A.M. Best Affirms Ratings of Symetra Financial Corporation and Its Subsidiaries
A.M. Best Co. has affirmed the financial strength rating (FSR) 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 the debt ratings of “bbb+” on $300 million of 6.125% senior unsecured notes due 2016 and “bbb-” on $150 million of fixed-to-floating junior subordinated notes due 2067 of Symetra Financial Corporation (Symetra) (NYSE: SYA). The outlook for all ratings is stable. All companies are domiciled in Bellevue, WA, unless otherwise specified.
The ratings reflect Symetra's consistent profitability, favorable risk-adjusted capital position and continued product diversification. Symetra's insurance operations continue to generate solid operating earnings across all business divisions. Within the benefits division, earnings continue to improve, driven by strong stop-loss sales and Symetra's conservative underwriting, which has resulted in low loss ratios over the past few years. The retirement division, despite lower annuity sales, has reported improved operating results year-to-date due to higher account values and annuity spreads. Although the individual life division has seen its pre-tax operating income decrease recently due to higher claims and costs associated with building its distribution, it still produces almost one-fifth of Symetra's operating revenue and earnings. 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 adjusted financial leverage ratio of approximately 12% and strong interest coverage of roughly nine times, both of which are well within A.M. Best's guidelines for its current ratings. Additionally, A.M. Best's expectation for future earnings and capitalization should enable Symetra to maintain its favorable leverage position.
While sales in Symetra's benefits division have increased, A.M. Best has observed declining premium trends in the company's individual life and annuity operations. Consistent with some of the organization's competitors, persistent low interest rates are expected to keep annuity sales depressed in the near to medium term. A.M. Best notes that despite the sluggish economy, Symetra has reported favorable persistency and has generally maintained its targeted spreads within its annuity business segments. Although the organization's business profile continues to improve, A.M. Best remains concerned regarding the sustainability of earnings across key product lines given the persistent low interest rate environment and the likelihood of lower net investment income. However, A.M. Best believes that Symetra's relatively strong risk-adjusted capital position and fairly liquid investment portfolio essentially mitigates 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 sizeable realized investment losses.
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.
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