Fitch Affirms Symetra Life's IFS at 'A+'; Revises Outlook to Negative

Today's action considers Fitch's outlook for Symetra and the life insurance sector based on their exposures to financial markets and Fitch's view that the difficult economic environment will continue for an extended period. The Negative Outlook also considers Symetra's unrealized loss related to its investment portfolio and the negative financial impact it may have on the company under stressed scenarios.

Fitch's rationale for the affirmation of SFC and its subsidiaries' ratings reflects the company's strong capitalization, diverse businesses mix and good profitability. Additional strengths include the company's recent growth in its retirement business and solid competitive position in the group medical excess-loss niche market.

Fitch views the company's balance sheet as a positive since it has largely avoided investments in subprime mortgage assets and troubled classes of mortgage backed securities and, as a result, has realized manageable losses in its investment portfolio. In addition, the company's investments are considered high quality and are appropriately matched to its liabilities. Fitch further notes that the company's balance sheet contains a straightforward liability profile and excludes the complex exposures affecting some companies in the life sector.

Due to widening credit spreads the company has reported a large unrealized loss on its asset portfolio. Fitch also recognizes that many of those devalued assets are tied to liabilities that are largely illiquid. Nonetheless, while it is not an immediate concern, Fitch believes this unrealized loss is significant relative to GAAP shareholder's equity, and under severe stressed scenarios has potential to strain the company's liquidity and cash flow.

Fitch's key ratings concerns include challenges in the near term to maintain total earnings growth in view of difficult economic conditions. In addition, despite the group excess loss business consistently yielding profitable results, Fitch believes Symetra will remain challenged by its earnings volatility. However, that volatility is increasingly offset by growth in the company's retirement and life sales which provide steady earnings.

Symetra Life's positive operating earnings for 2008 are lower than prior periods due to investment losses and higher than expected loss ratios on its group stop-loss business. Fitch notes good traction in new product sales in 2008, particularly in its retirement business and annuities sold through its bank channels.

Symetra is a privately held insurance holding company based in Bellevue, Washington. Symetra Life, the main operating company reported $18.4 billion in total assets and $1.2 billion in adjusted surplus as of Sept. 30, 2008.

Fitch has affirmed the following ratings and revised the Outlook to Negative from Stable:

Symetra Financial Corp.

--Long-term IDR at 'A-';

--Senior debt at 'BBB+';

--Junior subordinate debt at 'BBB'.

Symetra Life Insurance Company

--Insurer Financial Strength (IFS) at 'A+'.

First Symetra National Life of New York

--Insurer financial strength (IFS) at 'A+'.

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SOURCE: Fitch Ratings

Fitch Ratings 
Manish J. Patel, +1-312-368-3188 (Chicago) 
Andrew Davidson, CFA, +1-312-368-3144 (Chicago) 
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