[AXA LOGO]
SUN JIN MOON
Vice President and Counsel
(212) 314-2120
Fax: (212) 314-3953
December 4, 2009
VIA EDGAR
----------------
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Re: AXA Equitable Life Insurance Company
Variable Indexed Option
Initial Registration Statement filed on Form S-3
File No. 333-161963
Dear Mr. Oh:
On behalf of AXA Equitable Life Insurance Company ("AXA Equitable" or
the "Company"), we respond below to comments of the SEC staff on the
above-referenced registration statement. We set forth each specific staff
comment and then provide our response. We have attached a revised draft
prospectus reflecting our responses and minor product changes, clarifications
and corrections. The page reference numbers in the comments refer to the
courtesy copy that we provided to the staff with the above-referenced filing.
The page reference numbers in the response refer to the attachment to this
letter.
Please note that the product's marketing name is the Market Stabilizer
Option ("MSO") and we will refer to the MSO in our answers.
1. GENERAL
a. The registrant states in its cover letter that the securities being
registered qualify for registration on Form S-3 as "non-convertible"
securities. A careful reading of the prospectus indicates that
adverse market conditions can result in a diminution of the principal
owed to the investor by the registrant. Please explain the basis,
including precedent, for your belief that the securities qualify as
non-convertible securities within the meaning of General Instruction
1.B.2. of Form S-3.
Such explanation should also address the "**" footnote on the signature
page.
Mr. Sonny Oh, Esquire
December 4, 2009
Page 2 of 27
RESPONSE 1a.
------------
For reasons discussed below, the fact that adverse market conditions can
cause a policyholder to lose money by allocating a premium payment or other
amounts of account value to the MSO does not preclude reliance on General
Instruction I.B.2. to Form S-3.
Administrative History of General Instruction I.B.2.
This General Instruction dates from Form S-3's initial adoption in SEC
Rel. No. 33-6383 (March 3, 1982). As initially adopted, the instruction referred
to "non-convertible debt and preferred securities" that have been assigned an
investment grade rating. Even as to "non-convertible debt and preferred
securities," of course, there would be no guarantee that a purchaser would not
lose money. Many such securities are traded in open markets, for example, and
their market prices can vary dramatically over time due to a wide variety of
factors, such as post-issuance changes in interest rates and changes in
perceived credit-worthiness of the issuer.
In 1992, moreover, the language of General Instruction I.B.2. was
further broadened by SEC Rel. 33-6964 (Oct. 22, 1992) ("Release 33-6964").
Specifically, the words "debt" and "preferred" were deleted, which clarified
that the ability to rely on the instruction does not depend upon the security's
being a form of debt or preferred securities. Release 33-6964 explained this
change, as follows:
This change clarifies that other investment grade financing instruments
(such as foreign currency or other cash-settled derivative securities)
may be registered under the investment grade standard.
Clearly, foreign currency derivatives, as well as other types of derivatives
such as referred to in the above-quoted language, may result in substantial
losses to purchasers thereof; and such losses may result from, among other
things, changes in the value of a "Reference" (i.e., a reference currency,
reference commodity, reference instrument, or reference index upon which the
derivative is based). This may be called a "Reference Value Risk."
We believe that a policyholder's interest in a MSO could fairly be
embraced by the term "derivative," as used in the above-quoted language from
Release 33-6964, to the extent that the value of the policyholder's interest at
a given time is determined by applying a contractually specified formula to the
then-current value of a Reference. We do not believe it is necessary, however,
that the MSO interests be considered to be "derivatives" in order to rely on
General Instruction I.B.2. Rather, the above-quoted language from Release
33-6964 makes clear that "derivatives" are only one of the types of
non-convertible investment instruments that (in addition to debt and preferred
stock) can rely on this instruction, assuming that they are rated investment
grade.
Mr. Sonny Oh, Esquire
December 4, 2009
Page 3 of 27
Certain Public Policy Considerations
If Form S-3 were unavailable, interests in MSO would be required to be
registered on Form S-1, instead. We do not believe there is any public policy
reason that would make Form S-1 the preferable form for this purpose.
In particular, the fact that policyholders are exposed to a Reference
Value Risk by their participation in a MSO does not give rise to any public
policy reason for requiring the MSO interests to be registered on Form S-1,
rather than Form S-3. That risk is required to be as fully disclosed in a Form
S-3 prospectus as in a Form S-1 prospectus. For example, Form S-3 requires the
prospectus to include the same risk factors and information about the terms of
the MSO as would be required if the MSO interests were being registered on Form
S-1. See Items 3 and 9 of Form S-3, which are identical to Items 3 and 9 of Form
S-1, to the extent here relevant.
It is important to note that, under the specific terms of Form S-3,
this information about risk factors and the terms of the securities is required
to be included in the prospectus, and cannot be incorporated by reference into
the prospectus from any other document filed with SEC. Under Form S-1, by
contrast, this information could be incorporated by reference into the
prospectus from other filings with the SEC, assuming certain conditions are met.
See General Instruction VII. to Form S-1. Thus, if anything, Form S-3 generally
would require a greater level of disclosure in the prospectus concerning the MSO
interests and, in particular, the risks thereof and the terms and conditions
thereof.
Form S-3, of course, requires the registrant's 1934 Act filings to be
incorporated by reference into the prospectus. The information required to be
contained in those 1934 Act filings, however, has to do with matters such as the
registrant's business, financial condition, results of operations, financial
statements, officers and directors, management remuneration, properties, etc.
Such 1934 Act reports, of course, would not generally contain information
bearing upon the Reference Value Risk of the MSO. Rather, as noted above, Form
S-3 generally requires that risk, as well as the terms and conditions of the
MSO, to be disclosed in the prospectus. Moreover, pursuant to General
Instruction VII. to Form S-1, the information that is contained in a
registrant's 1934 Act reports generally is permitted to be incorporated by
reference into a prospectus filed pursuant to that form; and Form S-1,
therefore, does not differ greatly from Form S-3 in that regard.
In sum, insofar as pertinent to the MSO interests (and particularly the
Reference Value Risks thereof), (1) Form S-3 requires no less prospectus
disclosure than Form S-1 and (2) if the full extent of Form S-1's permitted
incorporation by reference were utilized, a Form S-1 prospectus might contain
even less disclosure in this regard than is required in a Form S-3 prospectus.
Mr. Sonny Oh, Esquire
December 4, 2009
Page 4 of 27
Certain Precedents
Numerous insurance companies have relied on General Instruction I.B.2.
of Form S-3 to register modified guarantee annuity ("MGA") interests that have
incorporated so-called "market value adjustment" features. In many such cases,
it has been possible for an investor in an MGA interest to receive back less
than the amount of his or her investment, due to the operation of the market
value adjustment feature. That is, it has been possible in such cases for the
market value adjustment formula to result in a negative adjustment that exceeded
the amount of any cumulative earnings on the MGA interest, such that an investor
withdrawing from the MGA interest would receive an amount less than the amount
originally allocated by the investor to the MGA interest. We respectfully submit
that such instances provide good precedents for registration of the MSO
interests in reliance on General Instruction I.B.2. of Form S-3.
Footnote on Signature Page
The staff's comment also refers to the footnote on the Form S-3
signature page. As stated in the footnote the registrant has a reasonable belief
that the MSO interests will be assigned an investment grade rating by a
nationally-recognized statistical rating organization prior to the sale of any
such interests.
b. Please revise the "Calculation of Registration Fee" as it is not
clear why the values appearing in the table are appropriate and
footnotes 1 and 2 to the table do not appear in the table itself.
RESPONSE 1.b.
-------------
There is some variation in the manner in which registrants complete the
Calculation of Registration Fee table in Form S-3 and S-1 registration
statements relating to insurance products, inasmuch as the table was not
designed with such products in mind. As the staff's comment points out, the
registrant inadvertently omitted to include the applicable footnote references
in the table. Otherwise, we believe that there is ample precedent for completing
the table in the manner filed in this registration statement. Nevertheless, as
described below, the registrant by pre-effective amendment will make certain
changes to make the table more clear.
Mr. Sonny Oh, Esquire
December 4, 2009
Page 5 of 27
In this regard, the $1,792,114.70 specified as the "Amount to be
registered" was simply the amount that could be registered by paying the minimum
$100 filing fee that was specified in the table under "Amount of registration
fee" and that was paid with the initial filing of this registration statement.
The registrant by pre-effective amendment will increase the dollar amount of
securities registered to a substantially greater amount and will enter that
greater amount in both the first and third columns of the table and in the
second sentence of footnote (1) to the table. The registrant will concomitantly
increase the amount of registration fee entered under "Amount of registration
fee" (with an appropriate explanatory footnote as to the additional amount of
registration fee being paid with the amendment). The first sentence of footnote
(1) to the table will be reworded to read as follows:
(1) Interests in the Variable Indexed Option of AXA Equitable Life
Insurance Company are issued in U.S. dollar amounts, rather than
units.
In the second column of the table, "100%" will be replaced by "Not Applicable"
and a reference to footnote (1). A reference to footnote (1) will also be
inserted in the first column of the table, and footnote (2) will be entirely
deleted from the table.
c. Please explain to the staff whether Phoenix intends to offer
additional similar options through separate registration
statements or simply adding them to this registration
statement.
RESPONSE 1.c.
This comment inquires about the procedure that the registrant expects
to follow in order to add "similar options" in the future.
As noted in the transmittal letter that accompanied the initial filing
of the this Form S-3 registration statement, the registrant initially plans to
offer the MSO with the "IL Optimizer" variable life insurance policy, interests
under which are currently registered pursuant to a Form N-6 registration
statement (File No. 333-10399). If and when the registrant determines to offer
the MSO in connection with forms of variable life insurance policies that are
registered pursuant to other Form N-6 registration statements, the registrant
expects that the same form of MSO rider will be used. That is, the registrant
does not expect that it will be necessary to "tailor" the form of the rider for
use with different forms of variable life insurance policies.
The registrant would also expect that the MSO prospectus disclosure
that would be used in connection with any additional forms of variable life
insurance policies would be identical to, or vary only slightly from, the MSO
prospectus disclosure that is used in connection with IL Optimizer.
Under the circumstances, the registrant generally does not expect to
file a new 1933 Act registration statement in order to use the MSO rider in
connection with any
Mr. Sonny Oh, Esquire
December 4, 2009
Page 6 of 27
variable life insurance policy in addition to IL Optimizer. In this connection,
it may well be that that this Form S-3 registration statement would never
include more than a single prospectus. That would be the case, for example, if
(1) no different disclosure in the MSO prospectus is ever required in connection
with the offering of the MSO with any additional forms of variable life
insurance or (2) if any such different disclosure is required, all of the
relevant disclosure, including all such differences, is set forth in a single
combined prospectus (and any supplements thereto).
Moreover, even if a separate version of the MSO prospectus is used, the
registrant would not expect to file a new registration statement with respect to
that prospectus. In this regard, we would emphasize that the registrant expects
that the same form of MSO rider would apply in each case, and any disclosure
differences would be minor, as among the different prospectuses. This situation
would be quite similar to cases that frequently arise currently where, for
example, a single 1933 Act registration statement is permitted to include
different versions of the prospectus for a variable product, in order to reflect
the distribution of the product through different channels. In effect, each
different variable life insurance product could fairly be regarded simply as a
different channel for distributing the MSO product.
Even outside the insurance product context, Form S-3 itself, of course,
is commonly used in circumstances where multiple versions of a prospectus are
included in the same registration statement (including even different versions
that relate to quite different securities). Accordingly, Form S-3 clearly
provides ample flexibility to include all MSO prospectus filings within the same
Form S-3 registration statement, as discussed above.
2. FRONT COVER PAGE
a. The prospectus states on page 1 that the registrant will apply
an "Index Linked Rate of Return," but leaves ambiguous whether
any other fixed or other rate of interest is applied to the
security. This matter is first addressed in the definitions,
which defines the Segment Account Value to include the Index
Linked Rate of Return as the only means for a return on
amounts contributed to the Segment Account. This in turn means
an investor in the security is at risk of a loss of principal
even if the investor makes no premature withdrawals. Please
revise the front cover page to make these matters clear.
RESPONSE 2.a.
