corresp
[Letterhead of]
CRAVATH, SWAINE & MOORE LLP
[New York Office]
212-474-1644
Symetra Financial Corporation
Registration Statement on Form S-1
File No. 333-162344
November 9, 2009
Dear Mr. Riedler:
Symetra Financial Corporation (the Company) has filed today with the Securities and
Exchange Commission (the Commission), via EDGAR, Amendment No. 2 (Amendment No.
2) to its Registration Statement on Form S-1 (File No. 333-162344) (the Registration
Statement). This letter, together with Amendment No. 2, sets forth the Companys responses to
the comments contained in your letter dated October 30, 2009 (the Comment Letter)
relating to the Registration Statement. In addition, Amendment No. 2 updates the financial
statements and related disclosure in the Registration Statement for the nine months ended September
30, 2009.
Set forth below in bold font are the comments of the staff of the Commission (the
Staff) contained in the Comment Letter and immediately below each comment is the response
of the Company with respect thereto or a statement identifying the location in Amendment No. 2 of
the requested disclosure or revised disclosure. Where requested, supplemental information is
provided.
Four clean copies of Amendment No. 2, and four copies that are marked to show changes from the
originally filed Registration Statement, are enclosed for your convenience with three copies of
this letter. Page references in the Companys responses are to pages in the marked copy of
Amendment No. 2.
FORM S-1
General
1. |
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We note that you are submitting a number of documents in a confidential treatment
request. Please note that you will be receiving comments to the confidential treatment
request under separate cover and that all confidential treatment issues must be resolved
before we will consider a request for acceleration of the registration statement. |
The Company acknowledges the Staffs comment and confirms its understanding that all
confidential treatment issues must be resolved before the Staff will consider a request for
acceleration of the Registration Statement.
2. |
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Please provide us proofs of all graphic, visual, or photographic information you will
provide in the printed prospectus prior to its use, for example in a preliminary
prospectus. Please note we may have comments regarding these materials. |
The Company confirms that the only graphic, visual or photographic information that will be
included in the printed prospectus will be the Symetra logo contained on the cover of the
prospectus.
3. |
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Please note that when you file a pre-effective amendment containing pricing-related
information, we may have additional comments. As you are likely aware, you must file this
amendment prior to circulating the prospectus. |
The Company confirms that it will file a pre-effective amendment containing pricing-related
information with adequate time for the Staff to review prior to circulating the preliminary
prospectus.
4. |
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Please note that when you file a pre-effective amendment that includes your price
range, it must be bone fide. We interpret this to mean your range may not exceed $2 if you
price below $20 and 10% if you price above $20. |
The Company acknowledges the Staffs comment and confirms that when it files a pre-effective
amendment that includes the price range, the Company intends to include a bona fide price range
within the limitation suggested by the Staff.
5. |
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Please file as promptly as possible all exhibits required by the Exhibit Table
provided in Item 601(a) of Regulation S-K. |
The Company has filed all currently available exhibits required by the Exhibit Table provided
in Item 601(a) of Regulation S-K and confirms that it will file all remaining exhibits as promptly
as practicable in a pre-effective amendment.
6. |
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Please note that where we provide examples to illustrate what we mean by our
comments, they are examples and not exhaustive lists. If our comments |
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are applicable to portions of the filing that we have not cited as examples, make the
appropriate changes in accordance with our comments. |
The Company acknowledges the Staffs comment and confirms that it has endeavored to make
appropriate changes in accordance with the Staffs comments in Amendment No. 2.
7. |
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Throughout the registration statement, you cite various estimates, statistics and
other figures. In the prospectus, please attribute the below statements and any other
similar statement to the source from which you obtained the information. |
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76.8 million baby-boomers (Americans born between 1946 and 1964) who are at or near
retirement age (pages 2 and 103); |
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61.6 million members of Generation X (Americans born between 1965 and 1979) who are
likely to fund their retirement from personal savings (pages and 103); |
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Illustrating this trend, industry sales of variable annuities declined by 26% in
the first six months of 2009 compared to the equivalent 2008 period. Conversely,
industry sales of fixed annuities grew by 46% over the same period (pages 2 and 103);
and |
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In the United States, 75 million people under the age of 65 receive their benefits
through self-funded plans, including 47% of workers in smaller firms and 76% of
workers in midsize firms (pages 2 and 103). |
The
Company has revised its disclosure on pages 2 and 108 of Amendment No. 2 to attribute
the estimates, statistics and similar figures listed above, and any similar statements, to the
respective sources from which the Company obtained such information.
Prospectus Summary, page 1
8. |
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We note your use of non-GAAP financial results throughout your Prospectus Summary.
These non-GAAP financial results appear to be presented in a manner that is more prominent
than your GAAP results. See Item 10(e) of Regulation S-K. Please replace the current
disclosure on page 1 with a brief summary of your recent operating results, your current
financial position and book value per common share that is expressed in GAAP terms.
Similarly, please replace your references to non-GAAP financial results on the top of page
4 to use financial results that are expressed in GAAP terms. |
The Company respectfully submits that it has complied with Item 10(e) by using a presentation
of its non-GAAP financial measures on page 1 of Amendment No. 2 that provides equal or greater
prominence to the most directly comparable financial measures determined in accordance with GAAP.
This is illustrated by the fact that the non-GAAP financial measures are presented in the same
sentence as the most directly comparable
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financial measures determined in accordance with GAAP. Further, the Company has revised its
disclosure on page 1 to present the most directly comparable financial measure determined in
accordance with GAAP before the applicable non-GAAP financial measure in each relevant sentence.
