On Aug 26, we issued an updated research report on StanCorp Financial Group Inc . SFG .
Last month StanCorp agreed to be acquired by Meiji Yasuda Life Insurance Company. Meiji Yasuda is the oldest and third largest life insurance company in Japan. Therefore, this transaction will not only enable StanCorp to benefit from the acquirer's expansive product portfolio and geographical footprint, but will also bring substantial and immediate value for its shareholders. The combined entity will have total assets worth $327 billion.
With respect to quarterly results, StanCorp's second-quarter earnings surpassed the Zacks Consensus Estimate and improved year over year on a higher favorable claims experience in Employee Benefits and Individual Disability. The quarter also experienced higher sales and premium growth along with solid results at Asset Management. This Zacks Rank #2 (Buy) life insurer delivered positive surprises in the last four quarters with an average of 21.5%
After several quarters with a higher benefit ratio, StanCorp is finally experiencing improvement in this ratio.The company continues to target benefit ratio between 77% and 79% in 2015. Also, StanCorp's investment portfolio continues to perform well with no considerable exposure to high-risk asset classes
Strong operational performance cushioned a solid capital position by virtue of which the company increased its dividend for the fifteenth straight year. Additionally, the dividend yield is better than the industry average.
Positives seen in the company drove the Zacks Consensus Estimate higher in the last 60 days, which increased 1.8% to $5.70 for 2015 and 0.7% to $5.93 for 2016.
However, declining Employee Benefits premiums pressurizing the top line, dependence on its subsidiaries to pay dividends to shareholders, service debts and other obligations remain headwinds.
Other Stocks to Consider
Investors interested in insurers can take a look at Primerica, Inc. PRI , First American Financial Corporation FAF and Hallmark Financial Services Inc. HALL . While First American Financial and Hallmark Financial sport a Zacks Rank #1 (Strong Buy), Primerica carries a Zacks Rank #2 (Buy).