AM Best Affirms Credit Ratings of Thrivent Financial for Lutherans

OLDWICK, N.J.--(BUSINESS WIRE)--AM Best has affirmed the Financial Strength Rating of A++ (Superior) and the Long-Term Issuer Credit Rating (Long-Term ICR) of “aa+” (Superior) of Thrivent Financial for Lutherans (Thrivent) (headquartered in Minneapolis, MN). The outlook of these Credit Ratings (ratings) is stable.

The ratings reflect Thrivent’s balance sheet strength, which AM Best assesses as strongest, as well as its strong operating performance, favorable business profile and very strong enterprise risk management (ERM).

The ratings recognize Thrivent’s favorable persistency from its loyal membership base and efforts to continue to grow despite the challenging economic environment. Thrivent maintains a diversified and well-managed product portfolio that is intended to complement its clients’ needs over their life cycles. The company continues to diversify its portfolio to meet client needs. In 2022, Thrivent added a Whole Life/LTC Hybrid product to round out its diversification and has plans for more new products in the future. Thrivent’s reserves are weighted toward ordinary life, which AM Best views as a more creditworthy liability profile.

In 2021, Thrivent experienced record high investment income at slightly over $4 billion, driven by strong performance of its private equity investments, which led to capital and surplus increasing by almost $3 billion. Earnings in the first quarter of 2022 remained strong, although capital growth while positive was offset by

unrealized losses from market movements. The company enhanced its liquidity at the end of 2021, adding borrowing capacity at the Federal Home Loan Bank and utilizes that capacity for liquidity and spread lending. Thrivent maintains a high quality capital structure, which utilizes no debt and no financial reinsurance or affiliated captives to house redundant reserves. Additionally, Thrivent’s risk-adjusted capitalization continues to be maintained at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), and it utilizes a sophisticated ERM program to manage and report risks, which includes a multitude of stress-testing scenarios accompanied with a clear action plan. Thrivent’s ERM program helped it navigate the COVID-19 pandemic headwinds over the past two years.

Offsetting rating factors include historical losses within its legacy long-term care block, which comprises a small part of its portfolio. However, Thrivent's long-term care (LTC) business, which consists of a run-off legacy block and new LTC block reported an operating gain in 2021, due to reserve releases and favorable experience related to COVID over the past two years on its closed block of legacy LTC contracts. Additionally, Thrivent maintains a slightly elevated level of Schedule BA assets, which it has managed well during the pandemic. Additionally, Thrivent has a large percentage of interest-sensitive reserves and a higher-than-average percentage of annuities lacking surrender charge protection. This exposes Thrivent to spread compression and given the rapidly rising interest rate environment, this presents a disintermediation risk within its annuity block.

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