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TMCNet:  Fitch Affirms New York Life's IFS at 'AAA'; Outlook Stable

[August 13, 2014]

Fitch Affirms New York Life's IFS at 'AAA'; Outlook Stable

CHICAGO --(Business Wire)--

Fitch Ratings has affirmed New York Life Insurance Company's (New York Life) Insurer Financial Strength (IFS) rating at 'AAA'. Fitch has also affirmed all other ratings assigned to New York Life and certain subsidiaries. A full list of ratings follows at the end of this release. The Rating Outlook is Stable.

KEY RATING DRIVERS

Fitch's ratings reflect New York Life's leading market position, extremely strong capitalization, and solid operating profile with favorable risk-adjusted profitability. The ratings also consider the company's above-average exposure to risky assets and ongoing challenges related to the protracted low interest rate environment.

New York Life's very strong operating profile reflects the company's leading position in the U.S. life insurance and annuity markets, diversified business mix, and low-risk product strategy. Key competitive strengths include the company's strong brand name, well-established market positions, and effective career distribution system. The company's business lines produce predictable cash flows and include individual participating whole life insurance, income and market value-adjusted annuities, and variable annuities without aggressive living benefit guarantees.

Fitch views the company's continued capital growth as a fundamental strength of the company. New York Life expanded its statutory surplus by 10% to $21.5 billion at year-end 2013, largely driven by earnings and unrealized investment gains during the year. The company's capitalization remains extremely strong based on Fitch's estimate of its NAIC risk-based capital (RBC) ratio of 578% as of March 31, 2014. New York Life's financial leverage, defined as surplus notes to total adjusted capital (TAC), remains low at 9.3% at year-end 2013.

Fitch considers New York Life's profitability as moderate on an absolute basis and somewhat suppressed by its large capital base. However, results compare favorably to its rated peer group and on a risk-adjusted basis, given its conservative product profile and operating strategy. New York Life's diversified operating segments and large traditional life insurance book generate high-quality, stable earnings.

New York Life reported higher operating earnings in 2013, partially due to greater asset-based fees driven by favorable capital market performance and sales activity, which was somewhat offset by modest spread compression in interest rate-sensitive business. Fitch believes that New York Life's exposure to potential economic headwinds and the low interest rate environment is manageable.

New York Life's risky assets ratio (measured by below investment-grade bonds, common stocks, schedule BA other invested assets, and troubled real estate as a percentage of total adusted capital) remained above industry average at 120% as of March 31, 2014. The company's asset-liability management strategy matches a diversified portfolio of limited partnerships and other private equity investments with participating business lines. New York Life's well-diversified, liquid investment portfolio continues to perform well with minimal credit-related impairments in 2013.

The ratings on New York Life Global Funding's funding agreement-backed note programs and related issues recognize that the trust obligations are secured by funding agreements issued by New York Life with cash flow structures that enable the trustees to pay the principal and interest on the notes. Thus, the note programs are dependent on New York Life's credit quality and are assigned a rating equal to the company's IFS rating.

RATING SENSITIVITIES

New York Life's IFS ratings are currently at Fitch's highest level. Key ratings triggers that could result in a downgrade include:

--A material weakening of operating company RBC ratio to below 425% through either declining asset quality or aggressive growth;

--A significant increase in near-term earnings volatility that is outside the historical average;

--Future increases in financial leverage to more than 15% on a sustained basis, or a reduction in GAAP-based, EBIT fixed-charge coverage below 6x;

--A decrease in the financial flexibility associated with the company's participating whole life business;

--A major acquisition that leads New York Life away from its core expertise;

--An unexpected shift in tax, regulatory or market dynamics that weakens New York Life's competitive strengths.

Fitch has affirmed the following ratings with a Stable Outlook:

New York Life Insurance Company

--Long-term IDR at 'AA+';

--IFS at 'AAA';

--Short-term IDR at 'F1+';

--$1,000,000,000 5.875% surplus note due May 15, 2033 at 'AA';

--$1,000,000,000 6.75% surplus note due Nov. 15, 2039 at 'AA'.

New York Life Insurance and Annuity Corporation

--IFS at 'AAA'.

NYL Capital Corporation

--Commercial paper at 'F1+'.

New York Life Funding

--Program rating at 'AAA'.

New York Life Global Funding

--Program rating at 'AAA'.

Additional information is available at www.fitchratings.com.

Applicable Criteria and Relevant Research:

--'Insurance Rating Methodology' (November 13, 2013).

Applicable Criteria and Related Research:

Insurance Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=723072

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=850615

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON (News - Alert) THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.


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