Insurance

Insurance

Life Insurers United States

New York Life Insurance

Company

And Subsidiaries

Key Rating Drivers

Leading Market Position: New York Life Insurance Company and its insurance subsidiaries (NYL) are a leading producer of both whole life insurance and guaranteed income annuities, and has become a leading presence in the group life and disability insurance market through its acquisition of Cigna Corp.'s group life and disability business, which closed on Dec. 31, 2020. NYL's market position is deepened by its loyal and productive career agency distribution channel, which Fitch Ratings believes reduces pricing pressure and anti-selection in competitive market environments.

Product Diversification: NYL's mix of life insurance, annuities and asset management products provide diversification of mortality, longevity and interest rate risks. Additionally, the transaction with Cigna further added to NYL's scale and diversification. While NYL has exposure to the long-term care (LTC) insurance products, Fitch believes that the company is well reserved and is managing the risk well.

Extremely Strong Capital Levels: NYL's statutory capitalization continued to be viewed as extremely strong based on the 2020 Prism capital model score of `Extremely Strong'; a 2020 RBC ratio of 452%, conservative operating leverage; and the fact that the New York regulator-based reserve calculation reflects more conservative reserving practices relative to the NAIC-based calculation. NYL's use of financial leverage increased as a result of the company's recent acquisition, but remains relatively modest and in line with rating expectations.

Stable Operating Results: NYL's diversity of earnings and participating nature of certain products drive strong and relatively stable earnings, despite the company's returns being partially suppressed by strong capital levels and persistently low interest rates. Additionally, the company has continued to perform well in light of the ongoing pandemic and Fitch expects earnings to remain very strong going forward.

Above-Average Risky Assets: NYL's risky assets ratio is above average at 92%; however, the ratio remains in line with similarly rated mutual peers with participating products and has remained steady over recent years. Credit impairments were minimal over the last 18 months, and Fitch expects them to remain below historical averages in the current environment.

Economic Headwinds: The prolonged low interest rate environment and ongoing coronavirus pandemic continue to pose risks to NYL and the insurance industry as a whole. The combination of these factors could have a material impact on NYL's earnings and capital, despite Fitch's view that NYL is well positioned.

Rating Sensitivities

Downgrade: A decline in capitalization, including a Prism capital model score below `Extremely Strong' or an NAIC RBC ratio below 450%; GAAP fixed-charge coverage below 6.0x; material adverse performance in the acquired group life and disability business; or an unexpected shift in tax, regulatory or market dynamics that weaken NYL's competitive strengths could lead to a negative rating action.

A sustained increase in surplus notes to TAC above 15%, could result in wider notching between NYL's Insurer Financial Strength (IFS) rating and the ratings on the surplus notes, and an increase in surplus notes to TAC to above 20%, could result in a downgrade of all ratings.

Upgrade: NYL has achieved Fitch's highest rating level, and as such, positive rating sensitivities are not applicable.

Rating Report November 16, 2021

Ratings

New York Life Insurance Company

Insurer Financial Strength

AAA

Long-Term IDR

AA+

Surplus Notes

AA

Short-Term IDR

F1+

Note: See additional ratings on page 7.

Outlook

Stable

Financial Data

New York Life Insurance Co.

($ Mil.)

2019

Total Adjusted Capital (TAC)

27,423

Surplus Notes Outstanding

2,987

Statutory Net Income

1,004

Operating Return

on TAC (%)

4.4

RBC (%)

507

2020

27,257

4,230 (531)

0.9 452

Note: Reported on a US statutory basis. Source: Fitch Ratings, New York Life Insurance Company.

Applicable Criteria

Insurance Rating Criteria (April 2021)

Related Research

TFC Ratio -- An Alternate View of Leverage (YE 2020 Results for North American Insurers) (October 2021) U.S. Life Insurers' Investment Portfolios (Results of Fitch's YE 2020 Survey) (September 2021)

Analysts

Douglas Baker +1 312 368-3207 douglas.baker@

Douglas Meyer

+1 312 368-2061

douglas.meyer@



1

Insurance

Life Insurers United States

Key Credit Factors -- Scoring Summary

Factor Levels

aaa aa+ aa aaa+ a abbb+ bbb bbbbb+ bb bbb+ b bccc+ ccc ccccc c d or rd

Operational Profile

Industry Profile &

Operating

Business Profile

Environment

Capitalization & Leverage

Debt Service Capabilities and

Financial Flexibility

Financial Performance &

Earnings

Financial Profile

Investment & Asset Risk

Asset/Liability & Liquidity

Management

Reserve Adequacy

Credit Factor Not Applicable

Reinsurance, Risk Mitigation &

Catastrophe Risk

Other Factors & Criteria Elements

(see below)

Insurer Financial Strength

Credit Factor Not Applicable

AAA AA+ AA AAA+ A ABBB+ BBB BBBBB+ BB BBB+ B BCCC+ CCC CCCCC C D or RD

Stable Stable Stable Stable Stable Stable Stable Stable Stable Stable Stable Stable Stable Stable Stable Stable Stable Stable Stable Stable

