MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

  Management's discussion and analysis of financial condition and results of operations for the Company that follows should be read 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 Management's Discussion and Analysis ("MD&A") in Part II, Item 7 and "Risk Factors" in Part I, Item 1A included in the Company's Annual Report on Form 10-K for the year ended December 31, 2012 ( "2012 Form 10-K").  

BACKGROUND

  Established in 1859, AXA Equitable is among the oldest and largest life insurance companies in the United States. As part of a diversified financial services organization, AXA Equitable offers a broad spectrum of insurance and investment management products and services. Together with its affiliates, including AllianceBernstein, AXA Equitable is a leading asset manager, with total assets under management of approximately $537.6 billion at March 31, 2013, of which approximately $443.2 billion were managed by AllianceBernstein. AXA Equitable is an indirect wholly owned subsidiary of AXA Financial, which is itself an indirect wholly owned subsidiary of AXA S.A. ("AXA"), a French holding company for an international group of insurance and related financial services companies.  The Company conducts operations in two business segments, the Insurance segment and the Investment Management segment. The Insurance segment offers a variety of traditional, variable and universal life insurance products, variable and fixed-interest annuity products and asset management principally to individuals, small and medium-size businesses and professional and trade associations. The Investment Management segment is principally comprised of the investment management business of AllianceBernstein. AllianceBernstein provides research, diversified investment management and related services globally to a broad range of clients. This segment also includes institutional Separate Accounts principally managed by AllianceBernstein that provide various investment options for large group pension clients, primarily defined benefit and contribution plans, through pooled or single group accounts.  

CURRENT MARKET CONDITIONS AND OVERVIEW

  The Company's business and consolidated results of operations are materially affected by conditions in the global capital markets and the economy, generally. In recent years, stressed conditions in the economy, volatility and disruptions in the capital markets and/or particular asset classes and continued low interest rates have had an adverse effect on the Company's business, consolidated results of operations and financial condition. While an economic recovery in the U.S. is underway, concerns over the pace of the recovery continue due to, among other things, the level of U.S. national debt, the European sovereign debt crisis, unemployment, the availability and cost of credit and geopolitical issues As part of the Company's efforts to mitigate the impacts of the challenging conditions in the economy and capital markets on its business, the Company has modified its product portfolio by developing new and innovative products with the objective of offering a more balanced and diversified product portfolio that drives profitable growth while appropriately managing risk. The Company has made solid progress in executing this strategy over the past few years, as the Company has introduced several new life insurance and annuity products to the marketplace which have been well received. The Company has also taken and expects to continue to take steps to manage the risks associated with the in-force business, particularly variable annuities with guarantee features. For example, in 2012, the Company suspended the acceptance of contributions into certain Accumulator® contracts issued prior to June 2009 and initiated a limited program to offer to purchase from certain policyholders the Guaranteed Minimum Death Benefit ("GMDB") rider contained in their Accumulator® contracts. The Company also took steps to limit and/or suspend the acceptance of contributions to other annuity products.  In addition, AXA Equitable continues to make solid progress in its on-going efforts to reduce costs, manage expenses and operate more efficiently. In 2012, AXA Equitable reduced headcount and has and may continue to reduce headcount further in 2013. Moreover, as a result of management's comprehensive study of AXA Equitable's real estate footprint and related lease obligations, an announcement was made in fourth quarter 2012 of AXA Equitable's intention to significantly reduce its occupancy in its 1290 Avenue of the Americas, New York, NY headquarters. These actions which began in first quarter 2013 are estimated to result in non-cash pre-tax charges of $110 million to $135 million for the full year 2013.                                           54 

