Company Quick10K Filing
Quick10K
AXA Equitable Life Insurance
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2018-12-31 Enter Agreement, Exhibits
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ADC Agree Realty 2,540
BPMP BP Midstream Partners 1,490
RARX RA Pharmaceuticals 1,010
CFSC Caterpillar Financial Services 0
COTE Coates 0
POYE Po Yuen Cultural 0
RIT Rodin Income Trust 0
AXAEQ 2019-03-31
Part I Financial Information
Item 1. Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4.
Part II Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 ael-33119exhibit311.htm
EX-31.2 ael-33119exhibit312.htm
EX-32.1 ael-33119exhibit321.htm
EX-32.2 ael-33119exhibit322.htm

AXA Equitable Life Insurance Earnings 2019-03-31

AXAEQ 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 ael1q201910q.htm AEL Q119 10-Q Document
Table of Contents                        

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 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 Number 000-20501
 
AXA Equitable Life Insurance Company
(Exact name of registrant as specified in its charter) 
New York
 
13-5570651
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
1290 Avenue of the Americas, New York, New York
 
10104
(Address of principal executive offices)
 
(Zip Code)
(212) 554-1234
(Registrant’s telephone number, including area code)
Not applicable
(Former name, former address, and former fiscal year if changed since last report.)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an “emerging growth company”. See definition of “accelerated filer,” “large accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
¨
Accelerated filer
¨
Non-accelerated filer
x
Smaller reporting company
¨
Emerging growth company
¨
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13 (a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ¨ No x
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol
 
Name of Exchange on which registered
Not Applicable
 
Not Applicable
 
Not Applicable
As of May 13, 2019, 2,000,000 shares of the registrant’s Common Stock were outstanding.
REDUCED DISCLOSURE FORMAT
AXA Equitable Life Insurance Company meets the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this Form 10-Q in the reduced disclosure format.




TABLE OF CONTENTS

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



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




1

PART I FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
AXA EQUITABLE LIFE INSURANCE COMPANY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

 
March 31, 2019
 
December 31, 2018
 
(in millions, except share data)
ASSETS
 
 
 
Investments:
 
Fixed maturities available-for-sale, at fair value (amortized cost of $44,926 and $42,492)
$
45,929

 
$
41,915

Mortgage loans on real estate (net of valuation allowance of $0 and $7)
12,100

 
11,818

Real estate held for production of income (1)
68

 
52

Policy loans
3,253

 
3,267

Other equity investments (1)
1,129

 
1,144

Trading securities, at fair value
12,704

 
15,166

Other invested assets
1,749

 
1,554

Total investments
76,932

 
74,916

Cash and cash equivalents
2,922

 
2,622

Deferred policy acquisition costs
4,338

 
5,011

Amounts due from reinsurers
3,093

 
3,124

Loans to affiliates
600

 
600

GMIB reinsurance contract asset, at fair value
2,009

 
1,991

Current and deferred income taxes
184

 
438

Other assets
3,031

 
2,763

Separate Accounts assets
118,130

 
108,487

Total Assets
$
211,239

 
$
199,952

LIABILITIES
 
 
 
Policyholders’ account balances
$
48,593

 
$
46,403

Future policy benefits and other policyholders' liabilities
30,294

 
29,808

Broker-dealer related payables
147

 
69

Securities sold under agreements to repurchase

 
573

Amounts due to reinsurers
57

 
113

Loans from affiliates

 
572

Other liabilities
1,600

 
1,460

Separate Accounts liabilities
118,130

 
108,487

Total Liabilities
$
198,821

 
$
187,485

Redeemable noncontrolling interest
48

 
39

Commitments and contingent liabilities (Note 12)

 

EQUITY
 
 
 
Equity attributable to AXA Equitable:
 
 
 
Common stock, $1.25 par value; 2,000,000 shares authorized, issued and outstanding
$
2

 
$
2

Additional paid-in capital
7,815

 
7,807

Retained earnings
4,268

 
5,098

Accumulated other comprehensive income (loss)
273

 
(491
)
Total equity attributable to AXA Equitable
12,358

 
12,416

Noncontrolling interest
12

 
12

Total Equity
12,370

 
12,428

Total Liabilities, Redeemable Noncontrolling Interest and Equity
$
211,239

 
$
199,952

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


2

AXA EQUITABLE LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(UNAUDITED)