In addition, the Company has added a cross-reference on page 1 to direct readers to the summary
presentation of its operating results and financial position determined in accordance with GAAP
included in the Summary Historical Consolidated Financial and Other Data section of the Prospectus
Summary. The Company is not aware of any formal guidance from the
Commission or the Staff that suggests that Item 10(e) prohibits the
presentation of non-GAAP information in a prospectus prior to the
presentation of summary financial information.
As also discussed in the Companys response to comment 28 below, the Company believes that its
use of non-GAAP financial measures provides useful information to investors, and that the Companys
presentation of these measures complies with Item 10(e) of Regulation S-K. The Company believes
that adjusted book value and operating return on average equity, or operating ROAE, provide
investors with useful insights regarding the underlying performance of the Companys business.
These measures are used by the Companys management and board of directors to assess the
effectiveness of operating and strategic decisions and to assess the efficiency with which the
Company deploys capital. These measures remove the impact of certain realized and unrealized gains
(losses) generated from the Companys investment portfolios. The amount and timing of these
realized and unrealized gains (losses) in any period or as of any date are substantially driven by
equity market conditions, interest rates, credit spreads and broader economic conditions that are
outside of the control of management. While the Company believes that its use of non-GAAP
financial measures provides important information to investors, the Company recognizes the
importance of these realized and unrealized gains and losses and
therefore has presented the most directly comparable financial
measures determined in accordance with GAAP, which fully reflects
such gains and losses, with equal or greater prominence. The Companys management fully expects to continue to communicate these
non-GAAP financial measures to the Companys shareholders as a public company. Accordingly, the
Company believes that such data belong on the first page of the
Prospectus Summary. Further, the Company believes that its use and
presentation of non-GAAP financial measures in relation to the
comparable financial measures determined in accordance with GAAP is
appropriately balanced throughout the prospectus.
In addition, the Company has revised its disclosure on page 4 of Amendment No. 2 by adding
the most directly comparable financial measure determined in accordance with GAAP to the same
sentence as the applicable non-GAAP financial measure. The Company has also added a
cross-reference on page 4 to direct readers to the summary presentation of its operating results
and financial position determined in accordance with GAAP included in the Summary Historical
Consolidated Financial and Other Data section of the Prospectus Summary.
Because of the reasons set forth above and the revisions to the Companys disclosure in
Amendment No. 2 described above, the Company believes that its presentation of non-GAAP measures in
the Prospectus Summary provides equal or greater prominence to the most directly comparable
financial measures determined in accordance with GAAP and complies with Item 10(e).
9. |
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You disclose on pages 3 and 104 that [you] have an attractive and diverse mix of
businesses and a strong and transparent balance sheet. Please remove these statements
or, in the alternative, revise your disclosure to |
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clarify that these statements are your beliefs. In addition, please revise to clarify what
you mean by a transparent balance sheet. |
The
Company has revised its disclosure on pages 3 and 109 of Amendment No. 2 to clarify
that it is the Companys belief that [it] ha[s] an attractive and diverse mix of businesses and
a strong and transparent balance sheet and to clarify what the Company means by a transparent
balance sheet.
10. |
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On pages 4 and 105, you disclose that [i]n the last 25 years, [your] group medical
stop-loss insurance business has experienced only two calendar years of net losses. If
either or both of these calendar years of net losses occurred in the last five years,
please disclose the years in which they occurred and quantify the losses. |
The Company confirms that neither of the two calendar years in which the Companys group
medical stop-loss insurance business experienced net losses occurred in the last five years. In
addition, the Company has revised its disclosure on pages 4 and 110 of Amendment No. 2 to
disclose that 1999 was the most recent calendar year in which such net losses occurred.
Financial Strength Ratings, page 7
11. |
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You disclose on pages 7, 15, 89 and 121 that the financial strength ratings of your
primary life insurance subsidiaries are A with a stable outlook from A.M. Best Company,
Inc., A with a negative outlook from Standard & Poors Rating Service, A3 with a
stable outlook from Moodys Investors Service, Inc. and A+ with a negative outlook from
Fitch, Inc. Please revise to identify each of your subsidiaries that have been rated by
the above listed rating agencies and their respective financial strength ratings. In
addition, we note that rating agencies also evaluate the general creditworthiness of debt
securities issued by companies. Please revise to disclose the issuer credit ratings for
you and each of your subsidiaries that have issuer credit ratings. |
The
Company has revised its disclosure on pages 7, 15, 95 and 126 of Amendment No. 2
to include the financial strength ratings of each of its subsidiaries rated by A.M. Best Company,
Inc., Standard & Poors Rating Service, Moodys Investors Service, Inc. and Fitch, Inc. In
addition, the Company has revised its disclosure on pages 95 and 126 to include the issuer
credit/default ratings for the Company and each of its subsidiaries that have issuer credit/default
ratings.
Risk Factors, page 12
Difficult conditions in the credit and equity markets..., page 13
12. |
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We note that you disclose that the credit, financial and economic crisis has had
various effects on your business and results of operations. Please expand each of the
bullet points to clarify and, to the extent possible, quantify the |
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effect that the credit, financial and economic crisis has had on your business and results
of operations.
The Company has revised its disclosure on page 13 of Amendment No. 2 to clarify, describe
and, to the extent possible, quantify the effect that the credit, financial and economic crisis has
had on its business and results of operations.
