Symetra Financial Corporation (SYA) reported third-quarter 2014 adjusted operating income of 39 cents per share, which lagged the Zacks Consensus Estimate by 11.4% and declined 4.9% year over year.
The lackluster results were owing to volatility in investment income arising out of low interest rate environment. Nevertheless, it witnessed storng underwriting results and interest margins.
Net income per share decreased 18.4% year over year to $36 million or 31 cents per share in the reported quarter.
Operational performance
Total revenue of Symetra Financial fell 3.3% year over year to $509.0 million due to low net investment income and a decline in policy fees, contract charges and others. The figure also missed the Zacks Consensus Estimate by 3.0%.
Total benefits and expenses dropped 0.3% year over year to $471.7 million mainly due to decrease in the policyholder benefits as well as claims and amortization of deferred policy acquisition costs.
Benefits: Pretax operating income increased 35.5%, driven by lower medical stop loss ratio in the reported quarter. Loss ratio improved 460 basis points to 62.7%, reflecting low claims frequency. Both improvements were on a year-over-year basis.
Sales improved 83% on higher medical stop-loss sales.
Deferred Annuities: Pretax operating income increased 29% from the prior-year quarter on the back of growth in fixed indexed annuity (FIA) account values.
Total account values increased 14.7% year over year. FIA account values rose more than double to $2.9 billion from $1.3 billion in the year-ago quarter.
Sales increased 1.6% year over year due to solid revenues in traditional fixed annuities and FIA through continued expansion and penetration of Symetra's bank and broker-dealer distribution network.
Income Annuities: Pretax operating income declined 70.4% from the year-ago quarter due to a less favorable investment margin.
Sales decreased 60.2% year over year to $62.3 million in the reported quarter.
Individual Life: Pretax operating income fell 32.3% year over year in the said quarter owing to increased operating expense, lower prepayment income and an unfavorable impact from unlocking. These were partly offset by BOLI block’s higher base ROA owing to lower claims.
Sales of individual life products increased to $8.3 million from $3.9 million in the year-ago quarter, driven by higher Classic UL sales.
Other: Pretax operating loss rose to $12.1 million from $3.3 million in the year-ago quarter due to low net investment income.
Financial Update
Total assets of Symetra Financial were $32.6 million in the third quarter, increasing 8.3% from 2013-end level.
Stockholders equity was $3.4 million as of Sep 30, 2014, up 14.7% year over year.
Book value per share of Symetra Financial at the reported quarter-end was $21.26, rising from $21.04 as of Jun 30, 2014.
Risk-based capital (RBC) ratio at the end of third quarter was 453% while statutory capital and surplus, including asset valuation reserve (AVR), was $2.3 billion.
Dividend and Share Repurchase Update
The board of directors of Symetra Financial approved a special dividend of $1.30 per share. This dividend will be paid on Nov 21, 2014 to shareholders of record on Nov 7, 2014.
The company did not repurchase any shares in the quarter under review. As of Sep 30, 2014, the company had 6.9 million shares under the current buyback authorization
2014 Earnings Outlook
Symetra Financial reiterated its 2014 adjusted operating income guidance in the range of $1.80–$1.90 per share. Notably, the current Zacks Consensus Estimate for 2014 of $1.93 is higher than the company outlook.
Performance of Other Insurance Companies
Reinsurance Group of America Inc. (RGA) reported third-quarter 2014 operating income of $2.31 per share, which surpassed the Zacks Consensus Estimate of $2.09.
StanCorp Financial Group Inc. (SFG) posted third-quarter 2014 operating net earnings of $1.73 per share, outperforming the Zacks Consensus Estimate by 31% and improving 19.3% year over year.
Zacks Rank
Symetra Financial currently holds a Zacks Rank #2 (Buy). Investors interested in the life insurance sector could consider stocks like Fidelity & Guaranty Life Common (FGL), which sports a Zacks Rank #1 (Strong Buy).
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