 Level 1 Level 2 Level 3 Total
 (in millions)
Assets       
Investments       
Fixed maturities, available-for-sale:       
Public Corporate$—
 $17,906
 $48
 $17,954
Private Corporate—
 6,390
 1,102
 7,492
U.S. Treasury, government and agency—
 18,508
 —
 18,508
States and political subdivisions—
 449
 40
 489
Foreign governments—
 419
 —
 419
Residential mortgage-backed(1)
—
 818
 —
 818
Asset-backed(2)
—
 208
 541
 749
Redeemable preferred stock184
 327
 1
 512
Subtotal184
 45,025
 1,732
 46,941
Other equity investments13
 —
 34
 47
Trading securities485
 13,647
 38
 14,170
Other invested assets:       
Short-term investments—
 1,730
 —
 1,730
Assets of consolidated VIEs/VOEs1,060
 215
 27
 1,302
Swaps—
 222
 —
 222
Credit Default Swaps—
 33
 —
 33
Futures(2) —
 —
 (2)
Foreign currency contract(3)
—
 5
 —
 5
Options—
 1,999
 —
 1,999
Subtotal1,058
 4,204
 27
 5,289
Cash equivalents3,608
 —
 —
 3,608
Segregated securities—
 825
 —
 825
GMIB reinsurance contract asset—
 —
 1,894
 1,894
Separate Accounts’ assets121,000
 2,997
 349
 124,346
Total Assets$126,348
 $66,698
 $4,074
 $197,120
Liabilities       
Other invested liabilities       
GMxB derivative features’ liability$—
 $—
 $4,358
 $4,358
SCS, SIO, MSO and IUL indexed features’ liability—
 1,786
 —
 1,786
Liabilities of consolidated VIEs/VOEs670
 22
 —
 692
Contingent payment arrangements—
 —
 15
 15
Total Liabilities$670
 $1,808
 $4,373
 $6,851
(1)Corporate fixed maturities includes both public and private issues.
(2)Includes publicly traded agency pass-through securities and collateralized obligations.
(2)(3)Includes credit-tranched securities collateralized by sub-prime mortgages and other asset types and credit tenant loans.
(3)Reported in Other assets in the consolidated balance sheets.

At March 31, 2018 and December 31, 2017, respectively, the fair value of public fixed maturities is approximately $35,131 million and $38,762 million or approximately 18.5% and 20.0% of the Company’s total assets measured at fair value on a recurring basis (excluding GMIB reinsurance contracts and segregated securities measured at fair value


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on a recurring basis). The fair values of the Company’s public fixed maturity securitiesmaturities are generally based on prices obtained from independent valuation service providers and for which the Company maintains a vendor hierarchy by asset type based on historical pricing experience and vendor expertise. Although each security generally is priced by multiple independent valuation service providers, the Company ultimately uses the price received from the independent valuation service provider highest in the vendor hierarchy based on the respective asset type, with limited exception. To validate reasonableness, prices also are internally reviewed by those with relevant expertise through comparison with directly observed recent market trades. Consistent with the fair value hierarchy, public fixed maturity securitiesmaturities validated in this manner generally are reflected within Level 2, as they are primarily based on observable pricing for similar assets and/or other market observable inputs. If the pricing information received from independent valuation service providers is not reflective of market activity or other inputs observable in the market, the Company may challenge the price through a formal process in accordance with the terms of the respective independent valuation service provider agreement. If as a result it is determined that the independent valuation service provider is able to reprice the security in a manner agreed as more consistent with current market observations, the security remains within Level 2. Alternatively, a Level 3 classification may result if the pricing information then is sourced from another vendor, non-binding broker quotes, or internally-developed valuations for which the Company’s own assumptions about market-participant inputs would be used in pricing the security.
At March 31, 2018 and December 31, 2017, respectively, the fair value of private fixed maturities is approximately $8,353 million and $8,179 million or approximately 4.4% and 4.2% of the Company’s total assets measured at fair value on a recurring basis. The fair values of the Company’s private fixed maturities are determined from prices obtained from independent valuation service providers. Prices not obtained from an independent valuation service provider are determined by using a discounted cash flow model or a market comparable company valuation technique. In certain cases, these models use observable inputs with a discount rate based upon the average of spread surveys collected from private market intermediaries who are active in both primary and secondary transactions, taking into account, among other factors, the credit quality and industry sector of the issuer and the reduced liquidity associated with private placements. Generally, these securities have been reflected within Level 2. For certain private fixed maturities, the discounted cash flow model or a market comparable company valuation technique may also incorporate unobservable inputs, which reflect the Company’s own assumptions about the inputs market participants would use in pricing the asset. To the extent management determines that such unobservable inputs are significant to the fair value measurement of a security, a Level 3 classification generally is made.
As disclosed in Note 3, at March 31, 2018 and December 31, 2017, respectively, theThe net fair value of the Company’s freestanding derivative positions is approximately 44.8% and 42.9% of Other invested assets measured at fair value on a recurring basis, with a value of $2,324 million and $2,258 million. The fair values of the Company’s derivative positionsas disclosed in Note 4 are generally based on prices obtained either from independent valuation service providers or derived by applying market inputs from recognized vendors into industry standard pricing models. The majority of these derivative contracts are traded in the OTC derivative market and are classified in Level 2. The fair values of derivative assets and liabilities traded in the OTC market are determined using quantitative models that require use of the contractual terms of the derivative instruments and multiple market inputs, including interest rates, prices, and indices to generate continuous yield or pricing curves, including overnight index swap (“OIS”) curves, and volatility factors, which then are applied to value the positions. The predominance of market inputs is actively quoted and can be validated through external sources or reliably interpolated if less observable. If the pricing information received from independent valuation service providers is not reflective of market activity or other inputs observable in the market, the Company may challenge the price through a formal process in accordance with the terms of the respective independent valuation service provider agreement. If as a result it is determined that the independent valuation service provider is able to reprice the derivative instrument in a manner agreed as more consistent with current market observations, the position remains within Level 2. Alternatively, a Level 3 classification may result if the pricing information then is sourced from


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another vendor, non-binding broker quotes, or internally-developed valuations for which the Company’s own assumptions about market-participant inputs would be used in pricing the security.
At March 31, 2018 and December 31, 2017, respectively, investmentsInvestments classified as Level 1 comprise approximately 66.1% and 64.9% of assets measured at fair value on a recurring basis and primarily include redeemable preferred stock, trading securities, cash equivalents and Separate AccountAccounts assets. Fair value measurements classified as Level 1


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include exchange-traded prices of fixed maturities, equity securities and derivative contracts, and net asset values for transacting subscriptions and redemptions of mutual fund shares held by Separate Accounts. Cash equivalents classified as Level 1 include money market accounts, overnight commercial paper and highly liquid debt instruments purchased with an original maturity of three months or less and are carried at cost as a proxy for fair value measurement due to their short-term nature.
At March 31, 2018 and December 31, 2017, respectively, investmentsInvestments classified as Level 2 comprise approximately 32.7% and 34.0% of assetsare measured at fair value on a recurring basis and primarily include U.S. government and agency securities and certain corporate debt securities, such as public and private fixed maturities. As market quotes generally are not readily available or accessible for these securities, their fair value measures are determined utilizing relevant information generated by market transactions involving comparable securities and often are based on model pricing techniques that effectively discount prospective cash flows to present value using appropriate sector-adjusted credit spreads commensurate with the security’s duration, also taking into consideration issuer-specific credit quality and liquidity. Segregated securities classified as Level 2 are U.S. Treasury bills segregated by AB in a special reserve bank custody account for the exclusive benefit of brokerage customers, as required by Rule 15c3-3 of the Exchange Act and for which fair values are based on quoted yields in secondary markets.
Observable inputs generally used to measure the fair value of securities classified as Level 2 include benchmark yields, reported secondary trades, issuer spreads, benchmark securities and other reference data. Additional observable inputs are used when available, and as may be appropriate, for certain security types, such as prepayment, default, and collateral information for the purpose of measuring the fair value of mortgage- and asset-backed securities. At March 31, 2018 and December 31, 2017, respectively, approximately $641 million and $875 million ofThe Company’s AAA-rated mortgage- and asset-backed securities are classified as Level 2 for which the observability of market inputs to their pricing models is supported by sufficient, albeit more recently contracted, market activity in these sectors.
Certain Company products such as the SCS and EQUI-VEST variable annuity product,products, and in the MSO fund available in some life contracts offer investment options which permit the contract owner to participate in the performance of an index, ETF or commodity price. These investment options, which depending on the product and on the index selected can currently have 1, 3, 5 or 6 year terms, provide for participation in the performance of specified indices, ETF or commodity price movement up to a segment-specific declared maximum rate. Under certain conditions that vary by product, e.g., holding these segments for the full term, these segments also shield policyholders from some or all negative investment performance associated with these indices, ETF or commodity prices. These investment options have defined formulaic liability amounts, and the current values of the option component of these segment reserves are accounted for as Level 2 embedded derivatives. The fair values of these embedded derivatives are based on data obtained from independent valuation service providers.
At March 31, 2018 and December 31, 2017, respectively,The Company’s investments classified as Level 3 comprise approximately 1.2% and 1.1% of assets measured at fair value on a recurring basis and primarily include corporate debt securities, such as private fixed maturities. Determinations to classify fair value measures within Level 3 of the valuation hierarchy generally are based upon the significance of the unobservable factors to the overall fair value measurement. Included in the Level 3 classification at March 31, 2018 and December 31, 2017, respectively, were approximately $95 million and $97 million ofare fixed maturities with indicative pricing obtained from brokers that otherwise could not be corroborated to market observable data. The Company applies various due diligence procedures, as considered appropriate, to validate these non-binding broker quotes for reasonableness, based on its understanding of the markets, including use of internally-developed assumptions about inputs a market participant would use to price the security. In addition, approximately $540 million and $598 million of mortgage- and asset-backed securities are classified as Level 3 at March 31, 2018 and December 31, 2017, respectively.3.
The Company also issues certain benefits on its variable annuity products that are accounted for as derivatives and are also considered Level 3. The GMIBNLG feature allows the policyholder to receive guaranteed minimum lifetime annuity payments based on predetermined annuity purchase rates applied to the contract’s benefit base if and when the contract account value is depleted and the NLG feature is activated. The GMWB feature allows the policyholder to withdraw at minimum, over the life of the contract, an amount based on the contract’s benefit base. The GWBL feature allows the policyholder to withdraw, each year for the life of the contract, a specified annual percentage of an amount


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based on the contract’s benefit base. The GMAB feature increases the contract account value at the end of a specified period to a GMAB base. The GIB feature provides a lifetime annuity based on predetermined annuity purchase rates if and when the contract account value is depleted. This lifetime annuity is based on predetermined annuity purchase rates applied to a GIB base.


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Level 3 also includes the GMIB reinsurance contract asset’sassets, which are accounted for as derivative contracts. The GMIB reinsurance contract asset and liabilities’ fair value reflects the present value of reinsurance premiums and recoveries and risk margins over a range of market consistent economic scenarios while GMxB derivative features liability reflects the present value of expected future payments (benefits) less fees, adjusted for risk margins and nonperformance risk, attributable to GMxB derivative features’ liability over a range of market-consistent economic scenarios.
The valuations of the GMIB reinsurance contract asset and GMxB derivative features liability incorporate significant non-observable assumptions related to policyholder behavior, risk margins and projections of equity separate accountSeparate Accounts funds. The credit risks of the counterparty and of the Company are considered in determining the fair values of its GMIB reinsurance contract asset and GMxB derivative features liability positions, respectively, after taking into account the effects of collateral arrangements. Incremental adjustment to the swap curve for non-performance risk is made to the fair values of the GMIB reinsurance contract asset and liabilities and GMIBNLG feature to reflect the claims-paying ratings of counterparties and the Company. Equity and fixed income volatilities were modeled to reflect current market volatilities. Due to the unique, long duration of the GMIBNLG feature, adjustments were made to the equity volatilities to remove the illiquidity bias associated with the longer tenors and risk margins were applied to the non-capital markets inputs to the GMIBNLG valuations.
After giving consideration to collateral arrangements, the Company reduced the fair value of its GMIB reinsurance contract asset by $12$80 million and $8$112 million at March 31, 2018June 30, 2019 and December 31, 2017,2018, respectively, to recognize incremental counterparty non-performance risk and reduced the fair value of its GMIB reinsurance contract liabilities by $24$32 million and $24$41 million at March 31, 2018June 30, 2019 and December 31, 2017,2018, respectively, to recognize its own incremental non-performance risk.
Lapse rates are adjusted at the contract level based on a comparison of the actuarially calculated guaranteed values and the current policyholder account value, which include other factors such as considering surrender charges. Generally, lapse rates are assumed to be lower in periods when a surrender charge applies. A dynamic lapse function reduces the base lapse rate when the guaranteed amount is greater than the account value as in the money contracts are less likely to lapse. For valuing the embedded derivative, lapse rates vary throughout the period over which cash flows are projected.
The Company’s Level 3 liabilities include contingent payment arrangements associated with acquisitions in 2010, 2013, 2014, 2016 and 20162019 by AB. At each reporting date, AB estimates the fair values of the contingent consideration expected to be paid based upon probability-weighted AUMrevenue and revenuediscount rate projections, using unobservable market data inputs, which are included in Level 3 of the valuation hierarchy. The Company’s Level 3 liabilities also include contingent payment arrangements associated with a Renewal Rights Agreement (the “Renewal Rights Agreement”) that transitions certain group employee benefits policies beginning January 1, 2017 from an insurer exiting such business to MONY Life Insurance Company of America (“MLOA”). The fair value of the contingent payments liability associated with this transaction is measured and adjusted each reporting period through final settlement using projected premiums from these policies, net of potential surrenders and terminations, and applying a risk-adjusted discount factor (7.0% at March 31, 2018) to the resulting cash flows.
As of March 31, 2018 and December 31, 2017, the Company’s consolidated VIEs/VOEs hold $32 million and $27 million, respectively of investments that are classified as Level 3, primarily consist of corporate bonds that are vendor priced with no ratings available, bank loans, non-agency collateralized mortgage obligations and asset-backed securities.
InDuring the first threesix months of 2018,ended June 30, 2019, AFS fixed maturities with fair values of $16$73 million were transferred out of Level 3 and into Level 2 principally due to the availability of trading activity and/or market observable inputs to measure and validate their fair values. In addition, AFS fixed maturities with fair value of $67$14 million were transferred from Level 2 into the Level 3 classification. These transfers in the aggregate represent approximately 0.5% of total equity at March 31,June 30, 2019.
During the six months ended June 30, 2018, AFS fixed maturities with fair values of $28 million were transferred out of Level 3 and into Level 2 principally due to the availability of trading activity and/or market observable inputs to measure and validate their fair values. In addition, AFS fixed maturities with fair value of $65 million were transferred from Level 2 into the Level 3 classification. These transfers in the aggregate represent approximately 0.6% of total equity at June 30, 2018.
The tables below present reconciliations for all Level 3 assets and liabilities for the three and six months ended June 30, 2019 and 2018.


5438
Table of Contents
AXA EQUITABLE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

In the first three months of 2017, $0 million AFS fixed maturities were transferred out of Level 3 and into Level 2 principally due to the availability of trading activity or market observable inputs to measure and validate their fair values. In addition, AFS fixed maturities with fair value of $24 million were transferred from Level 2 into the Level 3 classification. These transfers in the aggregate represent approximately 0.2% of total equity at March 31, 2017.

The table below presents a reconciliation for all Level 3 assets and liabilities for the three months ended March 31, 2018 and 2017, respectively:
Level 3 Instruments
- Fair Value Measurements
Corporate State and
Political
Sub-
divisions		 Commercial
Mortgage-
backed		 Asset-
backed		Corporate State and Political Subdivisions Asset-backed Redeemable Preferred Stock
(in millions)(in millions)
Balance, January 1, 2018$1,150
 $40
 $—
 $541
Balance, April 1, 2019$1,180
 $40
 $534
 $—
Total gains (losses), realized and unrealized, included in:              
Income (loss) as:              
Net investment income (loss)1
 —
 —
 —
2
 —
 —
 —
Investment gains (losses), net—
 —
 —
 —
—
 —
 —
 —
Subtotal1
 —
 —
 —
2
 —
 —
 —
Other comprehensive income (loss)(21) (1) —
 —
1
 1
 1
 —
Purchases189
 —
 —
 —
152
 —
 (1) —
Sales(117) —
 —
 (1)(26) (1) —
 —
Settlements—
 —
 —
 —
—
 —
 —
 —
Transfers into Level 3(1)
67
 —
 —
 —
(3) —
 —
 —
Transfers out of Level 3(1)
(16) —
 —
 —
(4) —
 —
 —
Balance, March 31, 2018$1,253
 $39
 $—
 $540
Balance, January 1, 2017$857
 $42
 $373
 $120
Balance, June 30, 2019$1,302
 $40
 $534
 $—
       
Balance, April 1, 2018$1,253
 $39
 $540
 $—
Total gains (losses), realized and unrealized, included in:              
Income (loss) as:              
Net investment income (loss)1
 —
 —
 —
3
 —
 —
 —
Investment gains (losses), net—
 —
 (23) —
1
 —
 —
 —
Subtotal1
 —
 (23) —
4
 —
 —
 —
Other comprehensive income (loss)45
 —
 25
 5
7
 —
 (1) —
Purchases171
 —
 —
 195
11
 —
 —
 —
Sales(67) —
 (35) (3)(101) (1) (1) —
Transfers into Level 3(1)
18
 —
 —
 6
(2) —
 —
 —
Transfers out of Level 3(1)
—
 —
 —
 —
(12) —
 —
 —
Balance, March 31, 2017$1,025
 $42
 $340
 $323
Balance, June 30, 2018$1,160
 $38
 $538
 $—
______________
(1)Transfers into/out of Level 3 classifications are reflected at beginning of period fair values.
 Corporate State and Political Subdivisions Asset-backed Redeemable Preferred Stock
 (in millions)
Balance, January 1, 2019$1,186
 $39
 $519
 $—
Total gains (losses), realized and unrealized, included in:       
Income (loss) as:       
Net investment income (loss)3
 —
 —
 —
Investment gains (losses), net—
 —
 —
 —
Subtotal3
 —
 —
 —
Other comprehensive income (loss)10
 2
 5
 —
Purchases222
 —
 10
 —
Sales(60) (1) —
 —
Transfers into Level 3 (1)14
 —
 —
 —
Transfers out of Level 3 (1)(73) —
 —
 —
Balance, June 30, 2019$1,302
 $40
 $534
 $—


5539
Table of Contents
AXA EQUITABLE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

 Redeemable
Preferred
Stock		 
Other
Equity
Investments(2)
 GMIB
Reinsurance
Contract Asset		 Separate
Accounts
Assets		 GMxB derivative features liability Contingent
Payment
Arrangement
 (in millions)
Balance, January 1, 2018$1
 $99
 $1,894
 $349
 $(4,358) $(15)
Total gains (losses), realized and unrealized, included in:           
Income (loss) as:           
Net investment income (loss)—
 —
 —
 —
 —
 —
Investment gains (losses), net—
 —
 —
 7
 —
 —
Net derivative gains (losses)—
 —
 (159) —
 460
 —
Subtotal—
 —
 (159) 7
 460
 —
Other comprehensive income (loss)—
 1
 —
 —
 —
 —
Purchases(2)
—
 4
 10
 3
 (84) —
Sales(3) 
(1) —
 (11) (1) 5
 —
Settlements(4)
—
 —
 —
 (1) —
 1
Activity related to consolidated VIEs—
 1
 —
 —
 —
 —
Transfers into Level 3(1)
—
 5
 —
 —
 —
 —
Transfers out of Level 3(1)
—
 —
 —
 —
 —
 —
Balance, March 31, 2018$—
 $110
 $1,734
 $357
 $(3,977) $(14)
Balance, January 1, 2017$1
 $88
 $1,735
 $313
 $(5,580) $(25)
Total gains (losses), realized and unrealized, included in:           
Income (loss) as:           
Net investment income (loss)—
 —
 —
 —
 —
 —
Investment gains (losses), net—
 (9) —
 10
 —
 —
Net derivative gains (losses)—
 —
 (71) 

 507
 —
Subtotal—
 (9) (71) 10
 507
 —
Other comprehensive income (loss)—
 —
 —
 —
 —
 —
Purchases(2)
—
 4
 9
 3
 (81) —
Sales(3) 
—
 (1) (14) (1) 8
 —
Settlements(4)
—
 

 —
 (1) —
 1
Activity related to consolidated VIEs—
 (9) —
 —
 —
 —
Transfers into Level 3(1)
—
 1
 —
 1
 —
 —
Transfers out of Level 3(1)
—
 

 —
 —
 —
 —
Balance, March 31, 2017$1
 $74
 $1,659
 $325
 $(5,146) $(24)
 Corporate State and Political Subdivisions Asset-backed Redeemable Preferred Stock
 (in millions)
Balance, January 1, 2018$1,150
 $40
 $541
 $1
Total gains (losses), realized and unrealized, included in:       
Net income (loss) as:       
Net investment income (loss)4
 —
 —
 —
Investment gains (losses), net1
 —
 —
 —
Subtotal5
 —
 —
 —
Other comprehensive income (loss)(14) (1) (1) —
Purchases200
 —
 —
 —
Sales(218) (1) (2) (1)
Transfers into Level 3 (1)65
 —
 —
 —
Transfers out of Level 3 (1)(28) —
 —
 —
Balance, June 30, 2018$1,160
 $38
 $538
 $—
______________
(1)Transfers into/out of Level 3 classificationclassifications are reflected at beginning-of-periodbeginning of period fair values.
 
Other
Equity
Investments
 
GMIB
Reinsurance
Contract Asset
 
Separate
Accounts
Assets
 GMxB Derivative Features Liability 
Contingent
Payment
Arrangement
 (in millions)
Balance, April 1, 2019$137
 $1,740
 $383
 $(6,126) $(7)
Total gains (losses), realized and unrealized, included in:         
Net income (loss) as:         
Investment gains (losses), net—
 —
 5
 —
 —
Net derivative gains (losses), excluding non-performance risk—
 147
 —
 (719) —
Non-performance risk (1)—
 12
 —
 —
 —
Subtotal—
 159
 5
 (719) —
Purchases (2)6
 11
 3
 (104) (17)
Sales (3)(7) (14) —
 8
 —
Settlements (4)—
 —
 (2) —
 —
Activity related to consolidated VIEs/VOEs(2) —
 —
 —
 (1)
Transfers out of Level 3 (5)—
 —
 —
 —
 —
Balance, June 30, 2019$134
 $1,896
 $389
 $(6,941) $(25)


5640
Table of Contents
AXA EQUITABLE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

 
Other
Equity
Investments
 
GMIB
Reinsurance
Contract Asset
 
Separate
Accounts
Assets
 GMxB Derivative Features Liability 
Contingent
Payment
Arrangement
 (in millions)
Balance, April 1, 2018$110
 $1,734
 $357
 (4,037) $(14)
Total gains (losses), realized and unrealized, included in:         
Net income (loss) as:         
Investment gains (losses), net(1) —
 6
 —
 —
Net derivative gains (losses), excluding non-performance risk—
 (100) —
 388
 —
Non-performance risk (1)—
 (1) —
 70
 —
Subtotal(1) (101) 6
 458
 —
Other comprehensive income (loss)5
 —
 —
 —
 —
Purchases (2)6
 13
 (1) (118) —
Sales (3)(2) (10) —
 5
 —
Settlements (4)—
 —
 (1) —
 1
Activity related to consolidated VIEs/VOEs(3) —
 —
 —
 —
Transfers into Level 3 (5)1
 —
 —
 —
 —
Transfers out of Level 3 (5)(5) —
 —
 —
 —
Balance, June 30, 2018$111
 $1,636
 $361
 $(3,692) $(13)
______________
(1)The Company’s non-performance risk is recorded through Net derivative gains (losses).
(2)For the GMIB reinsurance contract asset and GMxB derivative features liability, represents attributed fee.
(3)For the GMIB reinsurance contract asset, represents recoveries from reinsurers and for the GMxB derivative features liability, represents benefits paid.
(4)For contingent payment arrangements, it represents payments under the arrangement.

The table below details changes in unrealized gains (losses) for the three months ended March 31, 2018 and 2017 by category for Level 3 assets and liabilities still held at March 31, 2018 and 2017, respectively:
 Income (Loss) 
 Investment
Gains
(Losses),
Net		 Net Derivative Gains (losses) OCI        
 (in millions)
Level 3 Instruments     
First Quarter of 2018     
Held at March 31, 2018:     
Change in unrealized gains (losses):     
Fixed maturities, available-for-sale:     
Corporate$—
 $—
 $(19)
State and political subdivisions—
 —
 (1)
Asset-backed—
 —
 —
Subtotal$—
 $—
 $(20)
GMIB reinsurance contracts—
 (159) —
Separate Accounts’ assets(1)
7
 —
 —
GMxB derivative features’ liability—
 460
 —
Total$7
 $301
 $(20)
Level 3 Instruments     
First Quarter of 2017     
Held at March 31, 2017:     
Change in unrealized gains (losses):     
Fixed maturities, available-for-sale:     
Corporate$—
 $—
 $45
Commercial mortgage-backed—
 —
 13
Asset-backed—
 —
 5
Subtotal$—
 $—
 $63
GMIB reinsurance contracts—
 (71) —
Separate Accounts’ assets(1)
10
 —
 —
GMxB derivative features’ liability—
 507
 —
Total$10
 $436
 $63

(1)(5)There is an investment expense that offsets this investment gain (loss).Transfers into/out of Level 3 classification are reflected at beginning-of-period fair values.

The following tables disclose quantitative information about Level 3 fair value measurements by category for assets and liabilities as of March 31, 2018 and December 31, 2017, respectively.
 Other
Equity
Investments		 GMIB
Reinsurance
Contract Asset		 Separate
Accounts
Assets		 GMxB Derivative Features Liability Contingent
Payment
Arrangement
 (in millions)
Balance, Balance, January 1, 2019$165
 $1,732
 $374
 $(5,614) $(7)
Total gains (losses), realized and unrealized, included in:         
Net income (loss) as:         
Investment gains (losses), net—
 —
 12
 —
 —
Net derivative gains (losses), excluding non-performance risk—
 136
 —
 (656) —
Non-performance risk (1)—
 41
 —
 (470) —
Subtotal—
 177
 12
 (1,126) —
Other comprehensive income (loss)—
 —
 —
 —
 —
Purchases (2)8
 22
 7
 (215) (17)
Sales (3)(7) (35) —
 14
 —
Settlements (4)—
 —
 (3) —
 —
Activity related to consolidated VIEs/VOEs(3) —
 —
 —
 (1)
Transfers into Level 3 (5)—
 —
 —
 —
 —
Transfers out of Level 3 (5)(29) —
 (1) —
 —
Balance, June 30, 2019$134
 $1,896
 $389
 $(6,941) $(25)


5741
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AXA EQUITABLE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Quantitative Information about
 Other
Equity
Investments		 GMIB
Reinsurance
Contract Asset		 Separate
Accounts
Assets		 GMxB Derivative Features Liability Contingent
Payment
Arrangement
 (in millions)
Balance, Balance, January 1, 2018$99
 $1,894
 $349
 (4,451) $(15)
Total gains (losses), realized and unrealized, included in:         
Net income (loss) as:         
Investment gains (losses), net(1) —
 13
 —
 —
Net derivative gains (losses), excluding non-performance risk—
 (255) —
 845
 —
Non-performance risk (1)—
 (5) —
 118
 —
Subtotal(1) (260) 13
 963
 —
Other comprehensive income (loss)6
 —
 —
 —
 —
Purchases (2)10
 23
 2
 (214) —
Sales (3)(2) (21) (1) 10
 —
Settlements (4)—
 —
 (2) —
 2
Activity related to consolidated VIEs/VOEs(2) —
 —
 —
 —
Transfers into Level 3 (5)6
 —
 —
 —
 —
Transfers out of Level 3 (5)(5) —
 —
 —
 —
Balance, June 30, 2018$111
 $1,636
 $361
 $(3,692) $(13)
______________
(1)The Company’s non-performance risk is recorded through Net derivative gains (losses).
(2)For the GMIB reinsurance contract asset and GMxB derivative features liability, represents attributed fee.
(3)For the GMIB reinsurance contract asset, represents recoveries from reinsurers and for the GMxB derivative features liability, represents benefits paid.
(4)For contingent payment arrangements, represents payments under the arrangement.
(5)Transfers into/out of Level 3 classification are reflected at beginning-of-period fair values.
The table below details changes in unrealized gains (losses) for thesix months ended June 30, 2019 and 2018 by category for Level 3 Fair Value Measurementsassets and liabilities still held at June 30, 2019 and 2018.
March 31, 2018Change in Unrealized Gains (Losses) for Level 3 Instruments
 Fair
Value		 Valuation
Technique		 Significant
Unobservable Input		 Range Weighted Average
 (in millions)  
Assets:         
Investments:         
Fixed maturities, available-for-sale:         
Corporate$52
 Matrix pricing model Spread over the industry-Specific benchmark yield curve 0 - 565 bps 112 bps
 788
 Market comparable 
companies		 EBITDA multiples
Discount rate
Cash flow multiples		 6.2x - 30.7x
7.2% - 17.0%
9.0x - 17.7x		 13x
11.3%
13.1x
Other equity investments38
 Discounted cash flow Earnings Multiple
Discounts factor
Discount years		 10.8x
10.0%
12		  
Separate Accounts’ assets332
 Third party appraisal Capitalization Rate
Exit capitalization Rate
Discount Rate		 4.6%
5.6%
6.6%		  
 1
 Discounted cash flow Spread over U.S. Treasury curve
Discount factor		 228 bps
4.624%		  
GMIB reinsurance contract asset1,734
 Discounted cash flow Lapse Rates
Withdrawal Rates
Utilization Rates
Non-performance risk
Volatility rates - Equity		 1% - 6.27% 0.63% -13.94% 0% - 16% 6 - 14 bps 11%-30%  
Liabilities:         
GMIBNLG3,715
 Discounted cash flow Non-performance risk
Lapse Rates
Withdrawal Rates
Annuitization
NLG Forfeiture Rates
Long-term equity Volatility		 1.0%
0.8% - 26.2%
0.0% - 12.4%
0.0% - 16.0%
0.55% - 2.1%
20.0%		  
Assumed GMIB Reinsurance Contracts173
 Discounted cash flow Lapse Rates
Withdrawal Rates (Age 0-85)
Withdrawal Rates (Age 86+)
Utilization Rates
Non-performance risk
Volatility rates - Equity		 1.1% - 13.3%
0.7% - 22.2%
1.3% - 100%
0% - 30%
1.47%
11%-30%		  
GWBL/GMWB121
 Discounted cash flow Lapse Rates
Withdrawal Rates
Utilization Rates
Volatility rates - Equity		 0.5%-5.7% 0.0%-7.0% 100% after delay 11%-30%  
GIB(36) Discounted cash flow Lapse Rates
Withdrawal Rates
Utilization Rates
Volatility rates - Equity		 0.5%-5.7% 0%-8% 0% - 16% 11%-30%  
GMAB4
 Discounted cash flow Lapse Rates
Volatility rates - Equity		 0.5%-11.0% 11%-30%  
 Net Income (Loss)  
 Investment Gains (Losses), Net Net Derivative Gains (Losses) OCI
 (in millions)
Held at June 30, 2019:     
Change in unrealized gains (losses):     
Fixed maturities, available-for-sale:     
Corporate$—
 $—
 $10
State and political subdivisions—
 —
 3
Asset-backed—
 —
 5
Subtotal—
 —
 18
GMIB reinsurance contracts—
 177
 —
Separate Accounts assets (1)12
 —
 —
GMxB derivative features liability—
 (1,126) —
Total$12
 $(949) $18


5842
Table of Contents
AXA EQUITABLE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

 Net Income (Loss)  
 Investment Gains (Losses), Net Net Derivative Gains (Losses) OCI
 (in millions)
Held at June 30, 2018:     
Change in unrealized gains (losses):     
Fixed maturities, available-for-sale:     
Corporate$—
 $—
 $(15)
Commercial mortgage-backed—
 —
 —
State and political subdivisions—
 —
 (1)
Asset-backed—
 —
 1
Subtotal—
 —
 (15)
GMIB reinsurance contracts—
 (260) —
Separate Accounts assets (1)13
 —
 —
GMxB derivative features liability—
 963
 —
Total$13
 $703
 $(15)
______________
(1)There is an investment expense that offsets this investment gain (loss).
The following tables disclose quantitative information about Level 3 fair value measurements by category for assets and liabilities at June 30, 2019 and December 31, 2018.
Quantitative Information about Level 3 Fair Value Measurements
December 31, 2017 at June 30, 2019
  Fair
Value		 Valuation
Technique		 Significant
Unobservable Input		 Range Weighted Average
  (in millions)  
Assets:          
Investments:          
Fixed maturities, available-for-sale:          
Corporate $53
 Matrix pricing model Spread over the industry-specific benchmark yield curve 0 bps-565 bps 125 bps
  789
 Market comparable companies EBITDA multiples
Discount Rate
Cash flow Multiples		 5.3x-27.9x
7.2% - 17.0%
9.0x - 17.7x		 12.9x
11.1%
13.1x
Other equity investments 38
 Discounted cash flow Earnings Multiple
Discounts factor
Discount years		 10.8x 10.0% 12  
Separate Accounts’ assets 326
 Third party appraisal Capitalization Rate
Exit capitalization Rate
Discount Rate		 4.6% 5.6% 6.6%  
  1
 Discounted cash flow Spread over U.S. Treasury curve
Discount factor		 243 bps 4.409%  
GMIB reinsurance contract asset 1,894
 Discounted Cash flow Lapse Rates
Withdrawal Rates
Utilization Rates
Non-performance risk
Volatility rates - Equity		 1.0% - 6.3% 0.0% - 8.0% 0.0% - 16.0% 5bps - 10bps 9.9% - 30.9%  
Liabilities:          
GMIBNLG 4,056
 Discounted cash flow Non-performance risk
Lapse Rates
Withdrawal Rates
Utilization Rates
NLG Forfeiture Rates
Long -term Equity Volatility		 1.0% 0.8% - 26.2% 0.0% - 12.4% 0.0% - 16.0% 0.55% - 2.1% 20.0%  
Assumed GMIB Reinsurance Contracts 194
 Discounted cash flow Lapse Rates
Withdrawal Rates (Age 0-85)
Withdrawal Rates (Age 86+)
Utilization Rates
Non-performance risk
Volatility rates - Equity		 1.1% - 13.3% 0.7% - 22.2% 1.3% - 100%
0 - 30% 1.3% 9.9% - 30.9%		  
GWBL/GMWB 130
 Discounted cash flow Lapse Rates
Withdrawal Rates
Utilization Rates
Volatility rates - Equity		 0.9% - 5.7% 0.0% - 7.0% 100% after delay 9.9% - 30.9%  
GIB (27) Discounted cash flow Lapse Rates
Withdrawal Rates
Utilization Rates
Volatility rates - Equity		 0.9% - 5.7% 0.0% - 7.0% 0.0% - 16.0% 9.9% - 30.9%  
GMAB 5
 Discounted cash flow Lapse Rates
Volatility rates - Equity		 0.5% - 11.0% 9.9% - 30.9%  
 Fair
Value		 Valuation
Technique		 Significant
Unobservable Input		 Range Weighted Average
 (in millions)  
Assets:         
Investments:         
Fixed maturities, available-for-sale:         
Corporate$127
 Matrix pricing model Spread over benchmark 15 - 580 bps 95 bps
 749
 Market 
comparable 
companies		 
EBITDA multiples
Discount rate
Cash flow multiples
 4.1x - 44.6x
7.5% - 16.5%
7.5x - 16.5x		 15.8x
11.1%
11.1x
Other equity investments35
 Discounted cash flow 
Earnings multiple
Discount factor
Discount years
 9.4x
10.0%
12		 
Separate Accounts assets363
 Third party appraisal 
Capitalization rate
Exit capitalization rate
Discount rate
 4.4%
5.5%
6.4%		  
 1
 Discounted cash flow 
Spread over U.S. Treasury curve
Discount factor
 238 bps
4.3%		  
GMIB reinsurance contract asset1,896
 Discounted cash flow 
Lapse rates
Withdrawal rates
Utilization rates
Non-performance risk
Volatility rates - Equity
Mortality rates (1):
Ages 0 - 40
Ages 41 - 60
Ages 60 - 115
 1% - 6.27%
0% - 8%
0% - 16%
46 - 127 bps
8% - 31%

0.01% - 0.18%
0.07% - 0.54%
0.42% - 42.0%		  


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Fair
Value		Valuation
Technique		Significant
Unobservable Input		RangeWeighted Average
(in millions)
Liabilities:
GMIBNLG6,620
Discounted cash flow
Non-performance risk
Lapse rates
Withdrawal rates
Annuitization
Mortality rates (1):
Ages 0 - 40
Ages 41 - 60
Ages 60 - 115
149 bps
0.8% - 26.2%
0.0% - 12.144%
0.0% - 100.0%

0.01% - 0.19%
0.06% - 0.53%
0.41% - 41.2%
Assumed GMIB Reinsurance Contracts192
Discounted cash flow
Lapse rates
Withdrawal rates (Age 0 - 85)
Withdrawal rates (Age 86+)
Utilization rates
Non-performance risk
Volatility rates - Equity
1.1% - 11.2%
0.6% - 22.2%
1.2% - 100.0%
0.0% - 30.0%
0.75% - 1.75%
8.0% - 31.0%
GWBL/GMWB152
Discounted cash flow
Lapse rates
Withdrawal rates
Utilization rates
Volatility rates - Equity
0.5% - 5.7%
0.0% - 7.0%
100% after delay
8.0% - 31.0%
GIB(28)Discounted cash flow
Lapse rates
Withdrawal rates
Utilization rates
Volatility rates - Equity
0.5% - 5.7%
0.0% - 8.0%
0.0% - 16.0%
8.0% - 31.0%
GMAB5
Discounted cash flow
Lapse rates
Volatility rates - Equity
0.5% - 11.0%
8.0% - 31.0%
______________
(1)Mortality rates vary by age and demographic characteristic such as gender. Mortality rate assumptions are based on a combination of company and industry experience. A mortality improvement assumption is also applied. For any given contract, mortality rates vary throughout the period over which cash flows are projected for purposes of valuating the embedded derivatives.
Quantitative Information about Level 3 Fair Value Measurements at December 31, 2018
 Fair
Value		 Valuation
Technique		 Significant
Unobservable Input		 Range Weighted Average
 (in millions)  
Assets:         
Investments:         
Fixed maturities, available-for-sale:         
Corporate$99
 Matrix pricing model Spread over benchmark 15 - 580 bps 109 bps
 881
 Market comparable companies EBITDA multiples
Discount rate
Cash flow multiples		 4.1x - 37.8x
6.4% - 16.5%
1.8x - 18.0x		 12.1x
10.7%
11.4x
Other equity investments35
 Discounted cash flow Earnings multiple
Discount factor
Discount years		 9.4x
10.0%
12		 
Separate Accounts assets352
 Third party appraisal Capitalization rate
Exit capitalization rate
Discount rate		 4.4%
5.6%
6.5%		  
 1
 Discounted cash flow Spread over U.S. Treasury curve
Discount factor		 248bps
5.1%		  
GMIB reinsurance contract asset1,732
 Discounted cash flow Lapse rates
Withdrawal rates
Utilization rates
Non-performance risk
Volatility rates - Equity
Mortality rates (1):
Ages 0 - 40
Ages 41 - 60
Ages 60 - 115		 1% - 6.27%
0% - 8%
0% - 16%
74 - 159 bps
10% - 34%

0.01% - 0.18%
0.07% - 0.54%
0.42% - 42.0%		  


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

Fair
Value		Valuation
Technique		Significant
Unobservable Input		RangeWeighted Average
(in millions)
Liabilities:
GMIBNLG5,341
Discounted cash flowNon-performance risk
Lapse rates
Withdrawal rates
Annuitization
Mortality rates (1):
Ages 0 - 40
Ages 41 - 60
Ages 60 - 115		189 bps
0.8% - 26.2%
0.0% - 12.1%
0.0% - 100.0%

