NEW YORK LIFE INSURANCE COMPANY AND SUBSIDIARIES ...

NEW YORK LIFE INSURANCE COMPANY AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS (GAAP Basis)

December 31, 2018 and 2017

Table of Contents

Independent Auditor's Report Consolidated Statements of Financial Position Consolidated Statements of Operations Consolidated Statements of Comprehensive Income Consolidated Statements of Equity Consolidated Statements of Cash Flows Notes to Consolidated 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 Investment Gains and Losses Note 11 - Related Party Transactions Note 12 - Policyholders' Liabilities Note 13 - Deferred Policy Acquisition Costs and Sales Inducements Note 14 - Reinsurance Note 15 - Benefit Plans Note 16 - Goodwill and Other Intangible Assets Note 17 - Commitments and Contingencies, Loaned Securities and Repurchase Agreements Note 18 - Income Taxes Note 19 - Debt Note 20 - Equity Note 21 - Supplemental Cash Flow Information Note 22 - Statutory Financial Information Note 23 - Subsequent Events Glossary of Terms

Page Number 1 2 3 4 5 6

7 7 7 21 21 23 34 40 41 64 68 69 74 75 77 89 90 93 96 99 101 102 103 104

Report of Independent Auditors

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

We have audited the accompanying consolidated financial statements of New York Life Insurance Company and its subsidiaries (the "Company"), which comprise the consolidated statements of financial position as of December 31, 2018 and 2017, and the related consolidated statements of operations, of comprehensive income, of equity and of cash flows for the years then ended.

Management's Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated 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 consolidated 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 consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated 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 consolidated 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 consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of New York Life Insurance Company and its subsidiaries as of December 31, 2018 and 2017, and the results of their operations and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

March 7, 2019

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

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NEW YORK LIFE INSURANCE COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

December 31,

2018

2017

(in millions)

Assets

Fixed maturities (includes securities pledged to creditors of $1,297 and $1,325 in 2018 and 2017, respectively):

Available-for-sale, at fair value

$ 182,620 $ 180,645

Securities, at fair value

18,858

17,982

Equity securities:

Securities, at fair value (cost is $2,743 and $2,373 in 2018 and 2017, respectively)

Affiliated

3,627 10

3,945 10

Mortgage loans and other loans (includes mortgage loans carried at fair value of $1,104 and $1,254 in 2018 and 2017, respectively), net of allowances

39,388

36,682

Policy loans

12,142

11,787

Other investments

18,701

17,581

Total investments

275,346

268,632

Cash and cash equivalents

6,379

6,387

Deferred policy acquisition costs

8,313

6,985

Other assets (includes other assets carried at fair value of $3,397 and $3,701 in 2018 and 2017, respectively)

12,151

12,165

Separate account assets

36,955

42,947

Total assets

$ 339,144 $ 337,116

Liabilities

Future policy benefits (includes liabilities carried at fair value of $7,545 and $8,326

in 2018 and 2017, respectively)

$

123,527 $

118,901

Policyholders' account balances

119,954

112,223

Dividends payable to policyholders

1,248

1,255

Policy claims

1,368

1,309

Debt (includes debt carried at fair value of $1,621 and $1,786 in 2018 and 2017, respectively)

5,876

5,717

Collateral received on securities lending

1,327

1,353

Other liabilities (includes other liabilities carried at fair value of $4,631 and $4,981 in 2018 and 2017, respectively)

11,953

14,114

Separate account liabilities

36,955

42,947

Total liabilities

302,208

297,819

Equity Accumulated other comprehensive income

(1,893)

2,319

Retained earnings

35,017

33,477

Total New York Life equity

33,124

35,796

Non-controlling interest

3,812

3,501

Total equity

36,936

39,297

Total liabilities and equity

$ 339,144 $ 337,116

The accompanying notes are an integral part of the consolidated financial statements.

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NEW YORK LIFE INSURANCE COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS

Revenues Premiums Fees - universal life and annuity policies Net investment income Net investment gains (losses):

Other-than-temporary impairments on fixed maturities Other-than-temporary impairments on fixed maturities recognized in

accumulated other comprehensive income All other net investment gains (losses) Total net investment gains (losses) Management fees and other income Total revenues

Years Ended December 31,

2018

2017

(in millions)

$

15,002 $

14,749

1,691

1,667

11,479

10,767

(95)

32 (912) (975) 1,573 28,770

(121)

28 1,666 1,573 1,572 30,328

Expenses Policyholder benefits Increase in liabilities for future policy benefits Interest credited to policyholders' account balances Dividends to policyholders Operating expenses Total expenses

10,229 5,370 2,856 1,962 6,489 26,906

9,650 5,975 2,896 1,950 6,592 27,063

Income before income tax expense and non-controlling interest Income tax expense Net income Non-controlling interest

Net income attributable to New York Life

1,864 75

1,789 (343)

3,265 226

3,039 (278)

$

1,446 $

2,761

The accompanying notes are an integral part of the consolidated financial statements. 3

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