DUE CARE UPDATE December 14, 2012 Rating Action: TIAA-CREF, New York Life, Northwestern Mutual (Affirmation, Outlook Revision) On December 11, Moody’s Investors Service affirmed the ‘Aaa’ (Exceptional) insurance financial strength ratings of three U.S. life insurers and their affiliates and changed their outlooks to negative from stable. The companies—New York Life Insurance Co., Northwestern Mutual Life Insurance Co., and Teachers Insurance & Annuity Association—all have the highest possible insurance financial strength ratings from Moody’s. According to Moody’s, the change in outlook was influenced by Moody’s view that the link between the credit profiles of these insurers and the U.S. government are very strong, and that these insurers lack sufficient diversification to address the systemic risks that affect the U.S. government’s creditworthiness. Moody’s currently has a negative outlook on the U.S. government’s ‘Aaa’ sovereign credit rating. This action aligns the ratings and outlooks of the aforementioned companies with those of the U.S. government. Moody’s said these life insurers’ investments, businesses, revenues, and reserves are predominately domestic and the securities they invest in are typically correlated with the U.S. government and economy. A material weakening of the credit quality of the U.S. government would be major drivers of similar problems in the credit profiles of U.S. life insurance companies. In affirming the ratings, Moody’s stated the companies each exhibit leading positions in their core markets, excellent underwriting skills, and strong balance sheets. Rating Action: Prudential (Affirmation) On December 6, Fitch Ratings affirmed the ‘A+’ (Strong) insurer financial strength ratings of the U.S. insurance subsidiaries of Prudential Financial, Inc. (Prudential). The rating outlook is stable. According to Fitch, the ratings reflect Prudential’s strong market position and diversified mix of businesses, strong risk-adjusted capitalization, solid liquidity profile, and good operating performance. Fitch estimates that Prudential’s combined NAIC risk-based capital (RBC) ratio for the U.S. insurance operations was about 475% percent as of September 30, 2012. Fitch stated that credit-related investment losses continued to trend lower in line with rating expectations and the holding company has a net cash position of $3.6 billion, well above the company’s $1.2 billion minimum target. Ratings concerns cited by Fitch include Prudential’s high financial leverage and uncertainty associated with macroeconomic headwinds, in particular sustained low interest rates and ongoing financial market volatility. Prudential’s financial leverage ratio stood at 35% as of September 30, 2012, which is above Fitch’s expectations for the rating level. Page 1 of 7 DUE CARE UPDATE December 14, 2012 Rating Action: Lincoln National (Affirmation) On November 30, A.M. Best affirmed the financial strength rating of ‘A+’ (Superior) of the key life/health subsidiaries of Lincoln National Corp. (Lincoln National), including Lincoln National Life Insurance Co. Additionally, A.M. Best downgraded the financial strength rating of stand- alone subsidiary First-Penn Pacific Life Insurance Co. to ‘A’ (Excellent) from ‘A+’ (Superior), reflecting the company’s limited new business profile. The outlook for the ratings is stable. According to A.M. Best, Lincoln National’s ratings reflect its leadership position across various lines of business, improved investment performance, and solid level of risk-adjusted capital. A.M. Best noted that the company has been proactive in managing its universal life products with secondary guarantees and variable annuity living benefit liabilities. A.M. Best also believes that Lincoln National’s capital level adequately supports its current balance sheet risks under most stress scenarios. A.M. Best said Lincoln National’s investment portfolio continues to perform well and it believes exposure to riskier assets is manageable. A.M. Best noted that direct premiums have declined as a result of pricing changes to products with secondary guarantees and that Lincoln National faces ongoing challenges from competition in its core businesses. Rating Action: Aviva USA (Downgrade) On December 13, Moody’s Investors Service downgraded the insurance financial strength rating of Aviva Life and Annuity Co. (Aviva USA) to ‘Baa1’ (Adequate) from ‘A1’ (Good). The rating was assigned a developing outlook. According to Moody’s, the downgrade followed the conclusion of a ratings review of Aviva USA that was initiated on June 27, 2012. Moody’s said the downgrade was driven by the announcement by Aviva plc that it was in discussions with external parties which could lead to the sale of its U.S. operations. Moody’s described the