Fitch Ratings has affirmed the ratings of Thrivent Financial for
Lutherans (Thrivent Financial) and its subsidiary, Thrivent Life
Insurance Company (Thrivent Life), collectively referred to as Thrivent.
The affirmed ratings include Thrivent's 'AA' Insurer Financial Strength
(IFS) and its 'AA-' long-term Issuer Default Rating (IDR). The Rating
Outlook is Stable. A complete list of rating actions is provided at the
end of this release.
Fitch's ratings of Thrivent Financial reflect the organization's strong
capitalization with very low use of financial leverage, high-quality
investment portfolio, consistent profitability and favorable market
franchise within the Lutheran market. In addition, Thrivent has a
conservative liability profile with limited exposure to variable
annuities with living benefit guarantees.
The Stable Outlook is driven by Thrivent Financial's strong capital base
and Fitch's expectations of continued sustainable solid operating
performance for 2012, supported by conservative investment and product
offerings. Fitch believes that the pressure on profitability and
capital, driven by an extended low interest rate scenario and future
investment losses, is manageable in the context of the company's capital
position and liability profile.
Key rating concerns include Thrivent Financial's above-average exposure
to risky assets (below investment-grade bonds, common stocks, schedule
BA-other invested assets and troubled real estate), challenges due to
competitive pressures in the company's core life and annuity markets,
and uncertainty tied to difficult macroeconomic conditions and evolving
regulatory environment. Fitch believes that a prolonged low interest
rate environment could increase earnings pressure due to margin
compression for Thrivent and other industry participants in the annuity
and interest-sensitive life insurance business.
Thrivent Financial's capitalization is strong and of high quality,
improving on both an absolute and a risk-adjusted basis in 2011. Total
adjusted capital (TAC) increased to $5.5 billion and a risk based
capital (RBC) ratio of approximately 488% at March 31, 2012, as compared
to year-end 2010 TAC of $5.1 billion and RBC of 454%. The company has
not issued surplus notes to support its capital and Thrivent Financial's
reliance on capital markets to finance its product reserves and capital
base is very low. Capital strength is also aided by moderate operating
leverage and a relatively low-risk liability profile.
Profitability for Thrivent Financial is viewed as consistent and
improving in 2011 from the moderate mid-single-digit levels of recent
years. Thrivent's operating earnings improvement in 2011 reflects the
growing contributions of the annuity business and the stable results of
Thrivent's life insurance business. Thrivent's investment income has
improved as a result of increasing assets under management and
consistent yields despite the low interest rate environment.
Profitability in 2011 has benefited from favorable lapse rates for both
life and annuity, generally favorable mortality, and good expense
management. Fitch expects this trend of solid performance to continue in
Thrivent manages a high-quality, well-diversified, liquid investment
portfolio that has performed relatively well in terms of credit and
return over the last three years. Realized credit related losses are
considered low at approximately 12 basis points for 2011, and well
within pricing assumptions. Realized credit related investment losses
declined to $57 million in 2011 from $68 million in 2010, mainly in
structured security impairments, commercial real estate related
investments and private equity losses. Fitch expects modest losses again
Fitch believes Thrivent Financial is strongly positioned within the
Lutheran market, but that the company's narrow focus presents challenges
for long-term growth opportunities. Thrivent Financial provides a
variety of fraternal programs and services, life insurance, retirement,
disability income and other risk protection and asset accumulation
products to its membership. Its affiliates also offer its members a
family of mutual funds, and trust and banking services. At March 31,
2012, Thrivent Financial and Thrivent Life reported total statutory
assets of $68.9 billion, and total adjusted capital of over $5.5 billion.
Factors that could trigger a negative rating action:
--A decrease in estimated RBC below 390%;
--A material increase in realized gross investment losses and
impairments in 2012;
--Material negative trends in earnings and/or fraternal membership.
Factors that could trigger a positive rating action:
--Sustained profitability with low double-digit returns and profitable
growth in fraternal membership;
--A sustained RBC above 480%.
Fitch has affirmed the following ratings with a Stable Outlook:
Thrivent Financial for Lutherans
--Long-term IDR at 'AA-';
--Short-term IDR at 'F1+';
--IFS at 'AA'.
Thrivent Life Insurance Company
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' (Sept. 22, 2011).
Insurance Rating Methodology
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Fitch RatingsPrimary Analyst:Andrew Davidson, CFA,
+1-312-368-3144Senior DirectorFitch, Inc.70 W. Madison
StreetChicago, IL 60602orSecondary Analyst:Bruce
Cox, +1-312-606-2316DirectororCommittee Chairperson:Brian
Schneider, +1-312-606-2321Senior DirectororMedia
RelationsBrian Bertsch, New York, +email@example.com
Source: Fitch Ratings