0.01% - 0.19%
0.06% - 0.53%
0.41% - 41.2%
Assumed GMIB Reinsurance Contracts183
Discounted cash flowLapse rates
Withdrawal rates (Age 0 - 85)
Withdrawal rates (Age 86+)
Utilization rates
Non-performance risk
Volatility rates - Equity		1.1% - 11.2%
0.7% - 22.2%
1.3% - 100.0%
0.0% - 30.0%
1.1% - 2.4%
10.0% - 34.0%
GWBL/GMWB130
Discounted cash flowLapse rates
Withdrawal rates
Utilization rates
Volatility rates - Equity		0.5% - 5.7%
0.0% - 7.0%
100% after delay
10.0% - 34.0%
GIB(48)Discounted cash flowLapse rates
Withdrawal rates
Utilization rates
Volatility rates - Equity		0.5% - 5.7%
0.0% - 8.0%
0.0% - 16.0%
10.0% - 34.0%
GMAB7
Discounted cash flowLapse rates
Volatility rates - Equity		0.5% - 11.0%
10.0% - 34.0%
______________
(1)Mortality rates vary by age and demographic characteristic such as gender. Mortality rate assumptions are based on a combination of company and industry experience. A mortality improvement assumption is also applied. For any given contract, mortality rates vary throughout the period over which cash flows are projected for purposes of valuating the embedded derivatives.
Excluded from the tables above at March 31, 2018June 30, 2019 and December 31, 2017,2018, respectively, are approximately $1,087$1,124 million and $948$915 million of Level 3 fair value measurements of investments for which the underlying quantitative inputs are not developed by the Company and are not readily available. The fair value measurements of these Level 3 investments comprise approximately 47.3% and 44.0% of total assets classified as Level 3 and represent only 0.6% and 0.5% of total assets measured at fair value on a recurring basis at March 31, 2018 and December 31, 2017, respectively. These investments primarily consist of certain privately placed debt securities with limited trading activity, including residential mortgage- and asset-backed instruments, and their fair values generally reflect unadjusted prices obtained from independent valuation service providers and indicative, non-binding quotes obtained from third-party broker-dealers recognized as market participants. Significant increases or decreases in the fair value amounts received from these pricing sources may result in the Company’s reporting significantly higher or lower fair value measurements for these Level 3 investments.
Included in the tables above at March 31, 2018 and December 31, 2017, respectively, are approximately $840 million and $842 million fair value of loans classified as Level 3. The fair value of private placement securities is determined by application of a matrix pricing model or a market comparable company value technique, representing approximately 67.0% and 73.2% of the total fair value of Level 3 securities in the corporate fixed maturities asset class.technique. The significant unobservable input to the matrix pricing model valuation technique is the spread over the industry-specific benchmark yield curve. Generally, an increase or decrease in spreads would lead to directionally inverse movement in the fair value measurements of these securities. The significant unobservable input to the market comparable company valuation technique is the discount rate. Generally, a significant increase (decrease) in the discount rate would result in significantly lower (higher) fair value measurements of these securities.
Residential mortgage-backed securities classified as Level 3 primarily consist of non-agency paper with low trading activity. Included in the tables above at March 31, 2018June 30, 2019 and December 31, 2017,2018, there were no Level 3 securities that were determined by application of a matrix pricing model and for which the spread over the U.S. Treasury curve is the most significant unobservable input to the pricing result. Generally, a change in spreads would lead to directionally inverse movement in the fair value measurements of these securities.
Asset-backed securities classified as Level 3 primarily consist of non-agency mortgage loan trust certificates, including subprime and Alt-A paper, credit tenant loans, and equipment financings. Included in the tables above at March 31, 2018June 30, 2019 and December 31, 2017,2018, there were no securities that were determined by the application of matrix-pricing for which the spread over the U.S. Treasury curve is the most significant unobservable input to the pricing


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

result. Significant increases (decreases) in spreads would result in significantly lower (higher) fair value measurements.
Included in other equity investments classified as Level 3 are reporting entities’ venture capital securities in the Technology, Media and Telecommunications industries. The fair value measurements of these securities include significant unobservable inputs including an enterprise value to revenue multiples and a discount rate to account for liquidity and various risk factors. Significant increases (decreases) in the enterprise value to revenue multiple inputs in isolation would result in a significantly higher (lower) fair value measurement. Significant increases (decreases) in the discount rate would result in a significantly lower (higher) fair value measurement.
Separate AccountAccounts assets classified as Level 3 in the table at March 31, 2018June 30, 2019 and December 31, 2017,2018, primarily consist of a private real estate fund with a fair value of approximately $332 million and $326 millionand mortgage loans with fair value of approximately $1 million and $1 million, respectively.loans. A third partythird-party appraisal valuation technique is used to measure the fair value of the private real estate investment fund, including consideration of observable replacement cost and sales comparisons for the underlying commercial properties, as well as the results from applying a discounted cash flow approach. Significant increase (decrease) in isolation in the capitalization rate and exit capitalization rate assumptions used in the discounted cash flow approach to the appraisal value would result in a higher (lower) measure of fair value. With respect to the fair value measurement of mortgage loans a discounted cash flow approach is applied, a significant increase (decrease) in the assumed spread over U.S. Treasury securities would produce a lower (higher) fair value measurement. Changes in the discount rate or factor used in the valuation techniques to determine the fair values of these private equity investments and mortgage loans generally are not correlated to changes in the other significant unobservable inputs. Significant increase (decrease) in isolation in the discount rate or factor would result in significantly lower (higher) fair value measurements. The remaining Separate Account investments classified as Level


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

3 excluded from the table consist of mortgage- and asset-backed securities with fair values of approximately $15 million and $9 million at March 31, 2018 and $14 million and $8 million at December 31, 2017, respectively. These fair value measurements are determined using substantially the same valuation techniques as earlier described above for the Company’s General Account investments in these securities.
Significant unobservable inputs with respect to the fair value measurement of the Level 3 GMIB reinsurance contract asset and the Level 3 liabilities identified in the table above are developed using the Company data. Validations of unobservable inputs are performed to the extent the Company has experience. When an input is changed the model is updated and the results of each step of the model are analyzed for reasonableness.
The significant unobservable inputs used in the fair value measurement of the Company’s GMIB reinsurance contract asset are lapse rates, withdrawal rates, and GMIB utilization rates. Significant increases in GMIB utilization rates or decreases in lapse or withdrawal rates in isolation would tend to increase the GMIB reinsurance contract asset.
Fair value measurement of the GMIB reinsurance contract asset and liabilities includes dynamic lapse and GMIB utilization assumptions whereby projected contractual lapses and GMIB utilization reflect the projected net amount of risks of the contract. As the net amount of risk of a contract increases, the assumed lapse rate decreases and the GMIB utilization increases. Increases in volatility would increase the asset and liabilities.
The significant unobservable inputs used in the fair value measurement of the Company’s GMIBNLG liability are lapse rates, withdrawal rates, GMIB utilization rates, adjustment for Non-performance risk and NLG forfeiture rates.  NLG forfeiture rates are caused by excess withdrawals above the annual GMIB accrual rate that cause the NLG to expire. Significant decreases in lapse rates, NLG forfeiture rates, adjustment for non-performance risk and GMIB utilization rates would tend to increase the GMIBNLG liability, while decreases in withdrawal rates and volatility rates would tend to decrease the GMIBNLG liability.
The significant unobservable inputs used in the fair value measurement of the Company’s GMWB and GWBL liability are lapse rates and withdrawal rates. Significant increases in withdrawal rates or decreases in lapse rates in isolation would tend to increase these liabilities. Increases in volatility would increase these liabilities.
During 2017, AB made the final contingent consideration payment relating to its 2014 acquisition and recorded a change in estimate and wrote off the remaining contingent consideration payable relating to its 2010 acquisition. As of March 31, 2018At June 30, 2019 and December 31, 2017, one2018, there were acquisition-related contingent consideration liabilityliabilities of $11$26 million remainsand $7 million, relating to AB’s 2019 and 2016 acquisitions. The 2019 acquisition was valued at June 30, 2019 using expected revenue growth rates ranging from 0.7% to 2.5% per year and a discount rate of 10.4%, reflecting a 3.5% risk-free rate, based on AB’s cost of debt, and a 6.9% market price of risk adjustment rate. The 2016 acquisition which was valued using a revenue growth rate of 31.0%26.0% and a discount rate ranging from 1.4%3.2% to 2.3%3.7%.
The MLOA contingent payment arrangements associated with the Renewal Rights Agreement (with a fair value of $3 million as of March 31, 2018 is measured using projected premiums from these policies, net of potential surrenders and terminations, and applying a risk-adjusted discount factor (7% at March 31, 2018) to the resulting cash flows.


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

The carrying values and fair values at March 31, 2018 and December 31, 2017 for financial instruments not otherwise disclosed in Note 3 are presented in the table below. Certain financial instruments are exempt from the requirements for fair value disclosure, such as insurance liabilities other than financial guarantees and investment contracts, limited partnerships accounted for under the equity method and pension and other postretirement obligations.


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

The carrying values and fair values at June 30, 2019 and December 31, 2018 for financial instruments not otherwise disclosed in Notes 3 and 4 are presented in the table below.
Carrying Values and Fair Values for Financial Instruments Not Otherwise Disclosed
 Carrying Value Fair Value
  Level 1 Level 2 Level 3 Total
 (in millions)
March 31, 2018:        
Mortgage loans on real estate$11,333
 $—
 $—
 $11,128
 $11,128
Loans to affiliates885
 —
 885
 —
 885
Policyholders’ liabilities: Investment contracts2,222
 —
 —
 2,283
 2,283
FHLBNY Funding Agreements3,014
 —
 2,962
 —
 2,962
Short term and long-term debt2,373
 —
 2,449
 —
 2,449
Loans from affiliates2,530
 —
 2,530
 —
 2,530
Policy loans3,776
 —
 —
 4,330
 4,330
Separate Account Liabilities7,647
 —
 —
 7,647
 7,647
December 31, 2017:         
Mortgage loans on real estate$10,952
 $—
 $—
 $10,912
 $10,912
Loans to affiliates1,230
 —
 1,230
 —
 1,230
Policyholders’ liabilities: Investment contracts2,224
 —
 —
 2,329
 2,329
FHLBNY Funding Agreements3,014
 —
 3,020
 —
 3,020
Short term and long-term debt2,408
 —
 2,500
 —
 2,500
Loans from affiliates3,622
 —
 3,622
 —
 3,622
Policy loans3,819
 —
 —
 4,754
 4,754
Separate Account Liabilities7,537
 —
 —
 7,537
 7,537
 Carrying Value Fair Value
  Level 1 Level 2 Level 3 Total
 (in millions)
June 30, 2019:        
Mortgage loans on real estate$12,288
 $—
 $—
 $12,429
 $12,429
FHLBNY Funding Agreements$4,001
 $—
 $4,039
 $—
 $4,039
Policy loans$3,740
 $—
 $—
 $4,566
 $4,566
Policyholders’ liabilities: Investment contracts$2,084
 $—
 $—
 $2,248
 $2,248
Short-term and long-term debt$4,852
 $—
 $5,087
 $—
 $5,087
Separate Accounts liabilities$8,381
 $—
 $—
 $8,381
 $8,381
          
December 31, 2018:         
Mortgage loans on real estate$11,835
 $—
 $—
 $11,494
 $11,494
FHLBNY Funding Agreements$4,002
 $—
 $3,956
 $—
 $3,956
Policy loans$3,779
 $—
 $—
 $4,183
 $4,183
Policyholders’ liabilities: Investment contracts$2,127
 $—
 $—
 $2,174
 $2,174
Short-term and long-term debt$4,955
 $—
 $4,749
 $—
 $4,749
Separate Accounts liabilities$7,406
 $—
 $—
 $7,406
 $7,406

As our COLI policies are recorded at their cash surrender value, they are not required to be included in the table above.
Fair values for commercial and agricultural mortgage loans on real estate are measured by discounting future contractual cash flows to be received on the mortgage loan using interest rates at which loans with similar characteristics and credit quality would be made. The discount rate is derived from takingbased on the appropriate U.S. Treasury rate with a like term to the remaining term of the loan and addingto which a spread reflective of the risk premium associated with the specific loan.loan is added. Fair values for mortgage loans anticipated to be foreclosed and problem mortgage loans are limited to the fair value of the underlying collateral, if lower.
Fair values for the Company’s long-term debt related to real estate joint ventures are determined by a third partythird-party appraisal and assessed for reasonableness. The Company’s short-term debt primarily includes commercial paper with short termshort-term maturities and bookcarrying value approximates fair value. The fair values offor the Company’s borrowing and lending arrangements with AXA affiliated entitiesother long-term debt are determined in the same manner as for such transactions with third parties, including matrixby Bloomberg’s evaluated pricing models for debt securities and discounted cash flow analysis for mortgage loans.service, which uses direct observations or observed comparables.
The fair value of policy loans is calculated by discounting expected cash flows based upon the U.S. treasury yield curve and historical loan repayment patterns.
FairThe fair values for FHLBNYof the Company's funding agreements are determined from a matrix pricing model and are internally assessed for reasonableness. The matrix pricing model for FHLBNYby discounted cash flow analysis based on the indicative funding agreements utilizes an independently sourced U.S. Treasury curve which is separately sourced fromagreement rates published by the Barclays’ suite of curves.


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

FHLB.
The fair values for the Company’s association plans contracts, supplementary contracts not involving life contingencies (“SCNILC”), deferred annuities and certain annuities, which are included in Policyholders’ account balances and liabilities for investment contracts with fund investments in Separate Accounts are estimated using projected cash flows discounted at rates reflecting current market rates. Significant unobservable inputs reflected in the cash flows include lapse rates and withdrawal rates. Incremental adjustments may be made to the fair value to reflect non-performance risk. Certain other products such as Access Accounts and Escrow Shield Plus product reserves are held at book value.


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

8)    REVENUE RECOGNITIONLEASES
See Note 2, Significant Accounting Policies, Revenue Recognition,Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for descriptionsthese leases on a straight-line basis over the lease term. For those leases with a term greater than one year, the Company recognizes on the balance sheet at the time of revenues presentedlease commencement or modification a right of use (“RoU”) operating lease asset and a lease liability, initially measured at the present value of the lease payments. Lease costs are recognized in the table belowincome statement over the lease term on a straight-line basis. RoU assets represent our right to use an underlying asset for the lease term and subjectlease liabilities represent our obligation to contractsmake lease payments arising from the lease.
The Company's lease population primarily consists of real estate leases for office space. The Company also has operating leases for various types of furniture and office equipment. For certain equipment leases, the Company applies a portfolio approach to effectively account for the operating lease RoU assets and liabilities. For certain lease agreements entered into or reassessed after the adoption of ASC 842, the Company elected to combine the lease and related non-lease components for its operating leases; however, the non-lease components associated with customers determinedthe Company’s operating leases are primarily variable in nature and as such are not included in the determination of the RoU asset and lease liability but are recognized in the period in which the obligation for those payments is incurred.
The Company’s operating leases may include options to extend or terminate the lease, which are not included in the determination of the RoU asset or lease liability unless they are reasonably certain to be in-scopeexercised. The Company's operating leases have remaining lease terms of one year to 12 years, some of which include options to extend the leases. The Company typically does not include its renewal options in its lease terms for calculating its RoU operating lease asset and lease liability as the renewal options allow the Company to maintain operational flexibility and the Company is not reasonably certain it will exercise these renewal options until close to the initial end date of the new guidance.lease. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.
As the Company's leases do not provide an implicit rate, we used an incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments.
The Company primarily subleases floor space within our New Jersey and New York lease properties to various third parties. The lease term for the subleases typically corresponds to the head lease term.
Balance Sheet Classification of Operating Lease Assets and Liabilities
 Balance Sheet Line Item June 30, 2019
   (in millions)
Assets   
Operating lease assetOther Assets $726
Liabilities   
Operating lease liabilityOther Liabilities $938
The table below presentssummarizes the revenues recognized duringcomponents of lease costs for the three and six months ended March 31, 2018 and 2017, disaggregated by category:June 30, 2019.
Lease Costs
 Three Months Ended March 31,
 2018 2017
 (in millions)
Investment management, advisory and service fees:   
Base fees$724
 $643
Performance-based fees6
 6
Research services114
 113
Distribution services180
 166
Other revenues:   
Shareholder services20
 18
Other6
 4
Total investment management and service fees$1,050
 $950
    
Other income$112
 $101
 Three Months Ended
June 30, 2019		 Six Months Ended
June 30, 2019
 (in millions)
Operating lease cost (1)$46
 $93
Variable operating lease cost$11
 $24
Sublease income$(18) $(37)
Short-term lease expense$1
 $2
_____________
(1)The Operating lease cost for the three months ended March 31, 2019 previously reported as $81 million, has been revised to $47 million to properly exclude impairments recognized prior to the adoption of ASC 842.


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

Maturities of lease liabilities as of June 30, 2019 are as follows:
Maturities of Lease Liabilities
 June 30, 2019
 (in millions)
Operating Leases: 
2019$110
2020204
2021190
2022172
2023157
Thereafter198
Total lease payments1,031
Less: Interest(93)
Present value of lease liabilities$938

As of June 30, 2019, AXA Equitable Life entered into one additional operating real estate lease that has not yet commenced with an estimated total base rent of approximately $11 million. This operating lease will commence in 2019 with a lease term of ten years. During October 2018, AB signed a lease, which commences in mid-2020, relating to 205,000 square feet of space at AB’s new Nashville headquarters. The estimated total base rent obligation (excluding taxes, operating expenses and utilities) over the 15-year initial lease term is $126 million. During April 2019, AB signed a lease, which commences in 2024, relating to approximately 190,000 square feet of space in New York City. The estimated total base rent obligation (excluding taxes, operating expenses and utilities) over the 20-year lease term is approximately $448 million.
The below table shows the weighted average operating lease term and discount rate for the Company and its subsidiaries. The averages presented are blended rates derived by weighting the calculated values from internal lease systems of our subsidiaries with the proportional value of their lease liabilities.
Weighted Average of Lease Term and Discount Rate
June 30, 2019
Weighted average remaining operating lease term6 years
Weighted average discount rate for operating leases3.32%
Supplemental cash flow information related to leases was as follows:
Lease Liabilities Information
 Six Months Ended
June 30, 2019
 (in millions)
Cash paid for amounts included in the measurement of lease liabilities: 
Operating cash flows from operating leases$113
Non-cash transactions: 
Leased assets obtained in exchange for new operating lease liabilities$11


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

The following table presents the Company’s future minimum lease obligation under ASC 840 as of December 31, 2018:
 December 31, 2018
Calendar Year(in millions)
2019$212
2020$186
2021$181
2022$166
2023$155
Thereafter$293
9)    EMPLOYEE BENEFIT PLANS
AXA Financial and AXA Equitable Life Plans
AXA Equitable Life sponsors the AXA Equitable 401(k) Plan, a qualified defined contribution plan for eligible employees and financial professionals. The plan provides for both a company contribution and a discretionary profit-sharing contribution. Expenses associated with this 401(k) Plan were $9 million and $7 million in the three months ended March 31, 2018 and 2017, respectively.
AXA FinancialHoldings sponsors the MONY Life Retirement Income Security Plan for Employees and AXA Equitable Life sponsors the AXA Equitable Retirement Plan (the “AXA Equitable Life QP”), both of which are frozen qualified defined benefit plans covering eligible employees and financial professionals. These pension plans are non-contributory and their benefits are generally based on a cash balance formula and/or,Holdings is primarily liable for certain participants, years of service and average


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earnings over a specified period in theboth plans. AXA Financial and AXA Equitable Life also sponsor certain nonqualified defined benefit plans.
On March 13, 2018, the Company signed a binding agreement with a third party insurer to purchase two single premium, non-participating group annuity contracts with the intent of settling certain retiree liabilitiesis secondarily liable for obligations under the MONY Life Retirement Income Security Plan for Employees and the AXA Equitable Life QP.  Payment of the preliminary contribution amounts for the group annuity contracts was funded from plan assets on March 20, 2018, securing the third party insurer’s irrevocable assumption of certain benefits obligations and commitment to issue the group annuity contracts.  The annuity purchase transaction and consequent transfer of approximately $254 million of the plans’ obligations to retirees or 10% of the aggregate pension benefit obligations resulted in a partial settlement of the plans. Following remeasurement of the plans’ assets and obligations on March 20, 2018, as required in the event of an accounting settlement, the Company recognized a pre-tax settlement loss of approximately $100 million, largely attributable to recognition of a pro-rata portion of the plans’ unamortized net actuarial losses accumulated in other comprehensive income.
AB
AB maintains the Profit Sharing Plan for Employees of AB, a tax-qualified retirement plan for U.S. employees. Employer contributions under this plan are discretionary and generally are limited to the amount deductible for Federal income tax purposes.
AB also maintains a qualified, non-contributory,noncontributory, defined benefit retirement plan covering current and former employees who were employed by AB in the United States prior to October 2, 2000 (the “AB Plan”).2000. Benefits under the AB Plan are based on years of credited service, and average final base salary. Servicesalary and compensation after December 31, 2008 are not taken into account in determining participants’ retirementprimary Social Security benefits.
In the three months ended March 31, 2018, a $5 million cash contribution was made by AB to the AB Plan. Based on the funded status of the AB plan at March 31, 2018, no minimum contribution is required to be made in 2018 under ERISA, as amended by the Pension Act, but management is currently evaluating if it will make contributions for the remainder of 2018.
Funding Policy
The Company’s funding policy for its qualified pension plans is to satisfy its funding obligations each year in an amount not less than the minimum required by the ERISA, as amended by the Pension Act, and not greater than the maximum it can deduct for Federal income tax purposes.


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Components of certain benefit costs for the Company were as follows:

Three Months Ended March 31,Three Months Ended June 30, Six Months Ended June 30,
2018 20172019 2018 2019 2018
(in millions)(in millions)
Net Periodic Pension Expense:   
(Qualified and Non-qualified Plans)   
Net Periodic Pension Expense (Qualified Plans):       
Service cost$2
 $3
$2
 $2
 $4
 $4
Interest cost25
 26
22
 22
 44
 43
Expected return on assets(45) (43)(39) (40) (77) (83)
Actuarial (gain) loss—
 1
 —
 1
Net amortization29
 32
20
 20
 40
 46
Partial settlement100
 —
—
 2
 —
 101
Total$111
 $18
$5
 $7
 $11
 $112
Net Postretirement Benefits Costs:   
Service cost$—
 $—
Interest cost4
 4
Net amortization2
 2
Total$6
 $6
Net Postemployment Benefits Costs:   
Service cost$1
 $1
Interest cost—
 —
Net amortization—
 —
Total$1
 $1
       

10)    SHARE-BASED COMPENSATION PROGRAMSINCOME TAXES
AXA and the Company sponsor various share-based compensation plans for eligible employees, financial professionals and non-officer directors of Holdings and its subsidiaries. AB also sponsors its own equity compensation plan for certain of its employees.
Compensation costsIncome tax expense for the three and six months ended March 31,June 30, 2019 and 2018 and 2017 for share-based payment arrangementswas computed using an estimated annual effective tax rate (“ETR”), with discrete items recognized in the period in which they occur. The estimated ETR is revised, as further described hereinnecessary, at the end of successive interim reporting periods. During the second quarter of 2019, the Company released a state income tax liability due to recently drafted regulations. The benefit recorded in the Company’s financial statements was $63 million.
11)    RELATED PARTY TRANSACTIONS
The Company’s significant transactions during the six months ended June 30, 2019 with related parties are as follows:summarized below.
 Three Months Ended
March 31,
 2018 2017
 (in thousands)
Performance Shares$55
 $5,710
Stock Options (Other than AB stock options)114
 19
Restricted Awards12,484
 7,693
Other compensation plans(1)
(904) 293
Total Compensation Expenses$11,749
 $13,715
Termination of Trademark License Agreement
(1)Other compensation plans include Restricted Stock and Stock Appreciation Rights.


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Performance Shares
Settlement of second trancheOn March 28, 2019, AXA terminated the Trademark License Agreement, dated May 4, 2018, between Holdings and AXA (the “Trademark License Agreement”). Accordingly, we expect to rebrand and cease use, pursuant to the Trademark License Agreement, of the 2014 Grant in 2018.“AXA” brand, name and logo within 18 months of March 28, 2019 (subject to such extensions as permitted under the Trademark License Agreement).
AXA Secondary Offering of Holdings Common Stock and Holdings Share Buyback
On March 26, 2018, share distributions totaling approximately $2125, 2019, AXA completed a follow-on secondary offering of 46 million were madeshares of common stock of Holdings and the sale to active and former employeesHoldings of in settlement30 million shares of 0.8 million Performance Shares earned under the termscommon stock of the AXA Performance Share Plan 2014. On April 6, 2018, cash distributions of approximately $6 million were made to active and former financial professionals in settlement of 0.2 million Performance Units earned under the terms of the AXA Advisor Performance Unit Plan 2014.
AB Long-term Incentive Compensation Plans. During the three months ended March 31, 2018 and 2017, respectively, AB purchased 0.1 million and 1.3 million units representing assignments of beneficial ownership of limited partnership interests in AB Holding (“AB Holding Units”) for $2 million and $31 million, respectively (on a trade date basis). There were no open-market purchases during the three months ended March 31, 2018. The three months ended March 31, 2017 amount reflects open-market purchases of 1.2 million AB Holding Units for $28 million, with the remainder relating to purchases of AB Holding Units from employees to allow them to fulfill statutory tax withholding requirements at the time of distribution of long-term incentive compensation awards.
During the three months ended March 31, 2018 and 2017, AB granted to employees and eligible Directors 1.1 million and 1.1 million restricted Holding awards, respectively. In the three months ended March 31, 2018 and 2017, AB used AB Holding Units repurchased during the period and newly issued AB Holding Units to fund the restricted AB Holding Unit awards.
During the three months ended March 31, 2018 and 2017, AB Holding issued 0.2 million and 0.3 million, respectively, upon exercise of options to buy AB Holding Units. AB Holding used the proceeds of $4 million and $5 million, respectively, received from employees as payment in cash for the exercise price to purchase the equivalent number of newly-issued AB Units.

Holdings.
11)    INCOME TAXES12)    EQUITY
Income tax expense for the three months endedDividends to Shareholders
On February 14, 2019 and May 23, 2019, Holdings’ Board of Directors declared a cash dividend on Holdings’ common stock of $0.13 and $0.15 per share, respectively, payable on March 31, 201815, 2019 and 2017 was computed using an estimated annual effective tax rate (“ETR”).June 11, 2019 to shareholders of record as of March 5, 2019 and June 3, 2019, respectively. On August 8, 2019, Holdings’ Board of Directors declared a cash dividend on Holdings’ common stock of $0.15 per share, payable on August 29, 2019 to shareholders of record as of August 22, 2019. The estimated ETR is revised, as necessary,payment of any future dividends will be at the enddiscretion of successive interim reporting periods.Holdings’ Board of Directors and will depend on various factors.
Share Repurchase
In January 2019, Holdings entered into an Accelerated Share Repurchase agreement (the “ASR”) with a third-party financial institution to repurchase an aggregate of $150 million of Holdings’ common stock. Pursuant to the ASR, Holdings made a prepayment of $150 million and received initial delivery of seven million shares. The Company adopted revised goodwill impairment guidance inASR terminated during the first quarter of 2017. Income tax expense for the three months ended March 31, 2017 includes2019, at which time an expense of $129additional one million related to the impairment of non-deductible goodwill.

12)    RELATED PARTY TRANSACTIONS
The Company participates in certain cost sharing and service agreements with AXA and other non-consolidated affiliates, including technology, professional development and investment management agreements. The costs related to the cost sharing and service agreements are allocated based on methods that management believes are reasonable, including a review of the nature of such costs and the activities performed to support each company. There have been no material changes in these service agreements from those disclosed in the 2017 annual financial statements.
In October 2012, AXA Financial issued a note denominated in Euros in the amount of €300 million or $391 million to AXA Belgium S.A. (“AXA Belgium”). This note hadshares were delivered, at an interest rate of Europe Interbank Offered Rate (“EURIBOR”) plus 1.15% and a maturity date of October 23, 2017. Concurrently, AXA Financial entered into a swap with AXA covering the exchange rate on both the interest and principal payments related to this note. The interest rate on the swap was 6-month LIBOR plus 1.475%. In October 2017, the note was extended to March 30, 2018. The extended note has a floating interest rate of 1-month EURIBOR plus 0.06% with a minimum rate of 0%. Concurrently, AXA Financial entered into a swap with AXA covering the exchange rate on both the interest and principal payments related to the extended note until March 30, 2018. Both the loan and the swap were repaid on March 29, 2018.
In 2017, Holdings repaid a $56 million 1.39% loan from AXA America Corporate Solutions, Inc. (“AXA CS”) originally made in 2015. In 2017, Holdings received a $100 million and $10 million loan from AXA CS. The loans had interest rates of 1.86% and 1.76%, respectively, and were repaid on their maturity date of February 5, 2018.
Holdings formerly held 78.99% of the shares of AXA CS, which holds certain AXA U.S. P&C business. AXA CS and its subsidiaries have been excluded from the historical Consolidated Financial Statements since they were operated independently from the other Holdings subsidiaries. In March 2018, the legal transfer of the AXA CS shares to AXA was executed for $630 million, and is presented as an increase to Total equity attributable to Holdings. To anticipate this transfer, in the fourth quarter of 2017, AXA made a short-term loan of $622 million, 3-month LIBOR plus 0.439%


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margin to Holdings (the “$622 Million Loan”). Holdings’ repayment obligation to AXA in respect of this loan was set off against AXA’s payment obligation to Holdings with respect to the transfer of AXA CS shares, and AXA paid Holdings the $8 million balance in cash.
In September 2007, AXA received a $700 million 5.40% Senior Unsecured Note from AXA Equitable. The note pays interest semi-annually and was scheduled to mature on September 30, 2012. In March 2011, the maturity date of the note was extended to December 30, 2020 and the interest rate was increased to 5.70%. In January 2018, AXA pre-paid $50 million of the $700 million note.
In December 2008, AXA received a $500 million term loan from AXA Financial. In December 2014, AXA repaid $300 million on this term loan to AXA Financial plus accrued interest. This term loan has an interest rate of 5.40% payable semi-annually with a maturity date of December 15, 2020. In January 2018, AXA pre-paid $150 million of the $500 million term loan.
In December 2013, Colisée Re issued a $145 million 4.75% Senior Unsecured Note to Holdings. The loan was scheduled to mature on December 19, 2028. This loan was repaid on March 26, 2018.
In March 2018, AXA Equitable Life sold its interest in two consolidated real estate joint ventures to AXA France for a totalaverage purchase price of approximately $143 million, which resulted$18.51 per share based on the volume-weighted average price of Holding’s common stock traded during the pricing period, less an agreed discount. Shares repurchased under the ASR were retired upon receipt resulting in a pre-tax lossreduction of $0.2Holding’s total issued shares as of June 30, 2019.
On February 27, 2019, Holdings’ Board of Directors authorized a $800 million share repurchase program. Under this authorization, Holdings, may, from time to time through December 31, 2019, purchase shares of its common stock through various means. Holdings may choose to suspend or discontinue the repurchase program at any time. The repurchase program does not obligate Holdings to purchase any particular number of shares.
On March 25, 2019, AXA completed a secondary offering of 46 million shares of common stock of Holdings and the reduction of $203 million of long-term debt on the Company’s balance sheet for the first quarter of 2018.
In March 2018, AXA contributed the 0.5% noncontrolling interest in AXA Financialsale to Holdings reflected as a $66of 30 million capital contribution, resulting in AXA Financial being 100% ownedshares of common stock of Holdings. Following the completion of the share buyback by Holdings.Holdings, Holdings had approximately $200 million remaining under its share repurchase program authorization.

13)    ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)Accumulated Other Comprehensive Income (Loss)
AOCI represents cumulative gains (losses) on items that are not reflected in Net income (loss). The balances as of March 31,June 30, 2019 and 2018 and 2017 follow:
March 31,June 30,
2018 20172019 2018
(in millions)(in millions)
Unrealized gains (losses) on investments(1)$(130) $244
$1,799
 $(486)
Foreign currency translation adjustments(40) (69)
Defined benefit pension plans(822) (1,030)(901) (821)
Foreign currency translation adjustments (1)(62) (41)
Total accumulated other comprehensive income (loss)(992) (855)836
 (1,348)
Less: Accumulated other comprehensive (income) loss attributable to noncontrolling interest46
 64
Less: Accumulated other comprehensive income (loss) attributable to noncontrolling interest(40) (38)
Accumulated other comprehensive income (loss) attributable to Holdings$(946) $(791)$876
 $(1,310)

______________


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(1)A reclassification of $8 million has been made to the June 30, 2018 previously reported balances to conform to the current period’s presentation.

The components of OCI, net of taxes for the three and six months ended March 31,June 30, 2019 and 2018 and 2017 follow:
 Three Months Ended June 30, Six Months Ended June 30,
 2019 2018 2019 2018
 (in millions)
Change in net unrealized gains (losses) on investments:       
Net unrealized gains (losses) arising during the period1,381
 (397) $2,723
 $(1,618)
(Gains) losses reclassified to Net income (loss) during the period (1)(4) 16
 5
 (72)
Net unrealized gains (losses) on investments1,377
 (381) 2,728
 (1,690)
Adjustments for policyholders’ liabilities, DAC, insurance liability loss recognition and other (2)(8) 32
 (525) 379
Change in unrealized gains (losses), net of adjustments (net of deferred income tax expense (benefit) of $362, $(94), $580 and $(349))1,369
 (349) 2,203
 (1,311)
Change in defined benefit plans:       
Reclassification to Net income (loss) of amortization of net prior service credit included in net periodic cost18
 1
 67
 134
Change in defined benefit plans (net of deferred income tax expense (benefit) of $(5), $(1), $17 and $34)18
 1
 67
 134
Foreign currency translation adjustments:       
Foreign currency translation gains (losses) arising during the period (2)1
 (8) —
 (11)
Foreign currency translation adjustment1
 (8) —
 (11)
Total other comprehensive income (loss), net of income taxes1,388
 (356) 2,270
 (1,188)
Less: Other comprehensive income (loss) attributable to noncontrolling interest(1) 8
 (2) 14
Other comprehensive income (loss) attributable to Holdings$1,389
 $(364) $2,272
 $(1,202)
 Three Months Ended March 31,
 2018 2017
 (in millions)
Foreign currency translation adjustments:   
Foreign currency translation gains (losses) arising during the period$(5) $8
(Gains) losses reclassified into net income (loss) during the period—
 —
Foreign currency translation adjustment(5) 8
Net unrealized gains (losses) on investments:   
Net unrealized gains (losses) arising during the period(86) 155
(Gains) losses reclassified into net income (loss) during the period(1)
(1,223) (23)
Net unrealized gains (losses) on investments(1,309) 132
Adjustments for policyholders’ liabilities, DAC, insurance liability loss recognition and other349
 (28)
Change in unrealized gains (losses), net of adjustments (net of deferred income tax expense (benefit) of $(255) and $56)(960) 104
Change in defined benefit plans:   
Less: reclassification adjustments to net income (loss) for:   
Amortization of net actuarial (gains) losses included in:   
Amortization of net prior service cost included in net periodic cost133
 25
Change in defined benefit plans (net of deferred income tax expense (benefit) of $35 and $12)133
 25
Total other comprehensive income (loss), net of income taxes(832) 137
Less: Other comprehensive (income) loss attributable to noncontrolling interest(6) (7)
Other comprehensive income (loss) attributable to Holdings$(838) $130
______________
(1)See “Reclassification adjustments” in Note 3. Reclassification amounts presented net of income tax expense (benefit) of $(325)$(1) million, $4 million, $1 million and $(13)$(19) million for the three and six months ended March 31,June 30, 2019 and 2018, respectively.
(2)A reclassification of $1 million and 2017, respectively.$3 million has been made to the previously reported amounts for the three and six months ended June 30, 2018 to conform to the current period’s presentation.

Investment gains and losses reclassified from AOCI to netNet income (loss) primarily consist of realized gains (losses) on sales and OTTI of AFS securities and are included in Total investment gains (losses), net on the consolidated statements of income (loss). Amounts reclassified from AOCI to netNet income (loss) as related to defined benefit plans primarily consist of amortizations of net (gains) losses and net prior service cost (credit) recognized as a component of net periodic cost and reported in Compensation and benefit expenses in the consolidated statements of income (loss). Amounts presented in the table above are net of tax.


