How we measure up Annual Report

Transcription

1 How we measure up 2013 Annual Report

2 Financial Highlights (In $ Millions) December 31, 2013 December 31, 2012 Policyholder Benefits and Dividends 8,622 8,099 Individual Life Insurance In Force 840, ,361 Assets Under Management 425, ,432 Operating Earnings 1,764 1,586 Surplus and Asset Valuation Reserve 21,141 19,613 Insurance Sales 1,194 1,149 Annuity Sales 9,673 7,485 Mutual Fund Sales 31,254 17,224 For definitions of the company s performance measures, please see the Glossary of Terms on page 28. Note: New York Life or the company, as used throughout this Report, can refer either separately to the parent company, New York Life Insurance Company, or one of its subsidiaries, or collectively to all New York Life companies, which include the parent company and its subsidiaries and affiliates. Any discussion of ratings and safety throughout this Report applies only to the financial strength of New York Life, and not to the performance of any investment products issued by the company. Such products performance will fluctuate with market conditions. The New York State Department of Financial Services recognizes only statutory accounting practices for determining and reporting the financial condition and results of operations of an insurance company. The condensed consolidated statutory statement of financial position in this Report includes New York Life Insurance Company (NYLIC) and its domestic, wholly owned life insurance subsidiaries: New York Life Insurance and Annuity Corporation (NYLIAC) and NYLIFE Insurance Company of Arizona (NYLAZ). NYLAZ is not authorized in New York or Maine and does not conduct insurance business in New York or Maine. Policyholders may request a copy of the audited statutory financial statements applicable to their respective companies, New York Life s consolidated financial statements prepared in accordance with generally accepted accounting principles (GAAP), and the detailed reconciliation of the company s GAAP financial statements to its non-gaap performance measure (i.e., Operating Earnings) by contacting the Secretary of the parent, New York Life Insurance Company, 51 Madison Avenue, New York, New York The individual company audited statutory financial statements, New York Life s consolidated GAAP financial statements, and reconciliation to non-gaap performance measures are also available on our website (

3 A message from Ted Mathas Theodore Roosevelt once said, The best prize life has to offer is the chance to work hard at work worth doing. That s a notion that I m proud to say resonates with everyone in our organization. We understand that the work we do has purpose; it affects not only the lives of the people who have placed their trust with us, but arguably generations of their family members who will follow them. That s why we continue to hold ourselves to the highest standards to ensure we measure up to what anyone rightfully should expect from their life insurer. As we move into 2014, there are many reasons to be cautiously optimistic about the path of our nation s economy. The equity market had a very strong advance in 2013; interest rates, while still very low from a historical perspective, recorded a marked rise during the past year; unemployment declined to a five-year low; the housing market has been stabilizing; and in a sign of confidence that the economy is indeed regaining its strength, shortly before the year came to a close, the Federal Reserve announced its intention to begin scaling back on its massive stimulus program. Concerns remain, such as the nearterm possibility of an equity market correction, or more fundamentally, the fact that much of the improvement in our unemployment numbers has been driven by people who have stopped looking for work. Moreover, our federal government has not taken any material action to address our longterm debt situation, and we appear positioned for a continued stretch of political motivations trumping sound policy decisions. Yet, a feeling of optimism is starting to take root. Perhaps we are adjusting to the ongoing uncertainty in the markets and the continued inaction of our political leaders. Or perhaps we are collectively deciding that it is simply time to move New York Life Insurance Company 2013 Annual Report 2

4 For nearly 170 years, we have built our business around bringing certainty and security to our customers in good times and bad. No one can predict the future, but we ve made it our business to plan and prepare for whatever it may hold. forward more than five years after the start of the Great Recession. In any case, regardless of its source, a sense of confidence is essential to our prosperity. Of course, this ultimately must be grounded in individual action and accountability, but we are long overdue for a return of the optimism and collective pride that remain at the heart of the American success story. For nearly 170 years, we have built our business around bringing certainty and security to our customers in good times and bad. No one can predict the future, but we ve made it our business to plan and prepare for whatever it may hold. We recognize that no matter what is happening in the world around us, life goes on. And we are here to help people at every stage: life insurance to protect against the unexpected; mutual funds and annuities to help pay for college tuition, or prepare for a comfortable retirement; and long-term care insurance to help pay for nursing care in the event of a disability or chronic illness. Our undisputed financial strength anchors our ability to live up to the guarantees and promises we make. In the years since the onset of the financial crisis, New York Life has consistently delivered strong results despite unparalleled economic headwinds. And I m pleased to report the momentum continued in The details of our financial performance can be found on pages 7 9 in this Report and online at By any measure, the past year is one we feel very good about. Sales were up across the board; operating earnings, or profits, grew by 11 percent; and surplus, the money over and above the reserves we set aside to pay the benefits we offer, stood at more than $21 billion* at year-end an all-time record. Contributions to our success are coming from every corner of the company. The heart of our organization has been, and always will be, our core life insurance operation and our team of career * Includes Asset Valuation Reserve; see Glossary of Terms on page 28. New York Life Insurance Company 2013 Annual Report 3

