StanCorp Financial Downgraded - Analyst Blog


On Mar 15, we downgraded our recommendation on StanCorp Financial Group Inc . ( SFG ) to Neutral based on higher group insurance benefit ratio and lower premiums. This life insurer currently carries a Zacks Rank #3 (Hold).

Why the Downgrade?

After reporting strong growth in group insurance premiums, StanCorp witnessed a decline in premiums for the last two quarters. The decline largely stemmed from a low single-digit price increase in its group insurance business and stiff competition, which also weighed on new sales and renewals. Persistency also declined compared with 2011.

In 2012, delinquency improved to 0.40% from 0.34% in 2011.

Benefit ratio was 83.7% in the fourth quarter (up from 82.8% in the year-ago quarter) and was 83.9% for full year 2012, both exceeding the guided range of 80%-82%.

Causes for Concern

StanCorp also expects headwinds from the lack of employment and wage growth in the group insurance business to persist in the upcoming quarters and pressurize premium growth. StanCorp expects group insurance premium to decrease in low-single digit in 2013, exerting downward pressure on group insurance sales and persistency.

Group insurance benefit ratio is expected between 81% and 84% in 2013.

Insurance Stocks That Warrant a Look

Other insurance stocks worth a look are Reinsurance Group of America Inc . ( RGA ), Principal Financial Group Inc . ( PFG ) and Aegon N. V. ( AEG ). All these stocks carry a Zacks Rank #2 (Buy).

AEGON N V (AEG): Free Stock Analysis Report

PRINCIPAL FINL (PFG): Free Stock Analysis Report

REINSURANCE GRP (RGA): Free Stock Analysis Report

STANCORP FNL CP (SFG): Free Stock Analysis Report

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Zacks Investment Research

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

This article appears in: Investing , Business , Stocks

Referenced Stocks: AEG , PFG , RGA , SFG

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