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13) ��  REDEEMABLE NONCONTROLLING INTEREST
The changes in the components of redeemable noncontrolling interests were:
 Three Months Ended June 30, Six Months Ended June 30,
 2019 2018 2019 2018
 (in millions)
Balance, beginning of period$207
 $1,024
 $187
 $626
Net earnings (loss) attributable to redeemable noncontrolling interests7
 14
 19
 34
Purchase/change of redeemable noncontrolling interests43
 (892) 51
 (514)
Balance, end of period$257
 $146
 $257
 $146
14)    COMMITMENTS AND CONTINGENT LIABILITIES
Litigation
Litigation, regulatory and other loss contingencies arise in the ordinary course of the Company’s activities as a diversified financial services firm. The Company is a defendant in a number of litigation matters arising from the conduct of its business. In some of these matters, claimants seek to recover very large or indeterminate amounts, including compensatory, punitive, treble and exemplary damages. Modern pleading practice in the U.S. permits considerable


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variation in the assertion of monetary damages and other relief. Claimants are not always required to specify the monetary damages they seek, or they may be required only to state an amount sufficient to meet a court’s jurisdictional requirements. Moreover, some jurisdictions allow claimants to allege monetary damages that far exceed any reasonably possible verdict. The variability in pleading requirements and past experience demonstrates that the monetary and other relief that may be requested in a lawsuit or claim often bears little relevance to the merits or potential value of a claim. Litigation against the Company includes a variety of claims including, among other things, insurers’ sales practices, alleged agent misconduct, alleged failure to properly supervise agents, contract administration, product design, features and accompanying disclosure, cost of insurance increases, the use of captive reinsurers, payments of death benefits and the reporting and escheatment of unclaimed property, alleged breach of fiduciary duties, alleged mismanagement of client funds and other matters.
As with other financial services companies, the Company periodically receives informal and formal requests for information from various state and federal governmental agencies and self-regulatory organizations in connection with inquiries and investigations of the products and practices of the Company or the financial services industry. It is the practice of the Company to cooperate fully in these matters.
The outcome of a litigation or regulatory matter is difficult to predict, and the amount or range of potential losses associated with these or other loss contingencies requires significant management judgment. It is not possible to predict the ultimate outcome or to provide reasonably possible losses or ranges of losses for all pending regulatory matters, litigation and other loss contingencies. While it is possible that an adverse outcome in certain cases could have a material adverse effect upon the Company’s financial position, based on information currently known, management believes that neither the outcome of pending litigation and regulatory matters, nor potential liabilities associated with other loss contingencies, are likely to have such an effect. However, given the large and indeterminate amounts sought in certain litigation and the inherent unpredictability of all such matters, it is possible that an adverse outcome in certain of the Company’s litigation or regulatory matters, or liabilities arising from other loss contingencies, could, from time to time, have a material adverse effect upon the Company’s results of operations or cash flows in a particular quarterly or annual period.
For some matters where a loss is reasonably possible, the Company is able to estimate a possible range of loss. For such matters in which a loss is probable, an accrual has been made. For matters where the Company, however, believes a loss is reasonably possible, but not probable, no accrual is required. For matters for which an accrual has been made, but there remains a reasonably possible range of loss in excess of the amounts accrued or for matters where no accrual is required, the Company develops an estimate of the unaccrued amounts of the reasonably possible range of losses. As


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of June 30, 2019, the Company estimates the aggregate range of reasonably possible losses, in excess of any amounts accrued for these matters as of such date, to be up to approximately $90 million.$100 million.
For other matters, the Company is currently not able to estimate the reasonably possible loss or range of loss. The Company is often unable to estimate the possible loss or range of loss until developments in such matters have provided sufficient information to support an assessment of the range of possible loss, such as quantification of a damage demand from plaintiffs, discovery from plaintiffs and other parties, investigation of factual allegations, rulings by a court on motions or appeals, analysis by experts and the progress of settlement discussions. On a quarterly and annual basis, the Company reviews relevant information with respect to litigation and regulatory contingencies and updates the Company’s accruals, disclosures and reasonably possible losses or ranges of loss based on such reviews.
In July 2011, a derivative action was filed in the United States District Court for the District of New Jersey entitled Mary Ann Sivolella v. AXA Equitable Life Insurance Company and AXA Equitable Funds Management Group, LLC (“Sivolella Litigation”) and a substantially similar action was filed in January 2013 entitled Sanford et al. v. AXA Equitable FMG (“Sanford Litigation”). These lawsuits were filed on behalf of a total of twelve mutual funds and, among other things, seek recovery under (i) Section 36(b) of the Investment Company Act of 1940, as amended (the “Investment Company Act”), for alleged excessive fees paid to AXA Equitable Life and AXA Equitable FMG for investment management services and administrative services and (ii) a variety of other theories including unjust enrichment. The Sivolella Litigation and the Sanford Litigation were consolidated and a 25-day trial commenced in January 2016 and concluded in February 2016. In August 2016, the District Court issued its decision in favor of AXA Equitable Life and AXA Equitable FMG, finding that the plaintiffs had failed to meet their burden to demonstrate that


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AXA Equitable Life and AXA Equitable FMG breached their fiduciary duty in violation of Section 36(b) of the Investment Company Act or show any actual damages. In September 2016, the plaintiffs filed a motion to amend the District Court’s trial opinion and to amend or make new findings of fact and/or conclusions of law. In December 2016, the District Court issued an order denying the motion to amend and plaintiffs filed a notice to appeal the District Court’s decision to the U.S. Court of Appeals for the Third Circuit. We are vigorously defending this matter.
In April 2014, a lawsuit was filed in the United States District Court for the Southern District of New York, now entitled Ross v. AXA Equitable Life Insurance Company. The lawsuit is a putative class action on behalf of all persons and entities that, between 2011 and March 11, 2014, directly or indirectly, purchased, renewed or paid premiums on life insurance policies issued by AXA Equitable Life (the “Policies”). The complaint alleges that AXA Equitable Life did not disclose in its New York statutory annual statements or elsewhere that the collateral for certain reinsurance transactions with affiliated reinsurance companies was supported by parental guarantees, an omission that allegedly caused AXA Equitable Life to misrepresent its “financial condition” and “legal reserve system.” The lawsuit seeks recovery under Section 4226 of the New York Insurance Law of all premiums paid by the class for the Policies during the relevant period. In July 2015, the Court granted AXA Equitable Life’s motion to dismiss for lack of subject matter jurisdiction. In April 2015, a second action in the United States District Court for the Southern District of New York was filed on behalf of a putative class of variable annuity holders with “Guaranteed Benefits Insurance Riders,” entitled Calvin W. Yarbrough, on behalf of himself and all others similarly situated v. AXA Equitable Life Insurance Company. The new action covers the same class period, makes substantially the same allegations, and seeks the same relief as the Ross action. In October 2015, the Court, on its own, dismissed the Yarbrough litigation on similar grounds as the Ross litigation. In December 2015, the Second Circuit denied the plaintiffs motion to consolidate their appeals but ordered that the appeals be heard together before a single panel of judges. In February 2017, the Second Circuit affirmed the decisions of the district court in favor of AXA Equitable Life, and that decision is now final because the plaintiffs failed to file a further appeal.
In November 2014, a lawsuit was filed in the Superior Court of New Jersey, Camden County entitled Arlene Shuster, on behalf of herself and all others similarly situated v. AXA Equitable Life Insurance Company. This lawsuit is a putative class action on behalf of all AXA Equitable Life variable life insurance policyholders who allocated funds from their policy accounts to investments in AXA Equitable Life’s Separate Accounts, which were subsequently subjected to the volatility management strategy and who suffered injury as a result thereof. The action asserts that AXA Equitable Life breached its variable life insurance contracts by implementing the volatility management strategy. In February 2016, the Court dismissed the complaint. In March 2016, the plaintiff filed a notice of appeal. In April 2018, the Superior Court of New Jersey Appellate Division affirmed the trial court’s decision. In August 2015, anothera lawsuit was filed in Connecticut Superior Court, Judicial Division of New Haven entitled Richard T. O’Donnell, on behalf of himself and all others similarly situated v. AXA Equitable Life Insurance Company. This lawsuit is a putative class action on behalf of all persons who purchased variable annuities from AXA Equitable Life, which were subsequently subjected to the volatility management strategy and who suffered injury as a result thereof. Plaintiff asserts a claim for breach of contract alleging that AXA Equitable Life implemented the volatility management strategy in violation of applicable law. In November 2015, the Connecticut Federal District Court transferred this action to the United States District Court for the Southern District of New York. In March 2017, the Southern District of New York granted AXA Equitable Life’s motion to dismiss the complaint. In April 2017, the plaintiff filed a notice of appeal. In April 2018, the United States Court of Appeals for the Second Circuit reversed the trial court’s decision with instructions to remand the case to Connecticut state court. In September 2018, the Second Circuit issued its mandate, following AXA Equitable Life’s notification to the court that it would not file a petition for writ of certiorari.The case was transferred in December 2018 and is pending in Connecticut Superior Court, Judicial District of Stamford. We are vigorously defending these matters.this matter.
In February 2016, a lawsuit was filed in the United States District Court for the Southern District of New York entitled Brach Family Foundation, Inc. v. AXA Equitable Life Insurance Company. This lawsuit is a putative class action brought on behalf of all owners of universal life UL(“UL”) policies subject to AXA Equitable Life’s COI rate increase. In early 2016, AXA Equitable Life raised COI rates for certain UL policies issued between 2004 and 2007, which had both issue ages 70 and above and a current face value amount of $1 million and above. In March 2018, plaintiffA second putative class action was filed in Arizona in 2017 and consolidated with the Brach matter. The current consolidated amended its complaint to add two new plaintiffs, including the individual Malcolm Currie. The currentclass action complaint alleges the following claims: breach of contract; misrepresentations by AXA Equitable Life in violation of Section 4226 of the New York Insurance Law; violations of New York General Business Law Section 349; and violations of the California Unfair Competition Law, and the California Elder Abuse Statute. Plaintiffs seekseek: (a) compensatory damages, costs, and, pre- and post-judgment interest,interest; (b) with


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respect to their claim concerning Section 4226, a penalty in the amount of premiums paid by the plaintiffs and the putative class,class; and (c) injunctive relief and attorneys’ fees in connection with their statutory claims. Seven individualFive other federal actions challenging the COI rate increase are also pending against AXA Equitable Life in federal or state courts.and have been coordinated with the Brach action for the purposes of pre-trial activities. They contain allegations similar allegations asto those in the Brach action as well as additional allegations for violations of various states’ consumer protection statutes and common law fraud. Pursuant to an October 2017 order, the putative class action and the four individual federalTwo actions are consolidated for the purposes of coordinating pre-trial activities. We arealso pending against AXA Equitable Life in various stages of motion practice, and areNew York state court. AXA Equitable Life is vigorously defending each of these matters.
Restructuring
The restructuring costs and liabilities associated with the Company’s initiatives were as follows:
 Three Months Ended March 31, Twelve Months Ended December 31,
 2018 2017
 (in millions)
Severance   
Balance, beginning of year$23
 $22
Additions7
 17
Cash payments(3) (14)
Other reductions—
 (2)
Balance, end of Year$27
 $23
 Three Months Ended March 31, Twelve Months Ended December 31,
 2018 2017
 (in millions)
Leases   
Balance, beginning of year$165
 $170
Expense incurred—
 29
Deferred rent2
 10
Payments made(11) (48)
Interest accretion1
 4
Balance, end of year$157
 $165
Obligation under funding agreements
As a member of the FHLBNY, AXA Equitable Life has access to collateralized borrowings. It also may issue funding agreements to the FHLBNY. Both the collateralized borrowings and funding agreements would require AXA Equitable Life to pledge qualified mortgage-backed assets and/or government securities as collateral. AXA Equitable Life issues short-term funding agreements to the FHLBNY and uses the funds for asset, liability and cash management purposes. AXA Equitable Life issues long-term funding agreements to the FHLBNY and uses the funds for spread lending purposes. For other instruments used for asset liability management purposes see “Derivative and offsetting assets andNote 4. Funding agreements are reported in Policyholders’ account balances in the consolidated balance sheets.


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liabilities” includedChange in Note 3.FHLBNY Funding agreements are reported in Policyholders’ account balances inAgreements during the consolidated balance sheets.Six Months Ended June 30, 2019
 Outstanding balance at end of period Maturity of Outstanding balance Issued during the period Repaid during the period
March 31, 2018:(in millions)
Short-term FHLBNY funding agreements$500
 less than one month $1,500
 $1,500
Long-term FHLBNY funding agreements1,417
 less than 4 years —
 —
 204
 Less than 5 years —
 —
 879
 greater than five years —
 —
Total long-term funding agreements2,500
   —
 —
Total FHLBNY funding agreements at March 31, 2018$3,000
   $1,500
 $1,500
December 31, 2017:       
Short-term FHLBNY funding agreements$500
 Less than one month $6,000
 $6,000
Long-term FHLBNY funding agreements1,244
 Less than 4 years 324
 —
 377
 Less than 5 years 303
 —
 879
 Greater than five years 135
 —
Total long-term funding agreements2,500
   762
 —
Total FHLBNY funding agreements at December 31, 2017$3,000
   $6,762
 $6,000
 Outstanding Balance at December 31, 2018 Issued During the Period Repaid During the Period Long-term agreements maturing within one year Outstanding Balance at June 30, 2019
 (in millions)
Short-term funding agreements:         
Due in one year or less$1,640
 $5,940
 $5,940
 $58
 $1,698
Long-term funding agreements:         
Due in years two through five1,569
 —
 —
 (58) 1,511
Due in more than five years781
 —
 —
 —
 781
Total long-term funding agreements2,350
 —
 —
 (58) 2,292
Total funding agreements (1)$3,990
 $5,940
 $5,940
 $—
 $3,990
Letters of Credit______________
Holdings had $4,489 million of undrawn letters of credit issued in favor of third party beneficiaries, including $4,260 million at AXA Arizona RE relating to reinsurance assumed from AXA Equitable Life, USFL and MLOA at March 31, 2018.
(1)
The $11 million and $12 million difference between the funding agreements carrying values shown in Note 7 in the Carrying Values and Fair Values for Financial Instruments Not Otherwise Disclosed table at June 30, 2019 and December 31, 2018, respectively, reflects the remaining amortization of a hedge implemented and closed, which locked in the funding agreements’ borrowing rates.
Credit Facilities and Notes
All existing credit facilities at December 31, 2017 with AXA or guaranteed by AXA have been terminated prior to the IPO settlement. In February 2018, Holdings entered into the following credit facilities: (i)has a $3.9$2.5 billion two-year senior unsecured delayed draw term loan agreement; (ii) a $500 million three-year senior unsecured delayed draw term loan agreement; and (iii) a $2.5 billion five-year senior unsecured revolving credit facility with a syndicate of banks. The revolving credit facility has a sub-limit of $1.5 billion for letters of credit issued to support the Company’s life insurance business reinsured by EQ AZ Life Re and to support the third-party GMxB variable annuity business retroceded to CS Life RE. As of June 30, 2019,$125 millionand$600 million of undrawn letters of credit have been issued out of the $1.5 billion sub-limit for ACS Life and AXA Equitable Life, respectively, as beneficiaries.
In addition to the credit facilities, Holdings entered into letterletters of credit facilities with an aggregate principal amountissued under the $2.5 billion revolving credit facility, as of approximately $1.9June 30, 2019,$1.9 billion primarilyof undrawn letters of credit have been issued related to be used to support our life insurance business reinsured toreinsurance assumed by EQ AZ Life Re following the unwind of the reinsurance provided tofrom AXA Equitable Life, by AXA RE ArizonaUSFL and MLOA.
Contingent Funding Arrangements
In April 2019, pursuant to separate Purchase Agreements among Holdings, Credit Suisse Securities (USA) LLC, as representative of the several initial purchasers, and the Trusts (as defined below), Pine Street Trust I, a Delaware statutory trust (the “2029 Trust”), completed the issuance and sale of 600,000 of its Pre-Capitalized Trust Securities redeemable February 15, 2029 (the “2029 P-Caps”) for an aggregate purchase price of $600 million and Pine Street Trust II, a Delaware statutory trust (the “2049 Trust” and, together with the 2029 Trust, the “Trusts”), completed the issuance and sale of 400,000 of its Pre-Capitalized Trust Securities redeemable February 15, 2049 (the “2049 P-Caps” and, together with the 2029 P-Caps, the “P-Caps”) for an aggregate purchase price of $400 million, in each case to qualified institutional buyers in reliance on Rule 144A that are also “qualified purchasers” for purposes of Section 3(c)(7) of the Investment Company Act of 1940, as amended. The P-Caps are an off-balance sheet contingent funding arrangement that, upon Holdings’ election, gives Holdings the right over a ten-year period (in the case of the 2029 Trust) or over a thirty-year period (in the case of the 2049 Trust) to issue senior notes to the Trusts. The Trusts each invested the proceeds from the sale of their P-Caps in separate portfolios of principal and/or interest strips of U.S. Treasury securities. In return, Holdings will pay a semi-annual facility fee to the 2029 Trust and 2049 Trust calculated at a rate of 2.125% and 2.715% per annum, respectively, which will be applied to the unexercised portion of the contingent funding arrangement and Holdings will reimburse the Trusts for certain variable annuities with GMxB features (the “GMxB Unwind”). Asexpenses. The facility fees are recorded in Other operating costs and expenses in the Consolidated Statements of March 31, 2018, there were no outstanding balances on these credit facilities.Income (Loss).
Other Commitments
The Company had $812$974 million (including $262$320 million with affiliates) and $712$209 million of commitments under equity financing arrangements to certain limited partnership and existing mortgage loan agreements, respectively, at March 31, 2018.

June 30, 2019.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

15)    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, as they exist as of the initial filing date.
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 plansservices or products to beplans 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-channels - Institutional, Retail and Private Wealth Management-andManagement 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 operatingOperating earnings (loss) by segment enhances the understanding of the Company’s underlying drivers of profitability and trends in the Company’s segments.
In the first quarter of 2018,2019, the Company revisedupdated its Operating earnings definition as it relatesmeasure to exclude market value adjustments impacting the DAC amortization for its SCS variable annuity product in order to be consistent with the treatment of certain elementsthe market value adjustments on the SCS liability and with industry practice. The presentation of Operating earnings in prior periods was not revised to reflect this modification, however, the Company estimated that had the treatment in the Company’s Operating earnings measure of the profitabilityAmortization of its variable annuity products with indexed-linked features to align to the treatment of its variable annuity products with GMxB features. In addition, adjustmentsDAC for variable annuity products with index-linked features previously included within Other adjustmentsSCS been modified in the calculationfirst quarter of Non-GAAP2018, the pre-tax impact on Operating Earnings are now included withearnings of excluding the adjustments for variable annuity products with GMxB features inSCS-related DAC amortization from Operating earnings would have been a decrease of $52 million, $17 million and $4 million during the broader adjustment category, Variable annuity product features. In order to improvefirst, second and third quarters of 2018, respectively, and an increase of $17 million during the consistency and comparabilityfourth quarter 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. See Note 17 to the Notes to Consolidated Financial Statements for details of the revisions.2018.
Operating earnings is calculated by adjusting each segment’s Net income (loss) attributable to Holdings for the following items:


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Items related to Variablevariable 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 of our GMxB riders reflected within Variablevariable annuity products’ net derivative results;results and the impact of these items on DAC amortization;
Investment (gains) losses, which includes other-than-temporary impairments of securities, sales or disposals of securities/investments, realized capital gains/losses and valuation allowances;
Goodwill impairment, which includes a write-down of goodwill in first quarter of 2017.
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 one timethe one-time impact of the settlement of gains and losses;the defined benefit obligation;


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

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 permanent differences due to goodwill impairment andthe impact of the Tax Reform Act.
Revenues derived from any customer did not exceed 10% of revenues for the three and six months ended March 31, 2018June 30, 2019 and 2017.2018.
The table below presents operatingOperating earnings (loss) by segment and Corporate and Other and a reconciliation to Net income (loss) attributable to Holdings for the three and six months ended March 31,June 30, 2019 and 2018, and 2017, respectively:
 Three Months Ended June 30, Six Months Ended June 30,
 2019 2018 2019 2018
 (in millions)
Net income (loss) attributable to Holdings$363
 $164
 $(412) $378
Adjustments related to:       
Variable annuity product features (1)200
 249
 1,740
 425
Investment (gains) losses12
 22
 23
 (80)
Net actuarial (gains) losses related to pension and other postretirement benefit obligations24
 27
 48
 158
Other adjustments (2)89
 88
 129
 179
Income tax expense (benefit) related to above adjustments (3)(71) (75) (408) (130)
Non-recurring tax items(58) 11
 (52) 39
Non-GAAP Operating Earnings (4)$559
 $486
 $1,068
 $969
        
Operating earnings (loss) by segment:       
Individual Retirement (5)$359
 $405
 $729
 $773
Group Retirement$95
 $77
 $176
 $153
Investment Management and Research$80
 $97
 $157
 $178
Protection Solutions$106
 $(12) $155
 $23
Corporate and Other (6)$(81) $(81) $(149) $(158)
 Three Months Ended March 31,
 2018 2017
 (in millions)
Net income (loss) attributable to Holdings$168
 $(290)
Adjustments related to:   
Variable annuity product features212
 291
Investment (gains) losses(102) 24
Goodwill impairment—
 369
Net actuarial (gains) losses related to pension and other postretirement benefit obligations131
 34
Other adjustments90
 (21)
Income tax expense (benefit) related to above adjustments(63) (235)
Non-recurring tax items28
 132
Non-GAAP Operating Earnings$464
 $304
Operating earnings (loss) by segment:   
Individual Retirement$360
 $202
Group Retirement76
 59
Investment Management and Research81
 32
Protection Solutions23
 39
Corporate and Other(1)
(76) (28)


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

______________
(1)Includes interest expenseHad we modified the treatment of $44the amortization of DAC for SCS starting in the first quarter of 2018, the adjustment related to Variable annuity product features for the three and six months ended June 30, 2018 would have been $232 million and $31$356 million.
(2)Other adjustments include separation costs of $58 million, $33 million, $82 million and $94 million for the three and six months ended March 31,June 30, 2019 and 2018, and 2017, respectively.

(3)Had we modified the treatment of the amortization of DAC for SCS starting in the first quarter of 2018, the adjustment related to Income tax expense (benefit) related to above adjustments for the three and six months ended June 30, 2018 would have been $(71) million and $(115) million.
(4)Had we modified the treatment of the amortization of DAC for SCS starting in the first quarter of 2018, Non-GAAP Operating Earnings for the three and six months ended June 30, 2018 would have been $473 million and $915 million.
(5)Had we modified the treatment of the amortization of DAC for SCS starting in the first quarter of 2018, Operating earnings for the three and six months ended June 30, 2018 for the Individual Retirement segment would have been $392 million and $719 million.
(6)
Includes interest expense and financing fees of $59 million, $58 million, $111 million and $102 million for the three and six months ended June 30, 2019 and 2018, respectively.
Segment revenues areis 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;


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Investment gains (losses), net, 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.investment income (loss) from certain derivative instruments, excluding derivative instruments used to hedge risks associated with interest margins on interest-sensitive life and annuity contracts and freestanding and embedded derivatives associated with products with GMxB features.
The table below presents segment revenues for the three and six months ended March 31, 2018June 30, 2019 and 2017:2018:
 Three Months Ended March 31,
 2018 2017
 (in millions)
Segment revenues:   
Individual Retirement(1)
$729
 $1,019
Group Retirement(1)
238
 227
Investment Management and Research(2)
909
 743
Protection Solutions(1)
809
 789
Corporate and Other(1)
288
 340
Adjustments related to:   
Variable annuity product features(197) (287)
Investment gains (losses)102
 (24)
Other adjustments to segment revenues(43) 23
Total revenues$2,835
 $2,830
 Three Months Ended June 30, Six Months Ended June 30,
 2019 2018 2019 2018
 (in millions)
Segment revenues:       
Individual Retirement (1)$1,073
 $1,074
 $2,080
 $1,803
Group Retirement (1)267
 245
 518
 483
Investment Management and Research (2)848
 842
 1,628
 1,751
Protection Solutions (1)843
 790
 1,674
 1,604
Corporate and Other (1)300
 292
 612
 580
Adjustments related to:       
Variable annuity product features(161) (253) (1,639) (414)
Investment gains (losses), net(12) (22) (23)
80
Other adjustments to segment revenues2
 (2) 24
 (47)
Total revenues$3,160
 $2,966
 $4,874
 $5,840
______________
(1)Includes investment expenses charged by AB of approximately$21 million, $18 million, $39 million and $17$36 million for the three and six months ended March 31,June 30, 2019 and 2018 and 2017, respectively, for services provided to the Company.
(2)Inter-segment investment management and other fees of approximately$26 million, $25 million, $51 million and $24$50 million for the three and six months ended March 31,June 30, 2019 and 2018 and 2017, respectively, are included in total revenues of the Investment Management and Research segment.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

The table below presents Total assets by segment as of March 31, 2018June 30, 2019 and December 31, 2017:2018:
March 31,
2018		 December 31,
2017		June 30, 2019 December 31, 2018
(in millions)(in millions)
Total assets by segment:      
Individual Retirement$103,786
 $121,723
$118,952
 $105,532
Group Retirement43,615
 38,578
40,839
 38,874
Investment Management and Research11,809
 8,297
10,276
 10,294
Protection Solutions51,457
 43,116
44,232
 44,633
Corporate and Other21,627
 23,934
24,298
 21,464
Total assets$232,294
 $235,648
$238,597
 $220,797

16)    EARNINGS PER SHARE
Basic earnings per share (“EPS”) is calculated by dividing net income (loss) attributable to Holdings common shareholders by the weighted-average number of common shares outstanding during the period. Diluted EPS is calculated by dividing the net income (loss) attributable to Holdings common shareholders adjusted for the incremental dilution from AB by the weighted-average number of common shares used in the basic EPS calculation.
The following table presents the weighted average shares used in calculating basic and diluted earnings per common share:
 Three Months Ended March 31,
 2018 2017
 (in millions)
Weighted Average Shares:   
Weighted average common stock outstanding for basic and diluted earnings per common share561
 561
The following table presents the reconciliation of the numerator for the basic and diluted net income per share calculations:
 Three Months Ended March 31,
 2018 2017
 (in millions)
Net income (loss) attributable to Holdings common shareholders:   
Net income (loss) attributable to Holdings common shareholders (basic)$168
 $(290)
Less: Incremental dilution from AB(1)
—
 1
Net income (loss) attributable to Holdings common shareholders (diluted)$168
 $(291)
(1)The incremental dilution from AB represents the impact of AB’s dilutive units on the Company’s diluted earnings per share and is calculated based on the Company’s proportionate ownership interest in AB.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


The following table presents both basic and diluted income (loss) per share for each period presented:
 Three Months Ended March 31,
 2018 2017
 (dollars per share)
Net income (loss) attributable to Holdings per common share:   
Basic$0.30
 $(0.52)
Diluted$0.30
 $(0.52)

17)     REVISION OF PRIOR PERIOD FINANCIAL STATEMENTS
During the first quarter of 2018, management identified an error in its previously issued financial statements related to a misclassification between interest credited and net derivative gains/losses. The impact of this error to the consolidated financial statements for the six months ended June 30, 2017, nine months ended September 30, 2017 and the years ended December 31, 2017 and 2016 was not considered to be material. In order to improve the consistency and comparability of the financial statements, management revised the consolidated statements of income (loss) and statements of cash flows to include the revisions discussed herein.


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16)    EARNINGS PER SHARE
The following table presents the weighted average shares outstanding, basic earnings per common share and diluted earnings per common share:
 Three Months Ended June 30, Six Months Ended June 30,
 2019 2018 2019 2018
 (in millions)
Weighted average common shares outstanding:       
Weighted average common shares outstanding - basic491.1
 561.0
 504.5
 561.0
Effect of dilutive securities:       
Employee share awards (1)0.8
 0.1
 —
 0.1
Weighted average common shares outstanding - diluted (2)491.9
 561.1
 504.5
 561.1
        
Net income (loss):       
Net income (loss)$430
 $261
 $(279) $598
Less: Net income (loss) attributable to the noncontrolling interest67
 97
 133
 220
Net income (loss) attributable to Holdings common shareholders$363
 $164
 $(412) $378
        
Earnings per common share:       
Basic$0.74
 $0.29
 $(0.82) $0.67
Diluted$0.74
 $0.29
 $(0.82) $0.67
_____________
(1)Calculated using the treasury stock method.
(2)
Shares in the diluted EPS calculation represent basic shares for the six-month period ended June 30, 2019 due to the net loss in this period. The shares excluded from the calculation were 0.6 million shares.
For the three and six months ended June 30, 2019 and 2018, 4.2 million, 6.1 million, 3.7 million and 3.8 million shares of outstanding stock awards, respectively, were not included in the computation of diluted earnings per share because their effect was anti-dilutive.
17)REVISION OF PRIOR PERIOD FINANCIAL STATEMENTS
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. See Note 2 for further details of this reclassification.
Revisions 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.


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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 six months ended June 30, 2019 and 2018 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.
Revision of Consolidated Financial Statements as of and for the Six Months Ended June 30, 2018
The following tables present line items for prior periodof the consolidated financial statements as of June 30, 2018 and for the three and six months ended June 30, 2018 that have been affected by the revisions. This information has been corrected from the information previously presented in the Company’s June 30, 2018 Form 10-Q. For these items, the tables detail the amounts as previously reported and the impact upon those line items due to the reclassifications to conform to the current presentation, revisions and the amounts as currently revised withinrevised. Prior period amounts have been reclassified to conform to current period presentation, where applicable, and are summarized in the financial statements.accompanying tables.
Effects of the revision to the Company’s previously reported Consolidated Statements of Income (Loss) and Cash Flows for the six months ended June 30, 2017
  Six Months Ended
June 30, 2017
  As Previously Reported Impact of Revisions As Revised
 (in millions)
Consolidated Statement of Income (Loss):      
Revenues:      
Net derivative gains (losses) $528
 $(34) $494
Total revenues 6,746
 $(34) 6,712
Benefits and other deductions:      
Interest credited to policyholders’ account balances $522
 $(34) $488
Total benefits and other deductions 6,299
 $(34) 6,265
 Six Months Ended
June 30, 2017
 As Previously Reported Impact of Revisions As Revised
 (in millions)
Consolidated Statement of Cash Flows:     
Cash flow from operating activities:     
Interest credited to policyholders’ account balances$522
 $(34) $488
Net derivative (gains) loss(528) 34
 (494)
Net cash provided by (used in) operating activities666
 $—
 666
 As of June 30, 2018
 As Pre-viously
Reported		 Presentation Reclassifi-cations As Adjusted Impact of Revisions As Revised
 (in millions)
Consolidated Balance Sheet:         
Assets:         
Investments:         
DAC$6,346
 $—
 $6,346
 $(61) $6,285
Amounts due from reinsurers4,963
 —
 4,963
 (9) 4,954
Current and deferred tax assets47
 —
 47
 5
 52
Total Assets$231,012
 $—
 $231,012
 $(65) $230,947
  ��       
Liabilities:         
Future policy benefits and other policyholders’ liabilities$29,351
 $—
 $29,351
 (53) $29,298
Total Liabilities$216,003
 $—
 $216,003
 $(53) $215,950
Equity:         
Retained earnings$12,613
 $—
 $12,613
 $(12) $12,601
Total equity attributable to Holdings13,376
 —
 13,376
 (12) 13,364
Total Equity14,863
 —
 14,863
 (12) 14,851
Total Equity and Redeemable NCI15,009
 —
 15,009
 (12) 14,997
Total Liabilities, Redeemable Noncontrolling Interest and Equity$231,012
 $—
 $231,012
 $(65) $230,947



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(UNAUDITED)

Effects of the revision to the Company’s previously reported Consolidated Statements of Income (Loss) and Cash Flows for the nine months ended September 30, 2017
 Three Months Ended June 30, 2018
 As Pre-viously
Reported		 Presentation Reclassifi-cations As Adjusted Impact of Revisions As Revised
 (in millions)
Consolidated Statement of Income (Loss):         
Revenues:         
Policy charges and fee income$987
 $—
 $987
 $(23) $964
Net derivative gains (losses)(73) —
 (73) 27
 (46)
Total revenues2,962
 —
 2,962
 4
 2,966
Benefits and other deductions:         
Policyholders’ benefits920
 —
 920
 (20) 900
Amortization of deferred policy acquisition costs(1) 170
 169
 16
 185
Total benefits and other deductions2,648
 —
 2,648
 (4) 2,644
Income (loss) from continuing operations, before income taxes314
 —
 314
 8
 322
Income tax (expense) benefit(59) —
 (59) (2) (61)
Net income (loss)255
 —
 255
 6
 261
Net income (loss) attributable to Holdings$158
 $—
 $158
 $6
 $164
 Nine Months Ended
September 30, 2017		Six Months Ended June 30, 2018
 As Previously Reported Impact of Revisions As RevisedAs Pre-viously
Reported		 Presentation Reclassifi-cations As Adjusted Impact of Revisions As Revised
(in millions)(in millions)
Consolidated Statement of Income (Loss):               
Revenues:               
Policy charges and fee income$1,959
 $—
 $1,959
 $(29) $1,930
Net derivative gains (losses) $172
 $(44) $128
(354) —
 (354) 72
 (282)
Total revenues 9,529
 $(44) 9,485
5,797
 —

5,797

43

5,840
Benefits and other deductions:               
Interest credited to Policyholders’ account balances $787
 $(44) $743
Policyholders’ benefits1,528
 —
 1,528
 (34) 1,494
Amortization of deferred policy acquisition costs14
 332
 346
 11
 357
Total benefits and other deductions 9,070
 $(44) 9,026
5,113
 —
 5,113
 (23) 5,090
Income (loss) from continuing operations, before income taxes684
 —
 684
 66
 750
Income tax (expense) benefit(138) —
 (138) (14) (152)
Net income (loss)546
 —
 546
 52
 598
Net income (loss) attributable to Holdings$326
 $—
 $326
 $52
 $378
 Nine Months Ended
September 30, 2017
 As Previously Reported Impact of Revisions As Revised
 (in millions)
Consolidated Statement of Cash Flows:     
Cash flow from operating activities:     
Interest credited to policyholders’ account balances$787
 $(44) $743
Net derivative (gains) loss(172) 44
 (128)
Net cash provided by (used in) operating activities1,044
 $—
 1,044



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

 Three Months Ended June 30, 2018
 As Pre-viously
Reported		 Presentation Reclassifi-cations As Adjusted Impact of Revisions As Revised
 (in millions)
          
Comprehensive Income (Loss):         
Net income (loss)$255
 $—
 $255
 $6
 $261
Other Comprehensive income (loss) net of income taxes:         
Foreign currency translation adjustment(9) —
 (9) 1
 (8)
Change in unrealized gains (losses), net of reclassification adjustment(348) —
 (348) (1) (349)
Comprehensive income (loss)(101) —
 (101) 6
 (95)
Comprehensive income (loss) attributable to Holdings$(206) $—
 $(206) $6
 $(200)
 Six Months Ended June 30, 2018
 As Pre-viously
Reported		 Presentation Reclassifi-cations As Adjusted Impact of Revisions As Revised
 (in millions)
          
Comprehensive Income (Loss):         
Net income (loss)$546
 $—
 $546
 $52
 $598
Other Comprehensive income (loss), net of taxes:         
Foreign currency translation adjustment(14) —
 (14) 3
 (11)
Change in unrealized gains (losses), net of reclassification adjustment(1,308) —
 (1,308) (3) (1,311)
Comprehensive income (loss)(642) —
 (642) 52
 (590)
Comprehensive income (loss) attributable to Holdings$(876) $—
 $(876) $52
 $(824)
 Three Months Ended June 30, 2018
 As Pre-viously
Reported		 Presentation Reclassifi-cations As Adjusted Impact of Revisions As Revised
 (in millions)
Consolidated Statement of Equity:         
Net income (loss) attributable to Holdings$158
 $—
 $158
 $6
 $164
Retained earnings, end of period$12,595
 $—
 $12,595
 $6
 $12,601
Total Holdings’ equity, end of period$13,358
 $—
 $13,358
 $6
 $13,364
Total Equity, End of Period$14,845
 $—
 $14,845
 $6
 $14,851



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

 Six Months Ended June 30, 2018
 As Pre-viously
Reported		 Presentation Reclassifi-cations As Adjusted Impact of Revisions As Revised
 (in millions)
Consolidated Statement of Equity:         
Retained earnings, beginning of year$12,289
 $—
 $12,289
 $(64) $12,225
Net income (loss) attributable to Holdings326
 —
 326
 52
 378
Retained earnings, end of period$12,613
 $—
 $12,613
 $(12) $12,601
Total Holdings’ equity, end of period$13,376
 $—
 $13,376
 $(12) $13,364
Total Equity, End of Period$14,863
 $—
 $14,863
 $(12) $14,851



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

Effects of the revision to the Company’s previously reported Consolidated Statements of Income (Loss), and Cash Flows for the year ended December 31, 2017
 December 31, 2017
 As Previously Reported Impact of Revisions As Revised
 (in millions)
Consolidated Statement of Income (Loss):  
Revenues:     
Net derivative gains (losses)$228
 $(113) $115
Total revenues12,514
 $(113) 12,401
Benefits and other deductions:     
Interest credited to Policyholder’s account balances1,108
 $(113) 995
Total benefits and other deductions11,200
 $(113) 11,087
 December 31, 2017
 As Previously Reported Impact of Revisions As Revised
 (in millions)
Consolidated Statement of Cash Flows:     
Cash flow from operating activities:     
Interest credited to policyholders’ account balances$1,108
 $(113) $995
Net derivative (gains) loss(228) 113
 (115)
Net cash provided by (used in) operating activities1,021
 $—
 1,021
 Six Months Ended June 30, 2018
 As Pre-viously
Reported		 Presentation Reclassifi-cations As Adjusted Impact of Revisions As Revised
 (in millions)
Consolidated Statements of Cash Flows:         
Cash flow from operating activities:         
Net income (loss)$546
 $—
 $546
 $52
 $598
Adjustments to reconcile Net income (loss) to Net cash provided by (used in) operating activities:         
Policy charges and fee income(1,959) —
 (1,959) 29
 (1,930)
Net derivative (gains) losses354
 —
 354
 (72) 282
Amortization of deferred sales commission13
 (13) —
 —
 —
Amortization and depreciation(32) 369
 337
 11
 348
Amortization of deferred cost of reinsurance asset10
 (10) —
 —
 —
Distributions from joint ventures and limited partnerships44
 (44) —
 —
 —
Equity (income) loss from limited partnerships—
 (59) (59) —
 (59)
Changes in:  

   

  
Reinsurance recoverable20
 —
 20
 9
 29
Capitalization of deferred policy acquisition costs14
 (346) (332) —
 (332)
Future policy benefits(171) —
 (171) (15) (186)
Current and deferred income taxes224
 —
 224
 (42) 182
Other, net(180) 103
 (77) —
 (77)
Net cash provided by (used in) operating activities$(314) $—
 $(314) $(28) $(342)
Cash flows from investing activities:  

   

  
Proceeds from the sale/maturity/prepayment of:  

   

  
Short-term investments$—
 $2,756
 $2,756
 $—
 $2,756
Payment for the purchase/origination of:         
Short-term investments—
 (1,586) (1,586) —
 (1,586)
Cash settlements related to derivative instruments(333) —
 (333) (637) (970)
Change in short-term investments1,170
 (1,170) —
 —
 —
Other, net419
 —
 419
 61
 480
Net cash provided by (used in) investing activities$1,807
 $—
 $1,807
 $(576) $1,231
Cash flows from financing activities:  

   

  
Policyholders’ account balances:  

   

  
Deposits$5,567
 $—
 $5,567
 $(1,141) $4,426
Withdrawals(2,750) —
 (2,750) 572
 (2,178)
Transfers (to) from Separate Accounts(307) —
 (307) 1,173
 866
Net cash provided by (used in) financing activities$532
 $—
 $532
 $604
 $1,136

Effects of the revision to the Company’s previously reported Consolidated Statements of Income (Loss), and Cash Flows for the year ended December 31, 2016
 December 31, 2016
 As Previously Reported Impact of Revisions As Revised
 (in millions)
Consolidated Statement of Income (Loss):  
Revenues:     
Net derivative gains (losses)$(1,722) $(121)—
$(1,843)
Total revenues11,922
 $(121) 11,801
Benefits and other deductions:     
Interest credited to Policyholder’s account balances1,091
 $(121) 970
Total benefits and other deductions9,868
 $(121) 9,747


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

 December 31, 2016
 As Previously Reported Impact of Revisions As Revised
 (in millions)
Consolidated Statement of Cash Flows:     
Cash flow from operating activities:     
Interest credited to policyholders’ account balances$1,091
 $(121) $970
Net derivative (gains) loss1,722
 121
 1,843
Net cash provided by (used in) operating activities(236) $—
 (236)

18)    SUBSEQUENT EVENTS
In April 2018, Holdings entered into letter agreementsconnection with AXA’s secondary offering in June 2019, the lenders under eachunderwriters exercised their option to purchase six million additional shares, reducing AXA’s ownership to approximately 39% as of its credit facilities and letter of credit facilities, and AXA Equitable Life entered into waiver letter agreements with certain of its derivative counterparties, waiving defaults caused by the restatement of certain financial statements.  Holdings and AXA Equitable Life each restated their annual financial statements for the year ended December 31, 2016 and Holdings restated its interim financial statements for the nine months ended September 30, 2017 and the six months ended June 30, 2017.  All required waivers were received and we do not consider this to have a material impact on our business, results of operations or financial condition.
In April 2018, Colisee Re S.A.’s promise to the Delaware Department of Insurance to maintain the minimum RBC level for AXA Corporate Solutions Life Reinsurance Company at the company action level was terminated and replaced with a similar guarantee from Holdings.
As a result of the completion of the GMxB Unwind on April 12, 2018, we were released from regulatory letter of credit requirements, and accordingly no longer benefit from the $1.5 billion revolving credit facility with AXA.July 8, 2019.
On April 20, 2018, Holdings:
issued $800 million aggregate principal amountAugust 8, 2019, Holdings’ Board of 3.900% Senior Notes due 2023, $1.5 billion aggregate principal amount of 4.350% Senior Notes due 2028 and $1.5 billion aggregate principal amount of 5.000% Senior Notes due 2048 (together, the “Notes”);
deliveredDirectors declared a termination notice, effective April 23, 2018, for its $3.9 billion two-year senior unsecured delayed draw term loan agreement; and
settled certain loans issued to or received from AXA and its affiliates resulting in a net payment to AXA and its affiliates of $2,530 million in principal and $11 million of accrued interest.
On April 20, 2018, AXA pre-paid the remaining $650 million of a $700 million note and $50 million of a $500 million term loan and related accrued interest from the Company.
On April 23, 2018, Holdings used a portion of the net proceeds from the sale of the Notes, together with available cash to (i) purchase 100% of the shares of AXA IM Holdings US and (ii) purchase the AB Units held by Coliseum Re. The Company’s $185 million loan to AXA IM Holding US was settled as part of the purchase of AXA IM Holding US, which wholly owns AB units. The remaining net proceeds, together with the $300 million of borrowings drawndividend on May 4th, 2018 under our three-year term loan agreement, was used to fully repay the outstanding commercial paper program of AXA Financial currently guaranteed by AXA. By the time of the IPO, all the credit facilities Holdings and its subsidiaries previously had with AXA or guaranteed by AXA were terminated.
On April 24, 2018, a 459.4752645-for-1 stock split of theHoldings’ common stock of Holdings was effected. All applicable share data,$0.15 per share, amounts and related information inpayable on August 29, 2019, to shareholders of record as of August 22, 2019. The payment of any future dividends will be at the consolidated financial statements and notes thereto have been adjusted retroactively to give effect to the stock split.
On April 25, 2018, Holdings adopted the AXA Equitable Holdings, Inc. Short-Term Incentive Compensation Plan (the “STIC Plan”). Although the STIC Plan is not a share-based compensation plan, awards payable under the STIC Plan may be paid in cash or in awards granted under the AXA Equitable Holdings, Inc. 2018 Omnibus Incentive Plan (the “Omnibus Plan”), a share-based compensation plan. The Omnibus Plan was adopted by Holdings on May 8, 2018.
On May 2, 2018, AB announced that it will establish its corporate headquarters in, and relocate approximately 1,050 jobs currently located in the New York metro area to, Nashville, TN. AB’s Nashville headquarters will house Finance, IT, Operations, Legal, Compliance, Internal Audit, Human Capital, and Sales and Marketing. AB will begin relocating jobs during 2018 and expects this transition to take several years. AB will continue to maintain a principal location in New York City, which will house its Portfolio Management, Sell-Side Research and Trading, and New York-based Private Wealth Management businesses.
On May 4, 2018, Holdings borrowed $300 million under the $500 million three-year senior unsecured delayed draw term loan agreement. On May 9, 2018, Holdings amended and restated its Certificatediscretion of Incorporation under which theHoldings’ Board of Directors have the authority, without further action by stockholders, to issue up to 200,000,000 shares of preferred stock, par value $1.00 per share, in one or more series.
On May 14, 2018, Holdings completed an initial public offering in which AXA sold 157,837,500 shares of Holdings’ common stock to the public. Following the initial public offering, AXA owned 423,750,000 shares of Holdings’ common stock.
As of June 12th, there are no longer any amounts outstanding under AXA Financial’s commercial paper program and AXA will no longer provide any related guarantees.


depend on various factors.


