External Analysis of New York Life Insurance Company

Introduction New York Life Insurance Company or NYLIC is a private unlisted company operating in United States. It is one of the largest companies from its league. It offers wide range of products to its customer base. The product offerings include investment plans, insurance of life, retirement plans and benefits, and health care insurance programs (one source, 2011). The product offerings are further divided into wide range of divisions for the ease of customers. It is currently listed at number sixty four in the Fortune 1000 companies list (one source, 2011). According to the Fortune 500 (2008) rankings, it is one of the largest life insurance companies in the United States and around the globe (NYLIC, 2010). According to the financial reports by the company, the assets managed by the company were over 30 billion US dollars in 2009 which increased over 250 billion US dollars in the year 2010, a sturdy increase of 15% in the assets. It has received number of credit ratings from the top notch rating companies and it is among the top three life insurance companies that hold highest ratings from the top rating agencies. SWOT Analysis SWOT Matrix Strengths y y y y Brand equity Market position Assets of the company Revenues generated y y Weaknesses Geographic concentration Dependence on US markets

Opportunities y y y Demographic shift Market expansion The difficult market conditions of AIG can shift customer perceptions y y y

Threats Recession Competition Financial markets

Strengths New York Life Insurance Company is currently listed at number sixty four in the Fortune 1000 companies list (one source, 2011). According to the Fortune 500 (2008) rankings, it is one of the largest life insurance companies in the United States and around the globe (NYLIC, 2010). According to the financial reports by the company, the assets managed by the company were over 30 billion US dollars in 2009 which increased over 250 billion US dollars in the year 2010, a sturdy increase of 15% in the assets. The company has received number of credit ratings from the top notch rating companies and it is among the top three life insurance companies that hold highest ratings from the top rating agencies. It is offering wide range of products and services to its customers. It operates in four main divisions including retirement security, life insurance, life investment plans and other related financial services (NYLIC, 2011). The financial statements of the company showed that it had generated revenues around fifteen million US dollars in 2010 (NYLIC Annual Report, 2010). Weaknesses New York Life Insurance Company too faces some weaknesses in the markets. Some of the weaknesses of the company includes: weak geographic presence and the over dependence on domestic markets of USA. No doubt the company has expanded its business portfolio in various

other regions but it is required that it must expand its business strategically in order to maximize its revenues and market shares globally. Opportunities Since it is among the largest companies in insurance industry of United States, there are large numbers of opportunities available to the NYLIC. Among them are the market expansion and penetration plans for the company. NYLIC has expanded is business portfolio in Asia and Latin America includingMexico, India, China, Hong Kong, South Korea, Taiwan and Thailand respectively (NYLIC, 2010). It can develop tactful strategies to penetrate these markets further. Moreover, NYLIC can expand its business operations in Europe as well via number of business expansion tools like acquisitions and mergers. Likewise, the demographic structure of United States of America represents the favorable structure for New York Life Insurance Company. According to the CIA world fact book (2010), there is large number of baby boomers in the US population (age range 60 and over: 20%). Most of these people have reached old age and are retired from their life-long work related duties. This market segment offers the room of opportunities to New York Life Insurance Company in the form of retirement and pension plans and offerings. Threats Despite of the fact that New York Life Insurance Company is currently one of the market leaders in the local markets, it too faces certain level of threats. One of them is the economic conditions of United States. The downfall in the US economy has touched all the levels of business and lives of people. It has severely affected the companies operating in the domestic markets and the demand of the customers. If the US economy failed to recover from the

aftershocks of recession, the New York Life Insurance Company will find itself in serious trouble. Another possible threat faced by New York Life insurance Company is stiff competition in the markets. The level of competition among the existing competitors in the industry is very stiff. In the health insurance industry, the customer demands are associated with the increasing costs of medical options available to them. The market success and profitability of the firms operating in the industry is dependent on their operations and their ability to obtain favorable contracts with the medical and health care personnel (Hoovers, 2011).

The economic conditions of the United States have had huge impact on the financial markets of United States. These weakening markets severely damaged large number of businesses in USA (Reuters, 2009). The companies operating in United States are not free from the damages. If these conditions continued to prevail then the companies like NYLIC will suffer great setbacks in future.

PESTEL Analysis Political The federal law prohibits companies to make contributions in the political activities and federal candidates; New York Life Insurance Company makes contributions to the parties where it has liberty to make corporate contributions. The US Supreme Court has drawn restrictions on the corporate spending on the political activities. Like the other companies of its league, New York Life Ins is involved in the political contributions via its political action committee called New York Life Insurance PAC.

