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AARP Life Insurance - Fitch Affirms New York Life’s IFS rating at AAA
CHICAGO, Jul 31, 2008 (BUSINESS WIRE) — Fitch Ratings affirms the ratings of New York Life Insurance Company (NYLIC) and its wholly owned subsidiary, New York Life Insurance and Annuity Corporation (NYLIAC) — together referred to as New York Life (see complete list of Ratings below). The ratings reflect New York Life’s very strong balance sheet, favorable business profile and consistent operating profile. The Rating Outlook is Stable for all ratings.
Favorable balance sheet characteristics include New York Life’s very robust capitalization as of year end 2006 at 207% of ‘AAA’ stress level as measured by Prism, Fitch’s stochastic capital model for insurance organizations. In addition, New York Life has a high-quality, liquid investment portfolio. Fitch believes that New York Life’s exposure to problematic subprime and Alt-A investments, is modest in the aggregate (relative to total invested assets and statutory capital) and very manageable. Fitch considers New York Life’s use of financial leverage in its capital structure to be modest, remaining below 10% at year end 2007.
New York Life’s favorable business profile is characterized by its excellent market position in traditional individual life insurance and fixed annuity markets. Diversity is brought to top and bottom lines by New York Life Investment Management scale businesses (which includes retail mutual fund, institutional and retirement services operations), and its modest but growing international operations. New York Life also provides, long-term care insurance and is the exclusive provider of life insurance and income annuities to the AARP. New York Life is one of the largest life insurance organizations in the United States with approximately $180 billion in total statutory assets and $15.5 billion in total adjusted capital at December 31, 2007. Total assets under management increased 7% in 2007 to $280 billion.
New York Life generates high-quality, stable earnings, driven by its large book of traditional individual life insurance products. Fixed annuity sales have been strong in recent years, led by its guaranteed lifetime income annuities, adding diversity to the company’s revenues, earnings and risk profile. Fitch notes that New York Life’s operating earnings increased 17% and consolidated statutory net gain from operations increased 26% in 2007 over 2006 with significant contributions from life insurance and institutional businesses. Fitch believes New York Life career agency distribution network is a competitive advantage, providing stability to margins and lapse rates over time, and also generating strong increases in fixed annuity sales and above industry growth in first year individual life insurance.
The ‘AAA’ ratings on the FA-backed note programs and related issues recognize that the trust obligations are secured solely by funding agreements issued by NYLIC with cash flow structures that enable the trustees to pay the principal and interest on the notes. Thus, the note programs are dependent upon NYLIC’s credit quality and are assigned a rating equal to that company’s Insurer Financial Strength (IFS) rating.
The commercial paper and surplus notes ratings are based on the organization’s moderate consolidated financial leverage and strong capacity to service its debt-repayment capabilities. Total consolidated financial leverage (i.e., surplus notes, commercial paper outstanding divided by GAAP total adjusted capitalization) was 9.1% at year end 2007.
In 2008, Fitch expects New York Life’s capital quality to remain at or above current ‘AAA’ levels as measured by Fitch’s economic capital model, Prism, and NAIC risk-based capital (RBC) is expected to remain above 400%. GAAP-based financial leverage is expected to approximate 10% and fixed charge coverage is expected to be strong. Fitch expects GAAP operating earnings to grow at a steady pace in 2008 with single digit returns on total adjusted capital.
Copyright Business Wire 2008
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