OLDWICK, N.J.--(BUSINESS WIRE)--A.M. Best has affirmed the Financial Strength Rating (FSR) of A++ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “aa+” of Guardian Life Insurance Company of America (Guardian Life) (headquartered in New York, NY) and its core subsidiaries, Guardian Insurance & Annuity Company, Inc. (Wilmington, DE) and Berkshire Life Insurance Company of America (Pittsfield, MA) (together referred to as Guardian). Concurrently, A.M. Best has affirmed the Long-Term Issue Credit Rating (Long-Term IR) of “aa-” of Guardian Life’s existing surplus notes. The outlook of these Credit Ratings (ratings) is stable.
Additionally, A.M. Best also has affirmed the FSR of A (Excellent) and the Long-Term ICR of “a+” of First Commonwealth Insurance Company (First Commonwealth) (Chicago, IL), one of the core-managed dental subsidiaries of Guardian Life. The outlook of these ratings is stable.
The ratings of Guardian reflect its balance sheet strength, which A.M. Best categorizes as strongest, as well as its strong operating performance, favorable business profile and a very strong enterprise risk management.
The organization has maintained a very sound capital structure, and its Best’s Capital Adequacy Ratio (BCAR) is at the strongest level. Guardian also has accessed capital through the issuance of surplus notes as needed to support its business, with its unadjusted debt-to-capital ratio of 15%, which remains prudent, and statutory interest coverage also is adequate at over six times. Guardian also maintains a relatively conservative investment portfolio, adequate reserving and strong risk management practices, lending to its balance sheet strength.
The organization has maintained strong pre-tax, pre-policyholder dividend, operating gains with strong profitability ratios over the past several years, reaching a five-year high in 2017. These results have been driven by a combination of strong statutory earnings across all lines – with the exception of its group annuities segment. While Guardian’s sizable and mature participating ordinary life insurance business has historically driven earnings, the group accident and health line produced the most favorable results in 2017. As a result, Guardian continues to generate steady operating earnings and cash flows across its various life and accident and health segments. The organization has experienced favorable operating results in its group insurance business due to the combination of good underwriting fundamentals and expense initiatives, as well as the suspension of the health insurer fee in 2017.
Guardian has strong market positions across all of its core businesses: ordinary life, group employee benefits and individual disability. Guardian also continues to invest in future growth through management strategies such as its branding initiative, continued adjustments to its product offerings and design, technology advancements focused on the end consumer and strengthening its core distribution channels-career agency force, general agents and brokers. This has resulted in steady aggregate premium growth. For the past two years, while revenue growth was strong across its core product lines, premium in aggregate declined due to a combination of factors impacting the individual and group annuity lines of business: including the sale of its 401K business, the cessation of sales of its internally manufactured variable annuity products with living benefit riders and the general impact of the Department of Labor Fiduciary Rule on annuity sales. While this has had a temporary impact on total premium, Guardian management expects that over the long term, the move away from interest-sensitive products should have a positive effect on it earnings and limit margin compression caused by these products. Furthermore, investments in systems, infrastructure, personnel and strategic initiatives, have resulted in sales growth in Guardian’s group benefits segments, including its dental and worksite product offerings. Overall revenue continues to grow as a result of premium expansion and the addition of new and growing fee-income businesses.
A.M. Best has concurrently withdrawn the ratings of First Commonwealth and moved the ratings to NR (Not Rated) at Guardian’s request.
The following Long-Term IRs have been affirmed with a stable outlook:
Guardian Life Insurance Company of America—
-- “aa-” on $400 million 7.375% surplus notes, due 2039
-- “aa-” on $450 million 4.875% surplus notes, due 2064
-- “aa-” on $350 million 4.85% surplus notes, due 2077
Guardian Life Global Funding – “aa+” program rating
--“aa+” on all outstanding notes issued under the program
This press release relates to Credit Ratings that have been published on A.M. Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best’s Credit Ratings. For information on the proper media use of Best’s Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best’s Credit Ratings and A.M. Best Rating Action Press Releases.
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