Symetra's 8-K Filing
On January 14, 2014, Symetra (NYSE:SYA) filed an 8-K (material event) report with the Securities and Exchange Commission (SEC) disclosing the plan to redomesticate Symetra Life. The 8-K said:
Symetra expects the redomestication to further its efforts to grow and diversify Symetra Life's product portfolio and risk profile by permitting Symetra Life to take advantage of state-of-the-art statutes and regulations governing the life insurance industry, including regulations relating to derivative transactions.
Symetra's Press Release
Attached to the 8-K was a press release. It quoted Tom Marra, president and chief executive officer of Symetra, as saying:
After much consideration, our decision to change Symetra Life's state of incorporation was driven by a complex, challenging and quickly changing regulatory environment. We believe that the redomestication will further our efforts to grow and diversify Symetra Life's product portfolio and risk profile by permitting Symetra Life to take advantage of the state-of-the-art statutes and regulations governing the life insurance industry in Iowa, where some of the industry's biggest players are domiciled.
My Public Records Request in Iowa
In an effort to learn more, I filed a public records request with the Iowa Insurance Division (Division) asking for copies of the redomestication application and attachments. In response, the Division sent me two letters that had been written by Symetra—one to the Iowa commissioner and one to a deputy commissioner—and said the remainder of the application is a confidential examination workpaper pursuant to Iowa Code section 507.14. Here is some of what Symetra said in the two letters:
We believe that the redomestication will further our efforts to grow and diversify Symetra Life's product portfolio and risk profile. We are mindful of the need for our companies to meet your statutory requirements for redomestication, which include the placement of jobs in the State of Iowa. To that end, we have formulated a proposed plan to hire 20 to 40 employees in Iowa within the next two to four years....
We understand that the Application and its contents will be treated as materials disclosed to the Division in the course of analysis of the financial condition or market conduct of the Applicant, and therefore will be treated as privileged and confidential pursuant to the authority set forth in Iowa Code section 507.14. In the event that the Division at any time receives a request for or a subpoena requiring production of all or any portion of the Application that does not fall within the exceptions set forth in Iowa Code section 507.14, subsection 3, we respectfully request that the Division immediately advise us of such request or subpoena in order that we may take the appropriate action to protect confidential information within the Application.
My Public Records Request in Washington
I also filed a public records request with the Washington Office of the Insurance Commissioner (OIC). On March 7, the OIC said:
The documents you have requested have been marked confidential by the company. While we do not have a statutory exemption to withhold the documents, it is necessary to give the company an opportunity to file a court order to prevent the OIC from releasing them. If we do not receive a court order by 5:00 p.m., April 4, 2014, I will be able to release the requested documents to you on April 7, 2014. Should the OIC be restrained from releasing these documents, you will be notified.
My Request to Symetra
I also wrote to David S. Goldstein, senior vice president, general counsel and secretary of Symetra. I indicated what documents I had seen and asked him to tell me the reasons for the redomestication in greater detail than shown in those documents. He said in part:
Symetra Life expects to benefit from a fairly substantial reduction in the amount of premium taxes that it is assessed on a retaliatory basis. We also believe that Symetra Life needs a level playing field to effectively compete with other life insurance companies, particularly with regard to current and emerging industry standards that deal with reserve financing, accounting and reinsurance rules. A handful of states, including Iowa, are leading the way in engaging life insurance companies on these complex regulations. Many of these jurisdictions have the resources to dedicate to the life insurance industry. Attention to these issues by the state legislature is equally important. We evaluated a number of states across several criteria and concluded that Iowa is most closely aligned with our objectives. Among other things, Iowa has state-of-the-art statutes and regulations governing the life insurance business and is the domicile of some of the biggest players in the industry.
Documents from the OIC
Symetra did not provide a court order, and the OIC sent me 978 pages on a CD. The cover letter from Symetra mentions the simultaneous redomestication application to Iowa, makes no claim of confidentiality for the documents, and includes this paragraph:
We believe that the redomestication will further our efforts to grow and to diversify Symetra Life's product portfolio and risk profile. Following the redomestication, Symetra will maintain its corporate headquarters in Bellevue, Washington, which includes nearly 900 employees in the home office. In this regard, please note that Symetra Life recently renewed its lease for its home office space in downtown Bellevue through July 2025.
