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A.M. Best Affirms Ratings of TIAA
OLDWICK, N.J.-(Business Wire)-September 4, 2008 - A.M. Best Co. has affirmed the financial strength rating (FSR) of A++ (Superior) and issuer credit ratings (ICR) of “aaa†of Teachers Insurance and Annuity Association of America (TIAA) and its insurance operating subsidiary, TIAA-CREF Life Insurance Company (TIAA-CREF). Concurrently, A.M. Best has affirmed the debt ratings of “aaa†on senior unsecured notes issued by TIAA Global Markets, Inc. (TGM). The outlook for all the above ratings is stable. A.M. Best has also affirmed the AMB-1+ on TIAA’s $2 billion commercial paper program. The notes issued by TGM are unconditionally guaranteed by TIAA. All companies are headquartered in New York, NY. (See below for a detailed listing of the companies and ratings.)
These rating affirmations reflect TIAA’s superior capitalization, strong market position in its core higher education pension market, stable liability structure and favorable statutory earnings. TIAA also benefits from a lean operating structure, which is an outgrowth of its significant economies of scale.
TIAA continues to build on its superior capital position through a regular stream of operating earnings derived from its stable pension business, as well as its conservative approach to valuing its statutory reserves. TIAA, together with its companion organization, the College Retirement Equities Fund (CREF), possess significant scale and forms one of the largest retirement systems in the United States, with combined assets under management of approximately $420 billion at June 30, 2008. The group’s low expense structure and effective distribution offer competitive advantages in its core pension market.
Partially offsetting these positive factors is the challenge for TIAA to maintain its dominant market share as it faces increased competition in its core market. TIAA also maintains a higher degree of illiquidity and volatility in its investment portfolio than most of the U.S. life insurance industry. However, the company’s long liability structure and low liquidity needs serve to mitigate these risks. As a result, TIAA continues to maintain considerable latitude in managing its capital base, particularly given its stable liabilities and its ability to adjust policyholder crediting and dividend rates. Despite increasing competition in its core markets, A.M. Best anticipates that TIAA will continue to demonstrate competitive advantages that will allow it to maintain a strong market position in the higher education pension market.
The following debt ratings have been affirmed:
Teachers Insurance and Annuity Association of America—
— AMB-1+ on $2 billion commercial paper program
TIAA Global Markets, Inc.—“aaa†program rating
— “aaa†on all outstanding notes issued under the program
Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.
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