 
Three Months Ended March 31,
 
2019
 
2018
 
(in millions)
REVENUES
 
 
 
Policy charges and fee income
$
859

 
$
861

Premiums
232

 
223

Net derivative gains (losses)
(1,555
)
 
(817
)
Net investment income (loss)
904

 
509

Investment gains (losses), net
(8
)
 
87

Investment management and service fees
248

 
254

Other income
10

 
22

Total revenues
690

 
1,139

 
 
 
 
BENEFITS AND OTHER DEDUCTIONS
 
 
 
Policyholders’ benefits
819

 
480

Interest credited to policyholders’ account balances
269

 
255

Compensation and benefits
82

 
149

Commissions
157

 
160

Interest expense
4

 
9

Amortization of deferred policy acquisition costs
165

 
209

Other operating costs and expenses
184

 
250

Total benefits and other deductions
1,680

 
1,512

Income (loss) from continuing operations, before income taxes
(990
)
 
(373
)
Income tax (expense) benefit from continuing operations
162

 
80

Net income (loss) from continuing operations
(828
)
 
(293
)
Net income (loss) from discontinued operations, net of taxes and noncontrolling interest

 
29

Net income (loss)
(828
)
 
(264
)
Less: Net (income) loss attributable to the noncontrolling interest
(2
)
 
1

Net income (loss) attributable to AXA Equitable
$
(830
)
 
$
(263
)

See Notes to Consolidated Financial Statements (Unaudited).


3

AXA EQUITABLE LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)

 
Three Months Ended March 31,
 
2019
 
2018
 
(in millions)
COMPREHENSIVE INCOME (LOSS)
 
 
 
Net income (loss)
$
(828
)
 
$
(264
)
Other comprehensive income (loss) net of income taxes:
 
 
 
Change in unrealized gains (losses), net of reclassification adjustment
764

 
(742
)
Changes in defined benefit plan related items not yet recognized in periodic benefit cost, net of reclassification adjustment

 
(4
)
Other comprehensive income (loss) from discontinued operations

 
(10
)
Total other comprehensive income (loss), net of income taxes
764

 
(756
)
Comprehensive income (loss) attributable to AXA Equitable
$
(64
)
 
$
(1,020
)
See Notes to Consolidated Financial Statements (Unaudited).



4

AXA EQUITABLE LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF EQUITY
(UNAUDITED)

 
Three Months Ended March 31,
 
AXA Equitable Equity
 
Noncontrolling Interest
 
Total Equity
 
Common Stock
 
Additional Paid-in Capital
 
Retained Earnings
 
Accumulated Other Comprehensive Income (Loss)
 
Total
 
Continuing Operations
 
Discontinued Operations
 
Total
 
 
(in millions)
January 1, 2019
$
2

 
$
7,807

 
$
5,098

 
$
(491
)
 
$
12,416

 
$
12

 
$

 
$
12

 
$
12,428

Net income (loss)

 

 
(830
)
 

 
(830
)
 

 

 

 
(830
)
Other comprehensive income (loss)

 

 

 
764

 
764

 

 

 

 
764

Other

 
8

 

 

 
8

 

 

 

 
8

March 31, 2019
$
2

 
$
7,815

 
$
4,268

 
$
273

 
$
12,358

 
$
12

 
$

 
$
12

 
$
12,370


January 1, 2018
$
2

 
$
6,859

 
$
8,938

 
$
598

 
$
16,397

 
$
19

 
$
3,076

 
$
3,095

 
$
19,492

Cumulative effect of adoption of revenue recognition standard ASC 606

 

 
8

 

 
8

 

 
25

 
25

 
33

Deconsolidation of real estate joint ventures

 

 

 

 

 
(8
)
 

 
(8
)
 
(8
)
Repurchase of AB Holding units

 

 

 

 

 

 
(2
)
 
(2
)
 
(2
)
Dividends paid to noncontrolling interest

 

 

 

 

 

 
(176
)
 
(176
)
 
(176
)
Net income (loss)

 

 
(263
)
 

 
(263
)
 
1

 
133

 
134

 
(129
)
Other comprehensive income (loss)

 

 

 
(756
)
 
(756
)
 

 
7

 
7

 
(749
)
Other

 
18

 

 

 
18

 

 
13

 
13

 
31

March 31, 2018
$
2

 
$
6,877

 
$
8,683

 
$
(158
)
 
$
15,404

 
$
12

 
$
3,076

 
$
3,088

 
$
18,492

See Notes to Consolidated Financial Statements (Unaudited).




