New York Life Insurance: Mutuality and in Business for You

As you may know, I will be retiring as New York Life’s chairman of the board on May 31, 2009, when Ted Mathas, New York Life’s president and CEO, will assume the additional title of chairman of the board. And so, this will be my final letter to you –our policyholders.

It has truly been a privilege to serve as the Company’s 17th CEO for 11 years, continuing the legacy of my predecessors as stewards of this great 164-year-old institution. When I look back at our accomplishments, I am most proud of two – the decision in 1998 to retain the Company’s mutual structure and, toward the end of my career, the work I did in partnership with the board to identify my successor.

Back in 1997, most mutual life insurance companies decided to demutualize and become public companies, so that they might have access to public capital. We decided against that move for two reasons. First, insurance is a long-term business requiring long-term perspective in decision-making, a discipline best not compromised by the short-term outlook of Wall Street. Second, we saw an inherent conflict between policyholder priorities, which demand we maximize the amount of capital we hold to protect the promises we make, and the public company priority of minimizing capital in order to increase return on equity and improve performance for shareholders.

We knew that staying mutual was the right decision for the New York Life Insurance Company. However, ten years ago, we could not have predicted how critically important it would prove to be today. Indeed, it was our mutuality – with its singular focus on policyholder protection – that enabled us to be adequately prepared for a severe economic downturn. Consider these key strategic decisions, all based upon the principles of mutuality:

Because New York Life is a mutual, we were able to husband our capital. Between 2002 and 2007, we added nearly $6 billion to the Company’s surplus and asset valuation reserves – an action not impeded by an obligation to maximize return on equity for shareholders.

Because New York Life is a mutual, we did not put our reserves at risk by offering products whose profitability rested upon loosened underwriting standards or untested hedging strategies.

Because New York Life is a mutual, we could – and did – begin to divert a portion of our cash flow into lower yielding but safe U.S. Treasurys early in 2007, when we anticipated sizable risks in the U.S. credit markets.

In short, because of our mutuality, our judgment was not clouded by a need to provide investors with immediate returns. We anticipated the problems that might lie ahead . . . we adopted the appropriate strategies . . . and we built a financial safe harbor that is now protecting our policyholders from the storm.

However, financial strength means little if an organization’s management is not equal to the task of sustaining it. For that reason, over five years ago, I began working with the board to find my successor and build our management team for the future.

We found the right individual in Ted Mathas.

Ted Mathas, who succeeded me in 2008 as the Company’s 18th CEO, brings immense talent and leadership to the job. Just as important, there is no one more committed to the continuity of New York Life’s core values – or more qualified to uphold them.

I first observed Ted’s management skills nine years ago, when he managed NYLIFE Securities, our broker-dealer subsidiary. Since then, he has established a remarkable track record for success in a series of increasingly responsible positions. When the board of directors convened early in 2008 to consider CEO succession, their choice was unanimous.

Ted Mathas is an excellent president and CEO. The time is now right for Ted to assume the additional role of chairman of the board. We are fortunate to have a leader of Ted’s judgment, energy, intellect and vision to serve in these capacities.

In conclusion, I am pleased to report that, in spite of the uncertainty of the financial markets and the state of the economy during the latter part of 2008, the situation at New York Life is very much business as usual: Our financial strength is solid. Our values are sound. Our devotion to doing what’s right for our policyholders is uncompromised. This is how it always has been and always will be at New York Life.

On behalf of the board of directors, I thank you for continuing to let us be “The Company You Keep.”

Rate This
Rating: 5.0/5 (3 votes cast)

  Be the first to Comment