Our investment portfolio is subject to various risks..., page 13
13. |
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Please expand your risk factor under the subheading Credit risk to disclose the
amount of your fixed maturity portfolio and credit related impairments for 2007, 2008, and
interim 2009. |
The Company has revised its disclosure on page 15 of Amendment No. 2 to disclose the amount
of its fixed maturities portfolio as of September 30, 2009, December 31, 2008 and December 31, 2007
and the amount of its credit related impairments for the nine months ended September 30, 2009 and
2008 and the years ended December 31, 2008, 2007 and 2006.
14. |
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Please expand your risk factor under the subheading Liquidity risk to disclose the
percentage of your investments which you hold in privately placed fixed maturities,
mortgage loans, policy loans and limited partnership interests and that you have noted are
relatively illiquid as compared to publicly traded fixed maturities and equities. |
The Company has revised its disclosure on page 15 of Amendment No. 2 to disclose the
percentage of its total invested assets which it holds in privately placed fixed maturities,
mortgage loans, policy loans and limited partnership interests.
If our reserves for future policy benefits and claims are inadequate..., page 18
15. |
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Please expand your disclosure to disclose the total amount of adjustments to reserves
you made during each of 2007, 2008, and interim 2009. Alternatively, please supplementally
confirm that no adjustments to reserves were made in those time periods. |
The Company has revised its disclosure on page 19 of Amendment No. 2 to confirm that it has
not made any significant adjustments to reserves due to inadequacy during 2007, 2008 or the first
nine months of 2009.
We rely on reinsurance agreements to help manage our business risks..., page 20
16. |
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If a reinsurer has been or is currently unable or unwilling to pay the reinsurance
recoverable owed to you, and if this inability or unwillingness materially harmed your
business, please discuss the situation in this risk factor and quantify the amount
disputed. |
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The Company has revised its disclosure on page 20 of Amendment No. 2 to confirm that it has
not experienced any insolvency, inability or unwillingness on the part of any reinsurer to make
payments under the terms of its reinsurance agreement with the Company in 2007, 2008 or through
September 30, 2009.
Consolidation among distributors or potential distributors..., page 21
17. |
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You disclose that a single financial institution accounted for a significant portion
of your fixed annuity product sales in 2008 and through June 30, 2009. On page 114, you
disclose that this financial institution is JPMorgan Chase & Co. Please expand your
disclosure here to name the financial institution. In addition, please expand your
disclosure here and on page 114 to disclose the percentage of your total sales that
JPMorgan accounted for in 2008 and through June 30, 2009. |
The Company has revised its disclosure on page 21 to provide the name JPMorgan Chase & Co.
In addition, the Company has revised its disclosure on pages 21 and
119 of Amendment No. 2 to
disclose the percentage of the Companys total sales accounted for by JPMorgan Chase & Co. in 2008
and through September 30, 2009.
Changes in accounting standards issued by the Financial Accounting..., page 22
18. |
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This risk factor could apply to any issuer. Please revise this risk factor so it is
specific to your situation. |
The Company has revised its disclosure on page 22 of Amendment No. 2 to make the risk factor
Changes in accounting standards issued by the Financial Accounting... more specific to the
Company.
If we are unable to maintain the availability of our systems..., page 22
19. |
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If problems with your systems or data have materially harmed your business in the
past or if they are currently doing so, please discuss the situation in this risk factor. |
The Company confirms that it has not experienced any problems with its systems or data that
have materially harmed its business in the past or currently.
Our internal control over financial reporting does not currently meet the standards required
by Section 404 of the Sarbanes-Oxley Act of 2002..., page 29
20. |
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We note your disclosure here regarding your internal control over financial
reporting. Please revise your disclosure to clarify whether in connection with its audit
of your financial statements for the periods presented in the filing, your independent
registered public accounting firm reported any material weaknesses or significant
deficiencies related to policies and procedures that would impact your internal controls
over financial reporting. |
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The Company has revised its disclosure on page 30 of Amendment No. 2 to clarify that in
connection with the Companys 2006, 2007 and 2008 audits, no material weaknesses in the Companys
internal control over financial reporting were identified.
The
Company acknowledges the Staff's comment to clarify whether the
Companys independent registered public accounting firm, in
connection with its audits of the Companys financial statements for
the periods presented in the filing, has reported any significant
deficiencies that would impact the Companys internal control over
financial reporting. The Company notes that while material weaknesses
are required to be included in any reports on internal control over
financial reporting issued by management or the Companys independent
registered public accounting firm, disclosure of the presence or
absence of significant deficiencies is generally not required.
Industry and Market Data, page 33
21. |
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We note that you have included industry and government data and forecasts that you
have prepared based, in part, upon industry and government data and forecasts from
publications and surveys. We note further that you state that such sources do not assure
the accuracy and completeness of the information. Please revise your disclosure here to
state that you are responsible for the information included in the prospectus. |
The Company has revised its disclosure on page 34 of Amendment No. 2 to clarify that the
Company is responsible for the adequacy and accuracy of the disclosure in the prospectus.
Use of Proceeds, page 39
22. |
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We note that you intend to use the net primary proceeds from the offering for general
corporate purposes, which may include contributions of capital to your insurance and other
subsidiaries. Please revise your disclosure to clarify whether you have a current specific
plan for the proceeds. If you do not have such a plan, please so state and disclose the
principal reasons for the offering. If you do have a plan, please provide a brief outline
of your proposed expenditures and the cost of each expenditure. See Item 504 of Regulation
S-K. |
The Company has revised its disclosure on page 37 of Amendment No. 2 to clarify that its
board of directors has not made any determination of specific uses of proceeds at this time, but
that the Company expects to use the net primary proceeds from the offering for general corporate
purposes, which may include contributions of capital to the Companys insurance and other
subsidiaries.
