OREANDA-NEWS. Fitch Ratings has affirmed New York Life Insurance Company's (New York Life) Insurer Financial Strength (IFS) rating at 'AAA'. Fitch has also affirmed all other ratings assigned to New York Life and certain subsidiaries. A full list of ratings follows at the end of this release. The Rating Outlook is Stable.

KEY RATING DRIVERS

Fitch's ratings reflect New York Life's leading market position in the U.S. individual life insurance market, extremely strong capitalization and conservative operating profile. Key competitive strengths include the company's strong brand recognition, well-established market position, effective career distribution system and its stable block of participating whole life insurance. The ratings also consider the company's above-average exposure to risky assets and ongoing challenges related to the protracted low interest rate environment.

New York Life is one of the top producers of whole life insurance and a leading writer of guaranteed income annuities. The company's market position is deepened by its loyal and productive career agency distribution channel, which Fitch believes reduces pricing pressure and anti-selection in competitive market environments.

New York Life further enhanced its scale with the acquisition of a 60% net interest in John Hancock Financial's (John Hancock) closed block of primarily participating whole life insurance policies, through reinsurance, in July 2015. Under a separate agreement, New York Life Investment Management sold New York Life Retirement Plan Services (RPS), excluding its stable value business, to John Hancock. Fitch views these transactions favorably and consistent with New York Life's strategy of growing its core life insurance business.

Fitch views New York Life's extremely strong capitalization as a fundamental strength to its rating, which is reflected by its NAIC risk-based capital (RBC) ratio of 549% and low operating leverage at 9.6x at year-end 2015. New York Life reported a 5% increase in total adjusted capital (TAC) during 2015 to $22.8 billion, which was primarily driven by unrealized investment gains including the gain related to the sale of RPS. Financial leverage, defined as surplus notes to TAC, remained low at 8.8% as of year-end 2015.

New York Life reported a statutory net income of $257 million in 2015 compared with $1.6 billion in 2014. The statutory accounting treatment of the company's acquisition of John Hancock's closed block adversely affected results in 2015. Realized investment losses totaling $382 million also contributed to the decline in profitability, along with strain related to new business growth.

Investment losses included energy-related impairments, which were not outsized relative to the industry. Fitch expects greater credit-related impairments in 2016 but expects losses to remain manageable, as New York Life's energy exposure is largely in line with the broader life insurance industry.

Key concerns include macroeconomic headwinds in the form of low interest rates, financial market volatility and a weak economic recovery in the U.S. and abroad. These conditions are expected to constrain New York Life's earnings in the near term and could have a material negative effect on earnings and capital in a severe scenario.

The ratings on New York Life Global Funding's funding agreement-backed note programs and related issues recognize that the trust obligations are secured by funding agreements issued by New York Life with cash flow structures that enable the trustees to pay the principal and interest on the notes. Thus, the note programs are dependent on New York Life's credit quality and are assigned a rating equal to the company's IFS rating.

RATING SENSITIVITIES

New York Life's IFS ratings are currently at Fitch's highest level. Key ratings triggers that could result in a downgrade include:

--A material weakening of operating company RBC ratio to below 425% through either declining asset quality or aggressive growth;
--A significant increase in near-term earnings volatility that is outside the historical average;
--Future increases in financial leverage to more than 15% on a sustained basis, or a reduction in GAAP-based, EBIT fixed-charge coverage below 6x;
--A decrease in the financial flexibility associated with the company's participating whole life business;
--A major acquisition that leads New York Life away from its core expertise;
--An unexpected shift in tax, regulatory or market dynamics that weakens New York Life's competitive strengths.

Fitch has affirmed the following ratings with a Stable Outlook:

New York Life Insurance Company
--IFS at 'AAA';
--Long-term Issuer Default Rating (IDR) at 'AA+';
--Short-term IDR at 'F1+';
--$1,000,000,000 5.875% surplus note due May 15, 2033 at 'AA';
--$1,000,000,000 6.75% surplus note due Nov. 15, 2039 at 'AA'.

New York Life Insurance and Annuity Corporation
--IFS at 'AAA'.

NYL Capital Corporation
--Commercial paper at 'F1+'.

New York Life Funding
--Program rating at 'AAA'.

New York Life Global Funding
--Program rating at 'AAA'.