First Quarter 2010 - Investment Performance of the TIAA General Account
This statement is updated each quarter with the latest performance information for the TIAA General Account to offer assurance of our commitment to its security and stability.
Since 1918 and through periods of great economic volatility, TIAA's disciplined, long-term approach to asset management has enabled us to help meet the financial needs of the individuals and institutions we serve.
TIAA’s General Account supports our guaranteed fixed annuity, TIAA Traditional. The General Account primarily invests in corporate and government bonds, structured finance instruments (such as mortgage-backed securities) and real estate.
TIAA ended the first quarter of 2010 with high capital reserves and affirmations of our financial strength by all four major independent rating agencies. TIAA’s Triple-A ratings, the highest from each agency, confirm that losses1 experienced in 2008 and early 2009 have not affected our claims-paying ability to make good on our guarantees to you.2
As of March 31, 2010 TIAA had $204.6 billion in total statutory admitted assets, including $9.4 billion in its separate accounts. Importantly, our capital and contingency reserves – which determine our claims-paying ability – grew strongly, ending the first quarter of 2010 at $24.1 billion, an increase of $1.3 billion over year-end 2009. This is our highest level of capital and contingency reserves in the company’s history.
The net realized capital losses of $0.3 billion experienced by the TIAA General Account in the first quarter of 2010 were offset by $0.3 billion in net unrealized capital gains, resulting in no net capital losses on TIAA’s General Account portfolio for the first quarter of 2010.
While reaffirming TIAA’s Triple-A insurance financial strength rating, some of the rating agencies commented on TIAA’s structured investments and real estate holdings. As of March 31, 2010, TIAA held about $72.0 billion in structured investments (commercial and residential mortgage-backed securities (CMBS and RMBS), along with other asset-backed securities), and recorded about $0.2 billion in losses in first quarter of 2010. Real estate-related investments, excluding the CMBS and RMBS securities in the structured investments portfolio, totaled about $5.2 billion. These aggregate real estate-related holdings recorded about $0.1 billion in losses, including directly owned real estate, real estate joint ventures and real estate subsidiaries.
Importantly, the crediting rate for TIAA Traditional Annuity – currently 4.00% for Retirement Annuities (RA) 3 – remains highly competitive. Further, the average annual return for the TIAA Traditional Annuity RA contracts for the 10-year period ended April 30, 2010 is 6.51%, which is significantly higher than the average 10-year Treasury yield during that period and well above the general rate of inflation for most of the past three decades.
The Trustees of TIAA set the interest rates at a level that allows TIAA to guarantee and pay lifetime income to millions of retirees. Due to the strong capital position of the General Account, TIAA’s guarantees of principal and minimum rates of interest remain strong in spite of the turmoil the markets experienced in 2008 and 2009.
Note: This statement pertains to the TIAA General Account. The TIAA General Account is an insurance company general operating account. It is not available to investors and does not present investment returns to participants. The performance of the investments held in the TIAA General Account support the TIAA Traditional Annuity's guarantees of principal, minimum guaranteed returns, additional amounts and payout obligations.
1 TIAA accounts for investments in accordance with statutory accounting principles as prescribed or permitted by the New York State Insurance Department. A realized loss on an investment is recorded when an impairment is considered to be other-than-temporary. An impairment in the valuation of an investment is considered to have occurred if an event or change in circumstance indicates that the carrying value of the asset may not be recoverable or that the receipt of contractual payments of principal and interest may not occur when scheduled. When an impairment has been determined to have occurred, the investment is written down to either fair value or the present value of the discounted cash flows, depending on the asset class, and a realized loss is recorded. TIAA considers available evidence to evaluate the potential impairment of its investments. Realized losses also include losses on investments that have been sold or otherwise disposed of as well as losses on investments that continue to be held in the portfolio.
2 TIAA is rated A++, A.M. Best Company (as of 12/09); AAA, Fitch Ratings (as of 4/10); Aaa, Moody’s Investors Service (as of 10/09); AAA, Standard & Poor’s (as of 5/10) – the highest possible ratings from these independent analysts. These ratings do not apply to variable annuities, mutual funds, or any other product or service not fully backed by TIAA’s/TIAA-CREF Life’s claims-paying ability.
3 Funds applied to TIAA Traditional from May 1, 2010 through May 31, 2010 will be credited with interest at the annual effective rate of 4.00% for Retirement Annuities and 3.00% for Supplemental Retirement Annuities, IRAs and Keoghs until April 30, 2011. Funds transferred to TIAA Traditional between May 1, 2010 and May 31, 2010 will begin earning interest at the beginning of the next calendar day following the effective date of the transfer, and will be credited with the indicated rates through April 30, 2011.
