Attached files
| file | filename |
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| 8-K - FORM 8-K - Symetra Financial CORP | d267125d8k.htm |
| EX-99.1 - PRESS RELEASE - Symetra Financial CORP | d267125dex991.htm |
 2012 Outlook
Conference Call
December 9, 2011
Exhibit 99.2 |
 Forward-Looking Statements
2
Statements made in the following presentation that relate to anticipated financial performance or
business operations, business services and product prospects and plans, reinvestment
opportunities, changes in the amount of cash flow testing reserves, regulatory developments, accounting standard
changes and similar matters may be considered “forward-looking statements” as defined in
the Private Securities Litigation Reform Act of 1995. All statements, other than
statements of current or historical facts, are forward-looking statements. Forward-looking statements are subject to a number
of risks, uncertainties and contingencies that may cause the operations, performance, development and
results of our business to differ materially from those suggested by such statements.
Consequently, all of the forward-looking statements made in this presentation are qualified by these
cautionary statements. The modeled projections and related assumptions set forth on the
following pages are necessarily speculative in nature. Actual results may vary significantly
and adversely from modeled projections, as the scenarios do not incorporate all risks to which Symetra could be
exposed. The information contained in this presentation speaks as of December 9, 2011. Symetra
undertakes no obligation to update any such forward-looking statements, whether as a result
of new information, future events or otherwise. Historical results are not necessarily indicative of
future results. Future results, including our financial performance, business operations and
trends in our business and industry, are subject to significant risks and uncertainties,
including without limitation the following:
•
the effects of fluctuations in interest rates and a prolonged low interest rate environment; •
general economic, market or business conditions, including further economic downturns or other adverse
conditions in the global and domestic capital and credit markets; •
investment losses;
•
recorded reserves for future policy benefits and claims subsequently proving to be inadequate or
inaccurate; •
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 and other conditions; •
market pricing and competitive trends related to insurance products and services; •
changes in amortization of deferred policy acquisition costs and deferred sales inducements; •
financial strength or credit ratings downgrades; •
the availability and cost of capital and financing; •
the continued availability and cost of reinsurance coverage; •
changes in laws or regulations, or their interpretation, including those which could increase
Symetra's business costs and required capital levels;
•
the ability of subsidiaries to pay dividends to Symetra; •
the ability of the new executive leadership team to successfully implement business strategies; •
the effects of implementation of the Patient Protection and Affordable Care Act; •
the effects of implementation of the Dodd-Frank Wall Street Reform and Consumer Protection
Act; •
the effects of implementation of the new accounting standard for deferred acquisition costs; and •
the risks that are described from time to time in Symetra's filings with the Securities and Exchange
Commission, including those in Symetra's 2010 Annual Report on Form 10-K and 2011 quarterly
reports on Form 10-Q. |
 Executing on “Grow & Diversify”
Strategy
•
Driving profitable growth and diversifying revenue sources (especially
important in prolonged low interest rate environment)
–
Not taking easy route to growth
–
Targeting markets and products that offer higher ROE
–
Implementation
risk
–
not
balance
sheet
risk
•
Sustaining current positions of strength in:
–
Medical stop-loss
–
Banking channel distribution of fixed annuities
–
Excellent balance sheet and disciplined risk management
3 |
 Grow
& Diversify Initiatives Growth and diversification goals within each
division: Benefits
–
Group Life & Disability Income (DI) product platform
–
Complete AUL
2
integration
Retirement
–
Non-living benefits variable annuity (VA)
–
Fixed indexed annuity (FIA)
Life
–
Introduce
universal life (UL) products for life professional distribution
–
Introduce variable corporate-owned life (COLI)
1
Prior to 4Q11, Benefits division was called Group division.
2
American United Life Insurance Co.
4
1 |
 5
Grow & Diversify: Positive Long-Term Impact
2011
2012
2013
2014
2015
Net
Contribution
to
Operating
EPS
1
$(0.03)
$(0.08)
$(0.02)
$0.07
$0.14
•
2012 earnings pressured by higher expenses related to investments in
infrastructure –
More build cost to accelerate Group Life and DI
–
Heavy VA build in 1H2012
–
Steady, but more modest, cost to build product and distribution in Life
–
All
adding
to
the
run-rate
structural
cost
distribution
and
product
support
capabilities
•
Pricing ROEs across all Grow & Diversify products are initially 12% or
higher •
AUL is a net contributor to earnings in all years, with above-target ROE
•
Full investment in Grow & Diversify initiatives is recovered by
mid-2015 1
Denotes a non-GAAP financial measure also referred to as “adjusted
operating income per common share –
diluted.”
See Appendix for definition. |
 1
Includes impact of low interest rate environment.
2
Denotes a non-GAAP financial measure. See Appendix for definition.
3
Commercial mortgage loans.