5 Agents who have led the United States in MDRT membership for 59 consecutive years. We are also the #1 direct marketer of life insurance in America,** as well as one of the premier providers of life insurance to large professional associations. And our subsidiary, Seguros Monterrey New York Life, remains one of the top life insurance companies in Mexico. The size and strength of our insurance business is the reason why, out of roughly 900 companies selling life insurance in the United States today, not one has a higher rating for financial strength from A.M. Best, Fitch, Moody s, or Standard & Poor s than we do. While our combined insurance businesses form the foundation of the company, no other area of the organization is growing more rapidly than our investments operations. This is not happening by chance. During the past few years, we have made a concerted effort to extend beyond our insurance foundation by growing our mutual funds and asset management businesses. The array of products we offer provides our customers with additional solutions for their financial planning needs. And we re seeing great results. We remain the predominant provider of guaranteed lifetime income annuities in the United States. And mutual fund sales, which have been growing steadily, nearly doubled this year, reflecting both strong flows across the MainStay Funds family and the addition of a few new funds to our portfolio. The contributions from our investments operations ultimately generate additional surplus and enhance our financial strength and that is something that benefits all our policyholders. As a mutual life insurer, we have no shareholders. Policyholders are our priority. And every dollar we create within our organization is put to use with them in mind, which includes our annual dividend payout for eligible policies. As I ve discussed in this Report for the past several years, no economic factor has a greater effect on life insurance companies than the level of interest rates. It affects our dividends, crediting rates, and earnings. While rates have been slowly rising this past year, they still remain well below their long-term average. Regardless of the economic climate, when it comes to dividends, we always aim to provide the largest payout we can while ensuring our continued financial strength that backs the benefits we ve promised. Upon reviewing our operating performance this past year, and taking into consideration the additional capital we generated on the company s equity investments, our Board of Directors agreed to approve a raise to the dividend scale again this year. The total payout for 2014 will exceed $1.4 billion an increase of more than $100 million over last year. And I m very proud to say that we are the only major Million Dollar Round Table, the premier association of financial professionals, is an organization that recognizes excellence in the life insurance industry. ** Source: LIMRA International, 3rd quarter YTD 2013 survey results and other publicly available sources. Source, Third Party Ratings Reports: A.M. Best A++ (as of 6/4/2013), Fitch Ratings AAA (as of 8/29/2013), Moody s Aaa (as of 1/10/2014), Standard & Poor s AA+ (as of 6/18/2013). Source: LIMRA International, 3rd quarter YTD 2013 survey results. Guaranteed Lifetime Income products are issued by New York Life Insurance and Annuity Corporation, a wholly owned subsidiary of New York Life Insurance Company. Guarantees are backed by the claims-paying ability of the issuer. New York Life Insurance Company 2013 Annual Report 4

6 mutual U.S. life insurance company to increase both its dividend scale and its total dividend payout in both 2013 and 2014.*** From an operational and strategic standpoint, we could point to any number of factors as reasons why New York Life remains at the top of the life insurance industry. But in reality, strategies, products, marketing, and other business operations can be copied or replicated by others. What I believe truly separates us from others is our perspective on, and approach to, the business we re in. That perspective and approach begins at the top with the members of the New York Life Board of Directors. In 2013, we regretfully bade farewell to Mr. Conrad K. Harper after more than 15 years of exemplary service to New York Life. Conrad began his career as an attorney for the NAACP Legal Defense Fund, where he successfully argued a number of landmark civil rights cases. He later became a partner at Simpson, Thacher & Bartlett, and remained Of Counsel to that firm following his retirement in His thoughtful insights and commitment to our customers further strengthened the high standards we hold for our entire organization. At the same time, we were pleased to also welcome a new Director this past year: Ms. Michele G. Buck, president, North America of The Hershey Company. I know I speak for the other members in saying that Michele s wealth of marketing and management experience makes her a valuable addition to our Board. The members of our Board and every Agent and employee who works at the company share the same goal: ensuring that New York Life will be here to pay the benefit we promise whenever it comes due. That moment is, and always will be, the essence of what our business is all about. And when you visit newyorklife.com, you will find just a small sampling of stories that play out every day in the words of our customers and Agents. I want to personally thank them for taking the time to share their experiences, and, in turn, allowing us to share them with others. We hope our performance in 2013 makes people feel confident about doing business with New York Life. What we do each year isn t about having a bigger slice of the pie in the short term; it is always about growing the size of the pie for all our customers in the years ahead. Our job every single day is to help them remain optimistic and feel good about their future and the future of those they care about most. Sincerely, Ted Mathas Chairman of the Board, President and Chief Executive Officer *** Based on publicly available information on New York Life s peer mutual U.S. life insurers. This peer group is comprised of major mutual U.S. insurance companies for whom life insurance is the primary focus and primary line of business, and whose dividend information is made publicly available. New York Life Insurance Company 2013 Annual Report 5

7 As a mutual life insurer, we see New York Life as a notjust-for-profit company. New York Life Insurance Company 2013 Annual Report 6

8 Of course, like any business, we need profits or earnings to keep the organization strong and growing. But earnings are not our true bottom line. Unlike publicly traded companies that distribute earnings to their shareholders, we put that money to work on your behalf. This is the 160 th consecutive year that we have paid a dividend to eligible policyholders. Policyholder Benefits and Dividends Year In $ Billions Individual Life Insurance in Force, Assets Under Management Through economic ups and downs, life insurance is a product that has withstood the test of time; it continues to have a place in virtually every prudent financial plan. For nearly 170 years, life insurance also has been the foundation of New York Life s business. And as a mutual company with no shareholders, our primary objective is to invest and manage the dollars we re paid to generate strong, stable returns to back the promises we make to those who have placed their trust in us. The consistent growth in our individual life insurance in force means more people like you are turning to us each year for financial security and peace of mind. And the growth in our assets under management is primarily driven by the fact that, in the wake of the financial crisis, an increasing number of retail and institutional customers believe in our long-term investment management philosophy and want our assistance in growing their assets, regardless of what is happening in the world around us. Individual Life Insurance in Force Assets Under Management Year In $ Billions Year In $ Billions For definitions of the company's performance measures, see Glossary of Terms on page New York Life Insurance Company 2013 Annual Report 7

