New York Life Insurance Company's New Surplus Notes

The outlook for the rating is negative. The existing financial strength, issuer credit and debt ratings of New York Life and its affiliates are unchanged.

The proceeds from the offering will be utilized by New York Life for general corporate purposes and will strengthen its statutory capital position. A.M. Best believes that the additional capital will serve to cover a large portion of both incurred and further potential investment losses in 2009. A.M. Best notes that this benefit is somewhat offset by the higher statutory capital ratio of surplus notes to adjusted capital and surplus (which increases to approximately 14 percent) and the additional costs to service the new debt securities will be a small drag on the group's earnings. However, New York Life's all-in, pro forma GAAP adjusted financial leverage of 11.5 percent (excluding other comprehensive income) is within A.M. Best's guidelines for the company's current ratings.

New York Life's ratings continue to reflect its leading market position in the U.S. life insurance industry, its highly productive career agency force and its superior risk-adjusted capitalization. The ratings also consider the company's favorable liability profile, significant earnings capacity and commitment to mutuality. New York Life's sizeable inforce block of traditional life insurance and stable, long-term cash flows are the foundation of the company's financial strength. A.M. Best also notes that New York Life possesses some statutory flexibility to maintain its capital position through the management of its policyholder dividend scale or through the use of reinsurance.

The negative outlook primarily recognizes the recent decline in New York Life's capitalization and financial results mainly due to losses on public and private equity investments and fixed income credit losses. For the last 18 months ending June 30, pre-tax (and before transfers to the interest maintenance reserve) net realized capital losses from sales and other than temporary impairments have totaled nearly $2.5 billion. A.M. Best notes that most of the losses experienced to date were related to equity investments. Losses on credit related investments approximately totaled only $1 billion. Additionally, A.M. Best notes the potential for additional material credit losses as New York Life maintains significant holdings in mortgage-backed and asset-backed securities along with exposure to below investment grade bonds and commercial mortgage loans. Although A.M. Best believes New York Life's investment management capabilities are strong, the fact that high-yield default rates have increased and commercial mortgage delinquencies are beginning to materialize across the industry are key concerns in the near to medium term.