Other Factors & Criteria Elements Provisional Insurer Financial Strength

Non-Insurance Attributes

Corporate Governance & Management

Ownership / Group Support

Transfer & Convertibility / Country Ceiling Insurer Financial Strength (IFS) IFS Recovery Assumption Issuer Default Rating (IDR)

Positive Effective Positive

Yes

Good

Neutral Some Weakness

Neutral No

Negative

AAA +0

Ineffective

+0

Negative

+0

AAA

+0

Final: Final:

AAA -1

AA+

Bar Chart Legend

Vertical Bars = Range of Rating Factor

Bar Colors = Relative Importance

Higher Influence

Moderate Influence

Lower Influence

Bar Arrows = Rating Factor Outlook

Positive

Negative

Evolving Stable

Latest Developments

?

NYL closed its acquisition of Cigna's group life and disability insurance business through

the acquisition of Life Insurance Company of North American (LINA) and New York Life

Group Insurance Company of NY (formerly known as CIGNA Life Insurance Company of

New York) on Dec. 31, 2020.

?

The impact from the ongoing pandemic has been modest, and Fitch does not anticipate

a material impact to NYL's credit profile.

Peer Comparison

Click here for a report that shows a comparative peer analysis of key credit factor scoring.

Industry Profile and Operating Environment (IPOE)

Click here for a link to a report that summarizes the main factors driving the above IPOE score.

New York Life Insurance Company Rating Report November 16, 2021



2

Business Profile

Large, Well-Diversified Mutual Insurer

Fitch scores an insurer's overall business profile by assigning a ranking between "most favorable" and "least favorable" on a relative basis within the full range of insurers (rated or unrated by Fitch) in the applicable insurance markets. Within this context, Fitch views NYL as having a most favorable business profile relative to the broader North American life insurance market.

One of NYL's key competitive advantages is its loyal and productive career agency distribution channel. Fitch believes this distribution strategy reduces pricing pressure and anti-selection in competitive market environments. The company targets middle-market and mass-affluent customers with a particular focus on higher-growth cultural markets and women.

NYL is one of the largest life insurance companies in the U.S. and Mexico, with approximately $374 billion in total assets and $27 billion in TAC as of Dec. 31, 2020. The company is one of the leading producers of whole life insurance, guaranteed income annuities, and has become a leading presence in the group life and disability insurance market with its acquisition of Cigna Group Insurance (CGI), which closed on Dec. 31, 2020 and subsequently renamed New York Life Group Benefit Solutions. NYL also offers fixed annuities, variable annuities (VAs) with minimal living benefit exposure, and participating individual LTC insurance.

NYL uses effective risk management tools in its capital planning, investment and business strategies. The company offers relatively conservative product features and maintains a strong capital position to offset risks related to various stress scenarios. NYL's exposure to LTC is limited relative to the industry, and Fitch believes that the risk in legacy business is being managed appropriately.

Diversified revenue sources allow the company to emphasize or deemphasize certain products in favorable or challenging economic scenarios and reduce its overall dependence on any single product. NYL's mix of life insurance, disability, annuities and asset management products provides diversification of mortality, longevity and interest rate risks.

Ownership

Fitch views the ownership structure of mutual insurance companies favorably, as the interests of management are aligned with those of policyholders, but overall are neutral to the rating. Fitch believes that the company's ownership structure generally allows management to hold more conservative levels of capital and pursue a more conservative operating strategy with a longer-term focus on growth.

Insurance

Life Insurers United States

New York Life Insurance Company Rating Report November 16, 2021



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Insurance

Life Insurers United States

Capitalization and Leverage

Extremely Strong Capitalization

Fitch considers NYL's capitalization to be extremely strong as demonstrated by its score on Fitch's Prism capital model, which was `Extremely Strong' at YE 2020 and follows similar scores over the last several years. The company continues to generate solid capital growth and maintains a cushion for extreme adverse scenarios. Nonrisk-based leverage metrics remain very strong and consistent with prior years. Additionally, Fitch believes NYL's reported statutory capital is moderately understated relative to peers as the New York regulator-based reserve calculation reflects more conservative reserving practices relative to the NAIC-based calculation.

The company's use of financial leverage increased as a result of the company's recent acquisition, but remains relatively modest and in line with rating expectations. Through the first six months of 2021, Fitch estimates that NYL's financial leverage was 14.5%, and going forward, Fitch expects that financial leverage will begin to decline as a result of continuing growth of capital.

NYL's capital strength is also reflected by its strong quality of capital. Surplus notes remain a reasonable percentage of capital, and the company makes limited use of third-party reinsurance and does not utilize captive insurers to fund excess life reserves. Fitch also believes there is additional conservatism built into NYL's balance sheet, given the more conservative reserving practices prescribed by the New York State Department of Financial Services.

NYL's reliance on capital market funding is low, as demonstrated by its below industry average total financing and commitments ratio of 0.5x at YE 2020 and extremely strong capital levels.

Fitch Expectations

?