We have made the appropriate revisions and attempted to clarify the
disclosure by making consistent references to the Index-Linked Return. We have
also made the following changes marked by the underlined text:
The Index-Linked Return could be positive, zero or in certain circumstances
Mr. Sonny Oh, Esquire
December 4, 2009
Page 7 of 27
negative as described below. THEREFORE, THERE IS THE POSSIBILITY OF A NEGATIVE
RETURN ON THIS INVESTMENT AT THE END OF YOUR SEGMENT TERM.
b. Please include and confirm that all disclosure items required by
Item 501 of Regulation S-K per Item 1 of Form S-3, in particular
note Item 501(b)(5).
RESPONSE 2.B.
-------------
We have made the appropriate revision by adding the following disclosure
to the cover page:
Please refer to page 6 of this Prospectus for a discussion of risk factors.
c. The sentence preceding and the first sentence following the bullet
list of terms on page 1 are awkward. Therefore, please insert
"associated with" in lieu of "of" or otherwise clarify each
sentence.
RESPONSE 2.c.
-------------
We have made the appropriate revisions.
i. Please also briefly mention that a definitional section is
provided and where. Moreover, please disclose either here or
in the definitional section what terms are defined and how a
reader will know when they come across certain terms which
ones will be explained in the definitional section.
RESPONSE 2.c.i.
---------------
We have made the appropriate revision by adding a cross-reference to
the definitional section. We believe that the current structure of the
Prospectus is more reader-friendly with the definitional section placed in the
beginning of the Prospectus instead of notations to certain terms.
ii. In addition, please address the fact that several terms such
as "net policy account value" on page 7, "net cash surrender
value" and "cash surrender value" on page 8 are not terms
necessarily associated with the VIO.
RESPONSE 2.c.ii.
----------------
We have made the appropriate revision and added the following reference:
(please refer to your base variable life policy prospectus for a further
explanation of these terms).
Mr. Sonny Oh, Esquire
December 4, 2009
Page 8 of 27
iii. Finally, please confirm that all terms have been used
consistently throughout the prospectus, e.g., compare "Segment
Term" with first sentence of second paragraph under "Requested
Face Amount Increases" on page 9.
RESPONSE 2.c.iii.
-----------------
We have made the appropriate revisions.
d. Please reconcile the first and third bullet points on page 1 with
the definition of each of these terms on page 4 with respect to
whether such values can be positive, negative, or zero.
RESPONSE 2.d.
-------------
We have made the appropriate revisions. We have clarified the
disclosure to indicate that the Index-Linked Return can be positive, zero or
negative and made this consistent throughout the Prospectus.
e. Given the disclosure under "What is the Variable Indexed Account"
on page 1, the meaning of and distinction between "Segment" and
"Segment Account" is very unclear. For example, compare the third
and fourth sentence where the former applies the Index-Linked Rate
of Return to the policy account in a Segment Account and the latter
applies it to policy account in a Segment. Consequently, please
clarify the meaning of these terms as well as "Initial Segment
Account" and "Segment Value" if necessary. For example, it is not
entirely clear whether "Segment Account" is meant to refer to the
value of amounts held in a "Segment." If so, then it may be more
helpful to the reader to provide a term more appropriate to such
meaning and allow for more straightforward disclosure, e.g., easier
to refer to "Segment Account Value" instead of "policy account in a
Segment/Segment Account."
RESPONSE 2.e.
-------------
We have made the appropriate revisions and changed "Segment Account" to
"Segment Account value" to clarify the disclosure.
3. Please confirm that the following disclosure has been (or will be)
reflected in the applicable variable life policy prospectus prior to
the offering of this VIO rider.
a. Disclosure regarding the applicability of transfer charges to VIO
Holding Account (see for example, end of last paragraph on page 1).
Mr. Sonny Oh, Esquire
December 4, 2009
Page 9 of 27
RESPONSE 3.a.
-------------
So far as any current transfer charge is concerned, the applicable
variable life policy prospectus (the "VLI Prospectus") contains disclosure to
the effect that the registrant currently does not impose any charge on
transfers. This statement is not qualified in any way and thus would include
transfers to and from the MSO Holding Account. Accordingly, we can confirm that
the VLI Prospectus discloses that transfers into and out of the MSO Holding
Account are not currently subject to any transfer charge.
However, although the VLI Prospectus also discloses that the registrant
generally reserves the right in the future to deduct up to a maximum charge of
$25 per transfer, the VLI Prospectus does not disclose the additional fact that
no such future charge will apply to transfers into or out of the MSO Holding
Account. The MSO prospectus does disclose this additional fact, though, and we
respectfully submit that it is not necessary or desirable for the VLI Prospectus
to duplicate this disclosure.
It is important to bear in mind that, for an investor (or prospective
investor) in the MSO, almost all of the terms and conditions of the MSO can be
viewed as, in effect, modifying the disclosure contained in the VLI Prospectus.
The use of a separate MSO prospectus, of course, reflects a general decision to
use a separate disclosure document to communicate how the MSO modifies the
disclosures in the VLI Prospectus, rather than to include all of those
modifications within the text of the VLI Prospectus itself. The registrant
decided to use a separate MSO prospectus because, among other things, MSO is so
different from the other available variable life investment options, and
requires such extensive and complex explanation, that investor understanding
would best be served by gathering the relevant disclosure pertaining to the MSO
in a single, separately identifiable document. This general disclosure approach
would be violated by a decision to repeat in the VLI Prospectus the fact that,
unlike other transfers, transfers to and from the MSO Holding Account could
never in the future be subject to any charge. Such disclosure would be relevant
only to the MSO and clearly would be of minor significance, relative to much
other information in the MSO prospectus that would not be repeated in the VLI
Prospectus.
We respectfully submit, therefore, that there is no reason to single
out this piece of information (i.e., the fact that no transfer charges can ever
be imposed with respect to the MSO Holding Account) for repetition in the MSO
prospectus. Indeed, doing so would create an unbalanced disclosure approach
where a relatively minor detail of the MSO is repeated in the VLI prospectus,
whereas more important details are not. This would give unwarranted prominence
to a minor detail and perhaps distract the investor's attention from more
significant information about the MSO.
More generally, we believe that any information about the MSO in the
VLI Prospectus should be minimized to the extent possible. As noted above, the
general disclosure approach that the registrant has adopted is that the customer
should refer to the
Mr. Sonny Oh, Esquire
December 4, 2009
Page 10 of 27
MSO prospectus for disclosure concerning the MSO. The more information that the
VLI Prospectus discloses concerning the MSO, the greater the likelihood that
investors might ignore the MSO prospectus and make investment decisions based
primarily on the limited references to the MSO that appear in the VLI
Prospectus.
In this regard, even if disclosure were inserted in the VLI Prospectus
to the effect that a transfer charge would never in the future be imposed with
respect to the MSO Holding Account under a MSO, this information would not be
meaningful to an investor without reference to the discussion of the MSO,
including the MSO Holding Account, that appears in the MSO prospectus. This
underscores the appropriateness of leaving all discussion of this point in the
MSO prospectus where the context is provided in which it can be properly
understood.
b. All applicable portions of the fee table and fee disclosure
accordingly including effect disclosed in second paragraph under
"How we deduct policy monthly charges during a Segment Term" on
page 7.
RESPONSE 3.b.
-------------
As discussed in response to Comment 3.a. above, the use of a separate MSO
prospectus reflects a general decision to use a separate disclosure document to
communicate how the MSO modifies the disclosures in the VLI Prospectus, rather
than to modify all of those disclosures within the text of the VLI Prospectus
itself. As also discussed above, we believe that any information about the MSO
should be kept to a minimum in the VLI Prospectus, in order to avoid:
(1) Unbalanced disclosure patterns where some information about the MSO is
repeated in the VLI Prospectus, while other information (perhaps even
more important information) about the MSO is not. Among other things, we
are concerned that such unbalanced disclosure might create erroneous
impressions in the minds of investors;
(2) Inclusion of so much information about the MSO in the VLI Prospectus
that investors have a tendency to make decisions about the MSO based
primarily on disclosures in the VLI Prospectus, rather than based on the
MSO prospectus; and
(3) Inclusion in the VLI Prospectus of information about the MSO that an
investor cannot properly understand without reference to explanations
that appear in the MSO prospectus. Even though the registrant may
discharge its legal disclosure obligations by providing the investor with
the MSO prospectus, we believe it is more "user friendly" to omit from
the VLI Prospectus any disclosures about the MSO that require technical
explanations in the MSO prospectus in order to be reasonably understood.
Mr. Sonny Oh, Esquire
December 4, 2009
Page 11 of 27
This comment 3.b. requests confirmation that the specifics of the charges
that will be imposed for the MSO and the manner in which charges will be
deducted during a Segment Term will be repeated in the VLI Prospectus. For the
reasons discussed in (1)-(3) above, we do not believe that the repetition of
such information in the VLI Prospectuses is necessary or desirable. Although
this information about charges is clearly important to investors, this
information cannot be well understood without a reasonable understanding of how
the MSO works and related vocabulary.
For example, the manner of deducting charges during a Segment Term cannot
be well understood without an understanding of (among other things) the
significance and functions of the following:
o the Charge Reserve Amount,
o a Segment Term,
o the MSO Holding Account,
o Segment Accounts and Segment Values, and
o The Market Value Adjustment of the Segment Account.
Concepts such as the foregoing, of course, are technical and complex in
nature, are fundamental to the essence of the MSO product, and cannot be
effectively explained in isolation. Moreover, it is the purpose of the MSO
prospectus (and not the VLI Prospectus) to convey an understanding of these and
the other basic concepts of the MSO. The registrant believes, therefore, that
disclosures about the manner of deducting charges during a Segment Term can only
be well understood by investors in the context of the MSO prospectus, and such
disclosures are not relevant to anyone who is not an investor or prospective
investor in the MSO. Accordingly, the registrant does not intend to repeat in
the VLI Prospectus the type of disclosure referred to in Comment 3.b.
The registrant decided to use a separate MSO prospectus because, among
other things, the MSO is so different from the other available variable life
investment options, and requires such extensive and complex explanation, that
investor understanding would best be served by gathering the relevant disclosure
pertaining to the MSO in a single separately identifiable document. We
respectfully submit that repeating significant and complex disclosures about the
MSO (such as the manner of deducting charges during a Segment Term) in the VLI
Prospectus would, due to lack of full context, be more likely to impede than
enhance the understanding of an investor or prospective investor in the MSO.
Moreover, for purchasers who have no interest in making an investment in the
MSO, any references in the VLI Prospectus to the complex and highly technical
provisions of the MSO would be even more confusing and distracting. However, in
order to further clarify the relationship between the VLI Prospectus charge
information and the MSO Prospectus charge information, we have added the
following language in "2. Fee Table Summary" and the "Charges" section:
This fee table applies specifically to the MSO and should be read in
conjunction with the fee table in the appropriate variable life
insurance policy prospectus.
Mr. Sonny Oh, Esquire
December 4, 2009
Page 12 of 27
4. DEFINITIONS (PAGE 4)
a. In the definition of "Index Performance Rate," please expand
the last sentence with respect to how the value of the Index
will be determined on a day other than the Segment Start or
Maturity Dates.
If similarly determined as of the most recent preceding business day,
then please also reconcile with the last sentence in the definition of
"Market Value Adjustment ('MVA')."
RESPONSE 4.a.
-------------
Under the normal operation of the Index Performance Rate, the value of
the Index is only relevant on the Segment Start Date and Segment Maturity Date.
We have added disclosure to explain those circumstances under which the value of
the Index would need to be determined on a day other than the Segment Start Date
or Segment Maturity Date. The Put Option Factor is determined on the next
business day, so the disclosure does not need to be changed.
b. The definition of "Index Performance Rate" states that if an Index
"is discontinued or if the calculation of the Index is substantially
changed, we reserve the right to substitute an alternative index."
Please provide additional disclosure as to this right including the
following issues.
i. Will owners be notified of the use of an alternative index and
if so, how and when?
RESPONSE 4.b.i.
---------------
We have added the following disclosure to the Definitions section on p.
4 that outlines our procedures:
We also reserve the right to choose an alternative index at our discretion.
If we were to substitute an alternative index at our discretion, we would
provide notice 45 days before making that change. The new index would only apply
to new Segments. Any outstanding Segments would mature using the S&P 500 Index
excluding dividends to calculate the Index-Linked Return.
With an alternative index, the Downside Protection would remain the same or
greater. However, an alternative index may reduce the Growth Cap Rates we can
offer.
