CHICAGO--(BUSINESS WIRE)-- 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 2012.

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 for 2012.

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

--IFS 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' (Sept. 22, 2011).

Applicable Criteria and Related Research:

Insurance Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=651018

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Fitch Ratings
Primary Analyst:
Andrew Davidson, CFA, +1-312-368-3144
Senior Director
Fitch, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Secondary Analyst:
Bruce Cox, +1-312-606-2316
Director
or
Committee Chairperson:
Brian Schneider, +1-312-606-2321
Senior Director
or
Media Relations
Brian Bertsch, New York, +1-212-908-0549
brian.bertsch@fitchratings.com

Source: Fitch Ratings

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