5

AXA EQUITABLE LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)


 
Three Months Ended March 31,
2019
 
2018
 
(in millions)
Cash flows from operating activities:
 
 
 
Net income (loss) (1)
$
(828
)
 
$
(109
)
Adjustments to reconcile Net income (loss) to Net cash provided by (used in) operating activities:
 
 
 
Interest credited to policyholders’ account balances
269

 
255

Policy charges and fee income
(859
)
 
(861
)
Net derivative (gains) losses
1,555

 
815

Investment (gains) losses, net
8

 
(87
)
Realized and unrealized (gains) losses on trading securities
(250
)
 
63

Non-cash long-term incentive compensation expense
8

 
12

Amortization and depreciation (2)
143

 
201

Amortization of deferred cost of reinsurance asset

 
46

Equity (income) loss from limited partnerships (2)
(11
)
 
(39
)
Changes in:
 
 
 
Net broker-dealer and customer related receivables/payables

 
283

Reinsurance recoverable
(97
)
 
(147
)
Segregated cash and securities, net

 
(208
)
Capitalization of deferred policy acquisition costs (2)
(145
)
 
(135
)
Future policy benefits
41

 
(198
)
Current and deferred income taxes
54

 
80

Other, net
(36
)
 
12

Net cash provided by (used in) operating activities
$
(148
)
 
$
(17
)
 
 
 
 
Cash flows from investing activities:
 
 
 
Proceeds from the sale/maturity/prepayment of:
 
 
 
Fixed maturities, available-for-sale
$
2,662

 
$
3,238

Mortgage loans on real estate
216

 
68

Trading account securities
3,376

 
1,683

Real estate joint ventures
1

 
140

Short-term investments (2)
747

 
688

Other
41

 
(86
)
Payment for the purchase/origination of:
 
 
 
Fixed maturities, available-for-sale
(5,065
)
 
(2,313
)
Mortgage loans on real estate
(517
)
 
(447
)
Trading account securities
(518
)
 
(2,595
)
Short-term investments (2)
(681
)
 
(377
)
Other
(62
)
 
(48
)
Cash settlements related to derivative instruments
(978
)
 
(503
)
Investment in capitalized software, leasehold improvements and EDP equipment
(13
)
 
(24
)
Other, net
97

 
(407
)
Net cash provided by (used in) investing activities
$
(694
)
 
$
(983
)


6

AXA EQUITABLE LIFE INSURANCE COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS-CONTINUED
(UNAUDITED)

 
Three Months Ended March 31,
2019
 
2018
 
(in millions)
Cash flows from financing activities:
 
 
 
Policyholders’ account balances:
 
 
 
Deposits
$
2,271

 
$
1,898

Withdrawals
(1,048
)
 
(1,081
)
Transfers (to) from Separate Accounts
445

 
452

Change in short-term financings

 
(76
)
Change in collateralized pledged assets
(6
)
 
(5
)
Change in collateralized pledged liabilities
625

 
(31
)
 Increase (decrease) in overdrafts payable

 
7

Repurchase of AB Holding Units

 
(2
)
Purchase (redemption) of noncontrolling interests of consolidated company-sponsored investment funds

 
373

Distribution to noncontrolling interests in consolidated subsidiaries

 
(176
)
Repayment of loans from affiliates
(572
)
 

Increase (decrease) in securities sold under agreement to repurchase
(573
)
 
17

Other, net

 
4

Net cash provided by (used in) financing activities
$
1,142

 
$
1,380

 
 
 
 
Effect of exchange rate changes on Cash and cash equivalents

 
8

Change in Cash and cash equivalents
300

 
388

Cash and cash equivalents, beginning of year
2,622

 
3,409

Cash and cash equivalents, end of period
$
2,922

 
$
3,797

 
 
 
 
Cash and cash equivalents of disposed subsidiary:
 
 
 
Beginning of year
 
 
$
1,009

End of period
 
 
$
1,235

 
 
 
 
Cash and cash equivalents of continuing operations:
 
 
 
