S&P rates Teachers Insurance notes AA-

Standard & Poor's said it assigned an AA- rating to Teachers Insurance & Annuity Association of America's (TIAA) issuance of $2 billion of surplus notes.

The offering consists of $1.65 billion 4.9% fixed-rate surplus notes due 2044 and $350 million 4.375% fixed-to-floating rate surplus notes due 2054.

The agency rated these surplus notes two notches below the financial strength rating on the company, as it usually does for surplus notes, because they are subordinated to policyholder claims and payments may be extended due to regulatory restrictions on payments.

These surplus notes will receive intermediate equity credit under S&P’s hybrid criteria. The notes will be issued in accordance with Section 1307 of the New York Insurance Law, will rank pari passu with the association’s existing surplus notes ($2 billion currently outstanding, bearing interest at 6.85%, due Dec. 16, 2039) and will be subordinated to policyholder obligations.

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