NYLIC strives to demonstrate its commitment for the public health and care by making sure that it is able to add its voice at the time of devising public policies. Through its political action committee, New York Life Insurance Company spent over two million US dollars for political contributions in the year 2010 where two million dollars were contributed in the favor of Republicans party for the year 2010 (Open Secrets Org, 2011). Moreover, the company has hired its agents for the lobbying activities in order to obtain positive reviews from the legislators. It has spent around six million US dollars in the lobbying activities for the year 2010(Open Secrets Org, 2011). Economic The economic conditions of a country play an important role on determining the success and failure of a company. Since, most of the functions of New York Life Insurance Company are directed in the domestic markets of United States, so its likelihood of getting hit by the economic changes and governmental ruling is high. The downfall in the economy of United States has adversely affected large number of organizations operating in United States and increased the opportunity costs associated with their business segments and operations. Moreover, these declining market conditions have increased the unemployment rate in the company. According to the CEO of Aetna Inc. the government is been trying to raise the level of employment in the country but this has no significant or direct impact on the health care industry. The economic conditions of the country still seem to be troublesome for large number of companies (Sturdevant, 2011). The declining economic conditions have increased the awareness among the large number of companies to protect their financial futures in order to remain competitive in the

markets. As per the reports communicated by NYLIC, it earned over one billion dollar sales in 2010 which made it one of the top sellers in the country with over ten percent market share (NYLIC Annual Report, 2011). These calculations are based on the internal reportings of the company and the analysis of reports presented by LIMRA Intl US Individual Life Insurance sales survey. Social New York Life Insurance Company is effectively engaged in the social and community related activities in order to raise the living standards of people in the communities it operates in. The company believes it is very important for the success of the company, its employees and policy makers to understand the needs and requirements of the communities they operates in. the company follows diverse culture all over its business units. The employees hired by the company are from those communities. They recruit them and then polish their skills by giving proper training and education to them to perform their required jobs. Moreover, NYLIC has developed three diverse employee network groups that facilitate career planning and developments for African-Americans, Asian-Americans and Latinos respectively (NYLIC Annual Report, 2010). NYLIC established its Foundation in 1979 called New York Life Insurance Foundation. This foundation aims to contribute via various channels with the help of various non-profit organizations to improve the community life standards. The company has started the program called Nurturing the Children which with the help of this foundation targets the population of young children that have little or no reach to food, safe environment and educational opportunities (NYLIC Foundation, 2011). They have won number of awards for being the most diverse and equal opportunity employer in the country (NYLIC, 2011).

Technological The technological advancement is vital to the success of a company in todays competitive environment where large numbers of counterparts are ready to snatch the market share of a company. The business operations and processes are significantly dependent on the latest information technology systems. New York Life Insurance Company has implemented the latest information technology systems to facilitate the flow of information within the offices and all the other business divisions (NYLIC, 2011). Environmental Like the other entire responsible corporations in the markets, New York Life Insurance Company is also engaged in the activities that foster the environmental safety. It has started number of activities in order to minimize its impact on the environment and atmosphere. Among its initiatives includes reduced energy use, recycling of plastic and paper products at its facilities. For its efforts, NYLIC has gained recognition and awards from various organizations and is a leader in energy and environment safety measures in the markets (NYLIC, 2011; NYLIC Annual Report, 2010).

Legal Many insurance companies are in a practice to save their money by delaying the settlement funds asked by the customers as long as they can. This strategy allows them to make and save money. They make the investigations extremely very costly for the individual clients that it makes difficult for them to afford the investigations. New York Life Insurance Company is the recipient of various legal rules, regulations and implications due to the nature of its business. In order to maintain its market position and its license to operate in the markets of

United States, NYLIC has to comply with the local, regional, state and federal level rules, regulations and laws.

NYLIC is subject to various legal proceedings currently in pipeline. Some of the legal proceedings against the company include:New York Life Insurance Company v. ShereeGillispie (insurance coverage disputes), Bad Faith insurance law suits, bad faith and unfair practices, passing the file around and Acquistas bad faith insurance lawsuit etc. The verdict of these law suits can have adverse impact on the business practices of NYLIC (Bad Faith Insurance Claims, 2011).

Porters Five Forces Analysis Porters Five Forces Analysis helps the managers to understand the market position and the effectiveness of business strategies of a firm with reference to five micro and macro level environments (Porter, 2008). These five forces include Competition, New Entrants, Buyers Power, Suppliers Power and Substitute Products and/or services respectively. The Five Forces Analysis for WellPoint Inc. is as follows:

Rivalry among established competitions The level of competition among the existing competitors in the industry is very stiff. The top three competitors of New York Life Insurance Company are MetLife, Inc., The Northwestern Mutual Life Insurance Company, and Prudential Financial, Inc. (Hoovers, 2011).The demand is dependent on the demographics of the customers and the construction requirements of various companies and the government. The profitability of these competitors is dependent on the

accurate cost predictions for a potential project. The profit margins of the companies are highly dependent on their marketing strategies and on their abilities to accurately estimate the future payments (Hoovers, 2011). Bargaining power of suppliers The bargaining power of suppliers is derived by their power to demand the prices of their own choice. The suppliers power in the insurance industry is not a big threat to the companies operating in it. But the threat suppliers taking away human capital does exist in the industry. This industry is entirely based on the human capital.

The bargaining power of buyers The individual buyers do not have much power to influence the insurance industry at large. The large corporate clients like the airline and other related business pay large sums of money as insurance to these companies. These market players in the insurance industry long to get high margin corporate clients.

