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Rating Action:

Moody’s affirms Guardian’s ratings; outlook changed to positive

22 July 2021


New York , July 22, 2021 – Moody's Investors Service has affirmed the Aa2 insurance financial strength (IFS) ratings of Guardian Life Insurance Company of America and its affiliated ratings (see complete rating list below). The outlook has been changed to positive from stable.

RATINGS RATIONALE

According to Moody's, Guardian's Aa2 IFS rating reflects the company's strong business profile, which is supported by its stable block of individual life insurance business and career-agent distribution, its commitment to mutuality, as well as the company's low asset/liability management and liquidity risk, which stems from the primarily non-interest sensitive nature of its liability mix. In addition, the company has excellent capitalization and a high degree of financial flexibility through its participating policyholder dividend mechanism on its large block of whole life insurance policies.

The company's strengths are tempered by Guardian's modest market position and brand relative to its rating and its exposure to some less creditworthy products (relative to its participating whole life), including individual and group disability, which could produce earnings volatility.

The change in outlook to positive from stable reflects Moody's view of the conservatism of Guardian's management, products, capitalization, investments, and the flexibility provided by the dividend mechanism of the whole life policy, its dominant product. While Guardian's mutual peers are significantly larger, Guardian has a relatively high percentage of its business in low risk products and its investment portfolio is lower risk. Guardian also compares well with its mutual peers in terms of profitability and capitalization.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

The following factors could lead to an upgrade in Guardian's ratings: (1) a consistent return on capital (ROC) above 5%, without increasing the risk profile of liabilities; (2) increased market share in core businesses and/or profitable growth in supplemental group benefit products; and (3) adjusted financial leverage below 20%.

Given the positive outlook, a downgrade over the near term is unlikely. However, the following could cause us to change the outlook back to stable: (1) an NAIC RBC ratio of less than 400% (CAL); (2) ROC expected to be below 5%; (3) adjusted financial leverage expected to be above 20%, or (4) increased asset risk heightening investment losses in a stress scenario.

RATING ACTIONS

The following ratings were affirmed:

Guardian Life Insurance Company of America—insurance financial strength rating at Aa2, surplus note rating at A1(hyb);

Guardian Insurance & Annuity Company, Inc.— insurance financial strength rating at Aa2;

Guardian Life Global Funding—senior secured rating at Aa2, senior secured MTN rating at (P)Aa2.

The outlook for all the above entities changed to positive from stable.

The principal methodology used in these ratings was Life Insurers Methodology published in November 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1187348 . Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Guardian Life Insurance Company of America is headquartered in New York. As of March 31, 2021, the company reported total assets of $69.3 billion and total capital and surplus of $7.8 billion.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004 .

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288435 .

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Michael Fruchter, CFA
VP-Sr Credit Officer
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS : 1 212 553 0376
Client Service : 1 212 553 1653

Scott Robinson, CFA
Associate Managing Director
Financial Institutions Group
JOURNALISTS : 1 212 553 0376
Client Service : 1 212 553 1653

Releasing Office :
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS : 1 212 553 0376
Client Service : 1 212 553 1653

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