OREANDA-NEWS. Fitch Ratings has affirmed Symetra Life Insurance Company's (Symetra Life) Insurer Financial Strength (IFS) rating at 'A'. Fitch has also affirmed the Issuer Default Rating (IDR) of Symetra Financial Corporation (Symetra) at 'A-' and the ratings of all outstanding debt at current levels. The Rating Outlook is Stable. A complete list of rating actions follows at the end of this release.

KEY RATING DRIVERS

Fitch views Symetra's standalone credit profile as in line with an 'A' IFS rating, which reflects the company's strong balance sheet, diversified earnings and moderate financial leverage. Additional strengths include the company's strong competitive position in the group medical stop-loss market and fixed annuities sold through banks.

Symetra's ratings also reflect its status as a wholly-owned subsidiary of Japan-based Sumitomo Life Insurance Company (Sumitomo). Fitch rates the IFS and IDR of Sumitomo at 'A'. Sumitomo's IFS rating is currently constrained by Japan's Long-Term Local Currency IDR of 'A' with a Stable Outlook, and is one notch below its unadjusted IFS rating of 'A+'.

Based on Fitch's criteria, Symetra's strategic importance level is 'Very Important' within the Sumitomo enterprise reflecting its position as the parent's U.S. platform. This along with its stand-alone credit profile results in Symetra Life carrying the same IFS rating as Sumitomo. Symetra's IDR and debt ratings reflect Fitch's application of its notching criteria beginning with Sumitomo's IDR of 'A'.

The standalone credit profile also considers Symetra's exposure to the protracted low interest rate environment. Fitch believes that with its liability mix, particularly its large legacy structured settlement and bank owned life insurance (BOLI) book, Symetra is more exposed to interest rate risk than peers.

Symetra's operating return on equity declined to 8.7% in 2015, from 9.6% in the prior year. Key drivers were an increase in stop-loss benefit ratios back to normal ranges, higher expenses related to growth initiatives, higher losses on alternative investments and spread compression. The company's interest spread (excluding FIA) declined to 1.90% from 2.02% in the prior period, and the company's flexibility to adjust its minimum crediting rates is declining. Sales of fixed indexed annuities were very strong in 2015 at roughly $2.4 billion, but could face some headwinds from the Department of Labor's (DOL) recent fiduciary rule.

Symetra's GAAP interest coverage declined to 5.4x in 2015 from 7.8x in the prior year. Interest coverage was pressured in 2015 as interest expenses increased and earnings were challenged by low rates and more normalized loss ratios in the group medical stop-loss business. Pro forma 2016 interest coverage is expected to be in the 8x-9x range following the maturity of $300 million of senior notes on April 1, 2016.

Symetra's balance sheet remains well positioned, with strong capitalization, moderate financial leverage and a high quality, liquid investment portfolio. Statutory capital of Symetra Life is considered very strong with an RBC ratio at 424% at year-end 2015. Financial leverage is considered moderate for the rating at 22.4% and exposure to capital market funding is modest, as evidenced by the company's total financings and commitments (TFC) ratio of 0.3x at year-end 2015.

Symetra's risky asset ratio remained below the industry, at 70.6% of total adjusted capital (TAC) at year-end 2015 compared with 80.4% for the industry. The company's bond portfolio has normally carried a greater than industry allocation of 'BBB' rated bonds and an average exposure to below investment grade bonds (BIGs). Symetra is overweight commercial mortgages, which comprise 16.7% of invested assets, but the portfolio is of high quality and is considered a good match for the company's long-dated liabilities. The company's energy exposure is below average, with 8% of its corporate bonds energy-related at year-end 2015.

RATING SENSITIVITIES

In accordance with Fitch's group rating methodology, Symetra's ratings are expected to move in line with Sumitomo's ratings, which are currently constrained by Japan's sovereign rating. Symetra's ratings could also be upgraded if Fitch's view of its standalone profile improves.

Conversely, if Sumitomo's ratings were downgraded, based on its own credit quality, or deterioration in Japan's sovereign rating, Symetra's ratings could be lowered in conjunction with its parent. As a 'Very Important' subsidiary, Symetra could also be downgraded below the group rating if its standalone assessment is downgraded by three or more notches.

FULL LIST OF RATING ACTIONS

Fitch has affirmed the following ratings with a Stable Rating Outlook:

Symetra Financial Corp.
--IDR at 'A-';
--4.25% senior unsecured notes due July 15, 2024 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'.