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  The Company's business, consolidated results of operations and financial condition are impacted by conditions in the capital markets as well as the overall economy. During first quarter 2013, equity markets were higher while interest rates were relatively flat. The consolidated net loss of the Company and the Insurance segment in first quarter 2013 were largely due to the substantial decreases in first quarter 2013 and 2012 in the market driven decreases in fair values of derivative instruments and GMIB reinsurance contract asset used to hedge the variable annuity products with GMDB, Guaranteed Minimum Income Benefit ("GMIB") and Guaranteed Withdrawal Benefit for Life ("GWBL") features (collectively, the "VA Guarantee Features") that are reported at fair value. Under accounting principles generally accepted in the United States of America ("U.S. GAAP"), reserves for GMDB and GMIB features do not fully and immediately reflect the impact of equity and interest market fluctuations. If the reserves were calculated on a basis that would fully and immediately reflect the impact of equity and interest market fluctuations, U.S. GAAP earnings would be significantly higher than those being reported. For additional information, see "Accounting For Variable Annuity Guarantee Features" below.  In the first quarter of 2013, insurance and annuities first year premiums by the Company increased by $267 million, or 17.7% from the comparable 2012 periods, primarily due to increased first year premiums of variable annuity products.  At AllianceBernstein, total assets under management ("AUM") as of March 31, 2013 were $443.2 billion, an increase of $13.2 billion, or 3.0%, compared to December 31, 2012, and up $24.1 billion, or 5.8%, compared to March 31, 2012. During the first quarter of 2013, AUM increased as a result of market appreciation of $10.6 billion and net inflows of $2.6 billion. During the twelve month period ended March 31, 2013, AUM increased as a result of market appreciation of $23.6 billion and net inflows of $0.5 billion.  

ACCOUNTING FOR VA GUARANTEE FEATURES

  In recent years, variable annuity products with VA Guarantee Features have been the predominant products issued by the Company. These products account for over half of the Company's Separate Accounts assets and have been a significant driver of its results. Because the future claims exposure on these products is sensitive to movements in the equity markets and interest rates, the Company has in place various hedging and reinsurance programs that are designed to mitigate the impact of movements in the equity markets and interest rates. Due to the accounting treatment under U.S. GAAP, certain of these hedging and reinsurance programs contribute to earnings volatility. These programs generally include, among others, the following:   

• Hedging programs. Hedging programs are used to mitigate certain risks

associated with the VA Guarantee Features. These programs utilize various

derivative instruments that are managed in an effort to reduce the economic

impact of unfavorable changes in VA Guarantee Features' exposures

attributable to movements in the equity markets and interest rates. Although

these programs are designed to provide a measure of economic protection

against the impact adverse market conditions may have with respect to VA

Guarantee Features, they do not qualify for hedge accounting treatment under

      U.S. GAAP, meaning that changes in the value of the derivatives will be       recognized in the period in which they occur while offsetting changes in

reserves will be recognized over time, which will contribute to earnings

volatility as in first quarter 2013 when the Company recognized approximately

$888 million of losses on free standing derivatives and $1.2 billion of

losses on the change in fair value of GMIB reinsurance asset which were only

partially offset by a $152 million decrease in reserves for the VA Guarantee

      Features.    

• GMIB reinsurance contracts. GMIB reinsurance contracts are used to cede to

affiliated and non-affiliated reinsurers a portion of the exposure on

variable annuity products that offer the GMIB feature. Additionally, under

U.S. GAAP, the GMIB reinsurance contracts are accounted for as derivatives

and are reported at fair value. Gross reserves for GMIB as noted above, on

the other hand, are calculated under U.S. GAAP on the basis of assumptions

related to projected benefits and related contract charges over the lives of

the contracts and therefore will not immediately reflect the offsetting

impact on future claims exposure resulting from the same capital market

and/or interest rate fluctuations that cause gains or losses on the fair

value of the GMIB reinsurance contracts. Because the changes in the fair

value of the GMIB reinsurance contracts are recorded in the period in which

they occur while offsetting changes in gross reserves for GMIB will be

recognized over time, earnings will tend to be more volatile as in first

quarter 2013, particularly during periods in which equity markets and/or

      interest rates change significantly.                                            55 