If the S&P 500 Index were to be discontinued or substantially changed, thereby
affecting the Index-Linked Return of existing Segments, we reserve the right to
mature the Segments based on the most recently available closing value of the
Index before it is
Mr. Sonny Oh, Esquire
December 4, 2009
Page 13 of 27
discontinued or changed. We would provide notice as soon as practicable. We also
reserve the right to not offer new Segments. Please see "Right to Discontinue
and Limit Amounts Allocated to the MSO" later in this Prospectus.
ii. Please confirm that all circumstances under which the company
has the right to use an alternative index have been disclosed.
Otherwise, please disclose all other circumstances in which it
may exercise such right.
RESPONSE 4.b.ii.
----------------
We have added disclosure that discloses all circumstances under which
we may exercise this right.
iii. If an alternative index is used, how will that impact upon
the Index-Linked Return that a policy owner can expect.
RESPONSE 4.b.iii.
-----------------
We currently do not plan on utilizing the alternative index so it would be
difficult to say what the impact would be.
iv. If an alternative index is used, how will that impact upon the
Growth Cap Rate and protection against negative performance,
i.e., will same limits apply to alternative index?
RESPONSE 4.b.iv.
----------------
We have added disclosure that explains the protection against negative
performance would remain the same and that there may be a negative effect on the
Growth Cap Rate.
v. Please disclose whether there an index will always be
available or if there may be times when a suitable alternative
may not be available. If the latter is a possibility, please
expand on future interest would accrue to existing policy
owners.
RESPONSE 4.b.v.
We have added disclosure explaining that we may mature a Segment if the S&P 500
Index were to be discontinued or substantially changed.
c. Please provide a more precise definition of "Index-Linked Rate of
Return," i.e., explain more clearly how the Growth Cap and
protection against negative performance affects its value.
Mr. Sonny Oh, Esquire
December 4, 2009
Page 14 of 27
RESPONSE 4.c.
-------------
We have made the appropriate revision and added the following disclosure to the
definition:
Therefore, if the performance of the Index is zero or positive, we
will apply that performance up to the Growth Cap Rate. If the
performance of the Index is negative, we will apply performance of
zero unless decline in the performance of the Index is below -25%.
Please see the chart under "Index-Linked Return" for more
information.
d. The definition of the Market Value Adjustment ("MVA") is
extraordinarily dense and requires a complete revision for plain
English. A few examples of the obscurity of the definition follow:
i. The definition refers to the phrase ".75% Variable Index
Benefit Charge Rate" but, unlike the Put Option factor, does
not define the phrase or even make a cross reference to where
the definition may be found. The definition should define the
phrase and clarify in plain English why it is deducted from
the MVA.
RESPONSE 4.d.i.
---------------
We have made the appropriate revisions, adding a cross-reference and clarifying
the disclosure.
ii. The definition refers to the phrase "Loss Absorption Threshold
Rate" but, unlike the Put Option factor, does not define the
phrase or even make a cross reference to where the definition
may be found. The definition should define the phrase and
clarify in plain English why it is used to reduce the strike
price used to calculate the MVA.
RESPONSE 4.d.ii.
---------------
We have made the appropriate revisions, adding a cross-reference and clarifying
the disclosure. We have replaced "Loss Absorption Threshold Rate" with "Downside
Protection."
iii. The definition notes that the MVA is determined by the Put
Option Factor but provides no guidance as to what are the
factors that would determine the amount and the direction of
the factor. By way of comparison, an MVA for a fixed annuity
is typically disclosed as being based on the relationship
between the rate offered by the annuity and interest rates on
similar instruments in
Mr. Sonny Oh, Esquire
December 4, 2009
Page 15 of 27
the market. Please revise the prospectus to provide similar
general guidance in plain English.
RESPONSE 4.d.iii.
-----------------
We have made the appropriate revision and clarified the disclosure by providing
some similar general guidance.
iv. In addition, please disclose the basis for imposing an MVA if
amounts are withdrawn prior to the Segment maturity Date in
the narrative discussion of the MVA on page 7.
RESPONSE 4.d.iv.
----------------
We have made the appropriate revision and added the following disclosure to the
MVA section on p. 11:
The Market Value Adjustment reflects a fair market value methodology
used to determine the value of the Put Option Factor when there are amounts
deducted from a Segment before a Segment matures. We apply a Market Value
Adjustment to recover costs incurred in providing the Downside Protection under
the MSO.
v. Please also reconcile this term with the term "Segment Market
Value Adjustment" in the definition of "Segment Value."
RESPONSE 4.d.v
--------------
We have made the appropriate revision in the definition of "Segment Value" to
clarify this disclosure.
e. The first sentence under the definition of "Segment Account" and
last sentence of the first paragraph under "Index-Linked Return" on
page 5 both refer to making deductions "that we deem necessary."
Please expand on the meaning of this phrase as well as what factors
are considered in deeming a deduction as "necessary."
RESPONSE 4.e.
-------------
We have clarified the disclosure and added the following which is marked by the
underline:
...we deem necessary to continue to qualify the policy as life
insurance under applicable tax law,....
f. In the definition of "Segment Term," please clarify whether all
terms are for one year and whether they may ever be lengthened or
shortened.
Mr. Sonny Oh, Esquire
December 4, 2009
Page 16 of 27
RESPONSE 4.f.
-------------
We have revised the disclosure to clarify that we reserve the right to offer
different durations.
g. Page 6 of the prospectus refers to "the unloaned GIO." Please
define what is intended and ensure that all capitalized phrases
or terms are defined.
RESPONSE 4.g.
-------------
We have made the appropriate revision and added the following definition to the
Segments section on p. 8:
The Unloaned GIO is the portion of the GIO that is not being held to
secure policy loans you have taken. Please see your base variable life
policy prospectus for more information.
5. FEE TABLE
Please include a fee table reflecting the maximum fees of all
applicable VIO charges prior to section 2 beginning on page 5 including the MVA.
RESPONSE 5.
-----------
We have made the appropriate revision.
6. RISKS
Please include a section on risks following the fee table and prior to
section 2 beginning on page 5 in accordance with Item 3 of Form S-3, for
example, risks associated with the effects of the MVA and Charge Reserves Amount
on your account value and termination, the unavailability of a Segment upon
Segment Renewal, the use of an alternative index, and the possibility of a
decrease in the Loss Absorption Threshold Rate.
RESPONSE 6.
-----------
We have made the appropriate revision and added a Risk Factors section
that states the following:
There are risks associated with some features of the Market Stabilizer
Option. There is the possibility of a negative return on this investment. Your
return is also limited by the Growth Cap Rate. If any portion of a policy loan,
policy distribution or monthly deduction is allocated to a Segment, an MVA will
be applied to your Segment Account value. We may not offer new Segments so there
is also the possibility that a
Mr. Sonny Oh, Esquire
December 4, 2009
Page 17 of 27
Segment may not be available for a Segment Renewal at the end of your Segment
Term(s). We also reserve the right to substitute an alternative Index for the
S&P 500. No company other than AXA Equitable has any legal responsibility to pay
amounts that AXA Equitable owes under the policies.
7. SEGMENT RENEWAL (PAGE 5)
Please revise this subsection and the subsection "Segment Renewal" on
page 7 so that their disclosure is consistent. For example, compare where owner
can transfer Segment Maturity Value upon Segment maturity (including distinction
between investment options as opposed to variable investment options), and where
monies can be transferred if the owner does not make a choice and/or the VIO is
not being offered.
Alternatively, given the obvious connection between the disclosure under this
subsection and that under "Segment Renewal" on page 7, please move the latter
subsection from its current location in the prospectus and insert it after this
subsection and tailor both subsections to their captions accordingly.
RESPONSE 7.
-----------
We have made the appropriate revision within the Segment Renewal
section and also moved the section per the staff's comments.
8. VIO HOLDING ACCOUNT (PAGE 5)
The prospectus states in this section that amounts transferred to the
VIO are first transferred to the VIO Holding Account. In the next section, the
prospectus notes that the Segment Start Date is the third Friday of each
calendar month. Please clarify in the Holding Account section whether funds are
transferred into the VIO out of the Holding Account at that time. Please also
state explicitly whether all funds that are in the Holding Account are then
transferred, assuming the specified Cap Growth Rate requirement has been
satisfied.
RESPONSE 8
----------
We have added the following to the MSO Holding Account section on p. 8:
On the Segment Start Date, account value in the MSO Holding Account,
excluding charges and any account value transferred to the Charge Reserve
Amount, will be transferred into a Segment if all requirements and limitations
are met including a Growth Cap Rate that meets your minimum Growth Cap Rate.
Mr. Sonny Oh, Esquire
December 4, 2009
Page 18 of 27
9. GROWTH CAP RATE (PAGE 5)
a. Please disclose the company's basis for determining Growth Cap
Rate and Loss Absorption Threshold Rate and/or disclose that
these rates can be set at the company's sole discretion.
RESPONSE 9.a.
-------------
We have added the following disclosure to the Growth Cap Rate section
on p. 9:
The Growth Cap Rate and Downside Protection are set at the Company's sole
discretion.
b. Please disclose whether there is any guaranteed minimum and/or
maximum rate associated with the Loss Absorption Threshold Rate.
RESPONSE 9.b.
-------------
We currently disclose that we may increase the Downside Protection to
-100%. We have also added the following disclosure to the Growth Cap Rate
section on p. 9:
However, we may only increase your Downside Protection from the current -25%.
c. Please specify how and when prior notice of a change in the Loss
Absorption Threshold Rate will be provided.
Please also clarify whether any announced reduction will apply
to amounts invested in a Segment Account at the time of the
reduction and, if so, whether MVA's or other charges will be
assessed for withdrawals of those amounts made subsequent to
the announcement.
RESPONSE 9.c.
-------------
As discussed above, we will only increase the Downside Protection and
we have added the following disclosure to the Growth Cap Rate section on p. 9:
We will provide notice between 15 and 45 days before any change
in the Downside Protection is effective. Any change would only
apply to new Segments started after the effective date of the
change.
d. The prospectus notes in the Growth Cap Rate subsection that an
investor is required to specify a minimum Growth Cap Rate
required for transfers into the VIO out of the VIO Holding
Account. The prospectus also notes in the same subsection that
changes in this rate and in the Loss Absorption Threshold Rate
are inversely related. Please clarify the extent to which an
Mr. Sonny Oh, Esquire
December 4, 2009
Page 19 of 27
investor will have the opportunity to refuse a transfer of
amounts into the VIO scheduled because of a favorable change
in the Growth Cap Rate where the Loss Absorption Threshold
Rate has been adversely affected.
Separately, please clarify what are the consequences of a failure by an
investor to specify a minimum Growth Cap Rate.
RESPONSE 9.d.
-------------
As discussed above, the Downside Protection can only be increased. We
have added the following disclosure to the Growth Cap Rate section on p. 9:
If you do not specify a minimum Growth Cap Rate then your minimum Growth Cap
Rate will be set at 6%.
e. This section notes that the Loss Absorption Threshold Rate is
"currently up to 25%." The prospectus states on page 4, however,
that this rate is 25%. Please reconcile the two disclosures.
RESPONSE 9.e.
-------------
While the Downside Protection protects up to -25% of performance, for
the purposes of the formula we need to use the -25% number in the calculation
disclosure.
10. INDEX-LINKED RETURN (PAGE 5)
a. In the second sentence of the first paragraph, please clarify
whether the Segment Account is also net of the Charge Reserve
Amount discussed on the next page.
RESPONSE 10.a.
--------------
We have added the following disclosure to the Index-Linked Return section
on p. 9:
The Segment Account value does not include the Charge Reserve Amount described
later in this Prospectus.
b. Please clarify the last sentence of the first paragraph on page 6
by making the 25% a positive number.
RESPONSE 10.b.
--------------
We would prefer to leave the disclosure as is. Throughout the body of
the Prospectus, we tried to consistently use negative numbers when discussing
the Downside Protection of -25%. For the purposes of the chart and examples,
where we try to clarify
Mr. Sonny Oh, Esquire
December 4, 2009
Page 20 of 27
and illustrate the operation of the MSO by using terms such as "goes down by
more than" and "downside performance," it seemed that non-negative numbers
painted a clearer picture.
c. Please reconcile the second paragraph on page 6 with the second
to last paragraph under "Growth Cap Rate" on page 5 as to the
requirements to make the transfer to the Segment.
RESPONSE 10.c.
