[April 23, 2014] |
|
Symetra Reports First Quarter 2014 Results and Raises 2014 Guidance
BELLEVUE, Wash. --(Business Wire)--
Symetra Financial Corporation (NYSE: SYA) today reported first quarter
2014 adjusted operating income of $65.7 million, or $0.56 per diluted
share, compared with $49.4 million, or $0.36 per diluted share, for the
first quarter of 2013.
For the first quarter of 2014, net income was $79.3 million, or $0.68
per diluted share, compared with $66.0 million, or $0.48 per diluted
share, in the same period a year ago.
|
Summary Financial Results
|
|
|
|
Three Months Ended March 31
|
(In millions, except per share data)
|
|
|
|
2014
|
|
2013
|
Net Income
|
|
|
|
$
|
79.3
|
|
$
|
66.0
|
Per Diluted Share of Common Stock
|
|
|
|
$
|
0.68
|
|
$
|
0.48
|
|
|
|
|
|
|
|
Adjusted Operating Income
|
|
|
|
$
|
65.7
|
|
$
|
49.4
|
Per Diluted Share of Common Stock
|
|
|
|
$
|
0.56
|
|
$
|
0.36
|
|
"We kicked off 2014 with a great start in all of our divisions. Benefits
reported an excellent result, reflecting an unusually favorable loss
ratio. Each of our four operating segments posted improved earnings
relative to the same period of last year. Importantly, we continued to
achieve strong year-over-year sales growth in annuities, individual life
insurance, and group life and disability income insurance," said Tom
Marra, Symetra president and CEO.
"I am optimistic about our prospects for this year and beyond. Our
medical stop-loss business is on track to deliver a result that is well
within our profitability target range for the remainder of 2014. And
across the company, I expect our sales momentum to continue as we
execute our long-term strategies to drive profitable growth," Marra said.
|
Segment Pretax Adjusted Operating Income (Loss)
|
|
|
|
Three Months Ended March 31
|
(In millions)
|
|
|
|
2014
|
|
2013
|
Benefits
|
|
|
|
$
|
27.8
|
|
|
$
|
13.5
|
|
Deferred Annuities
|
|
|
|
|
30.2
|
|
|
|
29.1
|
|
Income Annuities
|
|
|
|
|
9.4
|
|
|
|
8.8
|
|
Individual Life
|
|
|
|
|
12.3
|
|
|
|
11.2
|
|
Other
|
|
|
|
|
(6.5
|
)
|
|
|
(4.8
|
)
|
Subtotal
|
|
|
|
$
|
73.2
|
|
|
$
|
57.8
|
|
Less: Income Taxes*
|
|
|
|
|
7.5
|
|
|
|
8.4
|
|
Adjusted Operating Income1
|
|
|
|
$
|
65.7
|
|
|
$
|
49.4
|
|
|
* Represents the total provision for income taxes adjusted for
the tax effect on net realized gains (losses) at the U.S. federal income
tax rate of 35%.
In the business discussions that follow, results for the first quarter
of 2014 are compared with the first quarter of 2013, unless otherwise
noted.
Benefits
-
Pretax adjusted operating income was $27.8 million for the
quarter, up from $13.5 million. This increase was driven by a lower
loss ratio for medical stop-loss.
-
Loss ratio was 57.1% in the quarter, compared with 68.5% in the
previous period, reflecting the impact of very favorable claims
experience. Compared with the year-ago period, the first quarter
experienced significantly lower claims frequency and severity.
-
Sales of $71.9 million for the quarter were up from $66.5
million in the previous period. The increase was driven by limited
benefit medical, mainly from one large case, and growth in group life
and disability income insurance. In the ongoing competitive
environment, medical stop-loss sales were down 12% from the year-ago
quarter.
Deferred Annuities
-
Pretax adjusted operating income was $30.2 million for the
quarter, up from $29.1 million in the previous period. Higher fixed
indexed annuity (FIA) account values contributed $6.0 million to
interest margin compared to $0.8 million in the prior-year period.
-
Earnings for the quarter included $2.1 million of investment
prepayment-related income, net of related amortization, compared with
$7.4 million in the prior period.
-
Total account values were $13.9 billion at quarter-end, up from
$12.0 billion a year ago. Strong FIA sales drove this growth, with FIA
account values rising to $2.1 billion from $539.1 million a year ago.
-
Sales for the quarter were $627.5 million, nearly double the
$322.0 million of the year-ago quarter. Strong sales of FIA and
traditional fixed annuities were driven by an improved interest rate
environment and the ongoing expansion of Symetra annuity products on
bank and broker-dealer distribution platforms.
