schedule db - part f - section 1 - TIAA-CREF

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STATEMENT AS OF SEPTEMBER 30, 2009 OF THE TEACHERS INSURANCE and ANNUITY ASSOCIATION of AMERICA 1. Summary of Significant Accounting Policies A. Accounting Principles NOTES TO FINANCIAL STATEMENTS The financial statements of Teachers Insurance and Annuity Association of America are presented on the basis of statutory accounting principles prescribed or permitted by the New York State Insurance Department (the “Department”). The State of New York requires insurance companies domiciled in the State of New York to prepare their statutory basis financial statements in accordance with the National Association of Insurance Commissioners’ (“NAIC”) Accounting Practices and Procedures Manual (“NAIC SAP”), subject to any deviation prescribed or permitted by the Department (“NY SAP”). A reconciliation of the Company’s net income and capital and contingency reserves between NAIC SAP and practices prescribed and permitted by the State of New York is shown below: 9/30/2009 12/31/2008 Net Loss, NY SAP $ (644,641,487 ) $ (3,283,390,785 ) NY SAP Prescribed or Permitted Practices: Additional Reserves for: Term Conversions 1,296,043 1,747,842 Deferred and Payout Annuities issued after 2000 318,171,126 424,228,167 Net Loss, NAIC SAP $ (325,174,318 ) $ (2,857,414,776 ) Capital and Contingency Reserves, NY SAP $ 17,694,734,335 $ 17,754,167,343 NY SAP Prescribed or Permitted Practices: Deferred Premium Asset Limitation 153,800 303,418 Goodwill/Intangible Asset Limitation 18,899,100 20,090,100 Additional Reserves for: Term Conversions 12,430,716 11,134,673 Deferred and Payout Annuities issued after 2000 4,127,549,077 3,809,377,951 Capital and Contingency Reserves, NAIC SAP $ 21,853,767,028 $ 21,595,073,485 2. Accounting Changes and Corrections of Errors (6) For the reporting periods beginning on or after September 30, 2009, SSAP No. 43R, Loan-backed and Structured Securities, was adopted. This statement establishes statutory accounting principles for investments in loan-backed securities and structured securities. Loan-backed securities and structured securities not in default, are stated at amortized cost. Estimated future cash flows and expected repayment periods are used in calculating amortization for loan-backed and structured securities on the prospective method. Loan-backed securities and structured securities held for sale are stated at the lower of amortized cost or fair value. Loan-backed securities and structured securities in default are valued at the lower of amortized cost of fair value. 3. Business Combinations and Goodwill Not Applicable. 4. Discontinued Operations Not Applicable. 5. Investments A. Mortgage Loans: 9/30/2009 12/31/2008 5. Taxes, assessments and any amounts advanced and not included in the mortgage loan total $ --- $ 3,730 6. Current period impaired loans with a related allowance for credit losses $ 244,205,222 $ --a) Related allowance for credit losses $ 13,600,000 $ --- 7. Impaired mortgage loans without an allowance for credit losses $ 147,589,496 $ 258,524,317 8. Average recorded investment in impaired loans $ 329,836,170 $ 185,086,064 9. Interest income recognized during the period the loans were impaired 10. Amount of interest income recognized on a cash basis during the period $ 22,642,001 $ 14,094,900 the loans were impaired 11. Allowance for credit losses: $ 26,463,466 $ 14,277,346 b) Additions charged to operations $ 318,760,938 $ --c) Direct write-downs charges against the allowances $ (29,739,788 ) $ --d) Recoveries of amounts previously charged off $ (275,421,150 ) $ --e) Balance at the end of the period $ 13,600,000 $ --- 7
STATEMENT AS OF SEPTEMBER 30, 2009 OF THE TEACHERS INSURANCE and ANNUITY ASSOCIATION of AMERICA B. Debt Restructuring: NOTES TO FINANCIAL STATEMENTS 7.1 9/30/2009 12/31/2008 1. The total recorded investment in restructured investments $ 28,612,224 $ 19,393,575 2. The realized capital losses related to these investments $ --- $ 4,602,620 D. Loan-Backed Securities (1) The Company primarily uses third party pricing vendors and to a lesser extent broker quotes in determining the market value of its loan backed and structured securities. Generally, each bond in the portfolio was priced individually utilizing the most recent price available. Effective September 30, 2009, the Company adopted SSAP No. 43R resulting in an increase of approximately $210 million in surplus. (2) Prepayment assumptions for loan-backed and structured securities are based on historical averages drawing from the 3, 6 or 12 month experience for a particular transaction and may vary by security type and vintage. The prepayment assumptions may also employ a vector approach with the first 1-2 years based on recent security prepay experience (3 or 6 month average) and the back-end of the vector, which is typically the longest component, based upon the 12-month prepayment rate. (3) The top ten concentration of credit risk exposure of loan-backed and structured securities as of September 30, 2009 are as follows: Description Amortized Cost Before Other- Than-Temporary Impairment * Other-Than- Temporary Impairment Fair Value DCENT 2009-A1 $ 200,000,000 $ --- $ 200,807,800 CSMC 2007-C2 157,800,532 20,705,482 78,915,913 CHAIT 2005-A6 150,000,000 --- 147,447,075 CNHMT 2009-1A 150,000,000 --- 149,795,775 MSC 2003-IQ6 139,999,778 --- 104,703,367 CSFB 2003-C4 130,837,157 --- 121,821,498 JPMCC 2005-LDP5 129,472,644 --- 47,643,658 JPMCC 2004-CB8 127,899,128 --- 86,744,974 LBUBS 2003-C5 120,600,104 --- 110,758,681 AMXCA 2009-1 120,000,000 --- 121,416,396 Total $ 1,426,609,343 $ 20,705,482 $ 1,170,055,137 *Cash flows analysis supports the recovery of the amortized cost as of September 30, 2009. (4) a. Security Intent to Sell Aggregate Intent to Sell Amortized Cost Basis Before Other-Than-Temporary Impairment C1 $ 26,640,801 Other-Than-Temporary Impairment Recognized in Loss C2 $ 8,096,939 Fair Value (C1 - C2) $ 18,543,862 (5) Securities with a recognized Other-than-temporary Impairment (“OTTI”) – See Note 5 D (5) – security with a recognized Other-than-temporary Impairment disclosure attachment (6) b. As of September 30, 2009, the Company held loan-backed and structured securities totaling $30,567,369,057 in amortized cost which have not been impaired and exceeded fair value. The fair value on these securities totaled $20,821,477,859, resulting in unrealized losses of $9,745,891,198. Where the estimated fair value declined and remained below cost for less than twelve months totaled $171,868,848 in unrealized losses with amortized cost of $3,148,524,634 and fair value of $2,976,655,785. Where the estimated fair value declined and remained below cost for twelve months or more totaled $9,574,022,350 in unrealized losses with amortized cost of $27,418,844,423 and fair value of $17,844,822,073. (7) Periodic reviews of investment portfolios are performed to identify investments which may have deteriorated in credit quality to identify, if any are candidates for impairments. The Company develops cash flows as part of its impairment review process. Where the cash flows support the recovery of the principal balance, the Company concludes that the impairment is not other-than-temporary. (8) The Company has been able to estimate fair values using third party pricing vendors and to a lesser extent broker quotes.
Page 1: QUARTERLY STATEMENT OF THE TEACHERS
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STATEMENT AS OF SEPTEMBER 30, 2009
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