Managements
Discussion and Analysis of Financial Condition and Results of Operations, page
43
Critical Accounting Policies and Estimates and Recently Issued Accounting Standards, page
44
Fair Value, page 46
Valuation of Fixed Maturities, page 47
23. |
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In regards to securities transferred into Level 3 please provide a discussion of the: |
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the significant inputs that you no longer consider to be observable; and |
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any material gain or loss you recognized on those assets or liabilities
during the period, and, to the extent you exclude that amount from |
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the realized/unrealized gains (losses) line item in the Level 3 reconciliation, the
amount you excluded. |
The Company acknowledges the Staffs comment and is providing the following supplemental
discussion:
The Company does not believe transfers of fixed maturities into Level 3 during the nine months
ended September 30, 2009 and the year ended December 31, 2008 are material to an assessment of the
Companys financial position or results of operations. Accordingly, the Company does not believe a
discussion of the significant inputs that became unobservable, which resulted in a transfer of the
securities into Level 3, is warranted. In addition, the Company did not recognize any material
gains or losses on fixed maturities transferred into Level 3 and no unrealized or realized amounts
were excluded from the Level 3 reconciliation.
Transfers of fixed maturities into Level 3, at fair value, during the periods ending September
30, 2009 and December 31, 2008 were $14.7 million and $64.4 million, respectively, which
represented 0.1% and 0.4%, respectively, of the Companys total fixed maturities.
During the nine months ended September 30, 2009, the Company did not realize any gain or loss
related to securities transferred into Level 3 and has not taken any impairment charges in relation
to these securities. For the year-ended December 31, 2008, the Company realized gains of less than
$0.01 million on securities transferred into Level 3 and has not taken any impairment charges in
relation to these securities.
Due to the immaterial amount of fixed maturities transferred into Level 3, the Company
believes discussion of these transfers in Managements Discussion and Analysis of Financial
Condition and Results of Operations is not warranted as it would not be material to an investors
assessment of the Companys financial position or results of operations.
24. |
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Similar to the comment above, with regard to your Level 3 assets, please provide a discussion
of: |
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whether realized and unrealized gains (losses) affected your results of
operations, liquidity or capital resources during the period, and if so, how; |
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the reason for any material decline or increase in the fair values; and |
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whether you believe the fair values diverge materially from the amounts you
currently anticipate realizing on settlement or maturity. If so, disclose why and
provide the basis for your views. |
In response to the Staffs comments 24(a) and 24(b), the Company has revised its disclosure on
page 49 of Amendment No. 2. In response to the Staffs comment 24(c), the Company has revised
its disclosure on page 49 of Amendment No. 2 to explain its
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beliefs with respect to the divergence between currently anticipated fair values and realized
values.
The Company further notes that it believes the fair values of its Level 3 fixed maturities may
differ significantly from the amounts the Company will ultimately realize upon settlement or
maturity as fair values can fluctuate with economic conditions that impact assumptions inherent in
the valuation process including, but not limited to, interest rates, credit spreads and liquidity
factors. The Company purchases fixed maturities with durations that are expected to support the
cash flows of its liabilities and generally intends to hold its fixed maturities until maturity at
which point the Company would receive face value. The majority of the Companys Level 3 fixed
maturities are private placements and residential mortgage-backed securities backed by reverse
mortgages. The Company believes it will hold these investments to maturity and, therefore, does
not anticipate realized gains (losses) on these investments upon settlement or maturity.
25. |
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Please disclose the significant judgments you made in classifying a particular financial
instrument in the fair value hierarchy. |
The Company has revised its disclosure on pages 48 through 49 of Amendment No. 2 to
provide the significant judgments made by the Company in classifying particular financial
instruments in the fair value hierarchy.
26. |
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Please disclose which financial instruments are affected by the lack of market liquidity
(i.e. inactivity), how the lack of liquidity impacted the valuation technique you used, and
how you factored illiquidity into your fair value determination of those financial
instruments. To the extent you used a discounted cash flow approach to determine the fair
value of a financial instrument, such as loans held for sale, or mortgage-backed securities
backed by subprime or Alt-A collateral, discuss the specific change in the discount rate or
any other analysis you performed to account for the lack of liquidity and discuss how and why
you changed your assumptions from prior periods. |
The Company has revised its disclosure on page 49 of Amendment No. 2 to address the Staffs
comment.
27. |
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You disclose that you use pricing services and investment advisors to assist you in
determining fair values. Please revise your disclosure to explaining the extent to which, and
how, the information is obtained and used in developing the fair value measurements in the
consolidated financial statements. Ensure that your revised disclosure includes the following: |
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The amount of assets you valued using prices you obtained from pricing
services, along with the classification in the fair value hierarchy; |
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The number of quotes or prices you generally obtained per instrument, and if
you obtained multiple quotes or prices, how you |
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determined the ultimate value you used in your financial statements; and |
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Whether, and if so, how and why, you adjusted quotes or prices you obtained
from investment advisors and pricing services. |
The Company has revised its disclosure on pages 48 through 49 of Amendment No. 2 to
address the Staffs comment.
Use of Non-GAAP Financial Measures, page 51
28. |
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We note your disclosure regarding the use of several non-GAAP financial measures here and
throughout the document. The disclosure provided does not meet the burden of demonstrating the
usefulness of a measure that excludes recurring items, especially given that the non-GAAP
financial measures appear to be used to evaluate performance. Further, it is unclear whether
and if so, how management could reasonably believe that it is probable that the financial
impact of these items will disappear or become immaterial within a near-term finite period.