Income Annuities
-
Pretax adjusted operating income was $9.4 million for the
quarter, up from $8.8 million in the prior-year period, primarily due
to more favorable mortality experience. This was partially offset by a
lower interest spread on slightly lower reserves.
-
Mortality gains were $5.3 million for the quarter, compared
with mortality gains of $1.0 million in the previous period. Mortality
experience can fluctuate from period to period.
-
Sales were $87.5 million for the quarter, up from $40.7 million
in the prior-year quarter. Sales of single premium immediate annuities
(SPIA) grew as a result of the continued effectiveness of our sales
strategies and a more favorable interest rate environment.
Individual Life
-
Pretax adjusted operating income was $12.3 million for the
quarter, up from $11.2 million in the year-ago period. The increase in
earnings was driven primarily by a higher bank-owned life insurance
(BOLI) return on assets, growth in Classic Universal Life (UL) account
values and lower individual claims. This improvement was partially
offset by an increase in operating expenses to support new business
growth.
-
Sales of individual life products were $7.9 million for the
quarter, up from $2.3 million in the prior period. The strong result
was driven by Classic UL, sold through an expanded brokerage general
agency distribution network.
Other
-
Pretax adjusted operating loss was $6.5 million for the
quarter, compared with a loss of $4.8 million in the year-ago quarter.
Investment Portfolio
-
Net realized gains were $20.7 million for the quarter, compared
with net gains of $26.5 million in the prior period. These results
include net gains on mark-to-market equities, which were $19.7 million
for the quarter, compared with net gains of $33.0 million in the
year-ago period. Gains from bond sales increased to $6.9 million from
losses of $6.3 million in the year-ago period.
Income Taxes
-
Provision for income taxes was $14.8 million for the quarter,
compared with $17.4 million in the year-ago period, reflecting a lower
effective tax rate.
-
Symetra's effective tax rate for the first quarter was 15.7%,
down from 20.9% in the prior-year period, due to increased benefits
from tax credit investments.
Stockholders' Equity
|
|
|
|
|
As of
|
(In millions, except per share data)
|
|
|
|
March 31 2014
|
|
December 31 2013
|
Total Stockholders' Equity
|
|
|
|
$
|
3,195.3
|
|
$
|
2,941.9
|
Per Common Share
|
|
|
|
$
|
27.40
|
|
$
|
24.99
|
|
|
|
|
|
|
|
Adjusted Book Value1
|
|
|
|
$
|
2,391.0
|
|
$
|
2,348.3
|
Per Common Share1
|
|
|
|
$
|
20.50
|
|
$
|
19.95
|
|
-
Capital actions - During the first quarter of 2014, Symetra
repurchased a total of 1.4 million shares. As of March 31, 2014, 7.7
million shares remained available under the current repurchase
authorization.
-
Risk-based capital (RBC) ratio for Symetra Life Insurance
Company at the end of first quarter 2014 was estimated at 469%.
Statutory capital and surplus, including asset valuation reserve
(AVR), was $2.3 billion.
Revised 2014 Earnings Outlook
Symetra has raised its earnings outlook for the year to reflect
better-than-expected results in the first quarter. The company now
expects to generate adjusted operating income per diluted share of
$1.80-$2.00 for full-year 2014. Among the factors that could drive
actual results toward the upper end, middle or lower end of the guidance
range are:
-
changes in the interest rate environment;
-
Benefits Division loss ratio;
-
timing and levels of life and annuity sales;
-
persistency of the in-force book of business;
-
amount of issuance and yields on commercial mortgage loans;
-
amount of prepayments in the investment portfolio;
-
returns on alternative investment portfolio;
-
mortality experience; and
-
timing and amount of common stock buybacks.
These expectations also are subject to the risks and uncertainties
identified below, including the possibility that one or more factors
could cause us to fall short of our expected range.
Additional Financial Information
This press release, the first quarter 2014 financial supplement and
financial review slides are posted on the company's website at http://investors.symetra.com.
Investors are encouraged to review all of these materials.
Management to Review Results on Conference Call and Webcast
Symetra's senior management team will discuss the company's first
quarter 2014 performance with investors and analysts on Thursday, Apr.
24, 2014 at 10 a.m., Eastern Time (7 a.m., Pacific Time). To listen by
phone, dial 1-888-713-4209. For international callers, dial
617-213-4863. The passcode is 68088988. Participants are encouraged to
pre-register for the call at www.symetra.com/earnings.
Pre-registrants will be issued a PIN to use when dialing into the live
call, which will provide quick access to the conference by bypassing the
operator.