9 Operating Earnings, Surplus and Asset Valuation Reserve Our growth in insurance in force and assets under management along with the investment returns we generate drive our strong earnings and the growth in surplus and asset valuation reserve. Surplus is an additional source of capital above and beyond the money already set aside to pay each and every benefit we ve promised. For definitions of the company's performance measures, see Glossary of Terms on page 28. Operating Earnings Year In $ Billions Surplus and Asset Valuation Reserve Year In $ Billions Policyholders Dividends Surplus Growth Financial Strength For policyholders, surplus is the most important financial measure it is the primary indicator of the strength of your life insurer. Surplus in a mutual company can be used in one of three ways, all of which ultimately benefit our current and future customers: 1) to further enhance our financial strength and ensure we can meet our obligations, regardless of what the future may hold; 2) to further grow our various business operations; or 3) to be distributed as a dividend to the owners of eligible policies. the capital needed to keep operations running with some even requiring a taxpayer-funded bailout. At New York Life, our surplus cushioned the impact on us and helped preserve the company s top ratings for financial strength. And in the five years that followed, we initiated some important strategic decisions that enabled us to simultaneously grow on all three sides of the surplus triangle. For policyholders, surplus is the most important financial measure it is the primary indicator of the strength of your life insurer. When the financial crisis hit in 2008, many companies struggled to come up with The result? Since 2009, surplus has grown over $6 billion. New York Life continues to grow in size and reach. And in 2013 and 2014, we have been the only major mutual U.S. life insurance company to increase both its dividend scale and total dividend payout to eligible policyholders. New York Life Insurance Company 2013 Annual Report 8

10 Insurance Sales, Annuity Sales, Mutual Fund Sales Whether your goal is protecting your family or business against the unexpected, paying for college, or building and securing a comfortable retirement, you should never feel you have to go it alone when it comes to taking control of your future. Despite the recent economic challenges, our track record of strong insurance and investments sales each year not only continues to fuel the company s growth it s a sign that more people are following your lead and turning to New York Life for assistance. And no matter what products you may already own, our Agents and advisors stand ready with the solutions you need to help you achieve your objectives at every stage of your life. Insurance Sales Annuity Sales Mutual Fund Sales Year In $ Millions Year In $ Billions Year In $ Billions , , , , , Guaranteed Income Annuities All Other Annuities For definitions of the company's performance measures, see Glossary of Terms on page 28. New York Life Insurance Company 2013 Annual Report 9

11 2013 Investment Review New York Life Insurance Company 2013 Annual Report 10

12 The following investment review presents information for New York Life Insurance Company and its domestic insurance subsidiaries, New York Life Insurance and Annuity Corporation and NYLIFE Insurance Company of Arizona. The assets of these entities represent most of the invested assets of the company. The cash and invested asset information below is presented on a statutory accounting basis. * Sound principles and strict standards guide New York Life s management of its investment portfolio. This includes conducting our own traditional, bottom-up research on individual investments and the underwriting of credit risk, rather than relying on third-party credit ratings. The company maintains strict diversification standards by asset classes, issuers, and sectors, and continues to hold ample liquidity in its investment portfolio. * Includes New York Life s investments in its non-insurance and international insurance affiliates. Cash and Invested Assets As of December 31, 2013, New York Life and its domestic insurance subsidiaries had cash and invested assets of $187.8 billion and maintained a well-diversified investment portfolio. Cash and Invested Assets 1 (In $ Millions) December 31, 2013 December 31, 2012 Public Corporate Bonds and Loans Private Corporate Bonds and Loans U.S. Gov t and Agency Securities Non-Agency Commercial Mortgage-Backed Securities Non-Agency Asset-Backed Securities Non-Agency Residential Mortgage-Backed Securities $ 50,962 36,923 30,575 8,900 8,035 4,069 27% 20% 16% 5% 4% 2% $ 48,703 33,894 30,197 8,858 7,619 4,997 27% 19% 17% 5% 4% 3% Subtotal Fixed Income $ 139,464 74% $ 134,268 75% Mortgage Loans Equity and Other Interests 2 Policy Loans Cash and Short-Term Investments 3 Derivatives $ 20,458 13,436 9,491 3,961 1,006 11% 7% 5% 2% 1% $ 18,810 12,266 9,277 4,430 1,057 10% 7% 5% 2% 1% Total Cash and Invested Assets $ 187, % $ 180, % 1 Includes $80,149 million and $75,596 million of assets related to New York Life Insurance and Annuity Corporation for 2013 and 2012, respectively. 2 Includes New York Life s investments in its non-insurance and international insurance affiliates. 3 Includes cash primarily received on financing transactions of $2,043 million and $2,142 million for 2013 and 2012, respectively. New York Life Insurance Company 2013 Annual Report 11

