##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2010
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission file number: 001-33808
 SYMETRA FINANCIAL CORPORATION
 (Exact name of registrant as specified in its charter)
 Delaware
    
    20-0978027(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 777 108th Avenue NE, Suite 1200
Bellevue, Washington 98004  (Address of principal executive offices, including zip code)
 (425) 256-8000  (Registrants telephone number, including area code)
 o þ
 o o
  Large accelerated filer oAccelerated filer oNon-accelerated filer þ(Do not check if a smaller reporting company)
Smaller reporting company o o þ




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##### 



TABLE OF CONTENTS
 PagePART I  FINANCIAL INFORMATIONItem 1:
    
    Financial Statements:Consolidated
Balance Sheets
    
    
    3Consolidated Statements of Income
    
    
    4Consolidated Statements of Stockholders Equity
    
    
    5Consolidated Statements of Cash Flows
    
    
    6Condensed Notes to Consolidated Financial Statements
    
    
    7Item 2:
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    24Item 3:
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    54Item 4:
    
    Controls and Procedures
    
    
    55PART II  OTHER INFORMATIONItem 1:
    
    Legal Proceedings
    
    
    56Item 1A:
    
    Risk Factors
    
    
    56Item 2:
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    56Item 6:
    
    Exhibits
    
    
    57Signatures
    
    
    
    
    58EX-10.14EX-10.21EX-10.22EX-10.23EX-31.1EX-31.2EX-32.1EX-32.2EX-99.01
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Forward-Looking Statements
  
    
    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;
    
    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 Symetras 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; and
    
    the risks that are described in Item 1ARisk Factors in this report and Symetras 2009 Annual Report on Form 10-K.
  2




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##### Table of Contents



PART I  Financial Information
 
 Item 1. Financial Statements
 
 CONSOLIDATED BALANCE SHEETS
 As of
    
    
    As ofMarch 31, 2010
    
    
    December 31, 2009(In millions, except share and per share data)(Unaudited)ASSETSInvestments:Available-for-sale securities:Fixed maturities, at fair value (cost: $18,978.4and $18,553.7, respectively)
    
    $
    19,390.6
    
    
    $
    18,594.3Marketable equity securities, at fair value (cost: $52.6and $52.6, respectively)
    
    
    37.6
    
    
    
    36.7Trading securities:Marketable equity securities, at fair value (cost: $158.3and $165.9, respectively)
    
    
    151.0
    
    
    
    154.1Mortgage loans, net
    
    
    1,228.0
    
    
    
    1,201.7Policy loans
    
    
    73.4
    
    
    
    73.9Short-term investments
    
    
    54.0
    
    
    
    2.1Investments in limited partnerships (includes $25.2and $24.7 measured at fair value,
respectively)
    
    
    130.6
    
    
    
    110.2Other invested assets
    
    
    9.1
    
    
    
    10.1Total investments
    
    
    21,074.3
    
    
    
    20,183.1Cash and cash equivalents
    
    
    389.3
    
    
    
    257.8Accrued investment income
    
    
    247.5
    
    
    
    237.2Accounts receivable and other receivables
    
    
    97.1
    
    
    
    70.1Reinsurance recoverables
    
    
    277.9
    
    
    
    276.6Deferred policy acquisition costs
    
    
    227.5
    
    
    
    250.4Goodwill
    
    
    26.8
    
    
    
    26.3Current income taxes recoverable
    
    
    19.6
    
    
    
    20.2Deferred income tax assets, net
    
    
    69.1
    
    
    
    191.2Other assets
    
    
    80.5
    
    
    
    84.5Separate account assets
    
    
    854.1
    
    
    
    840.1Total assets
    
    $
    23,363.7
    
    
    $
    22,437.5LIABILITIES AND STOCKHOLDERS EQUITYFunds held under deposit contracts
    
    $
    19,222.9
    
    
    $
    18,816.7Future policy benefits
    
    
    395.8
    
    
    
    394.9Policy and contract claims
    
    
    120.6
    
    
    
    125.6Unearned premiums
    
    
    14.5
    
    
    
    12.1Other policyholders funds
    
    
    108.6
    
    
    
    113.8Notes payable
    
    
    448.9
    
    
    
    448.9Other liabilities
    
    
    226.6
    
    
    
    252.1Separate account liabilities
    
    
    854.1
    
    
    
    840.1Total liabilities
    
    
    21,392.0
    
    
    
    21,004.2Commitments and contingencies (Note 9)Preferred stock, $0.01 par value; 10,000,000 shares authorized; none issued
    
    
    
    
    
    
    Common stock, $0.01 par value; 750,000,000 shares authorized; 118,086,019and
92,729,455 shares issued and outstanding as of March 31, 2010 and December 31, 2009,
respectively
    
    
    1.2
    
    
    
    0.9Additional paid-in capital
    
    
    1,448.3
    
    
    
    1,165.7Retained earnings
    
    
    362.7
    
    
    
    316.4Accumulated other comprehensive income (loss), net of taxes
    
    
    159.5
    
    
    
    (49.7
    )Total stockholders equity
    
    
    1,971.7
    
    
    
    1,433.3Total liabilities and stockholders equity
    
    $
    23,363.7
    
    
    $
    22,437.5
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CONSOLIDATED STATEMENTS OF INCOME
 For the Three Months EndedMarch 31,2010
    
    
    2009(In millions, except per share data)(Unaudited)
    
    
    (Unaudited)Revenues:Premiums
    
    $
    119.0
    
    
    $
    119.5Net investment income
    
    
    286.9
    
    
    
    262.7Policy fees, contract charges, and other
    
    
    40.5
    
    
    
    39.6Net realized investment gains (losses):Total other-than-temporary impairment losses on securities
    
    
    (17.9
    )
    
    
    (51.6
    )Less: portion of losses recognized in other comprehensive income (loss)
    
    
    8.2
    
    
    
    23.8Net impairment losses recognized in earnings
    
    
    (9.7
    )
    
    
    (27.8
    )Other net realized investment gains (losses)
    
    
    16.5
    
    
    
    (15.2
    )Total net realized investment gains (losses)
    
    
    6.8
    
    
    
    (43.0
    )Total revenues
    
    
    453.2
    
    
    
    378.8Benefits and expenses:Policyholder benefits and claims
    
    
    86.2
    
    
    
    94.4Interest credited
    
    
    218.5
    
    
    
    195.6Other underwriting and operating expenses
    
    
    59.6
    
    
    
    63.0Interest expense
    
    
    8.0
    
    
    
    7.9Amortization of deferred policy acquisition costs
    
    
    15.4
    
    
    
    10.7Total benefits and expenses
    
    
    387.7
    
    
    
    371.6Income from operations before income taxes
    
    
    65.5
    
    
    
    7.2Provision for income taxes:Current
    
    
    9.9
    
    
    
    1.9Deferred
    
    
    9.3
    
    
    
    0.2Total provision for income taxes
    
    
    19.2
    
    
    
    2.1Net income
    
    $
    46.3
    
    
    $
    5.1Net income per common share:Basic
    
    $
    0.35
    
    
    $
    0.05Diluted
    
    $
    0.35
    
    
    $
    0.05Weighted-average number of common shares outstanding:Basic
    
    
    131.018
    
    
    
    111.622Diluted
    
    
    131.038
    
    
    
    111.622
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CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
 AccumulatedAdditional
    
    
    
    
    
    
    Other
    
    
    TotalCommon
    
    
    Paid-in
    
    
    Retained
    
    
    Comprehensive
    
    
    StockholdersStock
    
    
    Capital
    
    
    Earnings
    
    
    Income (Loss)
    
    
    Equity(In millions)(Unaudited)Balances as of January 1, 2009
    
    $
    0.9
    
    
    $
    1,165.5
    
    
    $
    172.4
    
    
    $
    (1,052.6
    )
    
    $
    286.2Cumulative effect adjustment  new accounting
guidance (net of taxes: $(8.4))
    
    
    
    
    
    
    
    
    
    
    15.7
    
    
    
    (15.7
    )
    
    
    Comprehensive loss, net of taxes:Net income
    
    
    
    
    
    
    
    
    
    
    5.1
    
    
    
    
    
    
    
    5.1Other comprehensive loss (net of taxes: $(49.9))
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (92.8
    )
    
    
    (92.8
    )Total comprehensive loss, net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (87.7
    )Balances as of March 31, 2009
    
    $
    0.9
    
    
    $
    1,165.5
    
    
    $
    193.2
    
    
    $
    (1,161.1
    )
    
    $
    198.5Balances as of January 1, 2010
    
    $
    0.9
    
    
    $
    1,165.7
    
    
    $
    316.4
    
    
    $
    (49.7
    )
    
    $
    1,433.3Common stock issued (net of issuance costs: $20.4)
    
    
    0.3
    
    
    
    282.4
    
    
    
    
    
    
    
    
    
    
    
    282.7Comprehensive income, net of taxes:Net income
    
    
    
    
    
    
    
    
    
    
    46.3
    
    
    
    
    
    
    
    46.3Other comprehensive income (net of taxes: $112.7)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    209.2
    
    
    
    209.2Total comprehensive income, net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    255.5Stock-based compensation
    
    
    
    
    
    
    0.2
    
    
    
    
    
    
    
    
    
    
    
    0.2Balances as of March 31, 2010
    
    $
    1.2
    
    
    $
    1,448.3
    
    
    $
    362.7
    
    
    $
    159.5
    
    
    $
    1,971.7
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CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the Three Months EndedMarch 31,2010
    
    
    2009(In millions)(Unaudited)
    
    
    (Unaudited)Cash flows from operating activitiesNet income
    
    $
    46.3
    
    
    $
    5.1Adjustments to reconcile net income to net cash provided by operating activities:Net realized investment (gains) and losses
    
    
    (6.8
    )
    
    
    43.0Accretion and amortization of invested assets, net
    
    
    8.8
    
    
    
    5.4Accrued interest on bonds
    
    
    (11.5
    )
    
    
    (8.2
    )Amortization and depreciation
    
    
    4.2
    
    
    
    3.3Deferred income tax provision
    
    
    9.3
    
    
    
    0.2Interest credited on deposit contracts
    
    
    218.5
    
    
    
    195.6Mortality and expense charges and administrative fees
    
    
    (25.4
    )
    
    
    (25.1
    )Changes in:Accrued investment income
    
    
    (10.3
    )
    
    
    (17.7
    )Deferred policy acquisition costs, net
    
    
    (14.1
    )
    
    
    (48.1
    )Other receivables
    
    
    0.2
    
    
    
    2.0Future policy benefits
    
    
    0.9
    
    
    
    (0.1
    )Policy and contract claims
    
    
    (5.0
    )
    
    
    (8.6
    )Current income taxes recoverable
    
    
    0.6
    
    
    
    2.2Other assets and liabilities
    
    
    (6.3
    )
    
    
    19.4Other, net
    
    
    0.2
    
    
    
    (0.2
    )Total adjustments
    
    
    163.3
    
    
    
    163.1Net cash provided by operating activities
    
    
    209.6
    
    
    
    168.2Cash flows from investing activitiesPurchases of:Fixed maturities and marketable equity securities
    
    
    (1,024.8
    )
    
    
    (1,305.3
    )Other invested assets and investments in limited partnerships
    
    
    (8.9
    )
    
    
    (2.4
    )Issuances of mortgage loans
    
    
    (45.8
    )
    
    
    (39.0
    )Issuances of policy loans
    
    
    (4.7
    )
    
    
    (5.2
    )Maturities, calls, paydowns, and other
    
    
    387.5
    
    
    
    308.6Securities lending collateral returned, net
    
    
    
    
    
    
    10.4Sales of:Fixed maturities and marketable equity securities
    
    
    176.4
    
    
    
    29.7Other invested assets and investments in limited partnerships
    
    
    4.9
    
    
    
    0.5Repayments of mortgage loans
    
    
    18.8
    
    
    
    17.2Repayments of policy loans
    
    
    4.8
    
    
    
    5.3Net (increase) decrease in short-term investments
    
    
    (51.9
    )
    
    
    2.8Purchases of property, equipment, and leasehold improvements
    
    
    (0.4
    )
    
    
    (0.3
    )Net cash used in investing activities
    
    
    (544.1
    )
    
    
    (977.7
    )Cash flows from financing activitiesPolicyholder account balances:Deposits
    
    $
    495.3
    
    
    $
    1,016.9Withdrawals
    
    
    (295.2
    )
    
    
    (301.8
    )Securities lending collateral paid, net
    
    
    
    
    
    
    (10.4
    )Proceeds from issuance of common stock
    
    
    282.7
    
    
    
    Other, net
    
    
    (16.8
    )
    
    
    (42.6
    )Net cash provided by financing activities
    
    
    466.0
    
    
    
    662.1Net increase (decrease) in cash and cash equivalents
    
    
    131.5
    
    
    
    (147.4
    )Cash and cash equivalents at beginning of period
    
    
    257.8
    
    
    
    468.0Cash and cash equivalents at end of period
    
    $
    389.3
    
    
    $
    320.6Supplemental disclosures of cash flow informationNon-cash transactions during the period:Investments in limited partnerships and capital obligations incurred
    
    
    18.6
    
    
    
