We have upgraded
StanCorp Financial Group Inc.
) to Outperform from Neutral based on the approval of a dividend
hike along with a new share repurchase program and its
Based on StanCorp's strong capital position, the board authorized
a dividend hike as well as a share repurchase program. Recently,
the board approved a new 3 million share buyback program.
Additionally, it approved a 4.5% hike in dividend. The current
dividend yield of StanCorp stands at 2.52%, much above the
industry average of 1.60% as well as some of its nearest
) (2.25%) and
The company's third-quarter earnings outperformed the Zacks
Consensus Estimate on the back of favorable claims in the group
insurance business, a decline in operating expenses and increased
net investment income in the Asset Management segment.
After several quarters of higher benefit ratio, StanCorp managed
to post lower benefit ratio in the third quarter. It improved 100
basis points year over year and 800 basis points sequentially on
the back of better-than-expected claim recoveries, lower
incidence rates in group long-term disability business, and
improvement in severity.
StanCorp's Asset Management segment, after posting an earnings
decline in four consecutive quarters, witnessed a substantial
improvement in the third quarter of 2012. Higher net investment
income from the commercial mortgage loan pre-payment fee revenues
and bond call premiums aided the upside. However, the company
expects the interest rate environment to remain depressed over
the next few years.
Also, delinquency continues to remain low. Third quarter marks
the lowest 60 day delinquency rate since the first quarter of
2009 and fifth consecutive quarter of lower delinquency.
However, after reporting strong growth in Group insurance
premiums in the past quarters, the company witnessed a decline in
premium in the third quarter. The decline largely stemmed from a
low single-digit price increase in the group insurance business
and stiff competition, which also weighed on new sales and
renewals. StanCorp 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 carries a Zacks #1 rank translating into a short term
'Strong Buy' rating. Its peer MetLife carries a Zacks #5 Rank
(Strong Sell), while Unum Group carries a Zacks #4 Rank (Sell).
METLIFE INC (MET): Free Stock Analysis Report
STANCORP FNL CP (SFG): Free Stock Analysis
UNUM GROUP (UNM): Free Stock Analysis Report
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