Operating EPS: 2011E –
2012E
(at 2% 10-Year Treasury rate, assumes no capital management)
Middle-to-Upper
End
of
Guidance
Range:
•
Interest rate environment starts to improve
•
Loss ratio at bottom of/below long-term target range
•
Higher-than-targeted Benefits premium
•
Favorable mortality experience
Lower
End-to-Middle
of
Guidance
Range:
•
Less
favorable
CML
margins
and
supply
•
Loss ratio at top of/above long-term target range
•
Unfavorable mortality experience
•
Lower-than-targeted Benefits premium
•
Unfavorable return on alternative investments
•
Weaker-than-planned life and annuity sales early in year
6
2012 Guidance Range: What Moves Us Up or Down (Earnings Drivers)
3
ROAE
2
:
approx. 8.8%
Operating |
 Retrospective adoption of new “successful efforts”
guidance, effective 1/1/2012
•
Primarily affects Deferred Annuities segment
•
Policy acquisition costs for Benefits segment will be expensed as incurred
Future impact dependent on expected future sales levels, sales expense levels,
and projected amortization
No material impact to 2012 Operating ROAE
No impact on Statutory surplus
1
Accounting
Standards
Update
2010-26,
Financial
Services
–
Insurance
(ASU
2010-26),
Accounting
for
Costs
Associated
with Acquiring or Renewing Insurance Contracts.
2
Denotes a non-GAAP financial measure. See Appendix for definition and
reconciliation to most directly comparable GAAP measure. New
Accounting
for
Deferred
Acquisition
Costs
1
7
$ in millions
Range of Estimated Impact
DAC Balance, 12/31/10
$ 250.0
-12%
to
-18%
Book Value, 12/31/10
$ 2,380.6
-0.8%
to
-1.2%
Adjusted Book Value,
2
12/31/10
$ 1,948.1
-1.3%
to
-1.7%
2012 Operating EPS
-$0.03
to
-$0.04 |
 2012
Impact from AUL Medical Stop-Loss Renewal Rights Acquisition
•
We expect to renew approximately two-thirds of the $120 million in AUL
premium, at appropriate pricing
•
Interim pressure on overall loss ratio expected as AUL policies transition
to Symetra pricing levels
•
Expense ratio expected to improve with further scale improvement
•
Long-term target for overall loss ratio:
63% to 65%
8 |
 Analysis of Low Interest Rates: Minimal Reinvestment Risk
•
2012 Plan assumes 2% 10-year Treasury rate for three-year period
•
Reinvestment risk is relatively small due to:
•
Effective ALM program (matching asset and liability cash flows)
•
Flexibility from rate resetting capabilities (except in Income Annuities
segment) •
Attractive investment opportunity in commercial mortgage loan originations
•
Our estimates could be affected by changes in monetary policy, government programs
to stimulate mortgage refinancing and significant increases in corporate
refinance activity Estimated Amount of
Reinvestment
Risk Management Tools
Surplus
~ $250
CML
Deferred Annuity
< $50
Rate resets
Income Annuity
< $50
CML
BOLI
< $350
CML, rate resets, other product
levers
$ in millions
9 |
 We’re Focused on Building Long-Term Value
1.
Symetra has market leadership positions in fixed deferred annuities
sold in banks and medical stop-loss
2.
Grow & Diversify initiatives aim to generate incremental growth from
new, primarily non-interest rate sensitive earnings sources:
We’re leveraging existing strengths and building additional capabilities
to
expand
product
and
distribution
in
Benefits,
Retirement
and
Life
divisions
3.
Strong balance sheet provides a firm foundation
4.
Focused on expanding operating ROAE over time
10 |
 11
APPENDIX |
 Non-GAAP Measures
Operating return on average equity, or Operating ROAE
Operating return on average equity, or operating ROAE, consists of adjusted
operating income for the most recent four quarters, divided by average
adjusted book value, both of which are non-GAAP measures. We measure average adjusted book value by averaging adjusted
book
value
for
the
most
recent
five
quarters.
Return
on
stockholders’
equity,
or
ROE,
is
the
most
directly
comparable
GAAP
measure.
Return
on
stockholders’
equity
for
the
most
recent
four
quarters
is
calculated
as
net
income
for
such
period
divided
by
the
average
stockholders’
equity for the most recent five quarters.
Adjusted
Operating
Income
per
Common
Share
–
Diluted,
or
Operating
EPS
Adjusted
operating
income
per
common
share
–
diluted,
consist
of
adjusted
operating
income,
divided
by
the
GAAP-basis
weighted
average
diluted
shares
outstanding.
Net
income
per
common
share
–
diluted
is
the
most
directly
comparable
GAAP
measure
to
adjusted
operating
income
per
common
share
–
diluted.
Adjusted Operating Income
Adjusted operating income consists of net income, less after-tax net realized
investment gains (losses), plus after-tax net investment gains
(losses)
on
our
fixed
indexed
annuity
options.
Net
income
is
the
most
directly
comparable
GAAP
measure
to
adjusted
operating
income.
Adjusted Book Value
Adjusted
book
value
consists
of
stockholders’
equity,
less
accumulated
other
comprehensive
income
(AOCI).
As
of
Dec.
31,
2010
this
is
calculated as follows ($ in millions):
As of
Dec. 31, 2010
Stockholders’
Equity
$2,380.6
Less: AOCI
432.5
Adjusted Book Value
$1,948.1
12 |
 Symetra
®
is
a
registered
service
mark
of
Symetra
Life
Insurance
Company,
777
108
Ave.
NE,
Suite
1200,
Bellevue,
WA
98004.
th |