13 Fixed Income Assets The fixed income portfolio continues to be dominated by high-quality investments, with 93 percent being investment grade. The public and private corporate bond and loan portfolio remains well diversified across the broad industry spectrum and is comprised of securities issued by more than 2,290 individual issuers. The fixed income portfolio is managed to limit exposure to individual issuers according to credit quality and other factors. No single corporate exposure was greater than $320 million. The portfolio s 10 largest holdings by issuer represented 1.4 percent of cash and invested assets. Diversification of Corporate Bonds and Loans* (In $ Millions) Utilities Consumer Products Healthcare Energy Banking/Brokerage Conglomerates/Diversified Mfg. Municipal Real Estate Investment Trusts Retail Technology Transportation Chemicals Cable & Media Aerospace & Defense Gas Pipelines Gaming/Lodging/Leisure Other (No single category exceeds $2.2 billion) Total December 31, 2013 $ 12,973 8,816 6,001 5,294 5,027 4,551 4,285 4,035 3,102 2,874 2,815 2,761 2,710 2,638 2,623 2,250 15,130 15% 10% 7% 6% 6% 5% 5% 5% 4% 3% 3% 3% 3% 3% 3% 3% 17% $ 87, % Numbers may not add up due to rounding. *Includes $40,792 million of assets related to New York Life Insurance and Annuity Corporation. Fixed Income by Quality* (In $ Millions) NAIC Rating Approximate Rating Agency Equivalent Quality December 31, 2013 December 31, 2012 NAIC 1 NAIC 2 AAA to A- BBB+ to BBB- Highest Quality High Quality $ 89,257 39,879 64% 29% $ 89,889 33,962 67% 25% Investment Grade $ 129,136 93% $ 123,851 92% NAIC 3 NAIC 4 NAIC 5 NAIC 6 BB+ to BB- B+ to B- CCC+ to CCC- CC to D Medium Quality Low Quality Lower Quality In or Near Default $ 5,500 3,382 1, % 2% 1% 0% $ 5,414 3,690 1, % 3% 1% 0% Below Investment Grade $ 10,328 7% $ 10,417 8% Total Fixed Income $ 139, % $ 134, % *Includes $67,381 million and $63,806 million of assets related to New York Life Insurance and Annuity Corporation for 2013 and 2012, respectively. New York Life Insurance Company 2013 Annual Report 12

14 Non-Agency Commercial Mortgage-Backed Securities As of year-end 2013, New York Life and its domestic insurance subsidiaries owned $8.9 billion in non-agency commercial mortgage-backed securities, representing five percent of cash and invested assets. The majority of these securities are of the highest quality, as 99 percent were classified as NAIC 1. Notwithstanding the ratings, these securities are selected by our real estate investment professionals based on the quality of the underlying mortgage loans. Non-Agency Commercial Mortgage-Backed Securities by NAIC Rating Category* (In $ Millions) NAIC Rating Approximate Rating Agency Equivalent Quality December 31, 2013 NAIC 1 NAIC 2 NAIC 3 6 AAA to A- BBB+ to BBB- BB+ to D Highest Quality High Quality Medium Quality and Below $ 8, % 0% 1% Total $ 8, % *Includes $4,593 million of assets related to New York Life Insurance and Annuity Corporation. Non-Agency Asset-Backed Securities As of year-end 2013, New York Life and its domestic insurance subsidiaries owned $8.0 billion in non-agency asset-backed securities, representing four percent of cash and invested assets. Approximately 89 percent of these securities were rated NAIC 1 and are collateralized by a broad range of collateral types. These securities are diversified by issuance year. Non-Agency Asset-Backed Securities by NAIC Rating Category* (In $ Millions) NAIC Rating Approximate Rating Agency Equivalent Quality December 31, 2013 NAIC 1 NAIC 2 NAIC 3 6 AAA to A- BBB+ to BBB- BB+ to D Highest Quality High Quality Medium Quality and Below $ 7, % 4% 7% Total $ 8, % *Includes $4,298 million of assets related to New York Life Insurance and Annuity Corporation. New York Life Insurance Company 2013 Annual Report 13

15 Non-Agency Residential Mortgage-Backed Securities As of year-end 2013, New York Life and its domestic insurance subsidiaries owned $4.1 billion in non-agency residential mortgage backed securities, representing two percent of cash and invested assets. The mortgage loans underlying these securities were held predominantly by prime borrowers. The majority of these securities were classified as NAIC 1 and 88 percent are collateralized by fixed-rate mortgage loans. Non-Agency Residential Mortgage-Backed Securities by NAIC Rating Category* (In $ Millions) NAIC Rating Approximate Rating Agency Equivalent Quality December 31, 2013 NAIC 1 NAIC 2 NAIC 3 6 AAA to A- BBB+ to BBB- BB+ to D Highest Quality High Quality Medium Quality and Below $ 2, % 10% 20% Total $ 4, % *Includes $2,015 million of assets related to New York Life Insurance and Annuity Corporation. Mortgage Loans The $20.5 billion mortgage loans portfolio consists of $20.3 billion of loans on commercial real estate properties and $0.2 billion of loans on single-family residential properties as of year-end Commercial Mortgage Loans The company s mortgage loan investment style emphasizes conservative underwriting and a focus on high-quality properties. The commercial mortgage loan portfolio is broadly diversified by both property type and geographic location. The company employs a proactive portfolio monitoring program with a goal of early identification of potential problems. The commercial mortgage loan portfolio has historically performed very well, and the company believes that the portfolio is strongly positioned in the current economic environment. As of December 31, 2013, none of the commercial mortgage loans were delinquent, and there were no foreclosures during the year. Single-Family Residential Loans In addition to the non-agency residential mortgage-backed securities highlighted earlier, New York Life and its domestic insurance subsidiaries owned $0.2 billion in fixed-rate residential loans. Includes $160 million of assets related to New York Life Insurance and Annuity Corporation. Commercial Mortgage Loans by Geographic Region* (In $ Millions) December 31, 2013 Southeast Middle Atlantic Pacific North Central Other South Central Total Commercial Mortgage Loans by Property Type* (In $ Millions) December 31, 2013 Office Buildings Multi-Family Retail Industrial Other Commercial Property Total $ 5,411 4,963 4,576 2,511 1,485 1,331 $ 20, % $ 6,513 5,701 4,941 2, % 24% 23% 12% 7% 7% 32% 28% 24% 14% 2% $ 20, % * Includes $9,144 million of assets related to New York Life Insurance and Annuity Corporation. New York Life Insurance Company 2013 Annual Report 14

