Dividends increase for 2nd straight year
Strong operating performance, investment philosophy guide the way
On November 20, 2013, New York Life’s Board of Directors approved a total dividend payout of $1.43 billion in 2014. This represents a $109-million (8%) increase over the 2013 level. And 2014 will mark the 160th consecutive year in which the company has exceeded the guarantees on its whole life policies by paying dividends to participating policyholders. New York Life has paid a dividend every year since 1854.
Even in the face of unprecedented low interest rates, the company was able to increase its dividend because it had strong operating performance and was able to enhance both its surplus and dividends through the strong performance of its investment subsidiary, New York Life Investments, and from the recent divestiture of several international operations. The company also has had better than expected persistency as policyholders maintain their policies in force despite the challenging economy, which speaks to the consumer appeal of New York Life’s strong ratings for financial strength.
“Americans increasingly understand the value that a permanent product like whole life provides,” says Mark Pfaff, executive vice president in charge of the company’s agent sales operations. “The company’s mutual structure and ability to offer dividends on this participating product is important to insurance consumers and that is why 2014 marks the 160th anniversary of offering consecutive cash dividends, a remarkable achievement, especially at a time when so many financial institutions are having difficulty. ”
How the dividend decision is made
The company’s goal is to pay participating policyholders the highest-possible dividend each year while keeping an eye on its financial strength for current and future generations of policyholders. due to the strength of its operations and a disciplined investment approach, the company’s capital and consolidated surplus — the funds providing added safety and security to policyholders — are among the strongest in the industry.
A disciplined investment philosophy
New York Life maintains a disciplined investment philosophy. Its guiding principles are:
- We maintain diversification. We do not take outsized stakes in any single investment opportunity, no matter how attractive it may appear.
- We conduct our own research. We do our own fundamental, bottom-up research, rather than relying on the analysis of others.
- We insist on getting paid for taking risk.
- We take a long-term view. We invest for the long term because we make long-term commitments to our policyholders. As a mutual company, New York Life’s investment decisions are not subject to shareholder pressures for quarterly profit gains. We will — and do — forsake the potential of short-term gains to preserve long-term safety.
- We maintain ample liquidity. For New York Life, liquidity is “king, ” as we must always be prepared to meet our obligations to policyholders. Our strong balance sheet is our policyholders’ assurance of protection in any market environment.
- We don’t blindly follow the crowd. New York Life has been through numerous economic cycles in our 168-year history, and we have learned to avoid both the frenzy of overheated markets and the panic that occurs when markets tumble.
Its strong surplus, based in part, on its investment results, is the main reason why New York Life has the highest ratings for financial strength currently awarded to any life insurer by the four major rating agencies.* While more than 900 companies sell life insurance, not one of them has higher ratings.
Source: Third Party Ratings Reports as of 8/1/2013: * Standard & Poor’s (AA+, 6/10/2013), A.M. Best (A++, 6/4/2013), Moody’s (Aaa, 7/19/2013) and Fitch (AAA, 8/1/2013).