New York: Even as the credit rating agency Standard & Poors (S&P) is downgrading ratings of several life insurers worldover, the New York-based New York Life Insurance Company got its financial strengths affirmed.

The affirmation comes despite the companys exposure to some of the most notable problem credits at the beginning of 2002. In the first six months of 2002, as a result of these credit issues and the decline in the equity markets, it suffered realised and unrealised losses of $625 million.

The company has been able to sustain these losses because of its diversification and extremely strong capital base, which even after such losses remained extremely strong as indicated by a risk-based capital ratio on S&Ps model of approximately 316 per cent.

A combination of several positive features extraordinary strong business position in individual life and annuities, growing track record of enhancing the productivity of its career agency force, continued improvement in individual sales, disciplined approach to asset and liability management and small but rapidly growing presence in the global markets satisfied S&P to affirm its double-A-plus counter-party credit and financial strength ratings on New York Life.

S&P also affirmed its ratings on life insurers affiliates with stable outlook. New York Life is one of the most respected names in the domestic life insurance business, says S&Ps credit analyst Thomas Upton.

The companys individual life and annuity sales were up 42 per cent and 6 per cent, respectively, in 2001 versus 2000, with the former resulting in about a 7 per cent market share nationally. In 2001, the company was the number one US life insurer based on new sales, as reported by Limra.

Slightly offsetting the positive factors mentioned above are the developing business position of New York Lifes investment management subsidiaries and the ongoing process of maintaining and enhancing the operational efficiencies that have been gained in recent years.

New York Life reorganised all its investment management business operations under a separate subsidiary to integrate all related functions within its group. S&P believes the insurer has begun to show cohesion in its strategy for this business, as demonstrated by total sales in 2001 of $16.4 billion, roughly 20 per cent above those of the previous year.

Growth in agency life sales increased by 18 per cent in year 2001. There has also been substantial growth in individual life and annuity business now being sold by alternative means, including distribution through banks, stockbrokers, and independent agents. Brokerage sales increased 125 per cent in 2001 and have continued to increase by 58 per cent for the first half of 2002 compared with the first half of 2001.

In addition, S&P believes New York Life has established a good foothold in several foreign markets, most prominently Mexico, with its international sales increasing 29 per cent from December 2001 to June 2002 and now account for 25 per cent of all life sales.

New York Life now projects breakeven for this business in 2002, which is one year ahead of its former schedule. S&P expects that New York Lifes total individual life insurance sales will be up over 15 per cent for 2002, while individual annuity sales will remain flat despite the volatile equity markets. Any losses in the asset portfolio through the remainder of 2002 will be modest, reflecting the overall high quality of that portfolio.