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Fitch Affirms Thrivent Financial's IFS Rating at 'AA+'; Outlook Stable
June 26, 2017 / 2:32 PM / 6 months ago

Fitch Affirms Thrivent Financial's IFS Rating at 'AA+'; Outlook Stable

(The following statement was released by the rating agency) NEW YORK, June 26 (Fitch) Fitch Ratings has affirmed the Insurer Financial Strength (IFS) rating of Thrivent Financial for Lutherans (Thrivent Financial) and its subsidiary, Thrivent Life Insurance Company (Thrivent Life), collectively referred to as Thrivent, at 'AA+' (Very Strong). The Rating Outlook is Stable. A complete list of rating actions follows at the end of this release. KEY RATING DRIVERS Fitch's rationale for the affirmation of Thrivent's ratings reflects the company's exceptionally strong capitalization and Fitch's belief that management is committed to maintaining statutory capital levels in excess of rating guidelines. The rating level also considers Thrivent's very strong business profile. Fitch views Thrivent's capitalization as exceptionally strong and of high quality. Total adjusted capital (TAC) increased 2% in 1Q17 to $9.2 billion, while risk-based capital (RBC) remains among the highest in Fitch's rated universe at 750%. Further, Thrivent has not issued surplus notes to support its capital and does not use captive insurers to fund excess life reserves. The company attained a Prism score of 'Extremely Strong' in 2016. Thrivent's capital strength is also demonstrated by its extremely low operating leverage of 5.6x as of 1Q17. The company's low total financing and commitments ratio of 0.1x at year-end 2016 reflects its lack of financial debt and disciplined use of securities lending. Fitch considers Thrivent's business profile very strong. Fitch believes the faith-based affiliation Thrivent shares with its membership provides the company with a distinct competitive advantage in the form of a higher level of institutional trust and higher policyholder persistency. Thrivent's inforce business is split primarily between annuities and life insurance, with modest exposure to long-term care insurance. Fitch views Thrivent's product portfolio as generally more conservative and lower risk product design compared with the industry. Thrivent's earnings declined in 2016, with the return on total adjusted capital declining to 8%, as results were negatively impacted by a $114 million increase in the long-term care (LTC) insurance premium deficiency reserve. Earnings have benefitted from strong private equity returns in recent years, which are expected to moderate. Additionally, Fitch expects earnings to decline modestly from current levels, driven by increased expenses in support of the company's growth and its strategy to return excess surplus to members. 1Q17 results were in-line with the full year 2016, with a pre-fraternal spend, post-dividend return on assets of 99 bps. Fitch considers Thrivent to have an average exposure to interest rates, as its block of individual participating whole life business partially offsets its spread-based business and legacy long-term care exposure. Fitch notes that while LTC is a relatively small part of the company's product portfolio (11% of general account reserves), it does impose some surplus risk in the current low interest rate environment. With a membership of about 2.3 million, Thrivent is the largest fraternal benefit society in the U.S. The company reported assets under advisement of $117 billion as of year-end 2016. RATING SENSITIVITIES Factors that could trigger a negative rating action: --A decrease in RBC to below 550%, a Prism score below 'Extremely Strong' and/or an increase in operating leverage to above 8x; --Material negative trends in earnings and/or fraternal membership; -- An unexpected shift in tax, regulatory or market dynamics that affects Thrivent's competitive strengths. Fitch does not anticipate an upgrade given the company's modest size and scale versus 'AAA' rated peers. FULL LIST OF RATING ACTIONS Fitch has affirmed the following ratings with a Stable Outlook: Thrivent Financial for Lutherans --Long-Term Issuer Default Rating (IDR) at 'AA'; --IFS at 'AA+'. Thrivent Life Insurance Company --IFS at 'AA+'. Fitch has affirmed the following rating: Thrivent Financial for Lutherans --Short-Term IDR at 'F1+'. Contact: Primary Analyst Jamie R. Tucker, CPA Associate Director +1-212-612-7856 Fitch Ratings, Inc. 33 Whitehall Street New York, NY 10004 Secondary Analyst Dafina M. Dunmore, CFA Director +1-312-368-3136 Committee Chairperson Brian C. Schneider, CPA, CPCU, ARe Senior Director +1-312-606-2321 Media Relations: Hannah James, New York, Tel: + 1 646 582 4947, Email: Additional information is available on Applicable Criteria Insurance Rating Methodology (pub. 26 Apr 2017) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here#solicitation Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT 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. 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