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Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations
AXA Equitable Holdings, Inc. (“Holdings” and, collectively with its consolidated subsidiaries, the “Company”) is a diversified financial services company. Through March 31, 2018, Holdings was a wholly-owned subsidiary of AXA S.A. (“AXA”), a French holding company for the AXA Group, a worldwide leader in life, property and casualty and health insurance and asset management. As used herein, “AXA Equitable Life” refers to AXA Equitable Life Insurance Company, a New York stock life insurance corporation, “AXA Financial” refers to AXA Financial, Inc., an intermediate holding company incorporated in Delaware, “MLOA” refers to MONY Life Insurance Company of America, an Arizona life insurance corporation, “AXA Advisors” refers to AXA Advisors, LLC, a Delaware limited liability company, and “AXA RE Arizona” refers to AXA RE Arizona Company, an Arizona corporation, and “EQ AZ Life Re” refers to EQ AZ Life Re Company, a newly formed captive insurance company organized under the laws of Arizona.
In May 2017, AXA announced its intention to pursue the sale of a minority stake in Holdings through an initial public offering (the “IPO”). On May 14, 2018, Holdings completed the IPO in which AXA sold 157,837,500 shares of Holdings common stock to the public. Following the IPO, AXA owns approximately 71.9% of the outstanding common stock of Holdings.
Management’sThe following discussion and analysis of our financial condition and results of operations for the Company that follows should be read in its entirety and in conjunction with the consolidated financial statements and the related Notes to Consolidated Financial Statements included elsewhere herein, with the information provided under “Forward-looking Statements” included elsewhere herein and thenotes contained in Part I, Item 1 of this Quarterly Report on Form 10-Q, as well as “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section contained in our Annual Report on Form 10-K for the year ended December 31, 2018 (“2018 Form 10-K”).
In addition to historical data, this discussion contains forward-looking statements about our business, operations and “Risk Factors” sections includedfinancial performance based on current expectations that involve risks, uncertainties and assumptions. Actual results may differ materially from those discussed in Holdings’ prospectus dated May 9, 2018,the forward-looking statements as a result of various factors. See the Note Regarding Forward-Looking Statements and Information. Investors are directed to consider the risks and uncertainties discussed in Part II, Item 1A of this Quarterly Report on Form 10-Q, as well as in other documents we have filed with the U.S. Securities and Exchange Commission pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended, on May 11, 2018 (the “Prospectus”(“SEC”).
Executive Summary
Overview
We are one of America’s leading financial services companies, providingproviding: (i) advice and solutions for helping Americans set and meet their retirement goals and protect and transfer their wealth across generationsgenerations; and (ii) a wide range of investment management insights, expertise and innovations to drive better investment decisions and outcomes for clients worldwide.
We manage our business through four segments: Individual Retirement, Group Retirement, Investment Management and Research, and Protection Solutions. We report certain activities and items that are not included in these segments in Corporate and Other. See Note 15 of the Notes to the Consolidated Financial Statements for further information on the Company’sour segments.
We benefit from our complementary mix of businesses. This business mix provides diversity in our earnings sources, which helps offset fluctuations in market conditions and variability in business results, while offering growth opportunities.
Revenues
Our revenues come from three principal sources:
fee income derived from our retirement and protection products and our investment management and research services;
premiums from our traditional life insurance and annuity products; and
investment income from our General Account investment assets (“GAIA”).portfolio.
Our fee income varies directly in relation to the amount of the underlying account valueAV or benefit base of our retirement and protection products and the amount of AUM of our Investment Management and Research business. AV and AUM, each as defined in “—Key Operating Measures,” are influenced by changes in economic conditions, primarily equity market returns, as well as net flows. Our premium income is driven by the growth in new policies written and the persistency of our in-force policies, both of which are influenced by a combination of factors, including our efforts to attract and retain customers and market conditions that influence demand for our products. Our investment income is driven by the yield on our General Account investment portfolio of


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GAIA and is impacted by the prevailing level of interest rates as we reinvest cash associated with maturing investments and net flows to the portfolio.
Benefits and Other Deductions
Our primary expenses are:
policyholders’ benefits and interest credited to policyholders’ account balances;
sales commissions and compensation paid to intermediaries and advisors that distribute our products and services; and
compensation and benefits provided to our employees and other operating expenses.
Policyholders’ benefits are driven primarily by mortality, customer withdrawals, and benefits which change in response to changes in capital market conditions. In addition, some of our policyholders’ benefits are directly tied to the AV and benefit base of our variable annuity products. Interest credited to policyholders varies in relation to the amount of the underlying AV or benefit base. Sales commissions and compensation paid to intermediaries and advisors vary in relation to premium and fee


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income generated from these sources, whereas compensation and benefits to our employees are more constant and decline with increases in efficiency. Our ability to manage these expenses across various economic cycles and products is critical to the profitability of our company.
Net Income Volatility
We have offered and continue to offer variable annuity products with variable annuity guaranteed benefits (“GMxB”) features. The future claims exposure on these features is sensitive to movements in the equity markets and interest rates. Accordingly, we have implemented hedging and reinsurance programs designed to mitigate the economic exposure to us from these features due to equity market and interest rate movements. Changes in the values of the derivatives associated with these programs due to equity market and interest rate movements are recognized in the periods in which they occur while corresponding changes in offsetting liabilities are recognized over time. This results in net income volatility as further described below. See “—Significant Factors Impacting Our Results—Impact of Hedging and GMIB Reinsurance on Results.”
In addition to our dynamic hedging strategy, we have recently implemented static hedge positions designed to mitigate the adverse impact of changing market conditions on our statutory capital. We believe this program will continue to preserve the economic value of our variable annuity contracts and better protect our target variable annuity asset level. However, these new static hedge positions increase the size of our derivative positions and may result in higher net income volatility on a period-over-period basis.
Due to the impacts on our net income of equity market and interest rate movements and other items that are not part of the underlying profitability drivers of our business, we evaluate and manage our business performance using Non-GAAP Operating Earnings, a non-GAAP financial measure that is intended to remove these impacts from our results. See “—Key Operating Measures—Non-GAAP Operating Earnings.”
Significant Factors Impacting Our Results
The following significant factors have impacted, and may in the future impact, our financial condition, results of operations or cash flows.
Impact of Hedging and GMIB Reinsurance on Results
We have offered and continue to offer variable annuity products with GMxB features. The future claims exposure on these features is sensitive to movements in the equity markets and interest rates. Accordingly, we have implemented hedging and reinsurance programs designed to mitigate the economic exposure to us from these features due to equity market and interest rate movements. These programs include:


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Variable annuity hedging programs. We use a dynamic hedging program (within this program, generally, we reevaluate our economic exposure at least daily and rebalance our hedge positions accordingly) to mitigate certain risks associated with the GMxB features that are embedded in our liabilities for our variable annuity products. This program utilizes various derivative instruments that are managed in an effort to reduce the economic impact of unfavorable changes in GMxB features’ exposures attributable to movements in the equity markets and interest rates. Although this program is designed to provide a measure of economic protection against the impact of adverse market conditions, it does not qualify for hedge accounting treatment. Accordingly, changes in value of the derivatives will be recognized in the period in which they occur with offsetting changes in reserves partially recognized in the current period, resulting in net income volatility. In addition to our dynamic hedging program, in the fourth quarter of 2017 and the first quarter of 2018, we implementedhave a new hedging program using static hedge positions (derivative positions intended to be held to maturity with less frequent rebalancing)re-balancing) to protect our statutory capital against stress scenarios. The implementation of this newThis program in addition to our dynamic hedge program is expected to increasehas increased the size of our derivative positions, resulting in an increase in net income volatility. The impacts are most pronounced for variable annuity products in our Individual Retirement segment.
GMIB reinsurance contracts. Historically, GMIB reinsurance contracts were used to cede to affiliated and non-affiliated reinsurers a portion of our exposure to variable annuity products that offer a GMIB feature. We account for the GMIB reinsurance contracts as derivatives and report them at fair value. Gross reserves for GMIB reserves are calculated on the basis of assumptions related to projected benefits and related contract charges over the lives of the contracts. Accordingly, our gross reserves will not immediately reflect the offsetting impact on future claims exposure resulting from the same capital market or interest rate fluctuations that cause gains or losses on the fair value of the GMIB reinsurance contracts. Because changes in the fair value of the GMIB reinsurance contracts are recorded in the period in which they occur and a majority of the changes in gross reserves for GMIB are recognized over time, net income will be more volatile.


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Effect of Assumption Updates on Operating Results
Most of the variable annuity products, variable universal life insurance and universal life insurance products we offer maintain policyholder deposits that are reported as liabilities and classified within either Separate AccountAccounts liabilities or policyholder account balances. Our products and riders also impact liabilities for future policyholder benefits and unearned revenues and assets for DAC and deferred sales inducements.inducements (“DSI”). The valuation of these assets and liabilities (other than deposits) are based on differing accounting methods depending on the product, each of which requires numerous assumptions and considerable judgment. The accounting guidance applied in the valuation of these assets and liabilities includes, but is not limited to, the following: (i) traditional life insurance products for which assumptions are locked in at inception; (ii) universal life insurance and variable life insurance secondary guarantees for which benefit liabilities are determined by estimating the expected value of death benefits payable when the account balance is projected to be zero and recognizing those benefits ratably over the accumulation period based on total expected assessments; (iii) certain product guarantees for which benefit liabilities are accrued over the life of the contract in proportion to actual and future expected policy assessments; and (iv) certain product guarantees reported as embedded derivatives at fair value.
Our actuaries oversee the valuation of these product liabilities and assets and review underlying inputs and assumptions. We comprehensively review the actuarial assumptions underlying these valuations at least annually and update assumptions when appropriate.during the third quarter of each year. Assumptions are based on a combination of company experience, industry experience, management actions and expert judgment and reflect our best estimate as of the date of each financial statement. Changes in assumptions can result in a significant change to the carrying value of product liabilities and assets and, consequently, the impact could be material to earnings in the period of the change. For further details of our accounting policies and related judgments pertaining to assumption updates, see Note 2 of Notes to Consolidated Financial Statements.
Macroeconomic and Industry Trends
Our business and consolidated results of operations are significantly affected by economic conditions and consumer confidence, conditions in the global capital markets and the interest rate environment.


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Financial and Economic Conditions and Consumer ConfidenceEnvironment
A wide variety of factors continue to impact global financial and economic conditions and consumer confidence.conditions. These factors include, among others, concerns over economic growth in the United States, continued low interest rates, falling unemployment rates, the U.S. Federal Reserve’s potential plans to further raiselower short-term interest rates, fluctuations in the strength of the U.S. dollar, the uncertainty created by what actions the current administration may pursue, concerns over global trade wars, changes in tax policy, global economic factors including programs by the European Central Bank and the United Kingdom’s vote to exit from the European Union and other geopolitical issues. Additionally, many of the products and solutions we sell are tax-advantaged or tax-deferred. If U.S. tax laws were to change, such that our products and solutions are no longer tax-advantaged or tax-deferred, demand for our products could materially decrease.
Capital Market Conditions
Although extraordinary monetary accommodation has mitigatedStressed conditions, volatility and disruptions in interest ratethe capital markets, particular markets, or financial asset classes can have an adverse effect on us, in part because we have a large investment portfolio and creditour insurance liabilities and domestic equity markets for an extended period, global central banks may now be past peak accommodation as the U.S. Federal Reserve continues its gradual pace of policy normalization. As global monetary policy becomes less accommodating, anderivatives are sensitive to changing market factors. An increase in market volatility could affect our business, including through effects on the yields we earn on invested assets, changes in required reserves and capital and fluctuations in the value of our AUM, AV or AUA. These effects could be exacerbated by uncertainty about future fiscal policy, changes in tax policy, the scope of potential deregulation and levels of global trade.
In the short- to medium-term, the potential for increased volatility, coupled with prevailing interest rates remaining below historical averages, could pressure sales and reduce demand for our products as consumers consider purchasing alternative products to meet their objectives. In addition, this environment could make it difficult to consistently develop products that are attractive to customers. Financial performance can be adversely affected by market volatility and equity market declines as fees driven by AV and AUM fluctuate, hedging costs increase and revenues decline due to reduced sales and increased outflows.
We monitor the behavior of our customers and other factors, including mortality rates, morbidity rates, annuitization rates and lapse and surrender rates, which change in response to changes in capital market conditions, to ensure that our products and solutions remain attractive and profitable. For additional information on our sensitivity to interest rates and capital market prices, See “Quantitative and Qualitative Disclosures About Market Risk.”
Interest Rate Environment
We believe the interest rate environment will continue to impact our business and financial performance in the future for several reasons, including the following:
Our GAIA portfolio consists predominantly

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Table of fixed income investments. In the near term, and absent further material change in yields available on investments, we expect the yield we earn on new investments will be lower than the yields we earn on maturing investments, which were generally purchased in environments where interest rates were higher than current levels. If interest rates were to rise, we expect the yield on our new money investments would also rise and gradually converge toward the yield of those maturing assets.Contents

Certain of our variable annuity and life insurance products pay guaranteed minimum interest crediting rates. We are required to pay these guaranteed minimum rates even if earnings on our investment portfolio decline, with the resulting investment margin compression negatively impacting earnings. In addition, we expect more policyholders to hold policies with comparatively high guaranteed rates longer (lower lapse rates) in a low interest rate environment. Conversely, a rise in average yield on our investment portfolio should positively impact earnings. Similarly, we expect policyholders would be less likely to hold policies with existing guaranteed rates (higher lapse rates) as interest rates rise.
A prolonged low interest rate environment also may subject us to increased hedging costs or an increase in the amount of statutory reserves that our insurance subsidiaries are required to hold for GMxB features, lowering their statutory surplus, which would adversely affect their ability to pay dividends to us. In addition, it may also increase the perceived value of GMxB features to our policyholders, which in turn may lead to a higher rate of annuitization and higher persistency of those products over time. Finally, low interest rates may continue to cause an acceleration of DAC amortization or reserve increase due to loss recognition for interest sensitive products, primarily for our Protection Solutions segment.


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Regulatory Developments
Our life insurance subsidiaries are regulated primarily at the state level, with some policies and products also subject to federal regulation. On an ongoing basis, regulators refine capital requirements and introduce new reserving standards. See “Business—Regulation” and “Risk Factors—Legal and Regulatory Risks” in the 2018 Form 10-K. Regulations recently adopted or currently under review can potentially impact our statutory reserve and capital requirements.
National Association of Insurance Commissioners (“NAIC”). The NAIC is currently considering a proposal, which if adopted, could materially change the sensitivity of variable annuity reserves and capital requirements to capital markets including interest rate, equity markets and volatility as well as prescribed assumptions for policyholder behavior.. In addition,2015, the NAIC Financial Condition (E) Committee has established a working group to study and address, as appropriate, regulatory issues resulting from variable annuity captive reinsurance transactions, including reforms that would improve the current statutory reserve and capitalRBC framework for insurance companies that sell variable annuity products. In August 2018, the NAIC adopted the new framework developed and proposed by this working group. Following its referral to various NAIC committees to develop the full implementation details, the new framework is expected to be operational in January 2020. Among other changes, the new framework includes new prescriptions for reflecting hedge effectiveness, investment returns, interest rates, mortality and policyholder behavior in calculating statutory reserves and RBC. Once effective, it is expected to materially change the level of variable annuity reserves and RBC requirements as well as their sensitivity to capital markets including interest rate, equity markets, volatility and credit spreads. Overall, we believe the NAIC reform has moved variable annuity capital standards towards an economic framework and is consistent with how we manage our business. However, it is expected that the NYDFS will propose a rule for adoption that will differ from the standards of the NAIC framework. Other state insurance regulators may propose and adopt standards different from the NAIC framework.
DepartmentFiduciary Rules/ “Best Interest” Standards of Labor (“DOL”).Conduct. In April 2016,the wake of the March 2018 federal appeals court decision to vacate the DOL Rule, the NAIC as well as state regulators are currently considering whether to apply an impartial conduct standard similar to the DOL Rule to recommendations made in connection with certain annuities and, in one case, to life insurance policies. For example, the NAIC is actively working on a proposal to raise the advice standard for annuity sales and in July 2018, the NYDFS issued a final rule (the “Rule”), which significantly expandedversion of Regulation 187 that adopts a “best interest” standard for recommendations regarding the rangesale of activities considered to be fiduciary investment advice under the Employee Retirement Income Security Act of 1974 (“ERISA”) when our advisorslife insurance and our employees provide investment-related information and support to retirement plan sponsors, participants and individual retirement account (“IRA”) holders. In February 2017, the DOL was directed by memorandum (the “President’s Memorandum”) to review the Rule and determine whether the Rule should be rescinded or revised,annuity products in light of the new administration’s policies and orientations. The Rule was partially implemented on June 9, 2017, with a special transition period for certain requirements thatNew York. Regulation 187 took effect on JanuaryAugust 1, 2018. On2019 with respect to annuity sales and will take effect on February 1, 2020 for life insurance sales and is applicable to sales of life insurance and annuity products in New York. In November 29, 2017,2018, the DOL finalizedprimary agent groups in New York launched a delaylegal challenge against the NYDFS over the adoption of Regulation 187. It is not possible to predict whether this challenge will be successful. We have developed our compliance framework for Regulation 187 with respect to annuity sales and are assessing the impact it may have on our life insurance business. In addition, state regulators and legislatures in implementing certain portions of the Rule from January 1, 2018Nevada, New Jersey and Maryland have proposed measures that would make broker-dealers, sales agents, and investment advisers and their representatives to July 1, 2019. On March 15, 2018,be subject to a federal appeals court issued a decision vacating the Rule and subsequently denied motions by the Attorneys General of three states to intervene in the case. A final mandate has not been issued as of the date of this report, and there is a possibility that the DOL may appeal this decision to the U.S. Supreme Court. At this time, we do not currently plan any immediate changes to our approach to sellingfiduciary duty when providing products and providing services to ERISAcustomers, including pension plans and IRAs. IfBeyond the Rule remainsNew York regulation, the likelihood of enactment of any such state-based regulation is uncertain at this time, but if implemented, these regulations could have adverse effects on our business and consolidated results of operations.
In June 2019, the SEC released a set of rules that, among other things, enhance the existing standard of conduct for broker-dealers to require them to act in effect, we may need to make adverse changes to the level and typebest interest of services we provide as well astheir clients; clarify the nature of the fiduciary obligations owed by registered investment advisers to their clients; impose new disclosure requirements aimed at ensuring investors understand the nature of their relationship with their investment professionals; and restrict certain broker-


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dealers and their financial professionals from using the terms “adviser” or “advisor”. The effective date for compliance with these rules is June 30, 2020. Investment advisers to retail clients will also be required to file new Form CRS, providing disclosures about its standard of conduct and conflicts of interest, with the SEC and deliver copies of the Form to its retail clients. The intent of these rules is to impose on broker-dealers an enhanced duty of care to their customers similar to that which applies to investment advisers under existing law. We are currently assessing these rules to determine the impact they may have on our business.
Derivatives Regulation.  The amount of compensationcollateral we are required to pledge and feesthe expenses we incur under our derivatives transactions are expected to increase as a result of the requirement to pledge initial margin for non-centrally cleared derivative transactions ( “OTC” derivatives) entered into after the phase-in period, which will likely be applicable to us in September 2020 as a result of adoption by the Office of the Comptroller of the Currency (“OCC”), the Federal Reserve Board, the FDIC, the Farm Credit Administration and the Federal Housing Finance Agency and and the CFTC of final margin requirements for OTC derivatives. Also, in June 2019, the SEC adopted a set of rules that weestablish capital, margin and segregation requirements for security-based swaps. The rules are part of the larger regulatory framework that the SEC is establishing over non-bank security-based swap dealers (“SBSD’s”), non-bank major security-based swap dealers (“MSBSP’s”), and certain broker-dealers that are not SBSD’s that imposes registration, disqualification, recordkeeping and reporting requirements, and cross-border regulation.  The rules will become effective 60 days after publication in the Federal Register.  The compliance date for the new rules is 18 months after the later of (i) the effective date of the final rules establishing recordkeeping and reporting requirements for SBSD’s and MSBSP’s or (ii) the effective date of the final rules on cross-border application of security-based swap requirements, which have been proposed and are pending. We are monitoring these developments and evaluating the potential effect these rules might have on our affiliated advisors and firms receive for investment-related services to retirement plans and IRAs.business.
Impact of the Tax Reform Act
On December 22, 2017, President Trump signed into law the Tax Reform Act, a broad overhaul of the U.S. Internal Revenue Code that changeschanged long-standing provisions governing the taxation of U.S. corporations, including life insurance companies.
The Tax Reform Act reducesreduced the federal corporate income tax rate to 21% beginning in 2018 and repealsrepealed the corporate alternative minimum taxAlternative Minimum Tax (“AMT”) while keeping existing AMT credits. It also containscontained measures affecting our insurance companies, including changes to the dividends received deduction (“DRD”),DRD, insurance reserves and tax DAC, and measures affecting our international operations, such as a one-time transitional tax on some of the accumulated earnings of our foreign subsidiaries (within our Investment Management and Research Segment).
operations. As a result of the Tax Reform Act, we expect our Net Income and Non-GAAP Operating Earnings to improve on a recurring basis due to the reduction in the effective tax rate. Our new effective tax rate is expected to be approximately 19%, driven mainly by the new federal corporate tax rate of 21%has improved and the DRD benefit.
We expect the Tax Reform Act to have both positive and negative impacts on our balance sheet. On the one hand, as a one-time effect, the lower tax rate resulted in a reduction to the value of our deferred tax assets. On the other hand, the Tax Reform Act repeals the corporate AMT and, subject to certain limitations, allows us to use our AMT credits going forward, which we expect will result in a reduction of our tax liability.
In 2017, on a statutory basis, we recorded a moderate increase to our Combined risk-based capital (“RBC”) ratio as a result of the Tax Reform Act. Specifically, this was driven mainly by the benefit of the corporate AMT repeal, but partially offset by a lower statutory deferred tax asset valuation.


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We expect the tax liability on the earnings of our foreign subsidiaries will decrease going forward. has decreased.
In 2017, we recorded a one-time decrease to net income of $23 million dueAugust 2018, the NAIC adopted changes to the estimated transitionalRBC calculation, including the C-3 Phase II Total Asset Requirement for variable annuities, to reflect the 21% corporate income tax on some of the accumulated earnings of these subsidiaries.rate in RBC, which resulted in a reduction to our Combined RBC Ratio.
Overall, we expect the Tax Reform Act to havehad a net positive economic impact on us. Weus and we continue to evaluate this new and complicated piece of legislation, assess the magnitude of the various impacts and monitor potential regulatory changesregulations related to this reform.
Separation Costs
In connection with the IPO and transitioning to operating as a stand-alone public company, we have incurred and expect to continue to incur one-time and recurring expenses. These expenses primarily relate to information technology, compliance, internal audit, finance, risk management, procurement, client service, human resources and other support services. The process of replicating and replacing functions, systems and infrastructure provided by AXA or certain of its affiliates in order to operate on a stand-alone basis is currently underway and we expect that it will continue following the IPO.
We estimate that the aggregate amountunderway. Furthermore, as a result of the one-time expenses described above will be between approximately $300 million and $350 million, of which $93 million was incurred in 2017 and approximately $150 million is expected to be incurred in 2018. Of this amount, $61.4 million and $0 million were incurred in the first quarter of 2018 and 2017, respectively. Furthermore, additional one-time expenses will be incurred when AXA ceasesceasing to own at least a majority of our outstanding common stock.stock, we incurred, and continue to incur, additional expenses. These expenses, any recurring expenses, including under the Transitional Services Agreement, and any additional one-time expenses, including as a result of rebranding, we may incur may be material. See “Risk Factors” in the Prospectus2018 Form 10-K for additional information.
We estimate that the aggregate amount of the total separation expenses described above will be between approximately $650 million and $700 million. Through June 30, 2019, a total of $392 million has been incurred, of which $58 million, $82 million, $33 million, and $94 million was incurred in the three and six months ended June 30, 2019 and 2018, respectively.
Productivity Strategies


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Retirement and Protection Businesses
We continue to build upon our productivity improvements through which we have delivered more than $350 million in efficiency improvements from 2012 through 2017. Our productivity strategy includes several initiatives, including relocating some of our real estate footprint away from the New York metropolitan area, replacing or updating less efficient legacy technology infrastructure and expanding existing outsourcing arrangements, which we believe will reduce costs and improve productivity.
We anticipate that the savings from these initiatives will offset any incremental ongoing expenses that we incur as a standalone company, and we expect these initiatives to improve our operating leverage, increasing our Non-GAAP Operating Earnings by approximately $75 million pre-tax per annum by 2020.
Investment Management and Research Business
AB has announced that it will establish its corporate headquarters in, and relocate approximately 1,050 jobs located in the New York metro area to, Nashville, Tennessee. For more detail on the costs and expense savings AB expects to incur as a result of this relocation, see AB’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2019.
Key Operating Measures
In addition to our results presented in accordance with U.S. GAAP, we report Non-GAAP Operating Earnings, Non-GAAP Operating ROE, Non-GAAP Operating ROC by segment for our Individual Retirement, Group Retirement and Protection Solutions segments, and Non-GAAP Operating Earnings per share, each of which is a measure that is not determined in accordance with U.S. GAAP. Management believes that the use of these non-GAAP financial measures, together with relevant U.S. GAAP measures, provides a better understanding of our results of operations and the underlying profitability drivers and trends of our business. These non-GAAP financial measures are intended to remove from our results of operations the impact of market changes (where there is mismatch in the valuation of assets and liabilities) as well as certain other expenses which are not part of our underlying profitability drivers or likely to re-occur in the foreseeable future, as such items fluctuate from period-to-period in a manner inconsistent with these drivers. These measures should be considered supplementary to our results that are presented in accordance with U.S. GAAP and should not be viewed as a substitute for the U.S. GAAP measures. Other companies may use similarly titled non-GAAP financial measures that are calculated differently from the way we calculate such measures. Consequently, our non-GAAP financial measures may not be comparable to similar measures used by other companies.
We also discuss certain operating measures, including AUM, AUA, AV, Protection Solutions Reserves and certain other operating measures, which management believes provide useful information about our businesses and the operational factors underlying our financial performance.
Non-GAAP Operating Earnings
Non-GAAP Operating Earnings is an after-tax Non-GAAPnon-GAAP financial measure used to evaluate our financial performance on a consolidated basis that is determined by making certain adjustments to our consolidated after-tax net income attributable to Holdings. The most significant of such adjustments relates to our derivative positions, which protect economic value and statutory capital, and are more sensitive to changes in market conditions than the variable annuity product liabilities as valued under U.S. GAAP. This is a large source of volatility in net income.
In the first quarter of 2018, the Company revised its2019, we modified our Non-GAAP Operating Earnings definition as it relatesmeasure’s treatment of the impact of timing differences on the amortization of DAC resulting from market value adjustments for our SCS variable annuity product. As a result of this modification, the amortization of DAC for our SCS product included in Non-GAAP Operating Earnings was changed to be determined based on our SCS product's gross profits included in Non-GAAP Operating Earnings, consistent with both our exclusion from Non-GAAP Operating Earnings of other items that are distortive to the treatmentunderlying drivers of certain elements of the profitability of its variable annuity productsour financial performance on a consolidated basis and 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 calculationindustry practice. Our presentation of Non-GAAP Operating Earnings are now included within prior periods was not revised to reflect this modification, however, had we modified the treatment of the amortization of DAC for SCS starting in the first quarter of 2018, SCS-related DAC amortization excluded from Non-GAAP Operating Earnings would have been $52 million, $17 million and $4 million lower during the first, second and third quarters of 2018, respectively, and $17 million higher during the fourth quarter of 2018.


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adjustments for variable annuity products with GMxB features in the broader adjustment category, Variable annuity product features. The presentations of Non-GAAP Operating Earnings in prior periods were revised to reflect this change in definition.
Non-GAAP Operating Earnings equals our consolidated after-tax net income attributable to Holdings adjusted to eliminate the impact of the following items:
Items related to Variablevariable 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 Variablevariable annuity products’ net derivative results;results and the impact of these items on DAC amortization;
Investment (gains) losses, which includes other-than-temporary impairments of securities, sales or disposals of securities/investments, realized capital gains/losses and valuation allowances;
Goodwill impairment, which includes a write-down of goodwill in first quarter of 2017.
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 permanent differences due to goodwill impairment, and the impact of the Tax Reform Act.
Because Non-GAAP Operating Earnings excludes the foregoing items that can be distortive or unpredictable, management believes that this measure enhances the understanding of the Company’s underlying drivers of profitability and trends in our business, thereby allowing management to make decisions that will positively impact our business.
We use ourthe prevailing corporate federal income tax rate of 21% in 2018 and 35% in 2017,, while taking into account any non-recurring differences for events recognized differently in our financial statements and federal income tax returns as well as partnership income taxed at lower rates when reconciling Net income (loss) attributable to Holdings to Non-GAAP Operating Earnings.


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The table below presents a reconciliation of Net income (loss) attributable to Holdings to Non-GAAP Operating Earnings for the three and six months ended March 31, 2018June 30, 2019 and 2017:2018:
Three Months Ended
March 31,		Three Months Ended June 30, Six Months Ended June 30,
2018 20172019 2018 2019 2018
(in millions)(in millions)
Net income (loss) attributable to Holdings$168
 $(290)$363
 $164
 $(412) $378
Adjustments related to:          
Variable annuity product features (1)
212
 291
200
 249
 1,740
 425
Investment (gains) losses(102) 24
12
 22
 23
 (80)
Goodwill impairment—
 369
Net actuarial (gains) losses related to pension and other postretirement benefit obligations131
 34
24
 27
 48
 158
Other adjustments90
 (21)
Income tax expense (benefit) related to above adjustments(63) (235)
Other adjustments (2)89
 88
 129
 179
Income tax expense (benefit) related to above adjustments (3)(71) (75) (408) (130)
Non-recurring tax items28
 132
(58) 11
 (52) 39
Non-GAAP Operating Earnings$464
 $304
Non-GAAP Operating Earnings (4)$559
 $486
 $1,068
 $969
(1)    This reconciling item was previously referred to as “GMxB product features”, but is now referred to more broadly as “Variable annuity product features.” See Note 15 to the Notes to Consolidated Financial Statements for details of adjustments related to Variable annuity product features.______________
(1)Had we modified the treatment of the amortization of DAC for SCS starting in the first quarter of 2018, the adjustment related to Variable annuity product features for the three and six months ended June 30, 2018 would have been $232 million and $356 million.
(2)Other adjustments include separation costs of $58 million, $33 million, $82 million and $94 million for the three and six months ended June 30, 2019 and 2018, respectively.
(3)Had we modified the treatment of the amortization of DAC for SCS starting in the first quarter of 2018, the adjustment related to Income tax expense (benefit) related to above adjustments for the three and six months ended June 30, 2018 would have been $(71) million and $(115) million.
(4)Had we modified the treatment of the amortization of DAC for SCS starting in the first quarter of 2018, Non-GAAP Operating Earnings for the three and six months ended June 30, 2018 would have been $473 million and $915 million.

Non-GAAP Operating ROE and Non-GAAP Operating ROC by Segment


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We report Non-GAAP Operating ROE and Non-GAAP Operating ROC by segment for our Individual Retirement, Group Retirement and Protection Solutions segments, each of which is a non-GAAPNon-GAAP financial measure used to evaluate our recurrent profitability on a consolidated basis and by segment, respectively.
We calculate Non-GAAP Operating ROE by dividing Non-GAAP Operating Earnings for the previous twelve calendar months by consolidated average equity attributable to Holdings, excluding Accumulated Other Comprehensive Income (“AOCI”). We calculate Non-GAAP Operating ROC by segment by dividing operatingOperating earnings (loss) on a segment basis for the previous twelve calendar months by average capital on a segment basis, excluding AOCI, and NCI, as described below. AOCI fluctuates period-to-period in a manner inconsistent with our underlying profitability drivers as the majority of such fluctuation is related to the market volatility of the unrealized gains and losses associated with our available for saleavailable-for-sale (“AFS”) securities. Therefore, we believe excluding AOCI is more effective infor analyzing the trends of our operations. We do not calculate Non-GAAP Operating ROC by segment for our Investment Management &and Research segment because we do not manage that segment from a return of capital perspective. Instead, we use metrics more directly applicable to an asset management business, such as AUM, to evaluate and manage that segment.
For Non-GAAP Operating ROC by segment, capital components pertaining directly to specific segments such as DAC along with targeted capital are directly attributed to these segments. Targeted capital for each segment is established using assumptions supporting statutory capital adequacy levels necessary to be considered a going concern.(including CTE98). To enhance the ability to analyze these measures across periods, interim periods are annualized. Non-GAAP Operating ROE and Non-GAAP Operating ROC by segment should not be used as a substitutesubstitutes for ROE.


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The following table sets forthpresents Return on Average equity attributable to Holdings, excluding AOCI and Non-GAAP Operating ROE for the trailing twelve months ended June 30, 2019.
 Trailing Twelve Months Ended June 30, 2019
 (in millions)
Net income attributable to Holdings$1,030
Average equity attributable to Holdings, excluding AOCI$14,223
Return on average equity attributable to Holdings, excluding AOCI7.2%
  
Non-GAAP Operating Earnings (1)$2,265
Average equity attributable to Holdings, excluding AOCI$14,223
Non-GAAP Operating ROE (2)15.9%
______________
(1)Had we modified the treatment of the amortization of DAC for SCS starting in the first quarter of 2018, Non-GAAP Operating Earnings for the trailing twelve months ended June 30, 2019 would have been $2,275 million.
(2)Had we modified the treatment of the amortization of DAC for SCS starting in the first quarter of 2018, Non-GAAP Operating ROE for the trailing twelve months ended June 30, 2019 would have been 16.0%.
The following table presents Non-GAAP Operating ROC by segment for our Individual Retirement, Group Retirement and Protection Solutions segments for the trailing twelve months ended March 31, 2018.June 30, 2019.
Trailing Twelve Months Ended March 31, 2018Trailing Twelve Months Ended June 30, 2019
Individual Retirement Group Retirement Protection SolutionsIndividual Retirement Group Retirement Protection Solutions
(in millions)(in millions)
Operating earnings(1)$1,483
 $298
 $521
$1,511
 $412
 $329
Average capital(1)(2)
6,925
 1,262
 2,674
$6,917
 $1,285
 $2,870
Non-GAAP Operating ROC(3)21.4% 23.6% 19.5%21.8% 32.1% 11.5%
______________
(1)Had we modified the treatment of the amortization of DAC for SCS starting in the first quarter of 2018, Operating earnings for the trailing twelve months ended June 30, 2019 for the Individual Retirement segment would have been $1,521 million.
(2)For average capital amounts by segment, capital components pertaining directly to specific segments such as DAC along with targeted capital are directly attributed to these segments. Targeted capital for each segment is established using assumptions supporting statutory capital adequacy levels necessary to be considered a going concern.(including CTE98).
(3)Had we modified the treatment of the amortization of DAC for SCS starting in the first quarter of 2018, Non-GAAP Operating ROC for the trailing twelve months ended June 30, 2019 for the Individual Retirement segment would have been 22.0%.


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Non-GAAP Operating Earnings perPer Share
Non-GAAP Operating EPSEarnings Per Share (“Non-GAAP EPS”) is calculated by dividing Non-GAAP Operating Earnings by endingdiluted common shares outstanding - diluted.outstanding. The following table sets forth Non-GAAP Operating EPS for the three and six months ended March 31, 2018June 30, 2019 and 2017.2018.
Three Months Ended March 31,Three Months Ended June 30, Six Months Ended June 30,
2018 20172019 2018 2019 2018
(per share amounts)(per share amounts)
Net income (loss) attributable to Holdings$0.30
 $(0.52)$0.74
 $0.29
 $(0.82) $0.67
Adjustments related to:          
Variable annuity product features(1)0.38
 0.52
0.41
 0.44
 3.44
 0.75
Investment (gains) losses(0.18) 0.04
0.02
 0.04
 0.05
 (0.14)
Goodwill impairment—
 0.66
Net actuarial (gains) losses related to pension and other postretirement benefit obligations0.23
 0.06
0.05
 0.05
 0.10
 0.28
Other adjustments0.16
 (0.04)
Income tax expense (benefit) related to above adjustments(0.11) (0.42)
Other adjustments (2)0.18
 0.16
 0.25
 0.33
Income tax expense (benefit) related to above adjustments (3)(0.14) (0.13) (0.81) (0.23)
Non-recurring tax items0.05
 0.24
(0.12) 0.02
 (0.10) 0.07
Non-GAAP Operating Earnings$0.83
 $0.54
Non-GAAP Operating Earnings (4)$1.14
 $0.87
 $2.11
 $1.73
______________
(1)Had we modified the treatment of the amortization of DAC for SCS starting in the first quarter of 2018, the adjustment related to Variable annuity product features for the three and six months ended June 30, 2018 would have been $0.41 and $0.63.
(2)“Other adjustments” includes separation costs of $0.12, $0.06, $0.16 and $0.17, for the three and six months ended June 30, 2019 and 2018, respectively.
(3)Had we modified the treatment of the amortization of DAC for SCS starting in the first quarter of 2018, the adjustment related to Income tax expense (benefit) related to above adjustments for the three and six months ended June 30, 2018 would have been $(0.12) and $(0.21).
(4)Had we modified the treatment of the amortization of DAC for SCS starting in the first quarter of 2018, Non-GAAP Operating Earnings for the three and six months ended June 30, 2018 would have been $0.84 and $1.63.

Assets Under Management (“AUM”)
AUM means investment assets that are managed by one of our subsidiaries and includes: (i) assets managed by AB,AB; (ii) the assets in our GAIA portfolioGeneral Account investment portfolio; and (iii) the Separate AccountAccounts assets of our Individual Retirement, Group Retirement and Protection Solutions businesses. Total AUM reflects exclusions between segments to avoid double counting.
Assets Under Administration (“AUA”)
AUA includes non-insurance client assets that are invested in our savings and investment products or serviced by our AXA Advisors platform. We provide administrative services for these assets and generally record the revenues received as distribution fees.


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Account Value (“AV”)
AV generally equals the aggregate policy account value of our retirement products. General Account AV refers to account balances in investment options that are backed by the General Account while Separate AccountAccounts AV refers to Separate AccountAccounts investment assets.
Protection Solutions Reserves
Protection Solutions Reserves equals the aggregate value of Policyholders’ account balances and Future policy benefits for policies in our Protection Solutions segment.
Consolidated Results of Operations
Our consolidated results of operations are significantly affected by conditions in the capital markets and the economy because we offer variable annuity products with GMxB features.market sensitive products. These products have been a significant driver of our results of operations. Because the future claims exposure on these products is sensitive to movements in the equity markets and interest rates, we have in place various hedging and reinsurance programs that are designed to mitigate the economic risks of movements in the equity markets and interest rates. The volatility in Net income attributable to Holdings for the periods presented below results from the


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mismatch betweenbetween: (i) the change in carrying value of the reserves for GMDB and certain GMIB features that do not fully and
immediately reflect the impact of equity and interest market fluctuationsfluctuations; and (ii) the change in fair value of products with the GMIB feature that has a no-lapse guarantee, and our hedging and reinsurance programs.
AsReclassification of March 31,DAC Capitalization
During the fourth quarter of 2018, and March 31, 2017,we changed our economic interest in AB was approximately 46.5% and 45.8%, respectively. On April 23, 2018, Holdings purchased (i) 8,160,000 AB Units from Coliseum Reinsurance Company and (ii) allpresentation of the issuedcapitalization 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 outstanding sharesbenefits, Commissions and distribution-related payments, and Other operating costs and expenses. Previously, the capitalized amounts were netted within the Amortization of common stockDAC. There was no impact on Net income (loss) or Non-GAAP Operating Earnings of AXA-IM Holding U.S., Inc., which owns directly 41,934,582 AB Units. As a resultthis reclassification.
The reclassification adjustments for thethree and six months ended June 30, 2018 are presented in the tables below. Capitalization of these transactions (collectively,DAC reclassified to Compensation and benefits, Commissions and distribution-related payments, and Other operating costs and expenses reduced the “AB Reorganization Transactions”), at April 30,amounts previously reported in those expense line items, whereas the capitalization of DAC reclassified from the Amortization of DAC line item increases that expense line item.
 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:               
Commissions and distribution-related payments$81
 $15
 $36
 $131
 $153
 $29
 $70
 $251
Compensation and benefits and other operating costs and expenses16
 8
 15
 39
 35
 15
 31
 81
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

DAC Amortization for SCS
In the first quarter of 2019, the Company updated its Operating earnings measure to exclude market value adjustments impacting the DAC amortization for its SCS variable annuity product in order to be consistent with the treatment of the market value adjustments on the SCS liability and with industry practice. The presentation of Operating earnings in prior periods was not revised to reflect this modification, however, the Company estimated that had the treatment in the Company’s Operating earnings measure of the Amortization of DAC for SCS been modified in the first quarter of 2018, the Company’s economic interest in AB was approximately 65%.pre-tax impact on Operating earnings of excluding the SCS-related DAC amortization from Operating earnings would have been a decrease of $52 million, $17 million and $4 million during the first, second and third quarters of 2018, respectively, and an increase of $17 million during the fourth quarter of 2018.
Ownership and Consolidation of AllianceBernstein
Our indirect, wholly owned subsidiary, AllianceBernstein Corporation, is the General Partner of AB. Accordingly, AB is consolidated in our financial statements, and its results are fully reflected in our consolidated financial statements. Our blended economic interest in AB was approximately 65% during both the three and six months of 2019 and approximately 59% and 52% during the three and six months of 2018, respectively.

