General fixed income risks: The principal risks are generally similar to those attributable to bond investing. All investments in bonds are subject to market risks as well as issuer, credit, prepayment, extension, and other risks, and their values may fluctuate. Market risk is the risk that securities may decline in value due to factors affecting the securities markets or particular industries. Bonds have fixed principal and return if held to maturity but may fluctuate in the interim. Generally, when interest rates rise, bond prices fall. Bonds with longer maturities tend to be more sensitive to changes in interest rates. Issuer risk is the risk that the value of a security may decline for reasons specific to the issuer, such as changes in its financial condition.

Specific risks associated with commercial mortgage loans: Investments in commercial mortgage loans are subject to risks associated with general economic conditions, national, regional and local market risks and direct ownership risks, which may impact the ability of a borrower to meet its obligations on the loan because cash flows and value are derived from the performance of the underlying commercial real estate. These risks include: Changes in economic conditions, interest rates and tax laws; declines in the real estate values, rental or occupancy rates; changes in zoning laws and other governmental regulation; overbuilding and resulting high vacancy rates for extended periods; lack of available credit to refinance mortgage loans at or before maturity; inability to attract and retain tenants; financial inability to adequately maintain or improve a building; expenses related to environmental problems, tenant defaults or bankruptcy; casualty losses, terrorist threats and attacks, social unrest and civil disturbances; and weather, floods, earthquakes or other natural disasters.

The value of commercial mortgage loans will be influenced by the rate of delinquencies and defaults experienced on the commercial mortgage loans and by the severity of potential losses incurred. The factors influencing delinquencies, defaults, and loss severity include: (1) economic and real estate market conditions by property type (e.g., office, multifamily, retail, and hotels); (2) the terms and structure of the mortgage loans; and (3) limitations on legal and financial recourse in the event of default.

Commercial mortgage loans may expose a lender to potentially greater risk of loss through delinquency and foreclosure than residential mortgage loans. Repayment of a loan secured by income-producing property typically is dependent upon the ability of tenants to make lease payments, the ability of a property to attract and retain tenants, and the ability of the owner to maintain the property, control operating expenses, and comply with applicable laws, rather than upon the existence of independent income or assets of the borrower. Most commercial mortgage loans provide recourse only to the property and not against the borrower’s other assets or personal guarantees. Some commercial mortgage loans do not fully amortize, which can necessitate a sale of the property or refinancing of any terminal “balloon” payment or payments at or prior to maturity. Investors in commercial mortgage loans bear risk that the borrower will be unable to refinance or otherwise repay the mortgage loan at maturity, increasing the likelihood of a default.

The liquidity of commercial mortgage loans will fluctuate with, among other things, general economic conditions, political events, developments or trends in particular industries or economic sectors. Credit markets have periodically experienced reduced liquidity during periods of extreme market volatility, such as during the global credit crisis, and similar conditions could re-occur and impact the valuations of properties, debt instruments and securities.

When making investments in commercial mortgage loans Symetra Investment Management Real Estate Investors LLC (“SIM REI”) will conduct a due diligence process to evaluate factors believed to govern the success of those investments. There may be little publicly available information about the prospective investments other than what is developed on a proprietary basis by SIM REI. SIM REI cannot provide any assurances that these due diligence processes will uncover all relevant facts of the mortgage loans or that any investment will be successful.

Important information: This commentary has been prepared by SIM REI for informational purposes. Nothing contained herein should be construed as (i) an offer to sell or solicitation of an offer to buy any security, (ii) a recommendation as to the advisability of investing in, purchasing or selling any security or (iii) a solicitation for business or an offer to provide investment advisory services. Any opinions expressed herein reflect our judgment and are subject to change. Certain of the statements contained herein are statements of future expectations and other forward-looking statements that are based on management’s current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Actual results, performance or events may differ materially from those in such statements due to, without limitation, (1) general economic conditions, (2) performance of financial markets, (3) interest-rate levels, (4) increasing levels of loan defaults, (5) changes in laws and regulations, and (6) changes in the policies of governments and/or regulatory authorities.

SIM REI accepts no liability whatsoever for any direct, indirect or consequential loss arising from or in connection with any use of, or reliance on, this insight, which does not have any regard to the particular needs of any person. SIM REI takes no responsibility whatsoever for any use, reliance or reference by persons other than the intended recipient of this insight. Any prices referred to herein are indicative only and dependent upon market conditions. Past performance is not indicative of future results. Unless otherwise specified, investments are not bank deposits or other obligations of a bank, and the repayment of principal is not insured or guaranteed. They are subject to investment risks, including the possibility that the value of any investment—and income derived therefrom, if any—can increase, decrease, or in some cases be entirely lost, and investors may not get back the amount originally invested.

The opinions and views herein do not take into account your individual circumstances, objectives or needs and are not intended to be recommendations of particular financial instruments or strategies to you. This insight does not identify all the risks (direct or indirect) or other considerations which might be material to you when entering any financial transaction. You are advised to exercise caution in relation to any information in this document. If you are in doubt about any of the contents of this insight, you should seek independent professional advice.