StanCorp Financial Group
) reported second quarter 2012 earnings of 51 cents per share,
lagging the Zacks Consensus Estimate by 5 cents. Results were also
13.6% lower than 59 cents earned in the prior-year quarter. Net
income for the quarter declined by 14.4% to $22.5 million, from
$26.3 million reported in second quarter 2011.
The quarter experienced higher benefit ratio in the Insurance
Services segment, largely due to less favorable claims experience
in the group long-term disability business. However, this was
somewhat offset by more favorable claims experience in the
individual disability business and a lower income tax rate.
Including after tax capital loss of $2.5 million or 6 cents a
share, the company reported net earnings of $20 million or 45 cents
per share, comparing favorably with $17.8 million or 40 cents per
share in the year-ago quarter. The year-ago period included
after-tax capital loss of $8.5 million or 19 cents a share.
StanCorp's total revenue in the second quarter of 2012 was $725.3
million, up 2.7% from $706 million in the year-ago quarter. The
improvement primarily stemmed from higher premiums and lower
capital losses. Revenue also lagged the Zacks Consensus Estimate of
Total benefit and expense during the quarter increased 3.1% year
over year to $702.7 million. The upside was buoyed by the increase
in benefits to policyholders and higher premium taxes.
: Premiums from this business totaled $546.5 million in the second
quarter of 2012, up 2.0% year over year. Higher premiums from group
insurance largely triggered the overall premium increase.
Sales from the group insurance business in the quarter decreased
41% to $22.3 million, largely attributable to pricing competition.
Group insurance benefit ratio in the quarter was 88.5%, up 370
basis points year over year, while individual disability insurance
benefit ratio was 60.8%, down 1370 basis points year over year.
Pretax income in the quarter totaled $23.3 million, down 37% from
$36.9 million in the year-ago quarter.
: Second-quarter 2012 pretax income declined 5.6% over the
prior-year quarter to $15.2 million. The decrease was mainly
attributable to lower administrative fee revenues due to a decline
in retirement plan assets under administration.
Assets under administration were $21.07 billion as of June 30,
2012, reflecting a decrease of 4.4% from $22.04 billion as of June
During the quarter, StanCorp Mortgage Investors originated $300.2
million of commercial mortgage loans, slightly lower than $302.7
million in the prior-year quarter.
StanCorp's investment portfolio, as of March 31, 2012, consisted of
approximately 56.4% fixed maturity securities, 41.2% commercial
mortgage loans and 2.4% real estate. The overall weighted-average
credit rating of the fixed maturity securities portfolio assigned
by Standard & Poor's was "A."
During the quarter, StanCorp spent $10 million to buyback 279,700
shares. As of 30th June, StanCorp had approximately 2.7
million shares remaining under its repurchase authorization.
StanCorp exited the second quarter with cash and cash equivalents
of $129.5 million, down from $138.4 million at 2011-end. Long-term
debt was $301.2 million at quarter end, increasing marginally from
$300.9 million at 2011-end.
Book value per share as of June 30, 2012 was $47.27, reflecting a
10.9% upside from $42.64 as of June 30, 2011.
StanCorp's results were weighed upon by high unemployment and low
interest rates. However, management remains focused on adopting
pricing action on new as well as renewal business.
The positives for StanCorp include premium growth, continued good
investment performance, conservative underwriting practices, and
focus on increasing shareholder value along with a strong capital
We retain our Underperform recommendation on StanCorp Financial.
The quantitative Zacks #5 Rank (short-term Strong Sell rating) for
the company indicates downward pressure on the stock over the near
), which competes with StanCorp, is scheduled to release its second
quarter earnings on August 1 after the bell. It currently holds a
Zacks #3 Rank (short-term Hold rating) for indicating no clear
directional pressure on the stock over the near term.
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STANCORP FNL CP (SFG): Free Stock Analysis
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