Beginning of year
 
 
$
3,409

End of period
 
 
$
3,797

 
 
 
 
Cash flows of disposed subsidiary:
 
 
 
Net cash provided by (used in):
 
 
 
Operating activities
 
 
$
274

Investing activities
 
 
$
(182
)
Financing activities
 
 
$
126

Effect of exchange rate changes on Cash and cash equivalents
 
 
$
8

 
 
 
 
Non-cash transactions during the period:
 
 
 
(Settlement) issuance of long-term debt


 
$
(202
)
Transfer of assets to reinsurer


 
$
(604
)
_____________
(1)
Net income (loss) includes $155 million in the three months ended March 31, 2018 of the discontinued operations that are not included in Net income (loss) in the Consolidated Statements of Income (Loss).
(2)
Prior period amounts have been reclassified to conform to the current period’s presentation. See Note 14 for further information.

See Notes to Consolidated Financial Statements (Unaudited).


7

AXA EQUITABLE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


1)    ORGANIZATION
Consolidation
AXA Equitable Life Insurance Company’s (“AXA Equitable” and, collectively with its consolidated subsidiaries, the “Company”) primary business is providing life insurance and employee benefit products to both individuals and businesses. The Company is an indirect, wholly-owned subsidiary of AXA Equitable Holdings, Inc. (“Holdings”). As of March 31, 2019 and December 31, 2018, AXA S.A. (“AXA”), a French holding company for the AXA Group, owned approximately 48% and 59%, respectively, of the outstanding common stock of Holdings.
The accompanying consolidated financial statements represent the consolidated results and financial position of AXA Equitable and not the consolidated results and financial position of Holdings.
Discontinued Operations
In the fourth quarter of 2018, the Company transferred its economic interest in the business of AllianceBernstein Holding L.P. (“AB Holding”), AllianceBernstein L.P. (“ABLP”) and their subsidiaries (collectively, “AB”) to a newly created wholly-owned subsidiary of Holdings (the “AB Business Transfer”). See Note 13 for additional information.
2)    SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) on a basis consistent with reporting interim financial information in accordance with instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (“SEC”). Intercompany balances and transactions have been eliminated.
In the opinion of management, all adjustments necessary for a fair statement of the financial position and results of operations have been made. All such adjustments are of a normal, recurring nature. Interim results are not necessarily indicative of the results that may be expected for the full year. These financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.
The terms “first quarter 2019” or “first three months of 2019” and “first quarter 2018” or “first three months of 2018” refer to the three months ended March 31, 2019 and 2018, respectively.
Adoption of New Accounting Pronouncements
Description
Effect on the Financial Statement or Other Significant Matters
ASU 2017-12: Derivatives and Hedging (Topic 815)
The amendments in this ASU 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.


8

AXA EQUITABLE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Description
Effect on the Financial Statement or Other Significant Matters
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 ACS 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 $347 million reported in Other assets and operating lease liabilities of $439 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 $58 million and liabilities associated with previously recognized impairments of $34 million. See Note 8 for additional information.
Future Adoption of New Accounting Pronouncements
Description
Effective Date and Method of Adoption
Effect on the Financial Statement or Other Significant Matters
ASU 2018-17: Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities
This ASU provides guidance requiring that indirect interests held through related parties in common control arrangements be considered on a proportional basis for determining whether fees paid to decision makers and service providers are variable interests.
Effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted. All entities are required to apply the amendments in this update retrospectively with a cumulative-effect adjustment to retained earnings at the beginning of the earliest period presented.
Management currently is evaluating the impact that adoption of this guidance will have on the Company’s consolidated financial statements and related disclosures.
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 of certain disclosure requirements, modification of certain disclosures, and the addition of new 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.


9

AXA EQUITABLE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Description
Effective Date and Method of Adoption
Effect on the Financial Statement or Other Significant Matters
ASU 2018-12: Financial Services - Insurance (Topic 944)
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:
Effective for fiscal years beginning after December 31, 2020. Early adoption is permitted.
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.
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.
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.
 


10

AXA EQUITABLE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Description
Effective Date and Method of Adoption
Effect on the Financial Statement or Other Significant Matters
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.

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.

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.

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.
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.

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.