    1.0Bond exchanges
    
    
    6.0
    
    
    
    21.7
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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in millions, except per share data, unless otherwise stated)
(Unaudited)
 1. Description of Business
   2. Summary of Significant Accounting Policies
 Basis of Presentation and Use of Estimates
     Adoption of New Accounting Pronouncements
 ASC 810-10 (formerly SFAS No. 167), Amendments to FASB Interpretation No. 46(R)
 Amendments to FASB Interpretation No.
46(R)
 7




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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in millions, except per share data, unless otherwise stated)
(Unaudited)
   ASU 2010-6, Improving Disclosures about Fair Value Measurement
 Fair Value Measurements and Disclosures (Topic
820)  Improving Disclosures about Fair Value Measurement
 Accounting Pronouncements Not Yet Adopted
 ASU 2010-15, How Investments Held through Separate Accounts Affect an Insurers Consolidation
Analysis of Those Investments
 How Investments Held through Separate Accounts
Affect an Insurers Consolidation Analysis of Those Investments
 3. Earnings Per Share
    8




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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in millions, except per share data, unless otherwise stated)
(Unaudited)
  For the Three Months EndedMarch 31,2010
    
    
    2009Numerator:Net income, as reported
    
    $
    46.3
    
    
    $
    5.1Denominator:Weighted-average common shares outstanding  basic
    
    
    131.018
    
    
    
    111.622Add: Dilutive effect of restricted stock
    
    
    0.020
    
    
    
    Weighted-average common shares outstanding  diluted
    
    
    131.038
    
    
    
    111.622Net income per common share:Basic
    
    $
    0.35
    
    
    $
    0.05Diluted
    
    $
    0.35
    
    
    $
    0.05
 4. Investments
  Cost or
    
    
    Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Fair
    
    
    OTTI inCost
    
    
    Gains
    
    
    Losses
    
    
    Value
    
    
    AOCIAs of March 31, 2010Fixed maturities:U.S. government and agencies
    
    $
    41.6
    
    
    $
    2.5
    
    
    $
    
    
    
    $
    44.1
    
    
    $
    (0.1
    )State and political subdivisions
    
    
    516.5
    
    
    
    3.5
    
    
    
    (30.1
    )
    
    
    489.9
    
    
    
    (0.6
    )Corporate securities
    
    
    12,863.4
    
    
    
    597.8
    
    
    
    (262.4
    )
    
    
    13,198.8
    
    
    
    (26.3
    )Residential mortgage-backed securities
    
    
    3,607.8
    
    
    
    120.4
    
    
    
    (78.9
    )
    
    
    3,649.3
    
    
    
    (44.5
    )Commercial mortgage-backed securities
    
    
    1,711.9
    
    
    
    79.0
    
    
    
    (16.1
    )
    
    
    1,774.8
    
    
    
    (3.9
    )Other debt obligations(1)
    
    
    237.2
    
    
    
    13.3
    
    
    
    (16.8
    )
    
    
    233.7
    
    
    
    (3.8
    )Total fixed maturities
    
    
    18,978.4
    
    
    
    816.5
    
    
    
    (404.3
    )
    
    
    19,390.6
    
    
    
    (79.2
    )Marketable equity securities, available-for-sale
    
    
    52.6
    
    
    
    0.1
    
    
    
    (15.1
    )
    
    
    37.6
    
    
    
    Total
    
    $
    19,031.0
    
    
    $
    816.6
    
    
    $
    (419.4
    )
    
    $
    19,428.2
    
    
    $
    (79.2
    )
 Cost or
    
    
    Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Fair
    
    
    OTTI inCost
    
    
    
    Gains
    
    Losses
    
    
    Value
    
    
    AOCIAs of December 31, 2009Fixed 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(1)
    
    
    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
    )
 
 (1)
    
    As of March 31, 2010 and December 31, 2009, this includes foreign
government securities, collateralized mortgage obligations,
collateralized debt obligations and other asset-backed securities. 9




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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in millions, except per share data, unless otherwise stated)
(Unaudited)
  Less Than 12 Months
    
    
    12 Months or MoreGross
    
    
    
    
    
    
    
    
    
    
    GrossFair
    
    
    Unrealized
    
    
    # of
    
    
    Fair
    
    
    Unrealized
    
    
    # ofValue
    
    
    Losses
    
    
    Securities
    
    
    Value
    
    
    Losses
    
    
    SecuritiesAs of March 31, 2010Fixed maturities:State and political subdivisions
    
    $
    38.3
    
    
    $
    (0.9
    )
    
    
    10
    
    
    $
    307.0
    
    
    $
    (29.2
    )
    
    
    50Corporate securities
    
    
    1,347.3
    
    
    
    (25.7
    )
    
    
    125
    
    
    
    2,120.4
    
    
    
    (236.7
    )
    
    
    227Residential mortgage-backed securities
    
    
    390.3
    
    
    
    (3.3
    )
    
    
    26
    
    
    
    376.3
    
    
    
    (75.6
    )
    
    
    60Commercial mortgage-backed securities
    
    
    42.4
    
    
    
    (0.5
    )
    
    
    11
    
    
    
    269.3
    
    
    
    (15.6
    )
    
    
    33Other debt obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28.5
    
    
    
    (16.8
    )
    
    
    8Total fixed maturities
    
    $
    1,818.3
    
    
    $
    (30.4
    )
    
    
    172
    
    
    $
    3,101.5
    
    
    $
    (373.9
    )
    
    
    378Marketable equity securities, available-for-sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37.1
    
    
    
    (15.1
    )
    
    
    5Total
    
    $
    1,818.3
    
    
    $
    (30.4
    )
    
    
    172
    
    
    $
    3,138.6
    
    
    $
    (389.0
    )
    
    
    383
 Less Than 12 Months
    
    
    12 Months or MoreGross
    
    
    
    
    
    
    
    
    
    
    GrossFair
    
    
    Unrealized
    
    
    # of
    
    
    Fair
    
    
    Unrealized
    
    
    # ofValue
    
    
    Losses
    
    
    Securities
    
    
    Value
    
    
    Losses
    
    
    SecuritiesAs of December 31, 2009Fixed maturities:U.S. government and agencies
    
    $
    2.2
    
    
    $
    (0.1
    )
    
    
    1
    
    
    $
    
    
    
    $
    
    
    
    
    State and political subdivisions
    
    
    67.7
    
    
    
    (1.9
    )
    
    
    18
    
    
    
    299.7
    
    
    
    (35.4
    )
    
    
    49Corporate securities
    
    
    1,404.0
    
    
    
    (33.4
    )
    
    
    151
    
    
    
    2,504.0
    
    
    
    (360.3
    )
    
    
    291Residential mortgage-backed securities
    
    
    579.9
    
    
    
    (9.4
    )
    
    
    30
    
    
    
    404.6
    
    
    
    (91.6
    )
    
    
    65Commercial mortgage-backed securities
    
    
    94.9
    
    
    
    (1.4
    )
    
    
    11
    
    
    
    622.8
    
    
    
    (59.3
    )
    
    
    44Other debt obligations
    
    
    11.4
    
    
    
    (0.2
    )
    
    
    3
    
    
    
    28.2
    
    
    
    (17.4
    )
    
    
    8Total fixed maturities
    
    $
    2,160.1
    
    
    $
    (46.4
    )
    
    
    214
    
    
    $
    3,859.3
    
    
    $
    (564.0
    )
    
    
    457Marketable equity securities, available-for-sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36.3
    
    
    
    (16.0
    )
    
    
    5Total
    
    $
    2,160.1
    
    
    $
    (46.4
    )
    
    
    214
    
    
    $
    3,895.6
    
    
    $
    (580.0
    )
    
    
    462
   Cost orAmortized
    
    
    FairCost
    
    
    ValueOne year or less
    
    $
    688.7
    
    
    $
    701.1Over one year through five years
    
    
    3,010.3
    
    
    
    3,177.4Over five years through ten years
    
    
    4,563.7
    
    
    
    4,790.9Over ten years
    
    
    5,225.5
    
    
    
    5,122.4Residential mortgage-backed securities
    
    
    3,607.8
    
    
    
    3,649.3Commercial mortgage-backed securities
    
    
    1,711.9
    
    
    
    1,774.8Other asset-backed securities
    
    
    170.5
    
    
    
    174.7Total fixed maturities
    
    $
    18,978.4
    
    
    $
    19,390.6
 10




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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in millions, except per share data, unless otherwise stated)
(Unaudited)
  For the Three Months EndedMarch 31,2010
    
    
    2009Fixed maturities
    
    $
    271.0
    
    
    $
    250.8Marketable equity securities, available-for-sale
    
    
    0.6
    
    
    
    0.4Marketable equity securities, trading
    
    
    0.7
    
    
    
    0.6Mortgage loans
    
    
    18.8
    
    
    
    16.0Policy loans
    
    
    1.1
    
    
    
    1.1Investments in limited partnerships
    
    
    (1.2
    )
    
    
    (1.5
    )Other
    
    
    1.1
    
    
    
    0.2Total investment income
    
    
    292.1
    
    
    
    267.6Investment expenses
    
    
    (5.2
    )
    
    
    (4.9
    )Net investment income
    
    $
    286.9
    
    
    $
    262.7
  For the Three Months EndedMarch 31,2010
    
    
    2009Fixed maturities:Gross gains on sales
    
    $
    10.4
    
    
    $
    0.5Gross losses on sales
    
    
    (1.1
    )
    
    
    (0.6
    )Other-than-temporary impairments
    
    
    (9.7
    )
    
    
    (27.8
    )Other(1)
    
    
    2.3
    
    
    
    (4.3
    )Total fixed maturities
    
    
    1.9
    
    
    
    (32.2
    )Marketable equity securities, trading(2)
    
    
    7.6
    
    
    
    (15.3
    )Other invested assets
    
    
    (1.4
    )
    
    
    (1.6
    )Deferred policy acquisition costs adjustment
    
    
    (1.3
    )
    
    
    6.1Net realized investment gains (losses)
    
    $
    6.8
    
    
    $
    (43.0
    )
 
 (1)
    
    This includes gains (losses) on calls and redemptions, as well as
changes in fair value of the Companys convertible securities
totaling $2.5 and $0.1 for the three months ended March 31, 2010
and 2009.(2)
    
    This includes $4.8 and $(15.0) of gains (losses) related to
changes in fair value of trading securities held as of March 31,
2010 and 2009, respectively. Other-Than-Temporary Impairments
   
    
    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 securitys underlying collateral;
    
    Any downgrades of the security by a rating agency;
 11




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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in millions, except per share data, unless otherwise stated)
(Unaudited)
 
    
    Any reduction or elimination of dividends or nonpayment of scheduled interest payments;
    
    Other indications that a credit loss has occurred; and
    
    The Companys 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 Companys liquidity needs.
  Determination of Credit Losses on Corporate Securities
  
    
    Fundamentals of the issuer to determine what the Company would recover if the issuer
were to file bankruptcy versus 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 underlying
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.
 Determination of Credit Losses on Mortgage-backed Securities
  
    
    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 Companys expectation of the sale of such security; and
    
    Susceptibility to variability of prepayments.
 12




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CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in millions, except per share data, unless otherwise stated)
(Unaudited)
  As of March 31, 2010
    
    
    As of December 31, 2009Gross
    
    
    
    
    
    
    GrossFair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedValue
    
    
    Losses
    
    
    Value
    
    
    LossesFixed maturitiesUnderwater by 20% or more:Less than 6 consecutive months
    
    $
    71.5
    
    
    $
    (19.4
    )
    
    $
    103.4
    
    
    $
    (28.4
    )6 consecutive months or more
    
    
    309.8
    
    
    
    (131.9
    )
    
    
    517.9
    
    
    
    (229.5
    )Total underwater by 20% or more
    
    
    381.3
    
    
    
    (151.3
    )
    
    
    621.3
    
    
    
    (257.9
    )All other underwater fixed maturities
    
    
    4,538.5
    
    
    
    (253.0
    )
    
    
    5,398.1
    
    
    
    (352.5
    )Total underwater fixed maturities
    
    $
    4,919.8
    
    
    $
    (404.3
    )
    
    $
    6,019.4
    
    
    $
    (610.4
    )Marketable equity securities, available-for-saleUnderwater by 20% or more:6 consecutive months or more
    
    $
    16.3
    
    
    $
    (10.2
    )
    
    $
    35.6
    
    
    $
    (15.9
    )Total underwater by 20% or more
    
    
    16.3
    
    
    
    (10.2
    )
    
    
    35.6
    
    
    
    (15.9
    )All other underwater marketable equity securities, available-for-sale
    
    
    20.8
    
    
    
    (4.9
    )
    
    
    0.7
    
    
    
    (0.1
    )Total underwater marketable equity securities, available-for-sale
    
    $
    37.1
    
    
    $
    (15.1
    )
    
    $
    36.3
    
    
    $
    (16.0
    )
     For the Three Months EndedMarch 31,2010
    
    
    2009Balance, beginning of period
    
    $
    69.6
    
    
    $
    73.0Increases recognized in the current period:For which an OTTI was not previously recognized
    
    
    6.0
    
    
    
    10.2For which an OTTI was previously recognized
    
    
    1.5
    
    
    
