New York Life Insurance Company VP-Sr Credit Officer

FINANCIAL INSTITUTIONS

CREDIT OPINION

18 January 2019

Update

RATINGS

New York Life Insurance Company

Domicile

New York, New York, United States

Long Term Rating

Aaa

Type

Insurance Financial

Strength

Outlook

Stable

Please see the ratings section at the end of this report for more information. The ratings and outlook shown reflect information as of the publication date.

Contacts

Laura Bazer

+1.212.553.7919

VP-Sr Credit Officer

laura.bazer@

Kripa Thapa

+1.212.553.8924

Associate Analyst

kripa.thapa@

Scott Robinson

+1.212.553.3746

Associate Managing Director

scott.robinson@

Marc R. Pinto, CFA

+1.212.553.4352

MD-Financial Institutions

marc.pinto@

CLIENT SERVICES Americas Asia Pacific Japan EMEA

1-212-553-1653 852-3551-3077 81-3-5408-4100 44-20-7772-5454

New York Life Insurance Company

Update to credit analysis

Summary

Moody's rates New York Life Insurance Company (NYLIC) and its wholly owned subsidiary, New York Life Insurance and Annuity Corporation (NYLIAC ? collectively, New York Life) Aaa for insurance financial strength (IFS). The rating is based upon New York Life's intrinsic strengths as the largest US mutual life insurer, with a leading position in the US life insurance market and a large, profitable in-force block of participating whole life, its strong earnings diversity and liquidity, good distribution, and strong capitalization.

These strengths are tempered by earnings that are somewhat weak for its rating level, and material holdings of below investment-grade bonds, private middle market loans, alternative investments (e.g., private equities), and commercial mortgage loans. Other challenges are the slower growth prospects for traditional participating life insurance (which Moody's considers the most creditworthy product, relative to other, higher-growth products and businesses) and NYLIC's sizable asset management business, which, while providing business earnings diversity, remains under pressure in terms of net fund flows, similar to other active management peers. Rapid growth of the asset management business, currently around 7% (as of September 30, 2018) of core GAAP earnings, could put downward pressure on New York Life's ratings, although this is not what we are expecting.

Exhibit 1

Net Income and Return on Capital (1 yr. avg.)

2,500

Net income (loss) attributable to common shareholders

Return on avg. capital (1 yr. avg ROC)

8%

7%

2,000 6%

Net Income

Return on avg. Capital (1 yr. avg ROC)

5% 1,500

4% 1,000

3%

2% 500

1%

0 2013

2014

2015

2016

0% 2017

Net income for 2017 excludes a favorable tax adjustment of $602 million related to the new US tax law recorded at the end of the year. Source: Moody's Investors Service; Company Filings

This document has been prepared for the use of Ruchi Patel and is protected by law. It may not be copied, transferred or disseminated unless authorized under a contract with Moody's or otherwise authorized in writing by Moody's.

MOODY'S INVESTORS SERVICE

FINANCIAL INSTITUTIONS

Credit strengths

? Top-tier position in the domestic individual life insurance business ? Large block of individual life insurance containing significant embedded profits ? Productive and well-established career agency distribution force ? Well-diversified investment portfolio, strong liquidity, and outstanding capitalization

Credit challenges

? An earnings profile lower than the rating level, excluding one-time items ? Material holdings of higher risk assets, including below investment-grade bonds, middle market loans, alternative investments, as

well as real estate-related investments ? Challenges in growing its participating business lines ? Continued maintenance of its strong growth and retention of its agency field force

Outlook

New York Life has a stable outlook, based on its leading position in the US life insurance market and participating whole life block and strong capitalization, mitigated by growth in higher risk products and businesses, including asset management. Items to watch include the progression of par whole life vs. other product sales; profitability, including the performance of the long-term care (LTC) book; and changes to New York Life's NAIC RBC ratios, given tax reform-related and other expected changes to the ratio's calculation over the next 18 months.

Factors that could lead to a downgrade

? A downgrade of the US government rating ? Risk-sharing products sustained below 50% of total statutory reserves (currently at 53%) ? Consolidated statutory-based high risk asset ratio greater than 140%, or NAIC 2-rated securities above 40% of total bonds (at

117%, analytically, and 29%, respectively at year-end 2017) ? The company action level NAIC Risk Based Capital (RBC) ratio falling below 400% for more than a short time period or a reduction

in capital of more than 10% over a 12 month period ? Adjusted financial leverage of 20% or more; or earnings coverage consistently below 10x

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on for the most updated credit rating action information and rating history.