--------------
We have modified and clarified the disclosure. In order for account
value to transfer into a Segment, the Growth Cap Rate we offer must be greater
than the sum of the annual interest rate we are currently crediting on the
Unloaned GIO ("A"), the Variable Index Benefit Charge ("B"), the annualized
monthly Variable Index Segment Account Charge ("C") and the current annualized
mortality and expense risk charge ("D"). The Growth Cap Rate must be greater
than (A+B+C+D).
Therefore, account value will only transfer if the Growth Cap Rate
minus these charges is greater than the Unloaned GIO interest rate.
d. Please provide an example of how the return can lead to a reduction
of principal.
RESPONSE 10.d.
--------------
We currently provide an example of how the return can lead to a
reduction of principal:
If the Index had gone down by 30% by your Segment Maturity Date then your
Segment Account value would be reduced by 5% on the Segment Maturity Date. The
Downside Protection feature of the MSO will absorb the negative performance of
the Index up to -25%.
e. Based on the second to last and remaining paragraphs, it appears
that the VIO has a built in safeguard in that it will not permit a
transfer into a new Segment unless its Growth Cap Rate equals or
exceeds the minimum required by the owner and exceeds the interest
rate applicable to the unloaned GIO.
Consequently, the safeguard would only appear effective if the
VIO Holding Account was actually held in the unloaned GIO.
However, the VIO Holding Account is a portion of the EQ/Money
Market variable investment option. Therefore, please explain
to the staff how the transfer requirements actually serve as a
safeguard if the VIO Holding Account is not part of the
unloaned GIO.
Mr. Sonny Oh, Esquire
December 4, 2009
Page 21 of 27
RESPONSE 10.e.
--------------
We believe that the MSO Holding Account provides an effective safeguard
because it is a flexible investment option. Unlike the Guaranteed Interest
Option, there are no transfer restrictions and the policyowner can make the
decision to move out of the MSO Holding Account at any time into the GIO if they
wish.
11. CHARGES (PAGE 6)
a. Please clarify how the mortality and expense risk charge and
current non-guaranteed Customer Loyalty Credit are applied to
the VIO Holding Account and Segment, for example, with respect
to the credit, note the first paragraph under "Transfers" on
page 7.
RESPONSE 11.a.
--------------
We have added the following disclosure and cross-reference to p. 10:
The mortality and expense risk charge is part of the policy monthly charges.
Please see "How we deduct policy monthly charges during a Segment Term" for more
information. The Customer Loyalty Credit offsets some of the monthly charges.
b. Please expand the last sentence of the subsection to more clearly
explain how the refund works in tandem with the MVA and provide
an example to demonstrate its operation.
RESPONSE 11.b.
--------------
We have provided a cross-reference to an MVA example to clarify this
disclosure.
12. CHARGE RESERVE AMOUNT (PAGE 6)
Please reconcile the third paragraph with the definition of "Initial
Segment Account" as well as the third paragraph under "Segment Renewal"
on page 7 with respect to the initial source of funding for the Charge
Reserve Amount, i.e., the VIO Holding Account or all investment
options.
RESPONSE 12.
------------
We believe the disclosure is consistent. The MSO Holding Account is an
investment option from which account value could transfer to the Charge
Reserve Amount. The "Initial Segment Account" definition references the
fact that account value may transfer from the MSO Holding Account for
this purpose before transfer into a Segment.
Mr. Sonny Oh, Esquire
December 4, 2009
Page 22 of 27
13. HOW WE DEDUCT POLICY MONTHLY CHARGES DURING A SEGMENT TERM (PAGE 7)
The prospectus states that all of the monthly policy charges will be
deducted from the unloaned GIO if the Variable Index Option is selected, but
that any amounts in excess of the balance in that option will be then taken from
the other options proportionately. Please clarify supplementally the rationale
for this procedure.
RESPONSE 13.
------------
By allocating the charges in this manner, we try to avoid causing a
deduction from a Segment and thereby avoid an MVA which will most likely be
negative.
14. MARKET VALUE ADJUSTMENT (PAGE 7)
Please disclose the effect that a surrender (or if applicable, a
partial withdrawal) has on the amount of Index-Linked Return to be awarded to a
policy owner upon policy surrender.
The same applies to loan amounts, for example, see first sentence of second
paragraph under "Loans" on page 8.
RESPONSE 14.
------------
There is no Index-Linked Return on a surrender, there would be a Market
Value Adjustment and we believe that the current disclosure adequately details
that a surrender or loan generates a Market Value Adjustment. For a loan, we
disclose that the loan decreases the Segment Account value.
15. WITHDRAWALS (PAGE 8)
Please reconcile the first sentence with the disclosure under "Market
Value Adjustment" on page 7 and "Cash Surrender Value, Net Cash Surrender Value
and Loan Value" on page 8 in terms of what types of withdrawals are permitted
once a Segment has begun.
RESPONSE 15.
------------
We have the added the following marked disclosure to the Withdrawals
section on p. 11:
Once policy account value has been swept from the MSO Holding
Account into a Segment, you will not be allowed to withdraw
the account value out of a Segment before the Segment Maturity
Date UNLESS YOU SURRENDER YOUR POLICY. YOU MAY ALSO TAKE A
LOAN, PLEASE SEE "LOANS" LATER IN THIS PROSPECTUS FOR MORE
INFORMATION. ANY ACCOUNT
Mr. Sonny Oh, Esquire
December 4, 2009
Page 23 of 27
VALUE TAKEN OUT OF A SEGMENT BEFORE THE SEGMENT MATURITY DATE WILL
GENERATE A MARKET VALUE ADJUSTMENT.
16. CASH SURRENDER VALUE, NET CASH SURRENDER VALUE AND LOAN VALUE (PAGE 8)
Please clarify in plain English the disclosure in this section that for
purposes of calculating surrender and loan values, Segment Amounts will reflect
an MVA that would apply were amounts to be loaned or withdrawn based on the
segment amount.
RESPONSE 16.
------------
We have added the following disclosure to this section on p. 11:
This means an MVA would apply to those amounts. Please see Appendix I for more
information.
17. GUIDELINE PREMIUM FORCE-OUTS (PAGE 8)
For clarity, please highlight the next to last paragraph relating to
MVA's in bold.
RESPONSE 17.
------------
We have made the appropriate revision.
18. LOANS (PAGE 8)
a. Please clarify whether an investor can request a loan without
being forced to withdraw amounts from accounts that trigger an
MVA. If not, please note that the last sentence of the second
paragraph is another example of disclosure that should be
provided under the discussion of risks.
RESPONSE 18.a.
--------------
We have added the following disclosure to the Loans section on p.12:
You may specify how your loan is to be allocated among the MSO, the variable
investment options and the Unloaned GIO.
b. Please be more specific when referring to the VIO in the first
sentence of the third paragraph, i.e., VIO Holding Account
and/or Segment.
RESPONSE 18.b.
--------------
We have made the following revisions marked by the underline:
If you do not indicate or if we cannot allocate the loan from your values
Mr. Sonny Oh, Esquire
December 4, 2009
Page 24 of 27
in the MSO HOLDING ACCOUNT AND SEGMENT(S),
19. PLEASE PROVIDE ALL DISCLOSURE REQUIRED BY ITEMS 8 AND 10 OF FORM S-3.
RESPONSE 19.
------------
Item 8 of Form S-3
Item 8 requires information about the plan of distribution of the securities. As
a practical matter, there is no plan of distribution for the MSO interests. To
the extent there is such a plan, it might be stated simply that the MSO
interests will be distributed in conjunction with those variable life insurance
policies with which they are made available. The plan of distribution of the
policies, of course, is set forth in detail in the VLI Prospectus and related
statement of additional information, and that information is fully applicable,
regardless of whether the variable life policy is issued with or without the
MSO. Nor will the addition of the MSO to a policy change the facts relating to
the plan of distribution of the variable life policies. For example, no
additional or different sales compensation will be paid in connection with the
MSO.
Item 8 of Form S-3 requires that the information prescribed by Item 508 of
Regulation S-K be disclosed. Each paragraph of Item 508 is addressed separately
below:
Item 508(a). The information called for by Item 508(a) is, to the
extent applicable to the distribution of the variable life policies
and/or the MSO interests, set forth under "Plan of Distribution" in the
VLI Prospectus.
Items 508(b), (c), (d), (f), (g), (i), (j), (k), and (l). Not
applicable to the distribution of either of the variable life policies
or the MSO interests.
Items 508(e) and (h). Paragraphs (e) and (h) of Item 508
("Underwriters' Compensation" and "Dealers' Compensation") clearly were
drafted with offerings in mind that are far different from the proposed
offering of the variable life policies and the MSO interests. Although
Items 508(e) and (h) do not provide entirely clear guidance, therefore,
as to exactly what disclosures should be made in this context,
extensive information about underwriter and dealer compensation is set
forth under "Plan of Distribution" in the VLI Prospectus, and certain
additional information on these subjects is set forth under
"Distribution of the Policies" in the related statement of additional
information ("SAI"). This disclosure in the VLI Prospectus and SAI, of
course, is designed to meet the requirements for disclosing sales
compensation that the Commission has prescribed in Form N-6 as being
appropriate and sufficient for purchasers of variable life policies;
and be believe that the same disclosure is equally appropriate and
sufficient when an MSO applies.
Mr. Sonny Oh, Esquire
December 4, 2009
Page 25 of 27
To summarize, we believe that the disclosure in the VLI Prospectus
adequately responds to Item 508. (And the SAI provides some additional related
disclosure.) We do not believe there is any benefit or requirement to repeat any
of this information from the VLI Prospectus (or SAI) in the MSO prospectus. Such
repetition would merely result in additional disclosure with no corresponding
benefit (and possible confusion) to investors.
As previously noted, there really is no plan of distribution for the
MSO interests. Although there is a plan of distribution for the variable life
insurance policies, that plan is in no way affected by the existence or
non-existence of MSO interests, and there is no other plan of distribution for
the MSO interests. Accordingly, we are not adding to the MSO prospectus any
additional information about any "plan of distribution" for the MSO interests.
To repeat in the MSO prospectus additional information about the plan of
distribution for the variable life policies, would merely be duplicative. Nor is
such repetition required by Form S-3 Item 8, because, as previously discussed,
such repetition would contain information about the plan of distribution for the
variable life policies, but not about any "plan of distribution" for the MSO
interests.
In the interests of clarity, however, we are replacing the second
sentence under "5. Distribution of the policies" with the following language:
Extensive information about the arrangements for distributing the
variable life insurance policies, including sales compensation, is
included under "Plan of Distribution" in the appropriate variable life
insurance policy prospectus and under "Distribution of the Policies" in
the statement of additional information that relates to that
prospectus. All of that information applies regardless of whether you
choose to use the MSO, and there is no additional plan of distribution
or sales compensation with respect to the MSO.
Item 10 of Form S-3
Item 10 requires information about interests of named experts and
counsel as prescribed by Item 509 of Regulation S-K. We have not
disclosed any such information because no named expert or counsel has
any interest of a type that Item 509 requires to be disclosed.
20. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE (PAGE 11)
In addition to the registrant's annual report on Form 10-K, specific
reference should be made to each quarterly report on Form 10-Q filed since the
end of the last fiscal year.
RESPONSE 20.
------------
We have made the appropriate revisions.
21. IF APPLICABLE, PLEASE PROVIDE THE DISCLOSURE REQUIRED BY ITEM 13 OF FORM
S-3.
Mr. Sonny Oh, Esquire
December 4, 2009
Page 26 of 27
RESPONSE 21.
This disclosure is not applicable as we will be providing the
undertaking required by paragraph (h) of Item 512 of Regulation S-K.
PART II
-------
22. Please confirm all relevant disclosure required by Item 17 has been
provided, in particular, clarify applicability of Items 512(a)(5) and 512(e) of
Regulation S-K.
RESPONSE 22.
------------
We confirm that all relevant disclosure has been been provided. Item
512(a)(5) has been provided under Item 17.a.4 of the registration statement.
Item 512(e) is not applicable.
23. Please note that the signature page reflect the "Depositor" rather than
the "Registrant" as required by Form S-3.
RESPONSE 23.
------------
We have made the appropriate revision.
24. FINANCIAL STATEMENTS, EXHIBITS, AND CERTAIN OTHER INFORMATION
Any financial statements, exhibits, and any other required disclosure
not included in this registration statement must be filed by pre-effective
amendment to the registration statement.
RESPONSE 24.
------------
We will file the appropriate exhibits.