    8.4Decreases attributable to:Securities sold or paid down during the period
    
    
    (7.6
    )
    
    
    (0.1
    )Previously recognized credit losses on
securities impaired during the period due to a
change in intent to sell(1)
    
    
    
    
    
    
    (5.4
    )Balance, end of period
    
    $
    69.5
    
    
    $
    86.1
 
 (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




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##### Table of Contents



5. Fair Value of Financial Instruments
 CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in millions, except per share data, unless otherwise stated)
(Unaudited)
   
    
    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 March 31, 2010Fair Value
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Level 3 PercentTypes of InvestmentsFixed maturities, available-for-sale:U.S. government and agencies
    
    $
    44.1
    
    
    $
    
    
    
    $
    44.1
    
    
    $
    
    
    
    
    State and political subdivisions
    
    
    489.9
    
    
    
    
    
    
    
    482.5
    
    
    
    7.4
    
    
    
    0.0
    %Corporate securities
    
    
    13,198.8
    
    
    
    
    
    
    
    12,292.0
    
    
    
    906.8
    
    
    
    4.4Residential mortgage-backed securities
    
    
    3,649.3
    
    
    
    
    
    
    
    3,388.5
    
    
    
    260.8
    
    
    
    1.3Commercial mortgage-backed securities
    
    
    1,774.8
    
    
    
    
    
    
    
    1,751.7
    
    
    
    23.1
    
    
    
    0.1Other debt obligations
    
    
    233.7
    
    
    
    
    
    
    
    222.9
    
    
    
    10.8
    
    
    
    0.1Total fixed maturities, available-for-sale
    
    
    19,390.6
    
    
    
    
    
    
    
    18,181.7
    
    
    
    1,208.9
    
    
    
    5.9Marketable equity securities, available-for-sale
    
    
    37.6
    
    
    
    35.8
    
    
    
    
    
    
    
    1.8
    
    
    
    0.0Marketable equity securities, trading
    
    
    151.0
    
    
    
    150.5
    
    
    
    
    
    
    
    0.5
    
    
    
    0.0Short-term investments
    
    
    54.0
    
    
    
    2.0
    
    
    
    52.0
    
    
    
    
    
    
    
    Investments in limited partnerships(1)
    
    
    25.2
    
    
    
    
    
    
    
    
    
    
    
    25.2
    
    
    
    0.1Other invested assets
    
    
    3.8
    
    
    
    
    
    
    
    
    
    
    
    3.8
    
    
    
    0.0Total investments
    
    
    19,662.2
    
    
    
    188.3
    
    
    
    18,233.7
    
    
    
    1,240.2
    
    
    
    6.0Separate account assets
    
    
    854.1
    
    
    
    854.1
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    20,516.3
    
    
    $
    1,042.4
    
    
    $
    18,233.7
    
    
    $
    1,240.2
    
    
    
    6.0
    %
 14




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##### Table of Contents



CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in millions, except per share data, unless otherwise stated)
(Unaudited)
 As of December 31, 2009Fair Value
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Level 3 PercentTypes of InvestmentsFixed 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
    
    
    
    4.5Residential mortgage-backed securities
    
    
    3,536.4
    
    
    
    
    
    
    
    3,285.9
    
    
    
    250.5
    
    
    
    1.3Commercial mortgage-backed securities
    
    
    1,789.4
    
    
    
    
    
    
    
    1,765.4
    
    
    
    24.0
    
    
    
    0.1Other debt obligations
    
    
    193.0
    
    
    
    
    
    
    
    182.4
    
    
    
    10.6
    
    
    
    0.1Total fixed maturities, available-for-sale
    
    
    18,594.3
    
    
    
    
    
    
    
    17,410.8
    
    
    
    1,183.5
    
    
    
    6.0Marketable equity securities, available-for-sale
    
    
    36.7
    
    
    
    34.9
    
    
    
    
    
    
    
    1.8
    
    
    
    0.0Marketable equity securities, trading
    
    
    154.1
    
    
    
    153.8
    
    
    
    
    
    
    
    0.3
    
    
    
    0.0Short-term investments
    
    
    2.1
    
    
    
    2.1
    
    
    
    
    
    
    
    
    
    
    
    Investments in limited partnerships(1)
    
    
    24.7
    
    
    
    
    
    
    
    
    
    
    
    24.7
    
    
    
    0.2Other invested assets
    
    
    4.6
    
    
    
    
    
    
    
    
    
    
    
    4.6
    
    
    
    0.0Total investments
    
    
    18,816.5
    
    
    
    190.8
    
    
    
    17,410.8
    
    
    
    1,214.9
    
    
    
    6.2Separate account assets
    
    
    840.1
    
    
    
    840.1
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    19,656.6
    
    
    $
    1,030.9
    
    
    $
    17,410.8
    
    
    $
    1,214.9
    
    
    
    6.2
    %
 
 (1)
    
    As of March 31, 2010 and December 31, 2009, this amount included investments in private equity and
hedge funds. Fixed Maturities
    15




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##### Table of Contents



CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in millions, except per share data, unless otherwise stated)
(Unaudited)
 Corporate Securities
  As of
    
    As ofMarch 31, 2010
    
    December 31, 2009%
    
    # of
    
    
    
    
    
    %
    
    # ofAmount
    
    of Total
    
    Securities
    
    Amount
    
    of Total
    
    SecuritiesSignificant Security Sectors:Industrials
    
    $
    2,179.8
    
    
    
    17.7
    %
    
    
    209
    
    
    $
    1,974.9
    
    
    
    16.9
    %
    
    
    227Utilities
    
    
    1,838.5
    
    
    
    15.0
    
    
    
    196
    
    
    
    1,771.6
    
    
    
    15.2
    
    
    
    216Financials
    
    
    1,807.8
    
    
    
    14.7
    
    
    
    231
    
    
    
    1,760.2
    
    
    
    15.1
    
    
    
    286Consumer staples
    
    
    1,782.5
    
    
    
    14.5
    
    
    
    135
    
    
    
    1,731.0
    
    
    
    14.8
    
    
    
    150Weighted-average coupon rate
    
    
    6.5
    %
    
    
    
    
    
    
    
    
    
    
    6.5
    %Weighted-average remaining years to contractual maturity
    
    
    13.0
    
    
    
    
    
    
    
    
    
    
    
    13.3
     As of March 31, 2010
    
    
    As of December 31, 2009Fair
    
    
    % of Total
    
    
    Fair
    
    
    % of TotalNAIC Rating
    
    Comparable Standard & Poors rating
    
    
    Value
    
    
    Fair Value
    
    
    Value
    
    
    Fair Value1
    
    AAA, AA, A
    
    $
    153.8
    
    
    
    19.1
    %
    
    $
    153.5
    
    
    
    19.2
    %2
    
    BBB
    
    
    559.7
    
    
    
    69.6
    
    
    
    557.4
    
    
    
    69.83  6
    
    BB & below
    
    
    90.5
    
    
    
    11.3
    
    
    
    87.3
    
    
    
    11.0Total
    
    
    
    
    
    $
    804.0
    
    
    
    100.0
    %
    
    $
    798.2
    
    
    
    100.0
    %
  Residential Mortgage-backed Securities
  16




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##### Table of Contents



CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in millions, except per share data, unless otherwise stated)
(Unaudited)
  As of
    
    
    As ofMarch 31, 2010
    
    
    December 31, 2009Amount
    
    
    % of Total
    
    
    Amount
    
    
    % of TotalStandard & Poors equivalent rating:AAA
    
    $
    177.4
    
    
    
    36.6
    %
    
    $
    200.8
    
    
    
    39.9
    %AA through BBB
    
    
    116.6
    
    
    
    24.1
    
    
    
    140.2
    
    
    
    27.8BB & below
    
    
    190.0
    
    
    
    39.3
    
    
    
    162.7
    
    
    
    32.3Total Non-agency RMBS
    
    $
    484.0
    
    
    
    100.0
    %
    
    $
    503.7
    
    
    
    100.0
    %Non-agency RMBS with super senior subordination
    
    $
    294.3
    
    
    
    60.8
    %
    
    $
    300.3
    
    
    
    59.6
    %
    Commercial Mortgage-backed Securities
    17




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##### Table of Contents



CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in millions, except per share data, unless otherwise stated)
(Unaudited)
 Marketable Equity Securities
   Short-term Investments
  Investments in Limited Partnerships
   Other Invested Assets
  Separate Accounts
  Rollforward of Financial Instruments Measured at Fair Value on a Recurring Basis Using Significant
Unobservable Inputs (Level 3)
  Unrealized Gain (Loss)Transfers In
    
    
    
    
    
    
    Included in:Balance as
    
    
    
    
    
    
    
    
    
    
    and/or
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    Realized
    
    
    Balance as ofof January 1,
    
    
    
    
    
    
    
    
    
    
    (Out) of
    
    
    
    
    
    
    Net
    
    
    Comprehensive
    
    
    Gains
    
    
    March 31,2010
    
    
    Purchases
    
    
    Sales
    
    
    Level 3(1)
    
    
    Other(3)
    
    
    Income(2)
    
    
    Income
    
    
    (Losses)(2)
    
    
    2010Types of Investments:State and political subdivisions
    
    $
    7.2
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    0.2
    
    
    $
    
    
    
    $
    7.4Corporate securities
    
    
    891.2
    
    
    
    16.0
    
    
    
    (17.3
    )
    
    
    8.1
    
    
    
    (2.5
    )
    
    
    
    
    
    
    13.0
    
    
    
    (1.7
    )
    
    
    906.8Residential mortgage-backed securities
    
    
    250.5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2.7
    
    
    
    
    
    
    
    7.6
    
    
    
    
    
    
    
    260.8Commercial mortgage-backed securities
    
    
    24.0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1.9
    )
    
    
    
    
    
    
    1.0
    
    
    
    
    
    
    
    23.1Other debt obligations
    
    
    10.6
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.3
    )
    
    
    
    
    
    
    0.5
    
    
    
    
    
    
    
    10.8Total fixed maturities, available-for-sale
    
    
    1,183.5
    
    
    
    16.0
    
    
    
    (17.3
    )
    
    
    8.1
    
    
    
    (2.0
    )
    
    
    
    
    
    
    22.3
    
    
    
    (1.7
    )
    
    
    1,208.9Marketable equity securities, available-for-sale
    
    
    1.8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.8Marketable equity securities, trading
    
    
    0.3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.5Investments in limited partnerships
    
    
    24.7
    
    
    
    0.6
    
    
    
    (1.0
    )
    
    
    
    
    
    
    
    
    
    
    0.8
    
    
    
    
    
    
    
    0.1
    
    
    
    25.2Other invested assets
    
    
    4.6
    
    
    
    
    
    
    
    (0.3
    )
    
    
    
    
    
    
    (0.8
    )
    
    
    0.2
    
    
    
    
    
    
    
    0.1
    
    
    
    3.8Total Level 3
    
    $
    1,214.9
    
    
    $
    16.6
    
    
    $
    (18.6
    )
    
    $
    8.1
    
    
    $
    (2.6
    )
    
    $
    1.0
    
    
    $
    22.3
    
    
    $
    (1.5
    )
    
    $
    1,240.2
 18




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##### Table of Contents



CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in millions, except per share data, unless otherwise stated)
(Unaudited)
 
 (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 and out of Level 3 were $10.3
and $(2.2), respectively, for the three months ended March 31, 2010.(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 ofof January 1,
    
    
    
    
    
    
    
    
    
    
    (Out) of
    
    
    
    
    
    
    Net
    
    
    Comprehensive
    
    
    Gains
    
    
    March 31,2009
    
    
    Purchases
    
    
    Sales
    
    
    Level 3(1)
    
    
    Other(3)
    
    
    Income(2)
    
    
    Loss
    
    
    (Losses)(2)
    
    
    2009Types of Investments:State and political subdivisions
    
    $
    6.3
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    0.2
    
    
    $
    
    
    
    $
    6.5Corporate securities
    
    
    631.6
    
    
    
    52.3
    
    
    
    
    
    
    
    
    
    
    
    (4.8
    )
    
    
    (0.1
    )
    
    
    (13.3
    )
    
    
    (1.0
    )
    
    
    664.7Commercial mortgage-backed securities
    
    
    24.4
    
    
    
    
    
    
    
    
    
    
    
    (0.7
    )
    
    
    (0.9
    )
    
    
    
    
    
    
    (0.2
    )
    
    
    
    
    
    
    22.6Other debt obligations
    
    
    12.0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.5
    )
    
    
    
    
    
    
    1.4
    
    
    
    
    
    
    
    12.9Total fixed maturities, available-for-sale
    
    
    674.3
    
    
    
    52.3
    
    
    
    
    
    
    
    (0.7
    )
    
    
    (6.2
    )
    
    
    (0.1
    )
    
    
    (11.9
    )
    
    
    (1.0
    )
    
    
    706.7Marketable equity securities, available-for-sale
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5.3
    
    
    
    
    
    
    
    
    
    
    
    (3.5
    )
    
    
    
    
    
    
    1.8Marketable equity securities, trading
    
    
    0.2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.1
    )
    
    
    
    
    
    
    
    
    
    
    0.1Investments in limited partnerships
    
    
    56.3
    
    
    
