OREANDA-NEWS. Fitch Ratings has affirmed the 'AA+' Insurer Financial Strength (IFS) ratings of the Guardian Life Insurance Company of America (Guardian) and its wholly owned subsidiaries, Guardian Insurance & Annuity Company, Inc. (GIAC) and Berkshire Life Insurance Company of America (Berkshire). The Rating Outlook is Stable. A full list of ratings follows at the end of this release.

KEY RATING DRIVERS

Guardian's ratings reflect the company's favorable operating profile, very strong risk-based capitalization, low operating leverage, high quality investments, and relatively stable operating results. Fitch's key rating concerns include ongoing low interest rates, potential market volatility and the potential for significant deterioration in disability loss ratios in a weak economic environment. Fitch believes that pressure on profitability and capital driven by an extended low interest rate scenario is manageable in the context of the company's capital position and conservative liability profile.

Fitch views Guardian's primary product, participating whole life, as relatively low risk, given the long-duration participating liabilities, limited disintermediation risk, and very limited guarantee provisions. In addition to whole life, Guardian also holds top-tier positions and has had relatively stable performance in its core individual disability and the group insurance markets including group life, dental, and disability.

Fitch views Guardian's statutory capital profile as very strong and exceeding rating expectations. At year-end 2014, Guardian's risk-based capital ratio (RBC) was 527% and total adjusted capital (TAC) was $6.9 billion. TAC increased 6% to $7.3 billion as of June 30, 2015 due primarily to retained earnings and realized gains on the sale of assets. As of June 30, 2015, the company reported low operating leverage of 6.4x and statutory financial leverage (surplus notes in relation to TAC) of 12%, which is somewhat higher relative to mutual peers, but is offset by the relatively conservative liability profile of the company. While surplus notes to TAC is above average relative to mutual insurer peers, the ratio remains within Fitch's 15% guideline for standard surplus note notching.

Guardian generated solid investment performance and minimal credit-related impairments. Credit related impairments were very low in 2014, and Fitch expects impairments to remain low in 2015. Guardian maintains a relatively conservative investment profile as seen in an asset mix that focuses on publicly traded, investment grade, fixed-maturity investments and below-average exposure to commercial mortgages and structured bonds. Guardian's risky asset ratio of 62% at year-end 2014 was well below the average for its highly rated mutual peer group and also well below the life industry as a whole. Guardian has below-average exposure to below investment-grade bonds as a percent of TAC.

Guardian's operating performance has remained relatively stable and in line with rating expectations. Statutory operating results for first six months 2015 are improved over the prior year due to strong results in group insurance and individual life. Reported statutory operating return (after taxes and policyholder dividends) on TAC is in the 4% to 7% range, consistent with peer mutual companies and reasonable given the company's mix of business and levels of operating and financial leverage.

The ratings on Guardian Insurance and Annuity Company and Berkshire Life Insurance Company of America, which are wholly owned subsidiaries of Guardian, are based on Fitch's view that these entities are core operating companies within the Guardian organization.

RATING SENSITIVITIES

Key rating drivers that could lead to a downgrade include a significant decline in TAC or an RBC ratio below 400%; statutory financial leverage above 15%; statutory earnings interest coverage below 6x; a deterioration in disability claims experience causing a significant operating or capital loss; and/or regulatory or tax law changes that hurt the company's position in its primary whole life market.

Fitch could downgrade Guardian's surplus notes if the ratio of surplus notes to TAC exceeds 15%.

Fitch does not anticipate an upgrade at this time given the company's more limited operating profile and scale versus 'AAA' rated peers.

FULL LIST OF RATING ACTIONS

Fitch has affirmed the following ratings:

The Guardian Life Insurance Company of America
--Issuer Default Rating (IDR) at 'AA';
--IFS at 'AA+';
--Surplus notes at 'AA-'.

Guardian Insurance and Annuity Company
--IFS at 'AA+'.

Berkshire Life Insurance Company of America
--IFS at 'AA+'.