To listen to a live webcast of the conference call, go to http://investors.symetra.com.
Listeners should go to the website at least 15 minutes before the call
and test the compatibility of their computer. Links will be available to
download any necessary audio software.
A replay of the webcast may be accessed beginning approximately one hour
after the call ends, by visiting http://investors.symetra.com.
Use of Non-GAAP Measures
1 Symetra uses both U.S. generally accepted accounting
principles (GAAP) and non-GAAP financial measures to track the
performance of its operations and financial condition. A reconciliation
between each non-GAAP measure found in this presentation and the
comparable GAAP measure can be found in the Financial Supplement
accompanying this press release. The supplement is available for
download on the Company's website at www.symetra.com
on the Investor Relations page, under Financial Information, Quarterly
Financial Results.
This press release references the following non-GAAP financial measures:
-
Adjusted operating income is defined by the company as net
income, excluding after-tax net realized gains (losses) that are not
reflective of the performance of the company's insurance operations.
The company excludes gains (losses) associated with the following:
investment sales or disposals, other-than-temporary investment
impairments, changes in the fair value of mark-to-market investments
and derivative investments (except for certain S&P 500 options), and
changes in the fair value of embedded derivatives related to our fixed
indexed annuity product.
-
Adjusted operating income per diluted share is defined as
adjusted operating income divided by diluted common shares outstanding.
-
Pretax adjusted operating income is defined as adjusted
operating income on a pretax basis. It also represents the cumulative
total of segment pretax adjusted operating income, which at the
segment level is a GAAP measure.
-
Adjusted book value is defined as stockholders' equity, less
accumulated other comprehensive income (loss), or AOCI.
-
Adjusted book value per share is calculated as adjusted book
value divided by common shares outstanding.
About Symetra
Symetra Financial Corporation (NYSE: SYA) is a diversified financial
services company based in Bellevue, Wash. In business since 1957,
Symetra provides employee benefits, annuities and life insurance through
a national network of benefit consultants, financial institutions, and
independent agents and advisors. For more information, visit www.symetra.com.
Safe Harbor Statement under the Private Securities Litigation Reform
Act of 1995
This press release may contain "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of
the Securities Exchange Act of 1934. All statements, other than
statements of current or historical facts, included or referenced in
this release that address activities, events or developments that we
expect or anticipate will or may occur in the future are forward-looking
statements. The words "may," "will," "believe," "intend," "plan,"
"expect," "anticipate," "project," "estimate," "predict," "potential"
and similar expressions also are intended to identify forward-looking
statements. These forward-looking statements may include, among others,
statements with respect to Symetra's:
-
estimates or projections of revenues, net income (loss), net income
(loss) per share, adjusted operating income (loss), adjusted operating
income (loss) per share, market share or other financial forecasts, as
well as statements describing factors and conditions that might affect
those forecasts;
-
trends in operations, financial performance and financial condition;
-
financial and operating targets or plans;
-
business and growth strategy, including prospective products, services
and distribution partners, including statements about management's
intentions regarding those strategies; and
-
initiatives such as our previously announced stock repurchase program
that are intended or expected to have various impacts upon our
financial condition, results of operations, and liquidity and capital
resources.
These statements are based on various assumptions and analyses made by
Symetra in light of information presently known to management, and
considering management's experience and perception of historical trends,
current conditions and expected future developments, as well as other
factors believed to be appropriate under the circumstances. Whether
