Fitch Rates New York Life’s Surplus Notes ‘AA’; Affirms IFS at ‘AAA’; Outlook Negative

Fitch Rates New York Life's Surplus Notes 'AA'; Affirms IFS at 'AAA'; Outlook Negative

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has assigned an 'AA' rating to New York Life Insurance Company's (New York Life) recently issued 144a surplus notes 6.75% due 2039. At the same time, Fitch affirmed New York Life's Insurer Financial Strength (IFS) rating at 'AAA' and all other ratings on New York Life and its wholly owned insurance subsidiaries (see complete list below). The Rating Outlook is Negative for all ratings.

The rating assigned to the surplus note issuance reflects Fitch's standard notching from the company's IFS rating, and considers the subordination of surplus relative to both policyholder and senior debt obligations. Consistent with current outstanding surplus notes, interest and principal payments on new surplus notes are subject to prior approval by the New York State Insurance Department.

The current ratings reflect Fitch's view that New York Life's very strong capital and liquidity position, and favorable business profile continue to be consistent with rating expectations. Fitch believes that the company's exposure to future investment losses is manageable in the context of the company's capital position and statutory earnings under Fitch's base case scenario.

Fitch notes that New York Life's total adjusted capital was generally unchanged during the first six months of 2009, and believes the issuance of these surplus notes adds flexibility and support for future investment losses or strong life and annuity sales. With the issuance of the surplus notes the company's very strong capital adequacy, as measured by both regulatory calculation and Fitch internal analysis is expected to exceed New York Life's 429% risk-based capital (RBC) ratio that was reported at year-end 2008. In addition, Fitch believes New York Life has the flexibility to maintain strong levels of capital due to the participating nature of its large block of in-force, whole-life business as well as other insurance products.

Total surplus notes outstanding will comprise approximately 14% of New York Life's total adjusted capital, which is within Fitch's expectations of 15%. Statutory-based operating income coverage of New York Life's surplus note interest is estimated to be solid at 5.2 times (x) on a run rate basis for 2009.

The Negative Outlook reflects Fitch's view that the continuation of the challenging financial markets will further strain New York Life's financial results and balance sheet strength. The Outlook also considers that continued earnings volatility for New York Life may be more than is tolerable at its current rating level given the aforementioned concerns.

Fitch expects New York Life's statutory results for 2009 and 2010 to be negatively impacted by investment-related impairments and lower fee-related income due to lower assets under management. Based on a detailed analysis of New York Life's investment portfolio, Fitch projects gross investment losses in the $1.1 billion to $1.3 billion range for 2009 and 2010 using Fitch's stress testing methodology. The midpoint of this range equates to 8% of year-end 2008 statutory capital and represents approximately 1.7x Fitch's projection of run-rate statutory net operating gain. The company's investment loss exposure relative to capital and earnings is about average compared to industry peers.

The ratings on New York Life's funding agreement backed note programs and related issues recognize that the trust obligations are secured 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 New York Life's credit quality and are assigned a rating equal to that company's IFS rating.

The commercial paper and surplus notes ratings are based on the organization's strong capacity to service its debt and its moderate levels of consolidated financial leverage. Total consolidated financial leverage (i.e. surplus notes, commercial paper outstanding divided by GAAP total adjusted capitalization) is estimated to increase to 11.5% on a pro forma basis at June 30, 2009 versus 7.1% at year-end 2008 and 12.4% and 8.1% respectively when including discount debt obligations for its Share Appreciation Income Linked Securities (SAILS) agreements.

New York Life is one of the largest life insurance organizations in the United States with approximately $180 billion in total statutory assets and $13.5 billion in total adjusted capital at June 30, 2009.

Fitch has assigned the following rating:

New York Life Insurance Company

--$1,000,000,000 6.75% surplus note due Nov. 15, 2039 'AA'.

Fitch has affirmed the following ratings with a Negative Outlook:

New York Life Insurance Company

--Issuer Default Rating (IDR) 'AA+';

--IFS 'AAA';

--Short-term IDR 'F1+';

--$1,000,000,000 5.875% surplus note due May 15, 2033 'AA'.

New York Life Insurance and Annuity Corporation

--IFS 'AAA'.

NYL Capital Corporation

--Commercial paper 'F1+'.

New York Life Funding

--Program rating 'AAA'.

New York Life Global Funding

-Program rating 'AAA'.

Additional information is available at www.fitchratings.com.

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Fitch Ratings, Chicago

R. Andrew Davidson, CFA, +1-312-368-3144

Douglas L. Meyer, CFA, +1-312-368-2061

Brian Bertsch, +1-212-908-0549 (Media Relations, New York)

[email protected]

Source: Fitch Ratings

Copyright Business Wire 2009 Fitch Ratings has assigned an 'AA' rating to New York Life Insurance Company's recently issued 144a surplus notes 6.75% due 2039. The rating assigned to the surplus note issuance reflects Fitch's standard notching from the company's IFS rating, and considers the subordination of surplus relative to both policyholder and senior debt obligations.