11

AXA EQUITABLE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Description
Effective Date and Method of Adoption
Effect on the Financial Statement or Other Significant Matters
ASU 2016-13: Financial Instruments - Credit Losses (Topic 326)
This ASU 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.
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 March 31, 2019, the Company held $1.1 billion of investment assets in the form of equity interests issued by non-corporate legal entities determined under the guidance to be VIEs, such as limited partnerships and limited liability companies, including hedge funds, private equity funds and real estate-related funds. As an equity investor, the Company is considered to have a variable interest in each of these VIEs as a result of its participation in the risks and/or rewards these funds were designed to create by their defined portfolio objectives and strategies. Primarily through qualitative assessment, including consideration of related party interests or other financial arrangements, if any, the Company was not identified as primary beneficiary of any of these VIEs, largely due to its inability to direct the activities that most significantly impact their economic performance. Consequently, the Company continues to reflect these equity interests in the consolidated balance sheets as Other equity investments and to apply the equity method of accounting for these positions. The net assets of these non-consolidated VIEs are $168.6 billion at March 31, 2019. The Company’s maximum exposure to loss from its direct involvement with these VIEs is the carrying value of its investment of $1.1 billion and $866 million of unfunded commitments at March 31, 2019. The Company has no further economic interest in these VIEs in the form of guarantees, derivatives, credit enhancements or similar instruments and obligations.
At March 31, 2019, the Company consolidated one real estate joint venture for which it was identified as primary beneficiary under the VIE model. The consolidated entity is jointly owned by AXA Equitable Life Insurance Company (“AXA Equitable Life”) and AXA France and holds an investment in a real estate venture. Included in the Company’s consolidated balance sheet at March 31, 2019 related to this VIE is $35 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, 2019.
Assumption Updates and Model Changes
In 2018, the Company began conducting its annual review of the Company’s assumptions and models during the third quarter, consistent with industry practice. The annual review encompasses assumptions underlying the valuation of unearned revenue liabilities, embedded derivatives for the Company’s insurance business, liabilities for future policyholder benefits, deferred policy acquisition cost (“DAC”) and deferred sales inducement (“DSI”) assets. Accordingly, there were no material assumption changes in the first quarters of 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 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 months ended March 31, 2018 are presented in the table below. Capitalization of DAC reclassified to Compensation and benefits, Commissions and Other operating costs and expenses reduced the amounts previously reported in those expense line items, while the capitalization of DAC reclassified from the Amortization of deferred policy acquisition costs line item increases that expense line item.
 
Three Months Ended March 31, 2018
 
(in millions)
Reductions to expense line items:
 
Compensation and benefits
$
33

Commissions
101

Other operating costs and expenses
1

Total reductions
$
135

 
 
Increase to expense line item:
 
Amortization of deferred policy acquisition costs
$
135


Revenue Recognition
The table below presents the revenues recognized during the three months ended March 31, 2019 and 2018, disaggregated by category:
 
Three Months Ended March 31,
 
2019
 
2018
 
(in millions)
Investment management and service fees:
 
 
 
Base fees
$
178

 
$
182

Distribution services
70

 
72

Total investment management and service fees
$
248

 
$
254

 
 
 
 
Other income
$
5

 
$
7

Revision of Prior Period Financial Statements
During the second and 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 its financial statements of any period.
The impact of the misclassifications detailed in the revision tables included in Note 14 on the consolidated statement of cash flows for the three months ended March 31, 2018 were corrected in the comparative consolidated statements of cash flows for the three months ended March 31, 2019 and 2018 contained elsewhere in the financial statements. The misclassifications for the six and nine months ended June 30, 2018 and September 30, 2018 will be corrected in the Company’s comparative consolidated statements of cash flows to be included in the Form 10-Q filings as of and for the three and six months ended June 30, 2019 and as of and for the three and nine months ended September 30, 2019, respectively. See Note 14 for further information.
3)    INVESTMENTS
Fixed Maturities
The following tables provide information relating to fixed maturities classified as available-for-sale (“AFS”).