    2.5
    
    
    
    (0.6
    )
    
    
    
    
    
    
    
    
    
    
    0.8
    
    
    
    
    
    
    
    
    
    
    
    59.0Other invested assets
    
    
    2.4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1.5
    )
    
    
    
    
    
    
    
    
    
    
    0.9Total Level 3
    
    $
    733.2
    
    
    $
    54.8
    
    
    $
    (0.6
    )
    
    $
    4.6
    
    
    $
    (6.2
    )
    
    $
    (0.9
    )
    
    $
    (15.4
    )
    
    $
    (1.0
    )
    
    $
    768.5
 
 (1)
    
    Transfers into and/or out of Level 3 are reported as the value as of the beginning of the
period in which the transfer occurs. Gross transfers into and out of Level 3 were $5.3 and
$(0.7), respectively, for the three months ended March 31, 2009.(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.  As of March 31, 2010
    
    As of December 31, 2009Carrying
    
    
    
    
    
    CarryingAmount
    
    Fair Value
    
    Amount
    
    Fair ValueFinancial assets:Fixed maturities
    
    $
    19,360.6
    
    
    $
    19,360.6
    
    
    $
    18,594.3
    
    
    $
    18,594.3Marketable equity securities, available-for-sale
    
    
    37.6
    
    
    
    37.6
    
    
    
    36.7
    
    
    
    36.7Marketable equity securities, trading
    
    
    151.0
    
    
    
    151.0
    
    
    
    154.1
    
    
    
    154.1Mortgage loans
    
    
    1,228.0
    
    
    
    1,218.1
    
    
    
    1,201.7
    
    
    
    1,190.1Short-term investments
    
    
    54.0
    
    
    
    54.0
    
    
    
    2.1
    
    
    
    2.1Investments in limited partnerships:Hedge funds and private equity funds
    
    
    25.2
    
    
    
    25.2
    
    
    
    24.7
    
    
    
    24.7Affordable housing
    
    
    105.4
    
    
    
    107.0
    
    
    
    85.5
    
    
    
    89.9Other invested assets
    
    
    9.1
    
    
    
    9.1
    
    
    
    10.1
    
    
    
    10.1Cash and cash equivalents
    
    
    389.3
    
    
    
    389.3
    
    
    
    257.8
    
    
    
    257.8Separate account assets
    
    
    854.1
    
    
    
    854.1
    
    
    
    840.1
    
    
    
    840.1Financial liabilities:Funds held under deposit contracts:Deferred annuities
    
    
    7,545.8
    
    
    
    7,449.4
    
    
    
    7,212.1
    
    
    
    7,128.2Immediate annuities
    
    
    6,736.3
    
    
    
    6,938.8
    
    
    
    6,724.4
    
    
    
    6,937.8Notes payable:Capital Efficient Notes (CENts)
    
    
    149.8
    
    
    
    132.5
    
    
    
    149.8
    
    
    
    118.5Senior notes
    
    
    299.1
    
    
    
    299.1
    
    
    
    299.1
    
    
    
    276.8
 19




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##### Table of Contents



CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in millions, except per share data, unless otherwise stated)
(Unaudited)
 Other Financial Instruments
      6. Deferred Policy Acquisition Costs
  For the ThreeMonths Ended
    
    
    For the Year EndedMarch 31, 2010
    
    
    December 31, 2009Unamortized balance at beginning of period
    
    $
    325.7
    
    
    $
    219.5Deferral of acquisition costs
    
    
    30.5
    
    
    
    148.3Adjustments related to investment (gains) losses
    
    
    (1.0
    )
    
    
    9.3Amortization
    
    
    (15.4
    )
    
    
    (51.4
    )Unamortized balance at end of period
    
    
    339.8
    
    
    
    325.7Accumulated effect of net unrealized investment gains
    
    
    (112.3
    )
    
    
    (75.3
    )Balance at end of period
    
    $
    227.5
    
    
    $
    250.4
 7. Deferred Sales Inducements
  For the ThreeMonths Ended
    
    
    For the Year EndedMarch 31, 2010
    
    
    December 31, 2009Unamortized balance at beginning of period
    
    $
    67.6
    
    
    $
    33.0Capitalizations
    
    
    13.3
    
    
    
    42.5Adjustments related to investment (gains) losses
    
    
    (0.3
    )
    
    
    2.4Amortization
    
    
    (3.9
    )
    
    
    (10.3
    )Unamortized balance at end of period
    
    
    76.7
    
    
    
    67.6Accumulated effect of net unrealized investment gains
    
    
    (29.7
    )
    
    
    (18.4
    )Balance at end of period
    
    $
    47.0
    
    
    $
    49.2
 20




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##### Table of Contents



CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in millions, except per share data, unless otherwise stated)
(Unaudited)
 8. Stockholders Equity
  For the Three Months EndedMarch 31,2010
    
    
    2009Net income
    
    $
    46.3
    
    
    $
    5.1Other comprehensive income (loss), net of taxes:Changes in unrealized gains and losses on available-for-sale securities(1)
    
    
    244.9
    
    
    
    (112.6
    )Reclassification adjustment for net realized investment (gains) losses included in net income(2)
    
    
    (6.1
    )
    
    
    30.9Adjustment for deferred policy acquisition costs and deferred sales inducements valuation allowance(3)
    
    
    (31.4
    )
    
    
    4.4Other-than-temporary-impairments on fixed maturities not related to credit losses(4)
    
    
    1.8
    
    
    
    (15.5
    )Other comprehensive income (loss)
    
    
    209.2
    
    
    
    (92.8
    )Total comprehensive income (loss)
    
    $
    255.5
    
    
    $
    (87.7
    )
 
 (1)
    
    Net of taxes of $131.9 and $(60.6) for the three months ended March 31, 2010 and 2009, respectively.(2)
    
    Net of taxes of $(3.3) and $16.6 for the three months ended March 31, 2010 and 2009, respectively.
For the three months ended March 31, 2010, $7.1 (net of taxes of $3.9) of the reclassification
adjustment is related to losses previously classified as OTTI not related to credit losses. For the
three months ended March 31, 2009, the reclassification adjustment did not include any OTTI not
related to credit losses.(3)
    
    Net of taxes of $(16.9) and $2.5 for the three months ended March 31, 2010 and 2009, respectively.(4)
    
    Net of taxes of $1.0 and $(8.4) for the three months ended March 31, 2010 and 2009, respectively.  Common SharesBalance at January 1, 2009
    
    
    92,646,295Restricted shares(2)
    
    
    83,160Balance at December 31, 2009
    
    
    92,729,455Balance at January 1, 2010
    
    
    92,729,455Common stock, issued(1)
    
    
    25,259,510Restricted shares(2)
    
    
    97,054Balance at March 31, 2010
    
    
    118,086,019
 
 (1)
    
    In January 2010, the Company issued common stock in an initial public
offering. See Note 1 for further discussion.(2)
    
    Represents restricted shares issued pursuant to the Companys Equity Plan. 9. Commitments and Contingencies
 Investments in Limited Partnerships
  Litigation
  21




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##### Table of Contents



CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in millions, except per share data, unless otherwise stated)
(Unaudited)
 Other Commitments
  10. Segment Information
  For the Three Months Ended March 31, 2010Retirement
    
    
    IncomeGroup
    
    
    Services
    
    
    Annuities
    
    
    Individual
    
    
    Other
    
    
    TotalOperating revenues:Premiums
    
    $
    108.8
    
    
    $
    
    
    
    $
    
    
    
    $
    10.2
    
    
    $
    
    
    
    $
    119.0Net investment income
    
    
    4.6
    
    
    
    107.8
    
    
    
    104.0
    
    
    
    66.1
    
    
    
    4.4
    
    
    
    286.9Policy fees, contract charges, and other
    
    
    2.9
    
    
    
    4.8
    
    
    
    0.2
    
    
    
    29.1
    
    
    
    3.5
    
    
    
    40.5Net investment gains on FIA options
    
    
    
    
    
    
    0.1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.1Total operating revenues
    
    
    116.3
    
    
    
    112.7
    
    
    
    104.2
    
    
    
    105.4
    
    
    
    7.9
    
    
    
    446.5Benefits and expenses:Policyholder benefits and claims
    
    
    75.0
    
    
    
    0.1
    
    
    
    
    
    
    
    11.1
    
    
    
    
    
    
    
    86.2Interest credited
    
    
    
    
    
    
    68.5
    
    
    
    92.0
    
    
    
    58.5
    
    
    
    (0.5
    )
    
    
    218.5Other underwriting and operating expenses
    
    
    23.7
    
    
    
    13.6
    
    
    
    5.3
    
    
    
    12.7
    
    
    
    4.3
    
    
    
    59.6Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8.0
    
    
    
    8.0Amortization of deferred policy acquisition costs
    
    
    1.9
    
    
    
    13.2
    
    
    
    0.5
    
    
    
    (0.2
    )
    
    
    
    
    
    
    15.4Total benefits and expenses
    
    
    100.6
    
    
    
    95.4
    
    
    
    97.8
    
    
    
    82.1
    
    
    
    11.8
    
    
    
    387.7Segment pre-tax adjusted operating income (loss)
    
    $
    15.7
    
    
    $
    17.3
    
    
    $
    6.4
    
    
    $
    23.3
    
    
    $
    (3.9
    )
    
    $
    58.8Operating revenues
    
    $
    116.3
    
    
    $
    112.7
    
    
    $
    104.2
    
    
    $
    105.4
    
    
    $
    7.9
    
    
    $
    446.5Add: Net realized investment gains (losses), excluding
FIA options
    
    
    (0.2
    )
    
    
    3.0
    
    
    
    4.7
    
    
    
    0.2
    
    
    
    (1.0
    )
    
    
    6.7Total revenues
    
    
    116.1
    
    
    
    115.7
    
    
    
    108.9
    
    
    
    105.6
    
    
    
    6.9
    
    
    
    453.2Total benefits and expenses
    
    
    100.6
    
    
    
    95.4
    
    
    
    97.8
    
    
    
    82.1
    
    
    
    11.8
    
    
    
    387.7Income (loss) before income taxes
    
    $
    15.5
    
    
    $
    20.3
    
    
    $
    11.1
    
    
    $
    23.5
    
    
    $
    (4.9
    )
    
    $
    65.5As of March 31, 2010:Total assets
    
    $
    258.8
    
    
    $
    8,810.2
    
    
    $
    6,718.3
    
    
    $
    5,226.7
    
    
    $
    2,349.7
    
    
    $
    23,363.7
 22




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##### Table of Contents



CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in millions, except per share data, unless otherwise stated)
(Unaudited)
 For the Three Months Ended March 31, 2009Retirement
    
    
    IncomeGroup
    
    
    Services
    
    
    Annuities
    
    
    Individual
    
    
    Other
    
    
    TotalOperating revenues:Premiums
    
    $
    109.7
    
    
    $
    
    
    
    $
    
    
    
    $
    9.8
    
    
    $
    
    
    
    $
    119.5Net investment income
    
    
    4.5
    
    
    
    83.0
    
    
    
    106.3
    
    
    
    64.1
    
    
    
    4.8
    
    
    
    262.7Policy fees, contract charges, and other
    
    
    4.1
    
    
    
    3.8
    
    
    
    0.2
    
    
    
    29.2
    
    
    
    2.3
    
    
    
    39.6Net investment losses on FIA options
    
    
    
    
    
    
    (1.4
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1.4
    )Total operating revenues
    
    
    118.3
    
    
    
    85.4
    
    
    
    106.5
    
    
    
    103.1
    
    
    
    7.1
    
    
    
    420.4Benefits and expenses:Policyholder benefits and claims
    
    
    76.9
    
    
    
    (0.5
    )
    
    
    
    
    
    
    18.0
    
    
    
    
    
    
    
    94.4Interest credited
    
    
    
    
    
    
    55.6
    
    
    
    86.7
    
    
    
    53.9
    
    
    
    (0.6
    )
    
    
    195.6Other underwriting and operating expenses
    
    
    27.9
    
    
    
    13.5
    
    
    
    5.0
    
    
    
    13.5
    
    
    
    3.1
    
    
    
    63.0Interest expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7.9
    
    
    
    7.9Amortization of deferred policy acquisition costs
    
    
    2.0
    
    
    
    7.8
    
    
    
    0.4
    
    
    
    0.5
    
    
    
    
    
    
    
    10.7Total benefits and expenses
    
    
    106.8
    
    
    
    76.4
    
    
    
    92.1
    
    
    
    85.9
    
    
    
    10.4
    
    
    
    371.6Segment pre-tax adjusted operating income (loss)
    
    $
    11.5
    
    
    $
    9.0
    
    
    $
    14.4
    
    
    $
    17.2
    
    
    $
    (3.3
    )
    
    $
    48.8Operating revenues
    
    $
    118.3
    
    
    $
    85.4
    
    
    $
    106.5
    
    
    $
    103.1
    
    
    $
    7.1
    
    
    $
    420.4Add: Net realized investment losses, excluding
FIA options
    
    
    (0.1
    )
    
    
    (12.1
    )
    
    
    (24.0
    )
    
    
    (4.8
    )
    
    
    (0.6
    )
    
    
    (41.6
    )Total revenues
    
    
    118.2
    
    
    
