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. As a result, it maintains some exposure to product lines with higher risk, including long-term care and variable annuities, although variable annuity risk with guaranteed living benefits make up a relatively small portion of the company’s total in-force business. The company continues to diversify its portfolio to meet client needs and recently added Retirement Choice Variable Annuities to round out its diversification. Thrivent’s reserves are weighted toward ordinary life, which AM Best views as a more creditworthy liability profile. Thrivent maintains a high quality capital structure, which utilizes no debt and no financial reinsurance or affiliated captives to house redundant reserves. Additionally, its Best’s Capital Adequacy Ratio (BCAR) continues to be maintained at the strongest level, and Thrivent 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 year.
Offsetting rating factors include continued losses within its legacy long-term care block, which comprises a small part of its portfolio. Additionally, Thrivent maintains a slightly elevated level of Schedule BA assets and commercial mortgages as a percentage of total 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 given the continued low interest rate environment, and disintermediation risk within its annuity block should interest rates rise significantly.
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