12

AXA EQUITABLE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Available-for-Sale Securities by Classification
 
Amortized
Cost
 
Gross Unrealized
Gains
 
Gross Unrealized
Losses
 
Fair
Value
 
OTTI
in AOCI (4)
 
(in millions)
March 31, 2019:
 
 
 
 
 
 
 
 
 
Fixed Maturities:
 
 
 
 
 
 
 
 
 
Corporate (1)
$
30,106

 
$
867

 
$
208

 
$
30,765

 
$

U.S. Treasury, government and agency
12,719

 
462

 
213

 
12,968

 

States and political subdivisions
408

 
55

 

 
463

 

Foreign governments
478

 
27

 
7

 
498

 

Residential mortgage-backed (2)
185

 
10

 

 
195

 

Asset-backed (3)
608

 
1

 
4

 
605

 
2

Redeemable preferred stock
422

 
16

 
3

 
435

 

Total at March 31, 2019
$
44,926

 
$
1,438

 
$
435

 
$
45,929

 
$
2

 
 
 
 
 
 
 
 
 
 
December 31, 2018:
 
 
 
 
 
 
 
 
 
Fixed Maturities:
 
 
 
 
 
 
 
 
 
Corporate (1)
$
26,690

 
$
385

 
$
699

 
$
26,376

 
$

U.S. Treasury, government and agency
13,646

 
143

 
454

 
13,335

 

States and political subdivisions
408

 
47

 
1

 
454

 

Foreign governments
515

 
17

 
13

 
519

 

Residential mortgage-backed (2)
193

 
9

 

 
202

 

Asset-backed (3)
600

 
1

 
11

 
590

 
2

Redeemable preferred stock
440

 
16

 
17

 
439

 

Total at December 31, 2018
$
42,492

 
$
618

 
$
1,195

 
$
41,915

 
$
2

______________
(1)
Corporate fixed maturities include both public and private issues.
(2)
Includes publicly traded agency pass-through securities and collateralized obligations.
(3)
Includes credit-tranched securities collateralized by sub-prime mortgages and other asset types and credit tenant loans.
(4)
Amounts represent OTTI losses in AOCI, which were not included in Net income (loss).
The contractual maturities of AFS fixed maturities at March 31, 2019 are shown in the table below. Bonds not due at a single maturity date have been included in the table in the final year of maturity. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
Contractual Maturities of Available-for-Sale Fixed Maturities
 
Amortized
Cost
 
Fair Value
 
(in millions)
March 31, 2019:
 
 
 
Due in one year or less
$
1,817

 
$
1,829

Due in years two through five
10,322

 
10,519

Due in years six through ten
14,953

 
15,367

Due after ten years
16,619

 
16,979

Subtotal
43,711

 
44,694

Residential mortgage-backed
185

 
195

Asset-backed
608

 
605

Redeemable preferred stock
422

 
435

Total at March 31, 2019
$
44,926

 
$
45,929



13

AXA EQUITABLE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

The following table shows proceeds from sales, gross gains (losses) from sales and OTTI for AFS fixed maturities during the three months ended March 31, 2019 and 2018:
 
Three Months Ended March 31,
 
2019
 
2018
 
(in millions)
Proceeds from sales
$
1,361

 
$
3,428

Gross gains on sales
$
8

 
$
127

Gross losses on sales
$
(15
)
 
$
(41
)
 
 
 
 
Total OTTI
$

 
$

Non-credit losses recognized in OCI

 

Credit losses recognized in Net income (loss)
$

 
$

The following table sets forth the amount of credit loss impairments on AFS fixed maturities held by the Company at the dates indicated and the corresponding changes in such amounts:
Fixed Maturities - Credit Loss Impairments 
 
Three Months Ended March 31,
 
2019
 
2018
 
(in millions)
Balances at January 1,
$
(46
)
 
$
(10
)
Previously recognized impairments on securities that matured, paid, prepaid or sold
28

 

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
)
 
$
(10
)
______________
(1)
Represents circumstances where the Company determined in the current period that it intends to sell the security, or it is more likely than not that it will be required to sell the security before recovery of the security’s amortized cost.
Net unrealized investment gains (losses) on fixed maturities classified as AFS are included in the consolidated balance sheets as a component of AOCI. The table below presents these amounts as of the dates indicated:
Net Unrealized Gains (Losses) on Fixed Maturities Classified as AFS
 
March 31, 2019
 
December 31, 2018
 
(in millions)
Fixed maturities available-for-sale:
 
 
 