Please revise the filing to comply with item 10(e) of Regulation S-K, or remove all references
to these non-GAAP measures. Refer to Question 8 of the Frequently Asked Questions Regarding
the Use of Non-GAAP Financial Measures on our website at
http://sec.gov/divisions/corpfin/faqs/nongaapfaq.htm#item10e that we issued on June
13, 2003. |
The Company believes that net operating income, operating return on average equity, adjusted
book value, adjusted book value per common share and adjusted book value per common share, as
converted, each provide useful information to investors, and that the Companys presentation of
these measures complies with Item 10(e) of Regulation S-K.
The Company believes that each of these measures provides investors with useful insights
regarding the underlying performance of the Companys business. The Company believes that certain
realized and unrealized investment gains (losses), even though they are recurring items, may mask
the trends in core business performance because they are driven by interest rates, credit spreads,
investment decisions and other external economic developments unrelated to the insurance and
underwriting aspects of the Companys business. Certain other realized investment gains and losses
are included in these non-GAAP measures, such as those pertaining to the Companys fixed indexed
annuity, or FIA, product in the Companys Retirement Services segment. The Company includes these
gains and losses because it believes that they are integrally related to its core insurance
operations since the net realized gains and losses are directly related to an offsetting item
included in the income statement, such as interest credited.
The Company has expanded its disclosure to provide additional detail regarding how management
uses these non-GAAP measures to evaluate performance. The Company has also revised its disclosure
to further explain and provide examples of the factors that drive the timing and amount of the
recurring items. Management believes the
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financial impact of the recurring items can fluctuate from period to period. Therefore,
management believes that it is important for investors to also review the most directly comparable
GAAP measure. As an example, the Companys AOCI balance fluctuated significantly during the nine
months ended September 30, 2009. Increases in the fair value of the Companys fixed maturities
improved AOCI included in stockholders equity by $1,082.4 million from December 31, 2008 to
September 30, 2009 resulting in an AOCI balance of $29.8 million at September 30, 2009 versus an
AOCI balance of $(1,052.6) million at December 31, 2008. The increase in fair value was driven by
credit market improvements and tightening of interest spreads. Since the Company makes investments
of similar duration as associated liabilities and typically expects to hold the investments to
maturity, the Company does not expect to realize the unrealized gains (losses) in its investment
portfolio. For example, for the nine months ended September 30, 2009, when the Company experienced
substantial improvement in its investment portfolios unrealized gain (loss), the Company had much
smaller net realized losses on sales of fixed maturities of $1.4 million (net of taxes of $0.7
million).
In addition, as discussed in Question 8 of the Frequently Asked Questions Regarding the Use of
Non-GAAP Financial Measures, the Company has revised its disclosure on pages 53 through 56 of
Amendment No. 2 to include disclosure on the material limitations associated with use of non-GAAP
financial measures as compared to the use of the most directly comparable financial measures
determined in accordance with GAAP and to include the manner in which management compensates for
these limitations when using the non-GAAP financial measures. As discussed in the Companys
response to comment 8 above, the Company has also revised its disclosure to ensure that its
presentation of non-GAAP measures provides equal or greater prominence to the most directly
comparable financial measures determined in accordance with GAAP. The Company further believes
that investors will expect the Company to disclose these measures in order to allow for comparative
evaluation of Company performance.
Investments, page 73
29. |
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Footnote 3 to the table presenting the composition of your investment portfolio appears to be
missing some text. Please revise, as necessary, to clarify the significance of the $63.2
million and $56.3 million included in limited partnership investments. |
The Company has revised its disclosure on page 77 of Amendment No. 2 to clarify the
applicable footnote.
Fixed Maturity Securities Credit Quality, page 78
30. |
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For your below investment grade securities please disclose the amount of unrealized losses
and other-than-temporary impairments associated with these securities. In addition, clarify
why you believe no additional impairment is required. You may want to consider disaggregating
the |
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requested disclosure for those sectors with the most exposure, such as Corporate
Securities, RMBS and CMBS. |
The Company has revised its disclosure on pages 82 through 83 of Amendment No. 2 to
provide the amount of unrealized losses and other-than-temporary impairments associated with the
relevant securities and to clarify why the Company believes no additional impairment is required.
31. |
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Please revise your disclosure for the securities in your investment portfolio that are
guaranteed by monoline bond insurers to include the credit rating with and without the
guarantee. |
The Company has revised its disclosure on page 83 of Amendment No. 2 to address the Staffs
comment.
Dividends and Regulatory Requirements, page 95
32. |
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You disclose that you target a risk-based capital level of at least 350% in your life
insurance company. Please expand your disclosure to identify the company and disclose the
current risk-based capital level in that company. |
The Company has revised its disclosure on page 101 of Amendment No. 2 to identify the
Companys life insurance company as Symetra Life Insurance Company and to include the risk-based
capital ratio of Symetra Life Insurance Company as of September 30, 2009.
Business, page 102
33. |
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We have been unable to locate your disclosure of your financial information about segments in
your Business section. Please revise this section to disclose the information required by Item
101(b) of Regulation S-K or provide a cross reference to the section where all the required
information, conforming to generally accepted accounting principles, has been disclosed. |
The
Company has provided a cross-reference on page 107 of Amendment No. 2 to Note 22 to its
audited consolidated financial statements, which discloses the financial information by segment for
each of the last three fiscal years as required by Item 101(b) of Regulation S-K.
