New York Life Insurance Company, New York, announced in its third quarter earnings results, released Monday, that the company’s dividends to participating policyholders will increase by $100 million in 2013, an 8% rise over the company’s 2012 payout.
Mark Pfaff, New York Life’s executive vice president of agency operations, says the dividend distribution is in part a result of the “ongoing strength” of the company’s whole life portfolio, robust earnings, operating cost savings and growth of the company’s capital surplus, which now exceeds $19 billion.
Neal Strauss, vice president and senior credit officer of Moody’s Investors Services Inc., New York, adds that New York Life’s financial strength is mirrored in the company’s sterling credit rating: AAA, Moody’s highest rating.
“New York Life has a strong market position and brand, a diversified product portfolio, as well as capital adequacy and liquidity,” says Strauss. “Plus, the company has a very strong distribution field force.”
Pfaff says that New York Life’s career agency workforce, which numbers more than 12,000 agents, now has as a significant presence in the U.S.’ burgeoning cultural markets, including the African-American, Asian-American and Latino-American markets, The company invested “heavily” in these sectors three years ago, he notes, by recruiting and training agents to serve them.
New York Life recorded a 4% increase in agent recruitment over the same period in 2011, with 2,396 new agents hired through Sept. 30, 2012. In addition, 79% of the new agent hires in 2012 have been either women or individuals representing cultural markets.
“We’re now seeing the pay-off three years out,” he says Pfaff. “We’re on track to attain our sales goals in these markets.”
New York Life’s agents recorded an increase of 11% in sales of recurring premium whole life insurance over the third quarter of 2011; The company’s annuity sales also rose 16%, driven by income annuity sales, which are up 17%.
“This is our best year ever in terms of sales of income annuity products,” says Pfaff. “We should have well over $1 billion in sales through 2012. In respect to variable annuities, we expect to achieve an 8% to 9% growth in sales for all of 2012. And that’s on top of the 22% sales increase we recorded last year.”
Pfaff adds that New York Life’s “case rate” (or the number of sales) also grew 6.5% in the third quarter. For all of 2012, the case rate is expected to be up by 7-8% compared to 2011.
Sales of New York Life’s flagship product, whole life insurance, also are up 20% through the third quarter, says Pfaff.
Mutual fund sales in the third quarter increased 10% compared with the third quarter of 2011. The gain, New York Life reports, reflects the “consistent investment performance from the company’s investment boutiques in both income-oriented and capital appreciation funds.”
While touting New York’s robust third quarter results, Pfaff says that several macroeconomic factors remain concerns for the company moving into 2013. Among them: Congressional action to reign in the deficit by, among other possible measures, eliminating or watering down the tax-favored treatment of life insurance; the slow-growth economy; and continuing low interest rates. Moody’s Strauss believes, however, that if New York Life and other mutual life insurance companies can continue to maintain high dividend payments to policyholders, then the company should be able to insulate itself in some measure from low interest rates, which tend to depress insurers’ earnings on investments and the credit ratings they can offer policyholders on their products.
“Mutual insurers will be impacted less than other companies [by low interest rates] next year because dividends let them absorb some of the negative effect,” he says. “Though not immune to the interest rate environment, the mutual companies are more protected against low interest rates than publicly held insurers.”
Strauss notes also that, because mutual insurers aren’t beholden to stockholders they’re better able than publicly held companies to plan for the long-term and to resist steps that might only yield-short term gains.