With OTTI loss
$

 
$

All other
1,003

 
(577
)
Net unrealized gains (losses)
$
1,003

 
$
(577
)
Changes in net unrealized investment gains (losses) recognized in AOCI include reclassification adjustments to reflect amounts realized in Net income (loss) for the current period that had been part of OCI in earlier periods. The tables that follow below present a roll-forward of net unrealized investment gains (losses) recognized in AOCI, split between amounts related to fixed maturities on which an OTTI loss has been recognized and all other:


14

AXA EQUITABLE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Net Unrealized Gains (Losses) on 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)
Balances at January 1, 2019
$

 
$

 
$

 
$

 
$

Net investment gains (losses) arising during the period
(10
)
 

 

 

 
(10
)
Reclassification adjustment:
 
 
 
 
 
 
 
 
 
Included in Net income (loss)
10

 

 

 

 
10

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

 

 

 

 

Deferred income taxes

 

 

 

 

Policyholders’ liabilities

 

 

 

 

Balances at March 31, 2019
$

 
$

 
$

 
$

 
$

 
 
 
 
 
 
 
 
 
 
Balances at January 1, 2018
$
1

 
$
1

 
$
(1
)
 
$
(5
)
 
$
(4
)
Net investment gains (losses) arising during the period

 

 

 

 

Reclassification adjustment:
 
 
 
 
 
 
 
 
 
Included in Net income (loss)
(2
)
 

 

 

 
(2
)
Impact of net unrealized investment gains (losses) on:
 
 
 
 
 
 
 
 
 
DAC

 
(1
)
 

 

 
(1
)
Deferred income taxes

 

 

 

 

Policyholders’ liabilities

 

 
1

 

 
1

Balances at March 31, 2018
$
(1
)
 
$

 
$

 
$
(5
)
 
$
(6
)


15

AXA EQUITABLE LIFE INSURANCE COMPANY
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)
Balances at January 1, 2019
$
(577
)
 
$
39

 
$
(55
)
 
$
125

 
$
(468
)
Net investment gains (losses) arising during the period
1,583

 

 

 

 
1,583

Reclassification adjustment:
 
 
 
 
 
 
 
 

Included in Net income (loss)
(3
)
 

 

 

 
(3
)
Impact of net unrealized investment gains (losses) on:
 
 
 
 
 
 
 
 
 
DAC

 
(655
)
 

 

 
(655
)
Deferred income taxes

 

 

 
(211
)
 
(211
)
Policyholders’ liabilities

 

 
77

 

 
77

Balances at March 31, 2019
$
1,003

 
$
(616
)
 
$
22

 
$
(86
)
 
$
323

 
 
 
 
 
 
 
 
 
 
Balances at January 1, 2018
$
1,526

 
$
(315
)
 
$
(232
)
 
$
(300
)
 
$
679

Net investment gains (losses) arising during the period
(1,245
)
 

 

 

 
(1,245
)
Reclassification adjustment:
 
 
 
 
 
 
 
 

Included in Net income (loss)
(88
)
 

 

 

 
(88
)
Impact of net unrealized investment gains (losses) on:
 
 
 
 
 
 
 
 

DAC

 
288

 

 

 
288

Deferred income taxes

 

 

 
197

 
197

Policyholders’ liabilities

 

 
108

 

 
108

Balances at March 31, 2018
$
193

 
$
(27
)
 
$
(124
)
 
$
(103
)
 
$
(61
)
The following tables disclose the fair values and gross unrealized losses of the 674 issues at March 31, 2019 and the 1,471 issues at December 31, 2018 of fixed maturities 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:


16

AXA EQUITABLE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

 
Less Than 12 Months
 
12 Months or Longer
 
Total
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 
Fair
Value
 
Gross
Unrealized
Losses
 
(in millions)
March 31, 2019:
 
 
 
 
 
 
 
 
 
 
 
Fixed Maturities:
 
 
 
 
 
 
 
 
 
 
 
Corporate
$
653

 
$
6

 
$
5,387

 
$
202

 
$
6,040

 
$
208

U.S. Treasury, government and agency

 

 
3,163

 
213

 
3,163

 
213

Foreign governments

 

 
67

 
7

 
67

 
7

Asset-backed
279

 
1

 
249

 
3

 
528

 
4

Redeemable preferred stock
44

 
1

 
35

 
2

 
79

 
3

Total at March 31, 2019
$
976

 
$
8

 
$
8,901

 
$
427

 
$
9,877

 
$
435

 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2018:
 
