AM Best

AM Best Affirms Credit Ratings of Teachers Insurance and Annuity Association of America and Its Subsidiary


Igor Bass
Senior Financial Analyst
+1 908 439 2200, ext. 5109

Edward Kohlberg
+1 908 439 2200, ext. 5664
Christopher Sharkey
Manager, Public Relations
+1 908 439 2200, ext. 5159

Jeff Mango
Managing Director, Strategy & Communications
+1 908 439 2200, ext. 5204


OLDWICK - JULY 28, 2022 01:33 PM (EDT)
AM Best has affirmed the Financial Strength Rating of A++ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “aaa” (Exceptional) of Teachers Insurance and Annuity Association of America (TIAA) and its wholly owned insurance subsidiary, TIAA-CREF Life Insurance Company (TIAA-CREF Life). TIAA and TIAA-CREF Life collectively are referred to as the TIAA Group. Concurrently, AM Best has affirmed the Long-Term Issue Credit Ratings (Long-Term IR) of “aa” (Superior) on TIAA’s surplus notes. The outlook of these Credit Ratings (ratings) is stable. TIAA and TIAA-CREF Life are domiciled in New York, NY. (Please see below for detailed listing of the Long-Term IRs).

The ratings reflect TIAA Group’s balance sheet strength, which AM Best assesses as strongest, as well as its very strong operating performance, very favorable business profile and very strong enterprise risk management.

The rating affirmations reflect TIAA’s continued market-leading position in the higher education and not-for-profit pension marketplaces. TIAA, together with its companion organization, College Retirement Equities Fund (CREF), enjoys significant economies of scale as one of the largest retirement systems in the United States, with assets under administration of approximately $1.4 trillion at year-end 2021. TIAA-CREF Life’s primary products include individual annuities, funding agreements and separate account guaranteed interest contracts, which are marketed to customers of TIAA and the general public.

The ratings also reflect TIAA’s risk-adjusted capitalization at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). Risk-adjusted capitalization has been enhanced by its very strong operating performance, which has more than offset realized investment losses in recent years. TIAA has significant statutory accounting flexibility to manage its risk-adjusted capital position, including the ability to adjust crediting rates on its large in-force block of general account retirement annuities. TIAA uses a conservative approach to statutory reserves, and as a result, its balance sheet contains a considerable amount of hidden capital. AM Best notes that TIAA’s current adjusted financial leverage and operating leverage remain relatively low for its rating level.

AM Best also views favorably TIAA’s unique liability structure, whereby nearly three-quarters of its general account reserves are not cashable and can only be received as a death benefit, an IRS-required minimum distribution or in the form of a periodic annuity payout. Contract holders may transfer funds from TIAA to CREF or to other employer-approved funding vehicles, but typically in the form of a 10-year annuity payout. TIAA’s long insurance liability structure and its low liquidity needs allows the company to take advantage of higher yields offered by investments that are less liquid and of longer duration. TIAA does not provide living benefit guarantees on its variable annuities, and its exposure to guaranteed minimum death benefits is limited.

Although AM Best considers TIAA’s investment management capabilities to be strong, the overall investment portfolio has generated moderate levels of realized investment losses in recent years, with some concern regarding the group’s sizeable exposure to real estate assets and above-average level of Schedule BA assets. AM Best notes that the increased exposure to real estate has come from commercial mortgages. The mortgage loan portfolio has performed well with virtually no delinquencies, foreclosures or restructured loans over the past several years and is in good standing as of year-end 2021. However, AM Best notes that there are still potential economic headwinds, although more recently, interest rates have been increasing. Additionally, TIAA’s Nuveen LLC and TIAA Bank are expected to provide earnings diversification and add scale to TIAA’s business profile going forward.

The following Long-Term IRs have been affirmed with a stable outlook:

Teachers Insurance and Annuity Association of America—

— “aa” (Superior) on $1.05 billion 6.85% surplus notes due Dec. 16, 2039

— “aa” (Superior) on $1.65 billion 4.90% surplus notes due Sept. 15, 2044

— “aa” (Superior) on $2 billion 4.27% surplus notes due May 15, 2047

— “aa” (Superior) on $350 million fixed to floating rate 4.375% surplus notes due Sept. 15, 2054

— “aa” (Superior) on $1.25 billion 3.3% surplus notes due March 15, 2050

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best’s Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City.

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