25. REPRESENTATIONS
RESPONSE 25.
------------
The registrant will file with the Commission a letter including Tandy
representations requested by the staff with the further amendment.
Mr. Sonny Oh, Esquire
December 4, 2009
Page 27 of 27
Please contact the undersigned at (212) 314-2120 or, in my absence, Thomas
Lauerman of Jorden Burt, LLP at (202) 965-8156.
Very truly yours,
/s/ Sun Jin Moon
----------------
Sun Jin Moon
cc: Thomas Lauerman
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Market Stabilizer Option Available Under
Certain Variable Life Insurance Policies Issued by
AXA Equitable Life Insurance Company
PROSPECTUS DATED , 2009
Please read and keep this Prospectus for future reference. It contains
important information that you should know before purchasing or taking any
other action under your policy. Also, this Prospectus must be read along with
the appropriate variable life insurance policy prospectus. This Prospectus is
in addition to the appropriate variable life insurance policy prospectus and
all information in the appropriate variable life insurance policy prospectus
continue to apply unless addressed by this Prospectus.
--------------------------------------------------------------------------------
AXA Equitable Life Insurance Company (the "Company") issues the Market
Stabilizer Option described in this Prospectus. The Market Stabilizer Option is
available only under certain variable life insurance policies that we offer.
Among the many terms associated with the Market Stabilizer Option are:
o Index-Linked Return for a one year period tied to the performance of the S&P
500 Index excluding dividends as described below.
o Index-Linked Return will be applied at the end of your Segment Term on the
Segment Maturity Date.
o The Index-Linked Return could be positive, zero or in certain circumstances
negative as described below. Therefore, there is the possibility of a
negative return on this investment at the end of your Segment Term.
o A Market Value Adjustment, which will most likely be negative, will be made
for certain distributions or deductions from the Segment Account value
before the Segment Maturity Date. Therefore you should carefully consider
whether to make such distributions and/or maintain enough value in your
unloaned Guaranteed Interest Option ("GIO") and/or variable investment
options to cover your monthly deductions. As described later in this
Prospectus, we will attempt to maintain the Charge Reserve Amount to cover
your monthly deductions, but it is possible that the Charge Reserve Amount
will be insufficient to cover your monthly deductions.
--------------------------------------------------------------------------------
These are only some of the terms associated with the Market Stabilizer Option.
Please read this Prospectus for more details about the Market Stabilizer Option.
Also, this Prospectus must be read along with the appropriate variable life
insurance policy prospectus as well as the appropriate variable life policy and
policy rider for this option. Please refer to page 4 of this Prospectus for a
Definitions section that discusses these and other terms associated with the
Market Stabilizer Option. Please refer to page 6 of this Prospectus for a
discussion of risk factors.
--------------------------------------------------------------------------------
OTHER AXA EQUITABLE POLICIES. We offer a variety of fixed and variable life
insurance policies which offer policy features, including investment options,
that are different from those offered by this Prospectus. Not every policy or
feature is offered through your financial professional. You can contact us to
find out more about any other AXA Equitable insurance policy.
WHAT IS THE MARKET STABILIZER OPTION?
The Market Stabilizer Option ("MSO") is an investment option available under
certain AXA Equitable variable life insurance policies. The option provides for
participation in the performance of the S&P 500 Index excluding dividends (the
"Index") up to the Growth Cap Rate that we set on the Segment Start Date. On
the Segment Maturity Date, we will apply the Index-Linked Rate of Return to the
Segment Account value based on the performance of the Index. If the performance
of the Index has been positive for the Segment Term and equal to or below the
Growth Cap Rate, we will apply to the Segment Account value an Index-Linked
Rate of Return equal to the full Index performance. If the performance of the
Index has been positive for the Segment Term and above the Growth Cap Rate, we
will apply an Index-Linked Rate of Return equal to the Growth Cap Rate. If the
Index has negative performance, the Index-Linked Rate of Return will be 0%
unless the Index performance goes below -25%. In that case only the negative
performance in excess of -25% will be applied to the Segment Account value.
Please see the examples on page 5. Although we reserve the right to apply a
transfer charge up to $25 for each transfer among your investment options,
there are no transfer charges for transfers into or out of the MSO Holding
Account. Please note that once policy account value has been swept from the MSO
Holding Account into a Segment, transfers into or out of that Segment before
its Segment Maturity Date will not be permitted.
The SEC has not approved or disapproved these securities or determined if this
Prospectus is accurate or complete. Any representation to the contrary is a
criminal offense. The contracts are not insured by the FDIC or any other
agency. They are not deposits or other obligations of any bank and are not bank
guaranteed. They are subject to investment risks and possible loss of
principal.
X02785
(R-4/15)
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Contents of this Prospectus
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MARKET STABILIZER OPTION
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Who is AXA Equitable? 3
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1. DEFINITIONS 4
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2. FEE TABLE SUMMARY 6
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3. RISK FACTORS 7
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4. DESCRIPTION OF THE MARKET STABILIZER OPTION 8
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5. DISTRIBUTION OF THE POLICIES 14
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6. INCORPORATION OF CERTAIN DOCUMENTS
BY REFERENCE 15
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APPENDICES
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I -- Market value adjustment examples A-1
------------------
"We," "our," and "us" refer to AXA Equitable.
When we address the reader of this Prospectus with words such as "you" and
"your," we mean the person who has the right or responsibility that the
Prospectus is discussing at that point. This is usually the policy owner.
2 Contents of this Prospectus
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Who is AXA Equitable?
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We are AXA Equitable Life Insurance Company ("AXA Equitable") (until 2004, The
Equitable Life Assurance Society of the United States), a New York stock life
insurance corporation. We have been doing business since 1859. AXA Equitable is
an indirect, wholly-owned subsidiary of AXA Financial, Inc., a holding company,
which is itself an indirect, wholly-owned subsidiary of AXA SA ("AXA"). AXA is
a French holding company for an international group of insurance and related
financial services companies. As the ultimate sole shareholder of AXA
Equitable, and under its other arrangements with AXA Equitable and AXA
Equitable's parent, AXA exercises significant influence over the operations and
capital structure of AXA Equitable and its parent. AXA holds its interest in
AXA Equitable through a number of other intermediate holding companies,
including Oudinot Participations, AXA America Holdings, Inc. and AXA Equitable
Financial Services, LLC. AXA Equitable is obligated to pay all amounts that are
promised to be paid under the policies. No company other than AXA Equitable,
however, has any legal responsibility to pay amounts that AXA Equitable owes
under the policies.
AXA Financial, Inc. and its consolidated subsidiaries managed approximately
$543.2 billion in assets as of December 31, 2008. For more than 100 years AXA
Equitable has been among the largest insurance companies in the United States.
We are licensed to sell life insurance and annuities in all fifty states, the
District of Columbia and Puerto Rico. Our home office is located at 1290 Avenue
of the Americas, New York, NY 10104.
HOW TO REACH US
Please refer to the "How to reach us" section of the appropriate variable life
insurance policy prospectus for more information regarding contacting us and
communicating your instructions. We also have specific forms that we recommend
you use for electing the MSO and any MSO transactions.
Who is AXA Equitable? 3
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1. Definitions
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Growth Cap Rate -- The maximum rate of return that will be applied to a Segment
Account value.
Index -- The S&P 500 Index excluding dividends.
Index-Linked Return -- The amount that is applied to the Segment Account value
on the Segment Maturity Date that is equal to that Segment's Index-Linked Rate
of Return multiplied by the Segment Account value on the Segment Maturity Date.
The Index-Linked Return may be positive, negative or zero.
Index Performance Rate -- The Index Performance Rate measures the percentage
change in the Index during a Segment Term for each Segment. If the Index is
discontinued or if the calculation of the Index is substantially changed, we
reserve the right to substitute an alternative index. We also reserve the right
to choose an alternative index at our discretion.
If we were to substitute an alternative index at our discretion, we would
provide notice 45 days before making that change. The new index would only
apply to new Segments. Any outstanding Segments would mature using the S&P 500
Index excluding dividends to calculate the Index-Linked Return.
With an alternative index, the Downside Protection would remain the same or
greater. However, an alternative index may reduce the Growth Cap Rates we can
offer.
If the S&P 500 Index were to be discontinued or substantially changed, thereby
affecting the Index-Linked Return of existing Segments, we reserve the right to
mature the Segments based on the most recently available closing value of the
Index before it is discontinued or changed. We would provide notice as soon as
practicable. We also reserve the right to not offer new Segments. Please see
"Right to Discontinue and Limit Amounts Allocated to the MSO" later in this
Prospectus.
The Index Performance Rate is calculated by ((b) divided by (a)) minus one,
where:
(a) is the value of the Index at the close of business on the Segment
Start Date, and
(b) is the value of the Index at the close of business on the Segment
Maturity Date.
We determine the value of the Index at the close of business, which is the end
of a business day. Generally, a business day is any day the New York Stock
Exchange is open for trading. If the New York Stock Exchange is not open for
trading or if the Index value is not published on the Segment Start Date or a
Segment Maturity Date, the value of the Index will be determined as of the end
of the most recent preceding business day for which the Index value is
published.
Index-Linked Rate of Return -- The rate of return we apply to calculate the
Index-Linked Return and is based on the Index Performance Rate adjusted to
reflect the Growth Cap Rate and protection against negative performance.
Therefore, if the performance of the Index is zero or positive, we will apply
that performance up to the Growth Cap Rate. If the performance of the Index is
negative, we will apply performance of zero unless the decline in the
performance of the Index is below -25% in which case negative performance in
excess of -25% will apply. Please see the chart under "Index-Linked Return" for
more information.
Initial Segment Account -- The amount initially transferred to a Segment from
the MSO Holding Account on its Segment Start Date, net of any amount that may
have been transferred from the MSO Holding Account to the Guaranteed Interest
Option ("GIO") to cover the Charge Reserve Amount and of the Variable Index
Benefit Charge (see Charges and Charge Reserve Amount later in this
Prospectus).
Market Value Adjustment ("MVA") -- For purposes of determining Segment Value,
prior to a Segment Maturity Date, the MVA is equal to (1) the Put Option Factor
multiplied by the current Segment Account value, minus (2) a pro-rata portion
for the remainder of the Segment Term of the 0.75% Variable Index Benefit
Charge rate (Please see "Charges" later in this Prospectus for an explanation
of this charge) multiplied by the current Segment Account value, divided by one
minus the 0.75% Variable Index Benefit Charge rate (This equates to a partial
refund of the 0.75% Variable Index Benefit Charge). The Put Option Factor, on
any date, represents the value on that date of a put option on the Index
(without reinvested dividends) having a notional value equal to $1 and strike
price at Segment Maturity equal to $0.75 ($1 plus the Downside Protection which
is currently -25%). The strike price of the option represents your exposure to
negative S&P 500 Index performance at Segment Maturity (Please see "Growth Cap
Rate" later in this Prospectus for an explanation of the Downside Protection).
The Company will utilize a fair market value methodology to determine the Put
Option Factor. In general, the Put Option Factor will increase as the dividend
yield for the S&P 500 and/or volatility increases. In general, the Put Option
Factor will decrease as the London Interbank Offered Rate ("LIBOR") increases.
We determine Put Option Factors at the end of each business day. Generally, a
business day is any day the New York Stock Exchange is open for trading. The
Put Option Factor that applies to a transaction or valuation made on a business
day will be the Factor for that day. The Put Option Factor that applies to a
transaction or valuation made on a non-business day will be the Factor for the
next business day.
For purposes of determining the adjustment to the Segment Account value when
any portion of a loan, policy distribution or monthly deduction is allocated to
a Segment, the Market Value Adjustment will be determined as follows: First,
the Segment Value will be reduced by the amount of the loan, distribution or
monthly deduction. Then, the MVA will be equal to the difference between the
corresponding reduction in the Segment Account value and the amount of the
loan, distribution or monthly deduction.
4 Definitions
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MSO Holding Account -- This is a portion of the EQ/Money Market variable
investment option that holds amounts designated by the policy owner for
investment in the MSO prior to any transfer into the next available new
Segment.
Segment -- The portion of your total investment in the MSO that is associated
with a specific Segment Start Date. You create a new Segment each time an
amount is transferred from the MSO Holding Account into a Segment Account.
