Common Questions: AXA Equitable In Today's Markets
Financial Strength and Stability
Over the past few weeks, we have received a number of very important questions from our clients. You may have asked the same questions.
During times of economic and market uncertainty, it is especially prudent to look carefully at your investments, your insurance policies and the companies that provide them. We are committed to managing our business vigilantly to help you meet your financial protection goals.
The following questions and answers were designed to provide information that may be helpful in these turbulent times. We urge you to continue to ask questions of your financial professional to remain informed on the impact of the recent market swings on your investments.
About AXA Equitable
1. How is AXA Equitable faring during these challenging markets?1
Current market conditions continue to be highly volatile, fluid and unpredictable. While AXA Equitable is certainly not immune from these conditions, AXA Equitable has:
- A strong balance sheet,
- Conservatively managed assets
- Disciplined risk management, and
- Adequate resources to meet customer obligations
2. What backs AXA Equitable’s obligations and guarantees* to its clients?2
AXA Equitable’s assets and capital surplus back its obligations and guarantees to its policyholders. We monitor our capital carefully, particularly in volatile markets.
* Guarantees are based on the claims-paying ability of AXA Equitable Life Insurance Company (New York, NY). Guarantees do not apply to performance of the investment portfolios.
3. Is AXA Equitable engaged in businesses other than providing life insurance and annuity products?
AXA Equitable is engaged in building relationships with individuals and businesses by providing planning and advice services in addition to offering individual life insurance and annuity products.
AXA Equitable is not engaged in:
- Investment banking
- Commercial banking
- Residential mortgage origination or mortgage banking
- Providing mortgage insurance
- Issuing or guaranteeing credit default swaps
- Any securities lending positions outstanding in its general account
4. What is the current financial strength of AXA Equitable?
AXA Equitable has strong ratings by independent companies that rate insurance companies for their financial strength and stability.
Controlling Financial Risks
5. How is AXA Equitable able to continue to offer its insurance products guarantees during times of such strong market volatility?
The ability to meet our financial obligations to our clients rests on four key elements of our stringent risk-management strategy:
- Product design
- Dynamic hedging and reinsurance
- Funds management, and
- Assets and capital
6. How does AXA Equitable use product design to control financial risks?
AXA Equitable offers a diverse suite of annuity and life insurance products that provide a range of innovative benefits. We design our products with the objective of helping our clients transfer risks -- that are often difficult to manage individually -- to AXA Equitable where they typically can be managed more effectively on an institutional basis. Among the design features that help control financial risks are the different waiting periods that apply before certain benefits can be exercised.
7. What is dynamic hedging?
In addition to careful product design, we also use dynamically managed hedging programs to mitigate equity market risk and interest rate risks. Hedging programs utilize a number of capital market strategies including exchange traded futures, interest rate swaps and options to mitigate financial market risks.
AXA Equitable has dedicated considerable resources to the hedging program for risk management of variable annuities. AXA Equitable’s Chief Executive Officer and Chief Financial Officer have oversight of the Risk Management Teams, which are led by the Chief Investment Officer and Chief Actuary. The hedging teams develop and maintain robust models for hedging, conduct risk analysis and develop economic scenarios across product types.
8. Does AXA Equitable use reinsurance in its risk management?
AXA Equitable reinsures a portion of our insurance risks, including a portion of the risks under certain of our variable annuity contracts.
9. How does AXA Equitable control financial risks with funds management?
AXA Equitable Funds Management Group (AXA FMG) provides oversight of the outside subadvisors who manage the investment portfolios offered with our variable annuities and variable life insurance.
AXA FMG is a business unit of AXA Equitable that carefully screens, evaluates, selects, measures and assesses the subadvisors. AXA FMG seeks to ensure that the subadvisors selected to manage our underlying portfolios continue to adhere to the style and discipline established in the selection and ongoing management process.
10. How does AXA Equitable establish and maintain its reserves and capital?
AXA Equitable establishes appropriate reserve and capital levels for our productson the basis of our guidelines, regulatory requirements and economic modeling of the underlying risks.
AXA Equitable General Account
11. How is AXA Equitable’s general account invested?
Our goal is to maintain a well-diversified, high quality portfolio. The percentages and composition of the general account can and will change over time.
The majority of the General Account is invested in a well-diversified portfolio of high quality fixed income securities, primarily consisting of investment grade bonds, with less than ½ of 1% invested in residential sub-prime mortgage securities. The portfolio has solid liquidity in the form of cash and cash equivalents.
AXA Equitable Money Market Assets
12. Does the EQ/Money Market Portfolio maintain a constant net asset value of $1 per share?
Yes. The EQ/Money Market Portfolio’s objective is to maintain a stable net asset value of $1.00 per share. The Portfolio is managed in accordance with detailed regulatory requirements that prescribe the types of eligible investments for money market funds by quality, maturity and diversification. In accordance with these provisions, the Portfolio invests in obligations of the U.S. government and its agencies as well as other highly rated debt securities. Although the Portfolio seeks to preserve a stable net asset value of $1.00 per share, it is possible to lose money by investing in the Portfolio.
13. Did the EQ/Money Market Portfolio participate in the Treasury Department’s Temporary Guarantee Program for Money Market Funds?
Yes. Similar to the vast majority of other money market funds, the Portfolio, upon approval of the Board of Trustees of EQ Advisors Trust, participated in the U.S. Treasury Money Market Temporary Guarantee Program. This Program, which expires on December 18, 2008, guarantees the share price of the Portfolio at $1.00 per share for shareholders in the Portfolio as of September 19, 2008.
14. Was AXA Group among the largest institutional holders of AIG, Fannie Mae, Freddie Mac, Lehman, Washington Mutual among other financial services firms?
Yes, however the vast majority of these holdings were held on behalf of accounts we manage. AXA Group, through its subsidiaries including AllianceBernstein LP,6 is one of the largest asset managers in the world. The Group typically reports its ownership positions, including third-party accounts holdings, on a consolidated worldwide basis. As a result, AXA Group shows up as a large shareholder in many different companies.
15. What is the relationship between AXA Equitable and AXA Group?
AXA Equitable Life Insurance Company is an indirect, wholly-owned subsidiary of AXA S.A., the holding company for one of the largest insurance groups in the world.
16. Does AIG reinsure any of AXA Equitable’s variable annuity product guarantees?
17. Does AXA Equitable hold any credit default swaps issued by AIG?