StanCorp Beats Q3 Earnings, Lags Revs - Analyst Blog


Shutterstock photo

StanCorp Financial Group Inc . ( SFG ) reported third-quarter 2013 operating net earnings of $1.45 per share, which exceeded the Zacks Consensus Estimate of $1.04 by 39%. Results were 38% ahead of $1.05 earned in the prior-year quarter.

The improvement came on the back of increased favorable claims experience in the group insurance business and higher earnings in the company's Asset Management segment.

Including after-tax net capital losses of 13 cents a share, net earnings of StanCorp were $1.32 per share in the third quarter, up 31% year over year.

Operational Update

StanCorp's total revenue in the third quarter of 2013 was $702.0 million, down 1.6% year over year from $713.7 million. The decline came from waning premiums (down 0.8% year over year) as well as lower net investment income (down 2.5% year over year). Results were also below the Zacks Consensus Estimate of $711 million.

Total benefits and expenses of StanCorp stood at $620.2 million in the reported quarter, down 4.9% year over year. A decline in benefits to policy holders (down 6.5%), operating expense (down 0.4%), and interest expense (down 27.1%) from the prior-year quarter aided the results.

Segment Update

The Insurance Services business reported pre-tax income of $78.3 million for the third quarter of 2013, up 25% year over year. The surge was driven by increased favorable claims experience in the group insurance business. However, lower group insurance premiums and a lower discount rate used for new long-term disability claim reserves limited the upside.

Premiums for the segment in the third quarter were $523 million, down 0.9% from $527.5 million in the year-ago quarter. Group insurance premiums declined 1.7% year over year to $474.7 million. The results were affected by higher experience rated refunds (ERR) and lower group insurance sales. However, individual disability insurance premiums increased 8.8% year over year to $48.3 million during the reported quarter.

Sales from the group insurance business increased 44.9% year over year to $29.7 million in the reported quarter due to pricing competition.

Group Insurance benefit ratio was 75.1% compared with 79.7% in the year-ago quarter. Individual disability benefit ratio was 72.9% in the quarter against 75.7% in the prior-year period.

The Asset Management business reported pre-tax income of $21.9 million, up 25.1% year over year from $17.5 million. The improvement came on higher administrative fee revenues and spread margin stemming from increase in assets under administration and lower benefits to policy holders.

Assets under administration were $23.8 billion as of Sep 30, 2013, up 9.9% from $21.7 billion as of Sep 30, 2012. It largely reflected higher equity values for retirement plan assets under administration.

During the quarter, StanCorp Mortgage Investors originated $414.1 million of commercial mortgage loans, higher than $347.3 million in the comparable year-ago quarter.

The Other segment registered a pre-tax loss of $9.7 million in third-quarter 2013 compared with $16 million in the third quarter of 2012.

Financial Update

As of Sep 30, 2013, StanCorp's investment portfolio comprised approximately 54.8% fixed maturity securities, 43% commercial mortgage loans, and 2.2% real estate and other invested assets. The overall weighted-average credit rating of the fixed maturity securities portfolio assigned by Standard and Poor's was "A-".

As of Sep 30, 2013, cash and cash equivalents for StanCorp were $345.4 million, significantly up from $160.7 million as of Dec 31, 2012. Long-term debt of StanCorp was $551.4 million as of Sep 30, 2013, flat with 2012-end level.

Book value per share of StanCorp as on Sep 30, 2013 was $48.12, down 2%   from $49.08 at Sep 30, 2012.

Share Repurchase Update

In third-quarter 2013, StanCorp purchased 0.82 million shares for $44.1 million and is left with 1.5 million shares under its authorization, scheduled to expire on Dec 31, 2014.

Zacks Rank

StanCorp currently carries a Zacks Rank #1 (Strong Buy). Among other life insurers, Torchmark Corporation ( TMK ) with will report its results on Oct 23, after the market closes. Protective Life Corporation ( PL ) and Lincoln National Corporation ( LNC ) will report their results on Oct 30. All these stocks carry a Zacks Rank #2 (Buy).

LINCOLN NATL-IN (LNC): Free Stock Analysis Report

PROTECTIVE LIFE (PL): Free Stock Analysis Report

STANCORP FNL CP (SFG): Free Stock Analysis Report

TORCHMARK CORP (TMK): Free Stock Analysis Report

To read this article on click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Earnings , Stocks
Referenced Stocks: LNC , PL , SFG , TMK

More from


Equity Research
Follow on:

Find a Credit Card

Select a credit card product by:
Select an offer:
Data Provided by