Segment Account -- The amount of an Initial Segment Account subsequently
reduced by any monthly deductions, policy loans and unpaid loan interest, and
distributions from the policy that we deem necessary to continue to qualify the
policy as life insurance under applicable tax law, which are allocated to the
Segment. Any such reduction in a Segment Account value prior to its Segment
Maturity Date will result in a corresponding Segment Market Value Adjustment.
Generally, this Segment Market Value Adjustment will further reduce the Segment
Account value. A Segment Account value is used in determining policy account
values, death benefits, and the net amount at risk for monthly cost of
insurance calculations of the policy and the new base policy face amount
associated with a requested change in death benefit option.
Segment Start Date -- The Segment Start Date is the day on which a Segment is
created.
Segment Term -- The duration of a Segment. The Segment Term for each Segment
begins on its Segment Start Date and ends on its Segment Maturity Date one year
later. We are currently only offering Segment Terms of approximately one year.
We may offer different durations in the future.
Segment Maturity Date -- The date on which a Segment Term is completed and the
Index-Linked Return for that Segment is applied to a Segment Account value.
Segment Maturity Value -- This is the Segment Account value plus or minus the
Index-Linked Return for that Segment.
Segment Value -- This is the Segment Account value minus the Market Value
Adjustment for that Segment at any time prior to the Segment Maturity Date.
Segment Values will be used in determining policy value available to cover
monthly deductions, proportionate surrender charges for requested face amount
reductions, and other distributions; cash surrender values and maximum loan
values. They will also be used in determining whether any outstanding policy
loan and accrued loan interest exceeds the policy account value.
Definitions 5
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2. Fee Table Summary
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Current
Non- Guaranteed
MSO Charges guaranteed Maximum
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Variable Index Benefit Charge 0.75% 0.75%
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Variable Index Segment Account 0.65% 1.65%
Charge
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Total 1.40% 2.40%
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This fee table applies specifically to the MSO and should be read in
conjunction with the fee table in the appropriate variable life insurance
policy prospectus.
The base variable life policy's mortality and expense risk charge and current
non-guaranteed Customer Loyalty Credit will also apply to a Segment Account
value or any amounts held in the MSO Holding Account. The mortality and expense
risk charge is part of the policy monthly charges. Please see "How we deduct
policy monthly charges during a Segment Term" for more information. The
Customer Loyalty Credit offsets some of the monthly charges. Please refer to
the appropriate variable life insurance policy prospectus for more information.
6 Fee Table Summary
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3. Risk Factors
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There are risks associated with some features of the Market Stabilizer Option.
There is the possibility of a negative return on this investment. Your return
is also limited by the Growth Cap Rate. If any portion of a loan, policy
distribution or monthly deduction is allocated to a Segment, an MVA will be
applied to your Segment Account value. We may not offer new Segments so there
is also the possibility that a Segment may not be available for a Segment
Renewal at the end of your Segment Term(s). We also reserve the right to
substitute an alternative Index for the S&P 500. No company other than AXA
Equitable has any legal responsibility to pay amounts that AXA Equitable owes
under the policies.
Risk Factors 7
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4. Description of the Market Stabilizer Option
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We offer a Market Stabilizer Option that provides a rate of return tied to the
performance of the Index.
MSO HOLDING ACCOUNT
Once you make a transfer, premium payment or loan repayment to the MSO, the net
amount will first be placed in the MSO Holding Account. The MSO Holding Account
is a portion of the regular EQ/Money Market variable investment option that
will hold amounts allocated to the MSO until the next available Segment Start
Date. We currently plan on offering new Segments on a monthly basis but reserve
the right to offer them less frequently or to stop offering them or to suspend
offering them temporarily. Before any account value is transferred into a
Segment, you can transfer amounts from the MSO Holding Account into other
investment options available under your policy at any time subject to any
transfer restrictions within your policy. On the Segment Start Date, account
value in the MSO Holding Account, excluding charges and any account value
transferred to cover the Charge Reserve Amount, will be transferred into a
Segment if all requirements and limitations are met including a Growth Cap Rate
that meets your minimum Growth Cap Rate.
SEGMENTS
Each one-year Segment will have a Segment Start Date of the 3rd Friday of each
calendar month and will have a Segment Maturity Date on the 3rd Friday of the
same calendar month in the succeeding calendar year. We will notify you between
15 and 45 days before your Segment Maturity Date that your Segment is about to
mature and you may choose to transfer all or a portion of your Segment Maturity
Value to the Unloaned Guaranteed Interest Option ("Unloaned GIO"), the MSO
Holding Account or the other variable investment options available under your
policy. The Unloaned GIO is the portion of the GIO that is not being held to
secure policy loans you have taken. Please see your base variable life policy
prospectus for more information.
In order for any amount to be transferred from the MSO Holding Account into a
new Segment Account on a Segment Start Date, all of the following conditions
must be met on that date:
(1) The Growth Cap Rate for that Segment must be equal to or greater than your
minimum Growth Cap Rate (Please see "Growth Cap Rate" later in this
Prospectus).
(2) There must be sufficient account value available within the Unloaned GIO
and the variable investment options including the MSO Holding Account to
cover the Charge Reserve Amount as determined by us on such date (Please
see "Charge Reserve Amount" later in this Prospectus).
(3) The Growth Cap Rate must be greater than the sum of the annual interest
rate we are currently crediting on the Unloaned GIO ("A"), the Variable
Index Benefit Charge rate ("B"), the annualized monthly Variable Index
Segment Account Charge rate ("C") and the current annualized monthly
mortality and expense risk charge rate ("D"). The Growth Cap Rate must be
greater than (A+B+C+D).
(4) It must not be necessary, as determined by us on that date, for us to make
a distribution from the policy during the Segment Term in order for the
policy to continue to qualify as life insurance under applicable tax law.
(5) The total amount allocated to your Segments under your policy on that date
must be less than any limit we may have established.
If we do not receive your choice before the Segment Maturity Date, we will
automatically transfer your Segment Maturity Value into the MSO Holding Account
for investment in the next available Segment. However, if we are not offering
the MSO at that time, we will instead transfer the Segment Maturity Value to
the EQ/Money Market variable investment option.
SEGMENT RENEWAL
Near the end of the Segment Term, we will notify you between 15 and 45 days
before the Segment Maturity Date that a Segment is about to mature. At that
time, you may choose to have all or a part of:
(a) the Segment Maturity Value rolled over into the MSO Holding Account
(b) the Segment Maturity Value transferred to the variable invest ment options
available under your policy
(c) the Segment Maturity Value transferred to the Unloaned GIO.
If we do not receive your transfer instructions before the Segment Maturity
Date, your Segment Maturity Value will automatically be rolled over into the
MSO Holding Account for investment in the next available Segment subject to
eligibility requirements.
If there is sufficient policy account value in the Unloaned GIO to cover the
Charge Reserve Amount then no transfers to the Unloaned GIO will need to be
made. If there is insufficient value in the Unloaned GIO to cover the Charge
Reserve Amount and we do not receive instructions from you specifying the
investment options from which we should transfer the account value to the
Unloaned GIO to meet Charge Reserve Amount requirements at the time of
rollover, or the transfer instructions are not possible due to insufficient
funds, then the required amount will be transferred proportionately from your
variable investment options including the MSO Holding Account.
However, if we are not offering the MSO at that time, we will transfer the
Segment Maturity Value to the investment options available under your policy
per your instructions or to the EQ/Money Market investment option if no
instructions are received. Please see "Right to Discontinue and Limit Amounts
Allocated to the MSO" for more information. Although we reserve the right to
apply a transfer charge up to $25 for each transfer among your investment
options there will be no transfer charges for any of the transfers discussed in
this section.
8 Description of the Market Stabilizer Option
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If after any transfers there would be an insufficient amount in the Unloaned
GIO to cover the Charge Reserve Amount or the Growth Cap Rate for the next
available Segment does not qualify per your minimum Growth Cap Rate
instructions and the conditions described in this Prospectus then the Segment
Maturity Value will remain in the MSO Holding Account until further instruction
by you.
GROWTH CAP RATE
By allocating your account value to the MSO, you can participate in the
performance of the Index up to the applicable Growth Cap Rate that we declare
on the Segment Start Date.
Please note that this means we will set the Growth Cap Rate after the account
value has been transferred from the MSO Holding Account into the Segment and
you are not allowed to transfer the account value out of a Segment before the
Segment Maturity Date. Please see "Transfers" below.
Each Segment is likely to have a different Growth Cap Rate. However, the Growth
Cap Rate will never be less than 6%.
Your protection against negative performance for a Segment held until its
Segment Maturity Date is currently -25% ("Downside Protection" also referred to
in your policy as the Segment Loss Absorption Threshold Rate). We reserve the
right, for new Segments, to increase your Downside Protection against negative
performance. For example, if we were to adjust the Downside Protection for a
Segment to -100%, the Index-Linked Rate of Return for that Segment would not go
below 0%. Please note that any increase in the protection against negative
performance would likely result in a lower Growth Cap Rate than would otherwise
apply. We will provide notice between 15 and 45 days before any change in the
Downside Protection is effective. Any change would only apply to new Segments
started after the effective date of the change. The Growth Cap Rate and
Downside Protection are set at the Company's sole discretion. However, we may
only increase your Downside Protection from the current -25%.
As part of your initial instructions in selecting the MSO, you will specify
what your minimum acceptable Growth Cap Rate is for a Segment. You may specify
a minimum Growth Cap Rate from 6% to 10%. If the Growth Cap Rate we set, on the
Segment Start Date, is below the minimum you specified then the account value
will not be transferred from the MSO Holding Account into that Segment. If you
do not specify a minimum Growth Cap Rate then your minimum Growth Cap Rate will
be set at 6%. In addition, for account value to transfer into a Segment from
the MSO Holding Account, the Growth Cap Rate must be greater than the sum of
the annual interest rate we are currently crediting on the Unloaned GIO ("A"),
the Variable Index Benefit Charge rate ("B"), the annualized monthly Variable
Index Segment Account Charge rate ("C") and the current annualized monthly
mortality and expense risk charge rate ("D"). The Growth Cap Rate must be
greater than (A+B+C+D). Please see "Index-Linked Return" later in this
Prospectus for more information.
For example, you may specify a minimum Growth Cap Rate of 8%. If we set the
Growth Cap Rate at 8% or higher for a Segment then a transfer from the MSO
Holding Account will be made into that new Segment provided all other
requirements and conditions discussed in this Prospectus are met. If we set the
Growth Cap Rate below 8% then no transfer from the MSO Holding Account will be
made into that Segment. No transfer will be made until a Segment Growth Cap
Rate equal to or greater than 8% is set and all requirements are met or you
transfer account value out of the MSO Holding Account.
INDEX-LINKED RETURN
We calculate the Index-Linked Return for a Segment by taking the Index-Linked
Rate of Return and multiplying it by the Segment Account value on the Segment
Maturity Date. The Segment Account value is net of the Variable Index Benefit
Charge described below as well as any monthly deductions, policy loans and
unpaid interest, distributions from the policy that we deem necessary to
continue to qualify the policy as life insurance under applicable tax law and
any corresponding Market Value Adjustments. The Segment Account value does not
include the Charge Reserve Amount described later in this Prospectus.
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If the Index: Your Index-Linked Rate of Return will be:
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goes up by more than the equal to the Growth Cap Rate
Growth Cap Rate
goes up less than or equal equal to the Index performance
to the Growth Cap Rate
stays flat or goes down 25% equal to 0%
or less
goes down by more than negative but will not reflect the first
25% 25% of downside performance
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For instance, we may set the Growth Cap Rate at 15%. Therefore, if the Index
has gone up 20% over your Segment Term, you will receive a 15% credit to your
Segment Account value on the Segment Maturity Date. If the Index had gone up by
13% from your Segment Start Date to your Segment Maturity Date then you would
receive a credit of 13% to your Segment Account value on the Segment Maturity
Date.
If the Index had gone down 20% over the Segment Term then you would receive a
return of 0% to your Segment Account value on the Segment Maturity Date.
If the Index had gone down by 30% by your Segment Maturity Date then your
Segment Account value would be reduced by 5% on the Segment Maturity Date. The
Downside Protection feature of the MSO will absorb the negative performance of
the Index up to -25%.
The minimum Growth Cap Rate is 6%. However, account value will only transfer
into a new Segment from the MSO Holding Account if the Growth Cap Rate is equal
to or greater than your specified minimum Growth Cap Rate and meets the
conditions discussed earlier in the "Growth Cap Rate" section.