actual results and developments will conform to Symetra's expectations
and predictions, is subject to a number of risks, uncertainties and
contingencies that could cause actual results to differ materially from
expectations, or that could cause management to deviate from currently
expected or intended courses of actions, including, among others:
-
the effects of fluctuations in interest rates, including a prolonged
low interest rate environment or a rapidly rising interest rate
environment, as well as management's ability to anticipate and timely
respond to any such fluctuations;
-
general economic, market or business conditions, including economic
downturns or other adverse conditions in the global and domestic
capital and credit markets;
-
the effects of significant increases in corporate refinance activity,
including bond prepayments;
-
the performance of Symetra's investment portfolio;
-
the continued availability of quality commercial mortgage loan
investments and Symetra's continued capacity to invest in commercial
mortgage loans;
-
Symetra's ability to successfully execute on its strategies;
-
the accuracy and adequacy of our recorded reserves;
-
the persistency of our in-force blocks of business;
-
deviations from assumptions used in setting prices for insurance and
annuity products or establishing cash flow testing reserves;
-
continued viability of certain products under various economic,
regulatory and other conditions;
-
market pricing and competitive trends related to insurance products
and services;
-
the effects of implementation of the Patient Protection and Affordable
Care Act, including the direct effects upon our business, but also
including the effects upon our competitors and our customers;
-
changes in amortization of deferred policy acquisition costs and
deferred sales inducements;
-
financial strength or credit ratings changes, particularly of Symetra
but also of other companies in our industry sector;
-
retention of our key personnel and distribution partners;
-
the availability and cost of capital and financing;
-
the adequacy and collectibility of reinsurance that we have purchased,
as well as the continued availability and cost of reinsurance coverage;
-
the continued availability of tax credit investments, and the
continuation of current tax treatment of such investments;
-
changes in laws or regulations, or their interpretation, including
those that could increase Symetra's business costs, reserve levels and
required capital levels, or that could restrict the manner in which we
do business;
-
the ability of subsidiaries to pay dividends to Symetra;
-
Symetra's ability to implement effective risk management policies and
procedures, including hedging strategies;
-
our ability to maintain adequate telecommunications, information
technology, or other operational systems, including our ability to
prevent or timely detect and remediate any unauthorized access to or
disclosure of our customer information and other sensitive business
data;
-
the initiation of legal or regulatory investigations against Symetra
and the results of any legal or regulatory proceedings;
-
the effects of changes in national monetary and fiscal policy;
-
the effects of implementation of the Dodd-Frank Wall Street Reform and
Consumer Protection Act of 2010;
-
the effects of redomestication of our principal insurance subsidiary,
whether our redomestication applications will be approved, and whether
redomestication, if approved, will convey the intended benefits; and
-
the risks that are described from time to time in Symetra's filings
with the U.S. Securities and Exchange Commission, including those in
Symetra's 2013 Annual Report on Form 10-K.
Consequently, all of the forward-looking statements made in this press
release are qualified by these cautionary statements, and there can be
no assurance that the actual results or developments anticipated by
Symetra will be realized or, even if substantially realized, that they
will have the expected consequences to, or effects on, Symetra or its
business or operations. Symetra assumes no obligation to update publicly
any such forward-looking statements, whether as a result of new
information, future events or otherwise.
|
Symetra Financial Corporation Consolidated Income
Statement Data (in millions, except per share data) (unaudited)
|
|
|
|
|
|
Three Months Ended
March 31
|
|
|
|
|
2014
