þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware (State or other jurisdiction of incorporation or organization) |
20-0978027 (I.R.S. Employer Identification No.) |
Large accelerated filer o | Accelerated filer o | Non-accelerated filer þ (Do not check if a smaller reporting company) | Smaller reporting company o |
1
| estimates or projections of revenues, net income, net income per share, adjusted operating income, adjusted operating income per share, market share or other financial forecasts; |
| trends in operations, financial performance and financial condition; | ||
| financial and operating targets or plans; and | ||
| business and growth strategy. |
| general economic, market or business conditions, including further economic downturns or other adverse conditions in the global and domestic capital and credit markets; |
| the availability of capital and financing; | ||
| potential investment losses; | ||
| the effects of fluctuations in interest rates and a prolonged low interest rate environment; | ||
| 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; | ||
| market pricing and competitive trends related to insurance products and services; | ||
| changes in amortization of deferred policy acquisition costs; | ||
| financial strength or credit ratings downgrades; | ||
| the continued availability and cost of reinsurance coverage; |
| changes in laws or regulations, or their interpretation, including those that could increase Symetras business costs and required capital levels; |
| the ability of subsidiaries to pay dividends to Symetra; | ||
| 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; and | ||
| the risks that are described in Item 1A Risk Factors in this report and Symetras 2009 Annual Report on Form 10-K. |
2
Item 1. | Financial Statements |
As of | As of | |||||||
June 30, 2010 | December 31, 2009 | |||||||
(Unaudited) | ||||||||
ASSETS |
||||||||
Investments: |
||||||||
Available-for-sale securities: |
||||||||
Fixed maturities, at fair value (cost: $19,618.7 and $18,553.7, respectively) |
$ | 20,612.2 | $ | 18,594.3 | ||||
Marketable equity securities, at fair value (cost: $52.6 and $52.6, respectively) |
43.9 | 36.7 | ||||||
Trading securities: |
||||||||
Marketable equity securities, at fair value (cost: $157.3 and $165.9, respectively) |
141.0 | 154.1 | ||||||
Mortgage loans, net |
1,340.3 | 1,201.7 | ||||||
Policy loans |
72.3 | 73.9 | ||||||
Investments in limited partnerships (includes $32.1 and $24.7 measured at fair value,
respectively) |
136.9 | 110.2 | ||||||
Other invested assets |
12.0 | 12.2 | ||||||
Total investments |
22,358.6 | 20,183.1 | ||||||
Cash and cash equivalents |
322.7 | 257.8 | ||||||
Accrued investment income |
251.6 | 237.2 | ||||||
Accounts receivable and other receivables |
81.9 | 70.1 | ||||||
Reinsurance recoverables |
277.3 | 276.6 | ||||||
Deferred policy acquisition costs |
199.0 | 250.4 | ||||||
Goodwill |
27.3 | 26.3 | ||||||
Current income taxes recoverable |
| 20.2 | ||||||
Deferred income tax assets, net |
| 191.2 | ||||||
Other assets |
74.0 | 84.5 | ||||||
Separate account assets |
759.0 | 840.1 | ||||||
Total assets |
$ | 24,351.4 | $ | 22,437.5 | ||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||
Funds held under deposit contracts |
$ | 19,825.7 | $ | 18,816.7 | ||||
Future policy benefits |
397.0 | 394.9 | ||||||
Policy and contract claims |
120.7 | 125.6 | ||||||
Unearned premiums |
14.0 | 12.1 | ||||||
Other policyholders funds |
99.5 | 113.8 | ||||||
Notes payable |
449.0 | 448.9 | ||||||
Deferred income tax liabilities, net |
112.0 | | ||||||
Other liabilities |
231.7 | 252.1 | ||||||
Separate account liabilities |
759.0 | 840.1 | ||||||
Total liabilities |
22,008.6 | 21,004.2 | ||||||
Commitments and contingencies (Note 10) |
||||||||
Preferred stock, $0.01 par value; 10,000,000 shares authorized; none issued |
| | ||||||
Common stock, $0.01 par value; 750,000,000 shares authorized; 118,222,920 issued and
118,175,040 outstanding as of June 30, 2010; 92,729,455 issued and outstanding as of
December 31, 2009 |
1.2 | 0.9 | ||||||
Additional paid-in capital |
1,449.5 | 1,165.7 | ||||||
Retained earnings |
391.6 | 316.4 | ||||||
Treasury stock, at cost; 47,880 and 0 shares as of June 30, 2010 and December 31,
2009, respectively |
(0.6 | ) | | |||||
Accumulated other comprehensive income (loss), net of taxes |
501.1 | (49.7 | ) | |||||
Total stockholders equity |
2,342.8 | 1,433.3 | ||||||
Total liabilities and stockholders equity |
$ | 24,351.4 | $ | 22,437.5 | ||||
3
For the Three Months Ended | For the Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Revenues: |
||||||||||||||||
Premiums |
$ | 115.5 | $ | 116.8 | $ | 234.5 | $ | 236.3 | ||||||||
Net investment income |
297.1 | 283.1 | 584.0 | 545.8 | ||||||||||||
Policy fees, contract charges, and other |
41.8 | 40.7 | 82.3 | 80.3 | ||||||||||||
Net realized investment gains (losses): |
||||||||||||||||
Total other-than-temporary impairment losses on securities |
(2.7 | ) | (72.2 | ) | (20.6 | ) | (123.8 | ) | ||||||||
Less: portion of losses recognized in other comprehensive
income |
1.2 | 43.7 | 9.4 | 67.5 | ||||||||||||
Net impairment losses recognized in earnings |
(1.5 | ) | (28.5 | ) | (11.2 | ) | (56.3 | ) | ||||||||
Other net realized investment gains (losses) |
(8.5 | ) | 31.2 | 8.0 | 16.0 | |||||||||||
Total net realized investment gains (losses) |
(10.0 | ) | 2.7 | (3.2 | ) | (40.3 | ) | |||||||||
Total revenues |
444.4 | 443.3 | 897.6 | 822.1 | ||||||||||||
Benefits and expenses: |
||||||||||||||||
Policyholder benefits and claims |
83.3 | 82.1 | 169.5 | 176.5 | ||||||||||||
Interest credited |
221.5 | 213.1 | 440.0 | 408.7 | ||||||||||||
Other underwriting and operating expenses |
64.2 | 62.0 | 123.8 | 125.0 | ||||||||||||
Interest expense |
7.9 | 8.0 | 15.9 | 15.9 | ||||||||||||
Amortization of deferred policy acquisition costs |
17.0 | 11.9 | 32.4 | 22.6 | ||||||||||||
Total benefits and expenses |
393.9 | 377.1 | 781.6 | 748.7 | ||||||||||||
Income from operations before income taxes |
50.5 | 66.2 | 116.0 | 73.4 | ||||||||||||
Provision (benefit) for income taxes: |
||||||||||||||||
Current |
17.4 | 9.6 | 27.3 | 11.5 | ||||||||||||
Deferred |
(2.7 | ) | 9.6 | 6.6 | 9.8 | |||||||||||
Total provision for income taxes |
14.7 | 19.2 | 33.9 | 21.3 | ||||||||||||
Net income |
$ | 35.8 | $ | 47.0 | $ | 82.1 | $ | 52.1 | ||||||||
Net income per common share: |
||||||||||||||||
Basic |
$ | 0.26 | $ | 0.42 | $ | 0.61 | $ | 0.47 | ||||||||
Diluted |
$ | 0.26 | $ | 0.42 | $ | 0.61 | $ | 0.47 | ||||||||
Weighted-average number of common shares outstanding: |
||||||||||||||||
Basic |
137.019 | 111.622 | 134.035 | 111.622 | ||||||||||||
Diluted |
137.038 | 111.622 | 134.056 | 111.622 | ||||||||||||
Cash dividends declared per common share |
$ | 0.05 | | $ | 0.05 | |
4
Accumulated | ||||||||||||||||||||||||
Additional | Treasury | Other | Total | |||||||||||||||||||||
Common | Paid-in | Retained | Stock, | Comprehensive | Stockholders' | |||||||||||||||||||
Stock | Capital | Earnings | at Cost | Income (Loss) | Equity | |||||||||||||||||||
Balances as of January 1, 2009 |
$ | 0.9 | $ | 1,165.5 | $ | 172.4 | $ | | $ | (1,052.6 | ) | $ | 286.2 | |||||||||||
Cumulative effect adjustment new accounting
guidance (net of taxes: $(8.4)) |
| | 15.7 | | (15.7 | ) | | |||||||||||||||||
Comprehensive income, net of taxes: |
||||||||||||||||||||||||
Net income |
| | 52.1 | | | 52.1 | ||||||||||||||||||
Other comprehensive income (net of taxes: $229.1) |
| | | | 425.4 | 425.4 | ||||||||||||||||||
Total comprehensive income, net of taxes |
477.5 | |||||||||||||||||||||||
Balances as of June 30, 2009 |
$ | 0.9 | $ | 1,165.5 | $ | 240.2 | $ | | $ | (642.9 | ) | $ | 763.7 | |||||||||||
Balances as of January 1, 2010 |
$ | 0.9 | $ | 1,165.7 | $ | 316.4 | $ | | $ | (49.7 | ) | $ | 1,433.3 | |||||||||||
Common stock issued (net of issuance costs: $20.6) |
0.3 | 282.2 | | | | 282.5 | ||||||||||||||||||
Comprehensive income, net of taxes: |
||||||||||||||||||||||||
Net income |
| | 82.1 | | | 82.1 | ||||||||||||||||||
Other comprehensive income (net of taxes: $296.5) |
| | | | 550.8 | 550.8 | ||||||||||||||||||
Total comprehensive income, net of taxes |
632.9 | |||||||||||||||||||||||
Stock-based compensation |
| 1.6 | | (0.6 | ) | | 1.0 | |||||||||||||||||
Dividends declared |
| | (6.9 | ) | | | (6.9 | ) | ||||||||||||||||
Balances as of June 30, 2010 |
$ | 1.2 | $ | 1,449.5 | $ | 391.6 | $ | (0.6 | ) | $ | 501.1 | $ | 2,342.8 | |||||||||||
5
For the Six Months Ended | ||||||||
June 30, | ||||||||
2010 | 2009 | |||||||
Cash flows from operating activities |
||||||||
Net income |
$ | 82.1 | $ | 52.1 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
Net realized investment losses |
3.2 | 40.3 | ||||||
Accretion and amortization of invested assets, net |
18.9 | 8.5 | ||||||
Accrued interest on bonds |
(21.5 | ) | (16.6 | ) | ||||
Amortization and depreciation |
11.5 | 7.4 | ||||||
Deferred income tax provision |
6.6 | 9.8 | ||||||
Interest credited on deposit contracts |
440.0 | 408.7 | ||||||
Mortality and expense charges and administrative fees |
(51.2 | ) | (50.2 | ) | ||||
Changes in: |
||||||||
Accrued investment income |
(14.4 | ) | (24.1 | ) | ||||
Deferred policy acquisition costs, net |
(35.1 | ) | (76.2 | ) | ||||
Other receivables |
2.8 | (13.9 | ) | |||||
Future policy benefits |
2.1 | 2.2 | ||||||
Policy and contract claims |
(4.9 | ) | (0.8 | ) | ||||
Current income taxes recoverable |
22.3 | 18.7 | ||||||
Other assets and liabilities |
(27.0 | ) | (5.5 | ) | ||||
Other, net |
1.4 | 0.1 | ||||||
Total adjustments |
354.7 | 308.4 | ||||||
Net cash provided by operating activities |
436.8 | 360.5 | ||||||
Cash flows from investing activities |
||||||||
Purchases of: |
||||||||
Fixed maturities and marketable equity securities |
(2,397.7 | ) | (2,110.7 | ) | ||||
Other invested assets and investments in limited partnerships |
(23.4 | ) | (19.3 | ) | ||||
Issuances of mortgage loans |
(179.6 | ) | (86.0 | ) | ||||
Issuances of policy loans |
(8.6 | ) | (8.9 | ) | ||||
Maturities, calls, paydowns, and other |
892.7 | 649.5 | ||||||
Securities lending collateral returned, net |
| 59.6 | ||||||
Sales of: |
||||||||
Fixed maturities and marketable equity securities |
441.7 | 138.4 | ||||||
Other invested assets and investments in limited partnerships |
6.3 | 2.9 | ||||||
Repayments of mortgage loans |
37.5 | 35.8 | ||||||
Repayments of policy loans |
9.7 | 9.3 | ||||||
Other, net |
(1.8 | ) | 3.9 | |||||
Net cash used in investing activities |
(1,223.2 | ) | (1,325.5 | ) | ||||
Cash flows from financing activities |
||||||||
Policyholder account balances: |
||||||||
Deposits |
1,215.9 | 1,655.6 | ||||||
Withdrawals |
(621.2 | ) | (671.4 | ) | ||||
Securities lending collateral paid, net |
| (59.6 | ) | |||||
Proceeds from issuance of common stock |
282.5 | | ||||||
Cash dividends paid on common stock |
(6.9 | ) | | |||||
Acquisition of treasury stock |
(0.6 | ) | | |||||
Other, net |
(18.4 | ) | 7.4 | |||||
Net cash provided by financing activities |
851.3 | 932.0 | ||||||
Net increase (decrease) in cash and cash equivalents |
64.9 | (33.0 | ) | |||||
Cash and cash equivalents at beginning of period |
257.8 | 468.0 | ||||||
Cash and cash equivalents at end of period |
$ | 322.7 | $ | 435.0 | ||||
Supplemental disclosures of cash flow information |
||||||||
Non-cash transactions during the period: |
||||||||
Investments in limited partnerships and capital obligations incurred |
$ | 20.2 | $ | 9.2 | ||||
Bond exchanges |
72.7 | 27.4 |
6
7
8
For the Three Months Ended | For the Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Numerator: |
||||||||||||||||
Net income, as reported |
$ | 35.8 | $ | 47.0 | $ | 82.1 | $ | 52.1 | ||||||||
Denominator: |
||||||||||||||||
Weighted-average common shares outstanding basic |
137.019 | 111.622 | 134.035 | 111.622 | ||||||||||||
Add: Dilutive effect of restricted stock |
0.019 | | 0.021 | | ||||||||||||
Weighted-average common shares outstanding diluted |
137.038 | 111.622 | 134.056 | 111.622 | ||||||||||||
Net income per common share: |
||||||||||||||||
Basic |
$ | 0.26 | $ | 0.42 | $ | 0.61 | $ | 0.47 | ||||||||
Diluted |
$ | 0.26 | $ | 0.42 | $ | 0.61 | $ | 0.47 |
Cost or | Gross | Gross | ||||||||||||||||||
Amortized | Unrealized | Unrealized | Fair | OTTI in | ||||||||||||||||
Cost | Gains | Losses | Value | AOCI | ||||||||||||||||
As of June 30, 2010 |
||||||||||||||||||||
Fixed maturities: |
||||||||||||||||||||
U.S. government and agencies |
$ | 116.3 | $ | 6.7 | $ | | $ | 123.0 | $ | (0.1 | ) | |||||||||
State and political subdivisions |
482.7 | 7.0 | (17.9 | ) | 471.8 | (0.7 | ) | |||||||||||||
Corporate securities |
13,426.8 | 987.4 | (237.8 | ) | 14,176.4 | (25.5 | ) | |||||||||||||
Residential mortgage-backed securities |
3,667.7 | 195.5 | (57.0 | ) | 3,806.2 | (42.2 | ) | |||||||||||||
Commercial mortgage-backed securities |
1,722.4 | 116.8 | (9.7 | ) | 1,829.5 | (3.7 | ) | |||||||||||||
Other debt obligations |
202.8 | 17.0 | (14.5 | ) | 205.3 | (3.9 | ) | |||||||||||||
Total fixed maturities |
19,618.7 | 1,330.4 | (336.9 | ) | 20,612.2 | (76.1 | ) | |||||||||||||
Marketable equity securities, available-for-sale |
52.6 | 0.2 | (8.9 | ) | 43.9 | | ||||||||||||||
Total |
$ | 19,671.3 | $ | 1,330.6 | $ | (345.8 | ) | $ | 20,656.1 | $ | (76.1 | ) | ||||||||
Cost or | Gross | Gross | ||||||||||||||||||
Amortized | Unrealized | Unrealized | Fair | OTTI in | ||||||||||||||||
Cost | Gains | Losses | Value | AOCI | ||||||||||||||||
As of December 31, 2009 |
||||||||||||||||||||
Fixed maturities: |
||||||||||||||||||||
U.S. government and agencies |
$ | 41.6 | $ | 2.4 | $ | (0.1 | ) | $ | 43.9 | $ | (0.1 | ) | ||||||||
State and political subdivisions |
518.4 | 1.9 | (37.3 | ) | 483.0 | (1.3 | ) | |||||||||||||
Corporate securities |
12,454.8 | 487.5 | (393.7 | ) | 12,548.6 | (32.8 | ) | |||||||||||||
Residential mortgage-backed securities |
3,532.1 | 105.3 | (101.0 | ) | 3,536.4 | (39.9 | ) | |||||||||||||
Commercial mortgage-backed securities |
1,805.6 | 44.5 | (60.7 | ) | 1,789.4 | (4.0 | ) | |||||||||||||
Other debt obligations |
201.2 | 9.4 | (17.6 | ) | 193.0 | (3.8 | ) | |||||||||||||
Total fixed maturities |
18,553.7 | 651.0 | (610.4 | ) | 18,594.3 | (81.9 | ) | |||||||||||||
Marketable equity securities, available-for-sale |
52.6 | 0.1 | (16.0 | ) | 36.7 | | ||||||||||||||
Total |
$ | 18,606.3 | $ | 651.1 | $ | (626.4 | ) | $ | 18,631.0 | $ | (81.9 | ) | ||||||||
9
Less Than 12 Months | 12 Months or More | |||||||||||||||||||||||
Gross | Gross | |||||||||||||||||||||||
Fair | Unrealized | # of | Fair | Unrealized | # of | |||||||||||||||||||
Value | Losses | Securities | Value | Losses | Securities | |||||||||||||||||||
As of June 30, 2010 |
||||||||||||||||||||||||
Fixed maturities: |
||||||||||||||||||||||||
State and political subdivisions |
$ | | $ | | | $ | 283.9 | $ | (17.9 | ) | 43 | |||||||||||||
Corporate securities |
560.5 | (45.1 | ) | 104 | 1,567.2 | (192.7 | ) | 175 | ||||||||||||||||
Residential mortgage-backed securities |
50.6 | (0.7 | ) | 12 | 350.7 | (56.3 | ) | 58 | ||||||||||||||||
Commercial mortgage-backed securities |
6.6 | (0.2 | ) | 5 | 86.9 | (9.5 | ) | 22 | ||||||||||||||||
Other debt obligations |
| | | 26.8 | (14.5 | ) | 7 | |||||||||||||||||
Total fixed maturities |
$ | 617.7 | $ | (46.0 | ) | 121 | $ | 2,315.5 | $ | (290.9 | ) | 305 | ||||||||||||
Marketable equity securities, available-for-sale |
| | | 22.9 | (8.9 | ) | 4 | |||||||||||||||||
Total |
$ | 617.7 | $ | (46.0 | ) | 121 | $ | 2,338.4 | $ | (299.8 | ) | 309 | ||||||||||||
Less Than 12 Months | 12 Months or More | |||||||||||||||||||||||
Gross | Gross | |||||||||||||||||||||||
Fair | Unrealized | # of | Fair | Unrealized | # of | |||||||||||||||||||
Value | Losses | Securities | Value | Losses | Securities | |||||||||||||||||||
As of December 31, 2009 |
||||||||||||||||||||||||
Fixed maturities: |
||||||||||||||||||||||||
U.S. government and agencies |
$ | 2.2 | $ | (0.1 | ) | 1 | $ | | $ | | | |||||||||||||
State and political subdivisions |
67.7 | (1.9 | ) | 18 | 299.7 | (35.4 | ) | 49 | ||||||||||||||||
Corporate securities |
1,404.0 | (33.4 | ) | 151 | 2,504.0 | (360.3 | ) | 291 | ||||||||||||||||
Residential mortgage-backed securities |
579.9 | (9.4 | ) | 30 | 404.6 | (91.6 | ) | 65 | ||||||||||||||||
Commercial mortgage-backed securities |
94.9 | (1.4 | ) | 11 | 622.8 | (59.3 | ) | 44 | ||||||||||||||||
Other debt obligations |
11.4 | (0.2 | ) | 3 | 28.2 | (17.4 | ) | 8 | ||||||||||||||||
Total fixed maturities |
$ | 2,160.1 | $ | (46.4 | ) | 214 | $ | 3,859.3 | $ | (564.0 | ) | 457 | ||||||||||||
Marketable equity securities, available-for-sale |
| | | 36.3 | (16.0 | ) | 5 | |||||||||||||||||
Total |
$ | 2,160.1 | $ | (46.4 | ) | 214 | $ | 3,895.6 | $ | (580.0 | ) | 462 | ||||||||||||
Amortized | Fair | |||||||
Cost | Value | |||||||
One year or less |
$ | 706.4 | $ | 717.1 | ||||
Over one year through five years |
3,181.3 | 3,380.9 | ||||||
Over five years through ten years |
5,008.8 | 5,403.3 | ||||||
Over ten years |
5,193.8 | 5,328.6 | ||||||
Residential mortgage-backed securities |
3,667.7 | 3,806.2 | ||||||
Commercial mortgage-backed securities. |
1,722.4 | 1,829.5 | ||||||
Other asset-backed securities |
138.3 | 146.6 | ||||||
Total fixed maturities |
$ | 19,618.7 | $ | 20,612.2 | ||||
10
For the Three Months Ended | For the Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Fixed maturities |
$ | 280.4 | $ | 263.6 | $ | 551.4 | $ | 514.4 | ||||||||
Marketable equity securities, available-for-sale |
1.1 | 1.3 | 1.7 | 1.7 | ||||||||||||
Marketable equity securities, trading |
0.8 | 0.6 | 1.5 | 1.2 | ||||||||||||
Mortgage loans |
20.9 | 16.1 | 39.7 | 32.1 | ||||||||||||
Policy loans |
1.1 | 1.1 | 2.2 | 2.2 | ||||||||||||
Investments in limited partnerships |
(2.6 | ) | 4.1 | (3.8 | ) | 2.6 | ||||||||||
Other |
0.7 | 1.1 | 1.8 | 1.3 | ||||||||||||
Total investment income |
302.4 | 287.9 | 594.5 | 555.5 | ||||||||||||
Investment expenses |
(5.3 | ) | (4.8 | ) | (10.5 | ) | (9.7 | ) | ||||||||
Net investment income |
$ | 297.1 | $ | 283.1 | $ | 584.0 | $ | 545.8 | ||||||||
For the Three Months Ended | For the Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Fixed maturities: |
||||||||||||||||
Gross gains on sales |
$ | 7.0 | $ | 5.8 | $ | 17.4 | $ | 6.2 | ||||||||
Gross losses on sales |
(0.2 | ) | (1.6 | ) | (1.3 | ) | (2.2 | ) | ||||||||
Other-than-temporary impairments |
(1.5 | ) | (28.5 | ) | (11.2 | ) | (56.3 | ) | ||||||||
Other(1) |
(0.1 | ) | 3.6 | 2.2 | (0.6 | ) | ||||||||||
Total fixed maturities |
5.2 | (20.7 | ) | 7.1 | (52.9 | ) | ||||||||||
Marketable equity securities, trading(2) |
(8.8 | ) | 19.6 | (1.2 | ) | 4.3 | ||||||||||
Other invested assets |
(4.8 | ) | 0.1 | (6.2 | ) | (1.5 | ) | |||||||||
Deferred policy acquisition costs adjustment |
(1.6 | ) | 3.7 | (2.9 | ) | 9.8 | ||||||||||
Net realized investment gains (losses) |
$ | (10.0 | ) | $ | 2.7 | $ | (3.2 | ) | $ | (40.3 | ) | |||||
(1) | This includes gains (losses) on calls and redemptions. Also included are changes in the fair value of the Companys convertible securities held as of period end totaling $(2.9), $(0.6), $3.0 and $3.0 for the three and six months ended June 30, 2010 and 2009, respectively. | |
(2) | This includes $(7.4), $(2.7), $19.2 and $4.4 of gains (losses) for the three and six months ended June 30, 2010 and 2009, respectively, related to changes in fair value of trading securities held as of period end. |
| Extent and duration of the decline in fair value below cost or amortized cost; | ||
| The financial condition and near-term prospects of the issuer of the security, including any specific events that may affect its operations, earnings potential or compliance with terms and covenants of the security; | ||
| Changes in the financial condition of the securitys underlying collateral; | ||
| Any downgrades of the security by a rating agency; |
11
| Any reduction or elimination of dividends or nonpayment of scheduled interest payments; | ||
| Other indications that a credit loss has occurred; and | ||
| The Companys intent to sell a fixed maturity or whether it is more likely than not the Company will be required to sell the fixed maturity prior to recovery of its amortized cost, considering any regulatory developments and the Companys liquidity needs. |
| Fundamentals of the issuer to determine what the Company would recover if the issuer were to file for bankruptcy, compared to the price at which the market is trading; | ||
| Fundamentals of the industry in which the issuer operates; | ||
| Earnings multiples for the given industry or sector of the industry that the issuer operates within, divided by the outstanding debt to determine an expected recovery value of the security in the case of a liquidation; | ||
| Expected cash flows of the issuer; | ||
| Expectations regarding defaults and recovery rates; | ||
| Changes to the rating of the security by a rating agency; and | ||
| Additional market information. |
| Discounted cash flow analysis based on the current and future cash flows the Company expects to recover; | ||
| Level of creditworthiness; | ||
| Delinquency ratios and loan-to-value ratios; | ||
| Average cumulative collateral loss, vintage year and level of subordination; | ||
| Susceptibility to fair value fluctuations due to changes in the interest rate environment; | ||
| Susceptibility to reinvestment risk in cases where market yields are lower than the book yield earned; | ||
| Susceptibility to reinvestment risk in cases where market yields are higher than the book yields earned and the Companys expectation of the sale of such security; and | ||
| Susceptibility to variability of prepayments. |
12
As of June 30, 2010 | As of December 31, 2009 | |||||||||||||||
Gross | Gross | |||||||||||||||
Fair | Unrealized | Fair | Unrealized | |||||||||||||
Value | Losses | Value | Losses | |||||||||||||
Fixed maturities |
||||||||||||||||
Underwater by 20% or more: |
||||||||||||||||
Less than 6 consecutive months |
$ | 137.6 | $ | (43.8 | ) | $ | 103.4 | $ | (28.4 | ) | ||||||
6 consecutive months or more |
187.6 | (93.2 | ) | 517.9 | (229.5 | ) | ||||||||||
Total underwater by 20% or more |
325.2 | (137.0 | ) | 621.3 | (257.9 | ) | ||||||||||
All other underwater fixed maturities |
2,608.0 | (199.9 | ) | 5,398.1 | (352.5 | ) | ||||||||||
Total underwater fixed maturities |
$ | 2,933.2 | $ | (336.9 | ) | $ | 6,019.4 | $ | (610.4 | ) | ||||||
Marketable equity securities, available-for-sale |
||||||||||||||||
Underwater by 20% or more: |
||||||||||||||||
6 consecutive months or more |
$ | 1.7 | $ | (4.4 | ) | $ | 35.6 | $ | (15.9 | ) | ||||||
Total underwater by 20% or more |
1.7 | (4.4 | ) | 35.6 | (15.9 | ) | ||||||||||
All other underwater marketable equity securities, available-for-sale |
21.2 | (4.5 | ) | 0.7 | (0.1 | ) | ||||||||||
Total underwater marketable equity securities, available-for-sale |
$ | 22.9 | $ | (8.9 | ) | $ | 36.3 | $ | (16.0 | ) | ||||||
For the Three Months Ended | For the Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Balance, beginning of period |
$ | 69.5 | $ | 86.1 | $ | 69.6 | $ | 73.0 | ||||||||
Increases recognized in the current period: |
||||||||||||||||
For which an OTTI was not previously recognized |
0.5 | 11.1 | 6.5 | 21.3 | ||||||||||||
For which an OTTI was previously recognized |
0.9 | 2.2 | 2.4 | 10.6 | ||||||||||||
Decreases attributable to: |
||||||||||||||||
Securities sold or paid down during the period |
(2.4 | ) | (7.6 | ) | (10.0 | ) | (7.7 | ) | ||||||||
Previously recognized credit losses on
securities impaired during the period due to a
change in intent to sell(1) |
| (17.4 | ) | | (22.8 | ) | ||||||||||
Balance, end of period |
$ | 68.5 | $ | 74.4 | $ | 68.5 | $ | 74.4 | ||||||||
(1) | Represents circumstances where the Company determined in the current period that it intends to sell the security or it is more likely than not that it will be required to sell the security prior to recovery of its amortized cost. |
13
| Level 1 Unadjusted quoted prices in active markets for identical instruments. This level primarily consists of exchange-traded marketable equity securities and actively traded mutual fund investments. |
| Level 2 Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations whose inputs are observable or whose significant value drivers are observable. This level includes those financial instruments that are valued using industry-standard pricing methodologies, models or other valuation methodologies. All significant inputs are observable, derived from observable information in the marketplace or are supported by observable levels at which transactions are executed in the market place. Financial instruments in this category primarily include certain public and private corporate fixed maturities, government or agency securities and certain mortgage-backed securities. |
