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Analyst Blog

On May 29, 2013, we upgraded StanCorp Financial Group Inc. (SFG - Analyst Report) to Outperform from Neutral based on its strong first-quarter results and efforts to reduce operating costs. This life insurer currently carries a Zacks Rank #1 (Strong Buy).

Why the upgrade?

StanCorp Financial reported first-quarter 2013 net operating earnings of $1.07 per share, which exceeded the Zacks Consensus Estimate by 33.8% and the year-ago earnings by 35.4%. Over the past four quarters, StanCorp Financial has delivered an average surprise of 21.1%.

Following the release of the first-quarter results, the Zacks Consensus Estimate for 2013 moved up 1% to $3.96. Moreover, the Zacks Consensus Estimate for 2014 has also increased 1.4% to $4.28.

What is the cause for the strong positive bias on the company? Apart from the strong first-quarter results, which benefited from a decline in operating expenses, StanCorp’s investment portfolio continues to perform well with no considerable exposure to high-risk asset classes.

StanCorp’s Asset Management segment continues to deliver better numbers. The segments contribution to total revenue increased as well.

StanCorp enjoys a strong capital position, enabling it to remain focused on enhancing shareholder value. StanCorp envisions buybacks between $40 million and $80 million in 2013.  Additionally, in Nov 2012, the board approved a 4.5% hike in dividend, marking the 13th consecutive year of dividend hikes. Its annual dividend increased 24% since 2008. The current dividend yield stands at 2.13%, much above the industry average of 1.50% as well as some of other life insurers like Protective Life Corporation (PL - Analyst Report) (2.09%) and American Equity Investment Life Holding Co. (AEL - Snapshot Report) (0.95%).

Other Stocks to Consider

Besides StanCorp Financial, another stock in the life insurance sector worth noting is China Life Insurance Co. Ltd. (LFC - Analyst Report) with a Zacks Rank #2 (Buy).

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