Capital is expected to remain extremely strong over the ratings horizon.

?

Financial leverage, as measured by surplus notes to TAC, is expected to decrease going

forward.

2020 Prism Score -- New York Life Insurance Group

($ Mil.) 60,000 50,000 40,000 30,000 20,000 10,000

0

Extremely Strong

Very Strong Strong

Adequate Somewhat

Weak

Target Capital

Available Capital

(%) Prism Score

AC/TC at Prism Score

Target Capital Contributors Life Insurance Annuity Accident and Health Portfolio Scaling Adjustment Operational Risk Diversification Benefit

2020 Extremely

Strong 130

47 79 10 (28)

9 (18)

AC ? Available capital. TC ? Target capital. Note: Shaded area represents the high and low of AC due primarily to unrealized bond gains and surplus notes. Source: Fitch Ratings.

Financial Highlights

($ Mil.)

Total Adjusted Capital RBC (%) Asset Leverage (x) Operating Leverage (x) Surplus Notes/Total Adjusted Capital (%)

2019 27,423

507 13 10

11

2020 27,257

452 14 11

16

Note: Reported on a U.S. statutory basis. Source: Fitch Ratings, New York Life Insurance Company.

New York Life Insurance Company Rating Report November 16, 2021



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Insurance

Life Insurers United States

Debt Service Capabilities and Financial Flexibility

Coverage Remains Very Strong

Fitch views NYL's coverage metrics as very strong on both a GAAP and statutory basis, offset slightly by the company's somewhat limited financial flexibility, although Fitch notes NYL is active in the capital markets.

In addition to the company's demonstrated access to funding through surplus note issuances, NYL's wholly owned indirect subsidiary, New York Life Capital Corp., is authorized to issue up to $3.0 billion of CP, which it does opportunistically to support the management of cash flows for investment and liquidity purposes. Outstanding CP balances are manageable and totaled $495 million at YE 2020.

Additionally, NYL continues to maintain a $1.5 billion bank line of credit. There were no outstanding balances as of Dec. 31, 2020. New York Life Insurance Company also has approximately $9.4 billion of borrowing capacity with the Federal Home Loan Bank (FHLB) of New York, while its subsidiary New York Life Insurance and Annuity Corporation is a member of the FHLB of Pittsburgh, with $5.5 billion of borrowing capacity. Additionally, as of Sept. 30, 2021, LINA became a member of the FHLB of Pittsburgh with $0.5 billion of borrowing capacity.

As a mutual company, NYL's ability to raise equity capital is somewhat limited due to its inability to issue common stock. However, the company maintains an active medium-term note program both domestically and internationally. Additionally, liquidity from NYL's entire general account is available to service the company's outstanding surplus notes.

Fitch Expectations

?

GAAP-based interest coverage declined modestly as a result of additional surplus note

issuance, but remains very strong and in line with Fitch's expectations.

Financial Performance and Earnings

Extremely Strong Capital Moderates Reported Returns

NYL's diversity of earnings and participating nature of certain products drive strong and relatively stable earnings, despite economic headwinds associated with the ongoing pandemic that put modest pressure on earnings over the last 18?24 months. NYL's returns also continue to be partially suppressed by strong capital levels and persistently low interest rates.

Although interest rate-sensitive business remains under pressure for the industry, NYL continues to manage its spread margins well, aided by solid investment performance and actively managed crediting rates. Fitch believes that NYL's exposure to continued low interest rate headwinds is manageable, bolstered by its product diversification and extremely strong capitalization.

NYL's large life insurance business consistently accounts for the largest share of the company's earnings, with smaller contributions from annuities, asset management and group business. The participating nature of NYL's large block of in-force whole life business allows the company to adjust dividend rates in times of severe stress to maintain strong targeted capital levels, while also providing a buffer that can be used to share investment performance with policyholders.

Other factors enabling NYL to price its individual whole life products competitively include lowlapse rates on its protection-based insurance products and a low expense base, aided by significant scale. Fitch believes the company's low-lapse rate for its whole life products illustrates sound product design, competitive dividend rates, and strong relationships between NYL's career agency system and its policyholders.

Fitch Expectations

?

Financial performance will benefit from the acquired group life and disability insurance

business going forward and remain in line with Fitch's expectations.

Financial Highlights

($ Mil.)

Adjusted Interest Expense GAAP Interest Coverage (x) Statutory Interest Coverage (x)

2019 159

2020 203

18

13

9

3

Note: Reported on a US statutory basis except where noted. Source: Fitch Ratings, New York Life Insurance Company.

Financial Highlights

($ Mil.)

Pretax Gain from Operations

Net Income

Pretax Operating ROA (%)

Operating Return on Total Adjusted Capital (%)

Growth in Revenues Before Realized Gains (%)

2019 2020

1,338 1,004

397 (531)

0.4

0.1

4.4

0.9

10

23

Note: Reported on a U.S. statutory basis. Source: Fitch Ratings, New York Life Insurance Company.

New York Life Insurance Company Rating Report November 16, 2021



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