OLDWICK: AM Best has affirmed the Financial Strength Rating of A++ (Superior) and the Long-Term Issuer Credit Ratings of “aaa” of New York Life Insurance Company and its wholly owned subsidiary, New York Life Insurance and Annuity Corporation (collectively referred to as New York Life).
Additionally, AM Best has affirmed the Long-Term Issue Credit Ratings (Long-Term IRs) on the funding agreement-backed securities (FABS) programs, the outstanding notes issued thereunder and the Long-Term IRs on the existing surplus notes of New York Life Insurance Company.
The outlook of the Credit Ratings (rating) is stable. All companies are headquartered in New York, NY. (See below for a detailed listing of the Long- and Short-Term IRs.)
The ratings reflect New York Life Insurance balance sheet strength, which AM Best categorizes as strongest, as well as its very strong operating performance, very favorable business profile and very strong overall enterprise risk management.
The ratings also reflect New York Life Insurance risk-adjusted capitalization, which has been sustained at the very strong level, with consistently growing absolute levels of capital, ample financial flexibility and abundant liquidity, even under extreme stress scenarios.
Currently, the company’s reserve profile still remains slightly weighted toward annuity products, which are exposed to the continued low interest rate environment.
However, this reserve profile is driven partially by the reserving dynamics between life insurance and annuity products, which generate higher reserves for the annuity products in the earlier years. While AM Best believes that New York Life’s investment management capabilities remain strong, the potential still exists for higher-than-normal credit losses, albeit manageable, within New York Life’s general account investment portfolio.
The organization’s investment portfolio is considered well-diversified with allocations that follow a consistent, long-term approach, as well as a material allocation to highly rated corporate fixed-income securities.
AM Best notes that New York Life has a sizeable allocation to non-traditional assets, namely investments in private equity and hedge funds that together represent approximately 21% of total capital.
New York Life’s current adjusted GAAP financial leverage, excluding accumulated other comprehensive income, together with secured and non-recourse debt, continues to be well within AM Best’s guidelines for the company’s current ratings.
In addition, GAAP interest coverage is very strong. AM Best also holds a favorable view of New York Life’s proactive management approach to interest-rate risk through ongoing hedging, product design, dynamic asset rebalancing and disciplined sales.
Finally, AM Best notes that New York Life Insurance has an added measure of financial flexibility in support of its very strong risk-adjusted capital position through the management of its policyholder dividend scale.
The consistent and very strong operating performance is attributed to sales growth generated from its traditional ordinary life insurance business, providing long-term cash flows as the foundation. The majority of new annuity sales include market-value adjustment features that reduce interest-rate risk; however, some vulnerability to spread compression exists should the low interest rate environment persist.
Overall earnings are derived from diverse sources and have increased primarily because of favorable mortality experience with overall positive business growth.
New York Life’s investment operations provide further earnings diversification, reflective of the organization’s strong spread revenue and asset-based fees that are generated from the $572 billion of assets under management as of year-end 2018.
The business profile is characterized by the conservative nature of the company’s product portfolio, and together with its large block of ordinary life business, translates into one of the more creditworthy liability profiles in the U.S. life insurance industry.
New York Life’s ratings also reflect the stability and strength of its career agency distribution force and its market position among the top leaders in the U.S. life insurance industry, which has led the industry in Million Dollar Round Table membership for 64 consecutive years.
The agency channel has given New York Life a competitive advantage and has contributed to the organization’s strong persistency and prominent market position within the individual life market.
With respect to New York Life’s product portfolio, AM Best believes the allocation to interest-sensitive liabilities continues to be higher relative to peers, including New York Life’s use of operating leverage; however, the organization has historically demonstrated solid capabilities in managing this exposure. AM Best will continue to monitor any additional growth in this exposure.
The following Long-Term IRs have been affirmed with stable ratings:
New York Life Funding—program rating of “aaa”
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
— “aa” on $1 billion 4.45% surplus notes, due March 2069
The following Short-Term IR has been affirmed:
New York Life Capital Corp—
— AMB-1+ on the commercial paper program