A one-page document in the filing with the OIC is entitled "Narrative in Support of the Redomestication Application of Symetra Life Insurance Company." It says in part:
Symetra believes that redomestication of Symetra Life to Iowa will further its efforts to grow and to diversify its product portfolio and risk profile, as Symetra Life will benefit from the sophisticated and robust statutes and regulations governing the life insurance industry in Iowa. Specifically, Iowa supports the following initiatives, among others, that are relevant to the life insurance industry: the financing of certain statutory reserve amounts associated with universal life insurance products with secondary guarantees; the implementation of principles-based reserving; the enforcement of termination and netting provisions under qualified financial contracts entered into by life insurance companies; and the implementation of reinsurance collateral reform. In addition, Symetra Life's status as an Iowa-domiciled company will generate savings in retaliatory taxes which Symetra Life would otherwise pay on premiums written in other jurisdictions.
Also included on the CD are articles of incorporation; bylaws; amended articles of incorporation; amended bylaws; certificates of authority for states where Symetra Life operates; organizational documents; variable annuity prospectuses; the latest Symetra 10-Q quarterly report filed publicly with the SEC; biographical affidavits of officers, directors, and key employees; the latest Symetra Life quarterly financial statement filed publicly with state insurance regulators; and market conduct examination reports filed publicly by insurance regulators in Illinois, Nevada, Washington, Connecticut, California, and Oklahoma.
The Iowa Confidentiality Ruling
As mentioned earlier, the Division denied most of my request for documents relating to the redomestication. The Division cited Iowa Code section 507.14 and Symetra cited subdivision 3 of that section as the basis for the denial. Iowa Code section 507.14 is entitled "Confidential Documents—Exceptions." Subdivision 3 reads:
3. All work papers, notes, recorded information, documents, market conduct annual statements [sic], and copies thereof that are produced or obtained by or disclosed to the commissioner or any other person in the course of analysis by the commissioner of the financial condition or market conduct of an insurer are confidential records under chapter 22 and shall be privileged and confidential in any judicial or administrative proceeding except any of the following:....
b. An administrative proceeding brought by the insurance division under chapter 17A.
Although a redomestication application is not mentioned specifically as an exception in chapter 17A, I think the intent of the chapter is to exempt a redomestication application from confidential treatment. Thus I disagree with the denial. However, I did not appeal the denial because I received the entire file from the OIC.
The redomestication of Symetra Life is a token move, with only 20 to 40 employees to be hired in Iowa in the next two to four years, and with 900 employees remaining in Washington. I am not familiar with Iowa's statutory requirements for redomestications, but the Iowa Economic Development Authority, which promotes business development in the state, and which describes the Division as "supportive," "fair," and "responsive," cannot be pleased with so few new jobs in Iowa.
Symetra mentions the "biggest players" being in Iowa as a reason for the move. That refers primarily to big players in indexed life insurance and indexed annuities.
Symetra mentions a "fairly substantial reduction" in retaliatory premium taxes. I do not understand that complex subject well enough to know whether Symetra Life will achieve a significant reduction in premium taxes as a result of the redomestication.
Symetra mentions "state-of-the-art statutes and regulations" as a reason for the move. That is a euphemism for weak reserve requirements, weak accounting rules, and weak reinsurance rules. Anyone interested in what it means to be domiciled in Iowa in terms of reserves, accounting, and reinsurance should examine section 1(A) in the "Notes to Financial Statements" in the 2013 statutory statement of Iowa-domiciled Transamerica Life Insurance Company. Its statutory surplus at the end of 2013 on the "Iowa basis" was $4.7 billion, compared to $488 million based on statutory accounting principles. One Iowa "prescribed practice," relating to "reserve credits with respect to secondary guarantee reinsurance treaties," added $3.5 billion to statutory surplus. Another Iowa "prescribed practice," relating to treatment of a "parental guarantee" as an "admissible asset," added $751 million to statutory surplus.
Iowa and Washington have not yet acted on the redomestication applications. I plan to report developments. Meanwhile, I am offering, as a complimentary one-page PDF, section 1(A) in the "Notes to Financial Statements" in Transamerica's 2013 statutory statement. Send an e-mail to email@example.com and ask for the Transamerica statement excerpt.