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New York Life To Boost Charitable Gift Annuity Programs

Triple-A Rated Insurer Helps Charities Transfer Risk and Increase Cash Flow To Deal with Effects of Economic Downturn

NEW YORK, N.Y., March 23, 2009 – Charitable gift annuities are increasingly appealing to people seeking additional income, typically in retirement, and who are also philanthropic minded. In a charitable gift annuity arrangement, the donor makes a lump sum contribution to the charity and, in return, receives income for life and a charitable deduction. While nonprofit organizations see charitable gift annuity programs as a growing source of funds for their humanitarian pursuits, they present financial risks to charities that offer them. When the stock market was delivering double-digit returns and interest rates were higher, the investments supporting gift annuity programs provided solid financial returns to organizations. Today, in one of the tougher investment and fundraising climates on record, nonprofit organizations may want to reconsider how their charitable gift annuity programs are managed.

New York Life1 , the market leader2 in income annuities, also known as single premium immediate annuities, is offering nonprofits a way to strengthen their gift annuity programs through an arrangement that effectively transfers the complex investment and longevity risks to the Triple-A insurer. The charity uses a portion of the donor’s gift to purchase an income annuity to help fulfill the charity’s payment obligations to the donor, commonly know as “reinsurance”. In addition to passing along these risks, reinsurance can enhance the organization’s cash flow, more critical than ever in this economic climate. Charities can put donor funds to work immediately, since they have immediate access3 to the difference between the cost of reinsurance and the amount of the donation. If the charity does not need additional funds right away, the freed up funds can be invested without concern about the payment obligation to the donor.

In a reinsurance arrangement, a nonprofit organization purchases a single premium immediate annuity from New York Life that provides income that matches the charity’s obligation to its donor. New York Life assumes the investment risk underlying the gift annuity, eliminating the possibility that a charity’s investments cannot support the gift annuity payments.

With reinsurance, nonprofits are also able to transfer longevity risk to the insurer, eliminating the risk that the donated assets will be diminished due to donors living past their life expectancy.

“Charities are in a bit of a bind today with declining assets due to the collapse of the stock market, donors living longer, and donations that are likely to be declining, all at a time when the need for their charitable programs is rising, said Bob Rock, senior vice president, New York Life. “Rather than cutting back on programs or staff, reinsuring gift annuities can provide funds today that may match or exceed what charities would have been able to achieve during more favorable times.”

Rock added, “Organizations that choose to reinsure some or all of their gift annuities with New York Life are leveraging one of the strongest and most diversified investment portfolios in the life insurance industry, while allowing themselves to focus on their core mission.”

“With demand for lifetime income annuities at a record high, there is a strong case to be made for charitable gift annuity programs to be backed by a top rated insurer like New York Life,” continued Rock. “In fact, New York Life saw its overall sales of income annuities increase 55% to $1.2 billion in 2008 as consumers have become more and more concerned about outliving their retirement savings and are seeking guaranteed sources of income. Additionally there is a very good fit with our interest in helping charities and our core company values of financial strength, integrity and humanity.”

New York Life Insurance Company, a Fortune 100 company founded in 1845, is the largest mutual life insurance company in the United States and one of the largest life insurers in the world. New York Life has the highest possible financial strength ratings from all four of the major credit rating agencies. Headquartered in New York City, New York Life’s family of companies offers life insurance, retirement income, investments and long-term care insurance. New York Life Investments4 provides institutional asset management and retirement plan services. Other New York Life affiliates provide an array of securities products and services, as well as institutional and retail mutual funds.

1New York Life refers to both New York Life Insurance Company and New York Life Insurance and Annuity Corporation (NYLIAC). NYLIAC is a wholly-owned subsidiary of New York Life Insurance Company. New York Life income annuities are issued by and are solely the obligation of NYLIAC
2 Source: LIMRA International, Inc. Survey. LIMRA International, Inc. is an organization that provides market research, consulting, assessment and other services to financial services companies around the world.
3Subject to state regulations
4New York Life Investments is a service mark used by New York Life Investment Management Holdings LLC and its subsidiary, New York Life Investment Management LLC

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New York Life To Boost Charitable Gift Annuity Programs

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