| Level 3 Instruments whose significant value drivers are unobservable. This comprises financial instruments for which fair value is estimated based on industry-standard pricing methodologies and internally developed models utilizing significant inputs not based on or corroborated by readily available market information. In limited circumstances, this category may also utilize non-binding broker quotes. This category primarily consists of certain less liquid fixed maturities, including corporate private placement securities, investments in private equity and hedge funds and trading securities where the Company cannot corroborate the significant valuation inputs with market observable data. |
As of June 30, 2010 | ||||||||||||||||||||
Fair Value | Level 1 | Level 2 | Level 3 | Level 3 Percent | ||||||||||||||||
Types of Investments |
||||||||||||||||||||
Fixed maturities, available-for-sale: |
||||||||||||||||||||
U.S. government and agencies |
$ | 123.0 | $ | | $ | 123.0 | $ | | | |||||||||||
State and political subdivisions |
471.8 | | 464.2 | 7.6 | 0.0 | % | ||||||||||||||
Corporate securities |
14,176.4 | | 13,268.4 | 908.0 | 4.2 | |||||||||||||||
Residential mortgage-backed securities |
3,806.2 | | 3,729.1 | 77.1 | 0.4 | |||||||||||||||
Commercial mortgage-backed securities |
1,829.5 | | 1,797.9 | 31.6 | 0.1 | |||||||||||||||
Other debt obligations |
205.3 | | 194.6 | 10.7 | 0.1 | |||||||||||||||
Total fixed maturities, available-for-sale |
20,612.2 | | 19,577.2 | 1,035.0 | 4.8 | |||||||||||||||
Marketable equity securities, available-for-sale |
43.9 | 42.1 | | 1.8 | 0.0 | |||||||||||||||
Marketable equity securities, trading |
141.0 | 140.3 | | 0.7 | 0.0 | |||||||||||||||
Investments in limited partnerships(1) |
32.1 | | | 32.1 | 0.2 | |||||||||||||||
Other invested assets |
5.2 | 2.7 | | 2.5 | 0.0 | |||||||||||||||
Total investments |
20,834.4 | 185.1 | 19,577.2 | 1,072.1 | 5.0 | |||||||||||||||
Separate account assets |
759.0 | 759.0 | | | | |||||||||||||||
Total |
$ | 21,593.4 | $ | 944.1 | $ | 19,577.2 | $ | 1,072.1 | 5.0 | % | ||||||||||
14
As of December 31, 2009 | ||||||||||||||||||||
Fair Value | Level 1 | Level 2 | Level 3 | Level 3 Percent | ||||||||||||||||
Types of Investments |
||||||||||||||||||||
Fixed maturities, available-for-sale: |
||||||||||||||||||||
U.S. government and agencies |
$ | 43.9 | $ | | $ | 43.9 | $ | | | |||||||||||
State and political subdivisions |
483.0 | | 475.8 | 7.2 | 0.0 | % | ||||||||||||||
Corporate securities |
12,548.6 | | 11,657.4 | 891.2 | 4.5 | |||||||||||||||
Residential mortgage-backed securities |
3,536.4 | | 3,285.9 | 250.5 | 1.3 | |||||||||||||||
Commercial mortgage-backed securities |
1,789.4 | | 1,765.4 | 24.0 | 0.1 | |||||||||||||||
Other debt obligations |
193.0 | | 182.4 | 10.6 | 0.1 | |||||||||||||||
Total fixed maturities, available-for-sale |
18,594.3 | | 17,410.8 | 1,183.5 | 6.0 | |||||||||||||||
Marketable equity securities, available-for-sale |
36.7 | 34.9 | | 1.8 | 0.0 | |||||||||||||||
Marketable equity securities, trading |
154.1 | 153.8 | | 0.3 | 0.0 | |||||||||||||||
Investments in limited partnerships(1) |
24.7 | | | 24.7 | 0.2 | |||||||||||||||
Other invested assets |
6.7 | 2.1 | | 4.6 | 0.0 | |||||||||||||||
Total investments |
18,816.5 | 190.8 | 17,410.8 | 1,214.9 | 6.2 | |||||||||||||||
Separate account assets |
840.1 | 840.1 | | | | |||||||||||||||
Total |
$ | 19,656.6 | $ | 1,030.9 | $ | 17,410.8 | $ | 1,214.9 | 6.2 | % | ||||||||||
(1) | As of June 30, 2010 and December 31, 2009, this amount consisted of investments in private equity and hedge funds. |
15
As of June 30, 2010 | As of December 31, 2009 | |||||||||||||||||||||||
% | # of | % | # of | |||||||||||||||||||||
Amount | of Total | Securities | Amount | of Total | Securities | |||||||||||||||||||
Significant Security Sectors: |
||||||||||||||||||||||||
Industrials |
$ | 2,400.9 | 18.1 | % | 212 | $ | 1,974.9 | 16.9 | % | 227 | ||||||||||||||
Consumer staples |
2,003.9 | 15.1 | 141 | 1,731.0 | 14.8 | 150 | ||||||||||||||||||
Utilities |
1,849.3 | 13.9 | 196 | 1,771.6 | 15.2 | 216 | ||||||||||||||||||
Financials |
1,746.5 | 13.2 | 246 | 1,760.2 | 15.1 | 286 | ||||||||||||||||||
Weighted-average coupon rate |
6.44 | % | 6.55 | % | ||||||||||||||||||||
Weighted-average remaining years to contractual maturity |
12.5 | 13.3 |
As of June 30, 2010 | As of December 31, 2009 | ||||||||||||||||||||
Fair | % of Total | Fair | % of Total | ||||||||||||||||||
NAIC Rating | Comparable Standard & Poors rating | Value | Fair Value | Value | Fair Value | ||||||||||||||||
1 |
AAA, AA, A | $ | 163.9 | 20.5 | % | $ | 153.5 | 19.2 | % | ||||||||||||
2 |
BBB | 555.1 | 69.6 | 557.4 | 69.8 | ||||||||||||||||
3 6 |
BB & below | 78.8 | 9.9 | 87.3 | 11.0 | ||||||||||||||||
Total |
$ | 797.8 | 100.0 | % | $ | 798.2 | 100.0 | % | |||||||||||||
16
As of | As of | |||||||||||||||
June 30, 2010 | December 31, 2009 | |||||||||||||||
Amount | % of Total | Amount | % of Total | |||||||||||||
Standard & Poors equivalent rating: |
||||||||||||||||
AAA |
$ | 178.8 | 37.4 | % | $ | 200.8 | 39.9 | % | ||||||||
AA through BBB |
102.8 | 21.5 | 140.2 | 27.8 | ||||||||||||
BB & below |
196.7 | 41.1 | 162.7 | 32.3 | ||||||||||||
Total Non-agency RMBS |
$ | 478.3 | 100.0 | % | $ | 503.7 | 100.0 | % | ||||||||
Non-agency RMBS with super senior subordination |
$ | 285.9 | 59.8 | % | $ | 300.3 | 59.6 | % |
17
Unrealized Gain (Loss) | ||||||||||||||||||||||||||||||||||||
Transfers In | Included in: | |||||||||||||||||||||||||||||||||||
Balance as | and/or | Other | Realized | Balance as of | ||||||||||||||||||||||||||||||||
of April 1, | (Out) of | Net | Comprehensive | Gains | June 30, | |||||||||||||||||||||||||||||||
2010 | Purchases | Sales | Level 3(1) | Other(3) | Income(2) | Income | (Losses)(2) | 2010 | ||||||||||||||||||||||||||||
Types of Investments: |
||||||||||||||||||||||||||||||||||||
State and political subdivisions |
$ | 7.4 | $ | | $ | | $ | | $ | | $ | | $ | 0.2 | $ | | $ | 7.6 | ||||||||||||||||||
Corporate securities |
906.8 | 15.7 | | 4.7 | (35.9 | ) | | 14.4 | 2.3 | 908.0 | ||||||||||||||||||||||||||
Residential mortgage-backed securities |
260.8 | 17.4 | | (202.6 | ) | 0.7 | | 0.8 | | 77.1 | ||||||||||||||||||||||||||
Commercial mortgage-backed securities |
23.1 | 10.1 | | (1.3 | ) | (1.0 | ) | | 0.7 | | 31.6 | |||||||||||||||||||||||||
Other debt obligations |
10.8 | | | | (0.2 | ) | | 0.2 | (0.1 | ) | 10.7 | |||||||||||||||||||||||||
Total fixed maturities, available-for-sale |
1,208.9 | 43.2 | | (199.2 | ) | (36.4 | ) | | 16.3 | 2.2 | 1,035.0 | |||||||||||||||||||||||||
Marketable equity securities, available-for-sale |
1.8 | | | | | | | | 1.8 | |||||||||||||||||||||||||||
Marketable equity securities, trading |
0.5 | | | | 0.1 | 0.1 | | | 0.7 | |||||||||||||||||||||||||||
Investments in limited partnerships |
25.2 | 8.6 | (1.4 | ) | | 0.1 | (1.1 | ) | | 0.7 | 32.1 | |||||||||||||||||||||||||
Other invested assets |
3.8 | | | | | (1.3 | ) | | | 2.5 | ||||||||||||||||||||||||||
Total Level 3 |
$ | 1,240.2 | $ | 51.8 | $ | (1.4 | ) | $ | (199.2 | ) | $ | (36.2 | ) | $ | (2.3 | ) | $ | 16.3 | $ | 2.9 | $ | 1,072.1 | ||||||||||||||
Unrealized Gain (Loss) | ||||||||||||||||||||||||||||||||||||
Transfers In | Included in: | |||||||||||||||||||||||||||||||||||
Balance as | and/or | Other | Realized | Balance as of | ||||||||||||||||||||||||||||||||
of January 1, | (Out) of | Net | Comprehensive | Gains | June 30, | |||||||||||||||||||||||||||||||
2010 | Purchases | Sales | Level 3(1) | Other(3) | Income(2) | Income | (Losses)(2) | 2010 | ||||||||||||||||||||||||||||
Types of Investments: |
||||||||||||||||||||||||||||||||||||
State and political subdivisions |
$ | 7.2 | $ | | $ | | $ | | $ | | $ | | $ | 0.4 | $ | | $ | 7.6 | ||||||||||||||||||
Corporate securities |
891.2 | 31.7 | (17.3 | ) | 12.8 | (38.4 | ) | | 27.4 | 0.6 | 908.0 | |||||||||||||||||||||||||
Residential mortgage-backed securities |
250.5 | 17.4 | | (194.6 | ) | 1.4 | | 2.4 | | 77.1 | ||||||||||||||||||||||||||
Commercial mortgage-backed securities |
24.0 | 10.1 | | (1.3 | ) | (2.8 | ) | | 1.6 | | 31.6 | |||||||||||||||||||||||||
Other debt obligations |
10.6 | | | | (0.5 | ) | | 0.7 | (0.1 | ) | 10.7 | |||||||||||||||||||||||||
Total fixed maturities, available-for-sale |
1,183.5 | 59.2 | (17.3 | ) | (183.1 | ) | (40.3 | ) | | 32.5 | 0.5 | 1,035.0 | ||||||||||||||||||||||||
Marketable equity securities, available-for-sale |
1.8 | | | | | | | | 1.8 | |||||||||||||||||||||||||||
Marketable equity securities, trading |
0.3 | | | | 0.3 | 0.1 | | | 0.7 | |||||||||||||||||||||||||||
Investments in limited partnerships |
24.7 | 9.2 | (2.4 | ) | | | (0.2 | ) | | 0.8 | 32.1 | |||||||||||||||||||||||||
Other invested assets |
4.6 | | (0.3 | ) | | (0.8 | ) | (1.1 | ) | | 0.1 | 2.5 | ||||||||||||||||||||||||
Total Level 3 |
$ | 1,214.9 | $ | 68.4 | $ | (20.0 | ) | $ | (183.1 | ) | $ | (40.8 | ) | $ | (1.2 | ) | $ | 32.5 | $ | 1.4 | $ | 1,072.1 | ||||||||||||||
18
(1) | Transfers into and/or out of Level 3 are reported at the value as of the beginning of the period in which the transfer occurs. Gross transfers into Level 3 were $4.7 and $14.9 for the three and six months ended June 30, 2010, respectively. Gross transfers out of Level 3 were $(203.9) and $(198.0) for the three and six months ended June 30, 2010, respectively, as public market information on many of our RMBS securities became available and third party independent pricing services began to provide prices. Such securities are now classified as Level 2. | |
(2) | Realized and unrealized gains and losses for investments in limited partnerships are included in net investment income. All other realized and unrealized gains and losses are included in net realized investment gains (losses). | |
(3) | Other is comprised of transactions such as pay downs, calls, amortization and redemptions. |
Unrealized Gain (Loss) | ||||||||||||||||||||||||||||||||||||
Transfers In | Included in: | |||||||||||||||||||||||||||||||||||
Balance as | and/or | Other | Realized | Balance as of | ||||||||||||||||||||||||||||||||
of April 1, | (Out) of | Net | Comprehensive | Gains | June 30, | |||||||||||||||||||||||||||||||
2009 | Purchases | Sales | Level 3(1) | Other(3) | Income(2) | Loss | (Losses)(2) | 2009 | ||||||||||||||||||||||||||||
Types of Investments: |
||||||||||||||||||||||||||||||||||||
State and political subdivisions |
$ | 6.5 | $ | | $ | | $ | | $ | | $ | | $ | 0.6 | $ | | $ | 7.1 | ||||||||||||||||||
Corporate securities |
664.7 | 61.6 | (0.1 | ) | (19.9 | ) | (23.0 | ) | | 66.9 | (3.1 | ) | 747.1 | |||||||||||||||||||||||
Residential mortgage-backed securities |
| 56.9 | | 4.4 | (0.2 | ) | | | | 61.1 | ||||||||||||||||||||||||||
Commercial mortgage-backed securities |
22.6 | | | | (0.6 | ) | | 1.1 | | 23.1 | ||||||||||||||||||||||||||
Other debt obligations |
12.9 | | | | (0.3 | ) | | 0.1 | | 12.7 | ||||||||||||||||||||||||||
Total fixed maturities, available-for-sale |
706.7 | 118.5 | (0.1 | ) | (15.5 | ) | (24.1 | ) | | 68.7 | (3.1 | ) | 851.1 | |||||||||||||||||||||||
Marketable equity securities, available-for-sale |
1.8 | | | | | | | | 1.8 | |||||||||||||||||||||||||||
Marketable equity securities, trading |
0.1 | | | | | 0.1 | | | 0.2 | |||||||||||||||||||||||||||
Investments in limited partnerships |
59.0 | | (2.2 | ) | | | 8.3 | | (1.9 | ) | 63.2 | |||||||||||||||||||||||||
Other invested assets |
0.9 | | | | | 0.3 | | | 1.2 | |||||||||||||||||||||||||||
Total Level 3 |
$ | 768.5 | $ | 118.5 | $ | (2.3 | ) | $ | (15.5 | ) | $ | (24.1 | ) | $ | 8.7 | $ | 68.7 | $ | (5.0 | ) | $ | 917.5 | ||||||||||||||
Unrealized Gain (Loss) | ||||||||||||||||||||||||||||||||||||
Transfers In | Included in: | |||||||||||||||||||||||||||||||||||
Balance as | and/or | Other | Realized | Balance as of | ||||||||||||||||||||||||||||||||
of January 1, | (Out) of | Net | Comprehensive | Gains | June 30, | |||||||||||||||||||||||||||||||
2009 | Purchases | Sales | Level 3(1) | Other(3) | Income(2) | Loss | (Losses)(2) | 2009 | ||||||||||||||||||||||||||||
Types of Investments: |
||||||||||||||||||||||||||||||||||||
State and political subdivisions |
$ | 6.3 | $ | | $ | | $ | | $ | | $ | | $ | 0.8 | $ | | $ | 7.1 | ||||||||||||||||||
Corporate securities |
631.6 | 113.8 | (0.1 | ) | (23.7 | ) | (25.8 | ) | | 55.4 | (4.1 | ) | 747.1 | |||||||||||||||||||||||
Residential mortgage-backed securities |
| 56.9 | | 4.5 | (0.3 | ) | | | | 61.1 | ||||||||||||||||||||||||||
Commercial mortgage-backed securities |
24.4 | | | (0.7 | ) | (1.6 | ) | | 1.0 | | 23.1 | |||||||||||||||||||||||||
Other debt obligations |
12.0 | | | | (0.8 | ) | | 1.5 | | 12.7 | ||||||||||||||||||||||||||
Total fixed maturities, available-for-sale |
674.3 | 170.7 | (0.1 | ) | (19.9 | ) | (28.5 | ) | | 58.7 | (4.1 | ) | 851.1 | |||||||||||||||||||||||
Marketable equity securities, available-for-sale |
| | | 5.2 | | | (3.4 | ) | | 1.8 | ||||||||||||||||||||||||||
Marketable equity securities, trading |
0.2 | | | | | | | | 0.2 | |||||||||||||||||||||||||||
Investments in limited partnerships |
56.3 | 2.4 | (2.9 | ) | | | 9.2 | | (1.8 | ) | 63.2 | |||||||||||||||||||||||||
Other invested assets |
2.4 | | | | | (1.2 | ) | | | 1.2 | ||||||||||||||||||||||||||
Total Level 3 |
$ | 733.2 | $ | 173.1 | $ | (3.0 | ) | $ | (14.7 | ) | $ | (28.5 | ) | $ | 8.0 | $ | 55.3 | $ | (5.9 | ) | $ | 917.5 | ||||||||||||||
(1) | Transfers into and/or out of Level 3 are reported at the value as of the beginning of the period in which the transfer occurs. Gross transfers into Level 3 were $4.4 and $9.7 for the three and six months ended June 30, 2009, respectively. Gross transfers out of Level 3 were $(19.9) and $(24.4) for the three and six months ended June 30, 2009, respectively. | |
(2) | Realized and unrealized gains and losses for investments in limited partnerships are included in net investment income. All other realized and unrealized gains and losses are included in net realized investment gains (losses). | |
(3) | Other is comprised of transactions such as pay downs, calls, amortization, and redemptions. |
19
As of June 30, 2010 | As of December 31, 2009 | |||||||||||||||
Carrying | Carrying | |||||||||||||||
Amount | Fair Value | Amount | Fair Value | |||||||||||||
Financial assets: |
||||||||||||||||
Fixed maturities |
$ | 20,612.2 | $ | 20,612.2 | $ | 18,594.3 | $ | 18,594.3 | ||||||||
Marketable equity securities, available-for-sale |
43.9 | 43.9 | 36.7 | 36.7 | ||||||||||||
Marketable equity securities, trading |
141.0 | 141.0 | 154.1 | 154.1 | ||||||||||||
Mortgage loans |
1,340.3 | 1,360.6 | 1,201.7 | 1,190.1 | ||||||||||||
Investments in limited partnerships: |
||||||||||||||||
Hedge funds and private equity funds |
32.1 | 32.1 | 24.7 | 24.7 | ||||||||||||
Affordable housing |
104.8 | 102.8 | 85.5 | 89.9 | ||||||||||||
Other invested assets |
12.0 | 12.0 | 12.2 | 12.2 | ||||||||||||
Cash and cash equivalents |
322.7 | 322.7 | 257.8 | 257.8 | ||||||||||||
Separate account assets |
759.0 | 759.0 | 840.1 | 840.1 | ||||||||||||
Financial liabilities: |
||||||||||||||||
Funds held under deposit contracts: |
||||||||||||||||
Deferred annuities |
8,121.8 | 8,017.3 | 7,212.1 | 7,128.2 | ||||||||||||
Immediate annuities |
6,732.9 | 7,211.9 | 6,724.4 | 6,937.8 | ||||||||||||
Notes payable: |
||||||||||||||||
Capital Efficient Notes (CENts) |
149.8 | 127.2 | 149.8 | 118.5 | ||||||||||||
Senior notes |
299.2 | 302.7 | 299.1 | 276.8 |
20
For the Six | ||||||||
Months Ended | For the Year Ended | |||||||
June 30, 2010 | December 31, 2009 | |||||||
Unamortized balance at beginning of period |
$ | 325.7 | $ | 219.5 | ||||
Deferral of acquisition costs |
69.7 | 148.3 | ||||||
Adjustments related to investment (gains) losses |
(2.2 | ) | 9.3 | |||||
Amortization |
(32.4 | ) | (51.4 | ) | ||||
Unamortized balance at end of period |
360.8 | 325.7 | ||||||
Accumulated effect of net unrealized investment gains |
(161.8 | ) | (75.3 | ) | ||||
Balance at end of period |
$ | 199.0 | $ | 250.4 | ||||
For the Six | ||||||||
Months Ended | For the Year Ended | |||||||
June 30, 2010 | December 31, 2009 | |||||||
Unamortized balance at beginning of period |
$ | 67.6 | $ | 33.0 | ||||
Capitalizations |
28.0 | 42.5 | ||||||
Adjustments related to investment (gains) losses |
(0.7 | ) | 2.4 | |||||
Amortization |
(8.3 | ) | (10.3 | ) | ||||
Unamortized balance at end of period |
86.6 | 67.6 | ||||||
Accumulated effect of net unrealized investment gains |
(46.0 | ) | (18.4 | ) | ||||
Balance at end of period |
$ | 40.6 | $ | 49.2 | ||||
For the Three Months Ended | For the Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Net income
|
$ | 35.8 | $ | 47.0 | $ | 82.1 | $ | 52.1 | ||||||||
Other comprehensive income, net of taxes: |
||||||||||||||||
Changes in unrealized gains and losses on available-for-sale securities(1)
|
380.0 | 561.3 | 624.9 | 448.7 | ||||||||||||
Reclassification adjustment for net realized investment (gains) losses
included in net income(2)
|
2.4 | 0.7 | (3.7 | ) | 31.6 | |||||||||||
Adjustment for deferred policy acquisition costs and deferred sales
inducements valuation allowance(3)
|
(42.8 | ) | (16.3 | ) | (74.2 | ) | (11.9 | ) | ||||||||
Other-than-temporary-impairments on fixed maturities not related to
credit losses(4)
|
2.0 | (27.5 | ) | 3.8 | (43.0 | ) | ||||||||||
Other comprehensive income
|
341.6 | 518.2 | 550.8 | 425.4 | ||||||||||||
Total comprehensive income
|
$ | 377.4 | $ | 565.2 | $ | 632.9 | $ | 477.5 | ||||||||
(1) | Net of taxes of $204.5, $336.4, $302.2 and $241.6 for the three and six months ended June 30, 2010 and 2009, respectively. | |
(2) | Net of taxes of $1.3, $(2.0), $0.4 and $17.0 for the three and six months ended June 30, 2010 and 2009, respectively. For the three and six months ended June 30, 2010, $2.8 (net of taxes of $1.4) and $9.9 (net of taxes of $5.3) of the reclassification adjustment is related to losses previously classified as OTTI not related to credit losses. For the three and six months ended June 30, 2009, $0.9 (net of taxes of $0.4), of the reclassification adjustment is related to losses previously classified as OTTI not related to credit losses. | |
(3) | Net of taxes of $(23.0), $(39.9), $(8.8) and $(6.3) for the three and six months ended June 30, 2010 and 2009, respectively. | |
(4) | Net of taxes of $1.0, $2.0, $(14.8) and $(23.2) for the three months ended June 30, 2010 and 2009 and the six months ended June 30, 2010 and 2009, respectively. |
21
Common Shares | ||||
Balance at January 1, 2009 |
92,646,295 | |||
Restricted shares(1) |
83,160 | |||
Balance at December 31, 2009 |
92,729,455 | |||
Balance at January 1, 2010 |
92,729,455 | |||
Common stock, issued in initial public offering |
25,259,510 | |||
Restricted shares(1) |
233,955 | |||
Treasury stock acquired(2) |
(47,880 | ) | ||
Balance at June 30, 2010 |
118,175,040 | |||
(1) | Represents restricted shares issued pursuant to the Companys Equity Plan. | |
(2) | Represents shares repurchased to satisfy employee income tax withholding, pursuant to the Companys Equity Plan. |
22
Number of | Weighted-Average | |||||||
Shares | Fair Value | |||||||
Outstanding as of January 1, 2010 |
0.083 | $ | 13.08 | |||||
Shares granted |
0.234 | $ | 12.49 | |||||
Shares vested |
(0.131 | ) | $ | 12.40 | ||||
Shares forfeited |
| $ | | |||||
Outstanding at June 30, 2010 |
0.186 | $ | 12.44 | |||||
For the Three and Six Months | ||||
Ended June 30, 2010 | ||||
Expected term |
7.5 | years | ||
Risk-free interest rate |
2.7 | % | ||
Dividend yield |
1.6 | % | ||
Volatility |
45.6 | % |
23
For the Three Months Ended June 30, 2010 | ||||||||||||||||||||||||
Retirement | Income | |||||||||||||||||||||||
Group | Services | Annuities | Individual | Other | Total | |||||||||||||||||||
Operating revenues: |
||||||||||||||||||||||||
Premiums |
$ | 105.8 | $ | | $ | | $ | 9.7 | $ | | $ | 115.5 | ||||||||||||
Net investment income |
4.8 | 115.3 | 104.7 | 68.3 | 4.0 | 297.1 | ||||||||||||||||||
Policy fees, contract charges, and other |
3.0 | 4.8 | 0.2 | 29.8 | 4.0 | 41.8 | ||||||||||||||||||
Net investment losses on fixed index annuity (FIA)
options |
| (1.3 | ) | | | | (1.3 | ) | ||||||||||||||||
Total operating revenues |
113.6 | 118.8 | 104.9 | 107.8 | 8.0 | 453.1 | ||||||||||||||||||
Benefits and expenses: |
||||||||||||||||||||||||
Policyholder benefits and claims |
67.4 | 0.6 | | 15.3 | | 83.3 | ||||||||||||||||||
Interest credited |
| 70.4 | 92.9 | 59.1 | (0.9 | ) | 221.5 | |||||||||||||||||
Other underwriting and operating expenses |
26.0 | 13.6 | 5.2 | 13.4 | 6.0 | 64.2 | ||||||||||||||||||
Interest expense |
| | | | 7.9 | 7.9 | ||||||||||||||||||
Amortization of deferred policy acquisition costs |
2.0 | 13.6 | 0.4 | 1.0 | | 17.0 | ||||||||||||||||||
Total benefits and expenses |
95.4 | 98.2 | 98.5 | 88.8 | 13.0 | 393.9 | ||||||||||||||||||
Segment pre-tax adjusted operating income (loss) |
$ | 18.2 | $ | 20.6 | $ | 6.4 | $ | 19.0 | $ | (5.0 | ) | $ | 59.2 | |||||||||||
Operating revenues |
$ | 113.6 | $ | 118.8 | $ | 104.9 | $ | 107.8 | $ | 8.0 | $ | 453.1 | ||||||||||||
Add: Net realized investment gains (losses), excluding
FIA options |
| 2.6 | (13.8 | ) | 2.4 | 0.1 | (8.7 | ) | ||||||||||||||||
Total revenues |
113.6 | 121.4 | 91.1 | 110.2 | 8.1 | 444.4 | ||||||||||||||||||
Total benefits and expenses |
95.4 | 98.2 | 98.5 | 88.8 | 13.0 | 393.9 | ||||||||||||||||||
Income (loss) before income taxes |
$ | 18.2 | $ | 23.2 | $ | (7.4 | ) | $ | 21.4 | $ | (4.9 | ) | $ | 50.5 | ||||||||||
For the Three Months Ended June 30, 2009 | ||||||||||||||||||||||||
Retirement | Income | |||||||||||||||||||||||
Group | Services | Annuities | Individual | Other | Total | |||||||||||||||||||
Operating revenues: |
||||||||||||||||||||||||
Premiums |
$ | 107.9 | $ | | $ | | $ | 8.9 | $ | | $ | 116.8 | ||||||||||||
Net investment income |
4.3 | 95.3 | 107.1 | 67.0 | 9.4 | 283.1 | ||||||||||||||||||
Policy fees, contract charges, and other |
4.4 | 4.0 | 0.1 | 29.4 | 2.8 | 40.7 | ||||||||||||||||||
Net investment gains on FIA options |
| 0.2 | | | | 0.2 | ||||||||||||||||||
Total operating revenues |
116.6 | 99.5 | 107.2 | 105.3 | 12.2 | 440.8 | ||||||||||||||||||
Benefits and expenses: |
||||||||||||||||||||||||
Policyholder benefits and claims |
71.3 | (0.4 | ) | | 11.2 | | 82.1 | |||||||||||||||||
Interest credited |
| 61.1 | 91.3 | 61.8 | (1.1 | ) | 213.1 | |||||||||||||||||
Other underwriting and operating expenses |
26.2 | 14.2 | 5.2 | 12.7 | 3.7 | 62.0 | ||||||||||||||||||
Interest expense |
| | | | 8.0 | 8.0 | ||||||||||||||||||
Amortization of deferred policy acquisition costs |
1.9 | 8.5 | 0.4 | 1.1 | | 11.9 | ||||||||||||||||||
Total benefits and expenses |
99.4 | 83.4 | 96.9 | 86.8 | 10.6 | 377.1 | ||||||||||||||||||
Segment pre-tax adjusted operating income |
$ | 17.2 | $ | 16.1 | $ | 10.3 | $ | 18.5 | $ | 1.6 | $ | 63.7 | ||||||||||||
Operating revenues |
$ | 116.6 | $ | 99.5 | $ | 107.2 | $ | 105.3 | $ | 12.2 | $ | 440.8 | ||||||||||||
Add: Net realized investment gains (losses),
excluding FIA options |
(1.3 | ) | (5.1 | ) | 12.8 | 0.4 | (4.3 | ) | 2.5 | |||||||||||||||
Total revenues |
115.3 | 94.4 | 120.0 | 105.7 | 7.9 | 443.3 | ||||||||||||||||||
Total benefits and expenses |
99.4 | 83.4 | 96.9 | 86.8 | 10.6 | 377.1 | ||||||||||||||||||
Income (loss) before income taxes |
$ | 15.9 | $ | 11.0 | $ | 23.1 | $ | 18.9 | $ | (2.7 | ) | $ | 66.2 | |||||||||||
24
For the Six Months Ended June 30, 2010 | ||||||||||||||||||||||||
Retirement | Income | |||||||||||||||||||||||
Group | Services | Annuities | Individual | Other | Total | |||||||||||||||||||
Operating revenues: |
||||||||||||||||||||||||
Premiums |
$ | 214.6 | $ | | $ | | $ | 19.9 | $ | | $ | 234.5 | ||||||||||||
Net investment income |
9.4 | 223.1 | 208.7 | 134.4 | 8.4 | 584.0 | ||||||||||||||||||
Policy fees, contract charges, and other |
5.9 | 9.6 | 0.4 | 58.9 | 7.5 | 82.3 | ||||||||||||||||||
Net investment losses on FIA options |
| (1.2 | ) | | | | (1.2 | ) | ||||||||||||||||
Total operating revenues |
229.9 | 231.5 | 209.1 | 213.2 | 15.9 | 899.6 | ||||||||||||||||||
Benefits and expenses: |
||||||||||||||||||||||||
Policyholder benefits and claims |
142.4 | 0.7 | | 26.4 | | 169.5 | ||||||||||||||||||
Interest credited |
| 138.9 | 184.9 | 117.6 | (1.4 | ) | 440.0 | |||||||||||||||||
Other underwriting and operating expenses |
49.7 | 27.2 | 10.5 | 26.1 | 10.3 | 123.8 | ||||||||||||||||||
Interest expense |
| | | | 15.9 | 15.9 | ||||||||||||||||||
Amortization of deferred policy acquisition costs |
3.9 | 26.8 | 0.9 | 0.8 | | 32.4 | ||||||||||||||||||
Total benefits and expenses |
196.0 | 193.6 | 196.3 | 170.9 | 24.8 | 781.6 | ||||||||||||||||||
Segment pre-tax adjusted operating income (loss) |
$ | 33.9 | $ | 37.9 | $ | 12.8 | $ | 42.3 | $ | (8.9 | ) | $ | 118.0 | |||||||||||
Operating revenues |
$ | 229.9 | $ | 231.5 | $ | 209.1 | $ | 213.2 | $ | 15.9 | $ | 899.6 | ||||||||||||
Add: Net realized investment gains (losses), excluding
FIA options |
(0.2 | ) | 5.6 | (9.1 | ) | 2.6 | (0.9 | ) | (2.0 | ) | ||||||||||||||
Total revenues |
229.7 | 237.1 | 200.0 | 215.8 | 15.0 | 897.6 | ||||||||||||||||||
Total benefits and expenses |
196.0 | 193.6 | 196.3 | 170.9 | 24.8 | 781.6 | ||||||||||||||||||
Income (loss) before income taxes |
$ | 33.7 | $ | 43.5 | $ | 3.7 | $ | 44.9 | $ | (9.8 | ) | $ | 116.0 | |||||||||||
As of June 30, 2010: |
||||||||||||||||||||||||
Total assets |