    73.3
    
    
    
    82.5
    
    
    
    98.3
    
    
    
    6.5
    
    
    
    378.8Total benefits and expenses
    
    
    106.8
    
    
    
    76.4
    
    
    
    92.1
    
    
    
    85.9
    
    
    
    10.4
    
    
    
    371.6Income (loss) before income taxes
    
    $
    11.4
    
    
    $
    (3.1
    )
    
    $
    (9.6
    )
    
    $
    12.4
    
    
    $
    (3.9
    )
    
    $
    7.2As of March 31, 2009:Total assets
    
    $
    275.5
    
    
    $
    6,856.7
    
    
    $
    6,083.5
    
    
    $
    4,786.8
    
    
    $
    1,946.2
    
    
    $
    19,948.7
 11. Subsequent Events
  23




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Unless the context otherwise requires, references in this report on Form 10-Q to Symetra
refer to Symetra Financial Corporation on a stand-alone, non-consolidated basis. References to
we, our, us and the Company are to Symetra Financial Corporation together with its
subsidiaries.
 This discussion contains forward-looking statements that involve risks and uncertainties. Our
actual results may differ materially from those discussed in or implied by any of the
forward-looking statements as a result of various factors, including but not limited to those
listed under Forward-Looking Statements. You should read the following discussion in conjunction
with the unaudited interim consolidated financial statements and accompanying condensed notes
included in Item 1  Financial Statements included in this Form 10-Q, as well as our Annual
Report on Form 10-K for the year ended December 31, 2009, filed with the SEC on March 8, 2010
(2009 10-K), as well as our current reports on Form 8-K and other publicly available information.
Our fiscal year ends on December 31 of each calendar year.
 Management considers certain non-GAAP financial measures, including adjusted operating income,
adjusted book value, adjusted book value per common share, adjusted book value per common share, as
converted, and operating ROAE to be useful to investors in evaluating our financial performance and
condition. These measures have been reconciled to their most comparable GAAP financial measures.
For a definition of these non-GAAP measures, see  Use of non-GAAP Financial Measures.
 All amounts, except per share data, are in millions unless otherwise stated.
 Overview
   Our Operations
 We conduct our business through five segments, four of which are operating:
    
    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.
 24




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##### Table of Contents



Current Outlook
      Critical Accounting Policies and Estimates
  
    
    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.
  25




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##### Table of Contents



New Accounting Standards
  Sources of Revenues and Expenses
   Revenues
 Premiums
  Net investment income
  Policy fees, contract charges and other
  Net realized investment gains (losses)
  Benefits and Expenses
 Policyholder benefits and claims
  Interest credited
  26




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##### Table of Contents



Other underwriting and operating expenses
  Interest expense
  Amortization of deferred policy acquisition costs
  Use of non-GAAP Financial Measures
  As of
    
    
    As ofMarch 31,
    
    
    December 31,2010
    
    
    2009Total stockholders equity
    
    $
    1,971.7
    
    
    $
    1,433.3Less: AOCI
    
    
    159.5
    
    
    
    (49.7
    )Adjusted book value*
    
    
    1,812.2
    
    
    
    1,483.0Add: Assumed proceeds from exercise of warrants
    
    
    218.1
    
    
    
    218.1Adjusted book value, as converted*
    
    $
    2,030.3
    
    
    $
    1,701.1Book value per common share
    
    $
    14.39
    
    
    $
    12.83Adjusted book value per common share*
    
    $
    15.35
    
    
    $
    15.99Adjusted book value per common share, as converted*
    
    $
    14.81
    
    
    $
    15.23
 For the Twelve Months EndedMarch 31,
    
    December 31,2010
    
    2009Return on stockholders equity, ROE
    
    
    14.5
    %
    
    
    15.4
    %Average stockholders equity
    
    $
    1,169.5
    
    
    $
    832.4Operating return on average equity, or ROAE*
    
    
    10.5
    %
    
    
    10.5
    %Average adjusted book value*
    
    $
    1,502.4
    
    
    $
    1,407.8
 
 *
    
    Represents non-GAAP measures Adjusted Operating Income
  27




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##### Table of Contents




    
    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.
    28




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##### Table of Contents



Adjusted Book Value, Adjusted Book Value per Common Share and Adjusted Book Value per Common Share, as Converted
 Adjusted book value
        Adjusted book value per common share
  29




---



##### Table of Contents



Adjusted book value per common share, as converted
       30




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##### Table of Contents



Operating ROAE
       31




---



##### Table of Contents



Results of Operations
 Total Company
  Three MonthsEnded March 31,
    
    
    Variance (%)2010
    
    
    2009
    
    
    2010 vs. 2009Revenues:Premiums
    
    $
    119.0
    
    
    $
    119.5
    
    
    
    (0.4
    )%Net investment income
    
    
    286.9
    
    
    
    262.7
    
    
    
    9.2Policy fees, contract charges, and other
    
    
    40.5
    
    
    
    39.6
    
    
    
    2.3Net realized investment gains (losses):Total other-than-temporary impairment losses on securities
    
    
    (17.9
    )
    
    
    (51.6
    )
    
    
    *Less: portion of losses recognized in other comprehensive income (loss)
    
    
    8.2
    
    
    
    23.8
    
    
    
    *Net impairment losses recognized in earnings
    
    
    (9.7
    )
    
    
    (27.8
    )
    
    
    65.1Other net realized investment gains (losses)
    
    
    16.5
    
    
    
    (15.2
    )
    
    
    *Total net realized investment gains (losses)
    
    
    6.8
    
    
    
    (43.0
    )
    
    
    *Total revenues
    
    
    453.2
    
    
    
    378.8
    
    
    
    19.6Benefits and expenses:Policyholder benefits and claims
    
    
    86.2
    
    
    
    94.4
    
    
    
    (8.7
    )Interest credited
    
    
    218.5
    
    
    
    195.6
    
    
    
    11.7Other underwriting and operating expenses
    
    
    59.6
    
    
    
    63.0
    
    
    
    (5.4
    )Interest expense
    
    
    8.0
    
    
    
    7.9
    
    
    
    1.3Amortization of deferred policy acquisition costs
    
    
    15.4
    
    
    
    10.7
    
    
    
    43.9Total benefits and expenses
    
    
    387.7
    
    
    
    371.6
    
    
    
    4.3Income from operations before income taxes
    
    
    65.5
    
    
    
    7.2
    
    
    
    *Provision for income taxes:Current
    
    
    9.9
    
    
    
    1.9
    
    
    
    *Deferred
    
    
    9.3
    
    
    
    0.2
    
    
    
    *Total provision for income taxes:
    
    
    19.2
    
    
    
    2.1
    
    
    
    *Net income
    
    $
    46.3
    
    
    $
    5.1
    
    
    
    *Net income per common share(1):Basic
    
    $
    0.35
    
    
    $
    0.05
    
    
    
    *Diluted
    
    $
    0.35
    
    
    $
    0.05
    
    
    
    *Weighted-average common shares outstanding:Basic
    
    
    131.018
    
    
    
    111.622
    
    
    
    *Diluted
    
    
    131.038
    
    
    
    111.622
    
    
    
    *Non-GAAP Financial Measures(2):Adjusted operating income
    
    $
    41.9
    
    
    $
    32.2
    
    
    
    30.1
    %Reconciliation to net income:Net income
    
    $
    46.3
    
    
    $
    5.1
    
    
    
    *Less: Net realized investment gains (losses) (net of taxes of $2.3 and $(15.0))
    
    
    4.5
    
    
    
    (28.0
    )
    
    
    *Add: Net investment gains (losses) on FIA options (net of taxes of $0.0 and $(0.5))
    
    
    0.1
    
    
    
    (0.9
    )
    
    
    *Adjusted operating income
    
    $
    41.9
    
    
    $
    32.2
    
    
    
    30.1
    %
 
 *
    
    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. 32




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Three Months Ended March 31, 2010 Compared to the Three Months Ended March 31, 2009
 Summary of Results
    Further discussion of adjusted operating income drivers described above:
    Segment Operating Results
  33




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##### Table of Contents



Group
  Three MonthsEnded March 31,
    
    
    Variance (%)2010
    
    
    2009
    
    
    2010 vs. 2009Operating revenues:Premiums
    
    $
    108.8
    
    
    $
    109.7
    
    
    
    (0.8
    )%Net investment income
    
    
    4.6
    
    
    
    4.5
    
    
    
    2.2Policy fees, contract charges, and other
    
    
    2.9
    
    
    
    4.1
    
    
    
    (29.3
    )Total operating revenues
    
    
    116.3
    
    
    
    118.3
    
    
    
    (1.7
    )Benefits and expenses:Policyholder benefits and claims
    
    
    75.0
    
    
    
    76.9
    
    
    
    (2.5
    )Other underwriting and operating expenses
    
    
    23.7
    
    
    
    27.9
    
    
    
    (15.1
    )Amortization of deferred policy acquisition costs
    
    
    1.9
    
    
    
    2.0
    
    
    
    (5.0
    )Total benefits and expenses
    
    
    100.6
    
    
    
    106.8
    
    
    
    (5.8
    )Segment pre-tax adjusted operating income
    
    $
    15.7
    
    
    $
    11.5
    
    
    
    36.5
    %
  March 31,2010
    
    
    2009Group loss ratio(1)
    
    
    68.9
    %
    
    
    70.1
    %Expense ratio(2)
    
    
    23.1
    %
    
    
    24.6
    %Combined ratio(3)
    
    
    92.0
    %
    
    
    94.7
    %Medical stop-loss  loss ratio(4)
    
    
    70.1
    %
    
    
    71.6
    %Total sales(5)
    
    $
    41.4
    
    
    $
    36.8
 
 (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. Three Months Ended March 31, 2010 Compared to the Three Months Ended March 31, 2009
 Summary of Results
   34




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##### Table of Contents



Operating Revenues
  Benefits and Expenses
  Retirement Services
  Three MonthsEnded March 31,
    
    
    Variance (%)2010
    
    
    2009
    
    
    2010 vs. 2009Operating revenues:Net investment income
    
    $
    107.8
    
    
    $
    83.0
    
    
    
    29.9
    %Policy fees, contract charges, and other
    
    
    4.8
    
    
    
    3.8
    
    
    
    26.3Net investment gains (losses) on FIA options
    
    
    0.1
    
    
    
    (1.4
    )
    
    
    *Total operating revenues
    
    
    112.7
    
    
    
    85.4
    
    
    
    32.0Benefits and expenses:Policyholder benefits and claims
    
    
    0.1
    
    
    
    (0.5
    )
    
    
    *Interest credited
    
    
    68.5
    
    
    
    55.6
    
    
    
    23.2Other underwriting and operating expenses
    
    
    13.6
    
    
    
    13.5
    
    
    
    0.7Amortization of deferred policy acquisition costs
    
    
    13.2
    
    
    
    7.8
    
    
    
    69.2Total benefits and expenses
    
    
    95.4
    
    
    
    76.4
    
    
    
    24.9Segment pre-tax adjusted operating income
    
    $
    17.3
    
    
    $
    9.0
    
    
    
    92.2
    %
 
 *
    
    Represents percentage variances that are not meaningful or are explained through the discussion of other variances.  March 31,2010
    
    2009Account values  Fixed annuities
    
    $
    8,005.4
    
    
    $
    6,588.5Account values  Variable annuities
    
    
    768.0
    
    
    
    583.1Interest spread on average account values(1)
    
    
    1.86
    %
    
    
    1.63
    %Total sales(2)
    
    $
    377.5
    
    
    $
    911.1
 
 (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. 35




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Three Months Ended March 31, 2010 Compared to the Three Months Ended March 31, 2009
 Summary of Results
   Operating Revenues
   Benefits and Expenses
   Income Annuities
  Three MonthsEnded March 31,
    
    
    Variance (%)2010
    
    
    2009
    
    
    2010 vs. 2009Operating revenues:Net investment income
    
    $
    104.0
    
    
    $
    106.3
    
    
    
    (2.2
    )%Policy fees, contract charges, and other
    
    
    0.2
    
    
    
    0.2
    
    
    
    *Total operating revenues
    
    
    104.2
    
    
    
    106.5
    
    
    
    (2.2
    )Benefits and expenses:Interest credited
    
    
    92.0
    
    
    
    86.7
    
    
    
    6.1Other underwriting and operating expenses
    
    
    5.3
    
    
    
    5.0
    
    
    
    6.0Amortization of deferred policy acquisition costs
    
    
    0.5
    
    
    
    0.4
    
    
    
    25.0Total benefits and expenses
    
    
    97.8
    
    
    
    92.1
    
    
    
    6.2Segment pre-tax adjusted operating income
    
    $
    6.4
    
    
    $
    14.4
    
    
    
    (55.6
    )%
 
 *
    
    Represents percentage variances that are not meaningful or are explained through the discussion of other variances. 36




---



##### Table of Contents



March 31,2010
    
    2009Reserves(1)
    
    $
    6,726.7
    
    
    $
    6,742.7Interest spread on reserves(2)
    
    
    0.41
    %
    
    
    0.59
    %Mortality gains (losses)(3)
    
    $
    (0.1
    )
    