|
|
2013
|
Revenues
|
|
|
|
|
|
|
Premiums
|
|
|
|
$
|
153.8
|
|
|
$
|
157.0
|
|
Net investment income
|
|
|
|
|
324.4
|
|
|
|
323.7
|
|
Policy fees, contract charges and other
|
|
|
|
|
46.6
|
|
|
|
49.9
|
|
Net realized gains (losses):
|
|
|
|
|
|
|
Total other-than-temporary impairment losses on securities
|
|
|
|
|
(1.1
|
)
|
|
|
(2.6
|
)
|
Less: portion recognized in other comprehensive income
|
|
|
|
|
-
|
|
|
|
0.6
|
|
Net impairment losses recognized in earnings
|
|
|
|
|
(1.1
|
)
|
|
|
(2.0
|
)
|
Other net realized gains (losses)
|
|
|
|
|
21.8
|
|
|
|
28.5
|
|
Total net realized gains (losses)
|
|
|
|
|
20.7
|
|
|
|
26.5
|
|
Total revenues
|
|
|
|
|
545.5
|
|
|
|
557.1
|
|
Benefits and expenses
|
|
|
|
|
|
|
Policyholder benefits and claims
|
|
|
|
|
101.2
|
|
|
|
119.5
|
|
Interest credited
|
|
|
|
|
234.2
|
|
|
|
235.3
|
|
Other underwriting and operating expenses
|
|
|
|
|
87.9
|
|
|
|
91.8
|
|
Interest expense
|
|
|
|
|
8.2
|
|
|
|
8.2
|
|
Amortization of deferred policy acquisition costs
|
|
|
|
|
19.9
|
|
|
|
18.9
|
|
Total benefits and expenses
|
|
|
|
|
451.4
|
|
|
|
473.7
|
|
Income from operations before income taxes
|
|
|
|
|
94.1
|
|
|
|
83.4
|
|
Provision (benefit) for income taxes
|
|
|
|
|
|
|
Current
|
|
|
|
|
10.1
|
|
|
|
15.7
|
|
Deferred
|
|
|
|
|
4.7
|
|
|
|
1.7
|
|
Total provision for income taxes
|
|
|
|
|
14.8
|
|
|
|
17.4
|
|
Net income
|
|
|
|
$
|
79.3
|
|
|
$
|
66.0
|
|
Net income per common share
|
|
|
|
|
|
|
Basic
|
|
|
|
$
|
0.68
|
|
|
$
|
0.48
|
|
Diluted
|
|
|
|
$
|
0.68
|
|
|
$
|
0.48
|
|
Weighted-average number of common shares outstanding
|
|
|
|
|
|
|
Basic
|
|
|
|
|
117.460
|
|
|
|
138.093
|
|
Diluted
|
|
|
|
|
117.466
|
|
|
|
138.098
|
|
Cash dividends declared per common share
|
|
|
|
$
|
0.10
|
|
|
$
|
0.08
|
|
Non-GAAP financial measures
|
|
|
|
|
|
|
Adjusted operating income
|
|
|
|
$
|
65.7
|
|
|
$
|
49.4
|
|
Reconciliation to net income
|
|
|
|
|
|
|
Net income
|
|
|
|
$
|
79.3
|
|
|
$
|
66.0
|
|
Less: Excluded realized gains (losses) (net of taxes)*
|
|
|
|
|
13.6
|
|
|
|
16.6
|
|
Adjusted operating income
|
|
|
|
$
|
65.7
|
|
|
$
|
49.4
|
|
|
|
|
|
|
|
|
* Excluded realized gains (losses) are reported net of taxes of
$7.3 and $9.0 for the three months ended March 31, 2014 and 2013,
respectively.
|
|
|
Symetra Financial Corporation Consolidated Balance
Sheet Data (in millions, except per share data) (unaudited)
|
|
|
|
|
|
March 31 2014
|
|
December 31 2013
|
Assets
|
|
|
|
|
|
|
Total investments
|
|
|
|
$
|
28,940.0
|
|
|
$
|
27,901.1
|
|
Other assets
|
|
|
|
|
1,250.5
|
|
|
|
1,250.0
|
|
Separate account assets
|
|
|
|
|
973.8
|
|
|
|
978.4
|
|
Total assets
|
|
|
|
$
|
31,164.3
|
|
|
$
|
30,129.5
|
|
Liabilities and stockholders' equity
|
|
|
|
|
|
|
Policyholder liabilities
|
|
|
|
$
|
25,834.3
|
|
|
$
|
25,328.8
|
|
Notes payable
|
|
|
|
|
449.6
|
|
|
|
449.5
|
|
Other liabilities
|
|
|
|
|
711.3
|
|
|
|
430.9
|
|
Separate account liabilities
|
|
|
|
|
973.8
|
|
|
|
978.4
|
|
Total liabilities
|
|
|
|
|
27,969.0
|
|
|
|
27,187.6
|
|
Common stock and additional paid-in capital
|
|
|
|
|
1,467.5
|
|
|
|
1,465.8
|
|
Treasury stock
|
|
|
|
|
(119.9
|
)
|
|
|
(93.4
|
)
|
Retained earnings
|
|
|
|
|
1,043.4
|
|
|
|
975.9
|
|
Accumulated other comprehensive income, net of taxes
|
|
|
|
|
804.3
|
|
|
|
593.6
|
|
Total stockholders' equity
|
|
|
|
|
3,195.3
|
|
|
|
2,941.9
|
|
Total liabilities and stockholders' equity
|
|
|
|
$
|
31,164.3
|
|
|
$
|
30,129.5
|
|
Book value per common share*
|
|
|
|
$
|
27.40
|
|
|
$
|
24.99
|
|
Non-GAAP financial measures
|
|
|
|
|
|
|
Adjusted book value
|
|
|
|
$
|
2,391.0
|
|
|
$
|
2,348.3
|
|
Reconciliation to stockholders' equity
|
|
|
|
|
|
|
Total stockholders' equity
|
|
|
|
$
|
3,195.3
|
|
|
$
|
2,941.9
|
|
Less: AOCI
|
|
|
|
|
804.3
|
|
|
|
593.6
|
|
Adjusted book value
|
|
|
|
$
|
2,391.0
|
|
|
$
|
2,348.3
|
|
Adjusted book value per common share **
|
|
|
|
$
|
20.50
|
|
|
$
|
19.95
|
|
|
* Book value per common share is calculated as stockholders'
equity divided by common shares outstanding. These shares totaled
116.619 and 117.731 as of March 31, 2014 and December 31, 2013,
respectively.
|
|
** Adjusted book value per common share, is calculated as
adjusted book value divided by common shares outstanding. These
shares totaled 116.619 and 117.731 as of March 31, 2014 and
December 31, 2013, respectively.
|
|
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