16 Equity and Other Interests New York Life and its domestic insurance subsidiaries had $13.4 billion of assets classified as equity and other interests as of year-end Of this amount, $3.7 billion represented limited partnerships and other interests invested in diverse sectors of the economy. Private equity investments of $3.7 billion primarily represent leveraged buyout funds in a range of vintage years that are managed by various third-party private equity groups. Allocations to private equity provide an opportunity to exceed the returns of public equities over the long term. The public equity portfolio of $2.6 billion consists primarily of high dividend yielding stocks diversified across various companies, sectors, and regions. Investments in affiliates consist of the company s investment management and insurance operating subsidiaries. Real estate investments of $1.4 billion represent direct and indirect wholly owned properties. Equity and Other Interests* (In $ Millions) December 31, 2013 Various Limited Partnerships and Other Interests Private Equity Public Equity Investments in Affiliates Real Estate Convertible Preferred Securities Total $ 3,704 3,691 2,604 2,007 1, % 27% 19% 15% 10% 1% $ 13, % * Includes $1,371 million of assets related to New York Life Insurance and Annuity Corporation. Derivatives As of year-end 2013, New York Life and its domestic insurance subsidiaries had certain outstanding derivative positions carried as assets of $1,006 million. Offsetting these were derivative liabilities of $789 million for a net asset of $217 million. The derivative transactions are entered into to meet the hedging needs of the company or to replicate permissible investments. Derivatives include the purchase of cross currency swaps, forward agreements, and interest rate swaps and options. Cross currency swaps and forward agreements are typically entered into to convert assets or liabilities of the company that are designated in a foreign currency into U.S. dollars. Interest rate swaps are used to lock in yields of future investments, and to convert fixed-rate investments to floating-rate investments in support of floating-rate liabilities. Interest rate options are used to protect against a spike in interest rates. New York Life and its domestic insurance subsidiaries control over-the-counter derivative counterparty credit risk through the establishment of collateral support agreements. These agreements require the daily posting of cash collateral by the derivative counterparties if and when the market value of derivative positions with the counterparty exceeds a predetermined dollar limit, which in most cases is zero. These dollar limits are intentionally set at a low threshold. Credit exposure to each derivative counterparty is combined with other direct credit risk to the same counterparty and managed against prudent credit risk limits. To further enhance the safety of derivatives strategies, and as mandated under the Dodd Frank law, the counterparty for all new interest rate swaps is a central clearinghouse. Asset/Liability and Investment Risk Management The long-term promises New York Life makes to policyholders are backed by sound asset/liability management. Because the company s liabilities are generally fixed income-like in nature, a well diversified fixed income portfolio forms the foundation of the investment portfolio. Although the General Account assets collectively support all of our product lines, New York Life s approach to asset/liability management is founded on the segregation of assets supporting various products offered to clients. These portfolios are specifically tailored to fit the unique interest rate sensitivities and cash flow characteristics associated with each of these product segments. In addition, New York Life takes a comprehensive enterprise view, taking measures to mitigate overall risk exposures at the corporate level. New York Life has established policies and procedures at the corporate and business unit levels to manage risk exposures. The Investment Committee of the Board of Directors provides oversight over New York Life s investment activity, including review of various risk factors and establishment of investment policies. New York Life supplements our financial modeling with comprehensive stress testing, which is intended to assess the company s financial resilience and sustainability of our business model to extreme events. The stress testing results lead to the implementation of risk mitigation strategies and contingency planning, both key to ensuring the long-term financial strength of the company. New York Life Insurance Company 2013 Annual Report 15

17 Consolidated Statutory Statement of Financial Position Condensed Statutory Statement of Financial Position December 31, 2013 (In $ Millions) New York Life Insurance New York Life Insurance Company 1 and Annuity Corporation 1 Consolidated 2 Assets Cash and invested assets 3 Investment income due and accrued Other assets Separate account assets $ 114,329 1,287 12,264 11,318 $ 80, ,384 31,809 $ 187,816 1,893 3,913 43,127 Total Assets $ 139,198 $ 119,946 $ 236,749 Liabilities Policy benefit reserves Dividends payable to policyholders Other liabilities Separate account liabilities $ 99,335 1,467 6,824 11,300 $ 67,983 13,193 31,154 $ 164,361 1,467 8,041 41,739 Total Liabilities (excluding Asset Valuation Reserves) $ 118,926 $ 112,330 $ 215,608 Surplus and Asset Valuation Reserves Asset valuation reserves Surplus $ 2,418 17,854 $ 868 6,748 $ 3,287 17,854 Total Surplus and Asset Valuation Reserves $ 20,272 $ 7,616 $ 21,141 Total Liabilities and Surplus $ 139,198 $ 119,946 $ 236,749 1 Policyholders may request a copy of the statutory financial statements audited by an independent accounting firm by contacting the Secretary of the parent, New York Life Insurance Company, 51 Madison Avenue, New York, New York The individual company audited financial statements are also available on our website ( and from the New York State Department of Financial Services. 2 The unaudited condensed consolidated statutory statement of financial position compiled by management reflects the consolidation of the audited statutory statement of financial position of New York Life Insurance Company (NYLIC) with its domestic wholly owned life insurance subsidiaries, New York Life Insurance and Annuity Corporation (NYLIAC) and NYLIFE Insurance Company of Arizona (NYLAZ). The consolidated statutory statement of financial position has been derived from the individual separate audited statutory statements of financial position of NYLIC, NYLIAC, and NYLAZ, which were prepared in accordance with accounting practices prescribed or permitted by the New York State Department of Financial Services, or the Delaware or Arizona Department of Insurance (statutory basis of accounting). NYLIC s cash and invested assets and surplus include the surplus of its domestic wholly owned life insurance subsidiaries, which, along with all other significant intercompany transactions (primarily in other assets and other liabilities), have been eliminated in consolidation. As a result, amounts in the table above may not add across. NYLAZ is not authorized in New York or Maine, and does not conduct insurance business in New York or Maine. The NYLAZ audited statutory financial statements are available on our website or from the Arizona Department of Insurance. 3 For more detail on cash and invested assets, see 2013 Investment Review beginning on page 10. New York Life Insurance Company 2013 Annual Report 16