    $
    4.3Prepayment speed adjustment on mortgage-backed securities(4)
    
    
    (0.2
    )
    
    
    0.7Total sales(5)
    
    
    66.3
    
    
    
    40.4
 
 (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. Three Months Ended March 31, 2010 Compared to the Three Months Ended March 31, 2009
 Summary of Results
    Operating Revenues
  Benefits and Expenses
  37




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##### Table of Contents



Individual
  Three MonthsEnded March 31,
    
    
    Variance (%)2010
    
    
    2009
    
    
    2010 vs. 2009Operating revenues:Premiums
    
    $
    10.2
    
    
    $
    9.8
    
    
    
    4.1
    %Net investment income
    
    
    66.1
    
    
    
    64.1
    
    
    
    3.1Policy fees, contract charges, and other
    
    
    29.1
    
    
    
    29.2
    
    
    
    (0.3
    )Total operating revenues
    
    
    105.4
    
    
    
    103.1
    
    
    
    2.2Benefits and expenses:Policyholder benefits and claims
    
    
    11.1
    
    
    
    18.0
    
    
    
    (38.3
    )Interest credited
    
    
    58.5
    
    
    
    53.9
    
    
    
    8.5Other underwriting and operating expenses
    
    
    12.7
    
    
    
    13.5
    
    
    
    (5.9
    )Amortization of deferred policy acquisition costs
    
    
    (0.2
    )
    
    
    0.5
    
    
    
    *Total benefits and expenses
    
    
    82.1
    
    
    
    85.9
    
    
    
    (4.4
    )Segment pre-tax adjusted operating income
    
    $
    23.3
    
    
    $
    17.2
    
    
    
    35.5
    %
 
 *
    
    Represents percentage variances that are not meaningful or are explained through the discussion of other variances.  March 31,2010
    
    2009Insurance in force(1)
    
    $
    50,056.5
    
    
    $
    50,884.8Mortality ratio(2)
    
    
    83.2
    %
    
    
    82.3
    %BOLI account value(3)
    
    $
    3,853.2
    
    
    $
    3,759.8UL account value(3)
    
    
    585.3
    
    
    
    579.3BOLI ROA(4)
    
    
    1.08
    %
    
    
    1.34
    %UL interest spread(5)
    
    
    1.37
    %
    
    
    1.20
    %Total sales, excluding BOLI(6)
    
    $
    2.8
    
    
    $
    2.5BOLI 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 that is 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 2010 first quarter credited rate to
policyholders was adjusted to exclude a bonus interest reserve release. Without this adjustment the UL
interest spread would have been 5.40%.(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. 38




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##### Table of Contents



Three Months Ended March 31, 2010 Compared to the Three Months Ended March 31, 2009
 Summary of Results
   Benefits and Expenses
  Other
  Three MonthsEnded March 31,
    
    
    Variance (%)2010
    
    
    2009
    
    
    2010 vs. 2009Operating revenues:Net investment income
    
    $
    4.4
    
    
    $
    4.8
    
    
    
    (8.3
    )%Policy fees, contract charges, and other
    
    
    3.5
    
    
    
    2.3
    
    
    
    52.2Total operating revenues
    
    
    7.9
    
    
    
    7.1
    
    
    
    11.3Benefits and expenses:Interest credited
    
    
    (0.5
    )
    
    
    (0.6
    )
    
    
    16.7Other underwriting and operating expenses
    
    
    4.3
    
    
    
    3.1
    
    
    
    38.7Interest expense
    
    
    8.0
    
    
    
    7.9
    
    
    
    1.3Total benefits and expenses
    
    
    11.8
    
    
    
    10.4
    
    
    
    13.5Segment pre-tax adjusted operating loss
    
    $
    (3.9
    )
    
    $
    (3.3
    )
    
    
    (18.2
    )%
 Three Months Ended March 31, 2010 Compared to the Three Months Ended March 31, 2009
 Summary of Results
  39




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##### Table of Contents



Investments
    As of March 31,
    
    
    As of December 31,2010
    
    
    2009Types of InvestmentsFixed maturities, available-for-sale:Public
    
    $
    18,476.5
    
    
    $
    17,693.0Private
    
    
    914.1
    
    
    
    901.3Marketable equity securities, available-for-sale(1)
    
    
    37.6
    
    
    
    36.7Marketable equity securities, trading(2)
    
    
    151.0
    
    
    
    154.1Mortgage loans, net
    
    
    1,228.0
    
    
    
    1,201.7Policy loans
    
    
    73.4
    
    
    
    73.9Short-term investments
    
    
    54.0
    
    
    
    2.1Investments in limited partnerships(3)Private equity and hedge funds
    
    
    25.2
    
    
    
    24.7Affordable housing projects
    
    
    105.4
    
    
    
    85.5Other invested assets
    
    
    9.1
    
    
    
    10.1Total
    
    $
    21,074.3
    
    
    $
    20,183.1
 
 (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 credit refunds are carried at amortized cost. In 2009,
we submitted liquidation notices to all of our hedge fund
partnerships. As of March 31, 2010, our remaining investment in
hedge fund partnerships was $4.0.  Investment Returns
  Three Months Ended
    
    
    Three Months EndedMarch 31, 2010
    
    
    March 31, 2009Yield(1)
    
    
    Amount
    
    
    Yield(1)
    
    
    Amount(Dollars in millions)Types of InvestmentsFixed maturities, available-for-sale
    
    
    5.76
    %
    
    $
    271.0
    
    
    
    5.89
    %
    
    $
    250.8Marketable equity securities, available-for-sale
    
    
    4.43
    
    
    
    0.6
    
    
    
    2.71
    
    
    
    0.4Marketable equity securities, trading
    
    
    1.68
    
    
    
    0.7
    
    
    
    1.55
    
    
    
    0.6Mortgage loans, net
    
    
    6.17
    
    
    
    18.8
    
    
    
    6.34
    
    
    
    16.0Policy loans
    
    
    5.99
    
    
    
    1.1
    
    
    
    5.75
    
    
    
    1.1Investments in limited partnerships:Private equity and hedge funds
    
    
    11.70
    
    
    
    0.9
    
    
    
    4.95
    
    
    
    0.8Affordable housing(2)
    
    
    (6.96
    )
    
    
    (2.1
    )
    
    
    (9.02
    )
    
    
    (2.3
    )Other income producing assets(3)
    
    
    0.89
    
    
    
    1.1
    
    
    
    0.17
    
    
    
    0.2Gross investment income before investment expenses
    
    
    5.58
    
    
    
    292.1
    
    
    
    5.64
    
    
    
    267.6Investment expenses
    
    
    (0.10
    )
    
    
    (5.2
    )
    
    
    (0.10
    )
    
    
    (4.9
    )Net investment income
    
    
    5.48
    %
    
    $
    286.9
    
    
    
    5.54
    %
    
    $
    262.7
 40




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##### Table of Contents



(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 $1.5 and $0.9 for the three months ended March 31,
2010 and 2009, respectively.(3)
    
    Other income producing assets includes income from other invested assets, short-term investments
and cash and cash equivalents.    Three Months Ended March 31,2010
    
    
    2009Gross realized gains on sales of fixed maturities
    
    
    10.4
    
    
    
    0.5Gross realized losses on sales of fixed maturities
    
    
    (1.1
    )
    
    
    (0.6
    )Impairments:Public fixed maturities(1)
    
    
    (2.4
    )
    
    
    (17.7
    )Private fixed maturities
    
    
    (5.1
    )
    
    
    (0.9
    )Total credit-related
    
    
    (7.5
    )
    
    
    (18.6
    )Other
    
    
    (2.2
    )
    
    
    (9.2
    )Total impairments
    
    
    (9.7
    )
    
    
    (27.8
    )Net gains (losses) on trading securities
    
    
    7.6
    
    
    
    (15.3
    )Other net investment gains (losses)(2):Other gross gains
    
    
    3.8
    
    
    
    7.1Other gross losses
    
    
    (4.2
    )
    
    
    (6.9
    )Net realized investment gains (losses) before taxes
    
    $
    6.8
    
    
    $
    (43.0
    )
 
 (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.   41




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##### Table of Contents



Three Months Ended
    
    
    As of March 31, 2010March 31, 2010
    
    
    Cost or Amortized
    
    
    FairIndustry
    
    Impairment
    
    
    Cost(1)
    
    
    ValueNon-structured securities:Industrial machinery (private)
    
    $
    (5.1
    )
    
    $
    11.9
    
    
    $
    11.9Electrical utilities (public)
    
    
    (2.1
    )
    
    
    62.2
    
    
    
    58.3Municipal  taxable (public)
    
    
    (0.6
    )
    
    
    2.2
    
    
    
    1.9Other diversified financial services (public)
    
    
    (0.1
    )
    
    
    0.2
    
    
    
    0.2Building products (public)
    
    
    (0.1
    )
    
    
    0.1
    
    
    
    0.1Total for non-structured securities
    
    $
    (8.0
    )
    
    $
    76.6
    
    
    $
    72.4Structured securities:RMBS  Consumer finance (public)
    
    $
    (0.4
    )
    
    $
    14.8
    
    
    $
    11.7RMBS  Consumer finance (public)
    
    
    (0.4
    )
    
    
    14.3
    
    
    
    12.0RMBS  Consumer finance (public)
    
    
    (0.3
    )
    
    
    2.5
    
    
    
    2.7RMBS  Consumer finance (public)
    
    
    (0.3
    )
    
    
    2.7
    
    
    
    2.8RMBS  Consumer finance (public)
    
    
    (0.2
    )
    
    
    11.7
    
    
    
    9.0Total for structured securities
    
    $
    (1.6
    )
    
    $
    46.0
    
    
    $
    38.2
 
 (1)
    
    As of March 31, 2010, the cost or amortized cost represents our
estimated recovery value, based on our discounted cash flow
analysis, or fair value, if we intend to sell the security.   Three Months Ended
    
    
    As of March 31, 2009March 31, 2009
    
    
    Cost or Amortized
    
    
    FairIndustry
    
    Impairment
    
    
    Cost(1)
    
    
    ValueNon-structured securities:Publishing (public)
    
    $
    (6.7
    )
    
    $
    1.7
    
    
    $
    1.6Specialty chemicals (public)
    
    
    (4.1
    )
    
    
    4.5
    
    
    
    3.8Specialized finance (public)
    
    
    (2.1
    )
    
    
    4.9
    
    
    
    4.9Commodity chemicals (public)
    
    
    (1.8
    )
    
    
    9.5
    
    
    
    2.4Diversified chemicals (public)
    
    
    (1.1
    )
    
    
    0.3
    
    
    
    0.2Total for non-structured securities
    
    $
    (15.8
    )
    
    $
    20.9
    
    
    $
    12.9Structured securities:Asset management and customer banks (public)
    
    $
    (1.1
    )
    
    $
    46.6
    
    
    $
    43.1Consumer finance (public)
    
    
    (0.8
    )
    
    
    15.4
    
    
    
    9.2Specialized finance (public)
    
    
    (0.2
    )
    
    
    21.8
    
    
    
    18.5Total for structured securities
    
    $
    (2.1
    )
    
    $
    83.8
    
    
    $
    70.8
 
 (1)
    
    As of March 31, 2009, the cost or amortized cost represents our
estimated recovery value, based on our discounted cash flow
analysis, or fair value, if we intend to sell the security. 42




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##### Table of Contents



Fixed Maturity Securities
  Fixed Maturity Securities Credit Quality
   As of March 31, 2010
    
    
    As of December 31, 2009Amortized
    
    
    Fair
    
    
    % of Total
    
    
    Amortized
    
    
    Fair
    
    
    % of TotalNAIC
    
    
    S&P Equivalent
    
    Cost
    
    
    Value
    
    
    Fair Value
    
    
    Cost
    
    
    Value
    
    
    Fair Value1
    
    
    AAA, AA, A
    
    $
    11,036.4
    
    
    $
    11,350.3
    
    
    
    58.5
    %
    
    $
    10,917.3
    
    
    $
    11,031.3
    
    
    
    59.3
    %2
    
    
    BBB
    
    
    6,772.7
    
    
    
    6,960.2
    
    
    
    35.9
    
    
    
    6,471.3
    
    
    
    6,530.9
    
    
    
    35.1Total investment grade
    
    
    17,809.1
    
    
    
    18,310.5
    
    
    
    94.4
    
    
    
    17,388.6
    
    
    
    17,562.2
    
    
    
    94.43
    
    
    BB
    
    
    738.8
    
    
    
    688.4
    
    
    
    3.6
    
    
    
    717.9
    
    
    
    641.3
    
    
    
    3.54
    
    
    B
    
    
    272.2
    
    
    
    250.2
    
    
    
    1.3
    
    
    
    251.0
    
    
    
    219.2
    
    
    
    1.25
    
    
    CCC & lower
    
    
    128.4
    
    
    
    122.7
    
    
    
    0.6
    
    
    
    128.0
    
    
    
    113.5
    
    
    
    0.66
    
    
    In or near default
    
    
    29.9
    
    
    
    18.8
    
    
    
    0.1
    
    
    
    68.2
    
    
    
    58.1
    
    
    
    0.3Total below investment grade
    
    
    1,169.3
    
    
    
    1,080.1
    
    
    