Distribution, page 114
34. |
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It appears you have filed two agency agreements as Exhibits 10.8 and 10.9 to your Amendment
No. 1 to Form S-l. Please confirm that these are the only two agency and/or distribution
agreements upon which you are substantially dependent. Please also expand your disclosure to
discuss each agreements material terms, including, but not limited to any payment provisions,
obligations/rights to defend, other rights obtained and material obligations that must be met
to keep the agreement in place, duration and termination |
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provisions. Please also identify the third party which is currently performing the
obligations under these agreements. |
The Company confirms that the agreements filed as Exhibits 10.8 and 10.9 are the only two
agency and/or distribution agreements upon which the Companys business is substantially dependent.
In addition, the Company has revised its disclosure on page 119 of Amendment No. 2 to include a
discussion of the material terms (excluding certain terms that are pending review under the
Companys confidential treatment request) of each of these agreements and to state that Chase
Insurance Agency, Inc. is the third party currently performing the obligations under these
agreements.
Reinsurance, page 118
35. |
|
Please confirm that you will file all agreements with these four reinsurers upon which the
companys business is substantially dependent. It appears that you have filed and/or intend to
file some of these agreements as Exhibits 10.2 through 10.6. Please also confirm that in your
next amendment you will describe all the material terms of these agreements, including, but
not limited to any payment provisions, obligations/rights to defend, other rights obtained and
material obligations that must be met to keep the agreement in place, duration and termination
provisions. |
The Company confirms that it has now filed all reinsurance agreements with the reinsurers upon
which the Companys business is substantially dependent as exhibits to the Registration Statement.
In addition, the Company has revised its disclosure on page 124 of Amendment No. 2 to include a
discussion of the material terms (excluding certain terms that are pending review under the
Companys confidential treatment request) of each of these agreements.
Management, page 129
36. |
|
Please revise your disclosure regarding Mr. Smiths business experience to clarify when he
became a managing partner of Whittington Gray Associates and when he left The Hartford
Financial Services Group. Please also confirm that you have described Mr. Smiths business
experience during the past five years. |
The
Company has revised its disclosure on page 134 of Amendment No. 2 to clarify when Mr.
Smith became a managing partner of Whittington Gray Associates and when he left The Hartford
Financial Services Group. The Company confirms that it has described Mr. Smiths business
experience during the past five years.
Composition of the Board of Directors, page 131
37. |
|
Please expand your disclosure to identify the four directors which you believe are
independent directors under currently applicable listing standards of the NYSE. See Item
407(a) of Regulation S-K. |
15
The
Company has revised its disclosure on page 136 of Amendment No. 2 to identify the four
directors it believes are independent directors under currently applicable listing standards of the
NYSE.
Compensation Committee Interlocks and Insider Participation, page 132
38. |
|
You disclose that Upon completion of this offering, our board of directors will have a
compensation committee as described above. We have been unable to locate your disclosure
regarding your compensation committee. Please expand your disclosure to identify the directors
or other persons on this committee and provide any other material information regarding this
committee. |
The
Company has revised its disclosure on page 137 of Amendment No. 2 to provide information
about the Companys compensation committee, including the identities of the directors on the
compensation committee and any other material information regarding the committee.
Compensation Discussion and Analysis, page 132
Elements of Compensation, page 133
Annual incentive compensation, page 133
39. Please disclose the growth in your intrinsic business value per share in 2008.
The
Company has revised its disclosure on page 140 of Amendment
No. 2 to disclose the growth in the Companys intrinsic business value per share in 2008.
40. |
|
You disclose that after the Annual Incentive Bonus Plan is established, each executive is
allocated a portion of the pool based on his or her individual target and individual
performance. You also disclose that Mr. Talbot recommends to the compensation committee a
percentage of that executives individual target to be paid for the performance year based on
such executives individual performance compared to goals or expectations set for such
executive and Mr. Talbot. Please expand your discussion of your Annual Incentive Bonus Plan to
disclose the specific individual performance goals or expectations that were set for each
executive and Mr. Talbot in the beginning of 2008 for 2008 performance. Please further expand
your disclosure to provide an analysis that describes whether, and to what extent, each of
these goals were achieved and how the achievement or failure of each of these goals influenced
or determined the committees decisions relating to the bonus granted to each named executive
officer in 2008. Please include in this analysis Mr. Talbots recommendations for each
respective named executive officer. See Item 402(b)(2)(v) and Instruction 2 to Item 402(b) of
Regulation S-K. |
The
Company has revised its disclosure on page 140 of Amendment No. 2 to provide the
specific individual performance goals or expectations that were set forth for
16
each executive and Mr. Talbot in the beginning of 2008 for 2008 performance and an analysis
that describes whether, and to what extent, each of these goals was achieved and how the
achievement or failure of each of these goals influenced or determined the committees decisions
relating to the bonus granted to each named executive officer in 2008, including Mr. Talbots
recommendations for each respective named executive officer.
41. |
|
Please describe the analyses that the board undertook to conclude that 65% of the target
bonus pool was an appropriate amount to award the executives for the companys solid
operating performance in 2008. Similarly, please describe in the section entitled Long-Term
Incentive Compensation the analyses the board undertook to conclude that a 50% payout under
the Performance Share Plan was commensurate with the growth in operating return on equity in
2008. |
The
Company has revised its disclosure on page 140 of Amendment No. 2 to describe the
analyses that the Companys board of directors undertook to conclude that 65% of the target bonus
pool was an appropriate amount to award the executives for the Companys performance in 2008 and on
page 142 of Amendment No. 2 to describe the analyses that the Companys board of directors
undertook to conclude that a 50% payout under the Performance Share
Plan was commensurate with the Company's growth in operating return on equity in 2008.
