OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has affirmed the financial strength rating of A++ (Superior) and issuer credit ratings of “aa+” of Thrivent Financial for Lutherans (Appleton, WI) and its subsidiary, Thrivent Life Insurance Company (Minneapolis, MN) (together known as Thrivent Financial). The outlook for all ratings is stable.
The ratings reflect Thrivent Financial’s leading fraternal market position, favorable and increasing operating earnings trend, solid risk-adjusted capitalization, prudent asset liability matching and good liquidity management. While Thrivent Financial maintains exposure to equity market risk in its separate account products, the society’s level of living benefit guarantees within its variable product portfolio is viewed as moderate. Thrivent Financial continues to de-risk this line of business through product modifications and asset allocation limits. A.M. Best notes that Thrivent Financial has expanded its membership base into the Christian community and continues to benefit from strong persistency within its existing policyholder base by providing diversified financial services products and fraternal benefit programs. A.M. Best believes that Thrivent Financial’s overall liquidity profile is sound, and its ability to meet policyholder obligations remains strong, considering its fraternal niche and stable liability profile.
Partially offsetting these positive rating factors are the strategic challenges associated with penetrating Thrivent Financial’s membership base, its ongoing spread compression and the level of high risk asset classes relative to capital. High risk asset exposure, although elevated, has moderated somewhat in recent years and is partially offset by the high quality of its capital structure, which utilizes no debt and full retention of all product related risks on its balance sheet. With the continuing low interest rate environment, Thrivent Financial is expected to experience additional spread compression, especially in interest sensitive products with higher guaranteed minimum crediting rates. Thrivent Financial also has potential disintermediation risk in a rising rate environment as a large portion of its annuities lack surrender charge protection, although this risk is partially mitigated by the aforementioned affinity relationship with its membership base. Thrivent Financial’s enterprise risk management framework is reasonably well developed from a corporate governance structure perspective, although its hedging program for its variable annuity block remains limited to delta hedging. Thrivent Financial has re-entered the long-term care marketplace, a line of business that A.M. Best views as less creditworthy than the traditional life and annuity product businesses.
Positive rating movement for Thrivent Financial is unlikely in the near term. Factors that could lead to negative rating actions include a material deterioration in Thrivent Financial’s operating performance and capital erosion due to large losses in investment or underwriting. Additional factors that could lead to negative rating actions would be a material increase in the society’s investment or product risk appetite.
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
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