TEXT-Fitch affirms TIAA's IFS at 'AAA', outlook is stable

Tue Jan 29, 2013 10:36am EST

Jan 29 - 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). At the same time, Fitch has affirmed TIAA's 'AA+' Issuer Default Rating
(IDR) and 'AA' surplus note rating. A complete list of ratings is provided at
the end of this release. The Rating Outlook is Stable.

TIAA's ratings are based on its extremely strong balance sheet fundamentals,
strong and predictable operating earnings, and very strong competitive position
in the U.S. pension market.

TIAA's balance sheet fundamentals are consistent with 'AAA' ratings
expectations. Financial leverage (surplus notes in relation to total adjusted
capital ) remains low at 6% at Sept. 30, 2012 and operating leverage is
very low at 6x. The total financing and commitments (TFC) ratio, which includes
TIAA Global Markets, Inc. (TGM), is among the lowest in the Fitch universe. TIAA
estimates its risk-based capital (RBC) ratio at 594% as of Sept. 30, 2012 and
expects it to be in the 587% range at year end compared to 558% at year-end
2011.

TIAA's net realized investment losses declined modestly through the first nine
months of 2012, although OTTI was up somewhat mainly due to lower rated CMBS.
Full-year 2012 realized losses are expected to be in line with 2011.

TIAA's operating earnings remain strong and stable despite pressure from ongoing
low interest rates. Operating return on TAC was 8.8% at Sept. 30, 2012, compared
to 9.6% for the full year 2011, with the decline due mainly to an increase in
TAC. Net operating gain was $$2.1 billion through nine months 2012 compared to
$2.2 billion in the prior year period. Client net flows, excluding annuity
benefit payouts, increased 42% through nine months 2012 from the prior period.

The slow economic recovery, financial market volatility and potential contagion
from the eurozone debt crisis are ongoing concerns. Fitch expects these factors
to constrain earnings growth for TIAA and the industry as a whole over the near
term. Fitch believes, however, that TIAA is somewhat insulated from equity
market volatility and disintermediation risk given the lack of living and death
benefit guarantees in its pension annuities and its very stable liability
structure.

SENSITIVITY/RATING DRIVERS

Key rating triggers that could result in a downgrade include:

--Reported RBC below 425% on a sustained basis;
--Investment losses develop significantly higher than expected;
--A significant drop in operating earnings resulting in an after-tax operating
return on TAC below 5% for 18 months or longer;
--A regulatory change that would have a negative impact on TIAA's core pension
market;
--A change in TIAA's ownership structure.

Fitch affirms the following ratings with a Stable Outlook:

Teachers Insurance and Annuity Association of America
--IFS at 'AAA';
--IDR at 'AA+';
--Surplus note at 'AA'.

TIAA-CREF Life Insurance Company
--IFS at 'AAA'.

TIAA Global Markets, Inc. (Guaranteed by TIAA)
--$500 million 4.95% senior notes due July 15, 2013 at 'AA+'.


Additional information is available at 'www.fitchratings.com'. The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been
compensated for the provision of the ratings.

Applicable Criteria and Related Research:
--'Insurance Rating Methodology' (January 2013).

Applicable Criteria and Related Research:
Insurance Rating Methodology - Amended