A.M. Best Affirms Ratings of Symetra Financial Corporation and Its Subsidiaries
October 29, 2013 by BUSINESS WIRE
OLDWICK, N.J.–(BUSINESS WIRE)–A.M. Best Co. has affirmed the financial strength rating of A (Excellent) and issuer credit ratings (ICR) of “a+” of Symetra Life Insurance Company and its subsidiary, First Symetra National Life Insurance Company of New York (New York, NY). Concurrently, A.M. Best has affirmed the ICR of “bbb+” and existing debt ratings of the enterprise’s ultimate holding company, Symetra Financial Corporation (Symetra) (NYSE:SYA). The outlook for all ratings is stable. All companies are headquartered in Bellevue, WA, unless otherwise specified.
The ratings reflect Symetra’s balanced product mix, good earnings diversification, sound risk-adjusted capitalization and strong overall balance sheet. Symetra’s insurance operations continue to generate solid operating earnings across all business divisions. Although there has been some recent earnings pressure within some of its core lines of business, each segment currently comprises at least one-fifth of Symetra’s total pre-tax adjusted operating earnings. As a result of the group’s consistent operating earnings, Symetra’s risk-adjusted capital remains strong. The organization continues to look to enhance future earnings and revenue streams through both broadening its product portfolio and expanding its distribution.
The ratings also reflect Symetra’s conservative financial leverage ratio of approximately 14%—incorporating some equity credit for hybrid securities—and strong interest coverage of over eight times, both well within A.M. Best’s guidelines for the company’s current ratings. Additionally, A.M. Best’s expectations for future growth in both earnings and equity should enable the company to maintain its favorable leverage position.
While Symetra continues to report favorable overall earnings trends, some of its business segments have produced weaker pre-tax adjusted operating income through the first half of 2013. The company has generated lower earnings within its individual life and retirement business segments due to declining premium revenue and higher claims experience. Consistent with some of the organization’s competitors, persistent low interest rates have depressed annuity sales over the past couple of years. The sales decline in income annuities also can be attributable to Symetra discontinuing sales of structured settlements at the end of 2012. However, a more favorable interest rate environment, combined with Symetra’s ongoing expansion of bank distribution, has led to a sizeable increase in deferred annuity sales in the third quarter of 2013, led by fixed indexed annuities. A.M. Best notes that despite the sluggish economy, Symetra has generally maintained its targeted spreads and has been reporting favorable persistency within its annuity segments.
Symetra maintains a leadership position in medical stop-loss and is an established provider of annuities through banks and broker-dealers. Although the organization’s business profile continues to strengthen, A.M. Best remains concerned regarding the sustainability of earnings across key product lines given the persistent low interest rate environment and the possibility of lower net investment income. However, A.M. Best believes that Symetra’s strong capital position and high-quality investment portfolio partially mitigate the potential degradation in operating performance should low interest rates persist.
A.M. Best believes Symetra is well positioned at its current rating level over the near to medium term.
Factors that could lead to negative rating actions include a significant deterioration in the company’s operating performance, the need for material reserve adjustments or sizable realized investment losses.
The following debt ratings have been affirmed:
Symetra Financial Corporation—
— “bbb+” on $300 million 6.125% senior unsecured notes, due 2016
— “bbb-” on $150 million fixed-to-floating rate junior subordinated notes, due 2067
The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
A.M. Best Company is the world’s oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.