$ | 249.6 | $ | 9,482.2 | $ | 6,952.5 | $ | 5,430.5 | $ | 2,236.6 | $ | 24,351.4 |
For the Six Months Ended June 30, 2009 | ||||||||||||||||||||||||
Retirement | Income | |||||||||||||||||||||||
Group | Services | Annuities | Individual | Other | Total | |||||||||||||||||||
Operating revenues: |
||||||||||||||||||||||||
Premiums |
$ | 217.6 | $ | | $ | | $ | 18.7 | $ | | $ | 236.3 | ||||||||||||
Net investment income |
8.8 | 178.3 | 213.4 | 131.1 | 14.2 | 545.8 | ||||||||||||||||||
Policy fees, contract charges, and other |
8.5 | 7.8 | 0.3 | 58.6 | 5.1 | 80.3 | ||||||||||||||||||
Net investment losses on FIA options |
| (1.2 | ) | | | | (1.2 | ) | ||||||||||||||||
Total operating revenues |
234.9 | 184.9 | 213.7 | 208.4 | 19.3 | 861.2 | ||||||||||||||||||
Benefits and expenses: |
||||||||||||||||||||||||
Policyholder benefits and claims |
148.2 | (0.9 | ) | | 29.2 | | 176.5 | |||||||||||||||||
Interest credited |
| 116.7 | 178.0 | 115.7 | (1.7 | ) | 408.7 | |||||||||||||||||
Other underwriting and operating expenses |
54.1 | 27.7 | 10.2 | 26.2 | 6.8 | 125.0 | ||||||||||||||||||
Interest expense |
| | | | 15.9 | 15.9 | ||||||||||||||||||
Amortization of deferred policy acquisition costs |
3.9 | 16.3 | 0.8 | 1.6 | | 22.6 | ||||||||||||||||||
Total benefits and expenses |
206.2 | 159.8 | 189.0 | 172.7 | 21.0 | 748.7 | ||||||||||||||||||
Segment pre-tax adjusted operating income (loss) |
$ | 28.7 | $ | 25.1 | $ | 24.7 | $ | 35.7 | $ | (1.7 | ) | $ | 112.5 | |||||||||||
Operating revenues |
$ | 234.9 | $ | 184.9 | $ | 213.7 | $ | 208.4 | $ | 19.3 | $ | 861.2 | ||||||||||||
Add: Net realized investment losses, excluding
FIA options |
(1.4 | ) | (17.2 | ) | (11.2 | ) | (4.4 | ) | (4.9 | ) | (39.1 | ) | ||||||||||||
Total revenues |
233.5 | 167.7 | 202.5 | 204.0 | 14.4 | 822.1 | ||||||||||||||||||
Total benefits and expenses |
206.2 | 159.8 | 189.0 | 172.7 | 21.0 | 748.7 | ||||||||||||||||||
Income (loss) before income taxes |
$ | 27.3 | $ | 7.9 | $ | 13.5 | $ | 31.3 | $ | (6.6 | ) | $ | 73.4 | |||||||||||
As of June 30, 2009: |
||||||||||||||||||||||||
Total assets |
$ | 289.5 | $ | 7,617.7 | $ | 6,296.4 | $ | 4,911.9 | $ | 1,997.9 | $ | 21,113.4 |
25
26
Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations |
| Group. We offer medical stop-loss insurance, limited benefit medical plans, group life insurance, accidental death and dismemberment insurance and disability income insurance mainly to employer groups of 50 to 5,000 individuals. In addition to our insurance products, we offer managing general underwriting services. |
| Retirement Services. We offer fixed and variable deferred annuities, including tax sheltered annuities, individual retirement accounts, or IRAs, and group annuities to qualified retirement plans, including Section 401(k), 403(b) and 457 plans. |
| Income Annuities. We offer single premium immediate annuities, or SPIAs, for customers seeking a reliable source of retirement income and structured settlement annuities to fund third-party personal injury settlements. In addition, we offer funding services options to existing structured settlement clients. |
| Individual. We offer a wide array of term and universal life insurance as well as bank-owned life insurance, or BOLI. |
| Other. This segment consists of unallocated corporate income, composed primarily of investment income on unallocated surplus, returns from our investments in limited partnerships, unallocated corporate expenses, interest expense on debt, tax credits from our tax preferred affordable housing investments, the results of small, non-insurance businesses that are managed outside of our operating segments, and inter-segment elimination entries. |
27
| developing new distribution partnerships, especially with financial institutions and financial planners; | ||
| adding additional products with existing partners; | ||
| expanding our less interest-rate sensitive products, including life insurance in the Individual and Group segments, while maintaining our solid position in fixed deferred and income annuities; | ||
| developing transparent products that capitalize on favorable demographic trends such as the need for retirement savings, life insurance and employers need to provide affordable health care to employees; and | ||
| disciplined balance sheet management. |
| Valuation of investments at fair value; |
| The evaluation of OTTI of investments; |
| The balance, recoverability and amortization of deferred policy acquisition costs; |
| The liabilities for funds held under deposit contracts, future policy benefits, and policy and contract claims; and |
| The recoverability of deferred tax assets. |
28
29
As of | As of | |||||||
June 30, | December 31, | |||||||
2010 | 2009 | |||||||
Total stockholders equity |
$ | 2,342.8 | $ | 1,433.3 | ||||
Less: AOCI |
501.1 | (49.7 | ) | |||||
Adjusted book value* |
1,841.7 | 1,483.0 | ||||||
Add: Assumed proceeds from exercise of warrants |
218.1 | 218.1 | ||||||
Adjusted book value, as converted* |
$ | 2,059.8 | $ | 1,701.1 | ||||
Book value per common share |
$ | 17.08 | $ | 12.83 | ||||
Adjusted book value per common share* |
$ | 15.58 | $ | 15.99 | ||||
Adjusted book value per common share, as converted* |
$ | 15.02 | $ | 15.23 | ||||
For the Twelve Months Ended | ||||||||
June 30, | December 31, | |||||||
2010 | 2009 | |||||||
Return on stockholders equity, ROE |
9.9 | % | 15.4 | % | ||||
Average stockholders equity |
$ | 1,598.4 | $ | 832.4 | ||||
Operating return on average equity, or ROAE* |
9.6 | % | 10.5 | % | ||||
Average adjusted book value* |
$ | 1,598.8 | $ | 1,407.8 |
* | Represents non-GAAP measures. |
30
| OTTI related to available-for-sale securities, which depend on the timing and severity of market credit cycles and management judgments regarding recoverability; |
| Net gains (losses) on changes in fair value of our trading securities, which depend on equity market performance and broader market conditions; and |
| Net realized gains (losses) on sales of securities, which are subject to our discretion and influenced by market opportunities. |
31
32
33
34
For the Three Months | QTD | For the Six Months | YTD | |||||||||||||||||||||
Ended June 30, | Variance (%) | Ended June 30, | Variance (%) | |||||||||||||||||||||
2010 | 2009 | 2010 vs. 2009 | 2010 | 2009 | 2010 vs. 2009 | |||||||||||||||||||
Revenues: |
||||||||||||||||||||||||
Premiums |
$ | 115.5 | $ | 116.8 | (1.1 | )% | $ | 234.5 | $ | 236.3 | (0.8 | )% | ||||||||||||
Net investment income |
297.1 | 283.1 | 4.9 | 584.0 | 545.8 | 7.0 | ||||||||||||||||||
Policy fees, contract charges, and other |
41.8 | 40.7 | 2.7 | 82.3 | 80.3 | 2.5 | ||||||||||||||||||
Net realized investment gains (losses): |
||||||||||||||||||||||||
Net impairment losses recognized in earnings |
(1.5 | ) | (28.5 | ) | 94.7 | (11.2 | ) | (56.3 | ) | 80.1 | ||||||||||||||
Other net realized investment gains (losses) |
(8.5 | ) | 31.2 | * | 8.0 | 16.0 | (50.0 | ) | ||||||||||||||||
Total net realized investment gains (losses) |
(10.0 | ) | 2.7 | * | (3.2 | ) | (40.3 | ) | 92.1 | |||||||||||||||
Total revenues |
444.4 | 443.3 | 0.2 | 897.6 | 822.1 | 9.2 | ||||||||||||||||||
Benefits and expenses: |
||||||||||||||||||||||||
Policyholder benefits and claims |
83.3 | 82.1 | 1.5 | 169.5 | 176.5 | (4.0 | ) | |||||||||||||||||
Interest credited |
221.5 | 213.1 | 3.9 | 440.0 | 408.7 | 7.7 | ||||||||||||||||||
Other underwriting and operating expenses |
64.2 | 62.0 | 3.5 | 123.8 | 125.0 | (1.0 | ) | |||||||||||||||||
Interest expense |
7.9 | 8.0 | (1.3 | ) | 15.9 | 15.9 | | |||||||||||||||||
Amortization of deferred policy acquisition costs |
17.0 | 11.9 | 42.9 | 32.4 | 22.6 | 43.4 | ||||||||||||||||||
Total benefits and expenses |
393.9 | 377.1 | 4.5 | 781.6 | 748.7 | 4.4 | ||||||||||||||||||
Income from operations before income taxes |
50.5 | 66.2 | (23.7 | ) | 116.0 | 73.4 | 58.0 | |||||||||||||||||
Provision for income taxes: |
||||||||||||||||||||||||
Current |
17.4 | 9.6 | 81.3 | 27.3 | 11.5 | * | ||||||||||||||||||
Deferred |
(2.7 | ) | 9.6 | * | 6.6 | 9.8 | (32.7 | ) | ||||||||||||||||
Total provision for income taxes: |
14.7 | 19.2 | (23.4 | ) | 33.9 | 21.3 | 59.2 | |||||||||||||||||
Net income |
$ | 35.8 | $ | 47.0 | (23.8 | ) | $ | 82.1 | $ | 52.1 | 57.6 | |||||||||||||
Net income per common share(1): |
||||||||||||||||||||||||
Basic |
$ | 0.26 | $ | 0.42 | (38.1 | ) | $ | 0.61 | $ | 0.47 | 29.8 | |||||||||||||
Diluted |
$ | 0.26 | $ | 0.42 | (38.1 | ) | $ | 0.61 | $ | 0.47 | 29.8 | |||||||||||||
Weighted-average common shares outstanding: |
||||||||||||||||||||||||
Basic |
137.019 | 111.622 | * | 134.035 | 111.622 | * | ||||||||||||||||||
Diluted |
137.038 | 111.622 | * | 134.056 | 111.622 | * | ||||||||||||||||||
Non-GAAP Financial Measures(2): |
||||||||||||||||||||||||
Adjusted operating income |
$ | 41.5 | $ | 45.3 | (8.4 | )% | $ | 83.4 | $ | 77.5 | 7.6 | % | ||||||||||||
Reconciliation to net income: |
||||||||||||||||||||||||
Net income |
$ | 35.8 | $ | 47.0 | (23.8 | ) | $ | 82.1 | $ | 52.1 | 57.6 | |||||||||||||
Less: Net realized investment gains (losses)
(net of taxes of $(3.4), $0.9, $(1.1) and
$(14.1)) |
(6.6 | ) | 1.8 | * | (2.1 | ) | (26.2 | ) | 92.0 | |||||||||||||||
Add: Net investment gains (losses) on FIA
options (net of taxes of $(0.4), $0.1, $(0.4)
and $(0.4)) |
(0.9 | ) | 0.1 | * | (0.8 | ) | (0.8 | ) | | |||||||||||||||
Adjusted operating income |
$ | 41.5 | $ | 45.3 | (8.4 | )% | $ | 83.4 | $ | 77.5 | 7.6 | % | ||||||||||||
* | Represents percentage variances that are not meaningful or are explained through the discussion of other variances. | |
(1) | For further information on the calculation of basic and diluted net income per common share, see Note 3 to the accompanying unaudited interim financial statements. | |
(2) | For a definition and discussion of the uses and limitations of this non-GAAP measure and other metrics used in our analysis, see Use of non-GAAP Financial Measures above. |
35
36
For the Three Months | QTD | For the Six Months | YTD | |||||||||||||||||||||
Ended June 30, | Variance (%) | Ended June 30, | Variance (%) | |||||||||||||||||||||
2010 | 2009 | 2010 vs. 2009 | 2010 | 2009 | 2010 vs. 2009 | |||||||||||||||||||
Operating revenues: |
||||||||||||||||||||||||
Premiums |
$ | 105.8 | $ | 107.9 | (1.9 | )% | $ | 214.6 | $ | 217.6 | (1.4 | )% | ||||||||||||
Net investment income |
4.8 | 4.3 | 11.6 | 9.4 | 8.8 | 6.8 | ||||||||||||||||||
Policy fees, contract charges, and other |
3.0 | 4.4 | (31.8 | ) | 5.9 | 8.5 | (30.6 | ) | ||||||||||||||||
Total operating revenues |
113.6 | 116.6 | (2.6 | ) | 229.9 | 234.9 | (2.1 | ) | ||||||||||||||||
Benefits and expenses: |
||||||||||||||||||||||||
Policyholder benefits and claims |
67.4 | 71.3 | (5.5 | ) | 142.4 | 148.2 | (3.9 | ) | ||||||||||||||||
Other underwriting and operating expenses |
26.0 | 26.2 | (0.8 | ) | 49.7 | 54.1 | (8.1 | ) | ||||||||||||||||
Amortization of deferred policy acquisition
costs |
2.0 | 1.9 | 5.3 | 3.9 | 3.9 | | ||||||||||||||||||
Total benefits and expenses |
95.4 | 99.4 | (4.0 | ) | 196.0 | 206.2 | (4.9 | ) | ||||||||||||||||
Segment pre-tax adjusted operating income |
$ | 18.2 | $ | 17.2 | 5.8 | % | $ | 33.9 | $ | 28.7 | 18.1 | % | ||||||||||||
37
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Group loss ratio(1) |
63.8 | % | 66.1 | % | 66.4 | % | 68.1 | % | ||||||||
Expense ratio(2) |
25.4 | % | 23.9 | % | 24.3 | % | 24.3 | % | ||||||||
Combined ratio(3) |
89.2 | % | 90.0 | % | 90.7 | % | 92.4 | % | ||||||||
Medical stop-loss loss ratio(4) |
65.4 | % | 67.7 | % | 67.8 | % | 69.7 | % | ||||||||
Total sales(5) |
$ | 20.6 | $ | 14.0 | $ | 62.0 | $ | 50.8 |
(1) | Group loss ratio represents policyholder benefits and claims incurred divided by premiums earned. | |
(2) | Expense ratio is equal to other underwriting and operating expenses of our insurance operations and amortization of DAC divided by premiums earned. | |
(3) | Combined ratio is equal to the sum of the loss ratio and the expense ratio. | |
(4) | Medical stop-loss loss ratio represents medical stop-loss policyholder benefits and incurred claims divided by medical stop-loss premiums earned. | |
(5) | Total sales represents annualized first-year premiums. |
38
Three Months | QTD | Six Months | YTD | |||||||||||||||||||||
Ended June 30, | Variance (%) | Ended June 30, | Variance (%) | |||||||||||||||||||||
2010 | 2009 | 2010 vs. 2009 | 2010 | 2009 | 2010 vs. 2009 | |||||||||||||||||||
Operating revenues: |
||||||||||||||||||||||||
Net investment income |
$ | 115.3 | $ | 95.3 | 21.0 | % | $ | 223.1 | $ | 178.3 | 25.1 | % | ||||||||||||
Policy fees, contract charges, and other |
4.8 | 4.0 | 20.0 | 9.6 | 7.8 | 23.1 | ||||||||||||||||||
Net investment gains (losses) on FIA options |
(1.3 | ) | 0.2 | * | (1.2 | ) | (1.2 | ) | | |||||||||||||||
Total operating revenues |
118.8 | 99.5 | 19.4 | 231.5 | 184.9 | 25.2 | ||||||||||||||||||
Benefits and expenses: |
||||||||||||||||||||||||
Policyholder benefits and claims |
0.6 | (0.4 | ) | * | 0.7 | (0.9 | ) | * | ||||||||||||||||
Interest credited |
70.4 | 61.1 | 15.2 | 138.9 | 116.7 | 19.0 | ||||||||||||||||||
Other underwriting and operating expenses |
13.6 | 14.2 | (4.2 | ) | 27.2 | 27.7 | (1.8 | ) | ||||||||||||||||
Amortization of deferred policy acquisition costs |
13.6 | 8.5 | 60.0 | 26.8 | 16.3 | 64.4 | ||||||||||||||||||
Total benefits and expenses |
98.2 | 83.4 | 17.7 | 193.6 | 159.8 | 21.2 | ||||||||||||||||||
Segment pre-tax adjusted operating income |
$ | 20.6 | $ | 16.1 | 28.0 | % | $ | 37.9 | $ | 25.1 | 51.0 | % | ||||||||||||
* | Represents percentage variances that are not meaningful or are explained through the discussion of other variances. |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Account values Fixed annuities |
$ | 8,574.0 | $ | 7,025.6 | ||||||||||||
Account values Variable annuities |
682.3 | 664.1 | ||||||||||||||
Interest spread on average account values(1) |
1.97 | % | 1.82 | % | 1.91 | % | 1.73 | % | ||||||||
Total sales(2) |
$ | 623.9 | $ | 568.5 | $ | 1,001.4 | $ | 1,479.6 |
(1) | Interest spread is the difference between net investment yield earned and the credited interest rate to policyholders. The investment yield is the approximate yield on invested assets in the general account attributed to the segment. The credited interest rate is the approximate rate credited on policyholder fixed account values within the segment. Interest credited is subject to contractual terms, including minimum guarantees. Interest spread tends to move gradually over time to reflect market interest rate movements and may reflect actions by management to respond to competitive pressures and profit targets. | |
(2) | Total sales represent deposits for new policies. |
39
40
Three Months | Six Months | |||||||||||||||||||||||
Ended June 30, | Variance (%) | Ended June 30, | Variance (%) | |||||||||||||||||||||
2010 | 2009 | 2010 vs. 2009 | 2010 | 2009 | 2010 vs. 2009 | |||||||||||||||||||
Operating revenues: |
||||||||||||||||||||||||
Net investment income |
$ | 104.7 | $ | 107.1 | (2.2 | )% | $ | 208.7 | $ | 213.4 | (2.2 | )% | ||||||||||||
Policy fees, contract charges, and other |
0.2 | 0.1 | * | 0.4 | 0.3 | 33.3 | ||||||||||||||||||
Total operating revenues |
104.9 | 107.2 | (2.1 | ) | 209.1 | 213.7 | (2.2 | ) | ||||||||||||||||
Benefits and expenses: |
||||||||||||||||||||||||
Interest credited |
92.9 | 91.3 | 1.8 | 184.9 | 178.0 | 3.9 | ||||||||||||||||||
Other underwriting and operating expenses |
5.2 | 5.2 | | 10.5 | 10.2 | 2.9 | ||||||||||||||||||
Amortization of deferred policy acquisition costs |
0.4 | 0.4 | | 0.9 | 0.8 | 12.5 | ||||||||||||||||||
Total benefits and expenses |
98.5 | 96.9 | 1.7 | 196.3 | 189.0 | 3.9 | ||||||||||||||||||
Segment pre-tax adjusted operating income |
$ | 6.4 | $ | 10.3 | (37.9 | )% | $ | 12.8 | $ | 24.7 | (48.2 | )% | ||||||||||||
* | Represents percentage variances that are not meaningful or are explained through the discussion of other variances. |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Reserves(1) |
$ | 6,716.8 | $ | 6,722.6 | ||||||||||||
Interest spread on reserves(2) |
0.49 | % | 0.62 | % | 0.45 | % | 0.61 | % | ||||||||
Mortality gains (losses)(3) |
$ | (1.8 | ) | $ | (0.5 | ) | $ | (1.9 | ) | $ | 3.8 | |||||
Prepayment speed adjustment on mortgage-backed securities(4) |
(0.1 | ) | 1.8 | (0.3 | ) | 2.5 | ||||||||||
Total sales(5) |
67.8 | 56.9 | 134.1 | 97.3 |
(1) | Reserves represent the present value of future income annuity benefits and assumed expenses, discounted by the assumed interest rate. This metric represents the amount of our in-force book of business. | |
(2) | Interest spread is the difference between net investment yield earned and the credited interest rate on policyholder reserves. The investment yield is the approximate yield on invested assets, excluding equities, in the general account attributed to the segment. The credited interest rate is the approximate rate credited on policyholder reserves and excludes the gains and losses from funding services and mortality. | |
(3) | Mortality gains (losses) represent the difference between actual and expected reserves released on death of our life contingent annuities. | |
(4) | Prepayment speed adjustment on mortgage-backed securities is the impact to net investment income due to the change in prepayment speeds on the underlying collateral of mortgage-backed securities. | |
(5) | Sales represent deposits for new policies. |
41
42
Three Months | Six Months | |||||||||||||||||||||||
Ended June 30, | Variance (%) | Ended June 30, | Variance (%) | |||||||||||||||||||||
2010 | 2009 | 2010 vs. 2009 | 2010 | 2009 | 2010 vs. 2009 | |||||||||||||||||||
Operating revenues: |
||||||||||||||||||||||||
Premiums |
$ | 9.7 | $ | 8.9 | 9.0 | % | $ | 19.9 | $ | 18.7 | 6.4 | % | ||||||||||||
Net investment income |
68.3 | 67.0 | 1.9 | 134.4 | 131.1 | 2.5 | ||||||||||||||||||
Policy fees, contract charges, and other |
29.8 | 29.4 | 1.4 | 58.9 | 58.6 | 0.5 | ||||||||||||||||||
Total operating revenues |
107.8 | 105.3 | 2.4 | 213.2 | 208.4 | 2.3 | ||||||||||||||||||
Benefits and expenses: |
||||||||||||||||||||||||
Policyholder benefits and claims |
15.3 | 11.2 | 36.6 | 26.4 | 29.2 | (9.6 | ) | |||||||||||||||||
Interest credited |
59.1 | 61.8 | (4.4 | ) | 117.6 | 115.7 | 1.6 | |||||||||||||||||
Other underwriting and operating expenses |
13.4 | 12.7 | 5.5 | 26.1 | 26.2 | (0.4 | ) | |||||||||||||||||
Amortization of deferred policy acquisition costs |
1.0 | 1.1 | (9.1 | ) | 0.8 | 1.6 | (50.0 | ) | ||||||||||||||||
Total benefits and expenses |
88.8 | 86.8 | 2.3 | 170.9 | 172.7 | (1.0 | ) | |||||||||||||||||
Segment pre-tax adjusted operating income |
$ | 19.0 | $ | 18.5 | 2.7 | % | $ | 42.3 | $ | 35.7 | 18.5 | % | ||||||||||||
* | Represents percentage variances that are not meaningful or are explained through the discussion of other variances. |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Insurance in force(1) |
$ | 49,912.3 | $ | 50,475.8 | ||||||||||||
Mortality ratio(2) |
79.5 | % | 79.0 | % | 81.3 | % | 80.6 | % | ||||||||
BOLI account value(3) |
$ | 3,886.0 | $ | 3,741.2 | ||||||||||||
UL account value(3) |
588.9 | 580.0 | ||||||||||||||
BOLI ROA(4) |
1.28 | % | 1.24 | % | 1.17 | % | 1.29 | % | ||||||||
UL interest spread(5) |
1.59 | % | 1.26 | % | 1.47 | % | 1.22 | % | ||||||||
Total sales, excluding BOLI(6) |
$ | 2.4 | $ | 2.4 | $ | 5.2 | $ | 4.9 | ||||||||
BOLI sales(7) |
| | 2.7 | 2.5 |
(1) | Insurance in force represents dollar face amounts of policies. | |
(2) | Mortality ratio represents actual mortality experience as a percentage of industry mortality ratio benchmark. This benchmark is an expected level of claims derived by applying our current in force business to the Society of Actuaries 1990-95 Basic Select and Ultimate Mortality Table. | |
(3) | BOLI account value and UL account value represent our liability to our policyholders. | |
(4) | BOLI ROA is a measure of the gross margin on our BOLI book of business. This metric is calculated as the difference between our BOLI revenue earnings rate and our BOLI policy benefits rate. The revenue earnings rate is calculated as revenues divided by average invested assets. The policy benefits rate is calculated as total policy benefits divided by average account value. The policy benefits used in this metric do not include expenses. | |
(5) | UL interest spread is the difference between net investment yield earned and the credited interest rate to policyholders. The investment yield is the approximate yield on invested assets in the general account attributed to the UL policies. The credited interest rate is the approximate rate credited on UL policyholder fixed account values. Interest credited to UL policyholders account values is subject to contractual terms, including minimum guarantees. Interest credited tends to move gradually over time to reflect actions by management to respond to competitive pressures and profit targets. The credited rate to policyholders for the six months ended June 30, 2010 was adjusted to exclude a bonus interest reserve release. Without this adjustment the UL interest spread would have been 3.49%. | |
(6) | Total sales, excluding BOLI represents annualized first year premiums, and 10% of single premium new deposits. | |
(7) | BOLI sales represent 10% of new BOLI total deposits. |
43
Three Months | Six Months | |||||||||||||||||||||||
Ended June 30, | Variance (%) | Ended June 30, | Variance (%) | |||||||||||||||||||||
2010 | 2009 | 2010 vs. 2009 | 2010 | 2009 | 2010 vs. 2009 | |||||||||||||||||||
Operating revenues: |
||||||||||||||||||||||||
Net investment income |
$ | 4.0 | $ | 9.4 | (57.4 | )% | $ | 8.4 | $ | 14.2 | (40.8 | )% | ||||||||||||
Policy fees, contract charges, and other |
4.0 | 2.8 | 42.9 | 7.5 | 5.1 | 47.1 | ||||||||||||||||||
Total operating revenues |
8.0 | 12.2 | (34.4 | ) | 15.9 | 19.3 | (17.6 | ) | ||||||||||||||||
Benefits and expenses: |
||||||||||||||||||||||||
Interest credited |
(0.9 | ) | (1.1 | ) | 18.2 | (1.4 | ) | (1.7 | ) | 17.6 | ||||||||||||||
Other underwriting and operating expenses |
6.0 | 3.7 | 62.2 | 10.3 | 6.8 | 51.5 | ||||||||||||||||||
Interest expense |
7.9 | 8.0 | (1.3 | ) | 15.9 | 15.9 | | |||||||||||||||||
Total benefits and expenses |
13.0 | 10.6 | 22.6 | 24.8 | 21.0 | 18.1 | ||||||||||||||||||
Segment pre-tax adjusted operating loss |
$ | (5.0 | ) | $ | 1.6 | * | $ | (8.9 | ) | $ | (1.7 | ) | * | |||||||||||
44
As of June 30, 2010 | As of December 31, 2009 | |||||||||||||||
Amount | % of Total | Amount | % of Total | |||||||||||||
Types of Investments | (Dollars in Millions) | |||||||||||||||
Fixed maturities, available-for-sale: |
||||||||||||||||
Public |
$ | 19,719.2 | 88.2 | % | $ | 17,693.0 | 87.6 | % | ||||||||
Private |
893.0 | 4.0 | 901.3 | 4.5 | ||||||||||||
Marketable equity securities, available-for-sale(1) |
43.9 | 0.2 | 36.7 | 0.2 | ||||||||||||
Marketable equity securities, trading(2) |
141.0 | 0.6 | 154.1 | 0.7 | ||||||||||||
Mortgage loans, net |
1,340.3 | 6.0 | 1,201.7 | 6.0 | ||||||||||||
Policy loans |
72.3 | 0.3 | 73.9 | 0.4 | ||||||||||||
Investments in limited partnerships(3) |
||||||||||||||||
Private equity and hedge funds |
32.1 | 0.1 | 24.7 | 0.1 | ||||||||||||
Affordable housing projects |
104.8 | 0.5 | 85.5 | 0.4 | ||||||||||||
Other invested assets |
12.0 | 0.1 | 12.2 | 0.1 | ||||||||||||
Total |
$ | 22,358.6 | 100.0 | % | $ | 20,183.1 | 100.0 | % | ||||||||
(1) | Amount primarily represents non-redeemable preferred stock. | |
(2) | Amount represents investments in common stock. | |
(3) | Investments in private equity and hedge funds are carried at fair value, while our investments in affordable housing projects and state tax credits are carried at amortized cost. In 2009, we submitted liquidation notices to all of our hedge fund partnerships. As of June 30, 2010, our remaining investment in hedge funds was $3.6. |
45
Three Months Ended | Three Months Ended | |||||||||||||||
June 30, 2010 | June 30, 2009 | |||||||||||||||
Yield(1) | Amount | Yield(1) | Amount | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Types of Investments |
||||||||||||||||
Fixed maturities, available-for-sale |
5.79 | % | $ | 280.4 | 5.97 | % | $ | 263.6 | ||||||||
Marketable equity securities, available-for-sale |
8.46 | 1.1 | 10.16 | 1.3 | ||||||||||||
Marketable equity securities, trading |
2.05 | 0.8 | 1.57 | 0.6 | ||||||||||||
Mortgage loans, net |
6.47 | 20.9 | 6.28 | 16.1 | ||||||||||||
Policy loans |
5.94 | 1.1 | 5.83 | 1.1 | ||||||||||||
Investments in limited partnerships: |
||||||||||||||||
Private equity and hedge funds |
(4.74 | ) | (0.4 | ) | 36.60 | 6.5 | ||||||||||
Affordable housing(2) |
(6.62 | ) | (2.2 | ) | (9.18 | ) | (2.4 | ) | ||||||||
Other income producing assets(3) |
0.70 | 0.7 | 0.78 | 1.1 | ||||||||||||
Gross investment income before investment expenses |
5.62 | 302.4 | 5.85 | 287.9 | ||||||||||||
Investment expenses |
(0.10 | ) | (5.3 | ) | (0.10 | ) | (4.8 | ) | ||||||||
Net investment income |
5.52 | % | $ | 297.1 | 5.75 | % | $ | 283.1 | ||||||||
