1. A Word About Strength
What’s In a Dividend?
The Mutual Company Advantage
Founded in 1860, Guardian is a mutual life insurance company, operating solely
for the benefit of its participating life policyholders, who share in the company’s
performance through the payment of annual dividends.1 Unlike stock-based
companies, there are no outside stockholders to share in the profits, so Guardian is
not subject to the short-term demands of Wall Street analysts. While dividends are
not guaranteed, Guardian has paid a dividend to its permanent individual life
policyholders every year since 1865—through boon years as well as turbulent times.
Guardian’s 2010 Dividend
In November, 2009, Guardian's Board of Directors approved a significant dividend
allocation of $712 million to its individual life policyholders in 2010, the second
highest amount in company history.
Guardian has demonstrated Guardian's secure capital position and strong results in 2009 have allowed us to declare
the capacity to sustain its
financial stability, and its
a dividend interest rate of 7% for 2010. The following pages explain how the company's
commitment to policyholders, dividend interest rate affects the dividend, but is not the same as the rate of return on
especially during a time which a policy.
has seen particularly volatile
fluctuations in the marketplace. The chart below illustrates Guardian’s steady dividend performance from 2005–2008.
Dividends Declared
Results in $ millions
1 Dividends are not guaranteed. They are declared annually by Guardian’s Board of Directors.
The Guardian Life Insurance Company of America, New York NY
2. What’s in Our Dividend?
Throughout the years, Three of the business areas in a life insurance company that directly impact the
Guardian has
demonstrated excellent
dividend are:
business results Investment results … strong investment results demonstrate the company’s
in all of the
fundamental business ability to prudently manage a well-diversified, high-quality asset portfolio that
areas impacting the backs its long term obligations. The investment income generated in excess of
dividend. the policy’s guaranteed interest rate is used to support an increase in the
dividend. It includes income from assets underlying individual participating
products plus income from distributable earnings from other lines of business.
Mortality experience … a life insurance company’s ability to underwrite risks
effectively results in good mortality experience – that is, the number of death
claims paid is less than the mortality assumptions used to provide the guarantees
in the company’s whole life policies. This difference between actual experience
and the mortality guaranteed in the policy is returned to the policyholder as part
of the dividend.
Expense management … Guardian recovers the costs of acquiring and servicing
business through the expense component of the dividend. If the company’s
expenses are lower than anticipated, those savings help to support a more
favorable dividend that year.
The example below demonstrates how a dividend is calculated using the three
components just discussed. It is derived from the 2010 dividend scale for a
Guardian Life Paid-Up at Age 99 policy for a male, age 40, preferred plus/
no tobacco, $500,000 face amount, and highlights results in policy year 20.
Investment Return Component (Interest) $4,307
Mortality Return Component $2,003
Investment Return Component (Interest) ($90)
Total Dividend in Policy Year 20* $6,220
* Assumes no outstanding loans or loan interest.
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3. Industry Practices
There is currently no industry standard for defining a dividend interest rate.
Buying decisions ought not to be made with a narrow view of dividend interest rates,
company illustrations, or even past performance for specified years, since the results
depend on what particular years are included in the study.
For example, the chart below shows the Internal Rate of Return on a Guardian policy
in its 20th year, based on Guardian’s 2010 dividend scale. The policy is a Guardian
Whole Life Paid-Up at Age 99 for a face amount of $500,000, and based on a male,
preferred plus/no tobacco. It is compared to similar policies issued by a few other
major life insurance companies. Clearly, based on current numbers, the Guardian
policy provides significantly better growth on cash values over the long term.
Our goal is to provide Comparison of 20-Year IRR on Cash Value—$500,000 Male, Best Class*
sustained value for our
Age Guardian Mass Mutual Northwestern Mutual New York Life
clients over a lifetime.
35 4.04% 3.42% 3.47% ___%
45 3.69% 3.16% 3.34% ___%
55 3.16% 2.87% 3.03% ___%
* Values for Guardian policies are based on the 2009 dividend scale which is not guaranteed and is subject to change by
the company's Board of Directors. Numbers for other companies derived from current company illustrations.
The Mutual Company Advantage
As one of the few remaining mutual life insurance companies in America today,
Guardian is committed to the practice of doing business in the best interests of its
policyholders. Throughout the years as well as during the past few years of economic
volatility, Guardian has continued to provide exceptional value to its clients.
From the three key areas covered above, the company’s investment results may be
highlighted as a factor that has played a determining role in the 2009 and 2010
dividends. Guardian has long maintained an investment strategy that is focused on
the long term and that is aimed at protecting the company’s stability and ratings.
The highly experienced team of investment professionals actively oversees the
company’s well-diversified portfolio, which has high credit quality and ample
liquidity that allows them to take advantage of immediate opportunities while
prudently managing risk.
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4. What the Rating Agencies Say
During the past few years The chart below shows how the company is evaluated by four of the independent
of exceptional financial
market turbulence,
rating sources:
Guardian was one of the Ratings
few companies to have
received upgrades from 3
renowned rating
agencies. In 2009, our
ratings were further
reaffirmed by 3 of
the agencies.
Fitch raised Guardian’s rating in October 2007, stating in part that Guardian
demonstrated “improved operating performance and higher than expected
capital adequacy.”
In July 2008, Standard & Poor’s characterized Guardian as having “a conservative
investment philosophy which has limited speculative grade credit risk and no
exposure to sub-prime mortgages,” and raised the rating from AA (Positive Outlook)
to AA+ (Stable Outlook).
A.M. Best raised Guardian’s rating to A++ in November 2008, citing the company’s
“superior capitalization,” our ability to “sustain positive earnings trends,” the
company’s “well-diversified product portfolio” as well as the focus on “building
policyholder value.”
Guardian's ratings from Moody's, Standard & Poor's, and Fitch were reaffirmed
in 2009
More About Guardian
A mutual insurer founded nearly 150 years ago, The Guardian Life Insurance
Company of America and its subsidiaries are committed to protecting individuals,
business owners and their employees with life, long term care insurance, disability
income, group medical and dental insurance products, and offer 401(k), annuities and
other financial products. Guardian operates one of the largest dental networks in the
United States, and protects more than six million employees and their families at
120,000 companies. The company has more than 5,400 employees in the United
States and a network of over 3,000 financial representatives in more than 80
agencies nationwide.
Pub 4077 (12/09)
2008—XXXX The Guardian Life Insurance Company of America, New York NY 10004-4025
