Governor Andrew M. Cuomo announced today that AXA Equitable (“AXA”) will pay a $20 million fine to the Department of Financial Services (DFS) for violations of Insurance Law related to certain variable annuity products, which are investments that many consumers rely on to help pay for their retirements. A DFS investigation uncovered that AXA made changes to certain variable annuity products that limited the potential returns for existing customers without providing adequate notice to DFS. Those omissions limited DFS’ ability to put in place important consumer protections, such as requiring existing customers to affirmatively “opt in” to the altered product rather than remaining in that investment by default. This affected tens of thousands of New Yorkers with variable annuity products at AXA.

“Insurers have a fundamental responsibility to be clear and upfront with their regulators, particularly when a company’s actions can impact the retirement savings of tens of thousands of New Yorkers,” said Governor Cuomo. “Unfortunately, AXA did not meet that basic test and today's action should send a signal that failing to do so is simply unacceptable.”

Benjamin M. Lawsky, Superintendent of Financial Services, said “When it comes to retirement products, insurers must go above and beyond to explain any changes that would alter investor returns. Here, AXA changed the rules on these important products midstream and should have done more to disclose those changes to the Department. AXA has done the right thing in resolving this matter.”

In 2009, 2010, and 2011, AXA filed requests with DFS and its predecessor agency to amend and restate the Plans of Operation for certain variable annuity accounts in order to implement its AXA Tactical Manager strategy (“ATM Strategy”). These filings, through which AXA applied the ATM Strategy to new funds and existing funds, failed to inform and adequately explain to DFS the significance of the changes caused by introduction and application of the ATM Strategy to existing policyholders. For example, the filings did not address how existing policyholders who had not elected to invest in the ATM Strategy could end up invested in such funds.

The ATM Strategy is designed to smooth funds’ returns during periods of high market volatility. However, the application of the ATM Strategy can, especially during volatile markets, limit the gains that may accrue to a policyholder’s account without the ATM Strategy.

Many policyholders invested in variable annuities, including variable annuities with guaranteed living and death benefits, because they were interested in making more aggressive investments to capture market rises. These policyholders were comfortable taking such aggressive positions because they had purchased an annuity benefit guarantee that provided certain levels of benefits regardless of the performance of the selected investment options.

The changes effectively altered the nature of the product that the policyholders purchased, yet AXA did not explain in its filings to the Department that it was making such changes to its variable annuity products. The absence of detail and discussion in the filings regarding the significance of the implementation of the ATM Strategy had the effect of misleading the Department regarding the scope and potential effects of the ATM Strategy on the relevant funds and the possible consequences for policyholders.

The DFS investigation was handled by Chris Mulvihill, Senior Counsel to the Superintendent, and Anna MacCormack, Assistant Counsel, under the supervision of Joy Feigenbaum, Executive Deputy Superintendent, Financial Frauds and Consumer Protection.

To view a copy of the consent order between DFS and AXA, please visit, link.