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

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 management and administration of approximately $1.5 trillion at year-end 2023. 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 Group’s risk-adjusted capitalization, which continues to be at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR). Risk-adjusted capitalization has been enhanced by TIAA’s very strong operating performance, which has more than offset realized investment losses in recent years. The 2023 results were again unfavorable, impacted by higher operating expenses and declining net flows. TIAA has significant statutory accounting flexibility to manage its risk-adjusted capital position, including ability to adjust crediting rates on its large in-force block of general account retirement annuities. Also noted is TIAA’s conservative approach to statutory reserving that further enhances the company’s balance sheet strength. AM Best notes that TIAA’s current adjusted financial and operating leverages remain within targeted levels.

AM Best also views favorably TIAA’s unique long insurance liability structure with low liquidity needs, 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.

Although AM Best considers TIAA’s investment management capabilities to be strong, its overall investment portfolio has generated modest levels of realized investment losses in recent years, with some continued concern regarding the group’s sizeable increased exposure to real estate assets, including commercial mortgage holdings and an elevated level of Schedule BA assets. TIAA’s mortgage loan portfolio has generally performed well, but has had continued increased delinquencies and foreclosures in the past two years. AM Best notes that there are still potential economic headwinds, despite rising interest rates. Additionally, TIAA’s Nuveen LLC is expected to provide continued additional earnings diversification and add additional 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. For more information, visit www.ambest.com.

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