(1) | Yields are determined based on monthly averages calculated using beginning and end-of-period balances. Yields are based on carrying values except for fixed maturities and equity securities. Yields for fixed maturities are based on amortized cost. Yields for equity securities are based on cost. | |
(2) | The negative yield from affordable housing investments is offset by U.S. federal income tax benefits. The resulting impact to net income was $1.3 and $0.9 for the three months ended June 30, 2010 and 2009, respectively. | |
(3) | Other income producing assets includes income from other invested assets, short-term investments and cash and cash equivalents. |
46
Six Months Ended | Six Months Ended | |||||||||||||||
June 30, 2010 | June 30, 2009 | |||||||||||||||
Yield(1) | Amount | Yield(1) | Amount | |||||||||||||
(Dollars in millions) | ||||||||||||||||
Types of Investments |
||||||||||||||||
Fixed maturities, available-for-sale |
5.77 | % | $ | 551.4 | 5.94 | % | $ | 514.4 | ||||||||
Marketable equity securities, available-for-sale |
6.44 | 1.7 | 6.44 | 1.7 | ||||||||||||
Marketable equity securities, trading |
1.86 | 1.5 | 1.57 | 1.2 | ||||||||||||
Mortgage loans, net |
6.31 | 39.7 | 6.31 | 32.1 | ||||||||||||
Policy loans |
5.96 | 2.2 | 5.79 | 2.2 | ||||||||||||
Investments in limited partnerships: |
||||||||||||||||
Private equity and hedge funds |
3.55 | 0.5 | 20.82 | 7.3 | ||||||||||||
Affordable housing(2) |
(6.84 | ) | (4.3 | ) | (9.09 | ) | (4.7 | ) | ||||||||
Other income producing assets(3) |
0.82 | 1.8 | 0.47 | 1.3 | ||||||||||||
Gross investment income before investment expenses |
5.60 | 594.5 | 5.75 | 555.5 | ||||||||||||
Investment expenses |
(0.10 | ) | (10.5 | ) | (0.10 | ) | (9.7 | ) | ||||||||
Net investment income |
5.50 | % | $ | 584.0 | 5.65 | % | $ | 545.8 | ||||||||
(1) | Yields are determined based on monthly averages calculated using beginning and end-of-period balances. Yields are based on carrying values except for fixed maturities and equity securities. Yields for fixed maturities are based on amortized cost. Yields for equity securities are based on cost. | |
(2) | The negative yield from affordable housing investments is offset by U.S. federal income tax benefits. The resulting impact to net income was $2.8 and $1.8 for the six months ended June 30, 2010 and 2009, respectively. | |
(3) | Other income producing assets includes income from other invested assets, short-term investments and cash and cash equivalents. |
47
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Gross realized gains on sales of fixed maturities |
7.0 | 5.8 | 17.4 | 6.2 | ||||||||||||
Gross realized losses on sales of fixed maturities |
(0.2 | ) | (1.6 | ) | (1.3 | ) | (2.2 | ) | ||||||||
Impairments: |
||||||||||||||||
Public fixed maturities(1) |
(1.4 | ) | (10.2 | ) | (3.8 | ) | (27.9 | ) | ||||||||
Private fixed maturities |
| (3.2 | ) | (5.1 | ) | (4.1 | ) | |||||||||
Total credit-related |
(1.4 | ) | (13.4 | ) | (8.9 | ) | (32.0 | ) | ||||||||
Other |
(0.1 | ) | (15.1 | ) | (2.3 | ) | (24.3 | ) | ||||||||
Total impairments |
(1.5 | ) | (28.5 | ) | (11.2 | ) | (56.3 | ) | ||||||||
Net gains (losses) on trading securities |
(8.8 | ) | 19.6 | (1.2 | ) | 4.3 | ||||||||||
Other net investment gains (losses)(2): |
||||||||||||||||
Other gross gains |
4.6 | 8.0 | 8.4 | 15.2 | ||||||||||||
Other gross losses |
(11.1 | ) | (0.6 | ) | (15.3 | ) | (7.5 | ) | ||||||||
Net realized investment gains (losses) before taxes |
$ | (10.0 | ) | $ | 2.7 | $ | (3.2 | ) | $ | (40.3 | ) | |||||
(1) | Public fixed maturities includes publicly traded securities and highly marketable private placements for which there is an actively traded market. | |
(2) | This primarily consists of changes in fair value on derivatives instruments, gains (losses) on calls and redemptions, and the impact of net realized investment gains (losses) on DAC and deferred sales inducements. |
48
As of June 30, 2010 | As of December 31, 2009 | |||||||||||||||||||||||||||
Amortized | Fair | % of Total | Amortized | Fair | % of Total | |||||||||||||||||||||||
NAIC | S&P Equivalent | Cost | Value | Fair Value | Cost | Value | Fair Value | |||||||||||||||||||||
1 | AAA, AA, A |
$ | 11,413.7 | $ | 12,116.4 | 58.8 | % | $ | 10,917.3 | $ | 11,031.3 | 59.3 | % | |||||||||||||||
2 | BBB |
7,075.5 | 7,465.0 | 36.2 | 6,471.3 | 6,530.9 | 35.1 | |||||||||||||||||||||
Total investment grade |
18,489.2 | 19,581.4 | 95.0 | 17,388.6 | 17,562.2 | 94.4 | ||||||||||||||||||||||
3 | BB |
692.1 | 642.0 | 3.1 | 717.9 | 641.3 | 3.5 | |||||||||||||||||||||
4 | B |
296.6 | 264.6 | 1.3 | 251.0 | 219.2 | 1.2 | |||||||||||||||||||||
5 | CCC & lower |
110.2 | 105.4 | 0.5 | 128.0 | 113.5 | 0.6 | |||||||||||||||||||||
6 | In or near default |
30.6 | 18.8 | 0.1 | 68.2 | 58.1 | 0.3 | |||||||||||||||||||||
Total below investment grade |
1,129.5 | 1,030.8 | 5.0 | 1,165.1 | 1,032.1 | 5.6 | ||||||||||||||||||||||
Total | $ | 19,618.7 | $ | 20,612.2 | 100.0 | % | $ | 18,553.7 | $ | 18,594.3 | 100.0 | % | ||||||||||||||||
49
As of June 30, 2010 | ||||||||||||||||||||||||
Other-than- | ||||||||||||||||||||||||
Cost or | Gross | Gross | % of | Temporary | ||||||||||||||||||||
Amortized | Unrealized | Unrealized | Fair | Total Fair | Impairments | |||||||||||||||||||
Cost | Gains | Losses | Value | Value | in AOCI | |||||||||||||||||||
Security Sector |
||||||||||||||||||||||||
Corporate Securities: |
||||||||||||||||||||||||
Consumer discretionary |
$ | 1,386.7 | $ | 84.9 | $ | (14.6 | ) | $ | 1,457.0 | 7.1 | % | $ | (2.4 | ) | ||||||||||
Consumer staples |
1,912.0 | 179.7 | (7.7 | ) | 2,084.0 | 10.1 | (1.4 | ) | ||||||||||||||||
Energy |
662.3 | 48.6 | (8.3 | ) | 702.6 | 3.4 | | |||||||||||||||||
Financials |
2,034.2 | 68.7 | (130.1 | ) | 1,972.8 | 9.6 | (4.7 | ) | ||||||||||||||||
Health care |
1,073.0 | 111.2 | (1.6 | ) | 1,182.6 | 5.7 | (1.9 | ) | ||||||||||||||||
Industrials |
2,370.0 | 224.2 | (7.0 | ) | 2,587.2 | 12.6 | (0.8 | ) | ||||||||||||||||
Information technology |
367.6 | 40.4 | (1.3 | ) | 406.7 | 2.0 | | |||||||||||||||||
Materials |
1,117.5 | 72.5 | (27.4 | ) | 1,162.6 | 5.6 | (8.4 | ) | ||||||||||||||||
Telecommunication services |
608.0 | 35.0 | (13.4 | ) | 629.6 | 3.1 | (1.1 | ) | ||||||||||||||||
Utilities |
1,822.4 | 121.1 | (20.2 | ) | 1,923.3 | 9.3 | (0.4 | ) | ||||||||||||||||
Other |
73.1 | 1.1 | (6.2 | ) | 68.0 | 0.3 | (4.4 | ) | ||||||||||||||||
Total corporate securities |
13,426.8 | 987.4 | (237.8 | ) | 14,176.4 | 68.8 | (25.5 | ) | ||||||||||||||||
U.S. government and agencies |
116.3 | 6.7 | | 123.0 | 0.6 | (0.1 | ) | |||||||||||||||||
State and political subdivisions |
482.7 | 7.0 | (17.9 | ) | 471.8 | 2.3 | (0.7 | ) | ||||||||||||||||
Residential mortgage-backed securities: |
||||||||||||||||||||||||
Agency |
3,141.2 | 187.7 | (1.0 | ) | 3,327.9 | 16.1 | | |||||||||||||||||
Non-agency: |
||||||||||||||||||||||||
Prime |
397.4 | 4.5 | (46.2 | ) | 355.7 | 1.7 | (33.7 | ) | ||||||||||||||||
Alt-A |
129.1 | 3.3 | (9.8 | ) | 122.6 | 0.6 | (8.5 | ) | ||||||||||||||||
Total residential mortgage-backed securities |
3,667.7 | 195.5 | (57.0 | ) | 3,806.2 | 18.4 | (42.2 | ) | ||||||||||||||||
Commercial mortgage-backed securities |
1,722.4 | 116.8 | (9.7 | ) | 1,829.5 | 8.9 | (3.7 | ) | ||||||||||||||||
Other debt obligations |
202.8 | 17.0 | (14.5 | ) | 205.3 | 1.0 | (3.9 | ) | ||||||||||||||||
Total |
$ | 19,618.7 | $ | 1,330.4 | $ | (336.9 | ) | $ | 20,612.2 | 100.0 | % | $ | (76.1 | ) | ||||||||||
50
As of December 31, 2009 | ||||||||||||||||||||||||
Other-than- | ||||||||||||||||||||||||
Cost or | Gross | Gross | % of | Temporary | ||||||||||||||||||||
Amortized | Unrealized | Unrealized | Fair | Total Fair | Impairments | |||||||||||||||||||
Cost | Gains | Losses | Value | Value | in AOCI | |||||||||||||||||||
Security Sector |
||||||||||||||||||||||||
Corporate Securities: |
||||||||||||||||||||||||
Consumer discretionary |
$ | 1,093.3 | $ | 41.9 | $ | (29.6 | ) | $ | 1,105.6 | 5.9 | % | $ | (7.9 | ) | ||||||||||
Consumer staples |
1,736.6 | 84.7 | (17.6 | ) | 1,803.7 | 9.7 | (1.4 | ) | ||||||||||||||||
Energy |
651.4 | 28.3 | (8.8 | ) | 670.9 | 3.6 | | |||||||||||||||||
Financials |
2,122.9 | 39.8 | (193.2 | ) | 1,969.5 | 10.6 | (5.8 | ) | ||||||||||||||||
Health care |
861.1 | 59.1 | (4.1 | ) | 916.1 | 4.9 | (1.9 | ) | ||||||||||||||||
Industrials |
2,091.7 | 92.6 | (28.1 | ) | 2,156.2 | 11.6 | (1.4 | ) | ||||||||||||||||
Information technology |
357.2 | 27.9 | (0.3 | ) | 384.8 | 2.1 | | |||||||||||||||||
Materials |
1,111.7 | 39.1 | (49.0 | ) | 1,101.8 | 5.9 | (12.7 | ) | ||||||||||||||||
Telecommunication services |
583.4 | 21.3 | (16.7 | ) | 588.0 | 3.2 | (1.2 | ) | ||||||||||||||||
Utilities |
1,837.5 | 52.4 | (46.3 | ) | 1,843.6 | 9.9 | (0.5 | ) | ||||||||||||||||
Other |
8.0 | 0.4 | | 8.4 | 0.1 | | ||||||||||||||||||
Total corporate securities |
12,454.8 | 487.5 | (393.7 | ) | 12,548.6 | 67.5 | (32.8 | ) | ||||||||||||||||
U.S. government and agencies |
41.6 | 2.4 | (0.1 | ) | 43.9 | 0.2 | (0.1 | ) | ||||||||||||||||
State and political subdivisions |
518.4 | 1.9 | (37.3 | ) | 483.0 | 2.6 | (1.3 | ) | ||||||||||||||||
Residential mortgage-backed securities: |
||||||||||||||||||||||||
Agency |
2,936.8 | 102.6 | (6.7 | ) | 3,032.7 | 16.3 | | |||||||||||||||||
Non-agency: |
||||||||||||||||||||||||
Prime |
449.8 | 0.6 | (72.4 | ) | 378.0 | 2.0 | (31.7 | ) | ||||||||||||||||
Alt-A |
145.3 | 2.1 | (21.9 | ) | 125.5 | 0.7 | (8.2 | ) | ||||||||||||||||
Subprime |
0.2 | | | 0.2 | | | ||||||||||||||||||
Total residential mortgage-backed securities |
3,532.1 | 105.3 | (101.0 | ) | 3,536.4 | 19.0 | (39.9 | ) | ||||||||||||||||
Commercial mortgage-backed securities |
1,805.6 | 44.5 | (60.7 | ) | 1,789.4 | 9.7 | (4.0 | ) | ||||||||||||||||
Other debt obligations |
201.2 | 9.4 | (17.6 | ) | 193.0 | 1.0 | (3.8 | ) | ||||||||||||||||
Total |
$ | 18,553.7 | $ | 651.0 | $ | (610.4 | ) | $ | 18,594.3 | 100.0 | % | $ | (81.9 | ) | ||||||||||
51
As of June 30, 2010 | As of December 31, 2009 | |||||||||||||||
% of Total | % of Total | |||||||||||||||
Fair Value | Invested Assets | Fair Value | Invested Assets | |||||||||||||
Agency |
$ | 3,327.9 | 14.9 | % | $ | 3,032.7 | 15.0 | % | ||||||||
Non-agency: |
||||||||||||||||
Prime |
355.7 | 1.6 | 378.0 | 1.9 | ||||||||||||
Alt-A |
122.6 | 0.5 | 125.5 | 0.6 | ||||||||||||
Subprime |
| | 0.2 | | ||||||||||||
Subtotal non-agency |
478.3 | 2.1 | 503.7 | 2.5 | ||||||||||||
Total |
$ | 3,806.2 | 17.0 | % | $ | 3,536.4 | 17.5 | % | ||||||||
As of June 30, 2010 | ||||||||||||||||||||||||||||
Highest Rating Agency Rating | ||||||||||||||||||||||||||||
Total as of | ||||||||||||||||||||||||||||
BB and | December 31, | |||||||||||||||||||||||||||
Vintage | AAA | AA | A | BBB | Below | Total | 2009 | |||||||||||||||||||||
2007 |
$ | | $ | | $ | | $ | | $ | 66.3 | $ | 66.3 | $ | 91.0 | ||||||||||||||
2006 |
| 1.4 | | 24.6 | 126.6 | 152.6 | 177.0 | |||||||||||||||||||||
2005 |
0.5 | 9.2 | 11.7 | 59.1 | 28.3 | 108.8 | 113.6 | |||||||||||||||||||||
2004 & prior |
183.6 | 14.5 | | | 0.7 | 198.8 | 213.7 | |||||||||||||||||||||
Total amortized cost |
$ | 184.1 | $ | 25.1 | $ | 11.7 | $ | 83.7 | $ | 221.9 | $ | 526.5 | $ | 595.3 | ||||||||||||||
Total unrealized losses |
(5.3 | ) | (6.5 | ) | | (11.2 | ) | (25.2 | ) | (48.2 | ) | (91.6 | ) | |||||||||||||||
Total fair value |
$ | 178.8 | $ | 18.6 | $ | 11.7 | $ | 72.5 | $ | 196.7 | $ | 478.3 | $ | 503.7 | ||||||||||||||
As of June 30, 2010 | As of December 31, 2009 | |||||||||||||||
% of Total | % of Total | |||||||||||||||
Fair Value | Invested Assets | Fair Value | Invested Assets | |||||||||||||
Agency |
$ | 538.9 | 2.4 | % | $ | 425.6 | 2.1 | % | ||||||||
Non-agency |
1,290.6 | 5.8 | 1,363.8 | 6.8 | ||||||||||||
Total |
$ | 1,829.5 | 8.2 | % | $ | 1,789.4 | 8.9 | % | ||||||||
52
As of June 30, 2010 | ||||||||||||||||||||||||||||
Highest Rating Agency Rating | As of | |||||||||||||||||||||||||||
BB and | December 31, | |||||||||||||||||||||||||||
Vintage | AAA | AA | A | BBB | Below | Total | 2009 | |||||||||||||||||||||
2008 |
$ | 47.8 | $ | 18.3 | $ | | $ | | $ | | $ | 66.1 | $ | 66.0 | ||||||||||||||
2007 |
449.6 | | | | 1.3 | 450.9 | 471.0 | |||||||||||||||||||||
2006 |
136.3 | | | | 11.3 | 147.6 | 148.0 | |||||||||||||||||||||
2005 |
292.7 | | | | | 292.7 | 311.4 | |||||||||||||||||||||
2004 & prior |
241.6 | | 5.8 | | 10.7 | 258.1 | 391.9 | |||||||||||||||||||||
Total amortized cost |
$ | 1,168.0 | $ | 18.3 | $ | 5.8 | $ | | $ | 23.3 | $ | 1,215.4 | $ | 1,388.3 | ||||||||||||||
Total unrealized gains (losses) |
83.1 | (2.8 | ) | (0.4 | ) | | (4.7 | ) | 75.2 | (24.5 | ) | |||||||||||||||||
Total fair value |
$ | 1,251.1 | $ | 15.5 | $ | 5.4 | $ | | $ | 18.6 | $ | 1,290.6 | $ | 1,363.8 | ||||||||||||||
As of June 30, 2010 | ||||||||||||||||||||||||||||
Total AAA | ||||||||||||||||||||||||||||
Super Senior (Post 2004) | Other Structures (2005 and Prior) | Securities at | ||||||||||||||||||||||||||
Other | Amortized | |||||||||||||||||||||||||||
Vintage | Super Senior | Mezzanine | Junior | Other Senior | Subordinate | Other | Cost | |||||||||||||||||||||
2008 |
$ | 47.8 | $ | | $ | | $ | | $ | | $ | | $ | 47.8 | ||||||||||||||
2007 |
449.6 | | | | | | 449.6 | |||||||||||||||||||||
2006 |
136.3 | | | | | | 136.3 | |||||||||||||||||||||
2005 |
136.2 | 31.2 | | 125.3 | | | 292.7 | |||||||||||||||||||||
2004 & prior |
| | | 197.3 | 42.0 | 2.3 | 241.6 | |||||||||||||||||||||
Total |
$ | 769.9 | $ | 31.2 | $ | | $ | 322.6 | $ | 42.0 | $ | 2.3 | $ | 1,168.0 | ||||||||||||||
As of December 31, 2009 | ||||||||||||||||||||||||||||
Total AAA | ||||||||||||||||||||||||||||
Super Senior (Post 2004) | Other Structures (2005 and Prior) | Securities at | ||||||||||||||||||||||||||
Other | Amortized | |||||||||||||||||||||||||||
Vintage | Super Senior | Mezzanine | Junior | Other Senior | Subordinate | Other | Cost | |||||||||||||||||||||
2008 |
$ | 66.0 | $ | | $ | | $ | | $ | | $ | | $ | 66.0 | ||||||||||||||
2007 |
469.7 | | | | | | 469.7 | |||||||||||||||||||||
2006 |
135.7 | | | | | | 135.7 | |||||||||||||||||||||
2005 |
147.4 | 31.1 | | 132.8 | | | 311.3 | |||||||||||||||||||||
2004 & prior |
| | | 310.6 | 42.1 | 19.4 | 372.1 | |||||||||||||||||||||
Total |
$ | 818.8 | $ | 31.1 | $ | | $ | 443.4 | $ | 42.1 | $ | 19.4 | $ | 1,354.8 | ||||||||||||||
53
As of June 30, 2010 | As of December 31, 2009 | |||||||||||||||
Other asset-backed securities | Amortized Cost | Fair Value | Amortized Cost | Fair Value | ||||||||||||
Auto |
$ | 27.6 | $ | 28.1 | $ | 24.1 | $ | 24.6 | ||||||||
Credit cards |
75.5 | 83.5 | 73.0 | 78.5 | ||||||||||||
Manufactured homes |
19.0 | 17.7 | 19.2 | 15.6 | ||||||||||||
Utility |
10.8 | 12.0 | 10.9 | 11.7 | ||||||||||||
Other |
5.4 | 5.3 | 5.8 | 5.0 | ||||||||||||
Total other asset-backed securities |
$ | 138.3 | $ | 146.6 | $ | 133.0 | $ | 135.4 | ||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Public equity |
(4.7 | )% | 16.0 | % | 0.5 | % | 6.2 | % | ||||||||
S&P 500 Total Return Index |
(11.4 | ) | 15.9 | (6.6 | ) | 3.2 | ||||||||||
Difference |
6.7 | % | 0.1 | % | 7.1 | % | 3.0 | % | ||||||||
54
As of June 30, 2010 | As of December 31, 2009 | |||||||||||||||
% of | % of | |||||||||||||||
Loan-to-Value Ratio | Carrying Value | Total | Carrying Value | Total | ||||||||||||
< or = 50% |
$ | 483.7 | 36.0 | % | $ | 484.2 | 40.1 | % | ||||||||
51% 60% |
355.2 | 26.4 | 348.5 | 28.9 | ||||||||||||
61% 70% |
289.5 | 21.5 | 195.8 | 16.2 | ||||||||||||
71% 75% |
74.2 | 5.5 | 68.2 | 5.6 | ||||||||||||
76% 80% |
48.3 | 3.6 | 17.7 | 1.5 | ||||||||||||
81% 100% |
81.8 | 6.1 | 85.1 | 7.1 | ||||||||||||
> 100% |
12.4 | 0.9 | 7.4 | 0.6 | ||||||||||||
$ | 1,345.1 | 100.0 | % | $ | 1,206.9 | 100.0 | % | |||||||||
As of June 30, 2010 | As of December 31, 2009 | |||||||||||||||
Region | Carrying Value | % of Total | Carrying Value | % of Total | ||||||||||||
California |
$ | 409.6 | 30.4 | % | $ | 346.0 | 28.6 | % | ||||||||
Washington |
248.3 | 18.5 | 222.9 | 18.5 | ||||||||||||
Texas |
132.0 | 9.8 | 125.6 | 10.4 | ||||||||||||
Oregon |
83.8 | 6.2 | 88.0 | 7.3 | ||||||||||||
Colorado |
45.7 | 3.4 | 44.5 | 3.7 | ||||||||||||
Arizona |
37.6 | 2.8 | 37.1 | 3.1 | ||||||||||||
Virginia |
32.1 | 2.4 | 25.5 | 2.1 | ||||||||||||
Minnesota |
30.9 | 2.3 | 32.3 | 2.7 | ||||||||||||
Other |
325.1 | 24.2 | 285.0 | 23.6 | ||||||||||||
Total |
$ | 1,345.1 | 100.0 | % | $ | 1,206.9 | 100.0 | % | ||||||||
As of June 30, 2010 | As of December 31, 2009 | |||||||||||||||
Property Type | Carrying Value | % of Total | Carrying Value | % of Total | ||||||||||||
Shopping Centers and Retail |
$ | 528.7 | 39.3 | % | $ | 472.9 | 39.2 | % | ||||||||
Office Buildings |
383.0 | 28.5 | 339.2 | 28.1 | ||||||||||||
Industrial |
379.1 | 28.2 | 345.7 | 28.6 | ||||||||||||
Multi-Family |
38.3 | 2.8 | 34.9 | 2.9 | ||||||||||||
Other |
16.0 | 1.2 | 14.2 | 1.2 | ||||||||||||
Total |
$ | 1,345.1 | 100.0 | % | $ | 1,206.9 | 100.0 | % | ||||||||
55
As of June 30, 2010 | As of December 31, 2009 | |||||||||||||||
Years to Maturity | Carrying Value | % of Total | Carrying Value | % of Total | ||||||||||||
Due in one year or less |
$ | 5.3 | 0.4 | % | $ | 2.4 | 0.2 | % | ||||||||
Due after one year through five years |
102.9 | 7.7 | 100.0 | 8.3 | ||||||||||||
Due after five years through ten years |
685.0 | 50.9 | 541.8 | 44.9 | ||||||||||||
Due after ten years |
551.9 | 41.0 | 562.7 | 46.6 | ||||||||||||
Total |
$ | 1,345.1 | 100.0 | % | $ | 1,206.9 | 100.0 | % | ||||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Amortization related to affordable housing investments |
$ | (1.5 | ) | $ | (1.5 | ) | $ | (2.8 | ) | $ | (3.0 | ) | ||||
Affordable housing tax credits |
2.8 | 2.4 | 5.6 | 4.8 | ||||||||||||
Impact to net income |
$ | 1.3 | $ | 0.9 | $ | 2.8 | $ | 1.8 | ||||||||
Estimated | ||||
Impact to Net | ||||
Income | ||||
Remainder of 2010 |
$ | 2.6 | ||
2011 |
7.8 | |||
2012 |
8.9 | |||
2013 and beyond |
26.1 | |||
Estimated impact to net income |
$ | 45.4 | ||
56
| Sales for the six months ended June 30, 2010 were good across all distribution channels. Although below the record levels for the same period in 2009, sales continued to generate strong cash inflows on our deposit contracts (annuities and universal life policies, including BOLI). | ||
| While certain lapses and surrenders occur in the normal course of business, these lapses and surrenders have not deviated materially from management expectations. | ||
| The amount of accumulated other comprehensive income (loss), net of taxes, on our consolidated balance sheets increased to income of $501.1 as of June 30, 2010, from a loss of $49.7 as of December 31, 2009. The primary driver was an increase in the fair value of our available-for-sale securities, due to the bond markets showing signs of stabilization and credit spreads tightening. | ||
| As of June 30, 2010, we had the ability to borrow, on an unsecured basis, up to a maximum principal amount of $200.0 under a revolving line of credit arrangement. | ||
| To support the growing sales of our products and maintain financial strength ratings, we target a risk-based capital level of at least 350% in our life insurance company, Symetra Life Insurance Company. As of June 30, 2010, Symetra Life Insurance Company had an estimated risk-based capital ratio of 486%. |
57
As of June 30, 2010 | As of December 31, 2009 | |||||||||||||||
Amount | % of Total | Amount | % of Total | |||||||||||||
Illiquid Liabilities |
||||||||||||||||
Structured settlements & other SPIAs(1) |
$ | 6,708.8 | 33.4 | % | $ | 6,703.6 | 35.1 | % | ||||||||
Deferred annuities with 5-year payout provision or MVA(2) |
376.6 | 1.9 | 381.0 | 2.0 | ||||||||||||
Traditional insurance (net of reinsurance)(3) |
186.2 | 0.9 | 185.8 | 1.0 | ||||||||||||
Group health & life (net of reinsurance)(3) |
101.7 | 0.5 | 97.2 | 0.5 | ||||||||||||
Total illiquid liabilities |
7,373.3 | 36.7 | 7,367.6 | 38.6 | ||||||||||||
Somewhat Liquid Liabilities |
||||||||||||||||
Bank-owned life insurance (BOLI)(4) |
3,963.2 | 19.7 | 3,865.1 | 20.2 | ||||||||||||
Deferred annuities with surrender charges of 5% or higher |
5,632.1 | 28.0 | 4,788.2 | 25.1 | ||||||||||||
Universal life with surrender charges of 5% or higher |
164.4 | 0.8 | 152.5 | 0.8 | ||||||||||||
Total somewhat liquid liabilities |
9,759.7 | 48.5 | 8,805.8 | 46.1 | ||||||||||||
Fully Liquid Liabilities |
||||||||||||||||
Deferred annuities with surrender charges of: |
||||||||||||||||
3% up to 5% |
388.5 | 1.9 | 412.4 | 2.2 | ||||||||||||
Less than 3% |
201.3 | 1.0 | 87.6 | 0.5 | ||||||||||||
No surrender charges(5) |
1,926.5 | 9.6 | 1,950.7 | 10.2 | ||||||||||||
Universal life with surrender charges less than 5% |
438.9 | 2.2 | 441.7 | 2.3 | ||||||||||||
BOLI(6) |
1.3 | 0.0 | 3.7 | 0.0 | ||||||||||||
Traditional insurance (net of reinsurance)(6) |
2.0 | 0.0 | 2.1 | 0.0 | ||||||||||||
Group health & life (net of reinsurance)(6) |
16.5 | 0.1 | 18.4 | 0.1 | ||||||||||||
Total fully liquid liabilities |
2,975.0 | 14.8 | 2,916.6 | 15.3 | ||||||||||||
Total |
$ | 20,108.0 | 100.0 | % | $ | 19,090.0 | 100.0 | % | ||||||||
(1) | These contracts cannot be surrendered. The benefits are specified in the contracts as fixed amounts to be paid over the next several decades. | |
(2) | In a liquidity crisis situation, we could invoke the five-year payout provision so that the contract value with interest is paid out ratably over five years. | |
(3) | The surrender value on these contracts is generally zero. Represents incurred but not reported claim liabilities. | |
(4) | The biggest deterrent to surrender is the taxation on the gain within these contracts, which includes a 10% non-deductible penalty tax. Banks can exchange certain of these contracts with other carriers, tax-free. However, a significant portion of this business does not qualify for this tax-free treatment due to the employment status of the original covered employees. | |
(5) | Approximately half of this business has been with the Company for over a decade, contains lifetime minimum interest guarantees of 4.0% to 4.5%, and has been free of surrender charges for many years. This business has experienced high persistency given the high lifetime guarantees that have not been available in the market on new issues for many years. | |
(6) | Represents reported claim liabilities. |
58
As of June 30, | As of December 31, | |||||||
2010 | 2009 | |||||||
Notes payable |
$ | 449.0 | $ | 448.9 | ||||
Stockholders equity |
2,342.8 | 1,433.3 | ||||||
Total capital |
$ | 2,791.8 | $ | 1,882.2 | ||||
Six Months Ended June 30, | ||||||||
2010 | 2009 | |||||||
Net cash flows from operating activities |
$ | 436.8 | $ | 360.5 | ||||
Net cash flows from investing activities |
(1,223.2 | ) | (1,325.5 | ) | ||||
Net cash flows from financing activities |
851.3 | 932.0 |
59
60
61
62
Total Number of Shares | Maximum Number (or Approximate | |||||||||||||||
Purchased as part of | Dollar Value) of Shares that May | |||||||||||||||
Total Number of | Average Price Paid | Publicly Announced Plans | Yet Be Purchased Under the Plans or | |||||||||||||
Period | Shares Purchased(1) | Per Share | or Programs | Programs | ||||||||||||
April 1, 2010 April 30, 2010 |
| | | | ||||||||||||
May 1, 2010 May 31, 2010 |
| | | | ||||||||||||
June 1, 2010 June 30, 2010 |
47,880 | $ | 12.40 | | | |||||||||||
Total |
47,880 | $ | 12.40 | | | |||||||||||
(1) | Restricted shares withheld to offset tax withholding obligations related to the vesting of the former CEOs restricted shares. |
63
Exhibit | ||
Number | Description | |
10.1
|
Amendment No. 1 to Master Services Agreement by and between Symetra Life Insurance Company and Affiliated Computer Services, Inc., dated August 1, 2009* | |
10.7
|
Investment Management Agreement by and between Prospector Partners, LLC and Symetra Financial Corporation, dated July 1, 2010* | |
10.16
|
Symetra Financial Corporation Equity Plan (amended and restated on August 11, 2010)* | |
31.1
|
Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended* | |
31.2
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended* | |
32.1
|
Certification of Chief Executive Officer Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002* | |
32.2
|
Certification of Chief Financial Officer Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002* |
* | Filed herewith. | |
| An application for confidential treatment of selected portions of this agreement has been filed with the Commission. |
64
SYMETRA FINANCIAL CORPORATION |
||||
Date: August 12, 2010 | By: | /s/ Thomas M. Marra | ||
Name: | Thomas M. Marra | |||
Title: | President and Chief Executive Officer | |||
Date: August 12, 2010 | By: | /s/ Margaret A. Meister | ||
Name: | Margaret A. Meister | |||
Title: | Executive Vice President and Chief Financial Officer | |||
65
Critical Milestone | Due Date | Corrective Assessment | ||
For each Critical
Certificate that
expires prior to a
proactive renewal by
ACS, such that the
expiry impacted
Symetra external
users during the
in-scope business
hours identified
herein.
|
August 1 for each Contract Year. | [***] per failed Critical Certificate. |
ACS | Symetra | |||
Procure, maintain, manage, and perform SSL/Digital
Certificate inventory, expiration management and
installation as needed to provide continuous access to
application(s).