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  As referred to in the preceding paragraphs, higher equity markets and relatively flat interest rates in first quarter 2013 and increasing interest rates and higher equity markets in first quarter 2012, contributed to earnings volatility. The table below shows, for first quarter 2013 and 2012 and the year ended December 31, 2012, the impact on Earnings (Loss) from continuing operations before income taxes of the items discussed above (prior to the impact of Amortization of deferred acquisition costs):                                                             Three Months Ended            Year Ended                                                              March 31,               December 31,                                                         2013           2012              2012                                                                       (In Millions) 

Income (loss) on free-standing derivatives(1) $ (888 )$ (1,293 ) $

           (851 ) Increase (decrease) in fair value of GMIB reinsurance contracts(2)                                 (1,188 )      (1,843 )                 497 (Increase) decrease in GMDB, GMIB, GWBL and GMAB reserves, net of related GMDB reinsurance(3)                152           412                  (472 )  Total                                                 $  (1,924 )$ (2,724 )    $           (826 )     

(1) Reported in Net investment income (loss) in the consolidated statements of

     earnings (loss)   (2)  Reported in Increase (decrease) in fair value of reinsurance contracts in      the consolidated statements of earnings (loss)   (3)  Reported in Policyholders' benefits in the consolidated statements of      earnings (loss)   Reinsurance ceded - AXA Arizona. The Company has implemented capital management actions to mitigate statutory reserve strain for GMDB and GMIB riders on the Accumulator® products sold on or after January 1, 2006 and in-force at September 30, 2008 through reinsurance transactions with AXA Arizona. AXA Arizona also reinsures a 90% quota share of level premium term insurance issued by AXA Equitable on or after March 1, 2003 through December 31, 2008 and lapse protection riders under universal life insurance policies issued by AXA Equitable on or after June 1, 2003 through June 30, 2007. For AXA Equitable, these reinsurance transactions currently provide statutory capital relief and mitigate the volatility of capital requirements.  The Company receives statutory reserve credits for reinsurance treaties with AXA Arizona to the extent AXA Arizona holds assets in an irrevocable trust ($8.5 billion at March 31, 2013) and/or letters of credit ($2.6 billion at March 31, 2013). AXA Arizona is required to hold a combination of assets in the trust and/or letters of credit so that the Company will continue to be permitted to take credit for the reinsurance.  

For further information regarding this transaction, see "Item 1A-Risk Factors" included in the 2012 Form 10-K.

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CRITICAL ACCOUNTING ESTIMATES

Application of Critical Accounting Estimates

  The Company's MD&A is based upon its consolidated financial statements that have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires the application of accounting policies that often involve a significant degree of judgment, requiring management to make estimates and assumptions (including normal, recurring accruals) that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management, on an ongoing basis, reviews and evaluates the estimates and assumptions used in the preparation of the consolidated financial statements, including those related to investments, recognition of insurance income and related expenses, DAC, future policy benefits, recognition of Investment Management revenues and related expenses and benefit plan costs. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. The results of such factors form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. If management determines that modifications in assumptions and estimates are appropriate given current facts and circumstances, the consolidated results of operations and financial position as reported in the Consolidated Financial Statements could change significantly.  

Management believes the critical accounting policies relating to the following areas are most dependent on the application of estimates, assumptions and judgments:

     •   Insurance Revenue Recognition     •   Insurance Reserves and Policyholder Benefits     •   DAC     •   Goodwill and Other Intangible Assets     •   Investment Management Revenue Recognition and Related Expenses     •   Share-based and Other Compensation Programs     •   Pension Plans     •   Investments - Impairments and Fair Value Measurements     •   Income Taxes  

A discussion of each of the critical accounting estimates may be found in the Company's 2012 Form 10-K, under "Management's Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Estimates-Application of Critical Accounting Estimates."

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CONSOLIDATED RESULTS OF OPERATIONS

  The consolidated earnings (loss) narrative that follows discusses the results for the first quarter ended March 31, 2013 compared to the comparable 2012 period's results. For additional information, see "Accounting for VA Guarantee Features" at page 55.