Effective Tax Rates

For interim reporting periods, we calculate income tax expense using an estimated annual effective tax rate (“ETR”), with discrete items recognized in the period in which they occur.
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Operations
The following table summarizes our consolidated statements of income (loss) for the three and six months ended March 31, 2018June 30, 2019 and 2017:
 Three Months Ended March 31,
 2018 2017
 (in millions, except earnings per share amounts)
REVENUES   
Policy charges and fee income$972
 $956
Premiums279
 281
Net derivative gains (losses)(281) (235)
Net investment income (loss)591
 780
Investment gains (losses), net:   
Total other-than-temporary impairment losses—
 (1)
Other investment gains (losses), net102
 (23)
Total investment gains (losses), net102
 (24)
Investment management and service fees1,055
 954
Other income117
 118
Total revenues2,835
 2,830
BENEFITS AND OTHER DEDUCTIONS   
Policyholders’ benefits608
 1,093
Interest credited to policyholders’ account balances271
 246
Compensation and benefits (includes $40 and $41 of deferred acquisition costs)620
 539
Commissions and distribution related payments (includes $120 and $132 of deferred acquisition costs)411
 395
Interest expense46
 35
Amortization of deferred policy acquisition costs, net (net of capitalization of $160 and $173)15
 (55)
Other operating costs and expenses494
 744
Total benefits and other deductions2,465
 2,997
Income (loss) from continuing operations, before income taxes370
 (167)
Income tax (expense) benefit(79) (30)
Net income (loss)291
 (197)
Less: net (income) loss attributable to the noncontrolling interest(123) (93)
Net income (loss) attributable to Holdings$168
 $(290)
EARNINGS PER SHARE   
Earnings per share - Common stock   
Basic$0.30
 $(0.52)
Diluted$0.30
 $(0.52)
Weighted average common shares outstanding561
 561

2018:


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 Three Months Ended March 31,
 2018 2017
 (in millions, except earnings per share amounts)
 Non-GAAP Operating Earnings$464
 $304
Non-GAAP Operating Earnings per share, Basic$0.83
 $0.54
Non-GAAP Operating Earnings per share, Diluted$0.83
 $0.54
 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
Premiums280
 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 fees1,072
 1,075
 2,071
 2,130
Other income139
 124
 266
 241
Total revenues3,160
 2,966
 4,874
 5,840
        
BENEFITS AND OTHER DEDUCTIONS       
Policyholders’ benefits896
 900
 1,776
 1,494
Interest credited to policyholders’ account balances314
 268
 618
 539
Compensation and benefits512
 520
 1,021
 1,099
Commissions and distribution-related payments307
 287
 588
 578
Interest expense57
 60
 113
 106
Amortization of deferred policy acquisition costs177
 185
 375
 357
Other operating costs and expenses456
 424
 866
 917
Total benefits and other deductions2,719
 2,644
 5,357
 5,090
Income (loss) from continuing operations, before income taxes441
 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 interest67
 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:       
Basic491.1
 561.0
 504.5
 561.0
Diluted491.9
 561.1
 504.5
 561.1
 Three Months Ended June 30, Six Months Ended June 30,
 2019 2018 2019 2018
 (in millions)
Non-GAAP Operating Earnings (1)$559
 $486
 $1,068
 $969
______________
(1)Had we modified the treatment of the amortization of DAC for SCS starting in the first quarter of 2018, Non-GAAP Operating Earnings for the three and six months ended June 30, 2018 would have been $473 million and $915 million, respectively.
The following table summarizes our Non-GAAP Operating EPS for the three and six months ended June 30, 2019 and 2018:
 Three Months Ended June 30, Six Months Ended June 30,
 2019 2018 2019 2018
 (earnings per share amounts)
Non-GAAP Operating EPS - common stock:       
Basic (1)$1.14
 $0.87
 $2.11
 $1.73
Diluted (2)$1.14
 $0.87
 $2.11
 $1.73
______________


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(1)Had we modified the treatment of the amortization of DAC for SCS starting in the first quarter of 2018, Non-GAAP Operating EPS - common stock, basic for the three and six months ended June 30, 2018 would have been $0.84 and $1.63, respectively.
(2)Had we modified the treatment of the amortization of DAC for SCS starting in the first quarter of 2018, Non-GAAP Operating EPS - common stock, diluted for the three and six months ended June 30, 2018 would have been $0.84 and $1.63, respectively.
The following discussion compares the results for the three and six months ended March 31, 2018 comparedJune 30, 2019 to the comparable 2017 period’s results.results for the three and six months ended June 30, 2018.
First Quarter 2018Three Months Ended June 30, 2019 Compared to First Quarter 2017Three Months Ended June 30, 2018
Net Income Attributable to Holdings
The $458 million increase in Net income (loss) attributable to Holdings increased by $199 million, to $168net income of $363 million for the first quarterthree months ended June 30, 2019 from net income of 2018 from a Net loss of $290$164 million for the first quarter of 2017, wasthree months ended June 30, 2018, primarily driven by the following notable items:
Policyholders’ benefits decreased by $485 million, primarily due to a $441 million decrease in our Individual Retirement segment's GMxB reserves not carried at fair value, reflecting positive movement in interest rates in the first quarter of 2018 compared to the first quarter of 2017. The net improvement in GMxB margins was primarily driven by lower hedging losses related to equity (in the first quarter of 2017 equity market strongly increased while it slightly decreased in the first quarter of 2018) and reserve strengthening in 2017. The $41 million decrease in Corporate and Other was mainly driven by favorable claims experience in our Closed Block and assumed reinsurance block.
OtherNet investment gainsincome (loss) increased by $125 million, primarily due to the sale of fixed maturity securities, mainly U.S. Treasury securities.
Investment management and service fees increased by $102 million mainly driven by our Investment Management and Research segment, mainly due to higher base fees reflecting an increase in average AUM of 13% and a 2% increase in the overall portfolio return rate.
Policy charges and fee income increased by $16 million due to higher average account values from net flows and higher equity markets.
Other operating costs and expenses decreased by $250$380 million mainly due to a $369 million non-recurring goodwill impairment chargechange in the first quartermarket value of 2017 resultingtrading securities supporting our variable annuity products mainly driven by lower interest rates.
Investment gains (losses), net increased by $10 million due to 2018 higher losses from our General Account investment portfolio, partially offset by a real estate impairment in 2019.
Net income (loss) attributable to the noncontrolling interest decreased by $30 million mainly due to lower AB Net income.
Income tax expense decreased by $50 million driven primarily by a $63 million income tax benefit from the Company’s adoptionrelease of new accounting guidance for goodwill on January 1, 2017, partlya state income tax liability in the three months ended June 30, 2019, partially offset by higher IPO related separation costs.pre-tax income.
Partially offsetting this increase were the following notable items:
Decrease in Net investment income of $189derivative gains (losses) decreased by $190 million mainly due to a changehigher increase in marketthe fair value of trading securities primarily driventhe GMIBNLG liability, partially offset by an increase in interest rates.
income from freestanding derivatives.
Amortization of deferred acquisition costs, net increased by $70 million, mainly driven by our Protection Solutions and Individual Retirement segments, and Corporate and Other. DAC amortization in the Protection Solutions segment increased by $38 million, due to a $40 million increase in amortization before capitalization as we have remained in a loss recognition position in the first quarter of 2018 (loss recognition position started in the fourth quarter of 2017), which results in higher amortization. DAC amortization in our Individual Retirement segment was $13 million higher mainly due to $15 million lower capitalization due to a shift in sales towards SCS.
Interest credited to policyholders’ account balances increased by $25$46 million mainly driven by our Individual Retirement segment, reflecting an increase in SCS AV and by our Protection Solutions segment, reflecting an increase in Indexed Universal Life reserves due to new business, partially offset by higher Net derivative gains (losses), and higher interest credited on funding agreements.
Compensation, benefits and other operating expenses increased by $24 million mainly due to higher separation costs.
Commissions and distribution-related payments increased by $20 million mainly driven by higher distribution-related payments in our Investment Management and Research segment and higher broker-dealer sales.
Non-GAAP Operating Earnings
Non-GAAP Operating Earnings increased by $73 million to $559 million during the three months ended June 30, 2019 from $486 million in the three months ended June 30, 2018. Had we modified the treatment of the amortization of DAC for SCS AVstarting in the first quarter of 2018, Non-GAAP Operating Earnings for the three months ended June 30, 2019 would have increased $86 million from $473 million in the three months ended June 30, 2018. The following notable items were the primary drivers for the increase in Non-GAAP Operating Earnings.
Net investment income increased by $116 million mainly due to the positive impacts of higher asset balances, General Account investment portfolio optimization and higher seed money investment income.
Amortization of DAC decreased by $50 million mainly driven by our Protection Solutions segment as this segment is no longer in loss recognition, partially offset by an increase in our Individual Retirement segment, due to the impact of interest rate and Corporateequity market movements on our SCS block in the three months ended June 30, 2018. Had the treatment in our Non-GAAP Operating Earnings measure of the Amortization of DAC for SCS been modified starting in the first quarter of 2018, the SCS-related DAC amortization excluded from Non-GAAP Operating Earnings would have been $17 million lower, decreasing Non-GAAP Operating Earnings.
Earnings attributable to the noncontrolling interest decreased by $7 million mainly in our Investment Management and Other.
Research segment due to lower AB Operating earnings.


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Net derivative losses increased by $46 million driven by higher losses in our GMxB book carried at fair value and a change in market value of our freestanding derivatives.
Income tax expense increased by $49 million driven by an increase in pre-tax earnings partially offset by a lower effective tax rate due to the Tax Reform Act as well as the permanent differences of a one-time goodwill impairment in the first quarter of 2017.
Compensation and benefits increased by $81 million mainly due to the settlement of the pension benefit obligation of $100 million.
Non-GAAP Operating Earnings
Non-GAAP Operating Earnings increased by $160 million to $464 million during the first quarter of 2018 from $304 million in the first quarter of 2017, primarily driven by the following notable items:
Policyholders’ benefits decreased by $500 million primarily due to a $456 million decrease in our Individual Retirement segment and a $41 million decrease in Corporate and Other. The improvement in Individual Retirement was mainly driven by a $462 million decrease in GMxB reserves due to higher interest rates in the first quarter of 2018, offset by $384 million higher GMxB derivatives losses included in Investment gains (losses). The net improvement in GMxB margins was primarily driven by reserve strengthening in 2017. The $41 million improvement in Corporate and Other was mainly from favorable claims experience in our Closed Block and assumed reinsurance block.
Investment management and service fees increased by $179 million mainly driven by our Investment Management and Research segment, mainly due to higher base fees reflecting an increase in average AUM of 13% and a 2% increase in the overall portfolio return rate.
Policy charges, fee income and premiums increased by $13 million, due to higher average AV from net flows and higher equity markets.
Net investment income increased by $13 million mainly due to the GA portfolio rebalancing.
Partially offsetting this increase were the following notable items:
Interest expensecredited to policyholders’ account balances increased by $14$47 million primarilymainly driven by our Individual Retirement segment, reflecting an increase in SCS AV due to higher cost of borrowings through securities repurchase agreementssales, and by our Protection Solutions segment, mainly due to an increase in Indexed Universal Life reserves due to new business, partially offset by higher Net derivative gains (losses), and higher interest rates in floating rate internal debt.
credited on funding agreements.
Amortization of DAC, net increasedNet derivative gains (losses) decreased by $52$21 million mainly due to a $9 million and $8 million decrease in our Protection SolutionsInvestment Management and Research and Individual Retirement segments. DAC amortization in the Protection Solutions segment
Commissions and distribution-related payments increased by $42$20 million due tomainly driven by higher distribution-related payments in our Investment Management and Research segment and higher broker-dealer sales.
Income tax expense increased by $11 million mainly driven by higher pre-tax earnings partially offset by a $44 million increaselower effective tax rate. Had the treatment in amortization before capitalization, as we have remained in a loss recognition positionour Non-GAAP Operating Earnings measure of the Amortization of DAC for SCS been modified starting in the first quarter of 2018, (loss recognition position startedincome tax benefit excluded from Non-GAAP Operating Earnings would have been $4 million lower.
Six Months Ended June 30, 2019 Compared to Six Months Ended June 30, 2018
Net Income Attributable to Holdings
Net income (loss) attributable to Holdings decreased by $790 million, due to a net loss of $412 million for the six months ended June 30, 2019 from net income of $378 million for the six months ended June 30, 2018, primarily driven by the following notable items:
Net derivative gains (losses) decreased by $1,584 million mainly due to increases in the fourth quarterfair value of 2017), which results in higher amortization. DAC amortizationthe GMIBNLG liability, partially offset by income from freestanding derivatives reflecting lower interest rates.
Policyholders’ benefits increased by $282 million mainly driven by our Individual Retirement and Protection Solutions segments. The increase in our Individual Retirement segment was $7primarily due to the favorable impact of higher interest rates in the first six months of 2018. The assumption updates in the third quarter of 2018 reduced the impact of interest rates on GMxB policyholders’ benefits in the first six months of 2019. The increase in our Protection Solutions segment was primarily due to higher expected claims as the book is aging, combined with adverse mortality experience in the first quarter of 2019.
Investment gains (losses), net decreased by $103 million primarily due to higher gains from our General Account investment portfolio optimization in 2018 and a real estate impairment in 2019.
Revenue from fees and related items (“fee-type revenue”), including Policy charges and fee income, Premiums, Investment Management service fees and Other income, decreased by $83 million mainly driven by our Individual Retirement and Investment Management and Research segments. The decrease in the Individual Retirement segment was mainly due to $15 million lower capitalizationaverage Separate Accounts AV in 2019 compared to 2018 as a result of a decline in equity markets in the fourth quarter of 2018. The decrease in our Investment Management segment was primarily due to a shift in sales towards SCS.
Higher Compensation, benefits,lower Bernstein Research Services revenues and other operating cost of $77 million, mainly due to an increase of $67 million in the Investment Management & Research segment, including $43 million related to the impact of adopting the new revenue recognition standard (ASC 606) in 2018, higher promotion and servicing of $17 million, higher incentive compensation and higher base compensation, which resulted from higher fringe benefits and higher commissions. Other operating expenses excluding the Investment Management & Research segment were slightly lower resulting from productivity programs.
performance-based fees.
Interest credited to policyholders’ account balances increased by $25$79 million mainly from higherdriven by our Individual Retirement segment, reflecting an increase in SCS AV and by our Protection Solutions segment, mainly reflecting an increase in Indexed Universal Life reserves due to new business, partially offset by higher Net derivative gains (losses), and higher interest credited on funding agreements.
Amortization of DAC increased by $18 million mainly due to higher amortization in our Individual Retirement and from Corporate and Other.
Income tax expense decreased by $20 million driven by a lower effective tax ratesegment, primarily due to the Tax Reform Act.impact of interest rate and equity market movements on assets supporting our SCS block, partially offset by lower amortization in our Protection Solutions segment resulting from no longer being in loss recognition.

Commissions and distribution-related payments increased by $10 million mainly driven by higher commission expense due to higher broker-dealer sales and higher distribution-related payments in our Investment Management and Research segment.
Partially offsetting this decrease were the following notable items:


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Net investment income (loss) increased by $804 million mainly due to a change in the market value of trading securities supporting our variable annuity products due to lower interest rates.
Compensation, benefits and other operating expenses decreased by $129 million mainly due to the partial settlement of the employee pension plan in the first six months of 2018 and lower separation costs.
Net income (loss) attributable to noncontrolling interest decreased by $87 million mainly due to lower AB Net income and from the increase in our ownership percentage of AB that reduced the noncontrolling interest's share of AB's Net income.
Income tax expense decreased by $356 million driven primarily by a pre-tax loss in the first six months of 2019 compared to pre-tax income in the first six months of 2018 and by a $63 million income tax benefit from the release of a state income tax liability in the six months ended June 30, 2019.
Non-GAAP Operating Earnings
Non-GAAP Operating Earnings increased by $99 million to $1,068 million during the six months ended June 30, 2019 from $969 million in the six months ended June 30, 2018. Had we modified the treatment of the amortization of DAC for SCS starting in the first quarter of 2018, Non-GAAP Operating Earnings for the six months ended June 30, 2019 would have increased $153 million from $915 million in the six months ended June 30, 2018. The following notable items were the primary drivers for the increase in Non-GAAP Operating Earnings.
Net derivative gains (losses) increased by $244 million mainly due to a $271 million increase in our Individual Retirement segment due to decreasing interest rates in 2019 compared to 2018.
Net investment income increased by $207 million mainly due to the positive impacts of higher asset balances, General Account investment portfolio optimization and higher seed money investment income.
Amortization of DAC decreased by $75 million mainly driven by our Protection Solutions segment as this segment is no longer in loss recognition, partially offset by an increase in our Individual Retirement segment, due to the impact of interest rate and equity market movements on our SCS block in the first six months of 2018. Had the treatment in our Non-GAAP Operating Earnings measure of the Amortization of DAC for SCS been modified starting in the first quarter of 2018, the SCS-related DAC amortization excluded from Non-GAAP Operating Earnings would have been $69 million lower, decreasing Non-GAAP Operating Earnings.
Compensation, benefits and other operating costs and expenses decreased by $55 million mainly due to productivity initiatives, as well as a decrease in our Investment Management and Research segment driven by the non-recurrence of a $43 million expense related to the impact of adopting revenue recognition standard ASC 606 in 2018, partially offset by higher operating expenses.
Earnings attributable to the noncontrolling interest decreased by $78 million mainly in our Investment Management and Research segment due to lower AB Operating earnings and from the increase in our ownership percentage of AB that reduced the noncontrolling interest’s share of AB’s Operating earnings.
Partially offsetting this increase were the following notable items:
Policyholders’ benefits increased by $293 million mainly driven by our Individual Retirement and Protection Solutions segment. The increase in our Individual Retirement segment, which was offset by an increase in Net derivatives gains (losses), was primarily due to the favorable impact of higher interest rates in the first six months of 2018. The assumption updates in the third quarter of 2018 reduced the impact of interest rates on GMxB policyholders’ benefits in the first six months of 2019. The increase in our Protection Solutions segment was primarily due to higher expected claims as the book is aging, combined with adverse mortality experience in the first quarter of 2019.
Fee-type revenue decreased by $160 million mainly driven by our Investment Management and Research and Individual Retirement segments. The decrease in our Investment Management and Research segment was mainly due to lower performance-based fees, primarily due to the non-recurrence of a $78 million increase in revenues in the first six months of 2018 from the impact of adopting revenue recognition standard ASC 606 in 2018 and lower Bernstein Research Services revenues. The decrease in the Individual Retirement segment was mainly due to lower average Separate Accounts AV in 2019 compared to 2018 as a result of the decline in equity markets in the fourth quarter of 2018.


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Interest credited to policyholders’ account balances increased by $79 million mainly driven by our Individual Retirement segment, reflecting an increase in SCS AV due to higher sales, and by our Protection Solutions segment, mainly due to an increase in Indexed Universal Life reserves due to new business, partially offset by higher Net derivative gains (losses), and higher interest credited on funding agreements.
Interest expense and financing fees increased by $12 million mainly in Corporate and Other driven by the issuance of $3.8 billion of debt in April 2018.
Commissions and distribution-related payments increased by $10 million mainly driven by higher commission expense due to higher broker-dealer sales and higher distribution-related payments in our Investment Management and Research segment.
Income tax expense increased by $6 million mainly driven by higher pre-tax earnings partially offset by a lower effective tax rate. Had the treatment in our Non-GAAP Operating Earnings measure of the Amortization of DAC for SCS been modified starting in the first quarter of 2018, income tax benefit excluded from Non-GAAP Operating Earnings would have been $15 million lower.
Results of Operations by Segment
We manage our business through the following four segments: Individual Retirement, Group Retirement, Investment Management and Research, and Protection Solutions. We report certain activities and items that are not included in our four segments in Corporate and Other. The following section presents our discussion of Operating earnings (loss) by segment and AUM, AV and AVProtection Solutions Reserves by segment, as applicable. Consistent with U.S. GAAP guidance for segment reporting, operatingOperating earnings (loss) is our U.S. GAAP measure of segment performance. See Note 15 of the Notes to the Consolidated Financial Statements for further information on our segments.
The following table summarizes Operating earnings (loss) by segment and Corporate and Other for the Company’s segments.periods presented:
 Three Months Ended June 30, Six Months Ended June 30,
 2019 2018 2019 2018
 (in millions)
Operating earnings (loss):       
Individual Retirement (1)$359
 $405
 $729
 $773
Group Retirement95
 77
 176
 153
Investment Management and Research80
 97
 157
 178
Protection Solutions106
 (12) 155
 23
Corporate and Other(81) (81) (149) (158)
Non-GAAP Operating Earnings (2)$559
 $486
 $1,068
 $969
______________
(1)Had we modified the treatment of the amortization of DAC for SCS starting in the first quarter of 2018, Operating earnings for the three and six months ended June 30, 2018 for the Individual Retirement segment would have been $392 million and $719 million, respectively.
(2)Had we modified the treatment of the amortization of DAC for SCS starting in the first quarter of 2018, Non-GAAP Operating Earnings for the three and six months ended June 30, 2018 would have been $473 million and $915 million, respectively.

Effective Tax Rates by Segment
For interim reporting periods, in 2018 and 2017, the Company calculateswe calculate income tax expense using an estimated annual effective tax rate (“ETR”), with discrete items recognized in the period in which they occur. TheIncome tax expense is calculated using the ETR isand then allocated to the Company’sour business segments based on the proportion of each segment’s pre-tax Operating earnings (loss) to Non-GAAP Operating Earnings. Each business segment is also allocated its portion of any permanent tax items.
The following table summarizes Operating earnings (loss) by segmentusing a 17% ETR for our retirement and Corporateprotection businesses (Individual Retirement, Group Retirement, and OtherProtection Solutions) and a 28% ETR for Investment Management and Research for the threesix months ended March 31, 2018 and 2017:June 30, 2019.
 Three Months Ended March 31,
 2018 2017
 (in millions)
Operating earnings (loss):   
Individual Retirement$360
 $202
Group Retirement76
 59
Investment Management and Research81
 32
Protection Solutions23
 39
Total segment operating earnings540
 332
Corporate and Other(76) (28)
 Non-GAAP Operating Earnings$464
 $304



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Individual Retirement
The Individual Retirement segment includes our variable annuity products which primarily meet the needs of individuals saving for retirement or seeking retirement income.


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The following table summarizes Operating earnings of our Individual Retirement segment for the periods presented:
 Three Months Ended June 30, Six Months Ended June 30,
 2019 2018 2019 2018
 (in millions)
Operating earnings (1)$359
 $405
 $729
 $773
______________
(1)Had we modified the treatment of the amortization of DAC for SCS starting in the first quarter of 2018, Operating earnings for the three and six months ended June 30, 2018 for the Individual Retirement segment would have been $392 million and $719 million, respectively.
Key components of Operating earnings are:
Three Months Ended March 31,Three Months Ended June 30, Six Months Ended June 30,
2018 20172019 2018 2019 2018
(in millions)(in millions)
Operating earnings$360
 $202
   
Key components of Operating earnings are:   
   
REVENUES          
Policy charges, fee income and premiums$540
 $519
$524
 $530
 $1,022
 $1,059
Net investment income228
 177
280
 258
 548
 486
Investment gains (losses), net including derivative gains (losses)(227) 140
Net derivative gains (losses)87
 95
 150
 (121)
Investment management, service fees and other income188
 183
182
 191
 360
 379
Segment revenues729
 1,019
$1,073
 $1,074
 $2,080
 $1,803
       
BENEFITS AND OTHER DEDUCTIONS          
Policyholders’ benefits5
 461
$291
 $305
 $535
 $296
Interest credited to policyholders’ account balances59
 47
84
 54
 146
 113
Commissions and distribution related payments(1)
144
 158
Amortization of deferred policy acquisition costs, net(2)
(47) (54)
Compensation, benefits, interest expense and other operating costs and expenses(3)
121
 128
Segment benefits and other deductions$282
 $740
Commissions and distribution-related payments71
 71
 137
 143
Amortization of deferred policy acquisition costs (1)75
 50
 158
 94
Compensation, benefits and other operating costs and expenses114
 104
 225
 210
Interest expense and financing fees—
 —
 —
 —
Segment benefits and other deductions (2)$635
 $584
 $1,201
 $856
(1) Includes $72 million and $84 million of deferred policy acquisition costs.______________
(2) Net of capitalization of $87 million and $102 million.
(3) Includes $15 million and $18 million of deferred policy acquisition costs.

(1)Had we modified the treatment of the amortization of DAC for SCS starting in the first quarter of 2018, Amortization of deferred policy acquisition costs for the three and six months ended June 30, 2018 for the Individual Retirement segment would have been $67 million and $163 million, respectively.
(2)Had we modified the treatment of the amortization of DAC for SCS starting in the first quarter of 2018, Segment benefits and other deductions for the three and six months ended June 30, 2018 for the Individual Retirement segment would have been $601 million and $925 million, respectively.
The following table summarizes AV for our Individual Retirement segment as of the dates indicated:
As of
March 31,
2018		 December 31,
2017		June 30, 2019 December 31, 2018
(in millions)(in millions)
AV      
General Account$19,480
 $19,059
$23,455
 $20,631
Separate Accounts82,310
 84,364
80,852
 73,958
Total AV$101,790
 $103,423
$104,307
 $94,589


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The following table summarizes a roll forwardroll-forward of AV for our Individual Retirement segment for the periods indicated:
Three Months Ended June 30, Six Months Ended June 30,
March 31,
2018		 March 31,
2017		2019 2018 2019 2018
(in millions)(in millions)
Balance as of beginning of period$103,423
 $93,604
$102,498
 $101,789
 $94,589
 $103,423
Gross premiums1,787
 2,010
2,173
 2,056
 4,211
 3,842
Surrenders, withdrawals and benefits(2,249) (1,797)(2,265) (2,205) (4,391) (4,453)
Net flows(462) 213
(92) (149) (180) (611)
Investment performance, interest credited and policy charges(1,171) 2,862
2,359
 1,473
 10,356
 301
Transfer to Corporate and Other (1)
(458) —
 (458) —
Balance as of end of period$101,790
 $96,679
$104,307
 $103,113
 $104,307
 $103,113
First Quarter of 2018______________
(1)Transfer to Corporate and Other represents the placement of an Individual Retirement product in run-off effective for the second quarter of 2019.
Three Months Ended June 30, 2019 Compared to First Quarter of 2017the Three Months Ended June 30, 2018 for the Individual Retirement Segment
Operating earnings
Operating earnings increased $158decreased by $46 million to $360$359 million in the three months ended June 30, 2019 from $405 million in the three months ended June 30, 2018. Had we modified the treatment of the amortization of DAC for SCS starting in the first quarter of 2018, Operating earnings for the three months ended June 30, 2019 would have decreased $33 million from $202$392 million in the three months ended June 30, 2018. The following notable items were the primary drivers for the decrease in Operating earnings.
Increase in Interest credited to policyholders’ account balances of $30 million primarily driven by higher SCS AV due to new business growth.
Fee-type revenue decreased by $26 million mainly due to lower average Separate Accounts AV.
Increase in Amortization of DAC of $25 million, primarily due to the impact of interest rate and equity market movements on our SCS block in the three months ended June 30, 2018. Had the treatment in our Operating earnings measure of the Amortization of DAC for SCS been modified starting in the first quarter of 2017 primarily attributable to2018, the following:
A net increase inSCS-related DAC amortization excluded from Operating earnings of $78would have been $17 million lower.
Compensation, benefits and other operating costs and expenses increased by $10 million mainly due to higher GMxB results from reserve strengthening in 2017. Higher interest ratessub-advisory fees (these higher sub-advisory fees were the primary driver of a $462 millionoffset by related fee-type revenues).
The decrease in GMxB Policyholders’ benefits which was partially offset by GMxB Net derivative losses of $384 million.by:
Increase in Net investment income of $51$22 million resulting from higher asset balances mainly driven by SCS sales.
Increase in remaining Revenues of $26 million due to higher average Separate Account AV,SCS asset balances.
Improvement in GMxB results of $22 million primarily due to positive market performanceassumption updates in 2017the third quarter of 2018. GMxB results include Policy charges and higher premiumfee income, from payout annuities.Net derivative gains (losses) and Policyholders’ benefits.
A decrease
Decrease in Commissions and distribution related paymentsIncome tax expense of $14$8 million due to strong salesdriven by lower pre-tax earnings. Had the treatment in our Non-GAAP Operating Earnings measure of the Amortization of DAC for SCS been modified starting in the first quarter of 2017 in advance of the implementation of the DOL Rule.
The increase was partially offset by:
An increase in Amortization of DAC, net of $72018, income tax benefit excluded from Operating earnings would have been $4 million primarily driven by $15 million lower DAC capitalization as a result of lower sales and a product shift towards SCS.lower.
An increase in Income tax expense of $9 million due to higher pre-tax operating earnings, partially offset by a lower effective tax rate due to the Tax Reform Act.
Net Flows and AV
The increase in AV of $5.1$1.8 billion year-over-yearduring the three months ended June 30, 2019 and $1.2 billion from June 30, 2018 was drivenmainly due to the positive impact of higher equity markets, partially offset by market appreciation.net outflows in our older fixed-rate GMxB block.
Net outflows of $92 million decreased by $57 million compared to 2018, driven by higher deposits in our current product offerings and lower surrenders in the Company’s older fixed-rate GMxB block.


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Six Months Ended June 30, 2019 Compared to Six Months Ended June 30, 2018 for the Individual Retirement Segment
Operating earnings
Operating earnings decreased by $44 million to $729 million in the first six months of 2019 from $773 million in the first six months of 2018. Had we modified the treatment of the amortization of DAC for SCS starting in the first quarter of 2018, Operating earnings for the six months ended June 30, 2019 would have increased $10 million from $719 million in the six months ended June 30, 2018. The following notable items were $462the primary drivers for the decrease in Operating earnings.
Increase in Amortization of DAC of $64 million, primarily due to the impact of interest rate and equity market movements on our SCS block in the first six months of 2018. Had the treatment in our Operating earnings measure of the Amortization of DAC for SCS been modified starting in the first quarter of 2018, the SCS-related DAC amortization excluded from Operating earnings would have been $69 million lower.
Fee-type revenue decreased by $56 million mainly due to lower average Separate Accounts AV in 2019 compared to 2018 as a result of the sharp decline in equity markets in the fourth quarter of 2018.
Increase in Interest credited to policyholders’ account balances of $33 million primarily driven by $1.0 billionhigher SCS AV due to new business growth.
Compensation, benefits and other operating costs and expenses increased by $15 million primarily due to higher sub-advisory fee expenses (these higher sub-advisory fees were offset by related fee-type revenues).
The decrease was partially offset by:
Increase in Net investment income of outflows on our older fixed GMxB block which were$62 million mainly due to higher SCS asset balances partially offset by $579lower investment income from assets supporting our GMxB products.
Improvement in GMxB results of $31 million primarily due to assumption updates in the third quarter of inflows on2018. GMxB results include Policy charges and fee income, Net derivative gains (losses) and Policyholders’ benefits.
Decrease in Income tax expense of $24 million driven by lower pre-tax earnings as well as a lower effective tax rate. Had the treatment in our newer less capital intensive products.Non-GAAP Operating Earnings measure of the Amortization of DAC for SCS been modified starting in the first quarter of 2018, income tax benefit excluded from Operating earnings would have been $15 million lower.
Net Flows and AV
The increase in AV of $9.7 billion during the six months ended June 30, 2019 was due to higher equity markets partially offset by net outflows in our older fixed-rate GMxB block.
Net outflows of $180 million improved by $431 million compared to 2018, driven by higher deposits in our current product offerings and lower surrenders in the Company’s older fixed-rate GMxB block.
Group Retirement
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.


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The following table summarizes Operating earnings of our Group Retirement segment for the periods presented:
 Three Months Ended June 30, Six Months Ended June 30,
 2019 2018 2019 2018
 (in millions)
Operating earnings$95
 $77
 $176
 $153


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Key components of Operating earnings are:
 Three Months Ended March 31,
 2018 2017
 (in millions)
Operating earnings$76
 $59
    
Key components of Operating earnings are:   
    
REVENUES   
Policy charges, fee income and premiums$64
 $59
Net investment income131
 130
Investment gains (losses), net including derivative gains (losses)(1) (5)
Investment Management, service fees and other income44
 43
Segment Revenues238
 227
BENEFITS AND OTHER DEDUCTIONS   
Policyholders’ benefits—
 —
Interest credited to policyholders’ account balances70
 71
Commissions and distribution related payments(1)
24
 23
Amortization of deferred policy acquisition costs, net(2)
(11) (11)
Compensation, benefits, interest expense and other operating costs and expenses(3)
62
 62
Segment benefits and other deductions$145
 $145
(1) Includes $14 million and $12 million of deferred policy acquisition costs.
(2) Net of capitalization of $22 million and $21 million.
(3) Includes $8 million and $9 million of deferred policy acquisition costs.

 Three Months Ended June 30, Six Months Ended June 30,
 2019 2018 2019 2018
 (in millions)
REVENUES       
Policy charges, fee income and premiums$69
 $70
 $134
 $134
Net investment income150
 124
 284
 255
Net derivative gains (losses)(2) 2
 2
 1
Investment management, service fees and other income50
 49
 98
 93
Segment revenues$267
 $245
 $518
 $483
        
BENEFITS AND OTHER DEDUCTIONS       
Policyholders’ benefits$1
 $—
 $1
 $—
Interest credited to policyholders’ account balances75
 74
 148
 144
Commissions and distribution-related payments11
 12
 21
 22
Amortization of deferred policy acquisition costs10
 6
 22
 17
Compensation, benefits and other operating costs and expenses54
 59
 114
 113
Interest expense and financing fees—
 —
 —
 —
Segment benefits and other deductions$151
 $151
 $306
 $296
The following tables summarizetable summarizes AV for our Group Retirement Segmentsegment as of the dates indicated:
 March 31,
2018		 December 31,
2017
 (in millions)
AV   
General Account$11,393
 $11,319
Separate Accounts22,525
 22,587
Total AV$33,918
 $33,906


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 As of
 June 30, 2019 December 31, 2018
 (in millions)
AV   
General Account$11,892
 $11,619
Separate Accounts24,165
 20,782
Total AV$36,057
 $32,401
The following table summarizes a roll-forward of AV for our Group Retirement segment for the periods indicated:
Three Months Ended March 31,Three Months Ended June 30, Six Months Ended June 30,
2018 20172019 2018 2019 2018
(in millions)(in millions)
Balance as of beginning of period$33,906
 $30,138
$35,077
 $33,918
 $32,401
 $33,906
Gross premiums837
 824
910
 885
 1,750
 1,722
Surrenders, withdrawals and benefits(736) (769)(746) (734) (1,479) (1,470)
Net flows101
 55
164
 151
 271
 252
Investment performance, interest credited and policy charges(89) 975
816
 580
 3,385
 491
Balance as of end of period$33,918
 $31,168
$36,057
 $34,649
 $36,057
 $34,649
First Quarter of 2018Three Months Ended June 30, 2019 Compared to First Quarter of 2017the Three Months Ended June 30, 2018 for the Group Retirement Segment
Operating earnings
Operating earnings increased $17 million increased by $18 million to $76$95 million in the three months ended June 30, 2019 from $77 million in the three months ended June 30, 2018 primarily attributable to the following:
Net investment income increased by $26 million due to higher asset balances.


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Decrease in Compensation, benefits and other operating costs and expenses of $5 million driven by productivity initiatives.
The increase was partially offset by the following:
Decrease in Net derivative gains (losses) of $4 million primarily due to losses on freestanding derivatives.
Increase in income tax expense of $4 million driven by higher pre-tax operating earnings.
Net Flows and AV
The increase in the AV of $1.0 billion during the three months ended June 30, 2019 and $1.4 billion from June 30, 2018 was primarily due to higher equity markets and positive net flows.
Net inflows of $164 million improved by $13 million compared to 2018, driven by strong inflows and lower surrenders.
Six Months Ended June 30, 2019 Compared to Six Months Ended June 30, 2018 for the Group Retirement Segment
Operating earnings
Operating earnings increased by $23 million to $176 million for the first quartersix months of 20182019 from $59$153 million in the first quartersix months of 2017.2018.
The increase is primarily attributable to the following:
Higher feeNet investment income from Policy charges, fee income and premiums and Investment management, service fees and other income of $6increased by $29 million due to positive net flowshigher asset balances and equity market performance.our General Account investment portfolio optimization.
A decreaseIncrease in Income tax expensefee-type revenues of $6$5 million due to a lower effective tax rate as a result ofhigher average Separate Accounts AV, reflecting higher equity markets.
The increase was partially offset by the Tax Reform Act.following:
Interest credited to policyholders’ account balances increased by $4 million due to AV growth.
Net Flows and AV
The increase in AV of $2.8$3.7 billion fromduring the first quarter of 2018six months ended June 30, 2019 was primarily due to market appreciationhigher equity -markets and positive net flows.
Net flows were $101of $271 million a $46improved by $19 million increase for the first quarter ofcompared to 2018, driven primarily by a $13 million increase in Gross premiumsstrong inflows and a reduction of $33 million in Surrenders and withdrawals.lower surrenders.
Investment Management and Research
The Investment Management and Research segment provides diversified investment management, research and related services to a broad range of clients around the world. Operating earnings (loss), net of tax, presented here represents our March 31, 2018blended economic interest net of tax, in AB of approximately 46.5%. Giving effect to65% during both the AB Reorganization Transactions that occurred on April 23,three and six months of 2019 and approximately 59% and 52% during the three and six months of 2018, our current economic interest in AB at April 30, 2018 was approximately 64.8%.