The threat of substitute products or services The threat of substitutes is very high in the insurance industry as there are plenty of substitutes available in the market. Many of the firms offer the services that are similar to that of large companies. There exists high level of competition on all the grounds whether it is auto insurance or health insurance. There are companies operating in the markets that offers unique products and services to their customers and have competitive advantage over their counterparts which depends on the size of their business segments.

The threat of the entry of new competitors

The industry imposes certain barriers to the entry of the new companies in the markets. This means that the level of threat of new entrants is relatively low in the industry. There are varying reasons to the low rate of entry. Among them is the entry barriers imposed by the industry. The new entrants will have to comply with the governmental regulations in order to make their entry in the markets. Then the existing players are protected by the number of barriers which makes it difficult for the new entrants to give hard time to them. Among them are: entry restrictions, tariff rates, high capital requirement, distribution channels etc. These barriers limit them to compete against the existing market players

Recommendations This study provided brief overview on the external environment analysis of New York Life Insurance Company. The findings of the study suggested that New York Life Insurance Company should focus on the following factors in order to excel its business and social image in the world: 1. NYLIC can expand its business operations in the European markets with its diverse and innovative product range 2. Penetrate the existing markets it is currently covering especially the developing markets of Asia 3. Expand the product portfolio in the domestic and international markets. For example, it can start covering child education, health care plans 4. Improve the good will of the company by social and environmental activities.

References Bad Faith Insurance Claims (2011) New York Life Insurance, retrieved on July 14, 2011 from http://www.bad-faith-insurance-claims.com/insurance-carriers/new-york-life/ Hoovers (2011) Competitive Landscape, retrieved on July 13, 2011 from http://www.hoovers.com/company/New_York_Life_Insurance_Company/cfyysi-1-1njea3.html Justia US Law (2000) New York Life Insurance vsShereeGillispie, retrieved on July 14, 2011 formhttp://law.justia.com/cases/federal/appellate-courts/F3/203/384/474803/ NYLIC (2010) New York Life Reports 2009 Financial Results, retrieved on July 14, 2011 from http://www.newyorklife.com/nyl/v/index.jsp?contentId=124895&vgnextoid=340fc7583ecf7210 VgnVCM100000ac841cacRCRD (2011) About New York Life Insurance, retrieved on July 14, 2011 from http://www.newyorklife.com/nyl/v/index.jsp?contentId=2&vgnextoid=8f48a2b3019d221 0a2b3019d221024301cacRCRD&vgnextchannel=480c255fe92d2210VgnVCM740000ae 841cacRCRD (2011) Awards and Recognition, retrieved on July 14, 2011 from http://www.newyorklife.com/nyl/v/index.jsp?contentId=16335&vgnextoid=98541219a49 d2210a2b3019d221024301cacRCRD NYLIC Annual Report (2010) Financial Highlights, retrieved on July 14, 2011 from http://www.newyorklife.com/newyorklife.com/General/FileLink/Static%20Files/2010%20New %20York%20Life%20Annual%20Report.pdf NYLIC Foundation (2011) New York Life Insurance Foundation, retrieved on July 14, 2011 from http://www.newyorklife.com/nyl/v/index.jsp?contentId=13118&vgnextoid=74713c5ac59d2210a 2b3019d221024301cacRCRD One source (2011) Fortune 1000 companies list, retrieved on July 13, 2011 from http://www.onesource.com/free/Company/FortuneList/Fortune/0

(2011) New York Life Insurance Company, Company Profile, retrieved on July 13, 2011 from http://www.onesource.com/free/New-York-Life-InsuranceCompany/Company/Profile/362971 Open Secrets Org (2011) New York Life Insurance Company: Lobbying, retrieved on July 14, 2011 from http://www.opensecrets.org/orgs/lobby.php?id=D000000249 (2011) New York Life Insurance Company: Recipients, retrieved on July 14, 2011 from http://www.opensecrets.org/orgs/toprecips.php?id=D000000249&cycle=2010 (2011) New York Life Insurance Company: Summary, retrieved on July 14, 2011 from http://www.opensecrets.org/orgs/summary.php?id=D000000249&cycle=2010 Porter, M. E., (2008) The Five Competitive Forces that Shape Strategy, Harvard Business Review, p.86-104, retrieved on July 13, 2011 from http://hbr.org/2008/01/the-five-competitiveforces-that-shape-strategy/ar/1 Reuters (2009) Three Top Economists Agree 2009 Worst Financial Crisis Since Great Depression; Risks Increase if Right Steps are Not Taken, retrieved on July 14, 2011 from http://www.reuters.com/article/2009/02/27/idUS193520+27-Feb-2009+BW20090227 Sturdevant, M. (2011) Aetna CEO: Drop In Jobless Rate Hasn't Boosted Health-Plan Enrollment, retrieved on July 14, 2011 from http://articles.courant.com/2011-03-08/business/hcaetna-bertolini-unemployment-20110308_1_unemployment-rate-annual-health-care-conferencegroup-growth