|
X |
SYMETRA LIFE INSURANCE COMPANY |
||||
By: | ||||
Title: | ||||
Date: | ||||
AFFILIATED COMPUTER SERVICES, INC. |
||||
By: | ||||
Title: | ||||
Date: | ||||
Supplier Name | Product Name | Category | ||
Allen Systems Group |
ASG-TMON for CICS/ESA | 1 | ||
Allen Systems Group |
ASG-TMON for DB2 ( CA insite for DB2 ) | 1 | ||
Allen Systems Group |
ASG-TMON for z/os | 1 | ||
Allen Systems Group |
JCLPREP | 1 | ||
Altiris |
WISE | 1 | ||
AVAYA |
CMS Release 12 | 1 | ||
AVAYA |
CMS Supervisor (was Lucent CentreVu Supervisor | 1 | ||
AVAYA |
IP Agent | 1 | ||
AVAYA |
IP Office | 1 | ||
AVAYA |
IP Softphone | 1 | ||
AVAYA |
Modular Messaging (Voicemail) | 1 | ||
AVAYA |
Telephony Server (includes S8700 hardware) | 1 | ||
AVAYA |
Voice Mail Pro | 1 | ||
Biscom Inc. |
FAXCOM Server | 1 | ||
BMC |
Catalog Manager for DB2 ( CA R/C Compare ) | 1 | ||
BMC |
Change Manager for DB2 ( CA R/C Migrator ) | 1 | ||
BMC |
CM/Pilot for DB2 | 1 | ||
BMC |
Control-D | 1 | ||
BMC |
CONTROL-D WebAccess Server | 1 | ||
BMC |
DASD Manager for DB2 ( CA Data Analyser ) | 1 | ||
BMC |
DASD MANAGER PLUS for DB2 ( CA Data Analyzer ) | 1 | ||
BMC |
DATABASE INTEGRITY PLUS (IMS) | 1 | ||
BMC |
FAST REORG FACIILITY for IMS ( MAX Reorg / online for IMS ) | 1 | ||
BMC |
POINT CHECKER PLUS for IMS | 1 | ||
BMC |
Remedy (AKA AR System) | 1 | ||
BMC |
Remedy Base Framework | 1 | ||
BMC |
ULTRAOPT/IMS | 1 | ||
CA |
ACF2 | 1 | ||
CA |
ACF2/DB2 | 1 | ||
CA |
Argis Application uses SQL 2000 Database | 1 | ||
CA |
CA-1 [Tape Management] | 1 | ||
CA |
Detector(DB2) | 1 |
Supplier Name | Product Name | Category | ||
CA |
Endevor/MVS | 1 | ||
CA |
ESP Agent for Windows | 1 | ||
CA |
MII | 1 | ||
CA |
Netspy | 1 | ||
CA |
Unicenter CA-OPS/MVS Event Management and Automation for JES2 | 1 | ||
CA |
View [Sysout Archive Retrieval] | 1 | ||
CA |
Vision DYL interface for DB2 | 1 | ||
CA |
Vision: Interface for DB2 | 1 | ||
CA |
Vision: Report | 1 | ||
CA |
Vision: Results [DYL280, DYL260] | 1 | ||
Candle CL (IBM) |
Supersession (VTAMPLUS) | 1 | ||
Cisco |
Cisco CSS | 1 | ||
Cisco |
Cisco PIX Firewall | 1 | ||
Cisco |
Cisco VPN (replaces Contivity) | 1 | ||
Citrix |
50 user pack Citrix Metaframe xPE Presentation (350 users) | 1 | ||
Citrix |
Citrix ICA Client | 1 | ||
Citrix |
Citrix MF Xpe 1.0-10 User Conn. Pack w/Sub Adv | 1 | ||
Citrix |
Citrix MF XPe 1.0-20 User Conn. Pack w/Sub Adv | 1 | ||
Citrix |
Citrix MF XPe 1.0-Starter Sys. w/20 User w/Sub Adv | 1 | ||
Citrix |
MetaFrame Access Suite Console | 1 | ||
Citrix |
MetaFrame Presentation Server Client | 1 | ||
Citrix |
MetaFrame Presentation Server Web Client for Win32 | 1 | ||
Citrix Systems, Inc. |
Citrix MetaFrame | 1 | ||
Computware |
XPEDITER/IMS | 1 | ||
Compuware |
File-Aid for MVS | 1 | ||
Compuware |
File-Aid for IMS IMS | 1 | ||
Compuware |
XPEDITER/CICS | 1 | ||
Compuware |
XPEDITER/TSO | 1 | ||
DTS |
The Space Recovery System ( SRS ) | 1 | ||
EMC |
DISKXTENDER 2000 FOR CENTERA | 1 | ||
EMC |
EMAILXAMINER SERVER | 1 | ||
EMC |
EMAILXAMINER USER MAILBOX QTY 1 MAILBX | 1 | ||
EMC |
EMAILXTENDER SRVR | 1 | ||
EMC |
EMAILXTENDER TIER 2 QTY 26- 5000 USER MAILBOXES | 1 | ||
EMC |
Legato Gold Care Premier support agreement | 1 | ||
EMC |
Legato Networker Client Connection | 1 | ||
EMC |
Legato NetWorker Module for MS Exchange Server Tier 2 | 1 |
Supplier Name | Product Name | Category | ||
EMC |
Legato NetWorker Module for SQL Tier 2 | 1 | ||
EMC |
Legato NetWorker Power Ed Dedicated Storage Node | 1 | ||
EMC |
Legato NetWorker Power Edition Storage Node for Windows | 1 | ||
EMC |
Legato NetWorker Server Network Edition for Windows | 1 | ||
EMC |
Legato Silo Software Module 1-256 slot | 1 | ||
EMC |
Networker | 1 | ||
F5 |
BigIP | 1 | ||
FileNet |
P8 (FileNet) | 1 | ||
IBM |
ACF/NCP V7 | 1 | ||
IBM |
AFP2PDF | 1 | ||
IBM |
ASM High Level Assembler/MVS | 1 | ||
IBM |
BATCH TERMINAL SIMULATOR | 1 | ||
IBM |
Candle Command Center | 1 | ||
IBM |
CICS Application Security (subroutine DSS15600) | 1 | ||
IBM |
CICS Library Management System (CLM) | 1 | ||
IBM |
CICS/TS | 1 | ||
IBM |
CMF | 1 | ||
IBM |
COBOL Called/Copied Cross Reference (ISPF A.P) | 1 | ||
IBM |
COBOL Enterprise for z/OS (370/390) | 1 | ||
IBM |
COBOL II | 1 | ||
IBM |
COBOL Level 2 Report Writer for OS/390 | 1 | ||
IBM |
COBOL OS/VS | 1 | ||
IBM |
COMPAREX (ISPF D.CX) | 1 | ||
IBM |
CPK (related to FDR/ABR) | 1 | ||
IBM |
DB2 | 1 | ||
IBM |
DB2 Application Development Client | 1 | ||
IBM |
DB2 Connect Enterprise Edition | 1 | ||
IBM |
DB2 Connect Personal Edition | 1 | ||
IBM |
DB2 DATABASE ADMIN | 1 | ||
IBM |
DB2 DATABASE SYSTEM ADMINISTRATION | 1 | ||
IBM |
DB2 Enterprise Server Edition | 1 | ||
IBM |
DB2 Relational Tools | 1 | ||
IBM |
DfHSM | 1 | ||
IBM |
Enterprise COBOL for z/OS | 1 | ||
IBM |
EPILOG/IMS | 1 | ||
IBM |
GDDM [included in z/OS] | 1 | ||
IBM |
High Level Assembler/MVS | 1 | ||
IBM |
IBM HTTP Server | 1 | ||
IBM |
IBM WebSphere Application Server Network Deployment | 1 |
Supplier Name | Product Name | Category | ||
IBM |
IBM WebSphere MQ (client) | 1 | ||
IBM |
IBM WebSphere MQ Integrator (Client) | 1 | ||
IBM |
IMS & DB2 Utility Tools S&S | 1 | ||
IBM |
IMS/ESA | 1 | ||
IBM |
IMS/ESA BTS | 1 | ||
IBM |
IMS/ESA MRQ | 1 | ||
IBM |
IND$FILE | 1 | ||
IBM |
ISPF (IPF) | 1 | ||
IBM |
ISPF/PDF [included in z/OS] | 1 | ||
IBM |
JES2 [included in z/OS] | 1 | ||
IBM |
MVS TCP/IP | 1 | ||
IBM |
Netcool | 1 | ||
IBM |
NJE (Network Job Entry) | 1 | ||
IBM |
NTUNEMON | 1 | ||
IBM |
PSF/OS390 | 1 | ||
IBM |
QMF | 1 | ||
IBM |
SAMS Compress for IMS | 1 | ||
IBM |
SDF II/MVS | 1 | ||
IBM |
Softaudit | 1 | ||
IBM |
TCP/IP (HIP6140) | 1 | ||
IBM |
TME 10 NETVIEW OS/390 | 1 | ||
IBM |
TSO/E [included in z/OS] | 1 | ||
IBM |
Version Merger | 1 | ||
IBM |
VS FORTRAN | 1 | ||
IBM |
VTAM (HVT6140) | 1 | ||
IBM |
WebSphere Application Server | 1 | ||
IBM |
WebSphere Application Server | 1 | ||
IBM |
Websphere BIMB MQ with Rules & Formatting Extensions | 1 | ||
IBM |
WebSphere Business Integration Message Broker | 1 | ||
IBM |
Websphere Business Intergration Message Broker with Rules and formatting Extentions | 1 | ||
IBM |
WebSphere MQ | 1 | ||
IBM |
Websphere Transformation Extender (TX) | 1 | ||
IBM |
z/OS | 1 | ||
Innovation |
ABR/FDR [Application Backup function of FDR (or equivalent product) needed to support Archive/Restore of Control-D reports] | 1 | ||
Innovation Data |
DSF (Part of FDR product) | 1 | ||
Innovation Data |
FDR (DASD DUMP RESTORE SYSTEM) | 1 | ||
Legato |
Legato EmailXtender Archive Edition | 1 |
Supplier Name | Product Name | Category | ||
Legato |
Legato EmailXtender Server | 1 | ||
Legato |
Legato NetWorker Ed Dedicated Storage Node | 1 | ||
McAfee |
Active VirusScan for Desktop | 1 | ||
McAfee |
GroupShield for Exchange | 1 | ||
McAfee |
Host Intrusion Prevention for Server | 1 | ||
McAfee |
McAfee ePolicy Orchestrator | 1 | ||
Merrill |
MXG | 1 | ||
Microsoft |
IIS (Included with MS OS) | 1 | ||
NICE |
NICE Record | 1 | ||
Novell |
Novell Identity Manager | 1 | ||
Pitney Bowes |
Code 1 Plus | 1 | ||
Pitney Bowes |
DOC1 Archive | 1 | ||
Pitney Bowes |
Doc1 iProof | 1 | ||
Pitney Bowes |
Streamweaver | 1 | ||
RedSky |
E911 | 1 | ||
SAS |
SAS Base | 1 | ||
SAS |
SAS/IT | 1 | ||
Sterling |
Connect:Direct OS/390 with 2 concurrent sessions (SNA and TCP/IP Protocols) | 1 | ||
StorageTek |
EXLM | 1 | ||
Veramark |
ECAS | 1 | ||
VMWare |
VMWare | 1 | ||
Chicago-Soft |
MVS/QuickRef | 2 | ||
Cybermation |
ESP Workload Manager | 2 | ||
InfoExpress |
CyberArmor | 2 | ||
InfoExpress |
CyberGatekeeper Server | 2 | ||
Infogix Inc |
ACR/Workbench for ACR/Detail | 2 | ||
Infogix Inc |
ACR/Workbench for ACR/Summary | 2 | ||
INFOTEL |
INFOPAK/IMS | 2 | ||
LRS Software |
LRS server (VSV) | 2 | ||
LRS Software |
VMCF for TSO | 2 | ||
LRS Software |
VPS | 2 | ||
LRS Software |
VPS / TCPIP | 2 | ||
Macro 4 |
Dumpmaster MVS | 2 | ||
Macro 4 |
Insync MVS | 2 | ||
McAfee |
eBusiness Server (Encryption Software) | 2 | ||
McAfee |
McAfee Active Virus Defense Perpetual | 2 | ||
Microsoft |
Antigen (Antivirus for Microsoft Exchange) | 2 | ||
Microsoft |
Exchange 2003 Enterprise | 2 | ||
Microsoft |
Exchange 2003 Standard | 2 | ||
Microsoft |
Internet Security and Acceleration (ISA) | 2 |
Supplier Name | Product Name | Category | ||
Microsoft |
Microsoft Operations Manager | 2 | ||
Microsoft |
Microsoft Operations Manager (MOM) Reporting | 2 | ||
Microsoft |
Office Communications Server 2007 | 2 | ||
Microsoft |
Sharepoint Server | 2 | ||
Microsoft |
SharePoint Server 2007 | 2 | ||
Microsoft |
SMS 2003 Client Access Licenses | 2 | ||
Microsoft |
SMS 2003 Enterprise Server | 2 | ||
Microsoft |
SMS Enterprise Server Disk Kit | 2 | ||
Microsoft |
SQL Server 2005 Reporting Services | 2 | ||
Microsoft |
SQL Server Database Enterprise Edition | 2 | ||
Microsoft |
SQL Server Database Standard | 2 | ||
Microsoft |
Systems Management server ENT | 2 | ||
Microsoft |
Terminal server (Included with Citrix) | 2 | ||
Microsoft |
Windows 2003 Enterprise Edition | 2 | ||
Microsoft |
Windows 2003 Standard Edition | 2 | ||
Microsoft |
Windows Server 2000 Enterprise Edition | 2 | ||
Microsoft |
Windows Server 2003 Active Directory Application Mode (ADAM) | 2 | ||
Microsoft |
Windows SharePoint Services 2.0 | 2 | ||
Microsoft |
Windows SharePoint Services 3.0 | 2 | ||
M-Tech |
P-Sync | 2 | ||
Net IQ |
NetIQ Mail Mashal | 2 | ||
Net IQ |
Webtrends | 2 | ||
NetIQ |
NetIQ Mail Marshal Spam Filter | 2 | ||
Oracle |
Core ID | 2 | ||
PGP |
Encryption Software | 2 | ||
Quailstone Software |
USCCopy [aka COPYMACS] | 2 | ||
Research In Motion |
Blackberry Enterprise Server | 2 | ||
RIM |
RIM T-Support for Blackberry | 2 | ||
RSA |
SecureID | 2 | ||
SAS |
BASE | 2 | ||
Secure Computing |
SmartFilter (Replacement for WebSense) | 2 | ||
Syncsort |
SYNCSORT for z/OS | 2 | ||
Tone Software |
DYNA-STEP | 2 | ||
Tone Software |
Flasher (OS/390 Spool Display) | 2 | ||
Tumbleweed |
Tumbleweed SecureTransport | 2 | ||
A.M. Best Company, Inc. |
BestSRQ Services Workstation | 4 | ||
ACL Services Ltd. |
ACL | 4 | ||
Acro Software |
CutePDF Writer | 4 | ||
activePDF, Inc. |
activePDF Toolkit | 4 | ||
Adobe |
Acrobat | 4 | ||
Adobe |
ColdFusion | 4 |
Supplier Name | Product Name | Category | ||||
Adobe
|
Framemaker | 4 | ||||
Adobe
|
Illustrator | 4 | ||||
Adobe
|
InDesign | 4 | ||||
Adobe
|
Macromedia Dreamweaver | 4 | ||||
Adobe
|
Macromedia Fireworks | 4 | ||||
Adobe
|
Macromedia Flash | 4 | ||||
Adobe
|
Pagemaker | 4 | ||||
Adobe
|
Photoshop | 4 | ||||
Adobe
|
Photoshop Elements | 4 | ||||
Altova
|
XMLSpy | 4 | ||||
Amdoc Software Systems Limited
|
Clarify ClearConfigurator | 4 | ||||
AmDocs
|
ClarifyCRM | 4 | ||||
APL2000, Inc.
|
APL+Win | 4 | ||||
Attachmate
|
Extra! | 4 | ||||
Autodesk, Inc.
|
AutoCAD LT | 4 | ||||
Autodesk, Inc.
|
Autodesk DWF Viewer | 4 | ||||
AutomatedQA Corporation
|
AutomatedQA TestComplete | 4 | ||||
Bloomberg, L.P.
|
Bloomberg L.P. Smart Client | 4 | ||||
Blue Sky Software
|
RoboHelp Office 2000 | 4 | ||||
Broker Dealer Solutions
|
Back Office Network User System (Bonus) | 4 | ||||
Btrieve Technologies Inc.
|
Btrieve for Windows | 4 | ||||
CheckFree
|
APECS | 4 | ||||
Checkfree
|
CAPS Corporate Automated Payment System | 4 | ||||
CheckFree Corporation
|
RECON-Plus (Application Retained) | 4 | ||||
CMS
|
Bond Edge | 4 | ||||
Cognos Inc.
|
ReportNet | 4 | ||||
Cognos, Inc.
|
Cognos | 4 | ||||
Computer Sciences Corp (CSC)
|
CK4/CyberLife | 4 | ||||
Computer Sciences Corp (CSC)
|
DSS | 4 | ||||
Computer Sciences Corp (CSC)
|
JETS | 4 | ||||
Computer Sciences Corp (CSC)
|
Plan Advisor | 4 | ||||
Computer Sciences Corp (CSC)
|
Vantage-One | 4 | ||||
Concur Technologies, Inc.
|
Concur Expense Reimbursement | 4 | ||||
Convergyc
|
Edify | 4 | ||||
Convergyc
|
Edify Telephony (Application Retained) | 4 | ||||
Convergyc
|
Edify Web (Application Retained) | 4 | ||||
Convergyc
|
Edify-Data Integration (Application Retained)) | 4 | ||||
Crystal Decisions, Inc.
|
Crystal Reports (Application Retained) | 4 | ||||
CSC SoftwareConsult GmbH & Co
|
VP/MS Workbench | 4 | ||||
Datawatch Corporation
|
Monarch | 4 | ||||
DST Systems
|
FAN Mail (Financial Advisor Network) ( To be supplied by Symetra | 4 |
Supplier Name | Product Name | Category | ||||
DST Systems
|
TA2000 | 4 | ||||
DST Systems
|
TRAC2000 | 4 | ||||
DST Systems Inc.
|
AWD ViewStation | 4 | ||||
DST Systems, Inc.
|
ROSTER DST GUI | 4 | ||||
Duxbury Systems
|
Duxbury Braille Translator | 4 | ||||
DYMO Corporation
|
DYMO Label Software | 4 | ||||
DynaComp Software
|
DynaComp | 4 | ||||
Economic Analysis Group, Ltd.
|
CaseTrack | 4 | ||||
e-Copy Inc
|
eCopy Desktop | 4 | ||||
Entrust Technologies Limited
|
Entrust Entelligence (5c) JPMorgan Chase | 4 | ||||
Ernst & Young
|
EY/Options | 4 | ||||
Fiserv Insurance Solutions
|
Fiserv Lifeline Direct | 4 | ||||
FiServ Insurance Solutions
|
Freedom 2000 | 4 | ||||
Franklin Covey Co.
|
Franklin Covey Co. Franklin Planner | 4 | ||||
Freedom Scientific
|
JAWS | 4 | ||||
Gadwin Systems
|
Gadwin PrintScreen | 4 | ||||
Global360
|
Insight360 | 4 | ||||
Global360
|
Process360 | 4 | ||||
HP
|
Quality Center | 4 | ||||
HP
|
Quick Test Pro | 4 | ||||
HP
|
TestDirector | 4 | ||||
Hyperion
|
Analyzer (Application Retained) | 4 | ||||
Hyperion
|
Essbase (Application Retained) | 4 | ||||
Hyperion
|
Hyperion Analytic Services Server | 4 | ||||
Hyperion
|
Hyperion System 9 BI+ Analytic Integration Service | 4 | ||||
Hyperion
|
Hyperion System 9 BI+ Client | 4 | ||||
Hyperion
|
Hyperion System 9 Planning | 4 | ||||
Hyperion
|
Hyperion System 9 Smart View for Office | 4 | ||||
Hyperion
|
Hyperion System 9+ | 4 | ||||
IA Corp???
|
CheckVision Inquiry | 4 | ||||
IBM-Cognos
|
Impromptu | 4 | ||||
Infogix Inc
|
ACR/Detail® for Windows | 4 | ||||
Infogix Inc
|
ACR/Summary® for Windows | 4 | ||||
InsMark Inc.
|
InsMark Illustration System | 4 | ||||
Insurance Technologies
|
Foresight Illustration Software | 4 | ||||
Intuit
|
Quicken | 4 | ||||
IPSwitch
|
WS_FTP Pro | 4 | ||||
JP Morgan Chase
|
JP Morgan Chase CD Search | 4 | ||||
Lab1, Inc.
|
Lab1 Net | 4 | ||||
Lawson
|
Lawson Add-ins for Microsoft® Office | 4 |
Supplier Name | Product Name | Category | ||||
Lawson
|
Lawson General Ledger | 4 | ||||
Lawson
|
Lawson Interface Desktop Client | 4 | ||||
Lawson
|
Lawson ProcessFlow Designer | 4 | ||||
LexisNexis
|
LexisNexis Download and Print for IE | 4 | ||||
Matthew Bender & Company, Inc.,
|
HotDocs | 4 | ||||
McAfee
|
Safeboot Security System | 4 | ||||
McAfee
|
Actove VirusScan for Desktop | 4 | ||||
McAfee
|
AntiSpyware for Desktop | 4 | ||||
McAfee
|
EndPoint Encryption for Desktop | 4 | ||||
Medical Information Bureau
|
Knowledge Now | 4 | ||||
Medical Information Bureau
|
MIB-Link/Plus ( To be supplied by Symetra ) | 4 | ||||
Mercury Interactive
|
Winrunner ( To be supplied by Symetra ) | 4 | ||||
Microsoft
|
Access (Application Retained) | 4 | ||||
Microsoft
|
CDONTS Collaboration Data Objects for Windows NT Server | 4 | ||||
Microsoft
|
Collaborative Data Objects (CDO) | 4 | ||||
Microsoft
|
COM+ | 4 | ||||
Microsoft
|
FoxPro 2.6 Runtime | 4 | ||||
Microsoft
|
Identity Integration Server (MIIS) | 4 | ||||
Microsoft
|
Internet Explorer | 4 | ||||
Microsoft
|
Microsoft Access | 4 | ||||
Microsoft
|
Microsoft Data Access Components (MDAC) | 4 | ||||
Microsoft
|
Microsoft Developer Network (MSDN) Library | 4 | ||||
Microsoft
|
Microsoft Enterprise Learning Library | 4 | ||||
Microsoft
|
Microsoft Excel | 4 | ||||
Microsoft
|
Microsoft Expression Web | 4 | ||||
Microsoft
|
Microsoft Java Virtual Machine | 4 | ||||
Microsoft
|
Microsoft Office Business Scorecard Builder | 4 | ||||
Microsoft
|
Microsoft Office Business Scorecard Manager | 4 | ||||
Microsoft
|
Microsoft Office FrontPage | 4 | ||||
Microsoft
|
Microsoft Office Groove | 4 | ||||
Microsoft
|
Microsoft Office InfoPath | 4 | ||||
Microsoft
|
Microsoft Office Live Meeting | 4 | ||||
Microsoft
|
Microsoft Office OneNote | 4 | ||||
Microsoft
|
Microsoft Office Publisher | 4 | ||||
Microsoft
|
Microsoft Office SharePoint Designer | 4 | ||||
Microsoft
|
Microsoft Outlook | 4 | ||||
Microsoft
|
Microsoft PowerPoint | 4 | ||||
Microsoft
|
Microsoft PowerPoint Viewer | 4 | ||||
Microsoft
|
Microsoft Project | 4 | ||||
Microsoft
|
Microsoft SQL Server Express Edition | 4 | ||||
Microsoft
|
Microsoft SQL Server Desktop Engine | 4 |
Supplier Name | Product Name | Category | ||||
Microsoft
|
Microsoft Streets & Trips | 4 | ||||
Microsoft
|
Microsoft Virtual PC | 4 | ||||
Microsoft
|
Microsoft Virtual Server | 4 | ||||
Microsoft
|
Microsoft Visio | 4 | ||||
Microsoft
|
Microsoft Visio Viewer | 4 | ||||
Microsoft
|
Microsoft Visual Basic | 4 | ||||
Microsoft
|
Microsoft Visual FoxPro | 4 | ||||
Microsoft
|
Microsoft Visual SourceSafe | 4 | ||||
Microsoft
|
Microsoft Visual Studio .NET | 4 | ||||
Microsoft
|
Microsoft Word | 4 | ||||
Microsoft
|
MIIS | 4 | ||||
Microsoft
|
MSDN Subscription (Application Tool Retained) | 4 | ||||
Microsoft
|
NetMeeting | 4 | ||||
Microsoft
|
NT Scheduler (AT) | 4 | ||||
Microsoft
|
NTP | 4 | ||||
Microsoft
|
QuickBASIC | 4 | ||||
Microsoft
|
RoboCopy for Web Applications | 4 | ||||
Microsoft
|
SOAP Toolkit | 4 | ||||
Microsoft
|
UrlScan Security Tool | 4 | ||||
Microsoft
|
XML Notepad | 4 | ||||
Microsoft
|
MapPoint 2004 | 4 | ||||
Milliman USA
|
ALFA | 4 | ||||
Morningstar
|
Morningstar Direct | 4 | ||||
Mozilla
|
Firefox | 4 | ||||
NcFTP Software
|
NcFTP | 4 | ||||
NCH Software
|
Express Burn | 4 | ||||
NCH Software
|
NCH Toolbox | 4 | ||||
NERO
|
Nero | 4 | ||||
Netscape
|
Netscape Communicator | 4 | ||||
nomoreforms, inc.
|
nomoreforms | 4 | ||||
NSCC
|
Fund/Serve | 4 | ||||
NSCC
|
IPS | 4 | ||||
Onyx
|
Onyx | 4 | ||||
OpenText
|
Hummingbird Exceed | 4 | ||||
OPERA
|
Opera | 4 | ||||
Patton & Patton Software Corporation
|
Flow Charting 4 for Windows | 4 | ||||
Paymentech
|
eCommerce Solutions (Application Retained) | 4 | ||||
Paymentech, L.P.
|
Select Merchant Payment Card Processing ( To be supplied by Symetra ) | 4 | ||||
PaymentTech
|
PaymentTech | 4 | ||||
PeachWare Software
|
Password Genie | 4 |
Supplier Name | Product Name | Category | ||||
Performance Technologies Inc.,
|
Centerpiece | 4 | ||||
PGP Corporation
|
PGP | 4 | ||||
PKWARE
|
ZIP Reader | 4 | ||||
Polysystems, Inc.
|
Annuity Master | 4 | ||||
Polysystems, Inc.
|
Life Master | 4 | ||||
Polysystems, Inc.
|
UL Master | 4 | ||||
Quark
|
QuarkXPress | 4 | ||||
Red Hat or Open Source
|
JBoss Application Server | 4 | ||||
Roxio
|
Easy CD & DVD Creator | 4 | ||||
Roxio
|
Roxio | 4 | ||||
Sage Software
|
FAS Asset Accounting | 4 | ||||
SanDisk
|
U3Launcher | 4 | ||||
Scooter Software
|
Beyond Compare | 4 | ||||
Sharebuilder Corp
|
Sharebuilder (formerly Netstock) | 4 | ||||
Shareware/Freeware/Open Source
products
|
ClickN Design 3D | 4 | ||||
Shareware/Freeware/Open Source
products
|
CommandBurner | 4 | ||||
Shareware/Freeware/Open Source
products
|
Core FTP LE | 4 | ||||
Shareware/Freeware/Open Source
products
|
DeepBurner | 4 | ||||
Shareware/Freeware/Open Source
products
|
DesignPro | 4 | ||||
Shareware/Freeware/Open Source
products
|
EDGARLink | 4 | ||||
Shareware/Freeware/Open Source
products
|
FileZilla | 4 | ||||
Shareware/Freeware/Open Source
products
|
FileZilla Server | 4 | ||||
Shareware/Freeware/Open Source
products
|
Hardcopy | 4 | ||||
Shareware/Freeware/Open Source
products
|
Jxplorer | 4 | ||||
Shareware/Freeware/Open Source
products
|
LeechFTP | 4 | ||||
Shareware/Freeware/Open Source
products
|
MetaEdit | 4 | ||||
Shareware/Freeware/Open Source
products
|
Mr. Snappy | 4 | ||||
Shareware/Freeware/Open Source
products
|
MWSnap | 4 |
Supplier Name | Product Name | Category | ||||
Shareware/Freeware/Open Source
products
|
NIOC Service | 4 | ||||
Shareware/Freeware/Open Source
products
|
PDFCreator | 4 | ||||
Shareware/Freeware/Open Source
products
|
PDFLib | 4 | ||||
Shareware/Freeware/Open Source
products
|
PDF-Xchange | 4 | ||||
Shareware/Freeware/Open Source
products
|
PrimoPDF | 4 | ||||
Shareware/Freeware/Open Source
products
|
PrintCommander | 4 | ||||
Shareware/Freeware/Open Source
products
|
PrintKey2000 | 4 | ||||
Shareware/Freeware/Open Source
products
|
PureEdge Viewer | 4 | ||||
Shareware/Freeware/Open Source
products
|
SMART Board software | 4 | ||||
Shareware/Freeware/Open Source
products
|
SmartFTP | 4 | ||||
Shareware/Freeware/Open Source
products
|
SnagIt | 4 | ||||
Shareware/Freeware/Open Source
products
|
SnapShot Express | 4 | ||||
Shareware/Freeware/Open Source
products
|
Softerra LDAP Browser | 4 | ||||
Shareware/Freeware/Open Source
products
|
SolidConverterPDF | 4 | ||||
Shareware/Freeware/Open Source
products
|
Stuffit | 4 | ||||
Shareware/Freeware/Open Source
products
|
Stylus Studio 2007 XML Enterprise Suite | 4 | ||||
Shareware/Freeware/Open Source
products
|
Swift 3D | 4 | ||||
Shareware/Freeware/Open Source
products
|
Symtrax Compleo Explorer 3 | 4 | ||||
Shareware/Freeware/Open Source
products
|
Synthis Process Modeler | 4 | ||||
Shareware/Freeware/Open Source
products
|
TIFFSurfer | 4 | ||||
Shareware/Freeware/Open Source
products
|
Trillian | 4 |
Supplier Name | Product Name | Category | ||||
Shareware/Freeware/Open Source
products
|
URL Assistant | 4 | ||||
Shareware/Freeware/Open Source
products
|
VNC | 4 | ||||
Shareware/Freeware/Open Source
products
|
Volo View Express | 4 | ||||
Shareware/Freeware/Open Source
products
|
WinRAR archiver | 4 | ||||
Snap Surveys
|
Snap! | 4 | ||||
Software995
|
OmniFormat | 4 | ||||
Software995
|
PDF995 | 4 | ||||
Software995
|
PDFEdit995 | 4 | ||||
Sonic
|
Sonic | 4 | ||||
SourceForge
|
Source Offsite (Application Tool Retained) | 4 | ||||
Sowedoo
|
Easy PDF Converter Professional | 4 | ||||
Sun
|
Java Runtime Environment | 4 | ||||
SunGard
|
EAS (Application Retained) | 4 | ||||
Sungard (formerly FDP)
|
Pension Administration Recordkeeping Investment System (PARIS) |
4 | ||||
SunGard Systems International
|
CDS | 4 | ||||
Symetra
|
entBaseServices | 4 | ||||
TechSmith Corporation
|
Camtasia | 4 | ||||
Thales ATM GmbH
|
GBAS | 4 | ||||
Thoughworks
|
CruiseControl.NET | 4 | ||||
Trilogy Consulting Group
|
Trilogy Claims Administrative Handbook | 4 | ||||
Tritech Software
|
Premium Pro | 4 | ||||
Filmore
|
Fillmore Application Framework | 4 | ||||
Filmore
|
Fillmore BPI Wrapper | 4 | ||||
Insmark
|
InsMark PDF Creator | 4 | ||||
Inapplicable
|
Literature | 4 | ||||
Inapplicable
|
Loan Mortgage Services | 4 | ||||
Inapplicable
|
Loan Payment Estimate | 4 | ||||
Inapplicable
|
QuickStaff | 4 | ||||
Tableau
|
Tableau Desktop | 4 | ||||
DST
|
TRAC 2000 PLAN (TRAC Desktop Plan) | 4 | ||||
Stoneriver
|
Tracker | 4 | ||||
Stoneriver
|
Unclaimed Property Reporting System | 4 | ||||
US Bank
|
US Bank CD Viewer | 4 | ||||
Veritas
|
Veritas RecordNow | 4 | ||||
WebEx
|
WebEx | 4 | ||||
Winzip Computing (Corel)
|
Winzip | 4 |
Supplier Name | Product Name | Category | ||||
ZBSoft
|
Flash Saver Maker | 4 | ||||
ZBSoft
|
Flash Video Exporter | 4 | ||||
IBM
|
InfoPrint Manager | 4 | ||||
ACS
|
MCP2 | 1 | ||||
ACS
|
WEBDE | 1 | ||||
SimpleSoftware
|
TwainScan | 4 | ||||
SUN
|
DocuSP | 4 | ||||
Aspose
|
Aspose.Total.For.Net | 4 | ||||
Kofax
|
Kofax Capture | 4 | ||||
ACS
|
i-Star Portal | 5 | ||||
Symetra
|
COP (Control Online Processing for IMS) | 6 | ||||
Symetra
|
DATA SHARING FACILITY [app only no data] | 6 | ||||
Symetra
|
Utility Systems (UTY, LUT) | 6 | ||||
Symetra
|
Automated Library Management (ALM) | 6 | ||||
Symetra
|
Data Security System | 6 | ||||
Symetra
|
Help System (Online IMS) | 6 | ||||
Symetra
|
JCL Cross-Reference (ISPF A.JO) | 6 | ||||
Symetra
|
Oncall Dialog (ISPF J.O) | 6 | ||||
Symetra
|
RESTORE Dataset Dialog (ISPF D.R) | 6 | ||||
Symetra
|
RUNBOOKS (ISPF J.R) | 6 | ||||
Symetra
|
SFS (Screen Formatting Service) | 6 | ||||
Symetra
|
TIME SHARING OPTION SUPPORT [logon procs] | 6 | ||||
Symetra
|
TMS (Table Management System) | 6 |
1) | Investment Accounts. The investment account of each Client (each an Investment Account) shall consist of cash and securities in an amount equal to at least $50,000,000 (the Minimum Account Amount), or such other amount as may be agreed to by the Adviser, initially furnished by the Client for investment pursuant to this Agreement, as well as all other assets which become part of each Investment Account as a result of trading therein or additions thereto, except for amounts withdrawn therefrom and paid to the Client. Each Client may make additions to the Investment Account in amounts exceeding $100,000, or in such other amount as may be agreed to by the Adviser; provided that the Adviser shall have received prompt written notice of such additions. Each Client may make withdrawals from its Investment Account in such amounts as it shall determine upon not less than 30 days prior written notice thereof to the Adviser and provided that the withdrawal shall not cause the assets in the Investment Account to fall below the Minimum Account Amount, unless otherwise agreed to by the Adviser. | ||
2) | Services of Adviser. By execution of this Agreement the Adviser accepts appointment as adviser for each Investment Account with full discretion and agrees to supervise and direct the investments of each Investment Account in accordance with the investment objective, policies and restrictions attached hereto as Schedule 1, and as may be modified from time to time (Investment Guidelines). Adviser acknowledges that Clients are bound by state insurance laws regarding permissible investments and Clients own adopted Statement of Investment Policy, including any Addendums, attached hereto as Schedule 2, and as may be modified from time to time, applicable to Clients aggregate investable assets (the Investment Policy). Adviser has read the Investment Policy and understands that Clients Investment Guidelines, to be furnished to Adviser from time to time, will not deviate from the Investment Policy but will only summarize the provisions and limitations applicable to each Investment Account. In the performance of its services, the Adviser will not be liable for any error in judgment or any acts or omissions to act except those resulting from the Advisers gross negligence, willful misconduct or malfeasance. Nothing herein shall in any way constitute a waiver or limitation of any right of any person under the federal securities laws. The Adviser shall have no responsibility whatsoever for the management of any assets of Clients other than such entities Investment Account. |
2
3) | Discretionary Authority. Subject to the Investment Guidelines, the Adviser shall have full discretion and authority, without obtaining any prior approval, as the Clients agent and attorney-in-fact: (a) to make all investment decisions in respect of each Investment Account on the Clients behalf and at the sole risk of the Client; (b) to buy, sell, exchange, convert, liquidate or otherwise trade in any stock, bond and other securities or financial instruments in respect of each Investment Account; (c) to place orders with respect to, and to arrange for, any of the foregoing; and (d) in furtherance of the foregoing, to do anything which the Adviser shall deem requisite, appropriate or advisable in connection therewith, including, without limitation, the selection of such brokers, dealers, and others as the Adviser shall determine in its absolute discretion. | ||
4) | Custody. The assets of each Investment Account shall be held in one or more separately identified accounts in the custody of one or more banks, trust companies, brokerage firms or other entities designated by the Client and acceptable to the Adviser. The Adviser will communicate its investment purchase, sale and delivery instructions directly with the party identified by the Client or other qualified depositories. The Client shall be responsible for all custodial arrangements and the payment of all custodial charges and fees, and the Adviser shall have no responsibility or liability with respect to custody arrangements or the acts, omissions or other conduct of the custodians. | ||
5) | Brokerage. When placing orders for the execution of transactions for an Investment Account, the Adviser may allocate all transactions to such brokers or dealers, for execution on such markets, at such prices and commission rates, as are selected by the Adviser in its sole discretion. In selecting brokers or dealers to execute transactions, the Adviser need not solicit competitive bids and does not have an obligation to seek the lowest available commission cost. It is not the Advisers practice to negotiate execution only commission rates, and, in negotiating commission rates, the Adviser shall take into account the financial stability and reputation of brokerage firms and brokerage and research services provided by such brokers. An Investment Account may be deemed to be paying for research provided or paid for by the broker which is included in the commission rate although the Investment Account may not, in any particular instance, be the direct or indirect beneficiary of the research services provided. Research furnished by brokers may include, but is not limited to, written information and analyses concerning specific securities, companies or sectors; market, finance and economic studies and forecasts; financial publications; statistics and pricing services; discussions with research personnel; and software and data bases utilized in the investment management process. Symetra acknowledges on behalf of each Client that since commission rates are generally negotiable, selecting brokers on the basis of considerations which are not limited to applicable commission rates may at times result in higher transaction costs than would otherwise be obtainable. The Adviser is hereby authorized to, and Symetra acknowledges on behalf of each Client that the Adviser may aggregate orders on behalf of each Investment Account with orders on behalf of other clients of the Adviser. In such event, allocation of the securities purchased or sold, as well as expenses incurred in the transaction, shall be made in a manner which the |
3
Adviser considers to be the most fair and equitable to all of its clients, including the Clients. |
6) | Representations and Warranties |
a) | Symetra represents, warrants and agrees that: |
i) | it has full legal power and authority to enter into this Agreement; | ||
ii) | the appointment of the Adviser hereunder is permitted by each Clients governing documents and any investment management agreement between Symetra and the Clients to this Agreement and has been duly authorized by all necessary corporate or other action; and | ||
iii) | it will indemnify the Adviser and hold it harmless against any and all losses, costs, claims and liabilities which the Adviser may suffer or incur arising out of any material breach of these representations and warranties of Symetra. |
b) | The Adviser represents, warrants and agrees that: |
i) | it has full legal power and authority to enter into this Agreement; | ||
ii) | it is registered as an investment adviser with the Securities and Exchange Commission pursuant to the Investment Advisers Act of 1940, as amended (the Advisers Act); | ||
iii) | entering into this Agreement has been duly authorized by all necessary action; and | ||
iv) | it will indemnify Symetra and hold it harmless against any and all losses, costs, claims and liabilities which Symetra or any Client may suffer or incur arising out of any material breach of any representations and warranties of the Adviser. |
7) | Reports. The Adviser shall provide Symetra with reports containing the status of the Investment Account at least monthly (i.e. Flash Report), and will provide written advisory report letters on a quarterly basis. All records maintained pursuant to this Agreement shall be subject to examination by Symetra and by persons authorized by it, or by appropriate governmental authorities, at all times upon reasonable notice. The Adviser shall provide copies of trade tickets, custodial reports and other records Symetra reasonably requires for accounting, tax, regulatory, or audit purposes. | ||
8) | Management Fee and Expenses |
a) | The Adviser will be paid a quarterly management fee (the Management Fee) for its investment advisory services provided hereunder, determined in accordance with Exhibit A to this Agreement. During the term of this Agreement, the Management Fee shall be billed and payable in arrears on a quarterly basis within 10 days after the |
4
last day of each calendar quarter based upon the value of the Investment Accounts as of the last day of the immediately preceding calendar quarter, and showing that portion of the Management Fee attributable to each Investment Account. The Management Fee shall be pro-rated for any partial quarter. It is understood that, in the event that the Management Fee is to be paid by the custodian out of the Investment Accounts, Symetra or the Clients will provide written authorization to the custodian to pay the Management Fee directly from the Investment Accounts. | |||