In those instances where the account value in the MSO Holding Account does not
transfer into a new Segment, the account value will remain in the MSO Holding
Account until the next available, qualifying Segment unless you transfer the
account value into the Unloaned GIO and/or other investment option available
under your policy subject to any conditions and restrictions.
For instance, if we declare the Growth Cap Rate to be 6% and your specified
minimum Growth Cap Rate is 6% but we are currently crediting an annual interest
rate on the Unloaned GIO that is greater than
Description of the Market Stabilizer Option 9
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or equal to 6% minus the sum of the charges (B+C+D) discussed in the Growth Cap
Rate section then your account value will remain in the MSO Holding Account on
the date the new Segment would have started.
As indicated above, you must transfer account value out of the MSO Holding
Account into the GIO and/or other investment options available under your
policy if you do not want to remain in the MSO Holding Account.
If we declare the Growth Cap Rate to be 6% and your specified minimum Growth
Cap Rate is 6% and if the sum of the charges (B+C+D) discussed in the "Growth
Cap Rate" section plus the annual interest rate on the Unloaned GIO are less
than 6% and all requirements are met then the net amount of the account value
in the MSO Holding Account will transfer into a new Segment.
If you specified a minimum Growth Cap Rate of 10% in the above examples then
account value would not transfer into a new Segment from the MSO Holding
Account because the Growth Cap Rate did not meet your specified minimum Growth
Cap Rate.
CHARGES
There is a percentage charge of 1.40% of any policy account value allocated to
each one year Segment. We reserve the right to increase or decrease the charge
although it will never exceed 2.40%. Of this percentage charge, 0.75% will be
deducted on the Segment Start Date from the amount being transferred from the
MSO Holding Account into the Segment as an up-front charge ("Variable Index
Benefit Charge"), with the remaining 0.65% annual charge (of the current
Segment Account value) being deducted from the policy account on a monthly
basis during the Segment Term ("Variable Index Segment Account Charge").
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Current
Non- Guaranteed
MSO Charges guaranteed Maximum
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Variable Index Benefit Charge 0.75% 0.75%
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Variable Index Segment Account 0.65% 1.65%
Charge
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Total 1.40% 2.40%
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This fee table applies specifically to the MSO and should be read in
conjunction with the fee table in the appropriate variable life insurance
policy prospectus.
The base variable life policy's mortality and expense risk charge and current
non-guaranteed Customer Loyalty Credit will also be applicable to a Segment
Account value or any amounts held in the MSO Holding Account. The mortality and
expense risk charge is part of the policy monthly charges. Please see "How we
deduct policy monthly charges during a Segment Term" for more information. The
Customer Loyalty Credit offsets some of the monthly charges. Please refer to
the appropriate variable life policy prospectus for more information.
If a Segment is terminated prior to maturity by policy surrender, or reduced
prior to maturity by monthly deductions (if other funds are insufficient) or by
loans or a Guideline Premium Force-out as described below, we will refund a
proportionate amount of the Variable Index Benefit Charge corresponding to the
surrender or reduction and the time remaining until Segment Maturity. The
refund will be administered as part of the Market Value Adjustment process as
described above. This refund will increase your surrender value or remaining
Segment Account value, as appropriate. Please see Appendix I for an example and
further information.
CHARGE RESERVE AMOUNT
If you elect the Market Stabilizer Option, you are required to maintain a
minimum amount of policy account value in the Unloaned GIO to approximately
cover the policy's estimated monthly charges for the Segment Term. This is the
Charge Reserve Amount.
The Charge Reserve Amount will be determined on each Segment Start Date as an
amount projected to be sufficient to cover all of the policy's monthly
deductions during the Segment Term, assuming at the time such calculation is
made that no interest or investment performance is credited to or charged
against the policy account and that no policy changes or additional premium
payments are made. The Charge Reserve Amount will be reduced by each subsequent
monthly deduction (but not to less than zero).
When you select the MSO, as part of your initial instructions, you will be
asked to specify the investment options from which we should transfer the
account value to the Unloaned GIO to meet Charge Reserve Amount requirements,
if necessary. If your values in the variable investment options including the
MSO Holding Account and the unloaned portion of our GIO are insufficient to
cover the Charge Reserve Amount, no new Segment will be established. Please see
Segment Renewal above for more information regarding the Charge Reserve Amount
and how amounts may be transferred to meet this requirement.
Please note that the Charge Reserve Amount may not be sufficient to cover
actual monthly deductions during the Segment Term. Although the Charge Reserve
Amount will be re-calculated on each Segment Start Date, and the amount already
present in the Unloaned GIO will be supplemented through transfers from your
value in the variable investment options including the MSO Holding Account, if
necessary to meet this requirement, actual monthly deductions could vary up or
down during the Segment Term due to various factors including but not limited
to requested policy changes, additional premium payments, investment
performance, loans, partial policy withdrawals from other investment options
besides the MSO, and any changes we might make to current policy charges.
HOW WE DEDUCT POLICY MONTHLY CHARGES DURING A SEGMENT TERM
Under your base variable life policy, monthly deductions are allocated to the
variable investment options and the Unloaned GIO according to deduction
allocation percentages specified by you or based on a proportionate allocation
should any of the individual investment option values be insufficient.
However, if the Market Stabilizer Option is elected, on the Segment Start Date,
deduction allocation percentages will be changed so that 100% of monthly
deductions will be taken from the Unloaned GIO during the Segment Term. In
addition, if the value in the Unloaned GIO
10 Description of the Market Stabilizer Option
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is ever insufficient to cover monthly deductions during the Segment Term, the
base policy's proportionate allocation procedure will be modified as follows:
1. The first step will be to take the remaining portion of the deduc tions
proportionately from the values in the variable investment options,
including any value in the MSO Holding Account but excluding any Segment
Account values.
2. If the Unloaned GIO and variable investment options, including any value in
the MSO Holding Account, are insufficient to cover deductions in their
entirety, the remaining amount will be allocated to the individual Segments
proportionately, based on the current Segment Values.
3. Any portion of a monthly deduction allocated to an individual Segment will
generate a corresponding Market Value Adjustment of the Segment Account
value.
In addition, your base variable life policy will lapse if your net policy
account value (please refer to your base variable life policy prospectus for a
further explanation of this term) is not enough to pay your policy's monthly
charges when due (unless one of the available guarantees against termination is
applicable). If you have amounts allocated to MSO Segments, the Segment Value
will be used in place of the Segment Account value in calculating the net
policy account.
These modifications will apply during any period in which a Segment exists and
has not yet reached its Segment Maturity Date.
MARKET VALUE ADJUSTMENT
Before a Segment matures, if you surrender your policy, take a loan from a
Segment or if we should find it necessary to make deductions for monthly
charges from a Segment, we will make a Market Value Adjustment which will most
likely reduce your Segment Account value and your other policy values.
Therefore, the Market Value Adjustment to the Segment Account value will affect
the amount you would receive when you surrender your policy. For loans and
charge deductions, the Market Value Adjustment would most likely further reduce
the account value remaining in the Segment Account value and therefore decrease
the Segment Maturity Value.
We calculate the Market Value Adjustment by using the methodology described in
the definition of "Market Value Adjustment" in the Definitions section.
Appendix I at the end of this Prospectus provides examples of how the Market
Value Adjustment is calculated.
The Market Value Adjustment reflects a fair market value methodology used to
determine the value of the Put Option Factor when there are amounts deducted
from a Segment before a Segment matures. We apply a Market Value Adjustment to
recover costs incurred in providing the Downside Protection under the MSO.
TRANSFERS
There is no charge to transfer into and out of the MSO Holding Account and you
can make a transfer at any time subject to any transfer restrictions within
your policy. However, once policy account value has been swept from the MSO
Holding Account into a Segment, transfers into or out of that Segment before
its Segment Maturity Date will not be permitted. Please note that while a
Segment is in effect, before the Segment Maturity Date, the amount available
for transfers from the Unloaned GIO will be limited to avoid reducing the
Unloaned GIO below the remaining Charge Reserve Amount.
Thus the amount available for transfers from the Unloaned GIO will not be
greater than any excess of the Unloaned GIO over the remaining Charge Reserve
Amount.
WITHDRAWALS
Once policy account value has been swept from the MSO Holding Account into a
Segment, you will not be allowed to withdraw the account value out of a Segment
before the Segment Maturity Date unless you surrender your policy. You may also
take a loan, please see "Loans" later in this Prospectus for more information.
Any account value taken out of a Segment before the Segment Maturity Date will
generate a Market Value Adjustment. Please note that while a Segment is in
effect, before the Segment Maturity Date, the amount available for withdrawals
from the Unloaned GIO will be limited to avoid reducing the Unloaned GIO below
the Charge Reserve Amount. Thus, if there is any policy account value in a
Segment, the amount which would otherwise be available to you for a partial
withdrawal of net cash surrender value will be reduced, by the amount (if any)
by which the sum of your Segment Values and the Charge Reserve Amount exceeds
the policy surrender charge.
If the policy owner does not indicate or if we cannot allocate the withdrawal
as requested due to insufficient funds, we will allocate the withdrawal
proportionately from your values in the Unloaned GIO (excluding the Charge
Reserve Amount) and your values in the variable investment options including
the MSO Holding Account.
CASH SURRENDER VALUE, NET CASH SURRENDER VALUE AND LOAN VALUE
If you have amounts allocated to MSO Segments, the Segment Values will be used
in place of the Segment Account values in calculating the amount of any cash
surrender value, net cash surrender value and maximum amount available for
loans (please refer to your base variable life policy prospectus for a further
explanation of these latter terms). This means an MVA would apply to those
amounts. Please see Appendix I for more information.
GUIDELINE PREMIUM FORCE-OUTS
For policies that use the Guideline Premium Test, a new Segment will not be
established or created if we determine, when we process your election, that a
distribution from the policy will be required to maintain its qualification as
life insurance under federal tax law at any time during the Segment Term.
However, during a Segment Term if a distribution becomes necessary under the
force-out rules of Section 7702 of the Internal Revenue Code, it will be
deducted proportionately from the values in the Unloaned GIO (excluding the
Charge Reserve Amount) and in any variable investment option, including any
value in the MSO Holding Account but excluding any Segment Account values.
If the Unloaned GIO (excluding the Charge Reserve Amount) and variable
investment options, including any value in the MSO Holding
Description of the Market Stabilizer Option 11
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Account, are insufficient to cover the force-out in its entirety, any remaining
amount required to be forced out will be taken from the individual Segments
proportionately, based on the current Segment Values.
ANY PORTION OF A FORCE-OUT DISTRIBUTION TAKEN FROM AN INDIVIDUAL SEGMENT WILL
GENERATE A CORRESPONDING MARKET VALUE ADJUSTMENT OF THE SEGMENT ACCOUNT VALUE.
If the Unloaned GIO (excluding the remaining Charge Reserve Amount), together
with the variable investment options including any value in the MSO Holding
Account, and the Segment Values, is still insufficient to cover the force-out
in its entirety, the remaining amount of the force-out will be allocated to the
Unloaned GIO and reduce or eliminate any remaining Charge Reserve Amount under
the Unloaned GIO.
LOANS
Please refer to the appropriate variable life insurance policy prospectus for
information regarding policy loan provisions.
You may specify how your loan is to be allocated among the MSO, the variable
investment options and the Unloaned GIO. Any portion of a requested loan
allocated to the MSO will be redeemed from the individual Segments and the MSO
Holding Account proportionately, based on the value of the MSO Holding Account
and the current Segment Values of each Segment. Any portion allocated to an
individual Segment will generate a corresponding Market Value Adjustment of the
Segment Account value and be subject to a higher guaranteed maximum loan spread
(2% for policies with a contract state of New York and Oregon and 5% for other
policies).
If you do not indicate or if we cannot allocate the loan from your values in
the MSO Holding Account and Segment(s), the Unloaned GIO (excluding the Charge
Reserve Amount) and your values in the variable investment options, we will
allocate the loan proportionately from your values in the Unloaned GIO
(excluding the Charge Reserve Amount) and your values in the variable
investment options including the MSO Holding Account.
If the Unloaned GIO (excluding the remaining amount of the Charge Reserve
Amount), together with the variable investment options including any value in
the MSO Holding Account, are insufficient to cover the loan in its entirety,
the remaining amount of the loan will be allocated to the individual Segments
proportionately, based on current Segment Values.
