AM Best


A.M. Best Lowers Rating of Guaranty Income Life


CONTACTS:

Analyst(s)

Mansour Yamin

(908) 439-2200, ext. 5560

mansour.yamin@ambest.com

Stephen A. Irwin

(908) 439-2200, ext. 5454

stephen.irwin@ambest.com

Public Relations

Jim Peavy

(908) 439-2200, ext. 5644

james.peavy@ambest.com

Rachelle Striegel

(908) 439-2200, ext. 5378

rachelle.striegel@ambest.com


FOR IMMEDIATE RELEASE

OLDWICK, N.J. - MARCH 11, 2003 12:00 AM (EST)
A.M. Best Co. has lowered the financial strength rating to B+ (Very Good) from B++ (Very Good) of Guaranty Income Life Insurance Company (GILICO) (Baton Rouge, LA) and has placed the rating under review with negative implications.

This rating action reflects the company's weakened risk-adjusted capitalization, the decline in net statutory income primarily as a result of capital losses in its investment portfolio and relatively high leverage at the parent (Guaranty Corporation) level.

GILICO's capital position declined recently due to the rapid expansion of its fixed annuity product line and substantial write-downs from holdings of below investment grade bonds. In response to these capital losses, GILICO has been closely monitoring the credit quality of its portfolio and has shortened the effective duration of its bond holdings to reduce overall surplus volatility. Its parent is also committed to fund the continued expansion of GILICO and is evaluating various alternatives to raise capital and reduce its leverage. Capital enhancements expected in 2002 did not occur. However, A.M. Best believes that if these capital raising initiatives are successful, GILICO will improve its risk-adjusted capitalization to appropriate levels and continue to be able to execute its long-term growth strategy. Absent the execution of this strategy-which A.M. Best anticipates will occur in the near term-the rating may be further

downgraded.

The success of the annuity program has led to a concentration in business production with nearly nine-tenths of premium income coming from that line. GILICO's operating performance has also declined due to a high (but improving) expense structure and the strain associated with its sales growth.

A.M. Best anticipates GILICO will continue to generate positive sales momentum in the fixed annuity market given current favorable market conditions, reduce its expense levels and expand its geographic coverage.

A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source.

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AMB# Company Name
006504 Guaranty Income Life Insurance Company