18 December 31, 2012 (In $ Millions) New York Life Insurance New York Life Insurance Company 1 and Annuity Corporation 1 Consolidated 2 Assets Cash and invested assets 3 Investment income due and accrued Other assets Separate account assets $ 110,819 1,126 11,784 10,998 $ 75, ,075 26,246 $ 180,108 1,720 3,652 37,244 Total Assets $ 134,727 $ 109,510 $ 222,724 Liabilities Policy benefit reserves Dividends payable to policyholders Other liabilities Separate account liabilities $ 96,475 1,340 7,072 10,992 $ 63,766 12,892 25,688 $ 157,425 1,340 8,240 36,106 Total Liabilities (excluding Asset Valuation Reserves) $ 115,879 $ 102,346 $ 203,111 Surplus and Asset Valuation Reserves Asset valuation reserves Surplus $ 2,279 16,569 $ 765 6,399 $ 3,044 16,569 Total Surplus and Asset Valuation Reserves $ 18,848 $ 7,164 $ 19,613 Total Liabilities and Surplus $ 134,727 $ 109,510 $ 222,724 New York Life Insurance Company 2013 Annual Report 17

19 Management s Discussion of Financial Responsibility Management is responsible for the preparation and integrity of the financial information presented in the Annual Report. The company has complied with the NAIC Model Audit Rule and although we are not an SEC registrant, we have elected to comply voluntarily with Section 302 of the Sarbanes-Oxley Act of 2002, which identifies management s responsibilities over its financial statements and requires management to certify as to the integrity of the financial statements and the effectiveness of internal controls. Our statement to that effect can be viewed on the company s website, The financial information contained in this Report has been derived from financial statements that have been audited by the company s independent auditors, in accordance with auditing standards generally accepted in the United States of America. We support strong and effective corporate governance from our Board of Directors, continuously review our business results and strategic choices, and focus on financial stewardship. The Audit Committee of the Board of Directors of New York Life Insurance Company, which is comprised exclusively of directors who are not officers or employees of the company, meets regularly with management, the internal auditors, and the independent auditors to provide oversight of management s fulfillment of its responsibilities for accounting controls and preparation of financial statements. Theodore A. Mathas Chairman of the Board, President and Chief Executive Officer April 1, 2014 John T. Fleurant Executive Vice President and Chief Financial Officer April 1, 2014 New York Life Insurance Company 2013 Annual Report 18

20 You ve got dreams and responsibilities. We re here for both. As families grow, careers take unexpected turns, and priorities change, it s nice to know that you ve got a partner who s here to help. Meeting with your Agent for an annual review is a great opportunity to determine if you still have the best strategy in place or if you could benefit from an update to your protection or overall financial strategy. All the way from your first job to welcoming your great grandchildren, wherever life takes you, we ll be by your side with solutions and guidance to help you keep the good in your life going. Starting out. Getting started on the right foot doesn t have to be complicated or expensive. There are insurance, annuity, and investment options that can help you lay the foundation of a smart financial strategy no matter what your goal or budget may be. Growing along the way. As careers mature and families get bigger, priorities often change and so do your protection and financial needs. Your Agent can help you reassess your approach and determine the best way forward, like converting a term policy or purchasing an annuity. Whether you want to put four kids through college, pay off your mortgage, or retire early, we can help you find the right solution to turn your goals into realities. Enjoying what you ve accomplished. Longer, healthier lives mean more time to enjoy a vibrant and active retirement. So whether you re embarking on an exciting new chapter or just taking some well-deserved time for yourself, you can rest assured that New York Life will be there, just as we ve always been. Leaving a legacy to build on. And when you re ready to think about what you ll pass on to your loved ones, plan for your long-term care needs, or consider leaving your mark with a charitable gift to a worthy cause or favorite organization, your Agent can give you proper guidance to help you make the best decision for your situation. New York Life Insurance Company 2013 Annual Report 19