ANY PORTION OF A LOAN ALLOCATED TO AN INDIVIDUAL SEGMENT WILL GENERATE A
CORRESPONDING MARKET VALUE ADJUSTMENT OF THE SEGMENT ACCOUNT VALUE AND BE
SUBJECT TO A HIGHER GUARANTEED MAXIMUM LOAN SPREAD.
If the Unloaned GIO (excluding the remaining amount of the Charge Reserve
Amount), together with the variable investment options including any value in
the MSO Holding Account and the Segment Values, are still insufficient to cover
the loan in its entirety, the remaining amount of the loan will be allocated to
the Unloaned GIO and will reduce or eliminate the remaining Charge Reserve
Amount.
Loan interest is due on each policy anniversary. If the interest is not paid
when due, it will be added to your outstanding loan and allocated on the same
basis as monthly deductions. See "How we deduct policy monthly charges during a
Segment Term."
Whether or not any Segment is in effect and has not yet reached its Segment
Maturity Date, loan repayments will first reduce any loaned amounts that are
subject to the higher maximum loan interest spread. Loan repayments will first
be used to restore any amounts that, before being designated as loan
collateral, had been in the Unloaned GIO. Any portion of an additional loan
repayment allocated to the MSO at the policy owner's direction (or according to
premium allocation percentages) will be transferred to the MSO Holding Account
to await the next available Segment Start Date and will be subject to the same
conditions described earlier in this Prospectus.
PAID UP DEATH BENEFIT GUARANTEE
Please note that the MSO is not available while the Paid Up Death Benefit
Guarantee is in effect. Please see the appropriate variable life policy
prospectus for more information.
REQUESTED FACE AMOUNT INCREASES
Please refer to the appropriate variable life insurance policy prospectus for
conditions that will apply for a requested face amount increase.
If you wish to make a face amount increase during a Segment Term, the MSO
requires that a minimum amount of policy account value be available to be
transferred into the Unloaned GIO (if not already present in the Unloaned GIO),
and that the balance after deduction of monthly charges remain there during the
longest remaining Segment Term subject to any loans as described above. This
minimum amount will be any amount necessary to supplement the existing Charge
Reserve Amount so as to be projected to be sufficient to cover all monthly
deductions during the longest remaining Segment Term. Such amount will be
determined assuming at the time such calculation is made that no interest or
investment performance is credited to or charged against the policy account
value, and that no further policy changes or additional premium payments are
made.
Any necessary transfers to supplement the amount already present in the
Unloaned GIO in order to meet this minimum requirement will take effect on the
effective date of the face amount increase. There will be no charge for this
transfer. Any transfer from the variable investment options including the MSO
Holding Account will be made in accordance with your directions. Your transfer
instructions will be requested as part of the process for requesting the face
amount increase. If the requested allocation is not possible due to
insufficient funds, the required amount will be transferred proportionately
from the variable investment options, as well as the MSO Holding Account. If
such transfers are not possible due to insufficient funds, your requested face
amount increase will be declined.
YOUR RIGHT TO CANCEL WITHIN A CERTAIN NUMBER OF DAYS
Please refer to the appropriate variable insurance policy prospectus for more
information regarding your right to cancel your policy within a certain number
of days. However, the policy prospectus provisions that
12 Description of the Market Stabilizer Option
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address when amounts will be allocated to the investment options do not apply
to amounts allocated to the MSO.
In those states that require us to return your premium without adjustment for
investment performance within a certain number of days, we will initially put
all amounts which you have allocated to the MSO into our EQ/Money Market
investment option. In this case, on the first business day following the
twentieth day after your policy is issued (30th day in most states if your
policy is issued as the result of a replacement), we will re-allocate those
amounts to the MSO Holding Account where they will remain until the next
available Segment Start Date, at which time such amounts will be transferred to
a new Segment of the MSO subject to meeting the conditions described in this
Prospectus.
In all other states, any amounts allocated to the MSO will first be allocated
to the MSO Holding Account where they will remain for 20 days (unless the
policy is issued as the result of a replacement, in which case amounts in the
MSO Holding Account will remain there for 30 days (45 days in PA)). Thereafter,
such amounts will be transferred to a new Segment of the MSO on the next
available Segment Start Date, subject to meeting the conditions described in
this Prospectus.
RIGHT TO DISCONTINUE AND LIMIT AMOUNTS ALLOCATED TO THE MSO
We reserve the right to restrict or terminate future allocations to the MSO at
any time. If this right were ever to be exercised by us, all Segments
outstanding as of the effective date of the restriction would be guaranteed to
continue uninterrupted until Segment Maturity. As each such Segment matured,
the balance would be reallocated to the Unloaned GIO and/or variable investment
options per your instructions, or to the EQ/Money Market investment option if
no instructions are received. We may also temporarily suspend offering Segments
at any time and for any reason including emergency conditions as determined by
the Securities and Exchange Commission. We also reserve the right to establish
a maximum amount for any single policy that can be allocated to the MSO.
ABOUT SEPARATE ACCOUNT NO. 67
Amounts allocated to the MSO are held in a "non-unitized" separate account we
have established under the New York Insurance Law. We own the assets of the
separate account, as well as any favorable investment performance on those
assets. You do not participate in the performance of the assets held in this
separate account. We may, subject to state law that applies, transfer all
assets allocated to the separate account to our general account. We guarantee
all benefits relating to your value in the MSO, regardless of whether assets
supporting the MSO are held in a separate account or our general account.
Our current plans are to invest separate account assets in fixed-income
obligations, including corporate bonds, mortgage-backed and asset-backed
securities, and government and agency issues. Futures, options and interest
rate swaps may be used for hedging purposes.
Although the above generally describes our plans for investing the assets
supporting our obligations under MSO, we are not obligated to invest those
assets according to any particular plan except as we may be required to by
state insurance laws.
Description of the Market Stabilizer Option 13
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5. Distribution of the policies
--------------------------------------------------------------------------------
The MSO is only available only under certain variable life insurance policies
issued by AXA Equitable. Extensive information about the arrangements for
distributing the variable life insurance policies, including sales
compensation, is included under "Plan of Distribution" in the appropriate
variable life insurance policy prospectus and under "Distribution of the
Policies" in the statement of additional information that relates to that
prospectus. All of that information applies regardless of whether you choose to
use the MSO, and there is no additional plan of distribution or sales
compensation with respect to the MSO.
14 Distribution of the policies
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6. Incorporation of certain documents by reference
--------------------------------------------------------------------------------
AXA Equitable's Annual Report on Form 10-K for the period ended ______________
(the "Annual Report"), 10-Qs dated _______ and 8-Ks dated _______ are
considered to be part of this Prospectus because it is incorporated by
reference.
AXA Equitable files reports and other information with the SEC, as required by
law. You may read and copy this information at the SEC's public reference
facilities at Room 1580, 100 F Street, NE, Washington, DC 20549, or by
accessing the SEC's website at www.sec.gov. The public may obtain information
on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. Under the Securities Act of 1933, AXA Equitable has filed with
the SEC a registration statement relating to the Market Stabilizer Option (the
"Registration Statement"). This Prospectus has been filed as part of the
Registration Statement and does not contain all of the information set forth in
the Registration Statement.
After the date of this Prospectus and before we terminate the offering of the
securities under the Registration Statement, all documents or reports we file
with the SEC under the Securities Exchange Act of 1934 ("Exchange Act"), will
be considered to become part of this Prospectus because they are incorporated
by reference.
Any statement contained in a document that is or becomes part of this
Prospectus, will be considered changed or replaced for purposes of this
Prospectus if a statement contained in this Prospectus changes or is replaced.
Any statement that is considered to be a part of this Prospectus because of its
incorporation will be considered changed or replaced for the purpose of this
Prospectus if a statement contained in any other subsequently filed document
that is considered to be part of this Prospectus changes or replaces that
statement. After that, only the statement that is changed or replaced will be
considered to be part of this Prospectus.
We file the Registration Statement and our Exchange Act documents and reports,
including our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q,
electronically according to EDGAR under CIK No. 0000727920. The SEC maintains a
website that contains reports, proxy and information statements, and other
information regarding registrants that file electronically with the SEC. The
address of the site is www.sec.gov.
Upon written or oral request, we will provide, free of charge, to each person
to whom this Prospectus is delivered, a copy of any or all of the documents
considered to be part of this Prospectus because they are incorporated herein.
In accordance with SEC rules, we will provide copies of any exhibits
specifically incorporated by reference into the text of the Exchange Act
reports (but not any other exhibits). Requests for documents should be directed
to AXA Equitable Life Insurance Company, 1290 Avenue of the Americas, New York,
New York 10104. Attention: Corporate Secretary (telephone: (212) 554-1234). You
can access our website at www.axa-equitable.com.
Incorporation of certain documents by reference 15
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Appendix I: Market value adjustment examples
--------------------------------------------------------------------------------
Hypothetical Market Value Adjustment Examples
Example of Market Value Adjustment to determine Segment Value
Explanation of formulas below.
------------------------------------------------------------------------------------------------------------------------------------
Division of MSO into segments Segment 1: Segment 2: Total
------------------------------------------------------------------------------------------------------------------------------------
Start Date 3rd Friday of January, Calendar Year Y 3rd Friday of February, Calendar Year Y
------------------------------------------------------------------------------------------------------------------------------------
Maturity Date 3rd Friday of January, Calendar Year Y+1 3rd Friday of February, Calendar Year Y+1
------------------------------------------------------------------------------------------------------------------------------------
Segment Term 1 year 1 year
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Valuation Date 3rd Friday of July, Calendar Year Y 3rd Friday of July, Calendar Year Y
------------------------------------------------------------------------------------------------------------------------------------
Initial Segment Account 5,000 15,000 20,000
------------------------------------------------------------------------------------------------------------------------------------
Put Option Factor 0.0354 0.0346
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Remaining Segment Term 6 months / 12 months = 6/12 7 months / 12 months = 7/12
------------------------------------------------------------------------------------------------------------------------------------
Variable Index Benefit Charge 0.75 % 0.75 %
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Market Value Adjustment 5,000 x (0.0354 - (6 / 12) x (0.0075 / 15,000 x (0.0346 - (7 / 12) x (0.0075 / 610.99
(1 - 0.0075) )) = 5000 x 0.032 = 158.11 (1 - 0.0075) ) ) = 15,000 x 0.030 = 452.88
------------------------------------------------------------------------------------------------------------------------------------
Segment Value 5,000 x (1 - 0.032) = 5000 - 158.11 = 15,000 x (1 - 0.030) = 15,000 - 452.88 = 19,389.01
4,841.89 14,547.12
------------------------------------------------------------------------------------------------------------------------------------
Market Value Adjustment = (Segment Account value) x [ (Put Option Factor)
- (Number of days between Valuation Date and Maturity Date) /( Number of days
between Start Date and Maturity Date) x ( 0.0075 / (1 - 0.0075) ) ]
Segment Value = (Segment Account value) - (Market Value Adjustment)
----------------
Example of a Market Value Adjustment corresponding to a loan allocated to a
Segment, for Segment Values and Segment Account values listed above
Loan Amount: 2,000
Date: 3rd Friday of July, Calendar Year Y
Explanation of formulas below.
------------------------------------------------------------------------------------------------------------------------------------
Division of MSO into segments Segment 1: Segment 2: Total
------------------------------------------------------------------------------------------------------------------------------------
Loan Allocation 2,000 x 4,841.89 / 19,389.01 = 499.45 2,000 x 14,547.12 / 19,389.01 = 1,500.55 2,000
------------------------------------------------------------------------------------------------------------------------------------
Segment Value after Loan 4,841.89 - 499.45 = 4,342.44 14,547.12 - 1500.55 = 13,046.57 17,389.01
------------------------------------------------------------------------------------------------------------------------------------
Segment Account value after 4,342.44 / (1 - 0.032) = 4,484.24 13,046.57 / (1 - 0.030) = 13,452.73 17,936.98
Loan
------------------------------------------------------------------------------------------------------------------------------------
Market Value Adjustment 5,000 - 4,484.24 - 499.45 = 16.31 15,000 - 13,452.73 - 1,500.55 = 46.72 63.03
------------------------------------------------------------------------------------------------------------------------------------
Loan Allocation: On pro-rata basis based on current Segment Values.
Segment Value after Loan = (Segment Value) - (Loan Allocation)
Market Value Adjustment = (Segment Account value before Loan) - (Segment
Account after Loan) - (Loan Allocation)
A-1 Appendix I: Market value adjustment examples