NEW YORK LIFE INSURANCE COMPANY FINANCIAL STATEMENTS ...

NEW YORK LIFE INSURANCE COMPANY

FINANCIAL STATEMENTS (STATUTORY BASIS)

DECEMBER 31, 2017 and 2016

Table of Contents

Independent Auditor's Report Statutory Statements of Financial Position Statutory Statements of Operations Statutory Statements of Changes in Capital and Surplus Statutory Statements of Cash Flows Notes to Statutory Financial Statements

Note 1 - Nature of Operations Note 2 - Basis of Presentation Note 3 - Significant Accounting Policies Note 4 - Business Risks and Uncertainties Note 5 - Recent Accounting Pronouncements Note 6 - Investments Note 7 - Derivative Instruments and Risk Management Note 8 - Separate Accounts Note 9 - Fair Value Measurements Note 10 - Investment Income and Capital Gains and Losses Note 11 - Related Party Transactions Note 12 - Insurance Liabilities Note 13 - Reinsurance Note 14 - Benefit Plans Note 15 - Commitments and Contingencies Note 16 - Income Taxes Note 17 - Surplus Note 18 - Significant Subsidiary Note 19 - Written Premiums Note 20 - Loan-Backed and Structured Security Impairments Note 21 - Subsequent Events

Page Number 1 3 4 5 6

8 8 13 22 23 24 38 44 47 61 65 68 73 74 89 95 101 103 103 105 109

Report of Independent Auditors

To the Board of Directors of New York Life Insurance Company:

We have audited the accompanying statutory financial statements of New York Life Insurance Company (the "Company"), which comprise the statutory statements of financial position as of December 31, 2017 and 2016, and the related statutory statements of operations, of changes in surplus, and of cash flows for the years then ended.

Management's Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with the accounting practices prescribed or permitted by the New York State Department of Financial Services. Management is also responsible for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors' Responsibility

Our responsibility is to express an opinion on the financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles

As described in Note 2 to the financial statements, the financial statements are prepared by the Company on the basis of the accounting practices prescribed or permitted by the New York State Department of Financial Services, which is a basis of accounting other than accounting principles generally accepted in the United States of America.

The effects on the financial statements of the variances between the statutory basis of accounting described in Note 2 and accounting principles generally accepted in the United States of America are material.

PricewaterhouseCoopers LLP, PricewaterhouseCoopers Center, 300 Madison Avenue, New York, NY 10017 T: (646) 471 3000, F: (813) 286 6000, us

1

Adverse Opinion on U.S. Generally Accepted Accounting Principles In our opinion, because of the significance of the matter discussed in the "Basis for Adverse Opinion on U.S. Generally Accepted Accounting Principles" paragraph, the financial statements referred to above do not present fairly, in accordance with accounting principles generally accepted in the United States of America, the financial position of the Company as of December 31, 2017 and 2016, or the results of its operations or its cash flows for the years then ended. Opinion on Statutory Basis of Accounting In our opinion, the financial statements referred to above present fairly, in all material respects, the admitted assets, liabilities and surplus of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for the years then ended, in accordance with the accounting practices prescribed or permitted by the New York State Department of Financial Services described in Note 2. Emphasis of Matter As disclosed in Note 11 to the financial statements, the Company has entered into significant related party transactions with its affiliates. Our opinion is not modified with respect to this matter.

March 8, 2018

2

NEW YORK LIFE INSURANCE COMPANY STATUTORY STATEMENTS OF FINANCIAL POSITION

Assets Bonds Common and preferred stocks Mortgage loans Policy loans Limited partnerships and other invested assets Cash, cash equivalents and short-term investments Derivatives Real estate Other investments

Total cash and invested assets

December 31,

2017

2016

(in millions)

$ 98,176 $ 93,048

10,807

9,900

15,676

14,853

10,877

10,596

9,457

8,810

2,420

2,989

587

806

1,524

1,586

111

197

149,635

142,785

Deferred and uncollected premiums Investment income due and accrued Funds held by reinsurer - affiliated Other assets Separate accounts assets

