A.M. Best Affirms Ratings of Guardian Life of the Caribbean Limited and Guardian General Insurance Limited.

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating (FSR) of A (Excellent) and issuer credit rating (ICR) of "a" of Guardian Life of the Caribbean Limited (Guardian Life) (Port of Spain, Trinidad). The outlook for both ratings is negative.

A.M. Best also has assigned an ICR of "a-" and affirmed the FSR of A- (Excellent) of Guardian General Insurance Limited (GGIL) (Port of Spain, Trinidad). The outlook assigned to the ICR is negative, and the outlook for the FSR has been revised to negative from stable. Both Guardian Life and GGIL are major insurance operating subsidiaries of the publicly traded holding company, Guardian Holdings Limited (GHL), which is listed on Trinidad and Tobago and Jamaica exchanges.

The negative outlook is based on the continuing impact of market value fluctuations in the equity holdings of Guardian Life and GHL, the resulting modest level of return on stockholders' equity at both Guardian Life and GHL on a consolidated basis, increased levels of financial leverage and high exposure to intangible assets at GHL. Guardian Life's significant investments in local equities include a large concentration in several regional stocks. The company's overall net income is highly dependent on stock market performance. The stock market in Trinidad and Tobago showed modest improvement in 2007 after suffering a large drop in 2006 following losses in 2005 and may continue to remain volatile going forward. However, A.M. Best notes that the pending completion of the acquisition of Royal Bank of Trinidad and Tobago by Royal Bank of Canada in second quarter 2008 will reduce the negative impact of fair market value movement on Guardian Life and GHL's consolidated operating results, while enabling Guardian Life and GHL to realize sizeable capital gains and increase its stockholders' equity. A.M. Best also notes that the increased levels of financial leverage and high exposure to intangible assets at GHL could potentially affect further growth through merger and acquisition strategies as well as impose increasing debt servicing requirements. A.M. Best will continue to monitor GHL and Guardian Life's operating results from the impact of their large exposure to equities and other more volatile investments.

Guardian Life's ratings acknowledge its integral role within the GHL group, strong brand name recognition in the Caribbean markets, conservative reserving practices and diversified business profile. On an operating basis, excluding the impact of stock market volatility, Guardian Life's gains from its core life/health insurance operations have shown generally consistent growth in recent years. However, its operating results remain modest relative to its overall capitalization and its leading market share in Trinidad and Tobago.

The ratings of GGIL reflect its leading regional market presence, historically profitable operating performance, improved risk profile and the support and commitment of GHL. GGIL is the largest property/casualty writer in the Caribbean with a major presence in Trinidad and several other markets in the region. In addition, a significant amount of the company's premium income is now generated by its operations in the United Kingdom and is concentrated in that country's automobile segment. This geographic diversification has improved GGIL's risk profile and enhanced its ability to reduce the effects of a catastrophic event in its Caribbean operations.

Partially offsetting these rating factors is a high level of goodwill on GGIL's balance sheet, the continuing soft market conditions in the United Kingdom and the increasingly competitive regional markets in which the company operates. The company's high level of intangibles, mainly goodwill, currently represents more than half of its equity and may raise concerns over the quality of capital.

Concurrently, A.M. Best has withdrawn the FSR of A- (Excellent) of N.E.M. (West Indies) Insurance Limited (NEMWIL) (Trinidad). This rating action reflects the amalgamation of GGIL and NEMWIL, with GGIL as the surviving entity.

Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.