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respectively.
The following table summarizes Operating earnings of our Investment Management and Research segment for the periods presented:
 Three Months Ended March 31,
 2018 2017
 (in millions)
Operating earnings$81
 $32
    
Key components of Operating earnings are:   
    
REVENUES   
Policy charges, fee income and premiums$—
 $—
Net investment income3
 19
Investment gains (losses), net including derivative gains (losses)2
 (10)
Investment Management, service fees and other income904
 734
Segment Revenues909
 743
BENEFITS AND OTHER DEDUCTIONS   
Policyholders’ benefits—
 —
Interest credited to policyholders’ account balances—
 —
Commissions and distribution related payments110
 96
Amortization of deferred policy acquisition costs, net—
 —
Compensation, benefits, interest expense and other operating costs and expenses564
 497
Segment benefits and other deductions$674
 $593
 Three Months Ended June 30, Six Months Ended June 30,
 2019 2018 2019 2018
 (in millions)
Operating earnings$80
 $97
 $157
 $178


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Key components of Operating earnings are:
 Three Months Ended June 30, Six Months Ended June 30,
 2019 2018 2019 2018
 (in millions)
REVENUES       
Policy charges, fee income and premiums$—
 $—
 $—
 $—
Net investment income15
 4
 39
 7
Net derivative gains (losses)(9) —
 (29) 2
Investment management, service fees and other income842
 838
 1,618
 1,742
Segment revenues$848
 $842
 $1,628
 $1,751
        
BENEFITS AND OTHER DEDUCTIONS       
Policyholders’ benefits$—
 $—
 $—
 $—
Interest credited to policyholders’ account balances—
 —
 —
 —
Commissions and distribution-related payments116
 106
 222
 216
Amortization of deferred policy acquisition costs—
 —
 —
 —
Compensation, benefits and other operating costs and expenses547
 513
 1,056
 1,075
Interest expense and financing fees3
 2
 7
 4
Segment benefits and other deductions$666
 $621
 $1,285
 $1,295
Changes in AUM in the Investment Management and Research segment for the periods presented were as follows:
Three Months Ended March 31,Three Months Ended June 30, Six Months Ended June 30,
2018 20172019 2018 2019 2018
(in billions)(in billions)
Balance as of beginning of period$554.5
 $480.2
$554.7
 $549.5
 $516.4
 554.5
Long-term flows:          
Sales/new accounts34.1
 19.0
27.3
 19.0
 50.3
 53.2
Redemptions/terminations(31.2) (18.4)(16.1) (23.3) (34.2) (54.5)
Cash flow/unreinvested dividends(5.3) (0.8)(1.7) (3.4) (5.5) (8.8)
Net long-term (outflows) inflows(2.4) (0.2)9.5

(7.7)
10.6
 (10.1)
AUM adjustment (1)(0.9) —
 (0.9) —
Market appreciation (depreciation)(2.6) 17.9
17.5
 (2.0) 54.7
 (4.6)
Net change(5.0) 17.7
26.1

(9.7)
64.4

(14.7)
Balance as of end of period$549.5
 $497.9
$580.8
 $539.8
 $580.8

$539.8

______________
(1)Approximately $900 million of non-investment management fee earning taxable and tax-exempt money market assets


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2019.
Average AUM in the Investment Management and Research segment for the periods presented by distribution channel and investment services were as follows:
 Three Months Ended March 31,
 2018 2017
 (in billions)
Distribution Channel:   
Institutions$269.3
 $243.8
Retail194.0
 164.9
Private Wealth Management93.8
 82.5
Total$557.1
 $491.2
Investment Service:   
Equity Actively Managed$142.9
 $115.7
Equity Passively Managed(1)
54.3
 48.7
Fixed Income Actively Managed – Taxable243.3
 226.0
Fixed Income Actively Managed – Tax-exempt40.6
 37.3
Fixed Income Passively Managed(1)
10.0
 11.1
Other(2)
66.0
 52.4
Total$557.1
 $491.2
(1)    Includes index and enhanced index services.
(2)    Includes multi-asset solutions and services, and certain alternative investments.
 Three Months Ended June 30, Six Months Ended June 30,
 2019 2018 2019 2018
 (in billions)
Distribution Channel:       
Institutions$262.1
 $256.7
 $257.2
 $262.7
Retail207.3
 191.0
 200.1
 192.7
Private Wealth Management96.5
 94.5
 94.9
 94.2
Total$565.9
 $542.2
 $552.2
 $549.6
        

First Quarter

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 Three Months Ended June 30, Six Months Ended June 30,
 2019 2018 2019 2018
 (in billions)
Investment Service:       
Equity Actively Managed$157.4
 $145.4
 $152.6
 $144.4
Equity Passively Managed (1)56.1
 52.7
 54.9
 53.7
Fixed Income Actively Managed – Taxable233.5
 230.6
 228.6
 236.9
Fixed Income Actively Managed – Tax-exempt44.1
 41.1
 43.3
 40.8
Fixed Income Passively Managed (1)
9.4
 10.0
 9.4
 10.0
Other (2)65.4
 62.4
 63.4
 63.8
Total$565.9
 $542.2
 $552.2
 $549.6
______________
(1)Includes index and enhanced index services.
(2)Includes multi-asset solutions and services, and certain alternative investments.
Three Months Ended June 30, 2019 Compared to First Quarter of 2017the Three Months Ended June 30, 2018 for the Investment Management and Research Segment
Operating earnings
Operating earnings
Operating earnings increased $49 decreased by $17 million in the first quarter of 2018three months ended June 30, 2019 to $81$80 million from $32$97 million in the first quarter of 2017three months ended June 30, 2018 primarily attributable to the following:
Increase in Investment management, service fees,
Compensation, benefits and other income of $170operating costs and expenses increased $34 million primarily due to higher base feesgeneral and administrative expenses.
Higher commissions and distribution-related payments of $75$10 million resulting from a 13%due to higher payments to financial intermediaries for distribution of AB mutual funds.
Net derivative gains (losses) decreased $9 million primarily due to derivative losses mainly offsetting the increase in average AUM and a 2% increase in the overall portfolio rate. Operating earnings includes an increase in revenues of $78 million from the impact of adopting the new revenue recognition standard (ASC 606) in 2018.Net investment income.
Income tax expense decreased $8 million driven by a lower effective tax rate due to the Tax Reform Act.
This increasedecrease was partially offset by the following:
Higher Compensation, benefits, interest expense and other operating costs
Increase in Net investment income of $67$11 million including $43 million relatedmainly offsetting the decrease in Net derivative gains (losses).
Earnings attributable to the impact of adoption of revenue recognition standard (ASC 606) in 2018, higher promotion and servicing expenses of $17noncontrolling interest decreased by $14 million higher incentive compensation, higher base compensation, higher fringe benefits and higher commissions.due to lower AB Operating earnings.
Long-Term Net Flows and AUM
Total AUM as of March 31, 2018June 30, 2019 was $549.5$580.8 billion, up $51.6 $26.1 billion, or 10%4.7%, compared to firstMarch 31, 2019. The increase during the second quarter of 2017. The increase2019 was driven by market appreciation of $40.7$17.5 billion and net flowsinflows of $10.9$9.5 billion (primarily(net inflows of $5.9 billion and $4.2 billion for Retail and Institutions, respectively, offset by Private Wealth Management net outflows of $0.6 billion).
Six Months Ended June 30, 2019 Compared to Six Months Ended June 30, 2018 for the Investment Management and Research Segment
Operating earnings
Operating earnings decreased by $21 million in the first six months of 2019 to $157 million from $178 million in the first six months of 2018 primarily attributable to the following:
Decrease in fee-type revenues of $124 million mainly due lower performance-based fees, primarily due to Retailthe non-recurrence of a $78 million increase in revenues in the first six months of 2018 from the impact of adopting revenue recognition standard ASC 606 in 2018 and Institutional inflows of $8.7 billion).lower Bernstein Research Services revenues.

Net derivative gains (losses) decreased $31 million primarily due to derivative losses mainly offsetting the increase in Net investment income.


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Higher commissions and distribution-related payments of $6 million due to higher payments to financial intermediaries for distribution of AB mutual funds.
This decrease was partially offset by the following:
Increase in Net investment income of $32 million mainly offsetting the decrease in Net derivative gains (losses).
Compensation, benefits and other operating costs and expenses decreased $19 million primarily due to the non-recurrence of a $43 million expense related to the impact of adopting revenue recognition standard ASC 606 in the first six months of 2018 partially offset by higher general and administrative expenses.
Earnings attributable to the noncontrolling interest decreased by $86 million due to lower AB Operating earnings and from the increase in our ownership percentage of AB that reduced the noncontrolling interests’ share of AB’s Operating earnings.
Long-Term Net Flows and AUM
Total AUM as of June 30, 2019 was $580.8 billion, up $41.0 billion, or 7.6%, compared to June 30, 2018. During the twelve months ended June 30, 2019 AUM increased as a result of market appreciation of $29.3 billion and net inflows of $12.6 billion (Retail net inflows of $13.1 billion, and Institutional net inflows of $0.3 billion, offset by net outflows of $0.8 billion for Private Wealth Management).
Protection Solutions
The Protection Solutions segment includes our life insurance and employee benefits businesses. We provide a targeted range of products aimed at serving the financial needs of our clients throughout their lives, including Variable Universal Life (“VUL”),VUL, IUL and term life products. In 2015, we entered the employee benefits market and currently offer a suite of dental, vision, life, as well as short- and long-term disability insurance products to small and medium-size businesses.
In recent years, we have refocused our product offering and distribution towards less capital intensive, higher return accumulation and protection products. We plan to improve our operatingOperating earnings over time through earnings generated from sales of our repositioned product portfolio and by proactively managing and optimizing our in-force book.
The following table summarizes Operating earnings (loss) of our Protection Solutions segment for the periods presented:
 Three Months Ended March 31,
 2018 2017
 (in millions)
Operating earnings (loss)$23
 $39
    
Key components of Operating earnings are:   
    
REVENUES   
Policy charges, fee income and premiums$535
 $529
Net investment income220
 208
Investment gains (losses), net including derivative gains (losses)(1) —
Investment management, service fees and other income55
 52
Segment Revenues809
 789
BENEFITS AND OTHER DEDUCTIONS   
Policyholders’ benefits409
 412
Interest credited to policyholders’ account balances122
 116
Commissions and distribution related payments(1)
66
 68
Amortization of deferred policy acquisition costs, net(2)
71
 29
Compensation, benefits, interest expense and other operating costs and expenses(3)
114
 109
Segment benefits and other deductions$782
 $734
 Three Months Ended June 30, Six Months Ended June 30,
 2019 2018 2019 2018
 (in millions)
Operating earnings$106
 $(12) $155
 $23
(1) Includes $34 million and $36 millionKey components of deferred policy acquisition costs.Operating earnings (loss) are:
(2) Net of capitalization of $51 million and $50 million.
(3) Includes $17 million and $14 million of deferred policy acquisition costs.

 Three Months Ended June 30, Six Months Ended June 30,
 2019 2018 2019 2018
 (in millions)
REVENUES       
Policy charges, fee income and premiums$530
 $537
 $1,072
 $1,077
Net investment income248
 194
 472
 414
Net derivative gains (losses)1
 3
 11
 2
Investment management, service fees and other income64
 56
 119
 111
Segment revenues$843
 $790
 $1,674
 $1,604
        


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 Three Months Ended June 30, Six Months Ended June 30,
 2019 2018 2019 2018
 (in millions)
BENEFITS AND OTHER DEDUCTIONS       
Policyholders’ benefits$419
 $419
 $871
 $828
Interest credited to policyholders’ account balances127
 120
 265
 242
Commissions and distribution-related payments43
 39
 81
 71
Amortization of deferred policy acquisition costs50
 133
 100
 246
Compensation, benefits and other operating costs and expenses75
 94
 170
 190
Interest expense and financing fees—
 —
 ���
 —
Segment benefits and other deductions$714
 $805
 $1,487
 $1,577
The following table summarizes Protection Solutions Reserves for our Protection Solutions segment as of the dates indicated:presented:
 As of
 June 30, 2019 December 31, 2018
 (in millions)
Protection Solutions Reserves (1)   
General Account$17,716
 $17,562
Separate Accounts12,903
 11,393
Total Protection Solutions Reserves$30,619
 $28,955
 March 31, 2018 December 31, 2017
 (in millions)
Protection Solutions Reserves(1)
   
General Account$16,128
 $16,007
Separate Accounts12,396
 12,643
Total Protection Solutions Reserves$28,524
 $28,650
______________
(1)Does not include Protection Solutions Reserves for our employee benefitsEmployee Benefits business as it is a start-up business and therefore has immaterial in-force policies.
The following table presents our in-force face amounts for the periods indicated, respectively, for our individual life insurance products:
 March 31, 2018 December 31, 2017
 (in billions)
In-force Face Amounts for Protection Solutions(1)
   
Universal life(2)
$58.3
 $59.0
Indexed universal life21.0
 20.5
Variable universal life(3)
128.5
 128.9
Term234.7
 235.9
Whole life1.6
 1.6
Total in-force face amount$444.1
 $445.9
 As of
 June 30, 2019 December 31, 2018
 (in billions)
In-force face amount by product: (1)   
Universal Life (2)$54.5
 $55.9
Indexed Universal Life24.3
 22.9
Variable Universal Life (3)127.1
 127.3
Term235.4
 234.9
Whole Life1.4
 1.4
Total in-force face amount$442.7
 $442.4
______________
(1)Includes individual life insurance and does not include employee benefitsEmployee Benefits as it is a start-up business and therefore has immaterial in-force policies.
(2)Universal Life includes Guaranteed Universal Life.
(3)Variable Universal Life includes VL and COLI.

First Quarter of 2018Three Months Ended June 30, 2019 Compared to the First Quarter of 2017Three Months Ended June 30, 2018 for the Protection Solutions Segment
Operating earnings (loss)
Operating earnings decreased $16 increased by $118 million to $23$106 million in the first quarterthree months ended June 30, 2019 compared to an Operating (loss) of 2018 from $39$12 million in the first quarter of 2017three months ended June 30, 2018 primarily attributable to the following:
Decrease in Amortization of DAC net increased by $42of $83 million due to a $44 million increaseas the Protection Solutions segment is no longer in DAC amortization before capitalization, as we have remained in a loss recognition position in the first quarter of 2018 (loss recognition position started in the fourth quarter of 2017) which results in higher amortization. 
Increase of $6 million in Interest credited to policyholders' account balances mainly due to higher AV in our Indexed Universal Life products.recognition.


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Net investment income increased by $54 million primarily due to higher asset balances.
Compensation, benefits and other operating costs and expenses decreased by $19 million mainly due to an $11 million release of a litigation reserve.
This decreaseincrease was partially offset by the following:
Interest credited to policyholders’ account balances increased $7 million primarily due to higher Indexed Universal Life reserves due to new business, partially offset by higher Net derivative gains (losses).
Income tax expense increased $26 million driven by higher pre-tax earnings.
Six Months Ended June 30, 2019 Compared to Six Months Ended June 30, 2018 for the Protection Solutions Segment
Operating earnings
Operating earnings increased by $132 million to $155 million in the first six months of 2019 from $23 million in the first six months of 2018 primarily attributable to the following:
Decrease in Amortization of DAC of $146 million as the Protection Solutions segment is no longer in loss recognition.
Net investment income increased by $58 million primarily due to higher asset balances and the General Account investment portfolio optimization.
Compensation, benefits and other operating costs and expenses decreased by $20 million mainly due to an $11 million release of a litigation reserve.
Net derivative gains (losses) increased $9 million primarily attributable to our Indexed Universal Life hedging program in the first quarter of 2019, partially offset by the increase in Interest credited to policyholders’ account balances.
This increase was partially offset by the following:
Increase in Net investment incomePolicyholders’ benefits of $12$43 million due tomainly reflecting higher expected claims as the General Account portfolio rebalancingbook is aging, combined with adverse mortality experience in the first quarter of 2019 and higher asset balances.claims in our Employee Benefits business reflecting business growth.
Increase of $6Interest credited to policyholders’ account balances increased $23 million in Policy charges, fee income and premiums, mainlyprimarily due to an increase in cost of insurance charges.Indexed Universal Life reserves due to new business, partially offset by higher Net derivative gains (losses).
Increase in Commissions and distribution-related payments of $3$10 million in Investment management, service fees, and other income, mainly due to higher Separate Account reserves.non-proprietary product sales.
Decrease in income
Income tax expense of $12increased $28 million due to a lower effective tax rate as a result of the Tax Reform Act.driven by higher pre-tax earnings.
Corporate and Other
Corporate and Other includes certain of our financing and investment expenses. It also includes: AXA Advisors broker-dealer business, the Closed Block, run-off variable annuity reinsurance business, run-off group pension business, run-off health business, benefit plans for our employees, certain strategic investments and certain unallocated items, including capital and related investments, interest expense and financing fees and corporate expense. AB’s results of operations are reflected in the Investment Management and Research segment. Accordingly, Corporate and Other does not include any items applicable to AB.
The following table summarizes Operating earnings (loss) of Corporate and Other for the periods presented:
 Three Months Ended March 31,
 2018 2017
 (in millions)
Operating earnings (loss)$(76) $(28)
 Three Months Ended June 30, Six Months Ended June 30,
 2019 2018 2019 2018
 (in millions)
Operating earnings (loss)$(81) $(81) $(149) $(158)


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General Account Investment Assets Portfolio
The GAIAGeneral Account investment portfolio and investment results supportsupports the insurance and annuity liabilities of our Individual Retirement, Group Retirement and Protection Solutions businesses. Our GAIAGeneral Account investment portfolio investment strategy seeks to achieve sustainable risk-adjusted returns by focusing on principal preservation, investment return, duration and liquidity requirements by product class and the diversification of risks. Investment activities are undertaken according to investment policy statements that contain internally established guidelines and are required to comply with applicable laws and insurance regulations. Risk tolerances are established for credit risk, market risk, liquidity risk and concentration risk across types of issuers and asset classes and that seek to mitigate the impact of cash flow variability arising from these risks.
The GAIAGeneral Account investment portfolio consists largely of investment grade fixed maturities, and short-term investments, commercial and agricultural mortgage loans, below investment grade fixed maturities, alternative investments and other financial instruments. Fixed maturities include publicly issued corporate bonds, government bonds, privately placed notes and bonds, bonds issued by states and municipalities, mortgage-backed securities and asset-backed securities.
As part of our asset and liability management strategies, we maintain a weighted average duration for our GAIAThe General Account investment portfolio that is within an acceptable range of the estimated duration of our liabilities given our risk appetite and hedging programs. The GAIA portfolioalso includes credit derivatives to replicate exposure to individual securities or pools of securities as a means of achieving credit exposure similar to bonds of the underlying issuer(s) more efficiently. In addition, from time to time we use derivatives for hedging purposes to reduce our exposure to equity markets, interest rates and credit spreads.


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our asset and liability management strategies, we maintain a weighted average duration for our General Account investment portfolio that is within an acceptable range of the estimated duration of our liabilities given our risk appetite and hedging programs. Our asset and liability management strategies are applied to portfolio duration groups within the General Account investment portfolio. For example, we maintain a “short duration” group comprised primarily of investment grade fixed maturity securities that are aligned with the duration of product liabilities with an average duration of less than six years (e.g., our SCS product). As of June 30, 2019 and December 31, 2018, 65% and 69% of the fixed maturities in the short duration group were rated NAIC 1, and 35% and 31% were rated NAIC 2, respectively. During the first quarter of 2019, new purchases from both new money flows and portfolio rebalancing activity were designated as available-for-sale (“AFS”) included in fixed maturities. The remaining trading securities in the Short Duration VA portfolio will be opportunistically rebalanced to AFS and shown with fixed maturities, which is consistent with other portfolios in our General Account. We expect this rebalancing to largely occur over the next several quarters. New AFS assets included in fixed maturities was $8.4 billion as of June 30, 2019.
Investment portfolios are primarily managed by legal entity with dedicated portfolios for certain blocks of business. For portfolios that back multiple product groups, investment results are allocated to business segments.
The following tables reconcileInvestment Results of the consolidated balance sheet asset and liability amounts to GAIA.
General Account Investment AssetsPortfolio
March 31, 2018
 GAIA 
Other(1)
 Balance Sheet Total
 (in millions)
Balance Sheet Captions:     
Fixed maturities, available for sale, at fair value$43,953
 $(469) $43,484
Mortgage loans on real estate11,333
 —
 11,333
Policy Loans3,776
 —
 3,776
Real Estate held for production of income52
 —
 52
Other equity investments1,128
 130
 1,258
Other invested assets170
 3,891
 4,061
Sub-total investments60,412
 3,552
 63,964
Trading Securities12,907
(2) 
2,012
 14,919
Total investments73,319
 5,564
 78,883
Cash and cash equivalents4,220
 1,871
 6,091
Repurchase and funding agreements(3)
(4,397) —
 (4,397)
Total$73,142
 $7,435
 $80,577

(1)Assets listed in the “Other” category principally consist of our loans to affiliates and other miscellaneous assets or liabilities related to GAIA that are reclassified from various balance sheet lines held in portfolios other than the General Account and which are not managed as part of GAIA, including: (i) related accrued income or expense, (ii) certain reclassifications and intercompany adjustments, (iii) certain trading securities that are associated with hedging programs for variable annuity products with guarantee features, (iv) assets and income of AB and (v) for fixed maturities, the reversal of net unrealized gains (losses). The “Other” category is deducted in arriving at GAIA.
(2)Primarily related to SCS and consists of corporate bonds (83%), U.S. Treasury securities (6%), other government securities (10%) and other trading securities (1%).
(3)Includes Securities purchased under agreements to resell, Securities sold under agreements to repurchase and Federal Home Loan Bank funding agreements which are reported in policyholders’ account balances.



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General Account Investment Assets
December 31, 2017
Balance Sheet Captions:GAIA 
Other(1)
 
Balance
  Sheet Total  
 (in millions)
Fixed maturities, available for sale, at fair value$45,751
 $1,190
 $46,941
Mortgage loans on real estate10,952
 —
 10,952
Policy loans3,819
 —
 3,819
Real estate held for the production of Income390
 —
 390
Other equity investments1,264
 128
 1,392
Other invested assets25
 4,093
 4,118
Subtotal investment assets$62,201
 $5,411
 $67,612
Trading securities12,050
(2) 
2,120
 14,170
Total investments$74,251
 $7,531
 $81,782
Cash and cash equivalent4,539
 275
 4,814
Repurchase and funding agreements(3)
(4,382) —
 (4,382)
Total$74,408
 $7,806
 $82,214
(1)Assets listed in the “Other” category principally consist of our loans to affiliates and other miscellaneous assets or liabilities related to GAIA that are reclassified from various balance sheet lines held in portfolios other than the General Account and which are not managed as part of GAIA, including: (i) related accrued income or expense, (ii) certain reclassifications and intercompany adjustments, (iii) certain trading securities that are associated with hedging programs for variable annuity products with guarantee features, (iv) assets and income of AB and (v) for fixed maturities, the reversal of net unrealized gains (losses). The “Other” category is deducted in arriving at GAIA.
(2)
Primarily related to SCS and consists of corporate bonds (83%), U.S. Treasury securities (8%), other government securities (8%) and other trading securities (1%).
(3)Includes Securities purchased under agreements to resell, Securities sold under agreements to repurchase and Federal Home Loan Bank funding agreements which are reported in policyholders’ account balances.



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Investment Results of General Account Investment Assets
The following table summarizes the General Account investment portfolio results with Non-GAAP Operating Earnings adjustments by asset category for the periods indicated.
 Three Months Ended, March 31, Year Ended December 31, 2017
 2018 2017 
 Yield Amount Yield Amount 
 (Dollars in millions)
Fixed Maturities(1):
         
Investment grade         
Income (loss)3.64 % $396
 3.67 % $374
 $1,515
Ending assets  42,620
   40,970
 44,384
Below investment grade         
Income (loss)6.52 % 22
 7.32 % 30
 113
Ending assets  1,333
   1,646
 1,367
Mortgages:         
Income (loss)4.18 % 116
 4.66 % 116
 454
Ending assets  11,333
   10,197
 10,952
Real Estate Held for Production of Income:         
Interest expense and other(1.91)% (4) (1.19)% (1) 2
Ending assets (liabilities)  52
   56
 390
Other Equity Investments(2):
         
Income (loss)12.59 % 41
 12.76 % 41
 169
Ending assets  1,298
   1,410
 1,289
Policy Loans:         
Income (loss)5.71 % 54
 5.76 % 55
 221
Ending assets  3,776
   3,818
 3,819
Cash and Short-term Investments:         
Income (loss)0.71 % 8
 0.67 % 6
 32
Ending assets  4,220
   2,881
 4,539
Repurchase and Funding agreements:         
Interest expense and other  (9)   (4) (21)
Ending (liabilities)  (4,397)   (3,790) (4,382)
Total Invested Assets:         
Income (loss)4.07 % 624
 4.28 % 617
 2,485
Ending assets  60,235
   57,188
 62,358
Trading Securities:         
Income (loss)(0.94)% (29) 5.19 % 119
 231
Ending assets  12,907
   9,689
 12,050
Total:         
Investment Income (loss)3.22 % 595
 4.42 % 736
 2,716
 This presentation is consistent with how we measure investment performance for management purposes.


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Three Months Ended June 30,
2019 2018
Yield Amount (2) Yield Amount (2)
(Dollars in millions)
Fixed Maturities:       
Income (loss)4.00 % $516
 3.90 % $435
Ending assets  54,315
   44,154
Mortgages:       
Income (loss)4.26 % 130
 4.28 % 122
Ending assets  12,288
   11,808
Real Estate Held for the Production of Income:       
Interest expense and other— % —
 (0.44)% (1)
Ending assets  48
   53
Other Equity Investments (1):       
Income (loss)9.29 % 31
 6.60 % 21
Ending assets  1,334
   1,311
Policy Loans:       
Income (loss)5.44 % 51
 5.65 % 54
Ending assets  3,740
   3,739
Cash and Short-Term Investments:       
Income (loss)0.98 % 8
 1.02 % 12
Ending assets  3,296
   5,763
Repurchase and Funding Agreements:       
Interest expense and other  (24)   (25)
Ending assets (liabilities)  (4,001)   (4,843)
Total Invested Assets:       
Income (loss)4.18 % 712
 4.04 % 618
Ending assets  71,020
   61,985
Short Duration Fixed Maturities:       
Income (loss)3.04 % 79
 2.52 % 80
Ending assets  8,797
   13,247
Total:       
Investment income (loss)4.03 % 791
 3.78 % 698
Less: investment fees(0.10)% (18) (0.11)% (18) (68)(0.08)% (16) (0.08)% (14)
Investment Income, Net3.12 % $577
 4.31 % $718
 $2,648
Investment income, net3.95 % $775
 3.70 % $684
Ending Net Assets  $73,142
   $66,877
 $74,408
  $79,817
   $75,232


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 Six Months Ended June 30, Year Ended December 31, 2018 (2)
 2019 2018 
 Yield Amount (2) Yield Amount (2) 
 (Dollars in millions)
Fixed Maturities:         
Income (loss)3.82 % $951
 3.82 % $852
 $1,732
Ending assets  54,315
   44,154
 46,447
Mortgages:         
Income (loss)4.34 % 262
 4.18 % 238
 494
Ending assets  12,288
   11,808
 11,835
Real Estate Held for the Production of Income:         
Interest expense and other(1.78)% (1) (3.00)% (5) (6)
Ending assets  48
   53
 52
Other Equity Investments (1):         
Income (loss)7.01 % 47
 9.56 % 62
 133
Ending assets  1,334
   1,311
 1,354
Policy Loans:         
Income (loss)5.53 % 104
 5.70 % 108
 215
Ending assets  3,740
   3,739
 3,779
Cash and Short-Term Investments:         
Income (loss)0.49 % 8
 0.68 % 16
 21
Ending assets  3,296
   5,763
 3,332
Repurchase and Funding Agreements:         
Interest expense and other  (49)   (49) (104)
Ending assets (liabilities)  (4,001)   (4,843) (4,561)
Total Invested Assets:         
Income (loss)3.99 % 1,322
 3.99 % 1,222
 2,485
Ending assets  71,020
   61,985
 62,238
Short Duration Fixed Maturities:         
Income (loss)3.02 % 181
 2.32 % 147
 333
Ending assets  8,797
   13,247
 14,818
Total:         
Investment income (loss)3.85 % 1,503
 3.71 % 1,369
 2,818
Less: investment fees(0.08)% (32) (0.08)% (29) (62)
Investment income, net3.77 % $1,471
 3.63 % $1,340
 $2,756
Ending Net Assets  $79,817
   $75,232
 $77,056
______________
(1)Fixed Maturities Investment GradeIncludes Other invested assets of $209 million, $170 million and Below Investment Grade are based on Moody’s Equivalent ratings.$211 million as of June 30, 2019, June 30, 2018 and December 31, 2018 respectively,
(2)Includes, asAmount for fixed maturities and mortgages represents original cost, reduced by repayments, write-downs, adjusted amortization of March 31, 2018premiums, accretion of discount and December 31, 2017, respectively, $170 million,valuation allowances. Cost for equity securities represents original cost reduced by write-downs. Cost for other limited partnership interests represents original cost adjusted for equity in earnings and $25 million of other invested assets.reduced by distributions.

Fixed Maturities
The fixed maturity portfolio consists largely of investment grade corporate debt securities and includes significant amounts of U.S. government and agency obligations. The limited number of below investment grade securities in the GAIAGeneral Account investment portfolio consist of “fallen angels”angels,” originally purchased as investment grade, as well as short duration public high yield securities and loans to middle market companies. At March 31, 2018 and December 31, 2017, respectively, 79.5% and 81.1%


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Fixed Maturities by Industry
The following table sets forth these fixed maturities by industry category as of the dates indicated along with their associated gross unrealized gains and losses.


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Fixed Maturities by Industry(1)
Amortized  
Cost
 
Gross
Unrealized  
Gains
 
Gross
Unrealized  
Losses
 Fair Value Percentage of Total (%)Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Percentage of Total (%)
(in millions)  (in millions)
At March 31, 2018:         
As of June 30, 2019:         
Corporate Securities:         
Finance$10,231
 $374
 $9
 $10,596
 19%
Manufacturing11,149
 518
 18
 11,649
 20%
Utilities4,603
 242
 7
 4,838
 8%
Services5,694
 276
 12
 5,958
 10%
Energy3,130
 150
 10
 3,270
 6%
Retail and wholesale2,849
 142
 5
 2,986
 5%
Transportation1,651
 93
 3
 1,741
 3%
Other169
 7
 —
 176
 —%
Total corporate securities39,476
 1,802
 64
 41,214
 71%
U.S. government12,633
 1,108
 39
 13,702
 24%
Residential mortgage-backed (2)208
 13
 —
 221
 1%
Preferred stock419
 10
 4
 425
 1%
State & municipal495
 70
 —
 565
 1%
Foreign governments467
 36
 5
 498
 1%
Asset-backed securities617
 3
 2
 618
 1%
Total$54,315
 $3,042
 $114
 $57,243
 100%
         
As of December 31, 2018         
Corporate Securities:                  
Finance$6,064
 $113
 $60
 $6,117
 14%$6,343
 $77
 $124
 $6,296
 14%
Manufacturing8,026
 166
 133
 8,059
 18%9,123
 105
 273
 8,955
 20%
Utilities4,206
 134
 75
 4,265
 10%4,413
 80
 121
 4,372
 9%
Services3,639
 78
 55
 3,662
 8%4,317
 52
 102
 4,267
 9%
Energy2,084
 66
 36
 2,114
 5%2,347
 40
 75
 2,312
 5%
Retail and wholesale1,365
 20
 21
 1,364
 3%2,163
 19
 49
 2,133
 5%
Transportation1,078
 36
 24
 1,090
 2%1,357
 29
 54
 1,332
 3%
Other145
 5
 1
 149
 —%171
 4
 2
 173
 —%
Total corporate securities26,607
 618
 405
 26,820
 60%30,234
 406
 800
 29,840
 65%
U.S. government and agency14,757
 387
 506
 14,638
 34%13,989
 295
 470
 13,814
 30%
Residential mortgage-backed(2)
614
 16
 3
 627
 1%225
 9
 —
 234
 1%
Preferred stock473
 44
 4
 513
 1%448
 15
 18
 445
 1%
State & municipal422
 56
 1
 477
 1%415
 48
 1
 462
 1%
Foreign governments405
 23
 9
 419
 1%524
 19
 13
 530
 1%
Asset-backed securities675
 4
 4
 675
 2%612
 1
 12
 601
 1%
Total$43,953
 $1,148
 $932
 $44,169
 100%$46,447
 $793
 $1,314
 $45,926
 100%
At December 31, 2017         
Corporate Securities:         
Finance$5,824
 $200
 $7
 $6,017
 13%
Manufacturing7,546
 289
 15
 7,820
 17%
Utilities4,032
 210
 13
 4,229
 9%
Services3,307
 130
 15
 3,422
 7%
Energy1,980
 101
 9
 2,072
 4%
Retail and wholesale1,404
 36
 3
 1,437
 3%
Transportation957
 58
 3
 1,012
 2%
Other128
 7
 —
 135
 —%
Total corporate securities25,178
 1,031
 65
 26,144
 55%
U.S. government and agency17,744
 1,000
 251
 18,493
 39%
Residential mortgage-backed(2)
797
 22
 1
 818
 2%
Preferred stock470
 43
 1
 512
 1%
State & municipal422
 67
 —
 489
 1%
Foreign governments395
 29
 5
 419
 1%
Asset-backed securities745
 5
 1
 749
 1%
Total$45,751
 $2,197
 $324
 $47,624
 100%
______________
(1)Investment data has been classified based on standard industry categorizations for domestic public holdings and similar classifications by industry for all other holdings.
(2)Includes publicly traded agency pass-through securities and collateralized obligations.


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Fixed Maturities Credit Quality
The Securities Valuation Office (“SVO”) of the NAICNational Association of Insurance Commissioners (“NAIC”) evaluates the investments of insurers for regulatory reporting purposes and assigns fixed maturity securitiesmaturities to one of six categories (“NAIC Designations”). NAIC Designations of “1” or “2” include fixed maturities considered investment grade, which include securities rated Baa3 or higher by Moody’s or BBB- or higher by Standard & Poor’s. NAIC Designations of “3” through “6” are referred to as below investment grade, which include securities rated Ba1 or lower by Moody’s and BB+ or lower by Standard & Poor’s. As a result of time lags between the funding of investments and the completion of the SVO filing process, the fixed maturity portfolio typically includes securities that have not yet been rated by the SVO as of each balance sheet date. Pending receipt of SVO ratings, the categorization of these securities by NAIC Designationdesignation is based on the expected ratings indicated by internal analysis.
The amortized cost of the General Accounts’ public and private below investment grade fixed maturities totaled $1.1 billion, or 2.4% of the total fixed maturities at March 31, 2018 and $1.1 billion, or 2.5%, of the total fixed maturities at December 31, 2017. Gross unrealized losses on public and private fixed maturities increased from $324 million in 2017 to $932 million in first quarter of 2018. Below investment grade fixed maturities represented 2.5% and 5.6% of the gross unrealized losses at March 31, 2018 and December 31, 2017, respectively.


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Public Fixed Maturities Credit Quality.
The following table sets forth the General Account’s public fixed maturities portfolio by NAIC rating at the dates indicated.
Public Fixed Maturities
 
NAIC Designation(1)
Rating Agency Equivalent Amortized  Costs Gross Unrealized Gains Gross Unrealized Losses Fair Value
 
    (in millions)
 At March 31, 2018:         
 1Aaa, Aa, A $26,432
 $713
 $690
 $26,455
 2Baa 8,127
 288
 123
 8,292
  Investment grade 34,559
 1,001
 813
 34,747
          

 3Ba 250
 1
 1
 250
 4B 120
 —
 6
 114
 5C and lower 4
 —
 —
 4
 6In or near default 3
 —
 —
 3
  Below investment grade 377
 1
 7
 371
 Total Public Fixed Maturities $34,936
 $1,002
 $820
 $35,118
           
 At December 31, 2017         
 1Aaa, Aa, A $29,137
 $1,506
 $274
 $30,369
 2Baa 7,521
 434
 10
 7,945
  Investment grade 36,658
 1,940
 284
 38,314
 3Ba 304
 5
 6
 303
 4B 119
 —
 1
 118
 5C and lower 3
 —
 —
 3
 6In or near default 9
 —
 —
 9
  Below investment grade 435
 5
 7
 433
 Total Public Fixed Maturities $37,093
 $1,945
 $291
 $38,747
(1)Includes, as of March 31, 2018 and December 31, 2017, respectively, two securities with amortized cost of $4 million (fair value of $4 million) and two securities with amortized cost of $14 million (fair value of $14 million) that have been categorized based on expected NAIC designation pending receipt of SVO ratings.

 NAIC Designation Rating Agency Equivalent Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value
 
     (in millions)
 As of June 30, 2019:          
 1 Aaa, Aa, A $36,232
 $2,196
 $56
 $38,372
 2 Baa 16,828
 834
 38
 17,624
   Investment grade 53,060
 3,030
 94
 55,996
 3 Ba 670
 7
 7
 670
 4 B 568
 4
 12
 560
 5 Caa 14
 —
 1
 13
 6 Ca, C 3
 1
 —
 4
   Below investment grade 1,255
 12
 20
 1,247
 Total Fixed Maturities $54,315
 $3,042
 $114
 $57,243
            
 As of December 31, 2018:          
 1 Aaa, Aa, A $30,805
 $587
 $835
 $30,557
 2 Baa 14,541
 202
 437
 14,306
   Investment grade 45,346
 789
 1,272
 44,863
 3 Ba 589
 1
 18
 572
 4 B 489
 1
 22
 468
 5 Caa 18
 1
 1
 18
 6 Ca, C 5
 1
 1
 5
   Below investment grade 1,101
 4
 42
 1,063
 Total Fixed Maturities $46,447
 $793
 $1,314
 $45,926


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Private Fixed Maturities Credit Quality.Mortgage Loans
The following table sets forth the General Account’s private fixed maturities portfolios by NAIC rating at the dates indicated.
Private Fixed Maturities
NAIC Designation(1)
 Rating Agency Equivalent Amortized Cost Gross Unrealized Gains Gross Unrealized Losses  Fair Value
   (in millions)
At March 31, 2018:         
1Aaa, Aa, A $4,638
 $71
 $44
 $4,665
2Baa 3,683
 71
 52
 3,702
 Investment grade 8,321
 142
 96
 8,367
3Ba 346
 1
 6
 341
4B 331
 1
 10
 322
5C and lower 18
 —
 —
 18
6In or near default 1
 2
 —
 3
 Below investment grade 696
 4
 16
 684
Total Private Fixed Maturities $9,017
 $146
 $112
 $9,051
          
At December 31, 2017:         
1Aaa, Aa, A $4,356
 $122
 $12
 $4,466
2Baa 3,610
 123
 10
 3,723
 Investment grade 7,966
 245
 22
 8,189
3Ba 358
 2
 4
 356
4B 315
 2
 7
 310
5C and lower 17
 1
 —
 18
6In or near default 2
 2
 —
 4
 Below investment grade 692
 7
 11
 688
Total Private Fixed Maturities  $8,658
 $252
 $33
 $8,877
(1)Includes, asmortgage portfolio primarily consists of March 31, 2018 and December 31, 2017, respectively, 23 securities with amortized cost of $377 million (fair value, $368 million) and 24 securities with amortized cost of $541 million (fair value, $543 million) that have been categorized based on expected NAIC designation pending receipt of SVO ratings.



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Corporate Fixed Maturities Credit Quality.
The following table sets forth the General Account’s public and private holdings of corporate fixed maturities by NAIC rating at the dates indicated.
Corporate Fixed Maturities 
NAIC Designation(1)
Rating Agency  Equivalent Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value
   (in millions)
At March 31, 2018:         
1Aaa, Aa, A $14,329
 $300
 $214
 $14,415
2Baa 11,211
 313
 168
 11,356
 Investment grade 25,540
 613
 382
 25,771
         

3Ba 594
 2
 8
 588
4B 449
 1
 15
 435
5C and lower 21
 —
 —
 21
6In or near default 2
 2
 —
 4
 Below investment grade 1,066
 5
 23
 1,048
Total Corporate Fixed Maturities $26,606
 $618
 $405
 $26,819
          
At December 31, 2017:         
1Aaa, Aa, A $13,517
 $508
 $29
 $13,996
2Baa 10,543
 510
 19
 11,034
 Investment grade 24,060
 1,018
 48
 25,030
3Ba 660
 7
 9
 658
4B 432
 3
 8
 427
5C and lower 19
 —
 —
 19
6In or near default 7
 3
 —
 10
 Below investment grade 1,118
 13
 17
 1,114
Total Corporate Fixed Maturities $25,178
 $1,031
 $65
 $26,144
(1)Includes, as of March 31, 2018 and December 31, 2017, respectively, 24 securities with amortized cost of $310 million (fair value, $304 million) and 25 securities with amortized cost of $484 million (fair value, $484 million) that have been categorized based on expected NAIC designation pending receipt of SVO ratings.

Asset-backed Securities
As of March 31, 2018, the amortized cost and fair value of asset backed securities held were $675 million and $675 million, respectively. As of December 31, 2017, the amortized cost and fair value of asset-backed securities held were $745 million and $749 million, respectively.


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Commercial Mortgage-backed Securities
At March 31, 2018 and December 31, 2017 there were no General Account commercial mortgage-backed securities outstanding.
Mortgages
Investment Mix
As of March 31, 2018 and December 31, 2017, respectively, approximately 13.3% and 12.7%, respectively, of invested assets were in commercial and agricultural mortgage loans. The table below shows the composition of the commercial and agricultural mortgage loan portfolio, before the loss allowance, as of the dates indicated.
 March 31, 2018 December 31, 2017
 (in millions)
Commercial mortgage loans$8,755
 $8,386
Agricultural mortgage loans2,585
 2,574
Total mortgage loans$11,340
 $10,960
The investment strategy for the mortgage loan portfolio emphasizes diversification by property type and geographic location with a primary focus on asset quality. The tables below show the breakdown of the amortized cost of the General Account’s investments in mortgage loans by geographic region and property type as of the dates indicated.


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Mortgage Loans by Region and Property Type
 March 31, 2018 December 31, 2017
 Amortized  Cost % of Total Amortized  Cost % of Total
 (Dollars in millions)
By Region:       
U.S. Regions:       
Pacific$3,308
 29.2% $3,264
 29.8%
Middle Atlantic3,108
 27.4
 2,958
 27.0
South Atlantic1,266
 11.2
 1,096
 10.0
East North Central929
 8.2
 917
 8.4
Mountain812
 7.1
 800
 7.3
West North Central769
 6.8
 778
 7.1
West South Central507
 4.5
 499
 4.5
New England459
 4.0
 460
 4.2
East South Central182
 1.6
 188
 1.7
Total Mortgage Loans$11,340
 100.0% $10,960
 100.0%
By Property Type:       
Office Buildings$3,767
 33.2% $3,639
 33.2%
Apartment Complexes3,200
 28.2
 3,014
 27.5
Agricultural properties2,585
 22.8
 2,574
 23.5
Retail stores695
 6.1
 647
 5.9
Hospitality426
 3.8
 417
 3.8
Industrial325
 2.9
 326
 3.0
Other342
 3.0
 343
 3.1
Total mortgage loans$11,340
 100.0% $10,960
 100.0%
As of March 31, 2018 and December 31, 2017, respectively, the General Account investments in commercial mortgage loans had a weighted average loan-to-value ratio of 59% and 59%, respectively, while the agricultural mortgage loans weighted average loan-to-value ratio was 46% and 46%, respectively.