b) | Each Investment Account shall be responsible for all expenses incurred directly in connection with transactions effected on behalf of the Investment Account pursuant to this Agreement and shall include: custodial fees; PAM accounting service fees, investment expenses such as commissions; Infomediary transactions fees and other expenses reasonably related to the purchase, sale or transmittal of Investment Account assets (other than research fees and expenses with respect to the Investment Account). |
9) | Confidential Relationship. |
a) | The Parties hereby agree that all of the information provided to Symetra by the Adviser and to the Adviser by Symetra shall be considered proprietary and confidential in nature (hereinafter, the Confidential Information) and, as such, shall not be disclosed or revealed or caused to be disclosed or revealed, in any manner, to any non-party to this Agreement, except: |
i) | as may be required by law or any judicial, regulatory or self-regulatory authority (including without limitation any required filing with the SEC or any state insurance regulator), provided that notice of any such disclosure is at the time sent to the other party, except that no notice will be required for routine SEC or department of insurance filings, | ||
ii) | as either party may consent to specifically in advance in writing; provided, however, that | ||
iii) | any such Confidential Information may be disclosed to each partys officers, directors, employees, consultants, contractors, advisors, and fiduciaries (Representatives) who need to know such information in order to carry out the purpose of the disclosure and so long as they agree to keep it confidential; | ||
iv) | Confidential Information does not include any information which (A) is or subsequently becomes published or available to the public other than by breach of this Agreement, (B) is received by receiving party from a non-party not in breach of any obligation of confidentiality, (C) is independently developed by receiving party, or (D) was in receiving partys possession or known to receiving party before disclosing party disclosed it to receiving party; and | ||
v) | Adviser Confidential Information does not include the identification of Symetra |
5
as a Client or a Clients investments as of a given point in time (which is consistent with (iv) (A) above). |
b) | Symetra agrees that: |
i) | Adviser may disclose that Symetra (and each of the Clients) is a client of the Adviser and to the inclusion of Symetra on a list of representative clients of the Adviser or in other marketing materials; | ||
ii) | Adviser shall be permitted to retain copies of all documentation necessary under the Advisers Act to support the track record or otherwise required to be retained under the Advisers Act and related rules, but only for such period as required to be retained; and | ||
iii) | Symetra shall not allow the Confidential Information to be used to purchase, sell, trade or invest in any securities, instruments or other investments owned by the Account without obtaining the prior written consent of the Adviser, unless such consent is impossible or impractical due to an event of force majeure that interferes with Advisers performance under this Agreement; and further acknowledges that: | ||
iv) | the provisions of (b) are reasonable and necessary for the protection of the Adviser and its affiliates, and | ||
v) | the Adviser or its affiliates will be irrevocably damaged if the covenants herein are not specifically enforced and, accordingly, Symetra hereby further agrees that, in addition to any other relief or remedies available to the Adviser, the Adviser shall be entitled to seek and obtain an appropriate injunction or other equitable remedy from a court with proper jurisdiction for the purposes of restraining Symetra from any actual or threatened breach of such covenant, and no bond or security will be required in connection therewith. In any event, Symetra shall be responsible for any breach of this Agreement by any of Symetras Representatives, and Symetra agrees, at its sole expense, to take all reasonable measures (including, without limitation, court proceedings) to restrain its Representatives from prohibited or unauthorized disclosure or use of the Confidential Information or any other breach of the terms of this Agreement. |
c) | Adviser agrees that: |
i) | Symetra shall be permitted to report the Investment Track Record (on a stand-alone basis, as part of its total portfolio return or otherwise) with respect to the Investment Accounts in any internal or external reports of it or its affiliates; and | ||
ii) | Symetra and/or its affiliates will be irrevocably damaged if the covenants herein are not specifically enforced and, accordingly, Adviser hereby further agrees that, in addition to any other relief or remedies available to Symetra, Symetra shall be |
6
entitled to seek and obtain an appropriate injunction or other equitable remedy from a court with proper jurisdiction for the purposes of restraining Adviser from any actual or threatened breach of such covenant, and no bond or security will be required in connection therewith. In any event, Adviser shall be responsible for any breach of this Agreement by any of its Representatives, and Adviser agrees, at its sole expense, to take all reasonable measures (including, without limitation, court proceedings) to restrain its Representatives from prohibited or unauthorized disclosure or use of the Confidential Information or any other breach of the terms of this Agreement. |
10) | Non-Assignability. No assignment, as that term is defined in the Advisers Act, of this Agreement shall be made by the Adviser or Symetra without the written consent of the other party. | ||
11) | Directions to the Adviser. All directions by Symetra by or on behalf of the Clients to the Adviser shall be in writing signed by or on behalf of Symetra. The Adviser shall be fully protected in relying upon any such writing which the Adviser believes to be genuine and signed or presented by the proper person or persons, shall be under no duty to make any investigation or inquiry as to any statement contained therein and may accept the same as conclusive evidence of the truth and accuracy of the statements therein contained. | ||
12) | Consultation with Counsel. The Adviser may consult with legal counsel (who may be counsel to Symetra) concerning any question that may arise with reference to its duties under this Agreement, and the opinion of such counsel shall be full and complete protection in respect of any action taken or omitted by the Adviser hereunder in good faith and in accordance with such opinion. | ||
13) | Services to Other Clients. It is understood that the Adviser acts as investment adviser to other clients and may give advice and take action with respect to such clients that differs from the advice given or the action taken with respect to the Investment Accounts. Nothing in this Agreement shall restrict the right of the Adviser, its members, managers, officers, employees or affiliates to perform investment management or advisory services for any other person or entity, and the performance of such service for others shall not be deemed to violate or give rise to any duty or obligation to the Client. | ||
14) | Investment by the Adviser for Its Own Account. Nothing in this Agreement shall limit or restrict the Adviser or any of its members, managers, officers, employees or affiliates from buying, selling or trading any securities for its or their own account or accounts. Symetra on behalf of each Client acknowledges that the Adviser and its members, managers, officers, employees, affiliates and other clients may at any time have, acquire, increase, decrease or dispose of securities which are at or about the same time acquired or disposed of for the account of a Client. The Adviser shall have no obligation to purchase or sell for the Investment Accounts or to recommend for purchase or sale by the Investment Accounts any security that the Adviser or its members, managers, |
7
officers, employees or affiliates may purchase or sell for itself or themselves or for any other client. | |||
15) | Proxies. Subject to any other written instructions of Symetra, the Adviser is hereby appointed Symetras agent and attorney-in-fact in its discretion to vote, convert or tender in an exchange or tender offer any securities in the Investment Accounts, to execute proxies, waivers, consents and other instruments with respect to such securities, to endorse, transfer or deliver such securities and to participate in or consent to any plan of reorganization, merger, combination, consolidation, liquidation or similar plan with reference to such securities. | ||
16) | Sarbanes-Oxley Compliance. Symetra is subject to certain regulations (SOX) that require management to assess the effectiveness of its internal controls over financial reporting and state in its annual report whether such internal controls are effective. Because Adviser will perform trading execution functions for Symetras Investment Accounts as described in this Agreement, certain procedures performed by Adviser are relevant to Symetras evaluation of its internal controls. Having acknowledged the foregoing, Adviser agrees to cooperate with Symetra as reasonably necessary to facilitate Symetras ability to comply with its regulatory obligations. | ||
17) | Operational Audits. Upon Symetras request, but no more often than once annually except (a) as necessary for Symetra or Client to respond to any regulatory requirement or inquiry, or (b) as deemed reasonably necessary by Symetra as a result of Symetras good faith belief that Adviser has breached any of its obligations hereunder, Adviser shall allow Symetra and/or any independent third party (Third Party Representatives) selected by Symetra to perform operational audits with respect to Advisers performance of its obligations hereunder. Adviser shall grant Symetra and its Third Party Representatives access to Advisers facilities, personnel, and all books, records and other documents of Adviser related to trade execution it performs for Symetra under this Agreement (not otherwise provided under section 7) (Documentation) as may be required in order for Symetra to ascertain that trades (i) are conducted by authorized personnel, (ii) are completed, and (iii) reconcile to the accounting and custody records of Symetra and its other service providers, and such other facts relative to Advisers performance hereunder. Symetra acknowledges that to the extent such Documentation contains aggregated data for multiple clients of Adviser, Adviser may redact certain information contained in the Documentation as reasonably necessary to meet its confidential obligations to other clients. Adviser shall provide Symetra, or its Third Party Representatives, such information and assistance as requested in order to perform such audits, including access to Advisers personnel to explain the control environment by means of operational walk throughs or other means; provided, however, that the Parties shall endeavor to arrange such assistance in such a way that it does not interfere with Advisers performance of the Agreement. Notwithstanding anything to the contrary in section 17, no amendment to this Agreement shall be required where the Parties mutually agree to change the scope of audits under this section to permit Symetra to comply with SOX and related laws as enacted or amended from time to time. |
8
18) | Notices. All notices and instructions with respect to securities transactions or any other matters contemplated by this Agreement shall be deemed duly given when delivered in writing or deposited by first-class mail to the following addresses: (a) if to the Adviser, at its address set forth above, Attention: Peter N. Perugini, CFO, or (b) if to Symetra, at its address set forth above, Attention: Margaret Meister, CFO. The Adviser or the Client may change its address or specify a different manner of addressing itself by giving notice of such change in writing to the other party. | ||
19) | Entire Agreement; Amendment. This Agreement sets forth the entire agreement of the parties with respect to management of the Investment Account and shall not be amended except by an instrument in writing signed by the parties hereto. | ||
20) | Termination. This Agreement shall continue in force from the date hereof for an initial fixed term of three years (initial term), which may be extended by Symetra in its sole discretion for an additional one year (fourth year extension) at/prior to the end of the second year of the initial term, and if so extended, then, again in Symetras sole discretion, for an additional year (fifth year extension) at/prior to the end of the initial term. Notwithstanding the foregoing, during the initial term and any extensions, this Agreement shall be terminable without penalty by Symetra upon written notice to the Adviser at least thirty (30) days prior to the date upon which such termination is to become effective (i) for cause (including material non-performance by the Adviser), (ii) if either John Gillespie or Richard Howard are no-longer affiliated with the Adviser, or (iii) if there is a change in control of the Adviser. Following the end of the initial term and any extensions, this Agreement may be terminated without penalty by either party on 60 days written notice. Each Client shall honor any trades executed but not settled before the date of any termination under this Agreement. The fee for the calendar quarter during which any termination of this Agreement shall occur shall be paid as of the date of termination and prorated if the effective date does not coincide with the end of the quarter. | ||
21) | Governing Law. To the extent that the interpretation or effect of this Agreement shall depend on state law, this Agreement shall be governed by and construed in accordance with the laws of the State of Connecticut. | ||
22) | Effective Date. This Agreement shall become effective on the date first written above. | ||
23) | Receipt of Disclosure Statement. Symetra acknowledges receipt of a copy of Part II of the Advisers Form ADV in compliance with Rule 204-3(b) under the Advisers Act more than 48 hours prior to the date of execution of this Agreement. The Adviser shall annually and without charge, upon request by Symetra, deliver to Symetra the current version of such form or a written document containing at least the information then required to be contained in such form. | ||
24) | Counterparts. This Agreement may be executed in two counterparts, each one of which shall be deemed to be an original. |
9
ADVISER:
|
CLIENT: | |
PROSPECTOR PARTNERS, LLC
|
SYMETRA FINANCIAL CORPORATION | |
By: /s/ John D. Gillespie
|
By: /s/ Margaret A. Meister | |
John D. Gillespie
|
Margaret A. Meister | |
Title: Managing Member
|
Executive Vice President, Chief Financial Officer | |
Date: June 29, 2010
|
Date: 06/29/2010 | |
SYMETRA LIFE INSURANCE COMPANY | ||
By: /s/ Margaret A. Meister | ||
Margaret A. Meister | ||
Executive Vice President, Chief Financial Officer | ||
Date: 06/29/2010 | ||
Aggregate Net Assets | Annual Fee | Quarterly Fee | ||||||
Up to $200 million |
100 basis points | 25 basis points | ||||||
(1.00% or 0.0100) | (0.25% or 0.00250) | |||||||
Greater than $200 million |
50 basis points | 12.50 basis points |
11
1) | The Adviser may not purchase securities on margin, sell short, or enter into derivative transactions in an Investment Account without the written consent of Symetra. | ||
2) | The Adviser may purchase Rule 144A securities provided such securities are judged by the Adviser to be liquid and do not in the aggregate exceed 20% of the market value of each Investment Account. The Adviser shall also be able to purchase securities if such securities are convertible into publicly traded securities. | ||
3) | At least 95% of each Investment Account will consist of securities of companies having a market capitalization of $100 million or greater. | ||
4) | Each Investment Account may include domestic and non-domestic securities (common stocks, bonds, securities that are convertible to common stocks, preferred stocks, warrants and rights to subscribe to common stocks) that are listed on registered exchanges or actively traded in the over-the-counter market. |
5) | Issuers of securities located in countries other than the United States, including emerging market countries, shall not exceed 40% of the market value of each Investment Account. | ||
6) | In terms of diversification, investments shall be allocated with the intent to minimize the risk of large losses to each Investment Account. The maximum total investment in any one security shall be limited to 10% of an Investment Account at the time of purchase, and 25% of the market value of such Investment Account. | ||
7) | If the aggregate investment in an Investment Account of the equity securities of any one company exceeds 5% of that companys outstanding shares of all classes of stock of that issuer, the Adviser will notify Symetra. |
1) | Investment in preferred stock with voting rights plus common stock in the same issuer is limited to 15% of the issuers outstanding shares having voting rights. | ||
2) | Investment is limited to 10% of the outstanding common stock of the same issuer. | ||
3) | No investment in the securities issued by an insolvent corporation is permitted. For purposes of this section 3, insolvent corporation is a corporation for which bankruptcy, receivership, insolvency, reorganization or other similar proceedings have been instituted by or against such corporation under any section or chapter of the United States Bankruptcy Code, as amended, or under any similar laws or statutes of the United States (or any state thereof). |
Illustrative | ||||||||
Maximum | Long-term | |||||||
Asset Type | Allocation | Target* | ||||||
Fixed Income |
100 | % | 96 | % | ||||
Corporate Bonds |
70 | % | 55 | % | ||||
MBS/CMO |
20 | % | 10 | % | ||||
Asset Backed
Securities |
15 | % | 12 | % | ||||
CMBS |
12 | % | 7 | % | ||||
Commercial Mortgages |
10 | % | 7 | % | ||||
Other Investment
Grade |
10 | % | 2 | % | ||||
Below Investment
Grade |
7 | % | 3 | % | ||||
Equity/Alternatives |
5 | % | 4 | % | ||||
Public/Private
Equity |
3 | % | 1.5 | % | ||||
Hedge Funds |
3 | % | 1.5 | % | ||||
Real Estate |
2 | % | 0.5 | % | ||||
Other |
2 | % | 0.5 | % | ||||
Cash & short-term
purchases |
2 | % | 0 | % |
* | Illustrative long-term targets are based on the 2004 liability mix. |
2
3
Senior | Market Value as a % | Approximate % of | ||||||
Debt Rating | Surplus + AVR | Total Market Value * | ||||||
AAA |
12 | % | 0.7 | % | ||||
AA |
10 | % | 0.6 | % | ||||
A |
8 | % | 0.5 | % | ||||
BBB |
6 | % | 0.4 | % | ||||
BB |
3 | % | 0.2 | % | ||||
< BB |
2 | % | 0.1 | % |
* | As of 12/2003 |
Senior | Market Value as a % | Approximate % of | ||||||
Debt Rating | Surplus + AVR | Total Market Value * | ||||||
Investment Grade |
3 | % | 0.2 | % | ||||
Below Inv. Grade |
1 | % | 0.1 | % |
* | As of 12/2003 |
Market Value as a % | ||||
Type | Surplus + AVR | |||
Single Fund |
5 | % | ||
Single Manager |
10 | % |
4
5
I. POLICY |
1 | |||
II. DERIVATIVE INSTRUMENTS AND STRATEGIES |
1 | |||
A. DERIVATIVE INSTRUMENT DEFINITIONS |
1 | |||
B. EXCHANGE TRADED VERSUS OVER-THE-COUNTER TRANSACTIONS |
2 | |||
C. STRATEGIES |
3 | |||
D. DUTY TO CONSIDER RISKS INHERENT IN DERIVATIVE TRANSACTIONS |
4 | |||
E. RISK/EXPOSURE MEASUREMENT |
5 | |||
III. LIMITATIONS AND PARAMETERS |
5 | |||
A. QUANTITATIVE AND OTHER LIMITATIONS |
5 | |||
B. DOCUMENTATION OF OTC DERIVATIVE TRANSACTIONS |
7 | |||
IV. OVERSIGHT, INTERNAL CONTROL PROCEDURES AND REPORTING |
7 | |||
A. DELEGATION OF RESPONSIBILITY |
7 | |||
B. DAY-TO-DAY RESPONSIBILITY INVESTMENT MANAGER |
8 | |||
C. INTERNAL CONTROL PROCEDURES PROCESS FOR APPROVAL AND MONITORING
OF INDIVIDUAL TRANSACTIONS |
8 | |||
D. MANAGEMENT OVERSIGHT OF DERIVATIVES PROGRAM |
10 | |||
E. RECORDS AND DOCUMENTATION |
10 | |||
F. SEPARATION OF TRADING AND SETTLEMENT FUNCTIONS |
11 | |||
G. ACCOUNTING AND FINANCIAL REPORTING |
11 | |||
EXHIBIT A SAMPLE DERIVATIVE TRANSACTION CONTROL SHEET |
A-1 | |||
EXHIBIT B LIST OF COMPANIES |
B-1 | |||
EXHIBIT C SAMPLE EFFECTIVENESS SUMMARY |
C-1 |
II. DERIVATIVE INSTRUMENTS AND STRATEGIES |
A. | Derivative Instrument Definitions. |
1. | The definition according to Generally Accepted Accounting Principles (GAAP):1 | ||
A financial instrument or other contract with all three of the following characteristics: |
- | It has (1) one or more underlyings and (2) one or more notional amounts or payment provisions or both. | ||
- | It requires no initial net investment or an initial net investment that is smaller than would be required for other types of contracts that would be expected to have a similar response to changes in market factors. | ||
- | Its terms require or permit net settlement, it can readily be settled net by a means outside the contract, or it provides for delivery of an asset that puts the recipient in a position not substantially different from net settlement. |
2. | The regulatory definition:2 |
1 | FASB statement No. 133 Accounting for Derivative Instruments and Hedging Activities. | |
2 | Based on the NAICs Derivative Instruments Model Regulation and Statements of Statutory Accounting Principals (SSAPs). |
1
(a) | To make or take delivery of, or assume or relinquish, a specified amount of one or more underlying interests, or to make a cash settlement in lieu thereof; or | ||
(b) | That has a price, performance, value or cash flow based primarily upon the actual or expected price, level, performance, value or cash flow of one or more underlying interests. |
B. | Exchange Traded versus Over-the-Counter Transactions. |
3 | These definitions are based in whole or in part on definitions found in Washington state insurance laws as may be amended from time to time. |
2
C. | Strategies (All life insurance company strategies will conform to applicable state statutes). |
(a) | The risk of a change in the value, yield, price, cash flow, or quantity of assets or liabilities that the insurer has acquired or incurred or anticipates acquiring or incurring; or | ||
(b) | The currency exchange rate risk or the degree of exposure as to assets or liabilities that the insurer has acquired or incurred or anticipates acquiring or incurring. |
3
D. | Duty to Consider Risks Inherent in Derivative Transactions. |
- | $25 million for a counterparty with a AAA rating | ||
- | $20 million for a counterparty with a AA rating |
4
- | $15 million for a counterparty with a A rating | ||
- | $5 million for a counterparty with a BBB+ rating | ||
- | $2.5 million for a counterparty with a BBB rating | ||
- | $0 for BBB- and lower |
E. | Risk/Exposure Measurement. |
III. LIMITATIONS AND PARAMETERS |
A. | Quantitative and Other Limitations. |
5
(a) | Hedging. |
| The aggregate financial statement value of options, swaptions, caps, floors and warrants not attached to another financial instrument that are purchased by a Company and used in hedging transactions shall not exceed 7.5% of the market value of such Companys invested assets (admitted assets for life insurance companies). | ||
| The aggregate financial statement value of options, swaptions, caps and floors written by a Company for hedging transactions shall not exceed 3% of the market value of the such Companys invested assets (admitted assets for life insurance companies). | ||
| The aggregate potential exposure of collars, swaps, swaptions, forwards and futures used in hedging transactions shall not exceed 6.5% of a Companys invested assets (admitted assets for life insurance companies). |
(b) | Replication. |
| A Company shall aggregate all replicated investment positions with their direct investments as if such Company had invested in the replicated asset directly in determining its compliance with applicable quantitative limitations. | ||
| The aggregate financial statement value of assets being replicated shall not exceed 10% of the market value of a Companys invested assets (admitted assets for life insurance companies). |
(c) | Income Generation. |
6
| The aggregate financial statement value of options written by a Company for income generation transactions shall not exceed 1% of the market value of such Companys invested assets (admitted assets for life insurance companies). |
B. | Documentation of OTC Derivative Transactions. |
IV. OVERSIGHT, INTERNAL CONTROL PROCEDURES AND REPORTING |
A. | Delegation of Responsibility. |
7
B. | Day-to-Day Responsibility Investment Manager. |
C. | Internal Control Procedures Process for Approval and Monitoring of Individual Transactions. |
| type of derivative instrument(s) to be used; | ||
| type of strategy to be undertaken; | ||
| underlying investment position or other balance sheet or income statement item to which the derivative transaction relates; | ||
| description of the transaction, its purpose and its intended effect, including a precise identification of the risks being hedged or replicated, if applicable; | ||
| identity of the counterparty or, with respect to exchange-traded transactions, the identity of the exchange and the name of the firm that handled the trade; | ||
| notional amount of the transaction; | ||
| consideration for the transaction; | ||
| any additional collateral or other credit support taken or provided; and |
8
| Investment Managers recommendation for the most appropriate method for assessing effectiveness based on acceptable choices provided by a Company in the event hedge accounting is to be used (final determination to be made by a Company for accounting/tax purposes). |
| the Control Sheet is complete; | ||
| the derivative transaction complies with this Plan, including a Companys established quantitative and qualitative limits/parameters; | ||
| the transaction is reasonably expected to perform as intended, as demonstrated through stress testing and other techniques designed to vary market performance and conditions as appropriate; | ||
| the counterparty is included on the Investment Managers list of approved derivative counterparties for such Company; | ||
| Such Company has received a copy of the completed Control Sheet so that it can complete any additional required hedge designation documentation, including the anticipated accounting and tax treatment for such derivative transactions. In the event that the transaction is not of the type where standard language has been provided to the Investment Manager by such Company, a minimum of 1 day prior notice must be given to such Company to allow adequate time to complete the derivative documentation in a timely manner. In all other cases the Control Sheet will be provided to such Company by noon on the transaction date. |
9
D. | Management Oversight of Derivatives Program. |
| outstanding derivative positions and unrealized gains or losses on such positions, if any; | ||
| derivative transactions opened and/or closed during the quarter and realized gains and losses on such transactions, if any; | ||
| a performance review of the derivative transactions; | ||
| an evaluation of the risks and benefits of the derivative transactions, including whether a derivative transaction entered into for hedging purposes continues to be an effective hedging tool; | ||
| an assessment of future or potential risk exposure; | ||
| a review of all counterparty exposure amounts outstanding; | ||
| a valuation of the derivative transactions, including a mechanism for compensating for any lack of independence in valuing trading positions; | ||
| any other reports, documentation or analysis deemed necessary by a Company or the Investment Manager to ascertain whether all derivative transactions have been made in accordance with the delegations, standards, limitations and objectives contained in this Plan. |
E. | Records and Documentation. |
10
F. | Separation of Trading and Settlement Functions. |
G. | Accounting and Financial Reporting. |
| The Investment Manager will prepare and provide the Companies, on the trade date, with copies of the completed Control Sheet (see Exhibit A) relating to each derivative transaction. The Companies will use the information on the Control Sheet as part of their hedge designation documentation. The designation documentation supporting the hedge must be formal, be contemporaneous (i.e., prepared at inception of the hedge), identify the hedged item, the hedging instrument, the nature of the hedging relationship (e.g. fair value, cash flow, net investment), the Companies overall risk management objectives and strategy for undertaking the hedge. The Investment Manager will suggest the most appropriate method for determining how hedge effectiveness will be assessed. As part of the Financial Reporting designated documentation, a statement must be included that identifies the hedging transaction for tax purposes. This will be provided by the Companies. | ||
| The designation documentation must include support provided by the Investment Manager (e.g., correlation statistics such as r-squared using statistical analysis or observations of how effectively the hedging instrument achieved the dollar offset with the hedged item in the income statement) for why the hedge is expected to be highly effective at inception and on a go-forward basis. | ||
| To be determined to be a highly effective hedging transaction, such transaction must be measured on a dollar offset approach and recorded within an 80-125% effectiveness range. | ||
| The designation documentation must define and document the method the Companies (provided by the Companies) will use to assess the hedge effectiveness for both prospective considerations and retrospective considerations: either a dollar-offset approach or a regression or other statistical analysis approach. However, when it comes to actually recording the amount of ineffectiveness during a period, the dollar-offset method must be used. | ||
| Investment Manager will provide the Companies with the data supporting the amount of ineffectiveness and the ongoing assessment. |
11
| The Companies will prepare a summary similar to Exhibit C summarizing the measurement of hedge effectiveness / ineffectiveness on quarterly basis. See Exhibit C. | ||
| Investment Manager will provide the Companies, when reasonably requested, a quantitative and sensitivity analysis of the hedge transaction and market risk (equity and interest risks) as required in Management Discussion and Analysis. |
12
1. | Describe the derivative transaction, including the purpose (i.e., strategy) for
engaging in the derivative transaction and the intended effect. |
||
a. | Describe the underlying investment position or other balance
sheet or income statement item to which the derivative transaction relates. |
||
b. | If the derivative transaction is entered into for hedging purposes, describe the
precise risk being hedged or replicated. |
||
2. | Indicate the type of derivative instrument(s) used. |
||
3. | Indicate the notional amount of the derivative transaction. |
||
4. | Indicate the consideration paid/received in connection with the derivative
transaction. |
||
A-1
5. | Identify the counterparty to the derivative transaction, or, if the derivative
instrument is exchange traded, identify the exchange and the brokerage firm that
handled the trade. |
||
6. | Describe any collateral or credit support given or received in relation to the derivative transaction that is in addition to collateral required by the standard CSA. | ||
7. | Investment Managers recommendation for most appropriate method for assessing hedge effectiveness from Companies list of approved methods (Companies will make the final determination of the method to be used for accounting/tax purposes) | ||
Authorized Traders signature | ||||
Member of Operations/Compliance Area |
A-2
LIST OF COMPANIES | DATE ADOPTED BY THE BOARD | |
Symetra Life Insurance Company
|
December 5, 2006 |
B-1
Company reporting date: (Effectiveness must be assessed whenever financial statements or earnings are reported, but at least every 3 months) |
||||||||||||||||
Company Calculation of: |
||||||||||||||||
Hedged Item Fair Value |
$ | $ | $ | $ | ||||||||||||
Hedging Instrument Fair Value |
$ | $ | $ | $ | ||||||||||||
Retrospective Effectiveness |
||||||||||||||||
Prospective Effectiveness |
||||||||||||||||
For cash flow hedge of a forecasted transaction, is the hedged item
still probable of occurring? (yes or no) |
||||||||||||||||
Company performed and documented assessment of hedge effectiveness in
accordance with the method defined in the hedge designation
documentation? (yes or no) |
||||||||||||||||
Company concluded that hedge meets criteria for hedge accounting?