2 18 January 2019

New York Life Insurance Company: Update to credit analysis

This document has been prepared for the use of Ruchi Patel and is protected by law. It may not be copied, transferred or disseminated unless authorized under a contract with Moody's or otherwise authorized in writing by Moody's.

MOODY'S INVESTORS SERVICE

FINANCIAL INSTITUTIONS

Key indicators

Exhibit 2 New York Life Insurance Company 12

As Reported (US Dollar Millions) Total Assets Total Shareholders' Equity Net income (loss) attributable to common shareholders Total Revenue Moody's Adjusted Ratios High Risk Assets % Shareholders' Equity Goodwill & Intangibles % Shareholders' Equity Shareholders' Equity % Total Assets Return on avg. capital (1 yr. avg ROC) Sharpe Ratio of ROC (5 yr. avg) Financial Leverage Total Leverage Earnings Coverage (1 yr.) Cash Flow Coverage (1 yr.)

[1]Information based on US GAAP financial statements as of Fiscal YE December 31. [2]Certain items may have been relabeled and/or reclassified for global consistency. Source: Moody's Investors Service

2017

337,116 39,297

2,761 30,328

103.2% 23.4%

9.8% 5.6% 509.2% 10.6% 11.7% 18.3x

NA

2016

317,878 35,483

1,372 27,908

108.0% 26.2% 9.4% 4.0%

485.7% 12.3% 13.5% 11.4x NA

2015

301,657 33,512 1,486 26,127

113.0% 27.5% 9.4% 4.7% 487.1% 12.2% 13.5% 13.6x NA

2014

279,502 33,791 2,219 27,451

104.2% 23.4% 10.4%

6.7% 518.1%

12.1% 13.4% 18.5x

NA

2013

259,512 30,262

1,816 24,781

107.6% 24.2% 10.1% 6.0%

NA 11.0% 12.5% 16.8x

NA

Profile

New York Life Insurance Company and its affiliated entities provide individuals and businesses with life insurance products, annuities, long-term care insurance, pension products, mutual funds, and a variety of investment products and services.

According to the Life Insurance Marketing and Research Association (LIMRA), New York Life was among the largest sellers of life insurance products and fixed annuities in the US, as of March 31, 2018. In addition to NYLIC, the other principal US life affiliate in the group is New York Life Insurance and Annuity Corporation (NYLIAC). New York Life's primary asset management subsidiary is New York Life Investment Management Holdings LLC (NYLIM). Including NYLIM's affiliates, the company had approximately $552 billion in assets under management, as of September 30, 2018. Separately, New York Life maintains an insurance operation in Mexico, Seguros Monterrey New York Life.

Detailed credit considerations

Moody's rates New York Life Aaa for insurance financial strength, which is higher than the Aa1 rating indicated by the adjusted insurance financial strength rating scorecard. The principal differences are: (a) a focus on, and a very strong market position in, the participating life insurance business, (b) a governance structure with a strong focus on the best interests of policyholders/creditors, (c) an emphasis on superior customer value with substantial experience-rated policyholder dividends, and a strong capital position that depresses reported profitability metrics.

Insurance financial strength rating The key factors currently influencing the rating and outlook are:

Market position & brand: Leading positions in a number of markets

New York Life has one of the most well-recognized and respected brands in the U.S., and a leading market position in a number of important segments of the industry. According to LIMRA, as of 3Q2018, New York Life was among the largest sellers of life insurance (#2) in the US and the #1 provider of fixed annuities (including lifetime income annuities). New York Life is also the leading direct marketer of life insurance, a top long-term care insurance provider, and the largest underwriter of professional association insurance programs in the U.S. Accordingly, we view the company's market position and brand to be in line with expectations for Aaa insurers and have moved this factor up from the Aa indicated by the scorecard metric.

3 18 January 2019

New York Life Insurance Company: Update to credit analysis

This document has been prepared for the use of Ruchi Patel and is protected by law. It may not be copied, transferred or disseminated unless authorized under a contract with Moody's or otherwise authorized in writing by Moody's.