Total assets

Liabilities and Surplus Liabilities: Policy reserves Deposit funds Dividends payable to policyholders Policy claims Borrowed money Amounts payable under security lending agreements Derivatives Funds held under coinsurance Other liabilities Interest maintenance reserve Asset valuation reserve Separate accounts liabilities

1,950 1,285 4,015 6,527 13,354

1,843 1,375 4,154 6,808 13,797

$ 176,766 $ 170,762

$ 107,552 $ 102,601

17,922

16,435

1,897

1,885

786

855

496

503

679

653

323

539

4,228

4,407

5,862

6,086

658

724

2,652

2,175

13,354

13,791

Total liabilities

156,409

150,654

Surplus: Surplus notes Unassigned surplus Total surplus

Total liabilities and surplus

1,993 18,364 20,357

1,993 18,115 20,108

$ 176,766 $ 170,762

See accompanying notes to financial statements. 3

Income Premiums Net investment income Other income

Total income

NEW YORK LIFE INSURANCE COMPANY

STATUTORY STATEMENTS OF OPERATIONS

Years Ended December 31,

2017

2016

(in millions)

$ 15,071 $ 15,441

6,708

6,078

625

542

22,404

22,061

Benefits and expenses Benefit payments:

Death benefits Annuity benefits Health and disability insurance benefits Surrender benefits Payments on matured contracts Other benefit payments

Total benefit payments

Additions to reserves Net transfers (from) to separate accounts Adjustment in funds withheld Operating expenses Total benefits and expenses

3,944 1,215

241 2,436 4,130

369 12,335

4,756 (981) 158 3,229 19,497

3,872 1,170

232 2,360 3,435

310 11,379

4,042 1,000

135 3,117 19,673

Gain from operations before dividends and federal income taxes Dividends to policyholders Gain from operations before federal income taxes Federal and foreign income taxes Net gain from operations

Net realized capital losses, after tax and transfers to interest maintenance reserve

Net income

2,907 1,958

949 (622) 1,571

2,388 1,944

444 (163) 607

(91) $ 1,480 $

(309) 298

See accompanying notes to financial statements. 4

NEW YORK LIFE INSURANCE COMPANY STATUTORY STATEMENTS OF CHANGES IN SURPLUS

Surplus, beginning of year Net income Change in net unrealized capital gains on investments Change in liability for pension and postretirement plans Change in nonadmitted assets Change in reserve valuation basis Change in asset valuation reserve Change in net deferred income tax Prior period correction Other adjustments, net Surplus, end of year

Years Ended December 31,

2017

2016

(in millions)

$ 20,108 $ 19,496

1,480

298

843

301

543

(298)

(289)

108

(314)

--

(476)

85

(1,523)

129

--

17

(15)

(28)

$ 20,357 $ 20,108

See accompanying notes to financial statements. 5

NEW YORK LIFE INSURANCE COMPANY STATUTORY STATEMENTS OF CASH FLOWS

Cash flows from operating activities:

Premiums received Net investment income received Other

Total received

Benefits and other payments Net transfers (from) to separate accounts Operating expenses Dividends to policyholders Federal income taxes received

Total paid Net cash from operating activities

Cash flows from investing activities:

Proceeds from investments sold Proceeds from investments matured or repaid Cost of investments acquired Net change in policy loans and premium notes Net cash used in investing activities

Cash flows from financing and miscellaneous activities:

Other changes in borrowed money Net inflows from deposit contracts Net change in amounts payable under security lending agreements Other miscellaneous uses Net cash from financing and miscellaneous activities

Years Ended December 31,

2017

2016

(in millions)

$ 14,997 $ 15,383

6,233

5,244

449

396

21,679

21,023

12,219 (991) 2,685 1,938 (197)

15,654 6,025

11,281 998

2,762 1,849 (227) 16,663 4,360

4,192 12,956 (23,480)

(281) (6,613)

5,920 11,976 (24,380)

(186) (6,670)

(7) 1,106

25 (1,105)

19

-- 999 75 (167) 907

Net decrease in cash, cash equivalents and short-term investments

(569)

(1,403)

Cash, cash equivalents and short-term investments, beginning of year

2,989

4,392

Cash, cash equivalents and short-term investments, end of year

$ 2,420 $ 2,989

See accompanying notes to financial statements. 6

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