quarterly statement - TIAA-CREF

STATEMENT AS OF SEPTEMBER 30, 2011 OF THE TEACHERS INSURANCE and ANNUITY ASSOCIATION of AMERICA
NOTES TO FINANCIAL STATEMENTS
(3) Reconciliation of Level 3 assets and liabilities measured and reported at fair value:
The following is a reconciliation of the beginning and ending balances for assets and liabilities measured and
reported at fair value using Level 3 inputs at September 30, 2011:
Balance at
01/01/2011
Transfers in
of Level 3
Transfers out
of Level 3
Total gains
(losses)
included in Net
Income
Total gains
(losses) included
in Surplus
Purchases,
issuances,
sales and
settlements
09/30/2011
Total
Bonds $ 514,455,582 $125,146,844 a $(130,576,245) b $(12,316,997) $15,138,566 $(13,321,596) $498,526,154
Common
Stocks 255,871,614 93,519,177 d (68,628,693) c --- 28,334,587 --- 309,096,685
Preferred
Stocks 9,432,414 --- (8,529,914) c --- (502,500) --- 400,000
Separate
Accounts 8,030,742,434 --- --- --- 922,915,849 914,582,878 9,868,241,161
Total $8,810,502,044 $218,666,021 $(207,734,852) $(12,316,997) $965,886,502 $901,261,282 $10,676,264,000
Examples of notes for above table:
a. The Company transferred bonds which were not previously measured and reported at fair value into Level 3 primarily due to the
Securities Valuation Office (“SVO”) valuation process related to Loan-Backed and Structured Securities. A lack of observable market
information was used in the valuation of these securities.
b. The Company transferred bonds out of Level 3 that were not measured and reported at fair value as of September 30, 2011.
c. The Company transferred common and preferred stocks out of Level 3 due to the availability of observable or corroborated by market
data and not measured and reported at fair value as of September 30, 2011.
d. The Company transferred common stocks into Level 3 due to the lack of observable market data used in the valuation of these
securities.
The Company’s policy is to recognize transfers into and out of Level 3 at the end of the reporting period.
(4) Characteristics of items being measured for Level 2 and 3:
Bonds Level 3:
As of September 30, 2011, the reported fair value of bonds in Level 3 was $498,526,154, representing 124
individual bonds. The bonds are carried at fair value due to being rated NAIC 6.
Of the 124 bonds reported at fair value, 7 are issuer obligations with a related fair value of $92,900. These
issuer obligations have a weighted average coupon of 5.90%. The remaining 117 bonds are loan-backed and
structured securities with a fair value of $498,433,254. Of the loan-backed and structured securities reported
at fair value, 76 bonds with a fair value of $358,712,027 are collateralized by commercial mortgage loans, 8
bonds with a fair value of $76,901,010 are collateralized by residential mortgage loans, and 33 bonds with a
fair value of $62,820,217 are collateralized by various other collateral. The loan-backed and structured
securities reported at fair value have a weighted average coupon of 5.47%.
Common Stocks Levels 2 and 3:
As of September 30, 2011, the reported fair value of common stocks in Level 2 and 3 was $445,302,182
representing 19 individual common stocks. Common stocks are carried at fair value in accordance with SSAP
No. 30.
Of the 19 common stocks, 9 common stocks with a fair value of $136,205,497 were in Level 2 and 10
commons stocks with a fair value of $309,096,685 were reported in Level 3. 4 common stocks with a fair value
of $30,369,793 have a pricing method where the rate was determined by a pricing service, 5 common stocks
with a fair value of $105,835,704 have a pricing method where the price per share is determined by the
reporting entity and 10 common stocks with a fair value of $309,096,685 have a pricing method where the unit
price is published by the NAIC Valuation of Securities.
Preferred Stocks Levels 2 and 3:
As of September 30, 2011, the reported fair value of preferred stocks in Level 2 and 3 was $957,358,
representing 7 individual preferred stocks. In accordance with SSAP No. 32, redeemable preferred stocks and
perpetual preferred stocks that are NAIC designated RP4-RP6 and P4 to P6 are reported at the lower of book
value or fair value.
Of the 7 preferred stocks, 6 preferred stocks with a fair value of $557,358 were in Level 2 and 1 preferred stock
with a fair value of $400,000 was reported in Level 3. Preferred stocks in Level 2 and 3 are comprised of 4
redeemable preferred stocks with nominal fair value and 3 perpetual preferred stocks with a fair value of
$957,358.
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