2010 Q4 Earnings: Symetra Profit Is Nearly Double 2009 Results

Annuity, BOLI sales drive increases

Symetra Financial Corp. announced Wednesday that fourth quarter net income was $62.2 million, or $0.45 per diluted share, compared with $32.1 million ($0.29 per diluted share) in fourth quarter 2009. Total net income for 2010 was $200.9 million, or $1.48 per diluted share, compared with $128.3 million, or $1.15 per diluted share, in 2009.

Adjusted operating income totaled $48 million for the fourth quarter, or $0.35 per share; for 2010, adjusted operating income was $175.2 million, or $1.29 per share.

“We turned in a solid fourth quarter, with higher operating income across all four business segments compared with the same period a year ago,” said Tom Marra, Symetra president and chief executive officer, said in a press release. “The pricing actions we took in our stop-loss business in late 2009 and early 2010 contributed to an excellent loss ratio, and sales of bank-owned life insurance (BOLI) and fixed annuities were strong during the quarter. Our results also benefited from our commercial mortgage investment strategy.”

Return on equity for 2010 was 9.3%, down from 15.4% in 2009. The operating return on average equity was 9.8%, compared with 10.5% in 2009.

The group segment reported fourth quarter 2010 pre-tax adjusted operating income of $21.0 million, up from $10.7 million in 2009. Full-year income increased as well, rising from $55.4 million in 2009 to $71.6 million in 2010. The increase is attributed to improved medical stop-loss underwriting results, as well as limited benefit medical products.

The loss ratio for the group segment was 60.5% in the fourth quarter, compared with 69.9% in the fourth quarter of 2009. Medical stop-loss pricing increases and fewer claims account for the improvement.

An increased focus on employee benefits brokers drove sales from $13.4 million in 2009 to $15.1 million in the fourth quarter of 2010.

The deferred annuities segment reported $20.9 million in pre-tax adjusted operating income in the fourth quarter, compared with $17.3 million in the prior-year period, and full-year income totaled $81.3 million. Strong sales and higher interest spreads drove the increase, while total account values increased 19% to a "milestone" $10 billion at year-end.

Fourth-quarter sales doubled from the prior year period to $522.9 million due to increased sales through key bank partners.

The income annuities segment posted increases as well, reporting $10.9 million in pretax adjusted operating income for the fourth quarter, compared with $9.4 million in fourth quarter 2009. Full-year income fell slightly, however, to $33.2 million from $42.4 million in 2009. Mortality losses in 2010 were partially offset by increased interest spreads, which improved on increased originations of commercial mortgage loans.

Sales fell for the fourth quarter, falling to $67.9 million in fourth quarter 2010 from $83.8 million in fourth quarter 2009. Full-year sales increased from $251.8 million for full-year 2009 to $260 million for 2010.  

The life segment reported pre-tax adjusted operating income of $17.3 million for fourth quarter 2010, compared with $14.7 million in the prior-year period, primarily on an increase in return on assets from bank-owned life insurance.

Full-year income improved following a positive first quarter thanks to the company's move to reduce the credited interest rate on one of its universal life products.

Life sales fell slightly to $2.4 million from $2.7 million in the fourth quarter of 2009. Single premium life sales increased, however, rising over 25% from the third quarter of 2010. Full-year life sales also fell slightly to $10.2 million from $10.5 million in 2009.

BOLI sales rose 100% from fourth quarter 2009, to $35.9 million in fourth quarter 2010. Full-year sales jumped from just $2.5 million in 2009 to $46.1 million in 2010.

Marra noted that the company would invest in new retirement and life insurance products, and expand the firm's group life insurance operation in 2011, as well as enlist additional top-tier distribution partners. The company's 2011 guidance will be presented at an Investor's Day meeting Feb. 7.

Read about Symetra's third quarter earnings.

Read AdvisorOne's 2010 Q4 earnings calendar for the financial sector for release dates and links to earnings stories.

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