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New York Life Insurance Company is one of the largest insurance companies in the United States and the world. Ranked as a Fortune 100 company, New York Life has provided its policyholders with financial security and investment opportunities since 1841. As a mutual company, New York Life is owned solely by its policyholders, to whom it pays annual dividends and provides long-term coverage on a wide range of insurance products. The company prospered during its first 100 years of operations, as the growth of the nation's population and economy created an expanding market for life insurance. Since World War II New York Life has maintained its competitive edge by diversification.

Building the Business: 1840s-50s

Life insurance was an infant industry when New York Life's predecessor, Nautilus Insurance Company, began operations in the 1840s. Marine and fire insurance were important, but people hesitated to assign a cash value to human life, and often associated life insurance with gambling.

As the economy became more industrial and the population more mobile, society recognized the need to secure a family's welfare against the loss of a breadwinner. In 1840 New York State passed a law allowing a married woman to insure her husband's life with immunity from having the benefits seized by his creditors. Such legislation recognized the use of life insurance in a developing industrial economy and widened its potential market beyond wealthy speculators.

New York Life has its origins in a charter granted by the New York state legislature to Nautilus Insurance Company in 1841, for the sale of fire and marine insurance. The company began issuing policies in April 1845 and soon decided to jettison its fire and marine business in order to concentrate on life insurance. By 1849 the company was so securely established in this new business that it petitioned the state legislature and had its name changed to New-York Life Insurance Company. In 1917 or 1918 the company dropped the hyphen in its name. The company's early operations coincided with the development of U.S. life insurance. Policies issued by the company were usually limited to short periods of time and placed a variety of restrictions on their owners. Policyholders in the 1840s could not travel south of Virginia and Kentucky during the summer because the company considered the southern climate a health risk. Southerners applying for policies faced higher premiums and restrictions on their travel as well. Before 1850 the company considered overland travel to California too dangerous for policyholders to undertake without paying an extra premium. Epidemic diseases were of great concern to the company in its early years. Outbreaks of cholera and yellow fever often threatened the company's security, and temporarily forced it to restrict new business to Manhattan and Brooklyn in 1849.

Despite such natural threats, the company grew quickly and established an adequate reserve for paying out dividends and benefits to policyholders. This success was in large part due to the company's most innovative contribution to the young industry, the use of agents to sell policies. Previously, insurance sales had centered on a home office that served local merchants and elites wealthy enough to protect their property and lives. New-York Life's use of agents to seek out new business greatly expanded the market, and the company soon established agencies in New England, the southern states, and as far west as California.

Civil War Risks and Postwar Expansion: 1860s-90s

The Civil War presented the company with its first major crisis, since it had developed a sizable southern business. President Abraham Lincoln's prohibition of commerce with the Confederate states during the war cut off communication between the home office and its southern policyholders, creating a host of problems, including lapsed payments and unpaid claims. The company compensated for these losses, however, by issuing policies to soldiers and civilians involved in combat. One of the few companies to take on such war risks, New-York Life managed continued growth despite its southern losses. In fact, the company sold more than half of the 6,500 new life insurance policies issued in New York City in 1862.

After the war, New-York Life expanded quickly with the nation's booming economy. The company recovered its southern business by paying benefits on death claims left unsettled during the war and by allowing former customers to renew their lapsed policies. As the nation pushed westward, so did the company, establishing agencies in Utah, Montana, and Nevada in 1869 and in San Francisco in 1870. New-York Life also became an international name during this era, opening offices in Canada in 1868, Great Britain in 1870, Paris in 1884, Berlin in 1885, Vienna in 1887, Amsterdam in 1891, and Budapest in 1894.

Intense competition marked the insurance industry in the last two decades of the 19th century, and it was during this time that the company emerged as one of the largest mutual insurance companies in the nation. Competition was fueled in part by the introduction of tontine policies, a type of life insurance in which a number of policyholders would forego their annual dividends and award the money to the last survivor of the group. The winner enjoyed a considerable payoff for his or her longevity. New-York Life began selling tontine policies in 1871, and by 1900 its growth in sales made it one of the nation's three biggest mutual insurance companies, along with Mutual Life Insurance Company and Equitable Life Assurance Society.

Reorganization of the company's agency system also promoted its growth. In 1892 President John A. McCall implemented the branch office system, a structure that would serve the company well. The home office opened branch offices throughout the United States to act as liaisons between the company's New York operations and its agents in the field. Improved communications allowed for more effective administration of the agency force through sales incentives and professional training.

World Conditions Creating Volatile Environment: 1900s-40s

The boom of the 1880s and the 1890s did not go unchecked. New-York Life entered the 20th century at odds with progressive reformers, who accused the rapidly growing insurance companies of mismanagement and malfeasance. In 1905 the New York state legislature convened an investigative committee under the leadership of William W. Armstrong to examine the state's insurance companies and make recommendations for regulatory reform. With the legal assistance of future U.S. Supreme Court Chief Justice Charles Evans Hughes, The Armstrong Committee heard testimony from the industry's most powerful executives, including John A. McCall.