MOODY'S INVESTORS SERVICE

FINANCIAL INSTITUTIONS

Distribution: Wide diversity of distribution channels

New York Life benefits from a diverse network of distribution channels including career agents, independent brokers, banks, direct/ sponsored distribution (e.g. AARP), and an institutional sales force. While distribution diversity is consistent with an A rating on an unadjusted basis, it is one of the broadest among mutuals. Nevertheless, New York Life's key strength remains its productive, 12,000plus member career agency force, which is its primary channel for distributing permanent, cash value life insurance products - the company's core product. The controlled nature of the company's career agency channel contributes to New York Life's strong business retention rates, and its focus on "cultural" market recruitment helps it garner sales from underpenetrated ethnic and niche markets (e.g., Latino, Asian, women). The other distribution channels are primarily used to distribute specialized insurance and investment products, such as COLI/BOLI, sponsored life products (AARP and Professional Affinity Organizations), fixed annuities, and investment products and afford the company less control over its producers in these channels. However, because of the importance of the career agency channel, we view the company's distribution to be in line with expectations for Aa insurers and have moved this factor up from the A, indicated by the scorecard metric.

Product focus and diversification: Overall risk profile supported by low-risk block of participating whole life

New York Life manufactures and markets a wide range of products for both retail and institutional buyers, and maintains a risk profile consistent with Aa peers. The company's principal product lines include individual life insurance, individual annuities (fixed, immediate, and variable annuities-VAs), long-term care insurance, pensions and institutional investment products business, and asset management through its New York Life Investment Management subsidiary. The overall risk profile of the company's product portfolio, which is well positioned among its competitors, is supported by its large block of participating life insurance (about 27% of total year-end 2017 general and separate account liabilities), one of the lowest risk products sold by U.S. firms. We note, that like other mutual peers, New York Life uses some percentage of non-par business earnings to supplement its dividend ratio to participating whole life policyholders; this may not be sustainable over time, leading to lower sales and potentially higher lapses. In addition, the participating business is a slower-growing product relative to other higher risk products and lines of business (e.g., variable and fixed annuities). Although New York Life has grown its asset management business, both organically and through acquisition, we expect that this will continue to be a relatively smaller business segment in relation to the company's lower-risk life insurance businesses in terms of earnings (i.e., under 15%).

Asset quality: High risk asset exposure mostly driven by below investment grade bonds and alternative investments

The overall quality of New York Life's investment portfolio is good. On an unadjusted basis, the company's GAAP exposure to high risk assets was about 103% of equity as of December 31, 2017, consistent with Moody's expectations for Baa-rated companies. This compares with 108% in 2016, the decrease in 2017 stemming from an increase in shareholders' equity due to unusually high net income in 2017 (see Profitability discussion, below). On a statutory basis, adjusting analytically for additional below investment-grade middle market bank loans in its Madison Capital subsidiary, the ratio rises to about 117%, which is still a Baa-level score, but lower than the 140% trigger. We expect the adjusted ratio to remain in the 2017 range in 2018 and 2019. Approximately 4% of cash and invested assets are non-investment grade bonds, although many of these are private placements with covenant and/or collateral protections (albeit with the emergence of "covenant lite" transactions pressuring market prices). Privates, including 144a securities, were approximately 40-45% of the corporate bond portfolio, which is high relative to peers. Most of the remainder of high-risk assets are various forms of alternative investments, such as partnership interests in investment funds. Because investment results of the portfolio backing the participating business can generally be shared with participating policyholders, the company substantially reduces its risk of owning these assets. However, under a stress scenario, the overall portfolio investment losses would be well in excess of the annual policyholder dividend, and would negatively affect profitability and capital.

The adjusted score on this factor is raised to Aa from the unadjusted score of A, given the portfolio's strong diversification, the ability to share investment losses with policyholders, limited exposure to non-agency RMBS, and high likelihood of DAC recoverability. Material growth of the company's high risk exposures would put pressure on the asset quality score.

4 18 January 2019

New York Life Insurance Company: Update to credit analysis

This document has been prepared for the use of Ruchi Patel and is protected by law. It may not be copied, transferred or disseminated unless authorized under a contract with Moody's or otherwise authorized in writing by Moody's.