42. |
|
You disclose that in 2008, the Annual Incentive Bonus was designed to constitute 5%, 11%, 8%
and 11% of total target compensation for Mr. Talbot, Ms. Meister, Mr. Harbin and Mr. Lindsay,
respectively. Please expand your disclosure to state for each respective executive officer the
actual percent of total compensation which the bonus accounted. Please similarly expand your
disclosure to disclose the actual percent that Mr. McCormicks sales incentive compensation
accounted for of his 2008 total compensation. |
The
Company has revised its disclosure on pages 140 through 141 of Amendment No. 2 to
state for each executive officer the actual percent his or her respective Annual Incentive Bonus
accounted for in relation to his or her respective total compensation and the actual percent that Mr. McCormicks
sales incentive compensation accounted for in relation to his 2008 total compensation.
Sales incentive compensation, page 134
43. |
|
Please expand your disclosure to clarify what you mean by the targets for Mr. McCormicks
Sales Incentive Plan. Please also expand your disclosure to clarify the products to which this
plan applies. |
The
Company has revised its disclosure on page 141 of Amendment No. 2 to clarify what is
meant by the targets for Mr. McCormicks Sales Incentive Plan and the products to which the plan
applies.
17
The Equity Plan, page 136
44. |
|
You disclose that prior to 2009, you did not make grants under the Equity Plan. Please
confirm that as of December 31, 2008, you did not have any outstanding equity awards and that
none of your named executive officers exercised any options or vested in any stock awards
during 2008. Alternatively, please revise your registration statement to include the required
tables and information. See Item 402(f) and (g) of Regulation S-K. |
The
Company confirms that, as of December 31, 2008, it did not have any outstanding equity
awards and that none of its named executive officers exercised any options or vested in any stock
awards during 2008.
Restricted Stock Agreements, page 143
45. |
|
Please file, or provide a form of, the Restricted Stock Agreements with Mr. Talbot and Ms.
Meister. Alternatively, please provide us with your analysis as to why such agreements are not
required to be filed pursuant to Item 60l(b)(10) of Regulation S-K. |
The Company has filed with Amendment No. 2 a form of the Restricted Stock Agreements with Mr.
Talbot and Ms. Meister.
Certain Relationships and Related Transactions, page 146
46. |
|
Please expand your disclosure in this section to disclose for each transaction the name of
each related person that is related to the transaction, the basis upon which each person is a
related person and each related persons interest in the transaction. See Item 404(a)(1) and
(2) of Regulation S-K. For example, in the disclosure of your transactions with White
Mountain, please disclose that White Mountain Insurance Group, Ltd is a 26.3% beneficial owner
of your common stock and the affiliations your directors, David Foy and Robert Lusardi, have
with White Mountain. |
The
Company has revised its disclosure on pages 152 through 156 of Amendment No. 2 to
address the Staffs comment.
47. |
|
Please expand your disclosure regarding your shareholders agreements, dated as of March 8,
2004, March 19, 2004 and April 16, 2004, to provide a description of the provisions relating
to registration rights, transfer restrictions, tag-along rights, competition and
confidentiality. |
The
Company has revised its disclosure on page 154 of Amendment No. 2 to provide a
description of the provisions relating to registration rights, transfer restrictions, tag-along
rights, competition and confidentiality.
48. |
|
Please file copies of the following agreements as exhibits to this registration statement. |
18
|
|
|
Investment Management Agreement with Prospector Partners, LLC; |
|
|
|
|
Coinsurance reinsurance agreement with Wilton Reassurance Company; |
|
|
|
|
Coinsurance reinsurance agreements with General Re Life Corporation; |
|
|
|
|
Accident and health reinsurance agreement with White Mountains Re America;
and |
|
|
|
|
Any agreement entered into for the purchase or sale of the Class B common
stock of Berkshire Hathaway Inc. |
The Company undertakes to file the investment management agreement with Prospector in a future
pre-effective amendment following execution of that agreement.
The Company respectfully submits that the coinsurance agreements with Wilton Reassurance and
General Re Life and the reinsurance agreement with White Mountains Re America are not required to
be filed as exhibits because, pursuant to paragraph (b)10(ii) of Item 601 of Regulation S-K, the
Company believes that such contracts are immaterial in amount
and significance. Premiums ceded by the Company under the Wilton Reassurance, General Re Life and White Mountains Re America agreements
represented 0.3%, 0.1% and 0.4% of the Companys premium revenue recognized during 2008,
respectively, and are therefore immaterial in amount.
The Company is not party to any agreements for the purchase or sale of the Class B common
stock of Berkshire Hathaway Inc.
49. |
|
Please revise your disclose to confirm that the following policies/obligations were on
substantially the same terms as those provided to other third parties. Alternatively, please
file copies of the agreements as exhibits to this registration statement. |
|
|
|
Insurance policy for both specific and aggregate excess loss coverage to
Essent Healthcare with an effective date of January 1, 2008. |
|
|
|
Insurance policy for specific excess loss coverage to Moodys Corporation,
with an effective date of January 1, 2008. |
|
|
|
Assignment of periodic payment obligations from related parties OneBeacon
Insurance Group and United Stated Liability Insurance Company. |
The
Company has revised its disclosure on pages 155 through 156 of Amendment No. 2 to
confirm that the Essent Healthcare and Moodys Corporation policies and the assignments of payments
from OneBeacon Insurance Group and United States Liability Insurance Company were on substantially
the same terms as those provided to other third parties.