The Armstrong Committee found New-York Life free from many of the abuses common in other companies, but it also recommended curbing the practices that had pushed the industry's expansion since the Civil War. In 1906 New York outlawed the sale of tontine policies, prohibited excessive commission for agents, and limited the amount of new business a company could do each year. The company officers actively lobbied for revision of these laws. Under the vocal leadership of Darwin Kingsley, who had become president in 1907, the company achieved some success in having its new business ceiling increased and agent incentives reinstated later in the decade.

New-York Life prepared early for World War I, selling securities and borrowing in order to increase cash reserves and meet wartime obligations. During the war the company also issued war-risk policies. The war's greatest challenges came in its aftershocks. The worldwide influenza epidemic of 1918 and 1919 hit the United States with unexpected ferocity: death claims resulted in a $10 million loss for the company, almost twice the cost of benefits paid during the war.

During the Russian Revolution of 1917 the company's assets in Moscow were seized. Soon after, New York Life began its withdrawal from Europe, a reaction to unfriendly regulation and a volatile world economy.

The company's assets were not involved in the stock market crash in October 1929 because state regulation and conservative planning had kept New York Life investments out of common stocks and in more secure government bonds and real estate. In 1929 New York Life moved into its current corporate headquarters on Madison Avenue in New York City. The move represented the company's entry into a modern era of closer ties to the nation's economy and diversification into new financial markets. The company weathered the Great Depression and became an important source of capital in the cash-short economy. Its greatest losses during the Depression were in the form of lapsed payments and canceled policies, a trend finally reversed by the booming wartime economy of the 1940s.

Industry on the Rise: 1950s-70s

Wartime production and the postwar baby boom revived the insurance industry, and New York Life tailored its products and investments to take advantage of these economic and demographic changes. With the development of group insurance in the first half of the 20th century and the passage of the federal Social Security Act in 1935, people began to buy insurance less for its one-time benefit to surviving family members and more for its lifelong investment security. New York Life introduced its first group insurance policies in 1951 and expanded its coverage in group and personal policies to include accidents and sickness as well as death. Two years later it offered the employee protection plan, a combination of individual life and group sickness coverage designed for small businesses. The success of its group plans sustained New York Life's remarkable growth since World War II. In 1974 it created a pension department and began selling employee protection insurance, another policy plan popular with small businesses. In the 1970s alone, New York Life's group insurance sales increased by 152 percent.

Recognizing the need for housing in the postwar nation, New York Life began moving its assets out of wartime government securities and into real estate development in the late 1940s. The company established a mortgage-loan program for veterans in 1946 and also invested in residential housing developments in Queens and Manhattan and in Chicago and Princeton, New Jersey, during the 1940s and 1950s. In 1969 it established the Nautilus Realty Corporation to handle its commercial and residential real estate operations, which proved to be of increasing importance as inflation in the 1970s and 1980s made other investments less desirable.

In the 1960s New York Life introduced the family insurance plan, a policy of comprehensive family coverage. When economic recession and inflation caused the lapse rate on new policies to increase in the early 1970s, the company created an insurance conservation office to study ways of better serving--and thus keeping--customers. The introduction of its Series 78 policies in 1978 made conversion between short-term and life policies more flexible for investment purposes and reduced premiums for women, who were buying an increasing percentage of the company's personal policies. Further innovations included a widening variety of annuities, cost-of-living adjustments in benefits, and the sale of mutual funds. In 1986 the company introduced NYLIFE as a new brand name for its financial products, differentiating this growing business from its traditional life insurance policies.

Diversification Prompted by Industry Downturn: 1980s

Inflation and high interest rates in the early 1980s hurt New York Life's new business sales and reduced its reserves, as policyholders borrowed against their policies for cheap credit. The company quickly adapted to these circumstances by taking advantage of deregulation in the financial services industry. In early 1984 it acquired MacKay-Shields Financial Corporation and two years later the company began marketing its own MainStay mutual funds through this new subsidiary. The company also expanded its annuity business through its subsidiary New York Life Insurance and Annuity Corporation.

Another major growth area for New York Life during the 1980s was healthcare. The spiraling cost of medical care in the 1970s and 1980s strengthened the appeal of insurance as a security against long-term illness. In 1987 New York Life purchased controlling interest in Sanus Corporation Health Systems, one of the largest healthcare companies in the nation. At the time, New York Life's greatest concern in the healthcare field was AIDS. In the late 1980s New York Life became one of the most visible promoters of AIDS awareness in New York City as well as a generous supporter of the American Foundation for AIDS Research. The company opposed antitesting laws introduced in various states, arguing that testing for the AIDS virus is a necessary step in assessing the risks involved in new policies.

Diversification into real estate development, mutual funds, partnership investments, annuities and pensions, and healthcare preserved New York Life's market position, and it entered the 1990s ready to take advantage of expanding demand for these new products.

Reacting to the Changing Marketplaces: 1990s

New York Life reorganized its management structure in 1992. A team of specialists from areas such as service, legal, marketing, and actuarial led by a product manager could move new offerings through the pipeline and out into the market more quickly than in the past. In 1993, New York Life rolled out a variable annuity policy and in 1994 its first variable universal life policy. To tap into a market of more conservative investors, the company began selling a variable annuity product through the banking system in 1995. Bank sales channels had grabbed 25 percent of the annuity market, and New York Life deviated from its traditional agent sales system to take advantage of the trend.