 
 
 
 
 
 
 
 
 
 
Fixed Maturities:
 
 
 
 
 
 
 
 
 
 
 
Corporate
$
8,369

 
$
306

 
$
6,161

 
$
393

 
$
14,530

 
$
699

U.S. Treasury, government and agency
2,636

 
68

 
3,154

 
386

 
5,790

 
454

States and political subdivisions

 

 
19

 
1

 
19

 
1

Foreign governments
109

 
3

 
76

 
10

 
185

 
13

Residential mortgage-backed

 

 
13

 

 
13

 

Asset-backed
558

 
11

 
6

 

 
564

 
11

Redeemable preferred stock
160

 
12

 
31

 
5

 
191

 
17

Total at December 31, 2018
$
11,832

 
$
400

 
$
9,460

 
$
795

 
$
21,292

 
$
1,195

The Company’s investments in fixed maturities 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 0.7% of total investments. The largest exposures to a single issuer of corporate securities held at March 31, 2019 and December 31, 2018 were $218 million and $210 million, respectively, representing 1.8% and 1.7% 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, 2019 and December 31, 2018, respectively, approximately $1,250 million and $1,228 million, or 2.8% and 2.9%, of the $44,926 million and $42,492 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 $5 million and $30 million at March 31, 2019 and December 31, 2018, respectively.
At March 31, 2019 and December 31, 2018, respectively, the $427 million and $795 million of gross 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 the three months ended March 31, 2019 or 2018 for these securities was not warranted. At March 31, 2019 and December 31, 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.
At March 31, 2019 and December 31, 2018, the fair value of the Company’s trading account securities was $12,704 million and $15,166 million, respectively. At March 31, 2019 and December 31, 2018, trading account securities included the General Account’s investment in Separate Accounts which had carrying values of $50 million and $48 million, respectively.


17

AXA EQUITABLE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

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 months ended March 31, 2019 and 2018:
Net Investment Income (Loss) from Trading Account Securities
 
Three Months Ended March 31,
 
2019
 
2018
 
(in millions)
Net investment gains (losses) recognized during the period on securities held at the end of the period
$
274

 
$
(96
)
Net investment gains (losses) recognized on securities sold during the period
(24
)
 
(1
)
Net investment gains (losses) on trading account securities arising during the period
250

 
(97
)
Interest and dividend income from trading account securities
90

 
66

Net investment income (loss) from trading account securities
$
340

 
$
(31
)
Mortgage Loans
The payment terms of mortgage loans may from time to time be restructured or modified.
At March 31, 2019 and December 31, 2018, the carrying values of problem commercial mortgage loans on real estate that had been classified as non-accrual loans were $0 and $19 million, respectively.
Valuation Allowances for Mortgage Loans:
The change in the valuation allowance for credit losses for commercial mortgage loans during the three months ended March 31, 2019 and 2018 are as follows:
 
Three Months Ended March 31,
 
2019
 
2018
 
(in millions)
Allowance for credit losses:
 
 
 
Beginning balance, January 1,
$
7

 
$
8

Charge-offs
(7
)
 

Recoveries

 
(1
)
Provision

 

Ending balance, March 31,
$

 
$
7

 
 
 
 
March 31, Individually Evaluated for Impairment
$

 
$
7

There were no allowances for credit losses for agricultural mortgage loans for the three months ended March 31, 2019 and 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, 2019 and December 31, 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.


18

AXA EQUITABLE LIFE INSURANCE COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

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)
March 31, 2019:
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial Mortgage Loans
 
 
 
 
 
 
 
 
 
 
 
 
 
0% - 50%
$
764

 
$
21

 
$
215

 
$
24

 
$

 
$

 
$
1,024

50% - 70%
4,933

 
806

 
1,284

 
474

 

 

 
7,497

70% - 90%
266

 

 
117

 
334

 
132

 

 
849

90% plus

 

 

 

 

 

 

Total Commercial Mortgage Loans
$
5,963

 
$
827

 
$
1,616

 
$
832

 
$
132

 
$

 
$
9,370

Agricultural Mortgage Loans
 
 
 
 
 
 
 
 
 
 
 
 
 
0% - 50%
$
278

 
$
130

 
$
276

 
$
563

 
$
350

 
$
49

 
$
1,646

50% - 70%