(yes or no) |
||||||||||||||||
Comments/working paper reference |
C-1
Security | Requirement/Restriction | RCW | ||
General Qualifications: Interest
bearing or accruing or dividend or
income paying securities that are not
in default and not priced above market
value.
|
100% of securities purchased or acquired must satisfy these requirements. (Limited exceptions may apply.) | 48.13.020 | ||
One Entity: Any combination of
investments in or loans upon the
security of the obligations, property,
and securities of any one person,
institution, or municipal corporation.
|
Limited to 4% of assets without prior consent from OIC. (Limit does not apply to general obligations of the U.S. government or U.S. state governments.) | 48.13.030(1) (See 48.13.273 for limits on medium and lower grade obligations.) | ||
Depository Institutions: Voting
securities of a depository institution
or any company which controls a
depository institution.
|
Limited to 5% of admitted assets without prior consent from OIC. | 48.13.030(2) | ||
Public Obligations: Bonds or other
evidences of debt, not in default as
to principal or interest, that are
obligations issued, assumed or
guaranteed by the U.S. or by any U.S.
state or by any U.S. territory or
possession, or by the District of
Columbia or by any county, city, town,
village, municipality or district
therein or by any political
subdivision thereof or by any civil
division or public instrumentality of
one or more of the foregoing.
|
Funds may be invested in public obligations payable (1) from taxes levied or required to be levied upon all taxable property or all taxable income within the jurisdiction of such governmental unit or, (2) from adequate special revenues, but not including any obligation payable solely out of special assessments on properties benefited by local improvements unless adequate security is evidenced. | 48.13.040 | ||
Corporate Obligations: Obligations
issued, assumed, or guaranteed by any
solvent institution created or
existing under the laws of the U.S. or
of any state, district or territory
thereof, and are qualified under any
of the following: (1) Obligations which are secured by adequate collateral security and bear fixed interest. (2) Fixed interest bearing obligations. (3) Adjustment, income or other contingent interest obligations. |
Section not applicable to mortgage related
investments authorized under RCW 48.13.110. In determining the adequacy of collateral security, not more than 1/3 of the total value of such required collateral shall consist of stock other than stock meeting the requirements of RCW 48.13.080 (preferred or guaranteed stocks). Eligible corporate obligations are subject to issuer earnings requirements under RCW 48.13.050(1), (2) or (3). |
48.13.050 See limits under 48.13.273, for medium and lower grade obligations. See 48.13.060 and .070 for definition of net earnings and application of net earnings test on securities of merged/reorganized institutions. |
||
Preferred or Guaranteed Stocks: Qualified preferred or guaranteed stocks or shares (other than common stock) of solvent U.S. institutions. Stocks or shares are qualified if they meet the requirements of RCW 48.13.080(1)(a) for preferred stocks, or (b) for guaranteed stocks. In addition, as of the date of acquisition, all of the prior obligations and prior preferred stocks of the institution must be eligible investments. |
Limited to 10% of assets. Institutions must satisfy net earnings requirements for preferred stock and RCW 48.13.050 for guaranteed stock. Subject to limitations of RCW 48.13.030 (single issuer), investment in preferred stock with voting rights plus common stock in same issuer (other than investment in certain subsidiaries of the insurer) is limited to 15% of issuers outstanding shares having voting rights. |
48.13.080 |
2
Security | Requirement/Restriction | RCW | ||
Trustees or Receivers Obligations: Certificates, notes or other
obligations issued by trustees or receivers of U.S. institutions
which, or the assets of which, are court administered and which
are adequately secured as to principal and interest.
|
Limited to 2% of assets. | 48.13.090 | ||
Equipment Trust Certificates: Equipment trust obligations or
certificates which are adequately secured, or in other adequately
secured instruments evidencing an interest in transportation
equipment wholly or in part within the U.S. and the right to
receive determined portions of rental, purchase or other fixed
obligatory payments for the use or purchase of such transportation
equipment.
|
Limited to 10% of assets. | 48.13.100 | ||
Mortgages, Deeds of Trust, Mortgage Bonds, Notes, Contracts:
(1)(a) Bonds or evidences of debt which are secured by first
mortgages or deeds of trust on improved unencumbered real property
located in the U.S.; (1)(b) chattel mortgages in connection
therewith; (1)(c) the equity of the seller of any such property in
the contract for a deed, covering the entire balance due on a bona
fide sale of such property. (2) Money mortgages or like securities
received upon the sale or exchange of real property acquired
pursuant to RCW 48.13.160. (3) Bonds or notes secured by mortgage
or trust deed guaranteed or insured by the FHA. (4) Bonds or
notes secured by mortgage or trust deed guaranteed or insured as
to principal in whole or in part by the VA. (5) Evidences of debt
secured by first mortgages or deeds of trust upon leasehold
estates, except agricultural leaseholds executed pursuant to RCW
79.11.010. (6) Evidences of debt secured by first mortgages or
deeds of trust upon agricultural leasehold estates executed
pursuant to RCW 79.11.010.
|
(1)(b) Chattel mortgages are subject to
requirements of RCW 48.13.150. (1)(c) Sellers equity in any one such deed covering the balance due on sale of such property is limited to the greater of $10,000 or the amount permissible under RCW 48.13.030. (5) Leasehold estates must run for at least 15 years beyond the maturity of the loan as made or as extended, in improved real property, be otherwise unencumbered, and the mortgagee must be entitled to be subrogated to all the rights under the leasehold. (6) Agricultural leasehold estates must be otherwise unencumbered, and the mortgagee must be entitled to be subrogated to all the rights under the leasehold. Except for investments made under (3) and (4) and guaranteed by FHA or VA, investments are limited to 75% of the fair value of the property as of the date of investment (80% of market value for certain loans secured by first mortgages on single-family residential buildings). RCW 48.13.120 Exceptions for certain securities received on the sale or exchange of real property acquired under RCW 48.13.160. |
48.13.110 See 48.13.125 for limitation on amortization of loans on one-family dwellings. See 48.13.130 for definition of encumbrance. See 48.13.140 for appraisal of property, insurance requirements and the limit on loans upon the security of any one parcel of real property (the greater of $25,000 or the amount permissible under 48.13.030. See 48.13.265 for limits on investments secured by real estate. |
||
Real Property Owned Home Office Building: (1) insurer home and
branch office buildings; (2) real property acquired in
satisfaction or on account of loans, mortgages etc. previously
owing to the insurer in the course of its business; (3) real
property (a) required for convenient transaction of business;(b)
acquired by gift or devise; (c) acquired in exchange for real
property owned by insurer; (d) acquired through a lawful merger or
consolidation with it of another insurer, (e) requisite or
desirable for the protection or
|
(1) OIC approval required if investment in
home office etc. exceeds 10% of assets. (3) Investment in real property can include repair, alteration, furnishing, or improvement thereof and is subject to the requirements of RCW 48.13.160(3). See statute for complete description, including when OIC approval may be required. (4) Investment in income producing |
48.13.160 |
3
Security | Requirement/Restriction | RCW | ||
enhancement of the value of other
real property owned by the insurer; (4) income-producing property.
|
property is subject to the requirements of RCW 48.13.160(4). See statute for complete description with respect to insurer asset size, capital and surplus, and other conditions for investment that must be met. | |||
Disposal of Real Property Time Limit:
Real property acquired by an insurer pursuant to loans, mortgages,
liens, judgments, or other debts, or under RCW
48.13.160(3)(a);(b), (c), (d), and (e).
|
Property acquired under RCW 48.13.160(3)(a)
must be disposed of within 5 years of
ceasing to be of use in the transaction of
business. Property acquired pursuant to loans, mortgages, liens, judgments, or other debts, or under RCW 48.13.160(3)(b), (c), (d), and (e) must be disposed of within 5 years of acquisition, unless OIC approves a longer time. |
48.13.170 | ||
Foreign Securities: Obligations of foreign governments including
provinces, counties, municipalities, or similar entities, and
obligations and securities of foreign corporations, which have not
been in default during the five years next preceding date of
acquisition, and if the foreign jurisdiction has a sovereign debt
rating of SVO 1.
|
Limited to 10% of assets. Investment made in any one foreign country is limited to 5% of assets. |
48.13.180 | ||
Policy Loans: Loans to policyholders upon the pledge of the policy
as collateral.
|
Amount of respective loan cannot exceed the legal reserve maintained on the policy. | 48.13.190 | ||
Savings and Share Accounts: Share or savings accounts of savings
and loan associations or savings accounts of banks.
|
Amount deposited in any one institution is limited to amount insured by FSLIC or FDIC. | 48.13.200 | ||
Insurance Stocks: Stocks of U.S. domiciled insurers that also meet
the qualifications for stocks under RCW 48.13.220.
|
Limited to the lesser of 5% of assets or 25% of surplus over its capital stock and other liabilities. Unless a subsidiary, investment is limited to 5% of the voting stock of any one insurer and RCW 48.13.030. | 48.13.210 Note: Limits do not apply to OIC approved mergers and stock dividends on shares already owned. |
||
Limitation on Insurer Loans or Investments (Investment in
Non-Insurer Subsidiaries): Common stock, preferred stock, debt
obligations, and other securities of one or more subsidiaries as
defined in RCW 48.31B.005.
|
Limited to the lesser of 10% of assets, or 50% of its surplus as regards policyholders. | 48.13.218 Note: Subsidiaries that are insurers, healthcare service providers and HMOs are excluded. |
||
Common Stocks: Common shares of stock in solvent U.S. corporations
that qualify as a sound investment.
|
Must first satisfy requirements of RCW
48.13.260 for investment of capital and
reserves. Limited to 50% of surplus over the minimum required surplus. Subject to limitations of RCW 48.13.030 (single issuer), investment is limited to 10% of the outstanding common stock of same issuer (exception for stock of certain subsidiaries of the insurer). |
48.13.220 Note: 90 days notice to OIC is required prior to acquisition of a majority of the total outstanding common shares of any corporation. |
||
Collateral Loans: Loans upon the pledge of securities or evidences
of debt eligible for investment.
|
Limited to 90% of the market value of such collateral pledged, except that loans upon pledges of U.S. government bonds may be equal to the market value of the bonds pledged, subject to the maximums under RCW 48.13.030. | 48.13.230 |
4
Security | Requirement/Restriction | RCW | ||
Miscellaneous Investments: Loans or investments not otherwise
eligible for investment and not specifically prohibited by RCW
48.13.270 and not described in RCW 48.12.020 (non-allowable
assets).
|
Limited to the lesser of 10% of assets or
50% of surplus over capital and other
liabilities. Investment in or loan upon the security of any one entity is limited to the lesser of the limit described above or 1% of assets. [Exceptions require special consent order from OIC.] |
48.13.240 Note: The insurer shall keep a separate record of all miscellaneous investments. |
||
Special Consent Investments:
Investments not otherwise eligible, but still qualified under RCW
48.13.020 (general qualifications) and for which advance approval
from the OIC is obtained.
|
The approval from the OIC will specify whether the investment may be credited to required minimum capital or surplus investments, or to investments of reserves. | 48.13.250 | ||
Required Investments for Capital and Reserves: for Capital: Cash or investments eligible under RCW 48.13.040 (public obligations), and mortgage loans on real property located within this state, pursuant to RCW 48.13.110. |
Not less than 100% of the investments required for capital and reserves. | 48.13.260 | ||
for Reserves: Cash or premiums in course of collection or
investments under RCW 48.13: |
||||
.040 (public obligations), |
||||
.050 (corporate obligations), |
||||
.080 (preferred or guaranteed stocks), |
||||
.090 (trustees or receivers obligations), |
||||
.100 (equipment trust certificates), |
||||
.110 (mortgages, loans and contracts), |
||||
.150 (auxiliary chattel mortgages), |
||||
.160 (real property home office bldg. etc.), |
||||
.180 (foreign securities), |
||||
.190 (policy loans), |
||||
.200 (savings and share accounts), |
||||
.220 (common stocks), |
||||
.230 (collateral loans), |
||||
.250 (special consent investments). |
||||
Investments Secured by Real Estate Amount Restricted: real
estate, real estate contracts, and notes, bonds and other
evidences of debt secured by mortgage on real estate as described
in RCW 48.13.110 and .160.
|
Limited to 65% of assets-all investments in mortgage-backed securities qualifying under the secondary mortgage market enhancement act of 1984 are included in determining if an insurer has exceeded the 65% limit. | 48.13.265 | ||
Acquisition of Medium and Lower Grade Obligations: Medium
obligations are rated 3 by the NAICs securities valuation office.
Lower grade obligations are rated 4, 5 or 6 by the NAICs
securities valuation office.
|
Investment in medium and lower grade
obligations is limited to 20% of admitted
assets. (Limited to 1% in obligations
issued, guaranteed, or insured by one
institution.) Investment in lower grade obligations is limited to 10% of admitted assets. (Limited to 0.5% in obligations issued, guaranteed, or insured by 1 institution.) Investment in lower grade obligations rated 5 or 6 is limited to 3% of admitted assets. Investment in lower grade obligations rated 6 is limited to 1% of admitted assets. |
48.13.273 Note: If insurer intends to invest more than 2% of admitted assets in medium and lower grade obligations, the BOD must approve a written plan for making those investments. |
||
Obligations Rated by the Securities Valuation Office: Obligations
rated 1 or 2 by the NAICs securities valuation office.
|
Investment subject to the limitations under RCW 48.13.030 (single issuer). | 48.13.275 |
5
Security | Requirement/Restriction | RCW | ||
Derivative Transactions:
Options, warrants used in hedging transactions and not attached to
another financial instrument, caps, floors, collars, swaps,
forwards, futures, and any other agreements, options, or
instruments substantially similar thereto or any series or
combination thereof and any agreements, options, or instruments
permitted under rules adopted by the OIC. Income generation transactions: (1) Sales of covered call options on noncallable fixed income securities, callable fixed income securities; (2) Sales of covered call options on equity securities, (3) Sales of covered puts on investments that the insurer is permitted to acquire under Chapter 13, (4) Sales of covered caps or floors. |
Aggregate statement value (ASV) of
options, caps, floors, and warrants not
attached to a financial instrument
purchased and used in hedging transactions
is limited to 7.5% of admitted assets.
(ASV of options, caps, and floors written
in hedging transactions is limited to 3% of
admitted assets.) The aggregate potential
exposure of collars, swaps, forwards, and
futures used in hedging transactions is
limited to 6.5% of admitted assets.
For income generation transactions, the ASV
of fixed income assets subject to call or
that generate cash flows for payments under
the caps or floors, plus the face value of
fixed income securities underlying a
derivative instrument subject to call, plus
the amount of the purchase obligations
under the puts, is limited to 10% of
admitted assets. (1) Permitted if the option expires by its terms prior to the end of the noncallable period, or derivative instruments based on fixed income securities. (2) Permitted if the insurer holds or can immediately acquire through the exercise of options, warrants, or conversion rights already owned, the equity securities subject to call during the complete term of the call option sold. (3) Permitted if the insurer has escrowed, or entered into a custodian agreement segregating, cash or cash equivalents with a market value equal to the amount of its purchase obligations under the put during the complete term of the put option sold. (4) Permitted if the insurer holds the investments generating the cash flow to make the required payments under the caps or floors during the complete term that the cap or floor is outstanding. |
48.13.285 Note: Permitted only to engage in hedging transactions and certain income generation transactions, not for speculation. Insurer must be able to demonstrate to the OIC the intended hedging characteristics and the ongoing effectiveness of the derivative transaction(s) through cash flow testing or other appropriate analysis. |
||
Prohibited Investments:
|
48.13.270 | |||
(1) Issued shares of its own capital stock. | ||||
(2) Securities issued by any corporation if a majority of its stock having voting power is owned directly or indirectly by or for the benefit of any one or more of the insurers officers and directors. | ||||
(3) Any investment or loan ineligible under the provisions of RCW 48.13.030 (single issuer or depository institution). | ||||
(4) Securities issued by any insolvent corporation. | ||||
(5) Obligations contrary to the provisions of RCW 48.13.273 (medium and lower grade obligations). | ||||
(6) Any investment or security found by the OIC to be designed to evade prohibition of the Insurance Code. | ||||
Securities Underwriting, Agreements to Withhold or Repurchase Prohibited: | 48.13.280 | |||
No insurer shall: | ||||
(1) participate in the underwriting of the marketing of securities in advance of their issuance or enter into any transaction for such underwriting for the account of such insurer jointly with any other person; or | ||||
(2) enter into any agreement to withhold from sale any of its property, or to repurchase any property sold by it. |
6
Security | Requirement/Restriction | RCW | ||
Disposal of Ineligible Property or Securities: | 48.13.290 | |||
(1) Any ineligible personal property or securities acquired by an insurer may be required to be disposed of within the time not less than six months specified by order of the commissioner, unless before that time it attains the standard of eligibility, if retention of such property or securities would be contrary to the policyholders or public interest in that it tends to substantially lessen competition in the insurance business or threatens impairment of the financial condition of the insurer. | ||||
(2) Any personal property or securities acquired by an insurer contrary to RCW 48.13.270 shall be disposed of forthwith or within any period specified by order of the commissioner. | ||||
(3) Any property or securities ineligible only because of being excess of the amount permitted under Chapter 13 to be invested in the category to which it belongs shall be ineligible only to the extent of such excess. | ||||
Authorization of Investments: | 48.13.340 | |||
No investment, loan, sale or exchange thereof shall, except as to the policy loans of a life insurer, be made unless authorized or approved by the insurers board of directors or by a committee charged by the board of directors or the bylaws with the duty of making such investment, loan, sale or exchange. The minutes of any such committee shall be recorded and reports thereof shall be submitted to the board of directors for approval or disapproval. | ||||
Record of Investments: | 48.13.350 | |||
A written record in permanent form showing the authorization of each investment or loan shall be made and signed by an officer of the insurer or by the chair of such committee authorizing the investment or loan. Records shall contain: | ||||
(a) In the case of loans: the name of the borrower; the location and legal description of the property; a physical description, and the appraised value of the security; the amount of the loan, rate of interest and terms of repayment. | ||||
(b) In the case of securities: the name of the obligor; a description of the security and the record of earnings; the amount invested, the rate of interest or dividend, the maturity and yield based upon the purchase price. | ||||
(c) In the case of real estate: the location and legal description of the property; a physical description and the appraised value; the purchase price and terms. | ||||
(d) In the case of all investments: | ||||
(i) the amount of expenses and commissions if any incurred on account of any investment or loan and by whom and to whom payable if not covered by contracts with mortgage loan representatives or correspondents which are part of the insurers records; | ||||
(ii) the name of any officer or director of the insurer having any direct, indirect, or contingent interest in the securities or loan representing the investment, or in the assets of the person in whose behalf the investment or loan is made, and the nature of such interest. |
7
1. | PURPOSE | |
The purpose of the Symetra Financial Corporation Equity Plan (the Plan) is to advance the interests of Symetra Financial Corporation (the Company) and its stockholders by providing long-term incentives to certain employees, directors and consultants of the Company and its subsidiaries. | ||
2. | ADMINISTRATION | |
The Plan shall be administered by the Compensation Committee (the Committee) of the Board of Directors (the Board) of the Company; provided that, following the initial public offering of the Company common shares (the IPO), each member of the Committee shall qualify as (a) a non-employee director under Rule 16b-3 of the Securities Exchange Act of 1934, as amended (the Exchange Act), (b) an outside director under Section 162(m) of the Internal Revenue Code of 1986, as amended (the Code), and (c) otherwise meets the independence requirements of the New York Stock Exchange (the NYSE). In the event that, following the IPO, any member of the Committee does not so qualify, the Plan shall, to the extent practicable, be administered by a sub-committee of Committee members who do so qualify. If it is later determined that one or more members of the Committee do not so qualify, actions taken by the Committee prior to such determination shall be valid despite such failure to qualify. | ||
The Committee shall have exclusive authority to select the employees, directors and consultants to be granted awards under the Plan (Awards), to determine the type, size and terms of the Awards and to prescribe the form of the instruments embodying Awards. With respect to Awards made to directors and consultants, the Committee shall, and with respect to employees may, specify the terms and conditions applicable to such Awards in an Award agreement (each, an Award Agreement). The Committee is hereby authorized to interpret the Plan, Award Agreements and the Awards granted under the Plan, to establish, amend and rescind any rules and regulations relating to the Plan and to make any other determinations which it believes necessary or advisable for the administration of the Plan. In connection with any Award, the Committee in its sole discretion may provide for vesting provisions that are different from the default vesting provisions that are contained in the Plan and such alternative provisions shall not be deemed to conflict with the Plan. The Committee may correct any defect or supply any omission or reconcile any inconsistency in the Plan or in any Award or Award Agreement in the manner and to the extent the Committee deems desirable to carry it into effect. Any decision of the Committee in the administration of the Plan, as described herein, shall be final and conclusive. The Committee may act only by a majority of its members, except that the members thereof may authorize any one or more of their number or any officer of the Company to execute and deliver documents on behalf of the Committee. No member of the Committee shall be liable for anything done or omitted to |
be done by him or her or by any other member of the Committee in connection with the Plan, except for his or her own willful misconduct or as expressly provided by statute. |
The Committee may delegate, on such terms and conditions as it determines in its sole and plenary discretion, to one or more executive officers of the Company the authority to make grants of Awards to officers (other than executive officers), employees and consultants of the Company and its affiliates (including any prospective officer, employee or consultant) and all necessary and appropriate decisions and determinations with respect thereto. |
3. | PARTICIPATING SUBSIDIARIES | |
If a subsidiary of the Company wishes to participate in the Plan and its participation shall have been approved by the Board, the Board of Directors of the subsidiary (the Subsidiary Board) shall adopt a resolution in form and substance satisfactory to the Committee authorizing participation by the subsidiary in the Plan. As used herein, subsidiary shall mean a subsidiary corporation as defined in Section 424(f) of the Code. | ||
A subsidiary may cease to participate in the Plan at any time by action of the Board or by action of the Subsidiary Board, which latter action shall be effective not earlier than the date of delivery to the Secretary of the Company of a certified copy of a resolution of the Subsidiary Board taking such action. Termination of participation in the Plan shall not relieve a subsidiary of any obligations theretofore incurred by it under the Plan. | ||
4. | AWARDS |
(a) | Eligible Participants. Any employee, director or consultant of the Company or any of its subsidiaries is eligible to receive an Award hereunder. The Committee shall select which eligible employees, directors or consultants shall be granted Awards hereunder. No employee, director or consultant shall have a right to receive an Award hereunder and the grant of an Award to an employee, director or consultant shall not obligate the Committee to continue to grant Awards to such employee, director or consultant in subsequent periods or to grant Awards to any other person at any time. | ||
(b) | Type of Awards. Awards shall be limited to the following seven types: (i) Stock Options, (ii) Stock Appreciation Rights, (iii) Restricted Stock, (iv) Restricted Stock Units, (v) Performance Shares, (vi) Performance Units and (vii) other stock-based awards. | ||
(c) | Maximum Number of Shares That May Be Issued. A maximum of seven million, eight hundred and thirty thousand (7,830,000)1 shares of common stock of the Company, $0.01 par value (Shares), may be issued by the Company in satisfaction of its obligations with respect to Award grants. The maximum aggregate number of Shares with respect to which Awards may be issued to any participant in any fiscal year of the Company is one million three hundred and twenty-five |
1 | Increased from 900,000 to reflect the Companys stock dividend effective October 26, 2007. |
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thousand (1,325,000)2, subject to adjustment as provided in Section 17. For purposes of the foregoing, the exercise of a Stock Appreciation Right shall constitute the issuance of Shares equal to the Shares delivered under such Stock Appreciation Right. If any Shares issued as Restricted Stock shall be repurchased pursuant to the Companys option described in Section 6 below, or if any Shares issued under the Plan shall be reacquired pursuant to restrictions imposed at the time of issuance or pursuant to the satisfaction of tax withholding or related obligations, such Shares may again be issued under the Plan. |
(d) | Rights With Respect to Shares. |
(i) | A participant to whom Restricted Stock has been issued shall have, prior to the expiration of the Restricted Period or the earlier repurchase of such Shares as herein provided, ownership of such Shares, including the right to vote the same and to receive dividends thereon, subject, however, to the options, restrictions and limitations imposed thereon pursuant hereto. | ||
(ii) | A participant to whom Stock Options, Stock Appreciation Rights, Restricted Stock Units, Performance Shares or Performance Units are granted (and any person succeeding to such participants rights pursuant to the Plan) shall have no rights as a shareholder with respect to any Shares issuable pursuant thereto until the date of the issuance of a stock certificate (whether or not delivered) therefor. Except as provided in Section 17, no adjustment shall be made for dividends, distributions or other rights (whether ordinary or extraordinary, and whether in cash, securities or other property) the record date for which is prior to the date such stock certificate is issued. | ||
(iii) | The Company, in its discretion, may hold custody during the Restricted Period of any Shares of Restricted Stock. |
5. | STOCK OPTIONS AND STOCK APPRECIATION RIGHTS |
(a) | Stock Options, which include Incentive Stock Options and other stock options or combinations thereof, are rights to purchase shares of Common Stock of the Company. A Stock Appreciation Right is an unfunded and unsecured promise to deliver Shares, cash, other securities, other Awards or other property equal in value to the excess, if any, of the Fair Market Value per Share over the exercise price per Share of the Stock Appreciation Right, subject to the terms of the applicable Award Agreement. The maximum number of Shares with respect to which Incentive Stock Options may be issued to a participant in one year is, four hundred and thirty-five thousand (435,000)3 subject to adjustment pursuant to Section 17. Each Stock Option shall comply with the following terms and conditions: |
2 | Increased from 435,000 by action of the Board August 11, 2010. Previously increased from 50,000 to reflect the Companys stock dividend effective October 26, 2007. | |
3 | Increased from 50,000 to reflect the Companys Stock dividend effective October 26, 2007. |
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(i) | The Committee shall determine the participants to whom Stock Options shall be granted, the number of shares to be covered by each Stock Option, whether the Stock Option will be an Incentive Stock Option and the conditions and limitations applicable to the vesting and exercise of the Option. Unless otherwise set forth in the applicable Award Agreement, the per share exercise price shall not be less than the greater of (i) the Fair Market Value per Share at the time of grant and (ii) the par value per Share. However, the exercise price of an Incentive Stock Option granted to a participant who owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or of a subsidiary (a Ten Percent Participant) shall not be less than 110% of the greatest of (i) the Fair Market Value per share at the time of grant, and (ii) the par value per Share. | ||
(ii) | The Stock Option shall not be transferable by the optionee otherwise than by will or the laws of descent and distribution, and shall be exercisable during such optionees lifetime only by such optionee, unless otherwise set forth in the applicable Award Agreement. | ||
(iii) | The Stock Option shall not be exercisable unless payment in full is made for the Shares being acquired thereunder at the time of exercise (including any Federal, state or local income or other taxes which the Committee determines are required to be withheld in respect of such Shares), and such payment shall be made in United States dollars by cash or check or, if permitted by the Committee, (A) by tendering to the Company Shares owned by the person exercising the Stock Option and having an aggregate Fair Market Value equal to the aggregate cash exercise price thereof, (B) if there shall be a public market for the Shares at such time, subject to such rules as may be established by the Committee, through delivery of irrevocable instructions to a broker to sell a number of Shares otherwise deliverable upon the exercise of the Stock Option and to deliver promptly to the Company an amount equal to the aggregate exercise price, or (C) by a combination of United States dollars and Shares pursuant to (A) and/or (B) above. | ||
(iv) | The aggregate Fair Market Value of Shares (determined at the time of grant of the Stock Option pursuant to Section 5(a)(i) of the Plan) with respect to which Incentive Stock Options granted to any participant under the Plan are exercisable for the first time by such participant during any calendar year may not exceed the maximum amount permitted under Section 422(d) of the Code at the time of the Award grant. In the event this limitation would be exceeded in any year, the optionee may elect either (i) to defer to a succeeding year the date on which some or all of such Incentive Stock Options would first become exercisable (but no longer than the term specified in Section 5(c)(i) herein) or (ii) to convert some or all of such Incentive Stock Options into non-qualified Stock Options. |
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(b) | Each Stock Appreciation Right shall comply with the following terms and conditions: |
(i) | The Committee shall determine the participants to whom Stock Appreciation Rights shall be granted, the number of shares to be covered by each Stock Appreciation Right and the conditions and limitations applicable to the vesting and exercise of the Stock Appreciation Right. Unless otherwise set forth in the applicable Award Agreement, the per share exercise price shall not be less than the greater of (i) the Fair Market Value per Share at the time of grant and (ii) the par value per Share. | ||
(ii) | The Stock Appreciation Right shall not be transferable by the awardee otherwise than by will or the laws of descent and distribution, and shall be exercisable during such awardees lifetime only by such awardee, unless otherwise set forth in the applicable Award Agreement. | ||
(iii) | A Stock Appreciation Right shall entitle the Participant to receive an amount equal to the excess, if any, of the Fair Market Value of a Share on the date of exercise of the Stock Appreciation Right over the exercise price thereof. The Committee shall determine, in its sole and plenary discretion, whether a Stock Appreciation Right shall be settled in cash, Shares, other securities, other Awards, other property or a combination of any of the foregoing. | ||
(iv) | No fractional Shares shall be delivered under this Section 5(b), but in lieu thereof a cash adjustment may be made as determined by the Committee. |
(c) | Each Stock Option or Stock Appreciation Right shall not be exercisable: |
(i) | after the expiration of ten years from the date it is granted (or such earlier date specified in the grant of the Stock Option or Stock Appreciation Right or applicable Award Agreement) and may be exercised during such period only at such time or times as the Committee may establish; or |
(ii) | unless otherwise set forth in the applicable Award Agreement, by participants who were employees of the Company or one of its subsidiaries at the time of the grant of the Stock Option or Stock Appreciation Right unless such participant has been, at all times during the period beginning with the date of grant of the Stock Option or Stock Appreciation Right and ending on the date three months prior to such exercise, an officer or employee of the Company or any of its subsidiaries, or of a corporation, or a parent or subsidiary of a corporation, issuing or assuming the Stock Option or Stock Appreciation Right in a transaction to which Section 424(a) of the Code is applicable, except that: |
(A) | unless otherwise set forth in the applicable Award Agreement, if such person shall cease to be an officer or employee of the Company or one of its subsidiaries solely by reason of a period of Related Employment (as defined in Section 12), he or she may, |
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during such period of Related Employment (but in no event after the Stock Option or Stock Appreciation Right has expired under the provisions of Section 5(c)(i) hereof), exercise such Stock Option or Stock Appreciation Right as if he or she continued to be such an officer or employee; or |
(B) | unless otherwise set forth in the applicable Award Agreement, if an optionee shall become Disabled (as defined in Section 10) he or she may, at any time within three years of the date he or she becomes disabled (but in no event after the Stock Option or Stock Appreciation Right has expired under the provisions of Section 5(c)(i) hereof), exercise the Stock Option or Stock Appreciation Right with respect to (i) any Shares as to which he or she could have exercised the Stock Option or Stock Appreciation Right on the date he or she became disabled and (ii) if the Stock Option or Stock Appreciation Right is not fully exercisable on the date he or she becomes disabled, the number of additional Shares as to which the Stock Option or Stock Appreciation Right would have become exercisable had he or she remained an employee through the next date on which additional Shares were scheduled to become exercisable under the Stock Option or Stock Appreciation Right; or | ||
(C) | unless otherwise set forth in the applicable Award Agreement, if an optionee shall die while holding a Stock Option or Stock Appreciation Right, his executors, administrators, heirs or distributees, as the case may be, at any time within one year after the date of such death (but in no event after the Stock Option or Stock Appreciation Right has expired under the provisions of Section 5(c)(i) hereof), may exercise the Stock Option or Stock Appreciation Right with respect to any Shares as to which the decedent could have exercised the Stock Option or Stock Appreciation Right at the time of his or her death, and if the Stock Option or Stock Appreciation Right is not fully exercisable on the date of his or her death, the number of additional Shares as to which the Stock Option or Stock Appreciation Right would have become exercisable had he or she remained an employee through the next date on which additional Shares were scheduled to become exercisable under the Stock Option or Stock Appreciation Right; provided, however, that if death occurs during the three-year period following a Disability as described in Section 5(c)(ii)(B) hereof or any period following a voluntary termination (including retirement) in respect of which the Committee has exercised its discretion to grant continuing exercise rights as provided in Section 5(c)(ii)(D) hereof, the Stock Option or Stock Appreciation Right shall not become exercisable as to any Shares in addition to those as to which the decedent could have |
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exercised the Stock Option or Stock Appreciation Right at the time of his or her death; or |
(D) | unless otherwise set forth in the applicable Award Agreement, if such person shall voluntarily terminate his or her employment with the Company (including retirement), the Committee, in its sole discretion, may determine that such optionee may exercise the Stock Option or Stock Appreciation Right with respect to some or all of the Shares subject to the Stock Option or Stock Appreciation Right as to which it would not otherwise be exercisable on the date of his or her voluntary termination provided, however, that in no event may such exercise take place after the Stock Option or Stock Appreciation Right has expired under the provisions of Section 5(c)(i) hereof. |
(E) | notwithstanding anything herein to the contrary and subject to Section 13, unless otherwise set forth in the applicable Award Agreement, in the event a Change in Control (as defined in Section 13(a)) occurs and within 12 months thereafter: (A) there is a Termination Without Cause (as defined in Section 14) of an optionees or awardees employment or (B) there is a Constructive Termination (as defined in Section 15) of an optionees or awardees employment (any such Termination Without Cause or Constructive Termination, a Trigger Event), the optionee or awardee may exercise the entire Stock Option or Stock Appreciation Right at any time within 30 days following such Trigger Event (but in no event after the Stock Option or Stock Appreciation Right has expired under the provisions of Sections 5(c)(i)). |
6. | RESTRICTED STOCK | |
Each Award of Restricted Stock shall comply with the following terms and conditions, unless otherwise set forth in the applicable Award Agreement: |
(a) | The Committee shall determine the number of Shares to be issued to a participant pursuant to the Award. | ||
(b) | Shares issued may not be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of, except by will or the laws of descent and distribution, for such period from the date on which the Award is granted as the Committee shall determine (the Restricted Period). The Company shall have the option to repurchase the Shares subject to the Award at such price as the Committee shall have fixed (including zero consideration), in its sole discretion, when the Award was made, which option will be exercisable on such terms, in such manner and during such period as shall be determined by the Committee when the Award is made (which may include, for illustration, the participants cessation of continuous employment or the failure to satisfy performance conditions). Certificates for Shares issued pursuant to Restricted Stock Awards shall bear an |