Also in 1995, New York Life merged its group health division with its managed care provider (Sanus) to create NYLCare. The consolidation brought a mixture of healthcare products together, including indemnity coverage and preferred provider and health maintenance organization plans. Available to both large and small groups, an estimated 3.5 million people, through a network of about 175,000 physicians and more than 2,200 hospitals, were expected to be served.

Problems with its limited partnerships prompted New York Life to exit the business in 1996. A majority of its holdings were in poorly performing oil and gas deals. The company decided to reimburse all investors in full as part of a class-action lawsuit settlement.

Sy Sternberg stepped up to the plate as chairman and chief executive officer in 1997, succeeding Harry G. Hohn. A 40-year veteran with the company, Hohn had led New York Life since 1990. Sternberg said in a March 1997 press release, "Under Harry Hohn's direction, New York Life has successfully diversified and grown into a Fortune 100 company with over $18 billion in annual revenues. In addition to his legacy of financial strength, he has left a company with a reputation for integrity and for putting the customer first. He has left a solid foundation upon which we can build with confidence."

New York Life sold its NYLCare Health Plans subsidiary in 1998. Aetna Inc. purchased the operation for $1.05 billion in cash, money which New York Life planned to use to bolster its core life insurance, annuities, and asset management segments. The company planned to purchase established businesses both at home and abroad. At the time, New York Life was the fourth largest U.S. life insurance company, as ranked by assets, and the second largest writer of new life insurance premiums. Holding $17 billion in assets under management, the company's MainStay Funds ranked among the top 50 fund families.

In its first major thrust into the Mexican insurance market, New York Life acquired Seguros Monterrey Aetna for about $570 million. "The move fits in with New York Life's strategy of spreading into emerging markets," Sternberg told National Underwriter in December 1999. Seguros held 23 percent of the individual life market, but less than 2 percent of the Mexican population purchased life insurance products.

Preparing for the Future: 2000 and Beyond

The creation of New York Life Investment Management LLC, in 2000, brought all of the company's $115 billion in assets under management into one subsidiary. New York Life followed a trend in the insurance industry--distancing the financial products from traditional insurance products--intended to improve competitive strength. The move also protected the parent company from financial liabilities and in turn gave the smaller operation more flexibility. New York Life had no plans to take the new enterprise public.

New York Life prepared for another venture in the finance end of business by seeking and receiving approval to operate a federally insured thrift, a move made possible by changes in federal regulations during the late 1990s. The company first planned to offer trusts and individual retirement accounts. The trust operation gave New York Life the ability to manage insurance money distributions, a capability it lacked to this point.

New York Life reached a record net income of $1.2 billion in 2000. The strong showing translated to the largest ever dividend distribution for policyholders: an estimated $1.46 billion slated for 2001. Life and annuity businesses contributed $9.1 billion in operating revenue, up 5.5 percent. The investment management businesses operating revenue rose 14 percent to $623 million, during a period of stock volatility. The international business more than doubled operating revenue to $1.2 billion. The special markets group membership segment, which included the company's AARP life insurance products, produced operating revenue of $230 million, up 14 percent. Long-term care insurance operating revenue rose 21 percent to $51 million, with New York Life's agency system driving the sales.

Unlike MetLife and Prudential, New York Life planned to stay the course and remain a mutual company into the early years of the 21st century. That said, Sternberg was determined to remain competitive. Under his leadership, the company had cut costs in the main life insurance and annuity line, added new products such as long-term care, and introduced new sales channels including a brokerage operation. On the international front, New York Life spent $800 million over four years to build operations in Asia and Latin America. Near year-end 2001, the company operated in Argentina, Mexico, Hong Kong, India, Indonesia, the Philippines, South Korea, Taiwan, and Thailand, and had representative offices in the People's Republic of China and Vietnam.

A matter related to its long dissolved European operation was finally resolved in 2001. New York Life settled claims by the survivors of ethnic Armenians killed by Turkish soldiers back in World War I. A 1999 class-action lawsuit led to legislation allowing Armenians living in California to pursue claims against insurers for unpaid benefits.

Horribly, not much later, New York Life faced an onslaught of life insurance claims related to an act of terrorism--the destruction of the World Trade Center in New York on September 11, 2001. The nation's insurers, including New York Life, relaxed claims processing procedures in light of the absence of death certificates for those still missing in the rubble.

Testifying before the House Financial Services Committee, Sternberg said, "This is a time for the insurance industry to be visible. This is a time for us to be charitable. And this is a time for us to stand as a pillar of stability in a none-too-stable world." He also acknowledged that the insurance industry, a major investor in American businesses, could be negatively affected by any long-term economic downturn brought on by the terrorist attacks.

Principal Subsidiaries: New York Life Investment Management LLC.

Principal Competitors: MetLife General Insurance Agency; Prudential Insurance Company of America; TIAA-CREF.

Source: International Directory of Company Histories, Vol. 45. St. James Press, 2002.