Symetra Financial CEO: Interest Rates ‘Moved Against Us’ in First Quarter
April 27, 2015 by Fran Matso Lysiak, senior associate editor, BestWeek: fran.lysiak@ambest.com
BELLEVUE, Wash. – Symetra Financial Corp.’s first-quarter profit fell 51% as the company’s chief executive officer said “interest rates moved against us in the first quarter and remained stubbornly low.”
Net income declined to $38.8 million. Symetra experienced net realized losses of $6.2 million, compared with net gains of $20.7 million the same period a year ago.
The results reflected lower gains on mark-to-market equities, which were $8.2 million, compared with $19.7 million last year, the company said. Impairments on corporate fixed-maturities also increased from the year-ago quarter while the prior-period benefited from gains on sales of fixed maturities.
The business fundamentals “remain solid, and the positive momentum we have built over the last couple of years has continued into 2015, though we had hoped to begin the year with better earnings,” said Tom Marra, president and CEO of Symetra Financial, during the earnings call.
“It is challenging to maintain interest spreads and to grow in this environment,” he said.
Total revenues, however, rose to $549.7 million from $545.5 million. Symetra cited strong sales across its lines, with year-over-year growth in its benefits, retirement and individual life divisions.
“We have work to do but we remain confident in our outlook for the full year,” Marra said, adding Symetra kicked off this year with strong sales. Symetra offers employee benefits, annuities and life insurance through benefit consultants, financial institutions and independent agents and advisers nationally.
In its benefits division, pretax adjusted operating income fell to $18.5 million from $27.8 million, driven by a higher loss ratio in its medical stop-loss business. The loss ratio increased to 67.1% from 55.7% in the prior period.
Sales of medical stop-loss increased to $136.7 million from $71.9 million as sales benefited from strong relationships with national brokers. “We had a strong January 1 renewal and new business season for medical stop loss,” Marra said.
In Symetra’s retirement division’s income annuity business, pretax adjusted operating income fell to $1.3 million from $9.4 million, due in part to lower net investment income, the company said.
Net investment income experienced losses on hedge funds and reduced investment prepayment income. Losses on hedge fund investments, bought in the third quarter of 2014 and marked to market, totaled $2.4 million in the first quarter, the company said.
“We remain confident that we will deliver a year of solid earnings, despite some volatility in investment income in the first quarter,” Marra said in a statement. “Core profitability metrics — base interest spreads, underwriting results and operating margins — remain strong, and we are successfully expanding annuity and life insurance account values and premium revenues.”
Symetra Life Insurance Co. currently has a Best’s Financial Strength Rating of A (Excellent).
On the afternoon of April 24, Symetra Financial Corp.’s (NYSE: SYA) stock was trading at $24.41 a share, down 3.97% from the previous close.
