We recently upgraded StanCorp Financial Group (SFG) to Neutral from Underperform on the back of solid third-quarter results.
StanCorp Financial reported third-quarter 2010 operating earnings of $1.39 per share beating the Zacks Consensus Estimate as well as the year-ago figure. The beat was driven by favorable claims and increased premiums in the Insurance Services segment, coupled with improved earnings in the Asset Management segment and share buyback activity.
StanCorp Financial witnessed positive trends in claims activity, premium growth, as well as sales production in its Insurance segment. Better performance was driven by favorable claims activity in both the group and individual insurance businesses. In second-quarter 2010, this segment experienced an increase in claim incidence. Increasing long-term disability incidents, mainly in the education and manufacturing sectors, drove increased group insurance claims.
Premium in the Insurance segment increased 2.5% year over year in the quarter, driven by higher premiums from group insurance and individual disability insurance.
The Asset Management segment also posted a solid quarter driven by higher administrative fees earned along with lower operating expenses.
The company has been overly active on the share buyback front. During the third quarter of 2010 the company bought back 0.9 million shares. In February, the company’s board of directors had authorized additional 3 million shares for repurchase. At quarter end, the company had approximately 2.4 million shares remaining under its repurchase authorization. The authorization will lapse on December 31, 2011.
The company is also well capitalized, adheres to conservative underwriting practices and scores strongly with rating agencies.
The Zacks Consensus Estimate for fourth-quarter 2010 is $1.23 per share. For full years 2010 and 2011, the Zacks Consensus Estimates are, respectively, $4.76 per share and $5.13 per share.
The quantitative Zacks #3 Rank (short-term Hold rating) for the company indicates no clear directional pressure on the stock over the near term.
Headquartered in Portland, Oregon, StanCorp Financial Group is one of the largest providers of employee benefits products and services in the U.S. The company operates across the country, with a dominant position in western U.S.
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