A Mid-Year Update from TIAA-CREF CEO Roger Ferguson

Roger W. Ferguson, Jr.

Dear TIAA-CREF Participant:

I am writing with a mid-year update on TIAA-CREF's progress and the steps we are taking to meet your needs, with financial strength, competitive performance, superior value and industry-distinctive service.

Financial Strength
We have maintained our financial strength amid adverse economic conditions, thanks to broad diversification, a focus on higher-quality investments, a long-term horizon and prudent risk management. 

• Strong Capital Position.  Today, TIAA's capital reserves total approximately $17 billion.ⁱ  Because we are fully invested in the markets, and thus not immune from the effects of a low interest rate environment or overall market declines, we have experienced some losses.  However, our ability to build and maintain capital is significant. 
  
  
• Broad Claims-Paying Ability.  As one of the nation's leading financial services firms and the largest private retirement system in the United States, TIAA-CREF provides more than $10 billion in retirement income, guaranteed lifetime income and other payments to 500,000 participants each year. 
  
  
• The Highest Ratings.  Within the last two months, Moody's Investors Service, Fitch Ratings, and Standard & Poor's all affirmed TIAA's "triple-A" rating  - the highest possible - for insurer financial strength. These ratings underscore TIAA's stability and provide an independent assessment of our ability to meet our financial commitments to you.ⁱⁱ More information about our ratings is available on our website.

Competitive Performance
TIAA-CREF's variable annuity accounts and mutual funds have performed well relative to peers, according to Morningstar, an independent investment research provider.  As of June 30, 72% of our funds and accounts have exceeded their category median for the past three years.  And 63% have exceeded their category median over the past five years.  Morningstar also shows that 95% of TIAA-CREF's variable annuity accounts and mutual funds had an overall rating of three, four or five stars across all asset classes (as of June 30, 2009). 

On the fixed income side, our guaranteed account, the TIAA Traditional Annuity, is providing a highly competitive crediting rate and a base of lifetime income.ⁱⁱⁱ   The average annual return of the Retirement Annuity contract for the 10-year period ended June 30, 2009 is 6.25%.  That includes a minimum guaranteed rate of 3% and additional amounts as declared by the TIAA Board of Trustees.  It 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 28 years.^iv

Value
Our goal is to be smart stewards of the money you entrust to us.  With that in mind, we have embarked on a program to reduce expenses, to deliver more value to you. By the end of 2009, we will have reduced our annualized spending by approximately 20%.  While we cannot guarantee future expense levels, which are determined in part by market movements, we expect that our expense ratios will decrease as a result of these actions, providing you with superior value.  We will continue to manage costs aggressively across the economic cycle.  

Distinctive Service
We are also working diligently to improve the service we provide to you. 

• We increased the number of advice sessions and investment consultations by 12% year-over-year in order to help our participants stay on track.   These efforts are earning industry-wide recognition: our objective, non-commission-based advice was praised once again by Forbes^v as “the most extensive personal[ized] workplace advice.”   
  
  
• We provide financial education seminars on campus – 530 seminars in the past year alone – and online for added convenience.  And we continue to enhance our website with new tools and information such as our monthly Market Insights podcast, which is also available on iTunes. 
• We're constantly striving to make our communications more helpful and streamlined.  For example, our new Quarterly Statement, which debuted earlier this month, is designed to provide more information to help you evaluate your retirement plan and your progress. 

We are doing all this because we want to be accessible to you – and to make it easy for you to do business with us.  To see how we're faring, we talk to clients each month, and track a number of measures.  Through June, more than 96% of clients who met with one of our consultants or advisors tell us that they believe TIAA-CREF puts their interests first.

Because of the progress we are making and the advantages we offer, because of the trust and confidence we have earned, more than 245,000 people moved their money to TIAA-CREF last year, and clients and prospects are continuing to turn to us in 2009.  We will continue to put your interests first, enhancing our service and expanding our capabilities to ensure that we meet your needs. 

In Closing
Whatever financial markets bring, TIAA-CREF will continue to uphold its mission, and deliver the financial strength, performance, value and service you expect.  And as the national debate on retirement takes shape, you can count on us to be a leading voice for the importance of long-term financial security.

I hope you are having a safe and enjoyable summer.

Sincerely,

Roger W. Ferguson, Jr.
President and Chief Executive Officer