19
Principal and Selling Stockholders, page 150
50. |
|
Please revise the respective footnotes to identify the natural persons who are the beneficial
owners of the shares held by each of your beneficial owners of five percent or more of your
common stock. Please also identify any director of the registrant that such beneficial owner
is affiliated and the affiliation. |
The Company is in the process of gathering this information from the stockholders and will
provide this information in a future pre-effective amendment.
Shares Eligible for Future Sale, page 157
51. |
|
Please file a form of lock-up agreement which you intend to enter into with each of your
executive officers, directors and stockholders. |
The Company intends to file a form of lock-up agreement as an exhibit to the underwriting
agreement for this offering in a future pre-effective amendment.
Underwriting, page 162
No Sales of Similar Securities, page 163
52. |
|
You state that each of your executive officers, directors and stockholders have agreed, with
exceptions, not to sell or transfer any common stock for 180 days after the date of this
prospectus without first obtaining the written consent of the representatives. Please expand
your disclosure to disclose the exceptions. |
The
Company has revised its disclosure on page 171 of Amendment No. 2 to describe the
material exceptions to the lock-up agreements.
Index to Consolidated Financial Statements, page F-1
Notes to Consolidated Financial Statements, page F-7
4. Investments, page F-16
53. |
|
Please revise your disclosure here and on page F-53 to include disclosure regarding the
number of investment positions that are in an unrealized loss position and the severity of the
impairment. Refer to paragraph 17(b)(3) and (4) of FSP FAS 115-1. |
The Company has revised its disclosure on pages F-18, F-55 and F-56 of Amendment No. 2
to include disclosure regarding the number of investment positions that are in an unrealized loss
position and the severity of the impairment.
7. Fair Value of Financial Instruments, page F-23
54. |
|
With respect to your disclosure of Level 3 Securities here and on page F-63 and 64, please: |
20
|
a. |
|
Disclose your policy for transfers in or out of Level 3; and |
|
b. |
|
Disclose your transfers in and out separately in the Level 3 rollforward or
provide on a gross basis in a footnote to the table. |
The Company has revised its disclosure on pages F-27, F-65 and F-66 of Amendment No. 2
to include disclosure regarding the Companys policies for transfers into or out of Level 3 and to
include transfers into and out of Level 3 on a gross basis in a footnote to the table.
Exhibits
55. |
|
We note that you have not filed various schedules and exhibits to Exhibits 2.1. Please revise
to provide a list briefly identifying the contents of the omitted schedules, together with an
agreement to furnish supplementally a copy of any omitted schedule to the Commission upon
request. See Item 601(b)(2) of Regulation S-K. |
Upon further consideration, the Company has determined that the Stock Purchase Agreement by
and among Safeco Corporation, General America Corporation, White Mountains Insurance Group, Ltd.
and Occum Acquisition Corp. dated as of March 15, 2004 and originally filed as Exhibit 2.1 is not,
at the current time, a material plan of acquisition of the Company. The Company believes, based
upon the passage of time and the lack of material surviving provisions of the agreement, that the
agreement is no longer a material contract of the Company and should not be included as an exhibit
to the Registration Statement. Accordingly, the Company has withdrawn Exhibit 2.1 by removing it
from the exhibit table.
56. |
|
We note that the exhibits in the below each refer to one or more exhibits, annexes or
schedules which are attached to these agreements and which do not appear to have been
provided. |
|
|
|
Exhibit Number |
|
Missing exhibit, annex or schedule |
4.2
|
|
Exhibit A, B and C |
4.5
|
|
Schedules 1, 1A and 5.3
Exhibits A, B-1, B-2, C-1, C-2, D, E, F, G, H and I |
9.1
|
|
Schedule I |
9.2
|
|
Schedules I and A |
9.3
|
|
Schedule I |
10.13
|
|
Schedule of Definitions |
Please be aware that when you file an agreement pursuant to Item 601(b)(4), (9) and (10) of
Regulation S-K, you are required to file the entire agreement, including all exhibits,
schedules, appendices and any document which is incorporated in the agreement. Please
provide a copy of the above exhibits with the full and complete agreement, including any
exhibits, schedules and appendices which are included in such agreement. Please note that
if these agreements are otherwise filed as an exhibit to this registration statement
21
you may insert a note in brackets on the page which the annex or schedule is to be located
as to the exhibit number of the filed document. Also, confirm in your response letter that
all agreements provided pursuant to Item 601(b)(4), (9) and (10) are provided in their
entirety.
The Company has filed with Amendment No. 2 the above exhibits with the full and complete
agreements, including any exhibits, schedules and appendices that are included in such agreements.
The Company confirms that all agreements provided pursuant to Item 601(b)(4), (9) and (10) are
provided in their entirety.
Please contact the undersigned at (212) 474-1644, or, in my absence, D. Scott Bennett at (212)
474-1132, with any questions or comments you may have regarding the Registration Statement.
Very truly yours,
/s/ William J. Whelan, III
William J. Whelan, III
Mr. Jeffrey Riedler
Assistant Director
U.S. Securities and Exchange Commission
Division of Corporation Finance
100 F Street, N.E.
Washington, D.C. 20549
BY FED EX
Copy with enclosures to:
Ms. Jennifer Riegel
Staff Attorney
U.S. Securities and Exchange Commission
Division of Corporation Finance
100 F Street, N.E., Mail Stop 4720
Washington, D.C. 20549
BY FED EX
George C. Pagos
Symetra Financial Corporation
777 108th Avenue NE, Suite 1200
Bellevue, WA 98004
BY FED EX