StanCorp Beats Earnings Est., Lags Rev - Analyst Blog
StanCorp Financial Group Inc. ( SFG ) reported first quarter 2013 operating earnings of $1.07 per share, which exceeded the Zacks Consensus Estimate by 33.8%. Results were also 35.4% higher than 79 cents earned in the prior year quarter.
The improvement came on back of a decline in operating expenses. This was due to the expense management initiatives undertaken during the quarter to mitigate adverse effects of a low interest rate environment and lower group insurance premiums.
Including after-tax net capital losses of $1.0 million, net earnings of StanCorp was $46.8 million or $1.05 per share in the first quarter, up 33% year over year.
StanCorp's total revenue in the first quarter of 2013 was $722.5 million, down 2.5% year over year from $741.4 million in the year-ago quarter. The decline in results came from waning premiums (down 3.1% year over year). Results were below the Zacks Consensus Estimate of $727 million.
Total benefits and expenses stood at $662.2 million in the first quarter, down 4.5% year over year. A decline in benefits and expenses (down 1.8%), interest credited (down 1.3%), operating expense (down 15.2%), commissions and bonuses (down 2.9%), premium taxes (down 5%) and interest expense (down 12.4%) compared to the prior-year quarter aided the improvement.
Net investment income for the quarter was $159.2 million as compared to $159.7 million in the year-ago period.
The Insurance Services business reported pretax income of $48.8 million for the first quarter of 2013, up 5.9% year over year. The improvement was driven by lower operating expense resulting from the expense management initiatives of StanCorp. However the positive impacts were partially offset by less favorable claims experience in the individual disability insurance business of StanCorp, lower group insurance premiums and a low discount rate for recently-established long term disability claim reserves.
Premiums for the segment in the first quarter were $533.2 million, down 3.2% from $551.1 million in the prior-year quarter. Group insurance premiums declined 4.1% year over year to $486.2 million in the first quarter and induced the overall premium decline. The decline in group insurance premiums were affected by higher experience rated refunds (ERR) and lower group insurance sales. However, individual disability insurance premiums increased 6.3% year over year to $47 million during the reported quarter.
Sales from the group insurance business declined 24.2% year over year to $97.6 million in the reported quarter due to pricing competition.
Group Insurance benefit ratio was 83.9% compared to 83.5% in the year-ago quarter. Individual disability benefit ratio was 61.9% in the first quarter of 2013 compared to 52.3% in the prior-year period.
The Asset Management business reported pretax income of $17.2 million, up 14.7% year over year from $15 million in the prior-year quarter. The improvement came on the back of lower operating expenses.
Assets under administration were $22.7 billion as of Mar 31, 2013, up 5.3% from $21.6 billion as of Mar 31, 2012. It largely reflected higher equity values for retirement plan assets under administration.
During the quarter StanCorp Mortgage Investors originated $273.7 million of commercial mortgage loans, higher than $209.5 million in the prior-year quarter.
The Others segment pretax loss was $5.7 million in the reported quarter compared to $13.4 million in the first quarter of 2012.
As of Mar 31, 2013, SatnCorp's investment portfolio comprised approximately 56.3% fixed maturity securities, 41.3% commercial mortgage loans and 2.4% 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 Mar 31, 2013, cash and cash equivalents for StanCorp was $143.3 million, down 10.8% from $160.7 million as of Dec 31, 2012.
Long-term debt of StanCorp was $551.6 million as of Mar 31, 2013 compared to $551.4 million as of Dec 31, 2012. The debt-to-capital ratio of the company was 20.2% at quarter end compared to 20.3% at year end 2012.
Book value per share at Mar 31, 2013 was $49.36, up 7.7% year over year from $45.82 at Mar 31, 2012.
Share Repurchase Update
In the first quarter StanCorp purchased 0.2 million shares for $9.9 million and is left with 2.8 million shares under its authorization scheduled to expire on Dec 31, 2014.
StanCorp guided operating earnings in a range of $3.70 - $4.10 and expects to achieve return on equity (ROE) between 8.5%- 9.5%.
The cost reduction initiatives are expected to reduce operating expenses by $10.3 million or 15 cents per share in the second quarter of 2013.
Benefit ratio is expected to be between 81% - 84% and effective income tax rate between 22% - 24%.
StanCorp also expects share repurchase in the range of $40 - $80 million.
StanCorp currently carries a Zacks Rank #2 (Buy). Among others in the industry, Protective Life Corporation ( PL ) with Zacks Rank #1 (Strong Buy), and Lincoln National Corporation ( LNC ) and Universal American Corp ( UAM ) with Zacks Rank # 2 (Buy) are expected to report their first quarter 2013 results shortly.
LINCOLN NATL-IN (LNC): Free Stock Analysis Report
PROTECTIVE LIFE (PL): Free Stock Analysis Report
STANCORP FNL CP (SFG): Free Stock Analysis Report
UNIVL AMERICAN (UAM): Free Stock Analysis Report
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