Fitch Ratings assigns a long-term Issuer Default Rating (IDR) of 'AA-' and a short-term IDR of 'F1+' to Thrivent Financial for Lutherans (Thrivent Financial). Fitch also affirms the Insurer Financial Strength (IFS) ratings of Thrivent Financial and its subsidiary, Thrivent Life Insurance Company (Thrivent Life), at 'AA'. The Rating Outlook remains Negative.
The new IDR ratings have been assigned by Fitch in conjunction with Thrivent Financial's strategic move into the business of providing credit enhancement products in niche Lutheran related markets they serve.
The ratings of Thrivent Financial and Thrivent Life reflect the organization's relatively stable capital base since year-end 2008 and the expectation that operating earnings before policyholder dividends will experience manageable decreases in 2009 followed by a recovery in 2010. The Negative Outlook reflects the possibility that losses due to investments could be higher than Fitch's current base case projection of $600-$700 million for the remainder of 2009-2010. Fitch's projection is based on a detailed analysis of Thrivent Financial's investment portfolio using Fitch's stress testing methodology. In addition, Fitch believes current economic conditions have created some reserving and capital risk in Thrivent Financial's variable annuity business.
Thrivent Financial's reported total adjusted statutory capital (TAC) of $4.2 billion on June 30, 2009, was down slightly from year-end 2008 TAC of $4.3 billion. The slight decrease in TAC reflects the increased realization of investment losses, mostly in equities and bond impairments, which were partially offset by operating earnings and a modest reduction in unrealized losses due to improving financial markets. TAC fell more dramatically by 17.5% in 2008 and Fitch estimates Thrivent Financial's risk-based capital ratio decreased to 414% versus the reported risk-based capital ratio of 485% and 684% at year-end 2007 and 2008, respectively. Fitch believes Thrivent Financial's capital position will fall into the 'AA+' level from its historic 'AAA' position due to continued investment and variable annuity losses but takes comfort in the measure of financial flexibility that Thrivent Financial has to improve its capital position by adjusting its fraternal expense structure and policyholder dividends. Thrivent Financial's balance sheet and liquidity are also enhanced by its very low financial leverage and a relatively low-risk liability profile.
Thrivent Financial is the nation's largest fraternal benefit society, with a sizable share of the Lutheran affiliated market, and its ratings are supported by the strong membership affinity in that market. Thrivent Financial had combined TAC of $4.2 billion and assets under management of $63 billion on June 30, 2009.
Fitch has assigned the following ratings with a Negative Rating Outlook:
Thrivent Financial for Lutherans
--Long-term IDR 'AA-';
--Short-term IDR 'F1+'.
Fitch has affirmed the IFS ratings at 'AA' with a Negative Rating Outlook for the following companies:
--Thrivent Financial for Lutherans;
--Thrivent Life Insurance Company.
Additional information is available at 'www.fitchratings.com'.
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Contacts:
Fitch Ratings
Bruce E. Cox, 312-606-2316, Chicago
Cynthia
Crosson, 212-908-0863, New York
or
Media Relations:
Brian
Bertsch, 212-908-0549, New York
Email: brian.bertsch@fitchratings.com
