NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has affirmed the 'AAA' insurer financial strength (IFS) ratings of Teachers Insurance and Annuity Association of America (TIAA) and its wholly owned subsidiary, TIAA-CREF Life Insurance Company (TIAA-CREF Life). The Rating Outlook has been revised to Negative from Stable. At the same time, Fitch has downgraded the guaranteed senior debt rating of TIAA Global Markets, Inc. to 'AA+' from 'AAA', reflecting greater weighting of the subordinated nature of the guarantee in connection with the Outlook revision.

These rating actions follow Fitch's updated review of TIAA's capitalization, liquidity, financial flexibility and operating results.

The Negative Outlook reflects Fitch's concern about potential investment losses given the company's large unrealized loss position relative to total adjusted capital (TAC). TIAA has significant exposure to structured securities, particularly commercial mortgage backed securities (CMBS), which account for over half of the company's unrealized losses. This, together with a large commercial mortgage portfolio, exposes the company to potential weakness in the commercial mortgage sector in the ongoing difficult economic environment.

The affirmation of TIAA's IFS ratings recognizes TIAA's extremely strong risk-adjusted capitalization, the ability of the company to offset investment losses through strong statutory operating earnings, an exceptionally stable liability structure and the existence of hidden capital through reserve conservatism.

Fitch views TIAA's liability structure as extremely stable and relatively low risk. Roughly 80% of the company's $161 billion of general account annuity liabilities are non-surrenderable. TIAA also does not offer guaranteed living benefits on its variable annuity business, and it has guaranteed death benefits on only about $3 billion of account values. The company has no long-term financial leverage, no securities lending and no outstanding commercial paper. The company has guaranteed up to $5 billion of senior notes issued by its TIAA Global Markets (TGM) subsidiary. There is currently about $3 billion of outstanding issues. TGM's debt issuance is expected to run off over the next few years.


TIAA's statutory profitability is strong relative to 'AAA' rated peers. The company enjoys substantial cost advantages from economies of scale and a low-cost distribution system, and has significant flexibility in setting crediting rates. Operating profitability has increased significantly in 2009 due to increased pricing margins.

Fitch's 'F1+' rating on TIAA's $2 billion commercial paper (CP) program is supported by the organization's strong operating cash flow generation and a committed and unsecured $1 billion revolving credit facility. TIAA had no outstanding CP at June 18, 2009.

Fitch affirms the following ratings with a Negative Outlook:

Teachers Insurance and Annuity Association

--IFS at 'AAA';

--CP at 'F1+'.

TIAA-CREF Life Insurance Company

--IFS at 'AAA'.

Fitch downgrades the following ratings with a Negative Outlook:

Teachers Insurance and Annuity Association

--Issuer Default Rating to 'AA+' from 'AAA';

--TIAA Global Markets, Inc. (Guaranteed by TIAA) senior debt to 'AA+' from 'AAA';

--$1 billion 5.125% notes due Oct. 10, 2012;

--$500 million 4.95% notes due July 15, 2013;

--$500 million floating-rate notes due Jan. 14, 2010;

--$500 million floating-rate notes due Jan. 14, 2011;

--$250 million 4.875% notes due Jan. 12, 2011;

--$250 million floating-rate notes due Jan. 12, 2011;

--$250 million floating-rate notes due Oct. 8, 2010.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 'www.fitchratings.com'. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.



Fitch Ratings

Cynthia J. Crosson, +1-212-908-0863 (New York)

R. Andrew Davidson, CFA, +1-312-368-3144 (Chicago)

Brian Bertsch, +1-212-908-0549 (Media Relations)

brian.bertsch@fitchratings.com

Source: Fitch Ratings