A.M. Best Assigns Rating to Symetra Financial's New Junior Subordinated Notes

Business Wire, Oct 3, 2007

OLDWICK, N.J. -- A.M. Best Co. has assigned a debt rating of "bbb-" to the $150 million fixed-to-floating rate unsecured junior subordinated notes issued by Symetra Financial Corporation (Symetra) (Bellevue, WA). The rating outlook is stable.

The rating assigned to the notes reflects their subordinated status in right of payment to all existing and future indebtedness of Symetra, the replacement capital covenant and a 10-year optional interest deferral feature. All existing financial strength and issuer credit ratings applicable to Symetra's life/health insurance subsidiaries are unchanged.

A.M. Best expects Symetra to use the net proceeds of the offering to pay a special cash dividend to stockholders. Incorporating some equity credit for the new hybrids, Symetra's pro forma adjusted financial leverage will increase modestly to just over 20%, with solid interest coverage projected at roughly 10 times.

The rating reflects Symetra's high quality balance sheet and financial flexibility, minimal GAAP intangibles and the consistent statutory and GAAP profitability of its four operating segments. A.M. Best notes that while this debt issuance and the subsequent planned cash dividend slightly increase Symetra's financial leverage and reduces its consolidated GAAP equity, there is no direct impact on the risk-based capital positions of its life/health subsidiaries. Additionally, while Symetra has recently announced plans to become a public company, A.M. Best anticipates that it will continue to prudently manage its financial leverage and risk-based capital going forward.

Partially offsetting these rating strengths is Symetra's significant exposure to reinvestment risk from its $7.0 billion block of income annuity reserves, predominantly structured settlements. However, A.M. Best notes that Symetra's initiatives to closely manage asset/liability duration matching, its focus on growing both sales of shorter duration immediate annuities and its funding services business, combined with strategic investments in equities and hedge funds, should allow the company to better manage investment spreads in support of these long-tail liability exposures. In addition, although annuity deposits have increased recently, sales growth in Symetra's other product lines continues to be a challenge.

For Best's Debt Ratings, all other Best's Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.> Founded in 1899, A.M. Best Company is a global full-service credit rating organization dedicated to serving the financial and health care service industries, including insurance companies, banks, hospitals and health care system providers. For more information, visit www.ambest.com.