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September 2020 • Volume 121 • Issue 9 www.bestreview.com AM BEST’S MONTHLY INSURANCE MAGAZINE

New York Life Building

Past as Prologue

New York Life CEO Ted Mathas finds even amid the COVID-19 pandemic that the company’s 175-year history can be a guide to the future. Page 28 Life Insurance

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Key Points Timing: Storied New York Life had a lot to celebrate coming into 2020 as it prepared for its 175th anniversary year. Nature, and macroeconomics, had other plans.

Leadership: Chief Executive Ted Mathas now finds himself in the second crisis of his tenure. He came on board just in time for the 2008 financial crisis.

Ethos: Mathas likes to point to the institutional culture of New York Life, which he said focuses on preparation and long-term planning, as perhaps its greatest strength. Past as Prologue New York Life CEO Ted Mathas finds even amid the COVID-19 pandemic that the company’s 175-year history can be a guide to the future. by Terrence Dopp ne domestic civil war. Two has spent years running stress tests world wars. The 1918 Spanish of what it would face using the 1918 O flu. The Great epidemic as a basis. Depression. Even the “Having [run stress tests] “Having done Great Recession. doesn’t mean you can that doesn’t mean The New York predict when a pandemic you can predict Life Insurance would occur or that you when a pandemic Company has seen can actually think through would occur a lot happen in all of the issues. When we or that you can its 175 years, all actually think of which Chief look back at things like through all of the Executive Ted World War II and the 1918 issues,” Mathas, Mathas said has pandemic, they’re in our 53, said from his helped the company history but they’re also family’s vacation prepare for the in New York Life’s DNA home in New current COVID-19 and they help us navigate York state. “When pandemic that’s events like today.” we look back at brought large Ted Mathas things like World swaths of the global New York Life War II and the 1918 economy to a near pandemic, they’re standstill. In fact, he said the company in our history but they’re also in New York Life’s DNA and they help Terrence Dopp is a senior associate editor. He can be reached at [email protected]. us navigate events like today.”

