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Fitch Affirms Symetra's Ratings; Outlook Stable
August 29, 2013 / 4:57 PM / 4 years ago

Fitch Affirms Symetra's Ratings; Outlook Stable

(The following statement was released by the rating agency) CHICAGO, August 29 (Fitch) Fitch Ratings has affirmed its ratings on Symetra Financial Corp. (Symetra), including the Issuer Default Rating (IDR) at 'A-' and all outstanding debt issues, as well as the 'A+' Insurer Financial Strength (IFS) rating of the company's lead life insurance subsidiary, Symetra Life Insurance Company (Symetra Life). The Rating Outlook is Stable. A full list of rating actions follows at the end of this release. KEY RATING DRIVERS Fitch's affirmation of Symetra's ratings reflect the company's strong balance sheet, consistent and diversified earnings, moderate financial leverage and lower-risk products. Additional strengths include the company's good competitive position in the group medical stop-loss market and fixed annuities sold through banks. Symetra's products are less complex than many of its life and annuity peers. The ratings also consider Symetra's lack of significant scale to other highly rated life insurers. Fitch considers Symetra's reliance on its niche group medical stop-loss business, which generates a major source of earnings (26% in 2012), as a concentration risk. Fitch has maintained the Stable Outlook based primarily on expectations that key credit metrics, including earnings, will remain at or above current levels over the next 12 to 18 months. Longer term, Fitch is concerned with the earnings implications of a prolonged low interest rate environment as spreads between earned rates and credited rates narrow. Fitch expects 2013 earnings will be pressured by the low interest rate environment, higher loss ratios in its benefits segment and increased expenses related to Symetra's growth initiatives. Profitability is expected to range from 9% to 10% return on equity (ROE). Symetra's ROE through the first six months of 2013 was 9.8% on an annualized basis. Pretax, adjusted operating income for the first six months of 2013 declined 11% versus the comparable period in 2012. Fitch views Symetra's balance sheet strength and asset quality favorably. The company's estimated June 30, 2013, NAIC risk-adjusted capital (RBC) ratio of 480% is considered by Fitch to be very strong for the rating. Financial leverage at 17% is considered moderate for the ratings and financial flexibility is considered good. GAAP-based EBIT coverage is solid for the rating at 8x and statutory dividend coverage is strong. The company's invested assets provide good liquidity and are considered good quality. Symetra's risky asset ratio declined to average life industry levels at year-end 2012 due mainly to reduced holdings in below investment-grade bonds. The company's bond portfolio has avoided concentrations in troubled asset classes. While the company's portfolio has higher exposure to commercial mortgages than the life insurance industry, Fitch believes the quality of these assets is solid. RATING SENSITIVITIES Key rating triggers that could lead to a downgrade include: --A decline in run rate profitability to below 8% ROE on a sustained basis; --Any deterioration in operating company capitalization sustained below 400% Risk Based Capital (RBC); --An increase in financial leverage above 25% or a decline in GAAP-based fixed charge coverage to below 8x on a sustained basis; --Material realized or unrealized losses in the company's long-duration bond portfolio derived from sudden changes in market conditions, spiked interest rate levels, and credit spreads that lead to significant cash flow stresses or declines in capital. Given Symetra's current size and scale relative to higher rated peers, a rating upgrade is not likely in the near term. Rating triggers that could lead to an upgrade would be achieved over an extended period of time, and include: --Enhanced profitability to double-digit ROE levels; --Successful execution of its product diversification strategy; --Maintenance of strong capital levels in excess of 450% RBC, financial leverage, fixed charge coverage, and operating company leverage maintained near current levels or improved. Fitch has affirmed the following ratings with a Stable Outlook: Symetra Financial Corp. --IDR at 'A-'; --6.125% senior unsecured notes due April 1, 2016 at 'BBB+'; --8.3% junior subordinated CENts due Oct. 15, 2067 at 'BBB-'. Symetra Life Insurance Company --IFS at 'A+'. First Symetra National Life Insurance Company of New York --IFS at 'A+'. Contact: Primary Analyst R. Andrew Davidson, CFA Senior Director +1-312-368-3144 Fitch Ratings, Inc. 70 W. Madison Street Chicago, IL 60602 Secondary Analyst Julie A. Burke, CPA, CFA Managing Director +1-312-368-3158 Committee Chairperson Douglas Pawlowski, CFA Senior Director +1-312-368-2054 Media Relations: Elizabeth Fogerty, New York, Tel: +1 (212) 908 0526, Email: Additional information is available at ''. Applicable Criteria and Related Research: --'Insurance Rating Methodology', Aug. 19, 2013. Applicable Criteria and Related Research: Insurance Rating Methodology here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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