current rating as reflective of Aviva USA’s standalone credit profile and reflects the removal of three notches of ratings support from the parent company. Moody’s stated that the announcement was indicative of Aviva USA’s status as “non-core” to Aviva plc. Moody’s said it expects Aviva plc to provide minimal capital support to Aviva USA as a result of public statements. The developing outlook reflects the uncertainty surrounding the outcome of a possible sale of the company since the acquiring company could have ratings that are higher, lower, or the same as Aviva USA. Rating Actions: Phoenix Life The Phoenix Companies, Inc., parent company of Phoenix Life Insurance Co. (Phoenix Life), has announced that the company is seeking consent from bondholders to waive the requirement to furnish timely financials to the trustee on its Quarterly Interest Bonds due 2032, following a previous announcement by the company that it was postponing the release of its third quarter Page 2 of 7 DUE CARE UPDATE December 14, 2012 2012 financial statements. As a result of the announcement, several rating agencies took actions related to the financial strength ratings of Phoenix Life. A.M. Best placed the financial strength rating of ‘B+’ (Good) under review with negative implications. Fitch placed the ‘BB+’ (Moderately Weak) insurer financial strength rating on Rating Watch Negative. Moody’s placed the ‘Ba2’ (Questionable) insurance financial strength rating on review for downgrade. Standard & Poor’s affirmed its ‘BB-’ (Marginal) financial strength rating and placed it on CreditWatch with negative implications. Rating Action: MassMutual (Affirmation) On November 20, Fitch Ratings affirmed the ‘AA+’ (Very Strong) insurer financial strength ratings of Massachusetts Mutual Life Insurance Co. (MassMutual) and its wholly owned domestic insurance subsidiaries. The rating outlook is stable. According to Fitch, the ratings reflect MassMutual’s large and stable block of traditional life insurance, strong capital levels, strong competitive positions in major business lines, high-quality investment portfolio, and moderate financial leverage. Fitch stated that total adjusted capital at MassMutual grew by 9% during the first nine months of 2012. However, Fitch commented that the quality of MassMutual’s statutory capital has deteriorated somewhat in recent years due to the addition of a significant amount of surplus notes. Fitch said its key rating concerns include challenges related to macroeconomic factors and slow industry growth in the company’s core insurance product lines. Fitch said it expects challenges associated with the European debt crisis, the U.S. “fiscal cliff”, and the weak economic recovery will constrain MassMutual’s earnings over the near term and could have a negative effect on capital in a severe stress scenario. Rating Action: Guardian Life (Affirmation) On November 15, A.M. Best affirmed the financial strength rating of ‘A++’ (Superior) of Guardian Life Insurance Co. of America (Guardian Life) and its primary life/health subsidiaries. The outlook for the ratings is stable. According to A.M. Best, Guardian Life’s ratings reflect its superior capitalization and positive premium trends in its core business segments despite challenging economic conditions. A.M. Best said Guardian’s consistent earnings provide a stable stream of earnings and cash flow. The company has also executed a number of de-risking initiatives to counteract the low interest rate environment. Page 3 of 7 DUE CARE UPDATE December 14, 2012 A.M. Best noted that Guardian’s core life and group businesses face a high level of competition. In addition, A.M. Best expects continued pressure on investment spreads as a result of prolonged low interest rates. Rating Action: MetLife (Affirmation) On November 28, A.M. Best affirmed the financial strength rating of ‘A+’ (Superior) of the primary life/health insurance subsidiaries of MetLife, Inc. (MetLife). The outlook for the ratings is stable. According to A.M. Best, the affirmations reflect MetLife’s diverse business mix, leading market positions in core business lines, favorable operating results, and significant operating scale. Additionally, MetLife’s ratings are enhanced by de-risking strategies which focuses on products which are less capital intensive and sensitive to markets. MetLife has also benefitted from gains on interest rate hedges which have helped to reduce its earnings volatility in the current low interest rate environment. A.M. Best also stated that MetLife maintains a very strong liquidity position at the holding company level and is able to fund upcoming debt maturities without accessing capital markets. Partially offsetting these positive rating factors is MetLife’s risk-adjusted capital position,