Best’s News & Research Service - October 30, 2014 02:16 PM (EDT)
A.M. Best Affirms Ratings of Symetra Financial Corporation and Its Subsidiaries
Oldwick //BestWire// - A.M. Best has affirmed the financial strength rating of A (Excellent) and the 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 consistent operating earnings, solid liquidity and risk-adjusted capitalization, continued product diversification and sales growth. Symetra's insurance operations continue to generate solid operating earnings across all business segments. Each business segment, with the exception of income annuity, currently comprises at least one-fifth of Symetra's total pre-tax adjusted operating earnings. Income annuities continue to generate lower pre-tax adjusted operating income due to lower investment margins, which are attributable to the prolonged low interest rate environment. As a result of the group's consistent operating earnings, Symetra's risk-adjusted capital remains more than adequate for its current ratings. The organization continues to look to enhance future earnings and revenue streams through a broadening of its product portfolio and expansion of its distribution channels.
Symetra's ongoing expansion of bank distribution has resulted in a sizeable increase in deferred annuity sales in 2014, led by fixed-indexed annuities. Traditional fixed annuities and single premium immediate annuities have also seen significant sales growth due to improved penetration of the organization's bank and broker-dealer network. Additionally, sales within Symetra's individual life division, primarily classic universal life insurance, continue to gain traction in the broker-agency distribution network. As a result, individual life sales have more than doubled in 2014.
The ratings also reflect Symetra's relatively moderate adjusted financial leverage ratio of approximately 20%--incorporating some equity credit for hybrid securities--and strong interest coverage of roughly eight times, both of which are 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 stockholders' equity should enable the company to maintain its favorable leverage position.
Symetra maintains a leadership position in medical stop-loss and is an established provider of annuities through banks and broker-dealers. However, 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 yields. A.M. Best notes that Symetra's solid 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, a shift in business mix to less credit-worthy products, 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 $250 million 4.25% senior unsecured notes, due 2024
-- "bbb-" on $150 million fixed-to-floating rate junior subordinated notes, due 2067
The following indicative debt ratings available under the shelf registration have been affirmed:
Symetra Financial Corporation--
-- "bbb+" on senior unsecured debt
-- "bbb" on subordinated debt
-- "bbb-" on preferred securities
-- "bbb-" on junior subordinated debt
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.
Key insurance criteria reports utilized:
- A.M. Best's Liquidity Model for U.S. Life Insurers
- Evaluating Non-Insurance Ultimate Parents
- Insurance Holding Company and Debt Ratings
- Rating Members of Insurance Groups
- Risk Management and the Rating Process for Insurance Companies
- Understanding BCAR for U.S. and Canadian Life/Health Insurers
A.M. Best Company is the world's oldest and most authoritative insurance rating and information source.