StanCorp Financial Group Inc. (SFG) expects to deliver net operating income between 75 cents to 77 cents in the first quarter of 2011. The Zacks Consensus Estimate for first-quarter 2011 is 73 cents. The guidance remains short of $1.13 per share earned in the year ago quarter.
Including after-tax net capital losses of 3 cents per share, the company expects net income to fall in the range of 72 cents to 74 cents, shy of $1.04 reported in first quarter 2010.
StanCorp remains apprehensive of meeting its full year 2011 operating net income guidance of $4.80 to $5.10 per share, given the bleak first quarter results.
The company noted lower favorable claims in its group long term disability insurance business in the first quarter 2011, largely due to comparatively higher claims incidence. Also, StanCorp expects the benefit ratio for group insurance to be 84.2%, more than 73.6%-78.3% guided for full year 2011.
Counting on the positives, favorable sales for group insurance, premium growth in the Insurance Services segment and higher earnings in the Asset Management segment, favored the first quarter.
Last quarter, StanCorp reported operating earnings of $1.14 per share, lagging the Zacks Consensus Estimate as well as the year-ago results as higher premiums in the Insurance Services segment, improved earnings in the Asset Management segment and positive favorable impact of a share buyback were more than offset by lower favorable claims in the Insurance Services segment.
Delinquencies on commercial mortgage loans are expected to remain modestly high in the foreseeable future. Moreover, we suspect organic growth will remain restricted in the near term, given the sluggish economic environment and challenging labor market conditions.
We retain our Underperform rating on StanCorp Financial. The quantitative Zacks #3 Rank (short-term Hold rating) for StanCorp 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. It competes with Unum Group (UNM), MetLife, Inc. (MET)and Principal Financial Group Inc. (PFG).
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