    5.6
    
    
    
    1,165.1
    
    
    
    1,032.1
    
    
    
    5.6Total
    
    
    
    $
    18,978.4
    
    
    $
    19,390.6
    
    
    
    100.0
    %
    
    $
    18,553.7
    
    
    $
    18,594.3
    
    
    
    100.0
    %
     43




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##### Table of Contents



Fixed Maturity Securities and Unrealized Gains and Losses by Security Sector
  As of March 31, 2010Other-than-Cost or
    
    
    Gross
    
    
    Gross
    
    
    
    
    
    
    % of
    
    
    TemporaryAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Fair
    
    
    Total Fair
    
    
    ImpairmentsCost
    
    
    Gains
    
    
    Losses
    
    
    Value
    
    
    Value
    
    
    in AOCISecurity SectorCorporate Securities:Consumer discretionary
    
    $
    1,137.8
    
    
    $
    52.9
    
    
    $
    (18.7
    )
    
    $
    1,172.0
    
    
    
    6.0
    %
    
    $
    (2.4
    )Consumer staples
    
    
    1,762.9
    
    
    
    106.8
    
    
    
    (13.8
    )
    
    
    1,855.9
    
    
    
    9.6
    
    
    
    (1.4
    )Energy
    
    
    647.9
    
    
    
    32.5
    
    
    
    (6.3
    )
    
    
    674.1
    
    
    
    3.5
    
    
    
    Financials
    
    
    2,103.6
    
    
    
    50.5
    
    
    
    (120.1
    )
    
    
    2,034.0
    
    
    
    10.5
    
    
    
    (5.5
    )Health care
    
    
    908.5
    
    
    
    66.8
    
    
    
    (2.8
    )
    
    
    972.5
    
    
    
    5.0
    
    
    
    (1.9
    )Industrials
    
    
    2,257.6
    
    
    
    114.0
    
    
    
    (14.4
    )
    
    
    2,357.2
    
    
    
    12.2
    
    
    
    (0.8
    )Information technology
    
    
    381.7
    
    
    
    30.1
    
    
    
    (0.5
    )
    
    
    411.3
    
    
    
    2.1
    
    
    
    Materials
    
    
    1,190.6
    
    
    
    50.5
    
    
    
    (34.4
    )
    
    
    1,206.7
    
    
    
    6.2
    
    
    
    (12.7
    )Telecommunication services
    
    
    586.2
    
    
    
    23.3
    
    
    
    (15.1
    )
    
    
    594.4
    
    
    
    3.1
    
    
    
    (1.2
    )Utilities
    
    
    1,878.3
    
    
    
    69.8
    
    
    
    (36.3
    )
    
    
    1,911.8
    
    
    
    9.9
    
    
    
    (0.4
    )Other
    
    
    8.3
    
    
    
    0.6
    
    
    
    
    
    
    
    8.9
    
    
    
    0.0
    
    
    
    Total corporate securities
    
    
    12,863.4
    
    
    
    597.8
    
    
    
    (262.4
    )
    
    
    13,198.8
    
    
    
    68.1
    
    
    
    (26.3
    )U.S. government and agencies
    
    
    41.6
    
    
    
    2.5
    
    
    
    
    
    
    
    44.1
    
    
    
    0.2
    
    
    
    (0.1
    )State and political subdivisions
    
    
    516.5
    
    
    
    3.5
    
    
    
    (30.1
    )
    
    
    489.9
    
    
    
    2.5
    
    
    
    (0.6
    )Foreign governments
    
    
    25.3
    
    
    
    0.9
    
    
    
    
    
    
    
    26.2
    
    
    
    0.1
    
    
    
    Residential mortgage-backed securities:Agency
    
    
    3,052.1
    
    
    
    115.9
    
    
    
    (2.7
    )
    
    
    3,165.3
    
    
    
    16.3
    
    
    
    Non-agency:Prime
    
    
    418.2
    
    
    
    2.8
    
    
    
    (59.3
    )
    
    
    361.7
    
    
    
    1.9
    
    
    
    (36.1
    )Alt-A
    
    
    137.5
    
    
    
    1.7
    
    
    
    (16.9
    )
    
    
    122.3
    
    
    
    0.6
    
    
    
    (8.4
    )Total residential mortgage-backed securities
    
    
    3,607.8
    
    
    
    120.4
    
    
    
    (78.9
    )
    
    
    3,649.3
    
    
    
    18.8
    
    
    
    (44.5
    )Commercial mortgage-backed securities
    
    
    1,711.9
    
    
    
    79.0
    
    
    
    (16.1
    )
    
    
    1,774.8
    
    
    
    9.2
    
    
    
    (3.9
    )Other debt obligations
    
    
    211.9
    
    
    
    12.4
    
    
    
    (16.8
    )
    
    
    207.5
    
    
    
    1.1
    
    
    
    (3.8
    )Total
    
    $
    18,978.4
    
    
    $
    816.5
    
    
    $
    (404.3
    )
    
    $
    19,390.6
    
    
    
    100.0
    %
    
    $
    (79.2
    )
  44




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##### Table of Contents



As of December 31, 2009Other-than-Cost or
    
    
    Gross
    
    
    Gross
    
    
    
    
    
    
    % of
    
    
    TemporaryAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    Fair
    
    
    Total Fair
    
    
    ImpairmentsCost
    
    
    Gains
    
    
    Losses
    
    
    Value
    
    
    Value
    
    
    in AOCISecurity SectorCorporate 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
    )Foreign governments
    
    
    26.7
    
    
    
    0.8
    
    
    
    (0.1
    )
    
    
    27.4
    
    
    
    0.1
    
    
    
    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
    
    
    174.5
    
    
    
    8.6
    
    
    
    (17.5
    )
    
    
    165.6
    
    
    
    0.9
    
    
    
    (3.8
    )Total
    
    $
    18,553.7
    
    
    $
    651.0
    
    
    $
    (610.4
    )
    
    $
    18,594.3
    
    
    
    100.0
    %
    
    $
    (81.9
    )
 Fixed Maturity Securities by Contractual Maturity Date
  Residential Mortgage-Backed Securities (RMBS)
  45




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##### Table of Contents



As of March 31, 2010
    
    
    As of December 31, 2009% of Total
    
    
    
    
    
    
    % of TotalFair Value
    
    
    Invested Assets
    
    
    Fair Value
    
    
    Invested AssetsAgency
    
    $
    3,165.3
    
    
    
    15.0
    %
    
    $
    3,032.7
    
    
    
    15.0
    %Non-agency:Prime
    
    
    361.7
    
    
    
    1.7
    
    
    
    378.0
    
    
    
    1.9Alt-A
    
    
    122.3
    
    
    
    0.6
    
    
    
    125.5
    
    
    
    0.6Subprime
    
    
    
    
    
    
    
    
    
    
    0.2
    
    
    
    Subtotal non-agency
    
    
    484.0
    
    
    
    2.3
    
    
    
    503.7
    
    
    
    2.5Total
    
    $
    3,649.3
    
    
    
    17.3
    %
    
    $
    3,536.4
    
    
    
    17.5
    %
    As of March 31, 2010Highest Rating Agency RatingTotal
    
    
    Total as ofBB and
    
    
    Amortized
    
    
    December 31,Vintage
    
    AAA
    
    
    AA
    
    
    A
    
    
    BBB
    
    
    Below
    
    
    Cost
    
    
    20092007
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    74.7
    
    
    $
    74.7
    
    
    $
    91.02006
    
    
    0.2
    
    
    
    3.0
    
    
    
    16.5
    
    
    
    27.3
    
    
    
    118.0
    
    
    
    165.0
    
    
    
    177.02005
    
    
    2.6
    
    
    
    9.1
    
    
    
    31.7
    
    
    
    38.8
    
    
    
    28.3
    
    
    
    110.5
    
    
    
    113.62004 & prior
    
    
    190.1
    
    
    
    14.7
    
    
    
    
    
    
    
    
    
    
    
    0.7
    
    
    
    205.5
    
    
    
    213.7Total
    
    $
    192.9
    
    
    $
    26.8
    
    
    $
    48.2
    
    
    $
    66.1
    
    
    $
    221.7
    
    
    $
    555.7
    
    
    $
    595.3% of amortized cost
    
    
    34.7
    %
    
    
    4.8
    %
    
    
    8.7
    %
    
    
    11.9
    %
    
    
    39.9
    %
    
    
    100.0
    %
  As of March 31, 2010Highest Rating Agency Rating
    
    
    Total as ofBB and
    
    
    Total Fair
    
    
    December 31,Vintage
    
    AAA
    
    
    AA
    
    
    A
    
    
    BBB
    
    
    Below
    
    
    Value
    
    
    20092007
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    69.0
    
    
    $
    69.0
    
    
    $
    83.32006
    
    
    0.2
    
    
    
    2.9
    
    
    
    16.6
    
    
    
    24.4
    
    
    
    98.6
    
    
    
    142.7
    
    
    
    143.12005
    
    
    2.5
    
    
    
    4.8
    
    
    
    26.3
    
    
    
    30.0
    
    
    
    21.7
    
    
    
    85.3
    
    
    
    86.02004 & prior
    
    
    174.7
    
    
    
    11.6
    
    
    
    
    
    
    
    
    
    
    
    0.7
    
    
    
    187.0
    
    
    
    191.3Total
    
    $
    177.4
    
    
    $
    19.3
    
    
    $
    42.9
    
    
    $
    54.4
    
    
    $
    190.0
    
    
    $
    484.0
    
    
    $
    503.7% of fair value
    
    
    36.6
    %
    
    
    4.0
    %
    
    
    8.9
    %
    
    
    11.2
    %
    
    
    39.3
    %
    
    
    100.0
    %
  46




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##### Table of Contents



Commercial Mortgage-Backed Securities (CMBS)
  As of March 31, 2010
    
    
    As of December 31, 2009% of Total
    
    
    
    
    
    
    % of TotalFair Value
    
    
    Invested Assets
    
    
    Fair Value
    
    
    Invested AssetsAgency
    
    $
    450.6
    
    
    
    2.1
    %
    
    $
    425.6
    
    
    
    2.1
    %Non-agency
    
    
    1,324.2
    
    
    
    6.3
    
    
    
    1,363.8
    
    
    
    6.8Total
    
    $
    1,774.8
    
    
    
    8.4
    %
    
    $
    1,789.4
    
    
    
    8.9
    %
   As of March 31, 2010Highest Rating Agency RatingTotal
    
    
    As ofBB and
    
    
    Amortized
    
    
    December 31,Vintage
    
    AAA
    
    
    AA
    
    
    A
    
    
    BBB
    
    
    Below
    
    
    Cost
    
    
    20092008
    
    $
    66.1
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    66.1
    
    
    $
    66.02007
    
    
    452.1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.3
    
    
    
    453.4
    
    
    
    471.02006
    
    
    136.0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12.3
    
    
    
    148.3
    
    
    
    148.02005
    
    
    300.8
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    300.8
    
    
    
    311.42004 & prior
    
    
    286.8
    
    
    
    0.5
    
    
    
    6.0
    
    
    
    
    
    
    
    11.2
    
    
    
    304.5
    
    
    
    391.9Total
    
    $
    1,241.8
    
    
    $
    0.5
    
    
    $
    6.0
    
    
    $
    
    
    
    $
    24.8
    
    
    $
    1,273.1
    
    
    $
    1,388.3
  As of March 31, 2010Highest Rating Agency Rating
    
    

    As ofBB and
    
    
    Total Fair
    
    
    December 31,Vintage
    
    AAA
    
    
    AA
    
    
    A
    
    
    BBB
    
    
    Below
    
    
    Value
    
    
    20092008
    
    $
    64.8
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    64.8
    
    
    $
    59.02007
    
    
    474.9
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.4
    
    
    
    476.3
    
    
    
    458.42006
    
    
    144.9
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9.8
    
    
    
    154.7
    
    
    
    144.82005
    
    
    318.7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    318.7
    
    
    
    311.92004 & prior
    
    
    295.5
    
    
    
    0.5
    
    
    
    5.5
    
    
    
    
    
    
    
    8.2
    
    
    
    309.7
    
    
    
    389.7Total
    
    $
    1,298.8
    
    
    $
    0.5
    
    
    $
    5.5
    
    
    $
    
    
    
    $
    19.4
    
    
    $
    1,324.2
    
    
    $
    1,363.8
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##### Table of Contents



As of March 31, 2010Total AAAOther Structures (2005 and Prior)
    
    
    Securities atSuper Senior (Post 2004)
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    AmortizedVintage
    
    Super Senior
    
    
    Mezzanine
    
    
    Junior
    
    
    Other Senior
    
    
    Subordinate
    
    
    Other
    
    
    Cost2008
    
    $
    66.1
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    66.12007
    
    
    452.1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    452.12006
    
    
    136.0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    136.02005
    
    
    140.6
    
    
    
    31.2
    
    
    
    
    
    
    
    129.0
    
    
    
    
    
    
    
    
    
    
    
    300.82004 & prior
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    228.1
    
    
    
    42.0
    
    
    
    16.7
    
    
    
    286.8Total
    
    $
    794.8
    
    
    $
    31.2
    
    
    $
    
    
    
