On Mar 14, 2014, we issued an updated research report on StanCorp Financial Group Inc. (SFG). The company had earlier reported better-than-expected quarterly results.
StanCorp Financial has delivered positive earnings surprises in each of the last four quarters, with an average beat of 33.03%. Moreover, this life insurer delivered robust earnings in the fourth-quarter of 2013 which not only surpassed the Zacks Consensus Estimate by 26.3% but also climbed 67% on a year-over-year basis.
StanCorp Financial 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.
After several quarters with a higher benefit ratio, StanCorp is finally experiencing an improvement in this ratio. The Employee Benefit segment’s benefit ratio was 76.1% in the fourth quarter, not only improving year over year but also better than the management guidance of 80%–82%.
For full-year 2013, Employee Benefits’ benefit ratio was 78.9%, better than 83.9% in 2012. The improvement was aided by pricing actions, which have started to bear fruit in the group insurance businesses. Management expects Employee Benefits’ benefit ratio to range between 77% and 79% in 2014.
However, implementation of pricing actions, in turn, may pressurize the StanCorp Financial’s top line.
StanCorp Financial enjoys a strong capital position which allows it to remain focused on enhancing its shareholder value. Recently, the board of directors of StanCorp Financial authorized the company to repurchase 3 million shares by Dec 31, 2015. In addition, StanCorp’s investment portfolio continues to perform well with no considerable exposure to high-risk asset classes.
With respect to estimate revisions, this Zacks Rank #3 (Hold) life insurer has witnessed a positive movement. For 2014, the Zacks Consensus Estimate moved north by 4.4% to $8.21 per share and for 2015, the same moved up by 1.4% to $5.72 over the last 60 days.
Other Stocks to Consider
Some better-ranked stocks worth mentioning in the property and casualty insurance industry are Lincoln National Corp. (LNC), Primerica, Inc. (PRI) and Protective Life Corp. (PL). All these stocks sport a Zacks Rank #2 (Buy).