We retain our Outperform recommendation on
StanCorp Financial Group Inc
) following the solid second quarter earnings results, which
included a 33% positive earnings surprise. The property and
casualty insurer carries a Zacks Rank #2 (Buy).
CHINA LIFE INS (LFC): Free Stock Analysis
LINCOLN NATL-IN (LNC): Free Stock Analysis
STANCORP FNL CP (SFG): Free Stock Analysis
SYMETRA FINL CP (SYA): Free Stock Analysis
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Why the Reiteration?
StanCorp Financial reported second quarter 2013 operating net
earnings of $1.34 per share, way ahead of $0.51 earned in the
prior-year quarter. The improvement came on the back of a decline
in operating expenses, more favorable claims experience in the
group long-term disability insurance business, and higher
earnings in the company's Asset Management segment.
StanCorp Financial delivered positive earnings surprise in the
previous four quarters with an average beat of 31.5%. The
long-term expected earnings growth rate for this stock is 7%.
StanCorp's Asset Management segment continues to deliver better
numbers, benefiting from higher administrative fee revenues and
spread margin, stemming from increase in assets under
administration and lower operating expenses. An increase in the
sales of life-contingent annuity premiums also aided the upside.
The segment's contribution to total revenue increased as well.
Additionally, StanCorp's investment portfolio continues to
perform well with no considerable exposure to high-risk asset
StanCorp enjoys a strong capital position, enabling it to remain
focused on enhancing shareholder value.
However, Group insurance premiums continue to witness decline in
premium, largely stemming from a low single-digit price increase
in group insurance business and stiff competition, which also
weighed on new sales and renewals.
StanCorp has also been experiencing rising expenses.
Modifications to the post-retirement medical plan, that lowered
the operating expenses by $10.3 million or $0.15 per share both
in the first and second quarters of 2013, will not recur in the
Other Stocks to Consider
China Life Insurance Co. Ltd.
Lincoln National Corporation
Symetra Financial Corporation
) shares the same Zacks Rank #2 (Buy) with StanCorp Financial,
and are worth considering.