    $
    357.1
    
    
    $
    42.0
    
    
    $
    16.7
    
    
    $
    1,241.8
 As of December 31, 2009Total AAAOther Structures (2005 and Prior)
    
    
    Securities atSuper Senior (Post 2004)
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    AmortizedVintage
    
    Super Senior
    
    
    Mezzanine
    
    
    Junior
    
    
    Other Senior
    
    
    Subordinate
    
    
    Other
    
    
    Cost2008
    
    $
    66.0
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    66.02007
    
    
    469.7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    469.72006
    
    
    135.7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    135.72005
    
    
    147.4
    
    
    
    31.1
    
    
    
    
    
    
    
    132.8
    
    
    
    
    
    
    
    
    
    
    
    311.32004 & prior
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    310.6
    
    
    
    42.1
    
    
    
    19.4
    
    
    
    372.1Total
    
    $
    818.8
    
    
    $
    31.1
    
    
    $
    
    
    
    $
    443.4
    
    
    $
    42.1
    
    
    $
    19.4
    
    
    $
    1,354.8
  Asset-Backed Securities
  As of March 31, 2010
    
    
    As of December 31, 2009Other asset-backed securities
    
    Amortized Cost
    
    
    Fair Value
    
    
    Amortized Cost
    
    
    Fair ValueAuto
    
    $
    63.0
    
    
    $
    63.5
    
    
    $
    24.1
    
    
    $
    24.6Credit cards
    
    
    72.0
    
    
    
    78.2
    
    
    
    73.0
    
    
    
    78.5Manufactured homes
    
    
    19.1
    
    
    
    15.7
    
    
    
    19.2
    
    
    
    15.6Utility
    
    
    10.8
    
    
    
    11.9
    
    
    
    10.9
    
    
    
    11.7Other
    
    
    5.6
    
    
    
    5.4
    
    
    
    5.8
    
    
    
    5.0Total other asset-backed securities
    
    $
    170.5
    
    
    $
    174.7
    
    
    $
    133.0
    
    
    $
    135.4
 Return on Equity-Like Investments
  48




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Three Months Ended March 31, 20102010
    
    2009Public equity
    
    
    5.4
    %
    
    
    (8.5
    )%S&P 500 Total Return Index
    
    
    5.4
    
    
    
    (11.0
    )Difference
    
    
    0.0
    %
    
    
    2.5
    %
 Mortgage Loans
   Composition of Mortgage Loans
   As of March 31, 2010
    
    
    As of December 31, 2009Region
    
    Carrying Value
    
    
    % of Total
    
    
    Carrying Value
    
    
    % of TotalCalifornia
    
    $
    358.5
    
    
    
    29.1
    %
    
    $
    346.0
    
    
    
    28.6
    %Washington
    
    
    230.0
    
    
    
    18.6
    
    
    
    222.9
    
    
    
    18.5Texas
    
    
    122.3
    
    
    
    9.9
    
    
    
    125.6
    
    
    
    10.4Oregon
    
    
    84.7
    
    
    
    6.9
    
    
    
    88.0
    
    
    
    7.3Colorado
    
    
    45.0
    
    
    
    3.6
    
    
    
    44.5
    
    
    
    3.7Arizona
    
    
    37.9
    
    
    
    3.1
    
    
    
    37.1
    
    
    
    3.1Minnesota
    
    
    31.9
    
    
    
    2.6
    
    
    
    32.3
    
    
    
    2.7Other
    
    
    323.6
    
    
    
    26.2
    
    
    
    310.5
    
    
    
    25.7Total
    
    $
    1,233.9
    
    
    
    100.0
    %
    
    $
    1,206.9
    
    
    
    100.0
    %
  As of March 31, 2010
    
    
    As of December 31, 2009Property Type
    
    Carrying Value
    
    
    % of Total
    
    
    Carrying Value
    
    
    % of TotalShopping Centers and Retail
    
    $
    472.9
    
    
    
    38.3
    %
    
    $
    472.9
    
    
    
    39.2
    %Industrial
    
    
    365.6
    
    
    
    29.6
    
    
    
    345.7
    
    
    
    28.6Office Buildings
    
    
    346.5
    
    
    
    28.1
    
    
    
    339.2
    
    
    
    28.1Multi-Family
    
    
    32.8
    
    
    
    2.7
    
    
    
    34.9
    
    
    
    2.9Other
    
    
    16.1
    
    
    
    1.3
    
    
    
    14.2
    
    
    
    1.2Total
    
    $
    1,233.9
    
    
    
    100.0
    %
    
    $
    1,206.9
    
    
    
    100.0
    %
 49




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##### Table of Contents



As of
    
    
    
    
    
    
    As ofMarch 31,
    
    
    % of
    
    
    December 31,
    
    
    % ofLoan-to-Value Ratio
    
    2010
    
    
    Portfolio
    
    
    2009
    
    
    Portfolio< or = 50%
    
    $
    504.5
    
    
    
    40.9
    %
    
    $
    484.2
    
    
    
    40.1
    %51%  60%
    
    
    359.3
    
    
    
    29.1
    
    
    
    348.5
    
    
    
    28.961%  70%
    
    
    193.9
    
    
    
    15.7
    
    
    
    195.8
    
    
    
    16.271%  75%
    
    
    68.4
    
    
    
    5.5
    
    
    
    68.2
    
    
    
    5.676%  80%
    
    
    20.1
    
    
    
    1.7
    
    
    
    17.7
    
    
    
    1.581%  100%
    
    
    80.3
    
    
    
    6.5
    
    
    
    85.1
    
    
    
    7.1> 100%
    
    
    7.4
    
    
    
    0.6
    
    
    
    7.4
    
    
    
    0.6$
    1,233.9
    
    
    
    100.0
    %
    
    $
    1,206.9
    
    
    
    100.0
    %
   Maturity Date of Mortgage Loans
  As of March 31, 2010
    
    
    As of December 31, 2009Years to Maturity
    
    Carrying Value
    
    
    % of Total
    
    
    Carrying Value
    
    
    % of TotalDue in one year or less
    
    $
    5.4
    
    
    
    0.4
    %
    
    $
    2.4
    
    
    
    0.2
    %Due after one year through five years
    
    
    103.7
    
    
    
    8.4
    
    
    
    100.0
    
    
    
    8.3Due after five years through ten years
    
    
    598.8
    
    
    
    48.5
    
    
    
    541.8
    
    
    
    44.9Due after ten years
    
    
    526.0
    
    
    
    42.7
    
    
    
    562.7
    
    
    
    46.6Total
    
    $
    1,233.9
    
    
    
    100.0
    %
    
    $
    1,206.9
    
    
    
    100.0
    %
 Mortgage Loan Quality
   Investments in Limited Partnerships  Affordable Housing Investments
  50




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##### Table of Contents



Three Months Ended March 31,2010
    
    
    2009Amortization related to affordable housing investments, net of tax benefit
    
    $
    (1.3
    )
    
    $
    (1.5
    )Affordable housing tax credits
    
    
    2.8
    
    
    
    2.4Impact to net income
    
    $
    1.5
    
    
    $
    0.9
  EstimatedImpact to NetIncomeRemainder of 2010
    
    $
    4.02011
    
    
    7.82012
    
    
    8.92013 and beyond
    
    
    26.1Estimated impact to net income (net of taxes)
    
    $
    46.8
 Liquidity and Capital Resources
   
    
    Sales for the three months ended March 31, 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 during the
financial crisis.
    
    The amount of accumulated other comprehensive income (loss), net of taxes, on our
consolidated balance sheets increased to income of $159.5 as of March 31, 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 market showing signs of stabilization and
credit spreads tightening. We believe we are positioned to hold our investments in an
unrealized loss position to maturity because of our mix of insurance products and our
disciplined asset/liability matching. We have $7.4 billion of illiquid liabilities
consisting of reserves for structured settlements and SPIAs that cannot be surrendered,
deferred annuities with five-year payout provisions or market value adjustments (MVA),
traditional life insurance, and group life and health policies.
 51




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##### Table of Contents




    
    As of March 31, 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 March 31, 2010, Symetra Life Insurance Company had an
estimated risk-based capital ratio of 484%.
 Liquidity Requirements and Sources of Liquidity
   As of March 31, 2010
    
    
    As of December 31, 2009Amount
    
    
    % of Total
    
    
    Amount
    
    
    % of TotalIlliquid LiabilitiesStructured settlements & other SPIAs(1)
    
    $
    6,714.8
    
    
    
    34.4
    %
    
    $
    6,703.6
    
    
    
    35.1
    %Deferred annuities with 5-year payout provision or MVA(2)
    
    
    376.3
    
    
    
    1.9
    
    
    
    381.0
    
    
    
    2.0Traditional insurance (net of reinsurance)(3)
    
    
    186.7
    
    
    
    1.0
    
    
    
    185.8
    
    
    
    1.0Group health & life (net of reinsurance)(3)
    
    
    98.7
    
    
    
    0.5
    
    
    
    97.2
    
    
    
    0.5Total illiquid liabilities
    
    
    7,376.5
    
    
    
    37.8
    
    
    
    7,367.6
    
    
    
    38.6Somewhat Liquid LiabilitiesBank-owned life insurance (BOLI)(4)
    
    
    3,929.8
    
    
    
    20.2
    
    
    
    3,865.1
    
    
    
    20.2Deferred annuities with surrender charges of 5% or higher
    
    
    5,110.0
    
    
    
    26.2
    
    
    
    4,788.2
    
    
    
    25.1Universal life with surrender charges of 5% or higher
    
    
    159.7
    
    
    
    0.8
    
    
    
    152.5
    
    
    
    0.8Total somewhat liquid liabilities
    
    
    9,199.5
    
    
    
    47.2
    
    
    
    8,805.8
    
    
    
    46.1Fully Liquid LiabilitiesDeferred annuities with surrender charges of:3% up to 5%
    
    
    378.3
    
    
    
    1.9
    
    
    
    412.4
    
    
    
    2.2Less than 3%
    
    
    150.2
    
    
    
    0.8
    
    
    
    87.6
    
    
    
    0.5No surrender charges(5)
    
    
    1,936.3
    
    
    
    9.9
    
    
    
    1,950.7
    
    
    
    10.2Universal life and whole life with surrender charges less than 5%
    
    
    439.7
    
    
    
    2.3
    
    
    
    441.7
    
    
    
    2.3BOLI
    
    
    3.6
    
    
    
    0.0
    
    
    
    3.7
    
    
    
    0.0Traditional insurance (net of reinsurance)(6)
    
    
    3.0
    
    
    
    0.0
    
    
    
    2.1
    
    
    
    0.0Group health & life (net of reinsurance)(6)
    
    
    13.4
    
    
    
    0.1
    
    
    
    18.4
    
    
    
    0.1Total fully liquid liabilities
    
    
    2,924.5
    
    
    
    15.0
    
    
    
    2,916.6
    
    
    
    15.3Total
    
    $
    19,500.5
    
    
    
    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. 52




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##### Table of Contents



(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. Liquid Assets
     Capitalization
  March 31,
    
    
    December 31,2010
    
    
    2009Notes payable
    
    $
    448.9
    
    
    $
    448.9Stockholders equity
    
    
    1,971.7
    
    
    
    1,433.3Total capital
    
    $
    2,420.6
    
    
    $
    1,882.2
  Dividends
  53




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##### Table of Contents



Cash Flows
  Three Months Ended March 31,2010
    
    2009Net cash flows from operating activities
    
    $
    209.6
    
    
    $
    168.2Net cash flows from investing activities
    
    
    (544.1
    )
    
    
    (977.7
    )Net cash flows from financing activities
    
    
    466.0
    
    
    
    662.1
 Operating Activities
   Investing Activities
   Financing Activities
   Off-balance Sheet Transactions
  
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
  54




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##### Table of Contents



Item 4. Controls and Procedures
 Disclosure Controls and Procedures
  Limitations on Controls
  Changes in Internal Control Over Financial Reporting
  55




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##### Table of Contents



PART II  Other Information
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  The implementation of The Patient Protection and Affordable Care Act could have a material
adverse effect on the profitability or marketability of the health insurance products that we
sell.
    
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 Use of Proceeds from Initial Public Offering
   56




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##### Table of Contents



Item 6. Exhibits
 ExhibitNumber
    
    Description10.14
    
    Annual Incentive Bonus Plan*10.21
    
    Form of Restricted Stock Pursuant to the Symetra Financial Corporation Equity Plan*10.22
    
    Form of Performance Unit Award Agreement Pursuant to the Symetra Financial Corporation
Equity Plan 2010-2012 Grant*10.23
    
    Symetra Financial Corporation Employee Stock Purchase Plan (amended and restated on May 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*99.01
    
    Audit Committee Independent Auditor Services Pre-Approval Policy*
 
 *
    
    Filed herewith 57




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##### Table of Contents



SIGNATURES
  SYMETRA FINANCIAL CORPORATIONDate:  May 14, 2010
    By:
    /s/ Randall H. TalbotName:
    Randall H. TalbotTitle:
    President and Chief Executive OfficerDate:  May 14, 2010
    By:
    /s/ Margaret A. MeisterName:
    Margaret A. MeisterTitle:
    Executive Vice President and Chief Financial Officer 58