A.M. Best Affirms Ratings of New York Life Insurance Company and Its Subsidiaries
June 5, 2013 by Best's New Service
OLDWICK, N.J. – A.M. Best Co. has affirmed the financial strength rating of A++ (Superior) and issuer credit ratings of “aaa” of New York Life Insurance Company and its wholly owned subsidiaries, New York Life Insurance and Annuity Corporation and NYLIFE Insurance Company of Arizona (collectively referred to as New York Life).
Additionally, A.M. Best has affirmed the debt ratings on the funding agreement-backed securities (FABS) programs, the outstanding notes issued thereunder and the debt ratings on the existing surplus notes of New York Life Insurance Company. The outlook for these ratings is stable. A.M. Best also has affirmed the rating of AMB-1+ on the commercial paper program of New York Life Capital Corporation. All companies are headquartered in New York, NY. (See below for a detailed listing of the debt ratings.)
New York Life’s ratings continue to reflect its leading market position in the U.S. life insurance industry, its highly productive career agency force and superior risk-adjusted capitalization. The ratings also consider the organization’s favorable liability profile, stable operating earnings and commitment to mutuality. New York Life enjoys the competitive advantage of its core career agency force and has led the industry in Million Dollar Round Table membership for 58 consecutive years. The agency channel has contributed to the organization’s strong persistency and prominent market presence within the individual life market, while delivering sales growth that has generally exceeded industry averages in recent years, resulting in a very strong market share as measured by annualized new business life premiums.
New York Life’s sizeable inforce block of traditional life insurance and stable, long-term cash flows are the foundation of its operating performance. The conservative nature of the company’s product portfolio, together with its large block of ordinary life business, translates into one of the more creditworthy liability profiles in the industry. A.M. Best also notes that New York Life’s investment group realized a 25% increase in its earnings in 2012, reflective of its strong spread revenue and asset-based fees from higher assets under management, which resulted from a combination of strong positive net flows, market appreciation and fund adoptions. Additionally, A.M. Best notes that New York Life has an added measure of financial flexibility in support of its strong risk-adjusted capital position through the management of its policyholder dividend scale.
Overall, A.M. Best anticipates that New York Life’s future investment losses will be below the industry average (as a percentage of capital and surplus) and that statutory earnings will likely exceed expected losses. However, while A.M. Best believes New York Life’s investment management capabilities remain strong, the potential exists for higher than normal, albeit manageable, credit losses within the organization’s general account investment portfolio as it maintains significant holdings in public/private corporate bonds and structured securities. In addition, New York Life has approximately $19 billion (representing roughly 97% of total adjusted capital) of direct exposure to whole commercial mortgage loans, and the ongoing uncertainty in the commercial real estate market suggests the potential for impairments. However, A.M. Best notes that the commercial mortgage portfolio maintains below average exposure to properties with higher loan-to-value ratios and lower debt service coverage ratio bands.
New York Life’s current adjusted GAAP financial leverage of 9% (excluding accumulated other comprehensive income together with secured and non-recourse debt) is well within A.M. Best’s guidelines for its current rating level. Also, GAAP interest coverage is very strong at more than 22 times. Additionally, A.M. Best views favorably New York Life’s proactive management of interest rate risk through ongoing hedging, product design, dynamic asset rebalancing and its disciplined approach to sales.
While New York Life continues to maintain A.M. Best’s highest ratings, potential negative rating actions could result from a significant increase in its realized investment losses, a meaningful increase in its interest-sensitive liabilities as a percentage of total general account reserves and/or a material decline in its risk-adjusted capitalization.
The following debt ratings have been affirmed:
New York Life Funding—program rating of “aaa”
– “aaa” on all outstanding notes issued under the program
New York Life Global Funding—program rating of “aaa”
– “aaa” on all outstanding notes issued under the program
New York Life Insurance Company—
– “aa” on $1 billion 5.875% surplus notes, due May 2033
– “aa” on $1 billion 6.75% surplus notes, due November 2039
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at http://www.ambest.com/ratings/methodology. BN-NJ-06-04-2013 1418 ET #
