In its concerted effort to enhance shareholder value, the board of directors of StanCorp Financial Group, Inc. (SFG) authorized the company to repurchase 3 million shares by Dec 31, 2015.
The new buyback authorization will be effective as soon as the current one exhausts. The existing authorization – approved in Nov 2012 – is set to expire in 2014. Back then, the board had approved a similar 3 million share repurchase program. Under the existing authorization, the company had 1.4 million shares remaining for buyback as of Dec 31, 2013.
In the fourth quarter of 2013, StanCorp repurchased 0.19 million shares for $11.4 million, taking the full year tally to 1.6 million shares bought back for $82.3 million. StanCorp has repurchased $1 billion worth of shares since it went public in 1999. Consistent with its effort to return value to shareholders leveraging its sturdy capital position, the company envisions $40–$80 million of share repurchase in 2014.
The new authorization is duly supported by the company’s solid financial position, with cash and cash equivalents of $379.3 million as of the end of 2013 (significantly higher than $160.7 million as of Dec 31, 2012). Retained earnings at year end also stood solid at $1.9 billion (up 10.2% year over year). A sustained solid operational performance continues to cushion StanCorp’s sturdy financial position. The life insurer delivered six straight quarters of positive surprises.
Besides buying back shares, the company has hiked its dividend consistently each year. StanCorp has increased its dividend at a 7-year CAGR of 9.3%. Its dividend yield of 1.70% figures better than the industry yield of 1.51%.
Last month, StanCorp reported operating net income of $1.49 per share for the fourth quarter of 2013, surging 67% year over year and exceeding the Zacks Consensus Estimate by a substantial 26.3%. StanCorp witnessed robust earnings growth in Employee Benefits and record earnings in Individual Disability and Asset Management. While pricing actions implemented started bearing fruit, efficient expense management lowered operating costs.
Other insurers who are also authorized for share buybacks include AXIS Capital Holdings Limited (AXS) and Unum Group (UNM). While AXIS Capital is authorized to buy back $750 million worth of shares through Dec 31, 2014, Unum Group will be able to repurchase upto $750 million of shares through Jun 12, 2015.
StanCorp presently carries a Zacks Rank #3 (Hold). With the news of the share buyback authorization poised to boost investor confidence in the stock and boost the bottom line, we expect analysts to raise their estimates going forward and exert upward pressure on the Zacks Rank.
A better-ranked life insurer worth considering is Aviva plc (AV) with a Zacks Rank #1 (Strong Buy).