|[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
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
--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
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