21 It comes down to one word: trust. New York Life Insurance Company 2013 Annual Report 20

22 When you re preparing for the future, it s important to know you re working with people who have a proven record of being there when they re needed most. New York Life s guiding principles, strong surplus, commitment to mutuality, and career Agents have served policyholders well for nearly 170 years. Fulfilling our obligations to you. Our success is built on relationships that last a lifetime. That s why we are always looking ahead and making decisions and investments that are built for long-term performance rather than short-term gain. Financial strength, integrity, humanity: timeless principles for today and tomorrow. Strength and agility: nice to have in your corner. Agents who are here to help. Working with a New York Life Agent gives you the opportunity to discuss your needs and concerns with someone who values you as a person, not just a phone call or policy/account number. Our Agents build relationships, often spanning decades and even generations. They re more than just highly trained financial professionals; they re local business leaders, volunteers, coaches, and neighbors, just like you. It s this connection to their communities that is the key to their success. Mutuality makes all the difference. As a mutual company, New York Life issues no stock, and is not beholden to stockholders or outside investors. Mutuality means that the only constituency we serve is you. This gives us the freedom to focus on the longstanding needs of our policyholders rather than the often shortsighted demands of Wall Street. Another feature of mutuality is our ability to pay dividends. In 2014, our dividend payout to participating policyholders will rise by 8% for the second consecutive year a $108 million increase over the previous year, for a total payout of $1.43 billion. For 160 consecutive years, New York Life has paid dividends to participating policyholders. Taking responsibility for our communities. Whether it s providing relief to the victims of Hurricane Sandy or helping grieving children recover, few things are more important than giving financial support or volunteer time to make our communities stronger and better places to live. Since its inception, the New York Life Foundation has awarded nearly $185 million to charities and causes that share our commitment to building a better tomorrow. Together, the efforts of the Foundation and our Corporate Responsibility department are centered on a simple theme: making good happen....the efforts are centered on a simple theme: making good happen. New York Life Insurance Company 2013 Annual Report 21

23 Executive Management Committee As of April 1, 2014 Theodore A. Mathas CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE OFFICER As CEO, Ted Mathas is responsible for managing all aspects of the company, including all domestic and international business operations. In addition, as chairman he has overall responsibility for matters pertaining to the Board of Directors. John Y. Kim VICE CHAIRMAN, PRESIDENT OF THE INVESTMENTS GROUP, AND CHIEF INVESTMENT OFFICER John Kim is responsible for all divisions and subsidiaries of the Investments Group, which includes the investment management, annuities, and retirement plan recordkeeping businesses. He also oversees New York Life s Enterprise Technology division. Christopher O. Blunt EXECUTIVE VICE PRESIDENT AND CO-PRESIDENT OF THE INSURANCE AND AGENCY GROUP Chris Blunt shares oversight of the company s Insurance and Agency Group, the largest business division of New York Life. He is responsible for strategic direction, marketing, finance, service, and technology functions for life and long-term care insurance products, for direct marketing and Group Membership Association Business, as well as the company s insurance operation in Mexico. Mark W. Pfaff EXECUTIVE VICE PRESIDENT AND CO-PRESIDENT OF THE INSURANCE AND AGENCY GROUP Mark Pfaff shares oversight of the company s Insurance and Agency Group, the largest business division of New York Life. He is responsible for all aspects of the company s Career Agency distribution channel, which includes recruiting, training and development, and management of all of New York Life s field managers, Agents, and general offices across the United States. Frank M. Boccio EXECUTIVE VICE PRESIDENT AND CHIEF ADMINISTRATIVE OFFICER Frank Boccio oversees an array of corporate-wide shared services, including internal audit, procurement services, insurance management, records management, business resiliency, and security. He also oversees the company s charitable giving through its corporate responsibility programs and the New York Life Foundation. Sheila K. Davidson EXECUTIVE VICE PRESIDENT, CHIEF LEGAL OFFICER, AND GENERAL COUNSEL Sheila Davidson oversees all of the company s legal, compliance, corporate governance, and public relations operations. New York Life Insurance Company 2013 Annual Report 22

24 John T. Fleurant EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER John Fleurant oversees the company s finance functions, including accounting policy, financial reporting, tax and treasury, risk management, and actuarial functions. George Nichols III SENIOR VICE PRESIDENT IN CHARGE OF THE OFFICE OF GOVERNMENTAL AFFAIRS George Nichols oversees New York Life s Office of Governmental Affairs, which monitors state, federal, and international legislative and regulatory activity on behalf of the company. He is responsible for assisting senior management in developing New York Life s position and strategy on public policy issues and in communicating with key policymakers and regulators. Barry A. Schub SENIOR VICE PRESIDENT Barry Schub oversees the company's strategy, communications, and human resources operations for New York Life. His responsibilities include overall corporate strategy; brand management and corporate marketing, including corporate communications and Internet sites; and all aspects of human resources. Joel M. Steinberg SENIOR VICE PRESIDENT, CHIEF RISK OFFICER, AND CHIEF ACTUARY Joel Steinberg oversees the risk management activities across the company. He is responsible for all actuarial functions, including economic capital, product pricing, financial reporting, and embedded value. Susan A. Thrope SENIOR VICE PRESIDENT, DEPUTY GENERAL COUNSEL, AND SECRETARY Susan Thrope is responsible for the Office of the Corporate Secretary, which assists New York Life s chairman and CEO in all matters pertaining to the Board of Directors, its Standing Committees, and the Executive Management Committee, including the development and administration of policies, procedures, and legal advice with respect to corporate governance matters. New York Life Insurance Company 2013 Annual Report 23