BEST’S REVIEW • SEPTEMBER 2020 Life Insurance risk management strengths. risk operating performance, businessprofile and cited astrong balancesheet, aswell asits aaa Long-Term IssuerCredit grade. That rating New York Life andsubsidiaries, aswell as its Strength Ratingof assignedtoA++ (Superior) website. according available tofinancial reports onits yearthe prior andasurplusof$26.97billion, of $34.5billioncompared to$28.8billionin to thecompany. payments ineach ofthelastsixyears, according company todeclare arecord level ofsuch making itthesolemajorU.S. mutual life insurance $1.9 billionintotaldividendstopolicyholders, billion inassetsundermanagement. Itpaidout individual life insurance inplaceand$628 worthofin-forcemore than$1.06 trillion forbillion inoperating earnings theyear, had celebrate cominginto2020. Itnotched $2.39 Best LaidPlans experiment inhow todobusiness,” Mathassaid. the character oftheoldhouse. This isanongoing much easiertobuildanew house. Butyou don’t get buildinganewhouse versus house. It’s actually around soit’s 175years oflike renovating sort a your technology isnotoneofthem. We’ve been lot ofstrengths thatcomewiththat, butgenerally home from 97%work intheoffice.” Mathassaid. it—we have beenable topivot to98%work from to bemore we nimble did andflexible—and the lastfive toallow years thecompany’s systems in spent asignificant amountoftimeandmoney now,right hesaid. at home. with98%ofemployees puttinginhours flipped around thecountry.100-plus offices Today that’s New York anditsadditional Cityheadquarters 97% ofthecompany workforce was basedinits carrier: tothenovel Prior appearing, coronavirus Particularly challenging for insurance astoried Life finds itselfworking remotely thesedays. Like nearly allofcorporate America, New York In fact, AM BestinJuly theFinancial affirmed In 2019, NY Life totalrevenues reported New York Life andMathashadalotto “If you’re a175-year-old company, there are a “We builtoutatechnology infrastructure. We This isthebiggest challenge for thecompany BEST’S REV IEW •SEPTEMBER 2020 No. behindthepublicly 3ranking right traded released inJuly found New York Life retained its basedon2019 admittedassets health insurers on itscore businessline. company renamed itselfNew York Life tofocus coverage.also soldfire andmaritime In1845, the company grew as NautilusMutualLife, which financial district, where in1841theseedof A LifeInsuranceStory have imagined.” asstrong ofapositionaswewith about could Feldstein said. “We went intothisenvironment position it’s enjoyed 175years,” inabout 2020 inwhatarguably isthestrongest financial risk. and mortality displacementofitsworkforce;from theabrupt environment: asevere recession; operations risk trifecta confronting thecompanya risk inthis COVIDthis current world, Feldstein pointsto entered 2020. Hecalledthatposition “rock solid.” as examples ofjusthow strong thecompany insurance salesfor the23rd consecutive year $27 billionattheendof2019andrecord life officer, pointedtothecompany’s surplusof the history, thevalues andhow we live them.” not celebrating butwe much are embracing very Time tothinkofabackup tosay theleast. “We’re rapid stateofcontraction for thetimebeing. that hadtheeffect ofputtingeconomiesina governments begantoissuelockdown orders declaredOrganization itaglobalpandemicand in Wuhan, China. InMarch, the World Health inDecemberofanovel discovery coronavirus leading positionsinthesegmentsitoperates in.” the group’s businessprofile, asitholdsmarket- annuity products diversificationto provides risk Best said. “The businessprofile mixoflife and economicscenario,”in apotentialadverse AM shocksamounts ofroom toabsorb toincome base, which provides thecompany withmaterial operating performance from revenue adiverse A Best’s Rankingofthe200 largest U.S. life/ The roots oftheinsurer lieinthecity’s “New York Life ended2019andwent into Still, thechallenges whenasked about in Feldstein,Eric New York Life’s chief financial The plansfor ayear of175thcelebrations? Off. Of course, thatwas mostly tothe prior strong ofvery “The group hasahistory behemoths of Prudential and MetLife. The next- nearest competitor mutual was Northwestern Mutual at sixth place. Today, along with solid financials and strong sales, the company has a largest-in-class force of 12,000 agents and brokers it sees as the backbone of how it reaches the market. To make his point about the wisdom of proper planning and the need to maintain a heart in business, Mathas said during the pandemic the company assumed health insurance costs, paid rent and instituted a salary floor for commission-based workers amid the pandemic. For customers, the company also committed to not allowing policies to lapse during the first 90 days of the pandemic. For those customers still feeling pinched at the end of that period, New York Life instituted a second round of relief aimed at helping customers keep policies in place, along with a repayment schedule that Mutual companies “can allows them to affordably stretch the costs over a period of years. manage for the longer term. As Mathas sees it, the move by predecessor Sy They can be more patient, they Sternberg to resist a wave of demutualizations across the industry was smart and preserved a can accept some fluctuation in corporate structure that’s inherent to where the earnings and performance over company will be going in the coming 175 years. the short term to meet longer He doesn’t knock publicly traded companies. Still, there’s an inherent conflict between satiating term objectives.” the quarterly push for earnings to appease Thomas Rosendale shareholders while the needs of creditors and AM Best the customers can get lost in the middle, he said. The mutual structure has business advantages and allows the company to be run with heart, of Cigna’s group life and disability insurance Mathas said. business, its largest acquisition to date. “If I was at a publicly traded life insurance Being a mutual and a growing business feed company, and we had a successful asset into each other as Mathas sees it: As a mutual, management or retirement business, I’ve got to earnings from the new businesses go into one take all the profits from that and dividend them kitty and for the most part the earnings flow to to my shareholders. The core life and income the policyowners, who in essence are both the annuity policyholders don’t benefit from that but shareholders and life blood of the company. at New York Life they do. That’s a cool thing.” “Our typical policyowners can’t always get access to a diversified business portfolio like Mutuality this. They don’t own private equity in their Key to his vision is holding onto that structure own accounts. They do, however, get access and remaining focused on New York Life as to a diverse range of investments by being serving its current base of policyowners that is policyowners with New York Life—they get mixed both ethnically and in terms of income, he access to the investments we make as a company. said. In the third quarter of this year, the company So going forward as we run the business, we is expected to close on its $6.3 billion acquisition are staying focused on the core mission—