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The following tables provide information relating to the loan-to-value and debt service coverage ratios for commercial and agricultural mortgage loans as of March 31, 2018 and December 31, 2017, respectively. The values used in these ratio calculations were developed as part of the periodic review of the commercial and agricultural mortgage loan portfolio, which includes an evaluation of the underlying collateral value.
Mortgage Loans by Loan-to-Value and Debt Service Coverage Ratios
 June 30, 2019 December 31, 2018
 
Amortized
Cost
 % of Total 
Amortized
Cost
 % of Total
 (in millions)
By Region:       
U.S. Regions:       
Pacific$3,490
 28.4% $3,288
 27.7%
Middle Atlantic3,242
 26.4
 3,183
 26.9
South Atlantic1,364
 11.1
 1,207
 10.2
East North Central982
 8.0
 963
 8.1
Mountain1,023
 8.3
 1,014
 8.6
West North Central915
 7.5
 910
 7.7
West South Central578
 4.7
 578
 4.9
New England555
 4.5
 556
 4.7
East South Central139
 1.1
 143
 1.2
Total Mortgage Loans$12,288
 100.0% $11,842
 100.0%
By Property Type:       
Office$4,052
 33.0% $3,977
 33.6%
Multifamily3,682
 30.0
 3,440
 29.0
Agricultural loans2,746
 22.3
 2,695
 22.8
Retail666
 5.4
 667
 5.6
Industrial416
 3.4
 333
 2.8
Hospitality382
 3.1
 384
 3.3
Other344
 2.8
 346
 2.9
Total Mortgage Loans$12,288
 100.0% $11,842
 100.0%
March 31, 2018
 
Debt Service Coverage Ratio(1)
  
Loan-to-Value Ratio(2)
Greater
than  2.0x
 
1.8x  to
2.0x
 
1.5x  to
1.8x
 
1.2x  to
1.5x
 
1.0x  to
1.2x
 
Less
than
1.0x
 
Total
Mortgage
Loans
 (in millions)
0% - 50%$1,012
 $174
 $597
 $569
 $321
 $29
 $2,702
50% - 70%4,588
 689
 1,341
 759
 406
 48
 7,831
70% - 90%169
 110
 144
 330
 27
 —
 780
90% plus—
 —
 27
 —
 —
 —
 27
Total commercial and agricultural mortgage loans$5,769
 $973
 $2,109
 $1,658
 $754
 $77
 $11,340
(1)The debt service coverage ratio is calculated using actual results from property operations.
(2)The loan-to-value ratio is derived from current loan balance divided by the fair market value of the property. The fair market value of the underlying commercial properties is updated annually.

December 31, 2017
 
Debt Service Coverage Ratio(1)
  
Loan-to-Value Ratio(2)
Greater
than 2.0x
 
1.8x to
2.0x
 
1.5x to
1.8x
 
1.2x to
1.5x
 
1.0x to
1.2x
 
Less than
1.0x
 
Total Mortgage
Loans
 (in millions)
0% - 50%$1,031
 $149
 $595
 $589
 $316
 $30
 $2,710
50% - 70%4,199
 728
 1,293
 787
 366
 49
 7,422
70% - 90%169
 110
 196
 276
 50
 —
 801
90% plus—
 —
 27
 —
 —
 —
 27
Total commercial and agricultural mortgage loans$5,399
 $987
 $2,111
 $1,652
 $732
 $79
 $10,960
(1)The debt service coverage ratio is calculated using actual results from property operations.
(2)The loan-to-value ratio is derived from current loan balance divided by the fair market value of the property. The fair market value of the underlying commercial properties is updated annually.





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The tables below show the breakdown of the commercial and agricultural mortgage loans by year of origination at March 31, 2018 and December 31, 2017, respectively.
Mortgage Loans by Year of Origination
 March 31, 2018
Year of OriginationAmortized Cost % of Total
 (in millions)
2018$391
 3.5%
20172,043
 18.0
20163,305
 29.1
20151,556
 13.7
20141,174
 10.4
2013 and prior2,871
 25.3
Total mortgage loans$11,340
 100.0%
 December 31, 2017
Year of OriginationAmortized Cost % of Total
 (in millions)
2017$2,026
 18.5%
20163,298
 30.1
20151,551
 14.2
20141,170
 10.7
20131,485
 13.5
2012 and prior1,430
 13.0
Total mortgage loans$10,960
 100.0%
At March 31, 2018 and December 31, 2017, respectively, $66 million and $49 million of mortgage loans were classified as problem loans while $0 million and $0 million were classified as potential problem loans.
Valuation allowances for the commercial mortgage loan portfolio were related to loan specific reserves. The following table sets forth the change in valuation allowances for the commercial mortgage loan portfolio as of the dates indicated. There were no valuation allowances for agricultural mortgages at March 31, 2018 and March 31, 2017.
Commercial Mortgage Loans
 2018 2017
Allowance for credit losses:(in millions)
Beginning Balance, January 1$8
 $8
Charge-offs—
 —
Recoveries(1) —
Provision—
 —
Ending Balance, March 31$7
 $8
Ending Balance, March 31:   
Individually Evaluated for Impairment$7
 $8


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Other Equity Investments
At March 31, 2018 and December 31, 2017, private equity partnerships, hedge funds and real-estate related partnerships were 98.8% and 87.5%, respectively of total other equity investments. These interests, which represent 1.5% and 1.3%, respectively of GAIA, consist of a diversified portfolio of LBO mezzanine, venture capital and other alternative limited partnerships, diversified by sponsor, fund and vintage year. The portfolio is actively managed to control risk and generate investment returns over the long term. Portfolio returns are sensitive to overall market developments.
Other Equity Investments - Classifications
 March 31, 2018 December 31, 2017
 (in millions)
Common stock$13
 $158
Joint ventures and limited partnerships:   
Private equity963
 927
Hedge funds152
 179
Total Other Equity Investments$1,128
 $1,264
As a result of the adoption of the Recognition and Measurement of Financial Assets and Financial Liabilities standard on January 1, 2018 (Financial Instruments Recognition and Measurement Standard), equity securities are no longer classified and accounted for as available for sale securities.
Derivatives
We use derivatives as part of our overall asset/liability risk management primarily to reduce exposures to equity market and interest rate risks. Derivative hedging strategies are designed to reduce these risks from an economic perspective and are all executed within the framework of a Derivative Use Plan (“DUP”) approved by applicable states’ insurance law. Derivatives are generally not accounted for using hedge accounting. Operation of these hedging programs is based on models involving numerous estimates and assumptions, including, among others, mortality, lapse, surrender and withdrawal rates, election rates, fund performance, market volatility and interest rates. A wide range of derivative contracts are used in these hedging programs, including exchange traded equity, currency and interest rate futures contracts, total return swaps on equity, bond and Treasury indices, total return swaps on single U.S. Treasury Securities, interest rate swaps bond and bond-index total return swaps, swaptions, variance swaps, equity options, credit and foreign exchange derivatives, as well as bond and repo transactions to support the hedging.
Derivatives used to hedge exposure to variable annuity products with GMxB features
We have issued and continue to offer certain variable annuity products with GMxB features. The risk associated with the GMDB feature is that under-performance of the financial markets could result in GMDB benefits, in the event of death, being higher than what accumulated policyholders’ account balances would support. The risk associated with the GMLB features is that under-performance of the financial markets could result in the GMLB features’ benefits being higher than what accumulated policyholders’ account balances would support.
For GMxB features, we retain certain risks including basis, credit spread and some volatility risk and risk associated with actual versus expected actuarial assumptions for mortality, lapse and surrender, withdrawal, policyholder election rates and other behaviors. The derivative contracts are managed to correlate with changes in the value of the GMxB features that result from financial markets movements. A portion of exposure to realized equity volatility is hedged using equity options and variance swaps and a portion of exposure to credit risk is hedged using total return swaps on fixed income indices. Additionally, we are party to total return swaps for which the reference U.S. Treasury securities are contemporaneously purchased from the market and sold to the swap counterparty. As these transactions result in a transfer of control of the U.S. Treasury securities to the swap counterparty, we derecognize these securities with consequent gain or loss from the sale. We have also purchased reinsurance


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contracts to mitigate the risks associated with GMDB features and the impact of potential market fluctuations on future policyholder elections of GMIB features contained in certain annuity contracts issued by us.
Derivatives used to hedge crediting rate exposure on SCS, SIO, MSO and IUL products/investment options
We hedge crediting rates in SCS, SIO in the EQUI-VEST variable annuity product series, MSO in the variable life insurance products and IUL insurance products. These products permit the contract owner to participate in the performance of an index, ETF or commodity price movement up to a cap for a set period of time. They also contain a protection feature, in which we will absorb, up to a certain percentage, the loss of value in an index, ETF or commodity price, which varies by product segment.
In order to support the returns associated with these features, we enter into derivative contracts whose payouts, in combination with fixed income investments, emulate those of the index, ETF or commodity price, subject to caps and buffers.
Other derivatives based hedges
From time to time and depending on market and other conditions we hedge additional risks not otherwise covered by our variable annuity product hedge programs. Such hedge programs include:
the net duration of our General Account economic liability and assets;
expected income from fees on Separate Account AUM against declines in equity markets;
the economic impact of lower interest-rates on expected variable annuity product sales;
the equity exposure of General Account assets; and
the credit exposure of General Account assets.
Derivatives utilized for General Account investment portfolio
We maintain a strategy in our General Account investment portfolio reflects certain differences from the presentation of the U.S. GAAP Consolidated Financial Statements. This presentation is consistent with how we manage the General Account investment portfolio. For further investment information, please refer to replicate the exposure of fixed maturity securities otherwise permissible for investment under our investment guidelines. Examples include corporate bond exposure replicated through the sale of credit default swaps together with the purchase of a Treasury bondNote 3 and Treasury bond exposure replicated through the sale of an asset swap and the purchase the bond referencedNote 4 in the asset swap.
These asset swaps, when considered in combination with the bonds, result a yield higher than a term-equivalent U.S. Treasury bond.
The tables below present quantitative disclosures about our derivative instruments, including those embedded in other contracts required to be accounted for as derivative instruments.


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Derivative Instruments by Category
 At March 31, 2018
   Fair Value Gains (Losses) Reported in Net Earnings (Loss) Three Months Ended March 31, 2018
 
Notional
Amount  
 
Asset
Derivatives  
 
Liability
Derivatives  
 
 (in millions)
Freestanding derivatives       
Equity contracts:(1)
       
Futures$6,450
 $—
 $—
 $(24)
Swaps7,881
 253
 15
 112
Options23,013
 3,350
 1,411
 (18)
Interest rate contracts:(1)
       
Floors—
 —
 —
 —
Swaps29,281
 555
 394
 (672)
Futures24,015
 —
 —
 40
Swaptions—
 —
 —
 —
Credit contracts:(1)
       
Credit default swaps2,057
 30
 1
 —
Other freestanding contracts:(1)
       
Foreign currency contracts1,623
 1
 44
 (51)
Margin
 59
 57
 

Collateral
 16
 2,207
 
Embedded derivatives:       
GMIB reinsurance contracts(4)
—
 1,734
 —
 (161)
GMxB derivative features liability(2,4)
—
 —
 3,977
 (460)
SCS, SIO, MSO and IUL indexed features(3,4)
—
 —
 1,683
 (279)
Total$94,320
 $5,998
 $9,789
 $(1,513)
(1)Reported in Other invested assets in the consolidated balance sheets.
(2)Reported in Future policy benefits and other policyholders’ liabilities in the consolidated balance sheets.
(3)SCS and SIO indexed features are reported in Policyholders’ account balances; MSO and IUL indexed features are reported in the Future policyholders’ benefits and other policyholders’ liabilities in the consolidated balance sheets.
(4)Reported in Net derivative gains (losses) in the consolidated statements of income (loss).



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Derivative Instruments by Category
 At December 31, 2017 
Gains (Losses) Reported in Net Earnings (Loss)
March 31, 2017
   Fair Value 
 Notional
Amount  		 Asset
Derivatives  		 Liability
Derivatives  		 
 (in millions)
Freestanding derivatives       
Equity contracts:(1)
       
Futures$6,552
 $—
 $—
 $(391)
Swaps7,555
 3
 200
 (403)
Options22,223
 3,456
 1,457
 318
Interest rate contracts:(1)
       
Floors—
 —
 —
 —
Swaps26,725
 603
 192
 143
Futures20,675
 —
 —
 (19)
Credit contracts:(1)
       
Credit default swaps2,057
 34
 2
 6
Other freestanding contracts:(1)
       
Foreign currency contracts1,297
 11
 2
 —
Margin—
 18
 4
 —
Collateral—
 4
 2,123
 —
Embedded derivatives:       
GMIB reinsurance contracts(4)
—
 1,894
 —
 (514)
GMxB derivative features liability(2,4)
—
 —
 4,358
 (58)
SCS, SIO, MSO and IUL indexed features(3,4)
—
 —
 1,786
 (301)
Total$87,084
 $6,023
 $10,124
 $(1,219)

(1)Reported in Other invested assets in the consolidated balance sheets.
(2)Reported in Future policy benefits and other policyholders’ liabilities in the consolidated balance sheets.
(3)SCS and SIO indexed features are reported in Policyholders’ account balances; MSO and IUL indexed features are reported in the Future policyholders’ benefits and other policyholders’ liabilities in the consolidated balance sheets.
(4)Reported in Net derivative gains (losses) in the consolidated statements of income (loss).
Realized Investment Gains (Losses)
Realized investment gains (losses) are generated from numerous sources, including the sale of fixed maturity securities, equity securities, investments in limited partnerships and other types of investments, as well as adjustmentsNotes to the cost basis of investments for OTTI. Realized investment gains (losses) are also generated from prepayment premiums received on private fixed maturity securities, recoveries of principal on previously impaired securities, provisions for losses on commercial mortgage and other loans, fair value changes on commercial mortgage loans carried at fair value, and fair value changes on embedded derivatives and free-standing derivatives that do not qualify for hedge accounting treatment.Consolidated Financial Statements.



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The following table sets forth “Realized investment gains (losses), net,” for the periods indicated:
Realized Investment Gains (Losses), Net
 Three Months Ended March 31,
 2018 2017
 (in millions)
Fixed maturities$109
 $(6)
Other equity investments—
 4
Other—
 —
Total$109
 $(2)

The following table further describes realized gains (losses), net for Fixed maturities for the periods indicated:
Fixed Maturities
Realized Investment Gains (Losses)
 Three Months Ended March 31,
 2018 2017
 (in millions)
Gross realized investment gains:   
Gross gains on sales and maturities$161
 $20
Other—
 —
Total gross realized investment gains161
 20
Gross realized investment losses:   
Other-than-temporary impairments recognized in income (loss)—
 —
Gross losses on sales and maturities(52) (26)
Total gross realized investment losses(52) (26)
Total$109
 $(6)

Other-Than-Temporary Impairments Recorded in Earnings (Losses)
At March 31, 2018 and 2017, there were no General Account other-than-temporary impairments recorded in Income (Loss).




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LIQUIDITY AND CAPITAL RESOURCESLiquidity and Capital Resources
Liquidity refers to our ability to generate adequate amounts of cash from our operating, investment and financing activities to meet our cash requirements with a prudent margin of safety. Capital refers to our long-term financial resources available to support business operations and future growth. Our ability to generate and maintain sufficient liquidity and capital is dependent on the profitability of our businesses, timing of cash flows related to our investments and products, our ability to access the capital markets, general economic conditions and the alternative sources of liquidity and capital described herein. When considering our liquidity and cash flows, it is important to distinguish between the needs of Holdings and the needs of our insurance and non-insurance subsidiaries. We also distinguish and separately manage the liquidity and capital resources of our retirement and protection businesses, including our Individual Retirement, Group Retirement and Protection Solutions segments, and our Investment Management and Research segment.
Sources and Uses of Liquidity and Capital Position of Holdings
As a holding company with no business operations of its own, Holdings primarily derives cash flows from dividends and interest payments from its insurance subsidiaries and distributions related to its economic interest in AB, more than halfnearly all of which is currently held outside our insurance company subsidiaries, after giving effect to the AB Reorganization Transactions.subsidiaries. These principal sources of liquidity are augmented by cash and short-term investments held by Holdings and access to bank lines of credit and the capital markets. The main uses of liquidity for Holdings are interest payments and debt repayment, payment of dividends and other distributions to stockholders, which may include stock repurchases, and capital contributions, if needed, to our insurance subsidiaries. Our principal sources of liquidity and our capital position are described in the following paragraphs.
Historical

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Cash Distributions from Our Subsidiaries
From 2014 to 2016,In 2019, Holdings and AXA Financialhas received net cash distributions from ourAB of $221 million and $1.0 billion in dividends from AXA Equitable Life. Also, Holdings received $576 million from AXA Equitable Life as repayment of principal of $572 million and interest of $4 million related to a $572 million surplus note. In 2018, Holdings received net cash distributions from subsidiaries of $2.6$1.4 billion. These net cash distributions comprised of $1.1 billion in dividends and principal payments on surplus notes from our insurance subsidiaries, ($1.2 billion, $1.0 billion and $1.1 billion$255 million in 2014, 2015 and 2016, respectively), distributions from AB ($70and $45 million $72 million and $85 million in 2014, 2015 and 2016, respectively) and distributions from AXA Advisors ($30 million, $30 million and $33 million in 2014, 2015 and 2016, respectively), partially offset by a contribution by AXA Financial to AXA RE Arizona to enhance its balance sheet and liquidity position. In addition, AXA Financial also received dividends of $85 million in 2015 related to certain real estate assets. During this period, we also received $1.9 billion of net proceeds from the sale of certain real estate assets by AXA Financial. In 2017, in accordance with our agreement with the New York State Department of Financial Services (the “NYDFS”) and in preparation for the IPO, Holdings and AXA Financial collectively made $2.3 billion in aggregate capital contributions to AXA Equitable Life and AXA RE Arizona, and AXA Financial received a $124 million distribution on the AB Units held by it and a $74 million distribution from AXA Advisors and U.S. Financial Life Insurance Company.Advisors.
Distributions from Insurance Subsidiaries
Our insurance companies are subject to limitations on the payment of dividends and other transfers of funds to Holdings and other affiliates under applicable insurance law and regulation. Also, more generally, the ability of our insurance subsidiaries to pay dividends can be affected by market conditions and other factors beyond our control.
Under New York insurance law applicable to AXA Equitable Life, a domestic stock life insurer may not, without prior approval of the NYDFS, pay a dividend to its stockholders exceeding an amount calculated under one of two standards. The first standard allows payment of an ordinary dividend out ofeither the insurer’s earned surplus (as reported onEarned Surplus Standard or the insurer’s most recent annual statement) up to a limit calculated pursuant to a statutory formula, provided that the NYDFS is given notice and opportunity to disapprove the dividend if certain qualitative tests are not met (the “Earned Surplus Standard”). The second standard allows payment of an ordinary dividend up to a limit calculated pursuant to a different statutory formula without regard to the insurer’s earned surplus (the “Alternative Standard”).Alternative Standard. Dividends exceeding these prescribed limits require the insurer to file a notice of its intent to declare the dividends with the NYDFS and prior approval or non-disapproval from the NYDFS.
Applying the formulas under these standards and the definition of earned surplus used in the Earned Surplus Standard, AXA Equitable Life could pay ordinary dividends of up to approximately $1.2 billion during 2018 and could have paid ordinary dividends of up to approximately $1.2 billion during 2017. However, Also, in 2016, the NYDFS issued a circular letter to its regulated insurance companies stating that ordinary dividends which exceed an insurer’s positive unassigned funds (as reported on the


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insurer’s most recent annual statement) may fail one of the qualitative tests imposed by the Earned Surplus Standard. Given the circular letter, it is possible that the NYDFS could limit the amount of ordinary dividends declared by AXA Equitable Life under the Earned Surplus Standard to the amount of AXA Equitable Life’s positive unassigned funds. As
In December 2018, AXA Equitable Life transferred its interests in ABLP, AB Holding and the General Partner to a newly formed subsidiary and distributed the shares of December 31, 2017that subsidiary to its direct parent which subsequently distributed such shares to Holdings (the “AB Ownership Transfer”). In connection with the AB Ownership Transfer, AXA Equitable Life paid an extraordinary cash dividend of $572 million and December 31, 2016,issued a surplus note to Holdings in the same amount. AXA Equitable Life repaid the outstanding principal balance of the surplus note in March 2019.
Applying the formulas under the dividend standards above, AXA Equitable Life could pay ordinary dividends in 2019 of up to $2.1 billion under the Earned Surplus Standard, assuming the amount was limited to the amount of AXA Equitable Life’s positive unassigned funds reported on its statutory financial statements were approximately $1.9 billion and $0.9 billion, respectively.
Inas described above. However, in connection with the second quarter of 2017,AB Ownership Transfer, AXA Equitable Life agreed with the NYDFS that until it (i) filed a plan with respect to the management of our variable annuity business ceded to AXA RE Arizona with the NYDFS and (ii) fully implement that plan (the “DFS Conditions”), it would pay ordinary dividends onlynot seek a dividend of greater than $1.0 billion under the Earned Surplus Standard.
Standard during 2019. The completionrepayment of the unwind$572 million surplus note and interest of $4 million in March 2019 and the reinsurance provided to$1.0 billion dividend paid in July 2019 resulted in a total cash payout from AXA Equitable Life by AXA RE Arizona for certain variable annuities with GMxB features (the “GMxB Unwind”), which occurred on April 12, 2018, satisfied the DFS Conditions, and, going forward, satisfaction of either the Earned Surplus Standard or Alternative Standard will determine AXA Equitable Life’s ability to pay ordinary dividends. Our other insurance subsidiaries that reside outside of New York are subject to legal restrictions on dividends similar to those described above under New York law, though the specifics of such rules vary from state to state.$1.6 billion in 2019.
Distributions from AllianceBernstein
ABLP is required to distribute all of its Available Cash Flow, as defined in the Amended and Restated Partnership Agreement of ABLP, to the holders of AB Units and to the General Partner. Available Cash Flow can be summarized as the cash flow received by ABLP from operations minus such amounts as the General Partner determines, in its sole discretion, should be retained by ABLP for use in its business, or plus such amounts as the General Partner determines, in its sole discretion, should be released from previously retained cash flow. Distributions by ABLP are made 1% to the General Partner and 99% among the limited partners.
Typically, Available Cash Flow has been the adjusted diluted net income per unit for the quarter multiplied by the number of general and limited partnership interests at the end of the quarter. In future periods, management of AB anticipates that Available Cash Flow will be based on adjusted diluted net income per unit, unless management of AB determines, with the concurrence of the Board of Directors of AB, that one or more adjustments that are made for adjusted net income should not be made with respect to the Available Cash Flow calculation.
AB Holding is required to distribute all of its Available Cash Flow, as defined in the Amended and Restated Agreement of Limited Partnership of AB Holding, to holders of units representing assignments of beneficial ownership of limited partnership interests in AB Holding (“AB Holding Units”)Units pro rata in accordance with their percentage interestsinterest in AB Holding. Available Cash Flow is defined as the cash distributions AB Holding receives from ABLP minus such amounts as the General Partner determines, in its sole discretion, should be retained by AB Holding for use in its business (such as the payment of taxes) or plus such amounts as the General Partner determines, in its sole discretion, should be released from previously retained cash flow. AB Holding is dependent on the quarterly cash distributions it receives from ABLP, which is subject to the performance of capital markets and other factors beyond our control. Distributions from AB Holding are made pro rata based on the holder’s percentage ownership interest in AB Holding.
Following the AB Reorganization Transactions,

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Holdings and its non-insurance company subsidiaries now hold 93.1approximately 170 million AB Units, and 2.3 million AB Holding Units directly, while 77 million AB Units, 1.44 million AB Holding Units and the 1% General Partnership interest in ABLP. MLOA holds 2.6 million AB are now held by AXA Equitable Life andUnits. Because MLOA two of our insurance company subsidiaries. Because AXA Equitable Life and MLOA areis subject to regulatory restrictions on the amount of dividends it may pay, distributions they receiveit receives from AB may not be distributable to Holdings.
As of March 31, 2018,June 30, 2019, the ownership structure of ABLP, including AB Units outstanding as well as the general partner’s 1% interest, was as follows:
AXAOwnerPercentage Ownership
Holdings and its non-insurance subsidiaries63.062.7%
MLOA1.0%
AB Holding35.8
35.6		%
Unaffiliated holders1.2
0.7		%
Total 100.0%
Including both the general partnership and limited partnership interests in AB Holding and ABLP, AXAHoldings and its subsidiaries had an approximate 64.4%65% economic interest in AB as of MarchJune 30, 2019.
Holdings Credit Facilities
We have a $2.5 billion five-year senior unsecured revolving credit facility (the “Revolver”), which may provide significant support to our liquidity position when alternative sources of credit are limited. In addition to the Revolver, we entered into letter of credit facilities with an aggregate principal amount of approximately $1.9 billion (the “LOC Facilities”), primarily to be used to support our life insurance business reinsured to EQ AZ Life Re in April 2018.
The Revolver and LOC Facilities contain certain administrative, reporting, legal and financial covenants, including requirements to maintain a specified minimum consolidated net worth and to maintain a ratio of indebtedness to total capitalization not in excess of a specified percentage, and limitations on the dollar amount of indebtedness that may be incurred by our subsidiaries and the dollar amount of secured indebtedness that may be incurred by us, which could restrict our operations and use of funds. The right to borrow funds under the Revolver and LOC Facilities is subject to the fulfillment of certain conditions, including compliance with all covenants, and the ability to borrow thereunder is also subject to the continued ability of the lenders that are or will be parties to the facilities to provide funds. As of June 30, 2019, we were in compliance with these covenants. For additional information regarding the covenants in the facilities and the conditions to borrowing thereunder, see “Part I Item 1A-Risk Factors” in the Annual Report on Form 10-K for the year ended December 31, 2018.

Contingent Funding Arrangements

In April 2019, pursuant to separate Purchase Agreements among Holdings, Credit Suisse Securities (USA) LLC, as representative of the several initial purchasers, and the Trusts (as defined below), Pine Street Trust I, a Delaware statutory trust (the “2029 Trust”), completed the issuance and sale of 600,000 of its Pre-Capitalized Trust Securities redeemable February 15, 2029 (the “2029 P-Caps”) for an aggregate purchase price of $600 million and Pine Street Trust II, a Delaware statutory trust (the “2049 Trust” and, together with the 2029 Trust, the “Trusts”), completed the issuance and sale of 400,000 of its Pre-Capitalized Trust Securities redeemable February 15, 2049 (the “2049 P-Caps” and, together with the 2029 P-Caps, the “P-Caps”) for an aggregate purchase price of $400 million, in each case to qualified institutional buyers in reliance on Rule 144A that are also “qualified purchasers” for purposes of Section 3(c)(7) of the Investment Company Act of 1940, as amended. The P-Caps are a contingent funding arrangement that, upon Holdings’ election, gives Holdings the right over a ten-year period (in the case of the 2029 Trust) or over a thirty-year period (in the case of the 2049 Trust) to issue senior notes to the Trusts. The Trusts each invested the proceeds from the sale of their P-Caps in separate portfolios of principal and/or interest strips of U.S. Treasury securities.
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Capital Position Following the IPO
We manage our capital position to maintain financial strength and credit ratings that facilitate the distribution of our products and provide our desired level of access to the bank and public financing markets. Our capital position is supported by the ability of our subsidiaries to generate cash flows and distribute cash to us and our ability to effectively manage the risk of our businesses and to borrow funds and raise capital to meet our operating and growth needs.
We have historically operated with a capital structure that reflected our status as a wholly owned subsidiary

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Table of AXA, including relying on financing provided or guaranteed by AXA and its affiliates. To meet our target capitalization following the IPO, we have taken certain significant actions that have impacted our liquidity and capital position and that align our capital structure more closely with other U.S. public companies. These actions include:Contents
issuing debt securities to third party investors: (i) $800 million aggregate principal amount of 3.900% Senior Notes due 2023, (ii) $1.5 billion aggregate principal amount of 4.350% Senior Notes due 2028 and (iii) $1.5 billion aggregate principal amount of 5.000% Senior Notes due 2048, to replace intercompany financing that is provided or guaranteed by AXA and its affiliates, among other things;
arranging additional contingent financing facilities, including (i) letter of credit facilities with an aggregate principal amount of $1.9 billion, primarily to be used to support our life insurance business reinsured to EQ AZ Life Re following the GMxB Unwind, (ii) a five-year senior unsecured revolving credit facility for an amount of approximately $2.5 billion, and (iii) a three-year senior unsecured term loan facility of up to $500 million;
borrowing $300 million under our three-year term loan agreement;
terminating the outstanding balance issued under AXA Financial’s commercial paper program;
(i) a capital contribution of $318 million and (ii) the $622 million loan from AXA, which was set off against AXA’s payment obligation to Holdings with respect to the sale of AXA CS shares;
increasing the statutory capital and reserves of our retirement and protection businesses by approximately $2.3 billion in 2017;
selling AXA Equitable Life’s interest in two real estate joint ventures to AXA France for a total purchase price of $143 million, which resulted in the elimination of $203 million of long-term debt on Holdings’ consolidated balance sheet for the first quarter of 2018 and a corresponding reduction of our debt-to-capital ratio; and
implementing the Reorganization Transactions (as defined in the Prospectus) which included the direct or indirect acquisition of an additional 18.7% economic interest in AB and the GMxB Unwind.
Waiver Letter Agreements
In April 2018, we entered into waiver letter agreements with the lenders under each of our credit facilities and the letter of credit facilities, pursuant to which the lenders waived certain defaults or events of default under such facilities resulting from the restatement of our annual financial statements for the year ended December 31, 2016, the restatement of our interim financial statements for the nine months ended September 30, 2017 and for the six months ended June 30, 2017, the failure to furnish audited financial statements for the year ended December 31, 2017 on a timely basis as required by such facilities and related matters. There can be no assurance that our lenders will provide such waivers in the future. For a discussion of the restatement to our 2016 annual financial statements, see Note 1 to the Notes to Consolidated Financial Statements included in the Prospectus.
Capital Management
Prior to the IPO, as a wholly owned subsidiary of AXA, we adopted and abided by capital management policies determined by AXA and managed by AXA on a worldwide basis. Following the IPO, our board of directors (the “Board”)Our Board and senior management are directly involved in the development of our capital management policies. Accordingly, capital actions, including proposed changes to the annual capital plan, capital targets and capital policies, are approved by the Board.

Dividend Declared and Paid

On February 14, 2019 and May 23, 2019, Holdings’ Board of Directors declared a cash dividend on Holdings’ common stock of $0.13 and $0.15 per share, respectively, payable on March 15, 2019 and June 11, 2019 to shareholders of record as of March 5, 2019 and June 3, 2019, respectively. On August 8, 2019, Holdings’ Board of Directors declared a cash dividend on Holdings’ common stock of $0.15 per share, payable on August 29, 2019 to shareholders of record as of August 22, 2019.
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future dividends is subject to the discretion of our Board of Directors and depends on our financial condition, results of operations, cash requirements, future prospects, regulatory restrictions on the payment of dividends by Holdings’ insurance subsidiaries and other factors deemed relevant by the Board. 

Share Repurchase Program
On February 27, 2019, Holdings’ Board of Directors authorized a $800 million share repurchase program. Under this authorization, Holdings, may, from time to time through December 31, 2019, purchase shares of its common stock through various means. Holdings may choose to suspend or discontinue the repurchase program at any time. The repurchase program does not obligate Holdings to purchase any particular number of shares.
On March 25, 2019, AXA completed a secondary offering of 46 million shares of common stock of Holdings and the sale to Holdings of 30 million shares of common stock of Holdings. Following the completion of the share buyback by Holdings, Holdings had $200 million remaining under its share repurchase program authorization.
Accelerated Share Repurchase Agreement
In January 2019, Holdings entered into an Accelerated Share Repurchase agreement (the “ASR”) with a third-party financial institution to repurchase an aggregate of $150 million of Holdings’ common stock. Holdings received seven million shares upon entering the ASR in January and one million shares upon settlement of the ASR, which terminated on March 1, 2019.
Sources and Uses of Liquidity of Our Insurance Subsidiaries
The principal sources of liquidity for our insurance subsidiaries are premiums, investment and fee income, deposits associated with our insurance and annuity operations, cash and invested assets, as well as internal borrowings. The principal uses of that liquidity include benefits, claims and dividends paid to policyholders and payments to policyholders in connection with surrenders and withdrawals. Other uses of liquidity include commissions, general and administrative expenses, purchases of investments, the payment of dividends to Holdings and hedging activity. Certain of our insurance subsidiaries’ principal sources and uses of liquidity are described in the paragraphs that follow.
We manage the liquidity of our insurance subsidiaries with the objective of ensuring that they are able to meet payment obligations linked to our Individual Retirement, Group Retirement and Protection Solutions businesses and to their outstanding debt and derivative positions, including in our hedging programs, without support from Holdings. We employ an asset/liability management approach specific to the requirements of each of our insurance businesses. We measure liquidity against internally-developed benchmarks that consider the characteristics of our asset portfolio and the liabilities that it supports. We consider attributes of the various categories of our liquid assets (for example, type of asset and credit quality) in calculating internal liquidity indicators for our insurance and reinsurance operations. Our liquidity benchmarks are established for various stress scenarios and durations, including company-specific and market-wide events. The scenarios we use to evaluate the liquidity of our subsidiaries are defined to allow operating entities to operate without support from Holdings.
Liquid Assets
The investment portfolios of our insurance subsidiaries are a significant component of our overall liquidity. Liquid assets include cash and cash equivalents, short-term investments, U.S. Treasury fixed maturities, fixed maturities that are not designated as held-to-maturity and public equity securities. We believe that our business operations and the liquidity profile of our assets provide sufficient liquidity under reasonably foreseeable stress scenarios for each of our insurance subsidiaries.
See “—General Account Investment Assets Portfolio” and Note 3 and Note 4 for a description of our retirement and protection businesses’ portfolio of liquid assets.


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Hedging Activities
Because the future claims exposure on our insurance products, and in particular our variable annuity products with GMxB features, is sensitive to movements in the equity markets and interest rates, we have in place various hedging and reinsurance programs that are designed to mitigate the economic risks of movements in the equity markets and interest rates. We use derivatives as part of our overall asset/liability risk management program primarily to reduce exposures to equity market and interest rate risks. In addition, we use credit derivatives to replicate exposure to individual securities or pools of securities as a means of achieving credit exposure similar to bonds of the underlying issuer(s) more efficiently. The derivative contracts are an integral part of our risk management program, especially for the management of our variable annuities program, and are collectively managed to reduce the economic impact of unfavorable movements in capital markets. These derivative transactions require liquidity to meet payment obligations such as payments for periodic settlements, purchases, maturities and terminations as well as liquid assets pledged as collateral related to any decline in the net estimated fair value. Collateral calls represent one of our biggest drivers for liquidity needs for our insurance subsidiaries. Historically, we have managed our liquidity needs related to our derivative portfolio at AXA FinancialHoldings and AXA RE Arizona on a combined basis. Due to the limited size of the AXA RE Arizona investment portfolio, we have historically supported its collateral funding needs through AXA Financial’s commercial paper program. Following the GMxB Unwind, which was effected on April 12, 2018, our derivatives contracts reside primarily within AXA Equitable Life. As AXA Equitable Life has a significantly larger investment portfolio than AXA RE Arizona had, we anticipate ahave reduced the need for overall liquidity going forward.
FHLB Membership
AXA Equitable Life is a member of the Federal Home Loan Bank of New York (“FHLBNY”), which provides AXA Equitable Life with access to collateralized borrowings and other FHLBNY products. At March 31, 2018, weJune 30, 2019, Holdings had $500 million$1.7 billion of outstanding short-term funding agreements and $2.5$2.3 billion of long-term outstanding funding agreements issued to the FHLBNY and had posted $4.5$6.3 billion securities as collateral for funding agreements. In addition, AXA Equitable Life implemented a hedge


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to lock in the funding agreements borrowing rate, and $13$11 million of hedge impact was reported as funding agreement carrying value. MLOA also becameis a member of the Federal Home Loan Bank of San Francisco in February 2018.Francisco.
Sources and Uses of Liquidity of our Investment Management and Research Segment
The principal sources of liquidity for our Investment Management and Research business include investment management fees and borrowings under its revolving credit facility and commercial paper program. The principal uses of liquidity include general and administrative expenses, business financing and distributions to holders of AB Units and AB Holding Units plus interest and debt service. The primary liquidity risk for our fee-based Investment Management and Research business is its profitability, which is impacted by market conditions and our investment management performance.
As of June 30, 2019 and December 31, 2018, AB had $443 million and $521 million, respectively, in commercial paper outstanding with weighted average interest rates of approximately 2.7% for both periods. The commercial paper is short term in nature, and as such, recorded value is estimated to approximate fair value (and considered a Level 2 security in the fair value hierarchy). Average daily borrowings of commercial paper during the first six months of 2019 and the full year 2018 were $517 million and $350 million, respectively, with weighted average interest rates of approximately 2.7% and 2.0%, respectively.
AB has a $1.0 billion$800 million committed, unsecured senior revolving credit facility (the “AB Credit Facility”) with a group of commercial banks and other lenders, whichthat matures on October 22, 2019.September 27, 2023. The credit facility provides for possible increases in the principal amount by up to an aggregate incremental amount of $250$200 million. Any such increase is subject to the consent of the affected lenders. The AB Credit Facility is available for AB and SCB LLC, for business purposes, including the support of AB’s $1.0 billion commercial paper program. Both AB and SCB LLC can draw directly under the AB Credit Facility and AB management expects to draw on the AB Credit Facility from time to time. AB has agreed to guarantee the obligations of SCB LLC under the AB Credit Facility.
The AB Credit Facility contains affirmative, negative and financial covenants, which are customary for facilities of this type, including, among other things, restrictions on dispositions of assets, restrictions on liens, a minimum interest coverage ratio and a maximum leverage ratio. As of March 31, 2018,June 30, 2019, AB was in compliance with these covenants. The AB Credit Facility also includes customary events of default (with customary grace periods, as applicable), including provisions under which, upon the occurrence of an event of default, all outstanding loans may be accelerated and/or lender’s commitments may be terminated. Also, under such provisions, upon the occurrence of certain insolvency- or bankruptcy-related events of default, all amounts payable under the AB Credit Facility would automatically become immediately due and payable, and the lender’s commitments would automatically terminate.
As of March 31, 2018June 30, 2019 and December 31, 2017,2018, AB and SCB LLC had no amounts outstanding under the AB Credit Facility. During the first threesix months of 20182019 and the full year 2017,2018, AB and SCB LLC did not draw upon the AB Credit Facility.
AB has a $200 million committed, unsecured 364-day senior revolving credit facility (the “AB Revolver”) with a leading international bank and the other lending institutions that may be party thereto.matures on November 16, 2021. The AB Revolver is available for AB’s and SCB LLC’s business purposes, including the provision of additional liquidity to meet funding requirements primarily related to SCB LLC’s operations. Both AB and SCB LLC can draw directly under the AB Revolver and management expects to draw on the AB Revolver from time to time. AB has agreed to


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guarantee the obligations of SCB LLC under the AB Revolver. The AB Revolver contains affirmative, negative and financial covenants that are identical to those of the AB Credit Facility. As of March 31, 2018,June 30, 2019, AB had no amounts outstanding under the AB Revolver. As of December 31, 2017,2018, AB had $75$25 million outstanding under the AB Revolver.Revolver with an interest rate of 3.4%. Average daily borrowing of the AB Revolver during the first threesix months of 20182019 and full year 20172018 were $22$33 million and $21$19 million, respectively, with weighted average interest rates of approximately 2.4%3.4% and 2.0%2.8%, respectively.
In addition, SCB LLC also has three uncommitted lines of credit with three financial institutions. Two of these lines of credit permit usSCB LLC to borrow up to an aggregate of $175 million, with AB named as an additional borrower, while the other line has no stated limit. As of March 31, 2018June 30, 2019 and December 31, 2017,2018, SCB LLC had no bank loans outstanding. Average daily borrowings of bank loans during first threesix months of 20182019 and full year 20172018 were $3$2 million and $5$3 million, respectively, with weighted average interest rates of approximately 1.5%1.7% and 1.4%1.6%, respectively.
Consolidated Cash FlowsFlow Analysis
We believe that cash flows from our operations on a consolidated basis are adequate to satisfy current liquidity requirements. The continued adequacy of our liquidity will depend upon factors such as future market conditions, changes in interest rate levels, policyholder perceptions of our financial strength, policyholder behavior, the effectiveness of our hedging programs, catastrophic events and the relative safety and attractiveness of competing products. Changes in any of these factors may result in reduced or increased cash outflows. Our insurance subsidiaries’ cash flows from investment activities result from repayments of principal, proceeds