25 Board of Directors As of April 1, 2014 New York Life Insurance Company 2013 Annual Report 24

26 Betty C. Alewine Elected as a director in 1998, she is the former president and chief executive officer of COMSAT Corporation. Mrs. Alewine is a member of the Board s Compensation and Governance Committees. Michele G. Buck Elected as a director in 2013, she is the president, North America of The Hershey Company. Ms. Buck is a member of the Board s Insurance & Operations Committee. Ralph de la Vega Elected as a director in 2009, he is the president and chief executive officer of AT&T Mobility. Mr. de la Vega chairs the Board s Audit Committee and is a member of the Insurance & Operations and Investment Committees. Mark L. Feidler Elected as a director in 2006, he is a founding partner in MSouth Equity Partners and a former president and chief operating officer of BellSouth Corporation. Mr. Feidler chairs the Board s Governance Committee and is a member of the Audit, Compensation, and Investment Committees. He currently serves as the Board s lead director. Kent B. Foster Elected as a director in 1995, he is the former chairman and chief executive officer of Ingram Micro Inc. Mr. Foster is a member of the Board s Governance and Investment Committees. Christina A. Gold Elected as a director in 2001, she is the former president, chief executive officer, and director of The Western Union Company. Mrs. Gold is a member of the Board s Compensation and Governance Committees. Theodore A. Mathas Elected as a director in 2006, he is chairman of the board, president and chief executive officer of New York Life. S. Thomas Moser Elected as a director in 2008, he is a former vice chairman of KPMG, LLP, the U.S. member firm of KPMG International. Mr. Moser chairs the Board s Insurance & Operations Committee and is a member of the Audit Committee. Admiral Joseph W. Prueher Elected as a director in 2001, he is an Admiral U.S. Navy (Ret.), a former James R. Schlesinger Distinguished Professor at the University of Virginia, and former U.S. Ambassador to the People s Republic of China. Admiral Prueher is a member of the Board s Compensation, Governance, and Insurance & Operations Committees. Thomas C. Schievelbein Elected as a director in 2006, he is the chairman, president and chief executive officer of The Brink s Company. Mr. Schievelbein chairs the Board s Compensation Committee and is a member of the Audit and Governance Committees. Gerald B. Smith Elected as a director in 2012, he is the chairman and CEO of Smith, Graham & Co. Investment Advisors, L.P. Mr. Smith is a member of the Board s Audit and Investment Committees. William G. Walter Elected as a director in 2009, he is the former chairman, president and chief executive officer of FMC Corporation. Mr. Walter chairs the Board s Investment Committee and is a member of the Insurance & Operations Committee. Back, Left to Right: William G. Walter, Gerald B. Smith, Mark L. Feidler, Kent B. Foster, Thomas C. Schievelbein Front, Left to Right: Ralph de la Vega, Christina A. Gold, Admiral Joseph W. Prueher, Theodore A. Mathas, Betty C. Alewine, Michele G. Buck, S. Thomas Moser New York Life Insurance Company 2013 Annual Report 25

27 New York Life Insurance Company 2013 Annual Report 26

28 Offices of New York Life Its major subsidiaries and affiliates (as of April 1, 2014) NEW YORK LIFE INSURANCE COMPANY New York Life maintains more than 120 offices throughout the country, as well as a network of dedicated customer service centers. For questions about our products and services, please call your New York Life Agent or HOME OFFICE 51 Madison Avenue New York, NY HOME OFFICE WESTCHESTER CAMPUS 1 Rockwood Road Sleepy Hollow, NY LONG-TERM CARE INSURANCE DIVISION 6200 Bridgepoint Parkway Suite 400 Austin, TX NYL DIRECT 5505 West Cypress Street Tampa, FL GROUP MEMBERSHIP ASSOCIATION DIVISION 1 Rockwood Road Sleepy Hollow, NY (Disability Insurance Claims) (Life Insurance Claims) SEGUROS MONTERREY NEW YORK LIFE Headquarters Paseo de la Reforma #342 Col. Juárez México, D.F NEW YORK LIFE INVESTMENTS GROUP The retail products of New York Life Investments are available to consumers through New York Life s career Agents. For questions and further information, call your New York Life Agent or To contact one of the New York Life Investments Group companies directly, please refer to the list below. NYL INVESTORS LLC 51 Madison Avenue New York, NY NEW YORK LIFE INVESTMENT MANAGEMENT LLC 51 Madison Avenue New York, NY MAINSTAY INVESTMENTS Lackawanna Avenue Parsippany, NJ MAINSTAY NEW YORK LIFE RETIREMENT PLAN SERVICES plans.com 690 Canton Street Westwood, MA AUSBIL INVESTMENT MANAGEMENT LIMITED Level Kent Street Sydney NSW 2000 Australia CANDRIAM INVESTORS GROUP BELGIUM Avenue des Arts 58 B-1000 Bruxelles Belgium FRANCE 40, rue Washington Paris Cedex 08 France LUXEMBOURG 136, route d Arlon 1150 Luxembourg Luxembourg CORNERSTONE CAPITAL MANAGEMENT HOLDINGS LLC Avenue of the Americas 22nd Floor New York, NY CORNERSTONE CAPITAL MANAGEMENT LLC Minnesota Drive Suite 70 Minneapolis, MN GOLDPOINT PARTNERS LLC 51 Madison Avenue Suite 1600 New York, NY ICAP LLC West Wacker Drive Suite 2400 Chicago, IL MACKAY SHIELDS LLC Avenue of the Americas New York, NY MADISON CAPITAL FUNDING LLC 30 South Wacker Drive Suite 3700 Chicago, IL PRIVATE ADVISORS, LLC Riverfront Plaza West 901 East Byrd Street Richmond, VA MainStay Investments is a registered service mark and name under which New York Life Investment Management LLC does business. New York Life Insurance Company 2013 Annual Report 27