June 27, 2017 / 2:43 PM / 23 days ago

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

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(The following statement was released by the rating agency) CHICAGO, June 27 (Fitch) 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 of its subsidiaries. The Rating Outlook is Stable. A full list of ratings follows at the end of this release. KEY RATING DRIVERS Fitch's ratings reflect New York Life's leading market position in the U.S. individual life insurance market, extremely strong capitalization and conservative operating profile. Key competitive strengths include the company's strong brand recognition, well-established market position, effective career distribution system and its stable block of participating whole life insurance. New York Life is one of the top producers of whole life insurance and a leading writer of guaranteed income annuities. The company's market position is deepened by its loyal and productive career agency distribution channel, which Fitch believes reduces pricing pressure and anti-selection in competitive market environments. Fitch views New York Life's extremely strong capitalization as a fundamental strength to its rating, which is reflected by its RBC ratio of 550%, Prism capital model score of 'Extremely Strong' and low operating leverage at year-end 2016. Financial leverage, defined as surplus notes to total adjusted capital (TAC), remained low at 8%. New York Life reported a 3% increase in TAC during 2016 to $24 billion, which was primarily driven by earnings and unrealized investment gains. Fitch views New York Life's profitability as moderate on an absolute basis but favorable on a risk-adjusted basis, given its conservative product profile and operating strategy. Its large, traditional life insurance book generates high-quality, stable earnings, which is supported by its non-insurance business. The company reported statutory net income of $1.1 billion in 2016 compared with $257 million in 2015. The statutory accounting treatment of the company's acquisition of John Hancock's closed block adversely affected results in 2015. Fitch expects the relative stability of New York Life's par whole life book and earnings diversification from non-insurance businesses to be somewhat offset by low interest rates and lower income from limited partnerships investments. New York Life manages a well-diversified liquid investment portfolio that continues to perform well, despite continued low interest rates. The company's risky assets ratio remains above the industry average and in line with similarly rated mutual peers with participating products, given their strategy to pass investment performance to policyholders. As of year-end 2016, New York Life's risky asset ratio was 96%, driven primarily by its above-average exposure to Schedule BA assets. Credit impairments remain modest and well below historical averages. The ratings on the funding agreement-backed note programs of New York Life Funding and New York Life Global Funding 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 decline in capitalization which includes an RBC ratio below 450% or a PRISM capital model score below 'Extremely Strong'; --Future increases in financial leverage to more than 15%, or a reduction in GAAP-based, EBIT fixed-charge coverage below 6x; --Significantly reduced profitability evidenced by a GAAP operating ROA sustained below 0.5%; --A major acquisition that leads New York Life away from its core expertise and significantly reduces the proportion of its participating whole life insurance; --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 --IFS at 'AAA'; --Long-term Issuer Default Rating (IDR) at 'AA+'; --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'. Contact: Primary Analyst Dafina M. Dunmore, CFA Director +1-312-368-3136 Fitch Ratings, Inc. 70 W. Madison St. Chicago, IL 60602 Secondary Analyst Douglas L. Meyer, CFA Managing Director +1-312-368-2061 Committee Chairperson Martha M. Butler, CFA Senior Director +1-312-368-3191 Media Relations: Hannah James, New York, Tel: + 1 646 582 4947, Email: hannah.james@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria Insurance Rating Methodology (pub. 26 Apr 2017) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here#solicitation Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. 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