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appropriate legend referring to the foregoing option and other restrictions. Any attempt to dispose of any such Shares in contravention of the foregoing option and other restrictions shall be null and void and without effect. If Shares issued pursuant to a Restricted Stock Award shall be repurchased pursuant to the option described above, the participant to whom the Award was granted, or in the event of his or her death after such option became exercisable, his or her executor or administrator, shall forthwith deliver to the Secretary of the Company any certificates for the Shares awarded to the participant, accompanied by such instruments of transfer, if any, as may reasonably be required by the Secretary of the Company. If the option described above is not exercised by the Company, such option and the restriction imposed pursuant to the first sentence of this Section 6(b) shall terminate and be of no further force and effect. |
(c) | Unless otherwise set forth in the applicable Award Agreement, if a participant who has been in the continuous employment of the Company or of a subsidiary shall: |
(i) | die or become Disabled during the Restricted Period, the option of the Company to repurchase (and any and all other restrictions on) a pro rata portion of the Shares awarded to such participant under such Award shall lapse and cease to be effective as of the date on which his or her death or disability occurs which shall be determined as follows: (A) the number of Shares awarded under the Award multiplied by (B) a percentage, the numerator of which is equal to the number of months elapsed in the Restricted Period as of the date of death or disability (counting the month in which the death or disability occurred as a full month) and the denominator of which is equal to the number of months in the Restricted Period; or | ||
(ii) | voluntarily terminate his or her employment with the Company (including retirement) during the Restricted Period, the Committee may determine that all or any portion of the option to repurchase and any and all other restrictions on some or all of the Shares awarded to him or her under such Award, if such option and other restrictions are still in effect, shall lapse and cease to be effective as the date on which such voluntary termination or retirement occurs. |
(d) | Unless otherwise set forth in the applicable Award Agreement, in the event within 12 months after a Change in Control and during the Restricted Period there is a Trigger Event, then the option to repurchase (and any and all other restrictions on) all Shares awarded to the participant under his or her Restricted Stock Award shall lapse and cease to be effective as of the date on which such Trigger Event occurs. |
7. | RESTRICTED STOCK UNITS | |
The grant of a Restricted Stock Unit Award to a participant will entitle him or her to receive, without payment to the Company, an amount equal to the number of Shares underlying such Restricted Stock Unit Award multiplied by the Fair Market Value of a |
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Share on the date of vesting of the Restricted Stock Unit Award, if the terms and conditions specified herein and in the Award are satisfied. Payment in respect of a Restricted Stock Unit Award shall be made as provided in Section 7(e). Each Restricted Stock Unit Award shall be subject to the following terms and conditions: |
(a) | The Committee shall determine the number of Shares underlying the Restricted Stock Units to be granted to a participant. | ||
(b) | Restricted Stock Unit Awards shall be subject to the vesting schedule determined by the Committee and set forth in the applicable Award Agreement. Payment in respect of a vested Restricted Stock Unit may be made in cash, stock or any combination thereof, as specified in the applicable Award Agreement. | ||
(c) | Except as otherwise determined by the Committee or in an Award Agreement, Restricted Stock Units shall be cancelled if the participants continuous employment with the Company or any of its subsidiaries shall terminate for any reason prior to the vesting of the Restricted Stock Units, except solely by reason of a period of Related Employment, and except as otherwise specified in this Section 7(c) or in Section 7(d). Notwithstanding the foregoing, unless otherwise set forth in the applicable Award Agreement, if an employee participant shall: |
(i) | while in such employment, die or become Disabled prior to the vesting of the Restricted Stock Units, such Restricted Stock Units shall be immediately canceled and the participant, or the participants legal representative, as the case may be, shall receive a payment in respect of such canceled Restricted Stock Units equal to the product of (A)(i) the number of Shares underlying such Restricted Stock Units multiplied by (ii) a fraction, the numerator of which is equal to the number of full or partial months within the period commencing on the grant date of such Restricted Stock Units and such death or Disability (including, for this purpose, the month in which the death or Disability occurs), and the denominator of which is equal to the total number of months from the grant date to the date when such Restricted Stock Units were intended to vest; or | ||
(ii) | retire with the approval of the Committee in its sole discretion prior to the vesting of the Restricted Stock Units, the Restricted Stock Units shall be immediately canceled; provided that the Committee in its sole discretion may determine to make a payment to the participant in respect of some or all of such canceled Restricted Stock Units. |
(d) | Unless otherwise set forth in the applicable Award Agreement, if within 12 months after a Change in Control there is a Trigger Event, then with respect to Restricted Stock Unit Awards that were outstanding on the date of the Trigger Event (each, an Applicable Award), each such Applicable Award shall be immediately canceled and, in respect thereof, such participant shall be entitled to receive a cash payment equal to the product of (A) the number of Shares underlying such Applicable Awards and (B) the Fair Market Value of a Share on the date the applicable Trigger Event occurs. |
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(e) | Unless payment is deferred in accordance with an election made by the participant in accordance with procedures adopted by the Company in its sole discretion (if any), payment of any amount in respect of any Restricted Stock Units shall be made by the Company no later than 60 days after the end of the calendar year in which such Restricted Stock Units vest or become payable. |
8. | PERFORMANCE SHARES | |
The grant of a Performance Share Award to a participant will entitle such participant to receive, without payment to the Company, all or part of the value (the Actual Value) of a specified number of hypothetical Shares (Performance Shares) determined by the Committee, if the terms and conditions specified herein and in the Award are satisfied. Payment in respect of a Performance Share Award shall be made as provided in Section 8(h). Each Performance Share Award shall be subject to the following terms and conditions: |
(a) | The Committee shall determine the target number of Performance Shares to be granted to a participant. Performance Share Awards may be granted in different classes or series having different terms and conditions. | ||
(b) | The Actual Value of a Performance Share Award shall be the product of (i) the target number of Performance Shares subject to the Performance Share Award, (ii) the Performance Percentage (as determined below) applicable to the Performance Share Award and (iii) the Fair Market Value of a Share on the date the Award is paid or becomes payable to the participant. The Performance Percentage applicable to a Performance Share Award shall be a percentage of no less than 0% and no more than 200%, which percentage shall be determined by the Committee based upon the extent to which the Performance Objectives (as determined below) established for such Award are achieved during the Award Period (as defined below). The method for determining the applicable Performance Percentage shall also be established by the Committee. | ||
(c) | At the time each Performance Share Award is granted, the Committee shall establish performance objectives (Performance Objectives) to be attained within the Award Period as the means of determining the Performance Percentage applicable to such Award. The Performance Objectives shall be approved by the Committee (i) while the outcome for that Award Period is substantially uncertain and (ii) no more than 90 days after the commencement of the Award Period to which the Performance Objective relates or, if less than 90 days, the number of days which is equal to 25 percent of the relevant Award Period. The Performance Objectives established with respect to a Performance Share Award shall be specific performance targets established by the Committee with respect to one or more of the following criteria selected by the Committee: (i) consolidated earnings before or after taxes (including earnings before interest, taxes, depreciation and amortization); (ii) net income; (iii) operating income; (iv) earnings per Share; (v) book value per Share; (vi) return on stockholders equity; (vii) expense management; (viii) return on investment; (ix) improvements in capital structure; (x) share price; (xi) combined ratio; (xii) operating ratio; (xiii) profitability of an identifiable business unit or product; (xiv) maintenance or |
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improvement of profit margins; (xv) market share; (xvi) revenues or sales; (xvii) costs; (xviii) cash flow; (xix) working capital; (xx) return on assets; (xxi) customer satisfaction; (xxii) employee satisfaction; (xxiii) economic value per Share, (xxiv) underwriting return on capital and (xxv) underwriting return on equity. The foregoing criteria may relate to the Company, one or more of its subsidiaries or one or more of its divisions, units, partnerships, joint ventures or minority investments, product lines or products or any combination of the foregoing, and may be applied on an absolute basis and/or be relative to one or more peer group companies or indices, or any combination thereof, all as the Committee shall determine. In addition, to the degree consistent with Section 162(m) of the Code (or any successor section thereto), the Performance Objectives may be calculated without regard to extraordinary items. |
(d) | The award period (the Award Period) in respect of any grant of a Performance Share Award shall be such period as the Committee shall determine commencing as of the beginning of the fiscal year of the Company in which such grant is made. An Award Period may contain a number of performance periods; each performance period shall commence on or after the first day of the Award Period and shall end no later than the last day of the Award Period. If the Committee does not specify in a Performance Share Award agreement or elsewhere the performance periods contained in an Award Period, each 12-month period beginning with the first day of such Award Period shall be deemed to be a performance period. | ||
(e) | Except as otherwise determined by the Committee or in an Award Agreement, Performance Shares shall be canceled if the participants continuous employment with the Company or any of its subsidiaries shall terminate for any reason prior to the end of the Award Period, except by reason of a period of Related Employment as defined in Section 11, and except as otherwise specified in this Section 8(e) or in Section 8(f). Notwithstanding the foregoing, unless otherwise set forth in the applicable Award Agreement, if an employee participant shall: |
(i) | while in such employment, die or become Disabled prior to the end of an Award Period, the Performance Share Award for such Award Period shall be immediately canceled and he or she, or his or her legal representative, as the case may be, shall receive a payment in respect of such canceled Performance Share Award equal to the product of (A)(i) the target number of Performance Shares for such Award multiplied by (ii) a fraction, the numerator of which is equal to the number of full or partial months within the Award Period during which employee was continuously employed by the Company or its subsidiaries (including, for this purpose, the month in which the death or Disability occurs), and the denominator of which is equal to the total number of months within such Award Period, multiplied by (B) the Fair Market Value of a Share on the last day of the performance period in which the death or Disability occurred, multiplied by (C) the Performance Percentage determined by the Board to have been achieved through the end of the performance period in which the death or Disability occurred (but which in no event shall be less than 50%); or |
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(ii) | retire with the approval of the Committee in its sole discretion prior to the end of the Award Period, the Performance Share Award for such Award Period shall be immediately canceled; provided that the Committee in its sole discretion may determine to make a payment to the participant in respect of some or all of such canceled Performance Share Award. |
(f) | Unless otherwise set forth in the applicable Award Agreement, if within 12 months after a Change in Control there is a Trigger Event, then with respect to Performance Share Awards that were outstanding on the date of the Trigger Event (each, an Applicable Award), each such Applicable Award shall be immediately canceled and, in respect thereof, such participant shall be entitled to receive a payment equal to the product of (A) (i) the target number of Performance Shares for such Applicable Award multiplied by (ii) a fraction, the numerator of which is equal to the number of full months within the Award Period during which the participant was continuously employed by the Company or its subsidiaries, and the denominator of which is equal to the total number of months within such Award Period, multiplied by (B) the Fair Market Value of a Share on the date the applicable Trigger Event occurs, multiplied by (C) a Performance Percentage equal to 100%. Unless otherwise set forth in the applicable Award Agreement, if following a Change in Control, a Participants employment remains continuous through the end of an Award Period, then the Participant shall be paid with respect to such Awards for which he would have been paid had there not been a Change in Control and the Actual Value shall be determined in accordance with Section 8(g) below. | ||
(g) | Except as otherwise provided in Section 8(f), as soon as practicable after the end of the Award Period or such earlier date as the Committee in its sole discretion may designate, the Committee shall (i) determine, based on the extent to which the applicable Performance Objectives have been achieved, the Performance Percentage applicable to an Award of Performance Shares, (ii) calculate the Actual Value of the Performance Share Award and (iii) shall certify the foregoing to the Board. The Committee shall cause an amount equal to the Actual Value of the Performance Shares earned by the participant to be paid to him or his beneficiary. The Committee shall determine, in its sole and plenary discretion, whether Performance Shares shall be settled in cash, Shares, other securities, other Awards, other property or a combination of any of the foregoing. | ||
(h) | Unless payment is deferred in accordance with an election made by the participant in accordance with procedures adopted by the Company in its sole discretion (if any), payment of any amount in respect of any Performance Shares shall be made by the Company no later than 60 days after the end of the calendar year in which such Performance Shares are earned. |
9. | PERFORMANCE UNITS | |
The grant of a Performance Unit Award to a participant will entitle such participant to receive, without payment to the Company, all or part of a specified amount (the Earned Value) determined by the Committee, if the terms and conditions specified herein and in the Award are satisfied. Payment in respect of a Performance Unit Award shall be made |
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as provided in Section 9(h). Each Performance Unit Award shall be subject to the following terms and conditions: |
(a) | The Committee shall determine the target number of Performance Units to be granted to a participant. The maximum Earned Value that may be earned by a participant for Performance Units for any single Award Period of one year or longer shall not exceed $25,000,000. Performance Unit Awards may be granted in different classes or series having different terms and conditions. | ||
(b) | The Earned Value of an Award of Performance Units shall be the product of (i) the target number of Performance Units subject to the Performance Unit Award, (ii) the Performance Percentage (as determined below) applicable to the Performance Unit Award and (iii) the Value (as defined below) of a Performance Unit on the date the Award is paid or becomes payable to the employee. The Performance Percentage applicable to a Performance Unit Award shall be a percentage of no less than 0% and no more than 200%, which percentage shall be determined by the Committee based upon the extent to which the Performance Objectives (as determined below) established for such Award are achieved during the Award Period (as defined below). The method for determining the applicable Performance Percentage shall also be established by the Committee. The Value of a Performance Unit shall be a fixed dollar value (or a dollar value determined pursuant to a formula or similar process) specified by the Committee and set forth in the applicable Award Agreement. | ||
(c) | At the time each Performance Unit Award is granted the Committee shall establish performance objectives (Performance Objectives) to be attained within the Award Period as the means of determining the Performance Percentage applicable to such Award. The Performance Objectives shall be approved by the Committee (i) while the outcome for that Award Period is substantially uncertain and (ii) no more than 90 days after the commencement of the performance period to which the performance objective relates or, if less than 90 days, the number of days which is equal to 25 percent of the relevant performance period. The Performance Objectives established with respect to a Performance Unit Awards shall be specific performance targets established by the Committee with respect to one or more of the following criteria selected by the Committee: (i) consolidated earnings before or after taxes (including earnings before interest, taxes, depreciation and amortization); (ii) net income; (iii) operating income; (iv) earnings per Share; (v) book value per Share; (vi) return on stockholders equity; (vii) expense management; (viii) return on investment; (ix) improvements in capital structure; (x) share price; (xi) combined ratio; (xii) operating ratio; (xiii) profitability of an identifiable business unit or product; (xiv) maintenance or improvement of profit margins; (xv) market share; (xvi) revenues or sales; (xvii) costs; (xviii) cash flow; (xix) working capital; (xx) return on assets; (xxi) customer satisfaction; (xxii) employee satisfaction; (xxiii) economic value per Share, (xxiv) underwriting return on capital and (xxv) underwriting return on equity. The foregoing criteria may relate to the Company, one or more of its subsidiaries or one or more of its divisions, units, partnerships, joint ventures or minority investments, product lines or products or any combination of the foregoing, and may be applied on an absolute basis and/or be relative to one or |
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more peer group companies or indices, or any combination thereof, all as the Committee shall determine. In addition, to the degree consistent with Section 162(m) of the Code (or any successor section thereto), the Performance Objectives may be calculated without regard to extraordinary items. |
(d) | The award period (the Award Period) in respect of any grant of a Performance Unit Award shall be such period as the Committee shall determine commencing as of the beginning of the fiscal year of the Company in which such grant is made. An Award Period may contain a number of performance periods; each performance period shall commence on or after the first day of the Award Period and shall end no later than the last day of the Award Period. If the Committee does not specify in a Performance Unit Award Agreement or elsewhere the performance periods contained in an Award Period, each 12-month period beginning with the first day of such Award Period shall be deemed to be a performance period. | ||
(e) | Except as otherwise determined by the Committee or in an Award Agreement, Performance Units shall be cancelled if the participants continuous employment with the Company or any of its subsidiaries shall terminate for any reason prior to the end of the Award Period, except solely by reason of a period of Related Employment, and except as otherwise specified in this Section 9(e) or in Section 9(f). Notwithstanding the foregoing, unless otherwise set forth in the applicable Award Agreement, if an employee participant shall: |
(i) | while in such employment, die or become Disabled prior to the end of an Award Period, the Performance Unit Award for such Award Period shall be immediately canceled and the participant, or his or her legal representative, as the case may be, shall receive a payment in respect of such canceled Performance Unit Award equal to the product of (A)(i) the target number of Performance Units for such Award multiplied by (ii) a fraction, the numerator of which is equal to the number of full or partial months within the Award Period during which employee was continuously employed by the Company or its subsidiaries (including, for this purpose, the month in which the death or disability occurs), and the denominator of which is equal to the total number of months within such Award Period, multiplied by (B) the value of a Performance Unit on the last day of the performance period in which the death or disability occurred, multiplied by (C) the Performance Percentage determined by the Board to have been achieved through the end of the performance period in which the death or disability occurred; or | ||
(ii) | retire with the approval of the Committee in its sole discretion prior to the end of the Award Period, the Performance Unit Award for such Award Period shall be immediately canceled; provided that the Committee in its sole discretion may determine to make a payment to the participant in respect of some or all of such canceled Performance Unit Award. |
(f) | Unless otherwise set forth in the applicable Award Agreement, if within 12 months after a Change in Control there is a Trigger Event, then with respect to |
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Performance Unit Awards that were outstanding on the date of the Trigger Event (each, an Applicable Award), each such Applicable Award shall be immediately canceled and, in respect thereof, such participant shall be entitled to receive a payment equal to the product of (A) (i) the target number of Performance Units for such Applicable Award multiplied by (ii) a fraction, the numerator of which is equal to the number of full months within the Award Period during which the participant was continuously employed by the Company or its subsidiaries, and the denominator of which is equal to the total number of months within such Award Period, multiplied by (B) the Value of a Performance Unit on the date the applicable Trigger Event occurs, multiplied by (C) a Performance Percentage equal to 100%. If following a Change in Control, unless otherwise set forth in the applicable Award Agreement, a Participants employment remains continuous through the end of an Award Period, then the Participant shall be paid with respect to such Awards for which he or she would have been paid had there not been a Change in Control and the Earned Value shall be determined in accordance with Section 9(g) below. |
(g) | Except as otherwise provided in Section 9(f), as soon as practicable after the end of the Award Period or such earlier date as the Committee in its sole discretion may designate, the Committee shall (i) determine, based on the extent to which the applicable Performance Objectives have been achieved, the Performance Percentage applicable to an Award of Performance Units, (ii) calculate the Earned Value of the Performance Unit Award and (iii) shall certify all of the foregoing to the Board of Directors. The Committee shall cause an amount equal to the Earned Value of the Performance Units earned by the participant to be paid to him or her or his or her beneficiary. The Committee shall determine, in its sole and plenary discretion, whether a Performance Unit shall be settled in cash, Shares, other securities, other Awards, other property or a combination of any of the foregoing. | ||
(h) | Unless payment is deferred in accordance with an election made by the participant in accordance with procedures adopted by the Company in its sole discretion (if any), payment of any amount in respect of any Performance Units shall be made by the Company no later than 60 days after the end of the calendar year in which such Performance Units are earned. |
10. | OTHER STOCK-BASED AWARDS | |
Subject to the provisions of the Plan, the Committee shall have the sole and plenary authority to grant to participants other equity-based or equity-related Awards (including, but not limited to, fully-vested Shares) in such amounts and subject to such terms and conditions as the Committee shall determine. | ||
11. | DISABILITY | |
For the purposes of this Plan, unless otherwise specified in the applicable Award Agreement, a participant shall be deemed to be Disabled if the Committee shall determine that the physical or mental condition of the participant is such as would entitle |
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him or her to payment of long-term disability benefits under any disability plan of the Company or a subsidiary in which he or she is a participant. |
12. | RELATED EMPLOYMENT | |
For the purposes of this Plan, Related Employment shall mean the employment of a participant by an employer which is neither the Company nor a subsidiary provided: (i) such employment is undertaken by the participant and continued at the request of the Company or a subsidiary; (ii) immediately prior to undertaking such employment, the participant was an officer or employee of the Company or a subsidiary, or was engaged in Related Employment as herein defined; and (iii) such employment is recognized by the Committee, in its sole discretion, as Related Employment for the purposes of this Section 12. The death or Disability of a participant during a period of Related Employment as herein defined shall be treated, for purposes of this Plan, as if the death or onset of disability had occurred while the participant was an officer or employee of the Company. | ||
13. | CHANGE IN CONTROL |
(a) | For purposes of this Plan, unless otherwise specified in the applicable Award Agreement, a Change in Control within the meaning of this Section 13(a) shall occur if: |
(i) | Any person or group (within the meaning of Section 13(d) and 14(d)(2) of the Exchange Act), other than (x) White Mountains Insurance Group, Ltd., Berkshire Hathaway, Inc. or the respective wholly owned subsidiaries thereof, as applicable (the Significant Investors), (y) an underwriter temporarily holding Shares in connection with a public issuance thereof or (z) an employee benefit plan of the Company or its affiliates, becomes the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act) of thirty-five percent (35%) or more of the Companys then outstanding Shares and such ownership percentage exceeds the beneficial ownership percentage of the Significant Investors in the Companys then outstanding Shares; | ||
(ii) | the Continuing Directors, as defined in Section 13(b), cease for any reason to constitute a majority of the Board of the Company; or | ||
(iii) | the business of the Company and its subsidiaries is disposed of by the Company pursuant to a sale or other disposition of all or substantially all of the business or business-related assets of the Company and its subsidiaries. |
(b) | For the purposes of this Plan, Continuing Director shall mean a member of the Board who either was a member of the Board on the Effective Date (as defined below) or subsequently became a director of the Company and whose election, or nomination for election, by the Companys shareholders was approved by a vote of a majority of the Continuing Directors then on the Board (which term, for purposes of this definition, shall mean the whole Board and not any committee |
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thereof), but excluding any such individual whose initial assumption of office occurred pursuant to an actual or threatened proxy contest or consent solicitation with respect to the election or removal of directors. |
(c) | In the event of a Change in Control, the Committee as constituted immediately prior to the Change in Control shall determine the manner in which Fair Market Value of Shares will be determined following the Change in Control. |
14. | TERMINATION WITHOUT CAUSE | |
For purposes of this Plan, unless otherwise specified in the applicable Award Agreement, Termination Without Cause shall mean a termination of the participants employment with the Company or subsidiary or business unit of the Company by the Company (or subsidiary or business unit, as applicable) or, by a purchaser of the participants subsidiary or business unit after a Change in Control as described in Subsection 13(a)(iii), other than (i) for death or Disability or (ii) for Cause. Cause shall mean, unless otherwise set forth in the applicable Award Agreement, (a) an act or omission by the participant that constitutes a felony or any crime involving moral turpitude; or (b) willful gross negligence or willful gross misconduct by the participant in connection with his employment which causes, or is likely to cause, material loss or damage to the Company, subsidiary or business unit. Notwithstanding anything herein to the contrary, if the participants employment with the Company, subsidiary or business unit shall terminate due to a Change in Control as described in Subsection 13(a)(iii), where the purchaser (the Purchaser), as described in such subsection, formally assumes the Companys obligations under this Plan or places the participant in a similar or like plan with no diminution of the value of the awards, such termination shall not be deemed to be a Termination Without Cause. | ||
15. | CONSTRUCTIVE TERMINATION | |
Constructive Termination shall mean, unless otherwise set forth in the applicable Award Agreement, a termination of employment with the Company or a subsidiary at the initiative of the participant that the participant declares by prior written notice delivered to the Secretary of the Company to be a Constructive Termination by the Company or a subsidiary and which follows (a) a material decrease in his total compensation opportunity or (b) a material diminution in the authority, duties or responsibilities of his position with the result that the participant makes a determination in good faith that he or she cannot continue to carry out his or her job in substantially the same manner as it was intended to be carried out immediately before such diminution. Notwithstanding anything herein to the contrary, Constructive Termination shall not occur within the meaning of this Section 15 until and unless (a) the participant provides 30 days written notice of termination to the company of the occurrence of the circumstances described in this Section 15 within 30 days following such occurrence and (b) 30 days have elapsed from the date the Company receives such written notice from the participant without the Company curing or causing to be cured the circumstance or circumstances described in this Section 15 on the basis of which the declaration of Constructive Termination is given. |
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16. | [RESERVED] | |
17. | DILUTION AND OTHER ADJUSTMENTS |
(a) | In the event of any change in the outstanding Shares of the Company by reason of any stock split, stock or extraordinary cash dividend, recapitalization, merger, consolidation, reorganization, combination or exchange of Shares or other similar event, and if the Committee shall determine, in its sole discretion, that such change equitably requires an adjustment in the number or kind of Shares that may be issued under the Plan pursuant to Section 4, in the number or kind of Shares subject to, or the Stock Option or Stock Appreciation Right price per Share under, any outstanding Award, in the number or kind of Shares which have been awarded as Restricted Stock or in the repurchase option price per share relating thereto, in the target number of Performance Shares or Performance Units which have been awarded to any participant, or in any measure of performance, then such adjustment shall be made by the Committee and shall be conclusive and binding for all purposes of the Plan. | ||
(b) | The Committee is hereby authorized to make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events (including, without limitation, any extraordinary dividend or other extraordinary distribution (whether in the form of cash, Shares, other securities or other property), recapitalization, stock split, reverse stock split, split-up or spin-off, merger, consolidation, stock sale, asset sale or the occurrence of a Change of Control) affecting the Company, any affiliate, or the financial statements of the Company or any affiliate, or of changes in applicable rules, rulings, regulations or other requirements of any governmental body or securities exchange, accounting principles or law (i) whenever the Committee, in its sole and plenary discretion, determines that such adjustments are appropriate or desirable, including, without limitation, providing for a substitution or assumption of Awards, accelerating the exercisability of, lapse of restrictions on, or termination of, Awards or providing for a period of time for exercise prior to the occurrence of such event, (ii) if deemed appropriate or desirable by the Committee, in its sole and plenary discretion, by providing for a cash payment to the holder of an Award in consideration for the cancelation of such Award, including, in the case of an outstanding Option or Stock Appreciation Right, a cash payment to the holder of such Option or Stock Appreciation Right in consideration for the cancelation of such Option or Stock Appreciation Right in an amount equal to the excess, if any, of the Fair Market Value (as of a date specified by the Committee) of the Shares subject to such Option or Stock Appreciation Right over the aggregate Exercise Price of such Option or Stock Appreciation Right and (iii) if deemed appropriate or desirable by the Committee, in its sole and plenary discretion, by canceling and terminating any Option or Stock Appreciation Right having a per Share exercise price equal to, or in excess of, the Fair Market Value of a Share subject to such Option or Stock Appreciation Right without any payment or consideration therefor. |
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18. | DESIGNATION OF BENEFICIARY BY PARTICIPANT | |
A participant may name a beneficiary to receive any payment to which he may be entitled in respect of Restricted Stock Units, Performance Shares, Performance Units or Stock Appreciation Rights under the Plan in the event of his death, on a form to be provided by the Committee. A participant may change his beneficiary from time to time in the same manner. If no designated beneficiary is living on the date on which any amount becomes payable to a participants executors or administrators, the term beneficiary as used in the Plan shall include such person or persons. | ||
19. | CERTAIN ADDITIONAL DEFINITIONS | |
As used in the Plan, the term Fair Market Value shall mean (a) with respect to any property other than Shares, the fair market value of such property determined by such methods or procedures as shall be established from time to time by the Committee and (b) with respect to Shares, as of any date, (i) the closing per share sales price of the Shares (A) as reported by the NYSE for such date or (B) if the Shares are listed on any other national stock exchange, as reported on the stock exchange composite tape for securities traded on such stock exchange for such date or, with respect to each of clauses (A) and (B), if there were no sales on such date, on the closest preceding date on which there were sales of Shares or (ii) in the event there shall be no public market for the Shares on such date, the fair market value of the Shares as determined in good faith by the Committee. | ||
20. | MISCELLANEOUS PROVISIONS |
(a) | No employee or other person shall have any claim or right to be granted an Award under the Plan. Neither the Plan nor any action taken hereunder shall be construed as giving an employee any right to be retained in the employ of the Company or any subsidiary. | ||
(b) | A participants rights and interest under the Plan may not be assigned or transferred in whole or in part either directly or by operation of law or otherwise (except in the event of a participants death), including but not limited to, execution, levy, garnishment, attachment, pledge, bankruptcy or in any other manner and no such right or interest of any participant in the Plan shall be subject to any obligation or liability or such participant. | ||
(c) | No Shares shall be issued hereunder unless counsel for the Company shall be satisfied that such issuance will be in compliance with applicable Federal and state securities laws. | ||
(d) | The Company and its subsidiaries shall have the right to deduct from any payment made under the Plan any Federal, state or local income or other taxes required by law to be withheld with respect to such payment. It shall be a condition to the obligation of the Company to issue Shares upon exercise of a Stock Option, upon settlement of a Stock Appreciation Right, or upon payment of a Restricted Stock Unit, Performance Share or a Performance Unit that the participant (or any beneficiary or person entitled to payment under Section 5(c)(ii)(C) hereof) pay to |
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the Company, upon its demand, such amount as may be required by the Company for the purpose of satisfying any liability to withhold Federal, state or local income or other taxes. If the amount requested is not paid, the Company may refuse to issue Shares. |
(e) | The Plan shall be unfunded. The Company shall not be required to establish any special or separate fund or to make any other segregation of assets to assure the payment of any Award under the Plan. | ||
(f) | By accepting any Award or other benefit under the Plan, each participant and each person claiming under or through him or her shall be conclusively deemed to have indicated his or her acceptance and ratification of, and consent to, any action taken under the Plan by the Company, the Board or the Committee. |
21. | AMENDMENT | |
The Plan may be amended at any time and from time to time by the Board, but no amendment which increases the aggregate number of Shares which may be issued pursuant to the Plan or the class of employees eligible to participate shall be effective unless and until the same is approved by the shareholders of the Company. No amendment of the Plan shall adversely affect any right of any participant with respect to any Award previously granted without such participants written consent. | ||
22. | TERMINATION | |
This Plan shall terminate upon the earlier of the following dates or events to occur: |
(a) | the adoption of a resolution of the Board terminating the Plan; or | ||
(b) | ten years from the Effective Date. |
No termination of the Plan shall alter or impair any of the rights or obligations of any person, without his consent, under any Award previously granted under the Plan. |
23. | EFFECTIVE DATE | |
The Plan shall be effective as of the date of its adoption by the Board and approval by the Companys shareholders (such date, the Effective Date); provided, however, that no Incentive Share Options may be granted under the Plan unless it is approved by the Companys shareholders within twelve (12) months before or after the date the Plan is adopted by the Board. |
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1. | I have reviewed this quarterly report on Form 10-Q of Symetra Financial Corporation (the registrant); | |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: |
a. | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
b. | [paragraph omitted in accordance with Exchange Act Rule 13a-14(a)]; | ||
c. | evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and | ||
d. | disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | ||
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: August 12, 2010 | By: | /s/ Thomas M. Marra | ||
Thomas M. Marra | ||||
President and Chief Executive Officer |
1. | I have reviewed this quarterly report on Form 10-Q of Symetra Financial Corporation (the registrant); | |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: |
a. | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
b. | [paragraph omitted in accordance with Exchange Act Rule 13a-14(a)]; | ||
c. | evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report, based on such evaluation; and | ||
d. | disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of registrants board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | ||
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: August 12, 2010 | By: | /s/ Margaret A. Meister | ||
Margaret A. Meister | ||||
Executive Vice President and Chief Financial Officer |
Date: August 12, 2010 | By: | /s/ Thomas M. Marra | ||
Thomas M. Marra | ||||
President and Chief Executive Officer | ||||
Date: August 12, 2010 | By: | /s/ Margaret A. Meister | ||
Margaret A. Meister | ||||
Executive Vice President and Chief Financial Officer | ||||