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from maturities and sales of invested assets and investment income, net of amounts reinvested. The primary liquidity risks with respect to these cash flows are the risk of default by debtors or bond insurers, our counterparties’ willingness to extend repurchase agreements, commitments to invest and market volatility. We closely manage these risks through our asset/liability management process and regular monitoring of our liquidity position. Our primary sources and uses of liquidity and capital are summarized below.
Three Months Ended March 31,Six Months Ended June 30,
2018 20172019 2018
(in millions)(in millions)
Cash and Cash Equivalents, beginning of period$4,814
 $5,654
$4,469
 $4,814
Net cash provided by (used in) operating activities(264) 72
(425) (342)
Net cash provided by (used in) investing activities459
 (2,899)(2,442) 1,231
Net cash provided by financing activities1,074
 2,630
Effect of exchange rates8
 8
Net cash provided by (used in) financing activities3,132
 1,136
Net increase (decrease)265
 2,025
Effect of exchange rate changes on cash and cash equivalents—
 (6)
Cash and Cash Equivalents, end of period$6,091
 $5,465
$4,734
 $6,833
First Quarter 2018Six Months Ended June 30, 2019 Compared to First Quarter 2017Six Months Ended June 30, 2018
Cash and cash equivalents at June 30, 2019 were $4.7 billion, a decrease of $6.1$2.1 billion from $6.8 billion at March 31, 2018 increased $0.6 billion from $5.5 billion at March 31, 2017.June 30, 2018.
Net cash used in operating activities was $264$(425) million in the first quartersix months ended June 30, 2019; an increase of 2018, $336$(83) million more usage thanfrom the $72$(342) million net cash provided byused in operating activities in the first quarter of 2017.six months ended June 30, 2018. Cash flows from operating activities include such sources as premiums, investment management and advisory fees and investment income offset by such uses as life insurance benefit payments, policyholder dividends, compensation payments, other cash expenditures and tax payments.
Net cash used in investing activities was $(2.4) billion in the six months ended June 30, 2019; $3.7 billion less than the $1.2 billion net cash provided by investing activities was $459 million in the first quarter of 2018; $3.4 billion higher than the $2.9 billion net cash used in investing activities in the first quarter of 2017.six months ended June 30, 2018. The increasedecrease was primarily related to $1.8a $1.2 billion decrease in repayment of loans to affiliates, $1.2 billion lower net change in short-term investments, $591 million higher net salepurchases of investments, $553 million lower decrease for other investing activities primarily related to changes in investments of consolidated VIEs and $1.3 billion$142 million higher cash inflowsoutflows from cash settlementsettlements related to derivatives as compared to the first quarter of 2017.derivatives.
Cash flows provided by financing activities were $1.1$3.1 billion in the first quarter of 2018; $1.5six months ended June 30, 2019; $2.0 billion lowerhigher than the $2.6$1.1 billion net cash provided by financing activities in the first quarter of 2017.six months ended June 30, 2018. The decreaseincrease was primarily driven by $588the $3.0 billion decrease in repayments of loans to affiliates, the $1.3 billion lower purchases of AB Units by Holdings, $1.2 billion lower cash repayments of short-term financings, $988 million lowerhigher cash inflows due to net pledges of collateral, $575 million higher cash inflows for purchases of noncontrolling interest of consolidated company-sponsored investment funds, $255 million higher net deposits to policyholders’policyholders' account balances $470and $92 million lower cash outflows


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from the distribution to noncontrolling interest of consolidated subsidiaries. These were offset by $4.1 billion lower borrowings of public debt, $750 million cash paid to repurchase common stock, $536 million net decrease in securities sold under repurchase agreements and $126 million higher cash outflows of net repayment of loans from affiliates and $1.2 billion lower cash inflows from changes in collateral, which was largely offset by $459 million increase of repurchase agreement and commercial paper.dividends paid to shareholders.
Statutory Capital of Our Insurance Subsidiaries
Our capital management framework is primarily based on statutory RBC standards and the CTE asset standard for our variable annuity business.
RBC requirements are used as minimum capital requirements by the NAIC and the state insurance departments to evaluate the capital condition of regulated insurance companies. RBC is based on a formula calculated by applying factors to various asset, premium, claim, expense and statutory reserve items. The formula takes into account the risk characteristics of the insurer, including asset risk, insurance risk, interest rate risk, market risk and business risk and is calculated on a quarterly basis and made public on an annual basis. The formula is used as an early warning regulatory tool to identify possible inadequately capitalized insurers for purposes of initiating regulatory action, and not as a means to rank insurers generally. These rules apply to our insurance company subsidiaries and not to Holdings. State insurance laws provide insurance regulators the authority to require various actions by, or take various actions against, insurers whose total adjusted capital does not meet or exceed certain RBC


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levels. At the date of the most recent annual statutory financial statements filed with insurance regulators, the total adjusted capital of each of these insurance company subsidiaries subject to these requirements was in excess of each of those RBC levels.
CTE is a statistical measure of tail risk which quantifies the total asset requirement to sustain a loss if an event outside a given probability level has occurred. In the case of our analysis of variable annuity guarantees, CTE98 denotes the financial resources a company would need to cover the average of the worst 2% of scenarios.
We target to maintain an asset level for all variable annuity products at or above a CTE98 level under most economic scenarios.level. For our non-variable annuity insurance liabilities, we target to maintain an RBC ratio of 350%-400%–400%.
Captive Reinsurance Companies
We use captive reinsurance companies to more effectively manage our reserves and capital on an economic basis and to enable the aggregation and transfer of risks. Our captive reinsurance companies assume business from affiliates only and are closed to new business. All of our captive reinsurance companies are wholly owned subsidiaries and are located in the United States. In addition to state insurance regulation, our captives are subject to internal policies governing their activities. We continue to analyze the use of our existing captive reinsurance structures, as well as additional third-party reinsurance arrangements. On April 12, 2018, we effected an unwind of certain of our existing captive reinsurance structures as described below.
Unwind of Reinsurance of GMxB Business with a Captive Reinsurer
On April 12, 2018, we effected an unwind of our existing captive reinsurance structure between AXA Equitable Life and a captive reinsurer, AXA RE Arizona, an indirectly wholly owned subsidiary of Holdings. AXA Equitable Life ceded to AXA RE Arizona a 100% quota share of all liabilities for variable annuities with GMxB riders issued on or after January 1, 2006 and in-force on September 30, 2008 (the “GMxB Business”) and a 100% quota share of all liabilities for variable annuities with GMIB riders issued on or after May 1, 1999 through August 31, 2005 in excess of the liability assumed by two unaffiliated reinsurers, which are subject to certain maximum amounts or limitations on aggregate claims. AXA RE Arizona also reinsures a 90% quota share of level premium term insurance issued by AXA Equitable Life on or after March 1, 2003 through December 31, 2008 and lapse protection riders under certain series of universal life insurance policies issued by AXA Equitable Life on or after June 1, 2003 through June 30, 2007.
In connection with the GMxB Unwind, all of the business previously reinsured to AXA RE Arizona, with the exception of the GMxB Business, was novated on April 12, 2018 to EQ AZ Life Re, a newly formed captive insurance company organized under the laws of Arizona, an indirectly and wholly owned by Holdings. Following the novation of business to EQ AZ Life Re, AXA RE Arizona, holding only the GMxB Business, was merged with and into AXA Equitable Life. As a result of the merger, the reinsurance by AXA RE Arizona of the GMxB Business will no longer be in place. Following AXA RE Arizona’s merger with and into AXA Equitable Life, the GMxB Business is not subject to any new internal or third-party reinsurance arrangements, though in the future AXA Equitable Life may reinsure the GMxB Business with third parties.
Description of Certain Indebtedness
Historically, our insurance companies have relied on AXA for most of our financing, either through internal loans or guarantees. In connection with the IPO, we have put in place a stand-alone financing strategy at Holdings targeting an overall indebtedness level in line with our U.S. public company peers. AB historically has been self-reliant for its financing, and we expect AB will remain so in its financing activities going forward. As of March 31, 2018, our total short-term and long-term external debt on a consolidated basis was $2.4 billion.


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Description of Certain Indebtedness
The following table sets forth our total consolidated borrowings as of the dates indicated. Our financial strategy going forward will remain subject to market conditions and other factors. For example, we may from time to time enter into additional bank or other financing arrangements, including public or private debt, structured facilities and contingent capital arrangements, under which we could incur additional indebtedness.
 March 31, 2018 December 31, 2017
 Holdings and AXA Financial 
AXA
Equitable
Life(1)
 AB Consolidated Holdings and AXA Financial 
AXA
Equitable
Life
 AB Consolidated
 (in millions)
Short-term and long-term debt            
Commercial paper$1,534
 $—
 $490
 $2,024
 $1,290
 $—
 $491
 $1,781
AB Revolver—
 —
 —
 —
 —
 —
 75
 75
Long-term debt349
 —
 —
 349
 349
 203
 —
 552
Total short-term and long-term debt1,883
 —
 490
 2,373
 1,639
 203
 566
 2,408
Loans from affiliates            
Loans from affiliates2,530
 —
 —
 2,530
 3,622
 —
 —
 3,622
Total borrowings$4,413
 $—
 $490
 $4,903
 $5,261
 $203
 $566
 $6,030
 June 30, 2019
 Holdings AB Consolidated
 (in millions)
Short-term debt:     
AB commercial paper (with interest rate of 2.7%)$—
 $443
 $443
Total short-term debt—
 443
 443
      
Long-term debt:     
Senior Notes (5.00%, due 2048)1,480
 —
 1,480
Senior Notes (4.35%, due 2028)1,486
 —
 1,486
Senior Notes (3.90%, due 2023)794
 —
 794
Delayed Draw Term Loan (3-month LIBOR + 1.125%, due 2021)300
 —
 300
Senior Debentures, 7.0%, due 2028349
 —
 349
Total long-term debt4,409
 —
 4,409
Total borrowings$4,409
 $443
 $4,852
(1)In March 2018, AXA Equitable Life sold its interest in two real estate joint ventures to AXA France for a total purchase price of approximately $143 million, which resulted in the elimination of the $203 million long-term debt shown in this column on Holdings’ consolidated balance sheet for the first quarter of 2018.
 December 31, 2018
 Holdings AB Consolidated
 (in millions)
Short-term debt:     
AB commercial paper (with interest rate of 2.7%)$—
 $521
 $521
AB revolving credit facility (with interest rate of 3.4%)—
 25
 25
Total short-term debt—
 546
 546
Long-term debt:     
Senior Notes (5.00%, due 2048)1,480
 —
 1,480
Senior Notes (4.35%, due 2028)1,486
 —
 1,486
Senior Notes (3.90%, due 2023)794
 —
 794
Delayed Draw Term Loan (3-month LIBOR + 1.125%, due 2021)300
 —
 300
Senior Debentures, 7.0%, due 2028349
 —
 349
Total long-term debt4,409
 —
 4,409
Total borrowings$4,409
 $546
 $4,955
Notes and Debentures
In FebruaryApril 2018, we entered intoissued $3.8 billion in aggregate principal amount of notes (consisting of $800 million aggregate principal amount of 3.9% Senior Notes due 2023, $1.5 billion aggregate principal amount of 4.35% Senior Notes due 2028 and $1.5 billion aggregate principal amount of 5.0% Senior Notes due 2048) to third party investors. As of June 30, 2019, we had outstanding $349 million aggregate principal amount of 7.0% Senior Debentures due 2028 (the “Senior Debentures”).
The Senior Notes and Senior Debentures contain customary affirmative and negative covenants, including a $3.9 billion two-year senior unsecured delayed draw term loan agreement,limitation on certain liens and a limit on the Company’s ability to consolidate, merge or sell or otherwise dispose of all or substantially all of its assets. The Senior Notes and Senior Debentures also include customary events of default (with customary grace periods, as applicable), including provisions under which, upon the occurrence of an event of default, all outstanding Senior Notes and Senior Debentures may be accelerated. As of June 30, 2019, we were in compliance with all covenants.


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Term Loan
In May 2018, we borrowed $300 million under a $500 million three-year senior unsecured delayed draw term loan agreement (the “DDTL”) and a $2.5 billion five-year senior unsecured revolving credit facility (collectively,terminated the “Credit Facilities”), which may provide significant support to our liquidity position when alternative sources of credit are limited.remaining $200 million capacity. The Credit Facilities containDDTL contains certain administrative, reporting, legal and financial covenants, including requirements to maintain a specified minimum consolidated net worth and to maintain a ratio of indebtedness to total capitalization not in excess of a specified percentage, and limitations on the dollar amount of indebtedness that may be incurred by our subsidiaries and the dollar amount of secured indebtedness that may be incurred by the Company,us, which could restrict our operations and use of funds. Borrowings under the term loan agreements may be made only prior to this offering. In April 2018,As of June 20, 2019, we terminated the two-year term loan agreement, and,were in May 2018, we borrowed $300 million under the three-year term loan agreement. In addition to the Credit Facilities, we entered into letter of credit facilities with an aggregate principal amount of approximately $1.9 billion, primarily to be used to support our life insurance business reinsured to EQ AZ Life Re following the GMxB Unwind. In April 2018, we also issued $3.8 billion in aggregate principal amount of notes (consisting of $800 million aggregate principal amount of 3.900% Senior Notes due 2023, $1.5 billion aggregate principal amount of 4.350% Senior Notes due 2028 and $1.5 billion aggregate principal amount of 5.000% Senior Notes due 2048) to third party investors.
The right to borrow funds under the Credit Facilities is subject to the fulfillment of certain conditions, including compliance with all covenants, and the ability to borrow thereunder is also subject to the continued ability of the lenders that are or will be parties to the Credit Facilities to provide funds. these covenants.
For additional information regarding the covenants in our Credit Facilities and the conditions to borrowing thereunder,DDTL, see “Risk“Part I Item 1A-Risk Factors” in the Prospectus.Annual Report on Form 10-K for the year ended December 31, 2018.
Ratings
Financial strength ratings (which are sometimes referred to as “claims-paying” ratings) and credit ratings are important factors affecting public confidence in an insurer and its competitive position in marketing products. Our credit ratings are also important for our ability to raise capital through the issuance of debt and for the cost of such financing.


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A downgrade of our debt ratings could affect our ability to raise additional debt with terms and conditions similar to our current debt, and accordingly, likely increase our cost of capital. In addition, a downgrade of these ratings could make it more difficult to raise capital to refinance any maturing debt obligations, to support business growth at our insurance subsidiaries and to maintain or improve the current financial strength ratings of our principal insurance subsidiaries. Upon announcement of AXA’s plan to pursue the IPO and the filing of the initial Form S-1 on November 13, 2017, AXA Equitable Life’s and AXA Financial’s ratings were downgraded by AM Best, S&P and Moody’s. The downgrades reflected the removal of the uplift associated with assumed financial support from AXA.
Financial strength ratings represent the opinions of rating agencies regarding the financial ability of an insurance company to meet its obligations under an insurance policy. Credit ratings represent the opinions of rating agencies regarding an entity’s ability to repay its indebtedness. The following table summarizes the ratings for Holdings and certain of its subsidiaries. S&P, Moody’s and AM Best all have a stable outlook.
 AM Best S&P Moody’s
Last review date3/7/12/17/2018 3/6/20187/19/2019 4/11/20185/9/2019
Financial Strength Ratings:     
AXA Equitable LifeA A+ A2
MLOAA A+ A2
      
Credit Ratings:     
Holdings—BBB+Baa2
AXA Financialbbb+ BBB+ Baa2
Last Review Date  12/29/201711/09/18 5/17/201704/10/19
AB— AA/Stable/A-1 A2


SUPPLEMENTARY INFORMATION
We are involved in a number of ventures and transactions with AXA and certain of its affiliates. See Note 11 of the Notes to the Consolidated Financial Statements included herein and Note 12 ofin the Notes to Consolidated Financial Statements included herein.in the Annual Report on Form 10-K for the year ended December 31, 2018.
Contractual Obligations
Our consolidated contractual agreements include policyholder obligations, long-term debt, commercial paper, loans from affiliates, employee benefits, operating leases and various funding commitments. See “Supplementary Information – Contractual Obligations” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the ProspectusAnnual Report on Form 10-K for the year ended December 31, 2018 for additional information.
Off-Balance Sheet Arrangements
At March 31, 2018, the Company wasJune 30, 2019, we were not a party to any off-balance sheet transactions other than those guarantees and commitments described in Note 14 of the Notes to the Consolidated Financial Statements included herein.


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Summary of Critical Accounting PoliciesEstimates
The preparation of financial statements in conformity with U.S. GAAP requires management to adopt accounting policies and make estimates and assumptions that affect amounts reported in our consolidated financial statements included elsewhere herein. For a discussion of our significant accounting policies, see Note 2 of the Notes to the Consolidated Financial Statements.Statements included in our 2018 Form 10-K. The most critical estimates include those used in determining:
liabilities for future policy benefits;
accounting for reinsurance;
capitalization and amortization of DAC;DAC and policyholder bonus interest credits;
estimated fair values of investments in the absence of quoted market values and investment impairments;
estimated fair values of freestanding derivatives and the recognition and estimated fair value of embedded derivatives requiring bifurcation;
goodwill and related impairment;
measurement of income taxes and the valuation of deferred tax assets; and
liabilities for litigation and regulatory matters.
In applying our accounting policies, we make subjective and complex judgments that frequently require estimates about matters that are inherently uncertain. Many of these policies, estimates and related judgments are common in the insurance and financial services industries while others are specific to our business and operations. Actual results could differ from these estimates.
As previously reported, we identified two material weaknesses in the design and operation of our internal control over financial reporting. Our management has concluded that we do not (1) maintain effective controls to timely validate that actuarial models are properly configured to capture all relevant product features and to provide reasonable assurance, timely reviews of assumptions and data have occurred; and (2) maintain sufficient experienced personnel to prepare the Company’s consolidated financial statements and to verify that consolidating and adjusting journal entries were completely and accurately recorded to the appropriate accounts or segments. We are currently in the process of remediating these material weaknesses by taking steps to (i) validate all existing actuarial models and valuation systems as well as to improve controls and processes around our assumption and data process and (ii) strengthen the control function related to the financial closing process. Although we plan to complete these remediation processes as quickly as possible, we cannot at this time estimate when the remediations will be completed.
A discussion of each of the critical accounting estimates may be found in the Prospectus2018 Form 10-K in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Estimates — ApplicationSummary of Critical Accounting Estimates.”

Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes to the quantitative and qualitative disclosures about market risk described in the ProspectusAnnual Report on Form 10-K for the year ended December 31, 2018 in “Quantitative and Qualitative Disclosures About Market Risk”.


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Item 4. Controls and Procedures
CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
The management of the Company, with the participation of the Company’s Chief Executive Officer (CEO) and Chief Financial Officer (CFO), has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934)1934, as amended) as of March 31, 2018.June 30, 2019. This evaluation is performed to determine if our disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the Securities and Exchange Act of 1934, as amended, is accumulated and communicated to management, including the Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure and are effective to provide reasonable assurance that such information is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission’s rules and forms.
Due to the material weaknesses described below, the Company’s CEO and CFO, concluded that the Company’s disclosure controls and procedures were not effective as of June 30, 2019.
As previously reported, the Company identified two material weaknesses in the design and operation of the Company’s internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis. The Company’s management, including the Company’s CEO and CFO, have concluded that we do not (i) maintain effective controls to timely validate actuarial models are properly configured to capture all relevant product features and to provide reasonable assurance timely reviews of assumptions and data have occurred, and, as a result, errors were identified in future policyholders’ benefits and deferred policy acquisition costs balances; and (ii) maintain sufficient experienced personnel to prepare the Company’s consolidated financial statements and to verify consolidating and adjusting journal entries were completely and accurately recorded to the appropriate accounts or segments and, as a result, errors were identified in the consolidated financial statements, including in the presentation and disclosure between the operating and financing sections of the statements of cash flows. not:
(i)maintain effective controls to timely validate that actuarial models are properly configured to capture all relevant product features and provide reasonable assurance timely reviews of assumptions and data have occurred, and, as a result, errors were identified in future policyholders’ benefits and deferred policy acquisition costs balances; and
(ii)maintain sufficient experienced personnel to prepare the Company’s consolidated financial statements and to verify consolidating and adjusting journal entries are completely and accurately recorded to the appropriate accounts or segments and, as a result, errors were identified in the consolidated financial statements, including in the presentation and disclosure between sections of the statements of cash flows.
These material weaknesses resulted in misstatements in the Company’s previously issued annual and interim financial statements and resulted in in:
(i)the revision of the interim financial statements for the nine, six, and three months ended September 30, June 30, and March 31, 2018 and 2017, respectively, and the annual financial statements for the year ended December 31, 2017;
(ii)the amended restatement of the interim financial statements for the nine months ended September 30, 2017 and the six months ended June 30, 2017, and the year ended December 31, 2016 and revisions for the six and three months ended June 30, 2018 and March 31, 2018, respectively, and the three months ended March 31, 2017 and the years ended December 31, 2017, 2015, 2014, and 2013, respectively
(iii)the revision of the annual financial statements for the year ended December 31, 2017 and amended the restated annual financial statements for the year ended December 31, 2016, and amended the restated interim financial statements for the nine and six months ended September 30, 2017, and June 30, 2017, respectively;
(iv)the restatements of the interim financial statements for the nine and six months ended September 30, 2017 and June 30, 2017, respectively, the restatement of the annual financial statements for the year ended December 31, 2016, the revision of the interim financial statements for the nine and six months ended September 30, 2016 and June 30, 2016, respectively, and the revision of the annual financial statements for the year ended December 31, 2015; and
(v)the restatement of the interim financial statements for the six months ended June 30, 2017 and the revision of the annual financial statements for the years ended December 31, 2016, 2015 and 2014, respectively, and the interim financial statements for the six months ended June 30, 2016.
These revisions and restatements were directly related to the restatementmaterial weaknesses described above and not indicative of the annual financial statements for the year ended December 31, 2016, the restatements of the interim financial statements for the nine months ended September 30, 2017 and for the six months ended June 30, 2017, the revision of the annual financial statements for the year ended December 31, 2015 and the revision of the interim financial statements for the nine months ended September 30, 2016 and for the six months ended June 30, 2016, in each caseany new material weaknesses. Until remediated, there is a reasonable possibility that were reported in the preliminary prospectus included in the first amendment of our Form S-1 registration statement filed on February 14, 2018 and (ii) the restatement of the interim financial statements for the six months ended June 30, 2017 and the revision of the annual financial statements for the years ended December 31, 2016, 2015 and 2014 and the interim financial statements for the six months ended June 30, 2016, in each case that were reported in the preliminary prospectus included in our initial Form S-1 registration statement filed on November 13, 2017. Until remedied, these material weaknesses could result in a


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material misstatement of the Company’s consolidated financial statements or disclosures that would result in a material misstatement to the Company’s annual or interim financial statements that would not be prevented or detected.
DueRemediation Status of Material Weaknesses
Management continues to theseexecute its plan moving towards remediation of the material weaknesses, the Company’s management, including the Company’s CEO and CFO, concluded that the Company’s disclosure controls and procedures were not effective as of March 31, 2018.
weaknesses. Since identifying the material weakness relatedweaknesses, management has performed the following activities:
Material Weakness Related to ourActuarial Models, Assumptions and Data
We have designed and implemented an enhanced model validation control framework, including a rotational schedule to periodically re-validate all U.S. GAAP models.
We have designed and implemented enhanced controls and governance processes for new model implementations.
We have designed and implemented enhanced controls for model changes.
We have designed and implemented enhanced controls over the annual assumption setting process, including a comprehensive master assumption inventory and risk framework.
We have completed a current state assessment of significant data flows feeding actuarial models weand assumptions. We have been,initiated a validation review and a control design assessment of these data flows.
We are currently in the process of remediatingdesigning and implementing new controls over the reliability of data feeding significant actuarial models.
Material Weakness Related to Insufficient Personnel and Journal Entry Process
With respect to insufficient personnel, we have strengthened our finance team by taking stepsadding approximately 25 employees to validate allthe Accounting and Financial Reporting areas. Of these additional resources, eleven have a CPA license, eight have worked at a “Big 4” public accounting firm and the remainder have worked in a finance area within a public company. We have conducted both specific job-related training and general training on SOX controls and U.S. GAAP-related technical topics to new and existing actuarial models and valuation systems as well as tostaff.
To improve controls over journal entries, a less controlled secondary process that was used for consolidating certain entities, reflecting adjustments to prior periods, and processes around our assumptiongenerating the business segment disclosures has been eliminated. Beginning with third quarter 2018, all journal entries are recorded in the Company’s general ledger and data process. These steps include verifying inputs and unique algorithms, ensuring alignment with documented accountingthe secondary process is no longer necessary.
We have enhanced the controls over journal entries through the implementation of new standards and verifying assumptions used in our models are consistent with documented assumptions and data is reliable. The remediation efforts are being performed by our internal model risk team (which is separate from our modeling and valuation teams), as supported by third party firms. We will continue to enhance controlsdesigned to ensure our models, including assumptionseffective review and data,approval of journal entries with sufficient supporting documentation.
We have designed and implemented new management review controls within the period end financial reporting process that will operate at a level of precision sufficient to detect errors that could result in a material misstatement.
While progress has been made to remediate both material weaknesses, as of June 30, 2019, we are revalidated on a fixed calendar schedule and that new model changes and product features are tested through our internal model risk team prior to adoption within our models and systems. Although we plan to complete this remediation process as quickly as possible, we cannot at this time estimate when the remediation will be completed.


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Since identifying the material weakness related to our journal entry process, we have been, and are currentlystill in the process of developing and implementing the enhanced processes and procedures and testing the operating effectiveness of these improved controls. We believe our actions will be effective in remediating by taking steps to strengthen the control function related to our financial closing process. These steps include recruiting additional personnel, retaining external expert resources, further automating entries where possible, enhancing the design of certain management review controlsmaterial weaknesses, and providing training regarding internal control processes. We willwe continue to enhancedevote significant time and attention to these efforts. In addition, the material weaknesses will not be considered remediated until the applicable remedial processes and procedures have been in place for a sufficient period of time and management has concluded, through testing, that these controls to ensureare effective. Accordingly, the financial closing process is effectively implemented. Although we plan to complete this remediation processmaterial weaknesses are not remediated as quickly as possible, we cannot at this time estimate when the remediation will be completed.of June 30, 2019.
Changes in Internal Control Over Financial reportingReporting
As described above, the Company has designedcontinues to design and implementedimplement additional controls in connection with its remediation plan. Other than these additional controls, there were noThese remediation efforts related to the material weaknesses described above represent changes in the Company’sour internal control over financial reporting (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 for the quarter ended March 31, 2018June 30, 2019 that hashave materially affected, or isare reasonably likely to materially affect, the Company’s internal control over financial reporting.



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PART II
OTHER INFORMATION
Item 1.    Legal Proceedings
See Note 14 of Notes to Consolidated Financial Statements contained herein. Except as disclosed in Note 14 of Notes to Consolidated Financial Statements, there have been no new material legal proceedings and no new material developments in legal proceedings previously reported in the Prospectus.Annual Report on Form 10-K for the year ended December 31, 2018.
Item 1A. Risk Factors
You should carefully consider the risks described in the “Risk Factors” section included in our Annual Report on Form 10-K for the Prospectus.year ended December 31, 2018, as amended or supplemented in our subsequently filed Quarterly Report on Form 10-Q. These risks could materially affect our business, consolidated results of operations or financial condition. These risks are not exclusive, and additional risks to which we are subject include, but are not limited to, the factors mentioned under “Forward-Looking Statements” above and the risks of our businesses described elsewhere in this Quarterly Report on Form 10-Q.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds
NONE.The following table provides information about purchases by Holdings during the three months ended June 30, 2019, of its common stock:
PeriodTotal Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
4/1/19 through 4/30/19—
 $—
 —
 $200,375,000
5/1/19 through 5/31/19—
 $—
 —
 $200,375,000
6/1/19 through 6/30/19—
 $—
 —
 $200,375,000
Total—
 $—
 —
 $200,375,000
Item 3.    Defaults Upon Senior Securities
NONE.None.
Item 4.    Mine Safety Disclosures
NONE.None.
Item 5.    Other Information
Iran Threat Reduction and Syria Human Rights Act
Holdings and its subsidiaries had no transactions or activities requiring disclosure under the Iran Threat Reduction and Syria Human Rights Act, (“Iran Act”), nor were wethey involved in the AXA Group matters described immediately below.
The non-U.S. based subsidiaries of AXA operate in compliance with applicable laws and regulations of the various jurisdictions in which they operate, including applicable international (United Nations and European Union) laws and regulations. While AXA Group companies based and operating outside the United States generally are not subject to U.S. law, as an international group, AXA has in place policies and standards (including the AXA Group International Sanctions Policy) that apply to all AXA Group companies worldwide and often impose requirements that go well beyond local law.
AXA has informed us that AXA Konzern AG, an AXA insurance subsidiary organized under the laws of Germany, provides car, accident and health insurance to diplomats based at the Iranian Embassy in Berlin, Germany. The total annual premium of these policies is approximately $139,700 before tax$109,150 and the annual net profit arising from these policies, which is difficult to calculate with precision, is estimated to be $26,000. These policies were underwritten by a broker who specializes in providing insurance coverage for diplomats.$18,385.
In addition, AXA has informed us that AXA Insurance Ireland, an AXA insurance subsidiary, provides statutorily required


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car insurance under four separate policies to the Iranian Embassy in Dublin, Ireland. AXA has informed us that compliance with the Declined Cases Agreement of the Irish Government prohibits the cancellation of these policies unless another insurer is


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willing to assume the coverage. The total annual premium for these policies is approximately $6,268$7,115 and the annual net profit arising from these policies, which is difficult to calculate with precision, is estimated to be $764.$853.
Also, AXA has informed us that AXA Sigorta, a subsidiary of AXA organized under the laws of the Republic of Turkey, provides car insurance coverage for vehicle pools and compulsory earthquake coverage of the Iranian General Consulate and the Iranian Embassy in Istanbul, Turkey. Motor liability insurance coverage is mandatorycompulsory in Turkey and cannot be canceled unilaterally. The total annual premium in respect of these policies is approximately $3,150 and the annual net profit, which is difficult to calculate with precision, is estimated to be $473.
Additionally, AXA has informed us that AXA Winterthur, an AXA insurance subsidiary organized under the laws of Switzerland, provides Naftiran Intertrade, a wholly-owned subsidiary of the Iranian state-owned National Iranian Oil Company, with life, disability and accident coverage for its employees. In addition, AXA Winterthur also provides car and property insurance coverage for the Iranian Embassy in Bern. The provision of these forms of coverage is mandatory for employees in Switzerland. The total annual premium of these policies is approximately $373,668$396,597 and the annual net profit arising from these policies, which is difficult to calculate with precision, is estimated to be $56,000.$59,489.
Lastly,Also, AXA has informed us that AXA Egypt, an AXA insurance subsidiary organized under the laws of Egypt, provides the Iranian state-owned Iran Development Bank, two life insurance contracts, covering individuals who have loans with the bank. The total annual premium of these policies is approximately $34,446$20,650 and annual net profit arising from these policies, which is difficult to calculate with precision, is estimated to be $3,500.$2,000.
Lastly, AXA has informed us that AXA XL, which AXA acquired during the third quarter of 2018, through various non-U.S. subsidiaries, provides insurance to marine policyholders located outside of the U.S. or reinsurance coverage to non-U.S. insurers of marine risks as well as mutual associations of ship owners that provide their members with protection and liability coverage. The provision of these coverages may involve entities or activities related to Iran, including transporting crude oil, petrochemicals and refined petroleum products. AXA XL’s non-U.S. subsidiaries insure or reinsure multiple voyages and fleets containing multiple ships, so they are unable to attribute gross revenues and net profits from such marine policies to activities with Iran. As the activities of these insureds and re-insureds are permitted under applicable laws and regulations, AXA XL intends for its non-U.S. subsidiaries to continue providing such coverage to its insureds and re-insureds to the extent permitted by applicable law.
The aggregate annual premium for the above-referenced insurance policies is approximately $557,232,$536,662, representing approximately 0.0006%0.0007% of AXA’s 20172018 consolidated revenues, which exceed $100 billion. The related net profit, which is difficult to calculate with precision, is estimated to be $86,737,$81,200, representing approximately 0.001%0.002% of AXA’s 20172018 aggregate net profit.
Amendment to the AXA Equitable Supplemental Severance Plan for Executives
The AXA Equitable Supplemental Severance Plan for Executives was amended effective August 9, 2019 to provide benefits to eligible executives in the case of involuntary termination of employment without cause.  Prior to the amendment, benefits under the plan were only available in the case of involuntary termination of employment for certain specified reasons.


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Item 6.    Exhibits 
NumberDescription and Method of Filing
3.1#
Amended and Restated Certificate of Incorporation of AXA Equitable Holdings, Inc.
3.2#
Amended and Restated By-Laws of AXA Equitable Holdings, Inc.
4.1
Form of Common Stock Certificate of AXA Equitable Holdings, Inc. (incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-1 of AXA Equitable Holdings, Inc., Registration No. 333-221521 (the “Form S-1”)).
4.2
Indenture, dated as of April 20, 2018, among AXA Equitable Holdings, Inc., as issuer, Wilmington Saving Fund Society, FSB, as trustee, and Citibank, N.A., as security registrar and paying agent (incorporated by reference to Exhibit 4.4 to the Form S-1).
4.3
First Supplemental Indenture, dated as of April 20, 2018, among AXA Equitable Holdings, Inc., as issuer, Wilmington Saving Fund Society, FSB, as trustee, and Citibank, N.A., as security registrar and paying agent (incorporated by reference to Exhibit 4.5 to the Form S-1).
4.4
Second Supplemental Indenture, dated as of April 20, 2018, among AXA Equitable Holdings, Inc., as issuer, Wilmington Saving Fund Society, FSB, as trustee, and Citibank, N.A., as security registrar and paying agent (incorporated by reference to Exhibit 4.6 to the Form S-1).
4.5
Third Supplemental Indenture, dated as of April 20, 2018, among AXA Equitable Holdings, Inc., as issuer, Wilmington Saving Fund Society, FSB, as trustee, and Citibank, N.A., as security registrar and paying agent (incorporated by reference to Exhibit 4.7 to the Form S-1).
10.1#
Shareholder Agreement, dated as of May 4, 2018, between AXA S.A. and AXA Equitable Holdings, Inc.
10.2#
Registration Rights Agreement, dated as of May 4, 2018, between AXA S.A. and AXA Equitable Holdings, Inc.
10.3
Tax Sharing Agreement, dated March 28, 2018, among AXA S.A., AXA Investment Managers S.A. and AXA Equitable Holdings, Inc. (incorporated by reference to Exhibit 10.3 to the Form S-1).
10.4#
Transitional Services Agreement, dated as of May 4, 2018, between AXA S.A. and AXA Equitable Holdings, Inc.
10.5#
Trademark License Agreement, dated as of May 4, 2018, among AXA S.A., AXA Equitable Holdings, Inc. and AXA Financial, Inc.
10.6†#
Director Indemnification Agreement between AXA Equitable Holdings, Inc. and each of its directors.
10.7
Revolving Credit Agreement, dated as of February 16, 2018, by and among AXA Equitable Holdings, Inc., the Subsidiary Account Parties (as defined therein) party thereto, the banks party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent, is incorporated by reference to Exhibit 10.22 to the Form S-1 (incorporated by reference to Exhibit 10.22 to the Form S-1).
10.8
Term Loan Agreement, dated as of February 16, 2018, by and among AXA Equitable Holdings, Inc., the banks party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent (incorporated by reference to Exhibit 10.23 to the Form S-1).
10.9
Term Loan Agreement, dated as of February 16, 2018, by and among AXA Equitable Holdings, Inc., the banks party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent (incorporated by reference to Exhibit 10.24 to the Form S-1).
10.10
Reimbursement Agreement, dated as of February 16, 2018, by and among AXA Equitable Holdings, Inc. the Subsidiary Account Parties (as defined therein) party thereto and Natixis, New York Branch (incorporated by reference to Exhibit 10.25 to the Form S-1).
10.11
Reimbursement Agreement, dated as of February 16, 2018, by and among AXA Equitable Holdings, Inc. the Subsidiary Account Parties (as defined therein) party thereto and HSBC Bank USA, National Association (incorporated by reference to Exhibit 10.26 to the Form S-1).
10.12
Reimbursement Agreement, dated as of February 16, 2018, by and among AXA Equitable Holdings, Inc. the Subsidiary Account Parties (as defined therein) party thereto and Citibank Europe PLC (incorporated by reference to Exhibit 10.27 to the Form S-1).
10.13
Reimbursement Agreement, dated as of February 16, 2018, by and among AXA Equitable Holdings, Inc. the Subsidiary Account Parties (as defined therein) party thereto and Credit Agricole Corporate and Investment Bank (incorporated by reference to Exhibit 10.28 to the Form S-1).


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NumberDescription and Method of Filing
10.14
Reimbursement Agreement, dated as of February 16, 2018, by and among AXA Equitable Holdings, Inc. the Subsidiary Account Parties (as defined therein) party thereto and Barclays Bank PLC (incorporated by reference to Exhibit 10.29 to the Form S-1).
10.15
Reimbursement Agreement, dated as of February 16, 2018, by and among AXA Equitable Holdings, Inc. the Subsidiary Account Parties (as defined therein) party thereto and JPMorgan Chase Bank, N.A. (incorporated by reference to Exhibit 10.30 to the Form S-1).
10.16
Reimbursement Agreement, dated as of February 16, 2018, by and among AXA Equitable Holdings, Inc. the Subsidiary Account Parties (as defined therein) party thereto and Landesbank Hessen-Thüringen Girozentrale, acting through its New York Branch (incorporated by reference to Exhibit 10.31 to the Form S-1).
10.17
Reimbursement Agreement, dated as of February 16, 2018, by and among AXA Equitable Holdings, Inc. the Subsidiary Account Parties (as defined therein) party thereto and Commerzbank AG, New York Branch (incorporated by reference to Exhibit 10.32 to the Form S-1).
10.18
Waiver Letter Agreements with the lenders party to each of the agreements in Exhibits 10.22 to 10.32 to the Form S-1 (incorporated by reference to Exhibit 10.33 to the Form S-1).
10.19†
AXA Equitable Holdings, Inc. Short-Term Incentive Compensation Plan (incorporated by reference to Exhibit 10.56 to the Form S-1).
10.20†
AXA Equitable Holdings, Inc. 2018 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.57 to the Form S-1).
10.2110.1†#
Form of Transaction Incentive AwardWaiver Agreement, under the 2018 Omnibus Incentive Plan.
dated May 9, 2019, to Mark Pearson’s Employment Agreement dated March 9, 2011.
10.22†#
Form of Restricted Stock Unit Award Agreement under the 2018 Omnibus Incentive Plan.
10.23†#
Form of Performance Share Award Agreement under the 2018 Omnibus Incentive Plan.
10.24†#
Form of Stock Option Award Agreement under the 2018 Omnibus Incentive Plan.
10.2510.2†#
AXA Equitable Supplemental Severance Plan for Executives.
Executives, as amended and restated as of August 9, 2019.
31.1#
Certification of the Registrant’s Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2#
Certification of the Registrant’s Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1#
Certification of the Registrant’s Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2#
Certification of the Registrant’s Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INSXBRL Instance Document
101.SCHXBRL Taxonomy Extension Schema Document
101.CALXBRL Taxonomy Extension Calculation Linkbase Document
101.LABXBRL Taxonomy Extension Label Linkbase Document
101.PREXBRL Taxonomy Extension Presentation Linkbase Document
101.DEFXBRL Taxonomy Extension Definition Linkbase Document

______________

#     Filed herewith.
† Identifies each management contract or compensatory plan or arrangement.


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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, AXA Equitable Holdings, Inc. has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: June 19, 2018August 9, 2019AXA Equitable Holdings, Inc.EQUITABLE HOLDINGS, INC.
   
 By:/s/ Anders Malmström
  Name:Anders Malmström
  Title:Senior Executive Vice President
and Chief Financial Officer
    
Date: June 19, 2018August 9, 2019 /s/ Andrea NitzanWilliam Eckert
  Name:Andrea NitzanWilliam Eckert
  Title:Senior Vice President,
Chief Accounting Officer and Controller



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