BEST’S REVIEW • SEPTEMBER 2020 Life Insurance term objectives.”term tomeetlongerperformance over term theshort and inearnings can acceptsomefluctuation they for thelonger term. canbemore patient,They Rosendale said. Mutualcompanies “can manage financial statements strictly tothequarter,” separately.out tostockholders don’t have they topaythrough earnings aportion that whenmutual companies accumulate capital Best, saidone oftheadvantages ofmutuality is life operation. businessinaMexicoretained oneinternational exists withitsU.S. customerbase. The company create themutually beneficial relationship that differences andstructural didn’t to regulatory lifeinternational insurance operations, which due Mathas’ tenure toshedmuch ofthecompany’s tocome.”in theyears continue toprovide peaceofmindtoourclients financial plans soweplace protection-first can We are working withourpolicyowners toputin leveraging ouragents whoare providing advice. Data asofAugust7,2020 Source: (%) Top LinesofBusiness New York LifeInsurance Company “They alsodon’t have“They tomanage their Thomas Rosendale, aseniordirector with AM This ethos, inpart, fueledthedecisionearly in BEST’S REV Accident &Health Group Annuity 3.3 28.6 Group Life 15.2 IEW •SEPTEMBER 2020 Individual Annuity –Best’s Credit Report(AMB#006820) 2.4 Individual Life 50.5 (%) Top StatesofBusiness care workers wholosetheirlives toCOVID-19— Cigna toprovide payouts tothefamilies ofhealth with this year thecompany by inpartnership established in justweeksof intheearlier part economic. HepointedtotheBrave Fund ofHeart catastrophe,or short-term beitsocietalor collaboration andbeingprepared for any event said heattemptstofoster anenvironment of rather thananissuerofcorporate edicts. He and assumedthetoppositioninJuly of2008. intheassetmanagementan officer department, transfer. Henever looked back. alifeagainst insurance policytobankroll his Stanford outofreach untilhis father borrowed for Stanford University. Financial constraints put Though Richmond isa good school, helonged of Richmond inhishome stateof Virginia. it doesafterhisfreshman year attheUniversity industry. who never envisioned himselfintheinsurance Early Days Mathas speaksofhimselfasasteward Mathas joinedNew York Life inJune 1995as gainedanew respectMathas first for what It’s for alawyer quiteajourney training by Other Jurisdictions Texas 4.5 40.2 California 8.8 New York 16.2 Delaware 30.3 including orderlies and janitorial staff who may death benefit her family received—along with be underinsured or lack any coverage—as an student loans—to finance law school at George example of where being prepared for a disaster Washington University. and collaboration freed up New York Life to Mathas, Davidson and Feldstein all mention work on a program that benefited society, not an a fierce team ethic at New York Life and insist economic constituency. they aren’t just using buzzwords. The phrase Immediately after assuming the CEO role, he “confidently humble” is thrown around: as in, was confronted with guiding the organization plan and evaluate and hope at the end of the through the financial crisis that was wreaking process you can rest easily knowing any situation havoc on the larger financial services industry is dealt with. and decimating the balance sheets of insurers. Part of being humble, Mathas said, is having He likes to point to five principles, which he the ability to recognize when you “just got lucky” says were long standing New York Life values he and an outcome was not anticipated. simply codified. He points to the decision early in his tenure 1) Greater purpose. Do you feel part of to divest the international businesses around something bigger than yourself? 2) Individual 2010 in favor of America’s growth, where the accountability and accompanying collective base is immigrant heavy and culturally diverse. pride. 3) Grow the pie; only be in businesses Emerging markets was seen as a source of that are mutually beneficial to customers, the growth for an international life insurance company and its agent force. 4) Everything business, he said. But as a mutual, higher-risk you do has to build trust; if it doesn’t, then emerging markets exposed the mutual owners stop doing it. 5) Remain confident but also be to the risk with little upside. humble. “You know what happened? There was a Sheila Davidson, the company’s chief legal complete rout in international markets. Do you counsel, remembers the daily meetings to know how many people said ‘oh my God, Ted, grapple with the issue of the day at the onset of how did you know the international markets the Great Recession in 2008, just after Mathas were going to do so badly?’” he said. “It was the became CEO. right strategy because of who we are. It wasn’t What sticks out to her is the deep sense of because of some unique insight around those collaboration Mathas, who so embodies the markets.” culture of the company, sought to forge and Going forward, New York Life intends to build foster. He set up meetings every day at 5 o’clock its future based on a respect for the past coupled in the afternoon with a core group of senior with a human interaction and bond between the executives and he would invite in those who had company and its customers. Mathas said that can expertise in the area being discussed. prove tricky at a time when trust in institutions “He built his decision-making and leadership is at record low levels and many people have model on that experience,” she said. “To me lost the connective tissue with those institutions. that was probably the first and best example— Maintaining and growing that connection will be because it was such a sustained example, but the key, he said. that’s how we make all the decisions at the “When I think about New York Life, that’s our company. It’s iterative. We test it and then we company. We do it through 12,000 agents who come back and test it again. We have a longer build individual relationships in our communities. decision-making horizon because we are not You know New York Life, but you really know Joe worried about the next quarter; we don’t think or Sally or Paul. That’s who you’ve gotten to know in quarters, we think in quarter centuries.” and you’ve let them know you,” Mathas said. BR Like Mathas, Davidson had her own experience with life insurance at a formative Learn More age with the death of her father in her senior New York Life Insurance Company (AM Best # 006820) year of college as she was pondering continuing For ratings and other financial strength information visit www.ambest.com. to law school. She used part of the $90,000

BEST’S REVIEW • SEPTEMBER 2020 New York Life Insurance Company is a mutual insurance company, which means it is not publicly traded and has no shareholders. New York Life operates for the benefit of policyholders who purchase participating products. These policyowners share certain membership rights, such as voting in Board of Director’s elections and being eligible to share in annual dividends that are declared by the Board. New York Life is also the parent company of two other wholly owned life insurance subsidiaries. Policies issued by these subsidiaries are not participating and do not share in these rights. Guarantees are dependent upon the claims paying ability of the issuing company. Financial figures are as of 12/31/19. For detailed financial information, including the Annual Report to Policyowners, please click here: https://www.newyorklife.com/about/financial-information/2019-financial-information.

New York Life Insurance Company 51 New York, NY 10010 www.newyorklife.com 3143 SMRU1869572(Exp.12.31.2020)