A.M. Best Affirms Ratings of New York Life Insurance Company and Its Subsidiaries
June 6, 2014 by A.M. Best
Oldwick – A.M. Best has affirmed the financial strength rating of A++ (Superior) and the 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. All companies are headquartered in New York, NY. (See below for a detailed listing of the debt ratings.)
New York Life’s ratings reflect the strength of its career agency distribution force, market position among the leaders in the U.S. life insurance industry, superior risk-adjusted capitalization and sound operating earnings generated from its stable ordinary life insurance business. The ratings also consider the organization’s favorable liability profile and commitment to mutuality. New York Life enjoys the competitive advantage of its core career agency force, which has led the industry in Million Dollar Round Table membership for 59 consecutive years. The agency channel has contributed to the organization’s strong persistency and prominent market position within the individual life market. Sales growth 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. 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. A.M. Best also notes the diversification provided by New York Life’s Investment Group, reflective of its strong spread revenue and asset-based fees. Higher assets under management resulted from a combination of strong positive net flows, market appreciation and fund adoptions in 2013. The acquisition of Dexia Asset Management brings New York Life’s Investment Group’s total assets under management to $511 billion.
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 its general account investment portfolio. The organization maintains significant holdings in public/private corporate bonds and structured securities. In addition, New York Life has more than $20 billion of direct exposure to whole commercial mortgage loans, which, along with direct real estate investments, represents more than 100% of adjusted capital. While ongoing uncertainty in the commercial real estate market suggests the potential for impairments, 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 ratios.
New York Life’s current adjusted GAAP financial leverage, 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. 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.
New York Life continues to maintain A.M. Best’s highest ratings. Potential negative rating actions could result if New York Life were to alter its business profile away from its core profitable ordinary life insurance niche, add measureable balance sheet risk, generate significant operating or investment losses and/or materially reduce its risk-adjusted capital position.
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
New York Life Capital Corporation–
— AMB-1+ on the commercial paper program
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 www.ambest.com/ratings/methodology.
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