What was announced?
Moody's Investor Services has affirmed TIAA's Triple-A ("Aaa") financial strength rating as well as TIAA's rating outlook as "stable."
What does this mean?
It reflects the strong capital position of TIAA, according to Moody's. Moody's statement announcing the Aaa affirmation notes that "TIAA benefits from an exceptionally strong business and financial profile, evidenced by the company's dominant position in the higher-education pension market, strong capital base, lack of financial leverage, uniquely stable liability structure with little liquidity risk, and very conservative products without any equity market-related guarantees. These advantages all serve to limit TIAA's financial stress during a period in which many other life insurers have seen considerably greater strains."
How does the financial strength rating affect my investments?
For TIAA policyholders it means you have entrusted your savings to a company with a strong capital position, according to Moody's and the other major ratings agencies that each give TIAA their highest rating. TIAA remains just one of three U.S. life insurance companies to hold an insurance financial strength rating of "Aaa" from Moody's.
Is there reason to be concerned about TIAA's financial position?
In affirming TIAA's "Aaa" rating, Moody's commented on TIAA's strong capital position, which underlies TIAA's claims-paying ability and capacity to uphold obligations to policyholders. Moody's noted "TIAA has substantial capitalization and flexibility to maintain its financial strength in what is a very difficult economic environment."
How have market conditions affected TIAA's performance?
While TIAA is not immune from the recent downturn in interest rates or general declines in the markets, the losses1 TIAA experienced in 2008 have not significantly affected our claims-paying ability to make good on our guarantees to our clients, and we ended 2008 with the same fundamental soundness as we began the year with. For more information on the investment performance of TIAA's General Account, see this article.
What would a change to TIAA's Issuer or Debt Rating mean?
Moody's placed under review the issuer rating of TIAA, as well as the unconditional TIAA-guaranteed Aaa senior unsecured debt rating of TIAA Global Markets, Inc. (TGM). These ratings are separate from Moody's Aaa insurance financial strength rating in the following ways. TIAA maintains the debt rating for TGM, which seeks to issue debt to earn a profit for the benefit of policyholders. TGM has a total investment of about $3.25 billion, less than two percent of TIAA's total assets under management. TIAA has no outstanding corporate, long-term debt.
The rating agency said the possible downgrade would likely be limited to one notch, which would result in TIAA's IFS and issuer ratings being consistent with Moody's typical notching practices. To date, the notching between TIAA's IFS and issuer ratings has been narrower than normal given the company's exceptionally strong credit profile.
1TIAA 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 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 fair value, 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.
TIAA is rated A++, A.M. Best Company (as of 9/08); AAA, Fitch Ratings (as of 8/08); Aaa, Moody's Investors Service (as of 5/09); AAA, Standard & Poor's (as of 8/08) - 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.
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