A road less traveled: Symetra Financial, a spinoff bought by an investor group, exploits its advantages during its first two years.

Few companies can take unusual roads to success. That seems the case with Symetra Financial, which took form two years ago when Safeco Corp. sold its life insurance and investments businesses to an investor group led by Berkshire Hathaway and White Mountains Insurance Group. The group has 22 members.

Symetra emerged as a leaner company with renewed vigor, said Randy Talbot, president and chief executive officer. Under new ownership, it cut total costs by 13%--more than $20 million--and beefed up its technology platforms by outsourcing to a major contractor. "We have a quality board and quality set of investors," said Talbot. "Our board is made up of members that have invested in our company, so they're very attentive, very qualified and capable of helping us drive the company forward."

Symetra has picked up sales momentum in some channels, according to Talbot. Fixed annuity sales in the second quarter, for example, were up 46% from the first quarter and 57% from a year earlier. "Essentially, we are to compete, and it's a very exciting time at Symetra," he said.

When you became independent, you became a private company. How does being a private company provide you advantages?

We're privately held. We're not private; we're very transparent. Some of reporting requirements are obviously different for us, but we're actually not all that different from a public company. We produce quarterly numbers, numbers for the NAIC and the state insurance departments, and for our shareholders and for our agents. We also report to our rating agencies and the rest of the companies we work with.

So if you need an infusion of capital for something, where do you get it?

The same place that a public company gets it: from shareholders, or from borrowing money. Recently we actually put together a $300 million private debt offering to replace an existing line. We had the debt rated, we put our debt out into the marketplace, and we had a very successful offering. Our capital and surplus position is now excellent.

You went from a recognizable brand name to a new company name. What have been the challenges of making that transition?

First of all, our former parent company was recognized as a property/casualty company. Symetra is being recognized and will be recognized as a life insurance and group insurance company, a financial-services company. We are pleased with the brand recognition that we're gaining at the producer level. Our strategy is first to brand with the people who produce our policies, and we find that our name recognition among agents and advisers is rapidly gaining traction.

What about name recognition among the public?

That is important. It's obviously very important to some of the major companies. But our strategy avoids attempting a $50 million or $75 million national advertising campaign up front. We will gradually gain brand recognition among the general public, but we're not going to overspend capital to do a lot of consumer branding right out of the gate. We recognize that enduring brands are built over time, with consistently great customer service and repeatedly delivering on expectations.

How does your business mix break down between employee benefits and individual?

We are a very well balanced company. We have great diversification among our core businesses. Each of our main business segments--group and employee benefits, retirement services, income annuities and individual life insurance--contributes similarly to overall earnings. Within the individual line, we have all flavors: whole life, variable universal life, universal life and term.

How do you compete against the big companies in the life Industry?

There is a lot of talk about scale in our industry, but a good way to think about scale is as a function of revenues versus expenses. For example, if you think about trying to carve 1% or 2% out of a large legacy company, it is a major event. We carved out more than 13% of our total costs. So in that sense, we now find ourselves in the position of being scaled against the bigger players in very adequate fashion. That's evidenced by our strong [return on equity] numbers since inception, which was at 13.4% as of June 30, 2006.

In your reports, you mention distribution-channel-driven sales. What does that mean?

Our strategy is to develop a basket of products, not just one product, to sell through four distinct channels. Through our financial institutions and bank channel, we sell annuities and life insurance. Through our independent marketing organizations and agents, we sell life, annuity and group products. In our group and third-party administrator channel, we sell group life products, group excess-loss health products and a product we call Select Benefits. Fourth is our work-site channel, where we sell 401(k)s, tax-sheltered annuities, voluntary life insurance and medical products, and our Select Benefits product line. We can leverage the cost of our sales force by giving each channel a group of products to sell instead of just one specific thing.

What does Select Benefits encompass?

It's a limited-benefit group product that provides a health insurance card to people who very likely never had one before. It specializes in insuring part-time employees and employees who could not afford a major medical plan heretofore. It's essentially taking some of the 48 million uninsured people in the country off the uninsured rolls and providing them a minimum set of benefits so they can at least have their children immunized and go to the doctor when they need to.

What's the role of information technology at Symetra?

IT drives the long-term efficiency of a life insurance company. We've partnered with ACS, one of the world's largest outsourcing contractors. They've been able to deliver us platforms that are essentially leading-edge technology. In addition, we've developed Internet-based Express platforms for many of our products, allowing our agents and brokers via the Internet to quote and issue life insurance and immediate-annuity contracts on site with the client. Conventional life insurance applications used to take weeks to get submitted and through a process. We can do it much quicker. In fact, with our Express platform, agents can quote and bind a life policy in less than 10 minutes.

We've been able to turn several of our life insurance product lines into a very transactional business. Once you're able to do that, it opens up the number of platforms you can sell from, specifically the bank platforms and the independent agent platforms.

How would you describe the state of your product development?

We continually have new product in the pipeline. In the life insurance business, with the number of variations and new-product innovation, it's imperative to always be researching what your distribution partners need to succeed. We rely heavily on our distribution partners to show us the way in what the public is demanding.

Are you able to generate living-benefit offerings on variable annuities?

We do have some options on our VAs, but that is one area in which we've been very careful to not offer optionality in our product that might impair our financial future.

What about secondary guarantees in universal life?

Again, secondary guarantees are a built-in option, and we've been very careful not to over-emphasize some of these aspects in our life products. But we have a very solid group of voluntary and employer-supported work-site life products, universal and term products.

Are you reaching many members of middle-income America through these strategies?

That is primarily our marketplace. And it's a wonderful marketplace to be in. Not only are we gaining access to new distribution partners and new customer bases, but the industry itself is expanding because of the number of boomers retiring and the need for retirement income for life.

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Symetra Life Insurance Co. A.M. Best Company # 07017

Distribution: Independent broker/dealers, marketing organizations, agencies, financial institutions, and company investment and administrative services

For ratings and other financial strength information about this company, visit www.ambest.com.

Snapshot of SYMETRA[SM] FINANCIAL

Company name: Symetra Financial

Headquarters: Bellevue, Wash.

Began as an independent corporation: Aug. 2, 2004

Customers: Approximately 2 million

Core businesses: Retirement plans, employee benefits, annuities and life insurance

Employees: Approximately 1,200

Established: 1957, Symetra Life Insurance Co., a wholly owned subsidiary 

Financials

(all figures per closing statements of Dec. 31, 2005)

Total assets: $20.1 billion

Total revenues: $1.6 billion

Net income: $145.5 million

Return on equity: 13.5%

Source: Symetra Financial