MOODY'S INVESTORS SERVICE

FINANCIAL INSTITUTIONS

Capital adequacy: RBC ratio is strong; high quality capital

New York Life's capital-to-total asset ratio of about 9.8% in the scorecard suggests a Aa score, but we believe that the NAIC RBC ratio is a better indicator of the company's capital adequacy. The company's consolidated year-end 2017 NAIC RBC ratio was 526% (company action level), a level commensurate with Aaa-rated companies on an unadjusted basis, however, lower than the 2016 RBC of 550%, mainly due a deferred tax asset (DTA) write-down of $616 million related to the 2018 tax reform. Total Adjusted Capital (which includes half the dividend liability) at September 30, 2018 of approximately $26 billion, is high quality, as New York Life does not use captive reinsurers to boost its capital adequacy. However, under a situation of severe stress, RBC would be lower, due to significant investment losses. We also expect NAIC 2018 tax-reform-related changes to RBC to lower aggregate industry RBC ratios by 50 points, which would put New York Life's proforma 2017 ratio in the 475% range, still strong, but somewhat lower than similarly rated peers. The adjusted score for capital adequacy is Aa, the same as its unadjusted scorecard because of the good quality of New York Life's capital and the company's flexibility in adjusting dividends (almost $2 billion of dividends paid in 2017) on its sizeable participating whole life business, as well as other risk sharing mechanisms in its various other products. These mitigate some of the impact of investment losses in times of severe stress, but we would expect New York Life to rebuild capital to its current high levels, if need be.

Profitability: Policyholder dividends and strong capital position depress nominal profitability

The company's GAAP return on capital (ROC) for 2017 strengthened to 5.4% from 4% in 2016, but this was largely due to $1.7 billion in partnership investment gains and a $602 million benefit from the reduction of a deferred tax liability, both of which are nonrecurring. On a consolidated statutory basis, ROC tends to be higher than GAAP ROC. However, statutory net income for the first nine months of 2018 was lower compared to the same period in 2017 due to one-time items including new business strain for fixed deferred annuities and new higher valuation rates for income annuity products. Whether on a one-year, or five-year basis, ROC of 5.4% remains below our expectations for a Aaa-rated company (i.e., aligns with an A sub-factor score). However, the low score is due, in part, to New York Life's strong capital position (which depresses reported return on capital measures), and also to an emphasis on superior policyholder value, which reduces profitability through policyholder dividends that are treated as operating expenses. Although a portion of policyholder dividends is economically equivalent to shareholder dividends for a mutual insurer, under GAAP accounting these dividends are considered expenses, and thus depress the company's reported ROC, whereas shareholder dividends do not impact ROC for a stock company. ROC on a similar accounting basis would raise the company's ROC toward the Aa-level, which is the reason we raise the adjusted score to Aa for this factor, while relatively low earnings volatility is consistent with a Aa score.

Liquidity and asset/liability management (ALM): Stable liabilities and strong liquidity

New York Life's unadjusted liquidity score is consistent with a Aa rating ? the same as the adjusted score for this factor. However, ALM at New York Life is greatly enhanced by the large amount of very stable participating business on the company's books, which effectively allows the company to share some of its inherent risks with its participating policyholders, and also benefits the company's liquidity profile. The company's liquidity profile is further bolstered by a relatively liquid general account investment portfolio and approximately $12.1 billion in holdings of cash, short term investments, and U.S. Treasury and agency securities at September 30, 2018. We expect the company's liquidity to show similar strength into 2019. New York Life is one of the smaller number of companies that continue to issue funding agreement-backed notes (about $14.9 billion of liabilities at Q3 2018). However, we believe that the program is well managed and that these exposures are well matched, from both a duration and from a cash perspective - the latter as issues approach maturity.

We recognize the stability of the majority of the company's liabilities, as well as the substantial liquidity available in the investment portfolio. Therefore, we have moved the adjusted score on this factor to Aaa, from the unadjusted scorecard result of Aa.

Financial flexibility: Low financial leverage, but mutuals are unable to issue equity

We expect New York Life's adjusted leverage and total leverage in 2018 to be in the same range as year-end 2017, which is in line with Aaa issuers on an unadjusted basis. The company's financial leverage was 10.6% as of year-end 2017, and total leverage, which excludes Moody's equity credit treatment for the company's surplus notes and includes operating debt, was very strong, at 11.7%. The company's nearly $2 billion of surplus notes receive 25% equity credit in accordance with Moody's hybrid methodology, which is factored into the adjusted financial leverage calculation. Average earnings coverage of 15.7x over the past five years is consistent with

5 18 January 2019

New York Life Insurance Company: Update to credit analysis

This document has been prepared for the use of Ruchi Patel and is protected by law. It may not be copied, transferred or disseminated unless authorized under a contract with Moody's or otherwise authorized in writing by Moody's.

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