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We retain our Outperform recommendation on StanCorp Financial Group Inc. (SFG - Analyst Report) following solid third quarter earnings results, as well as increase in dividend. The life insurer currently carries a Zacks Rank #1 (Strong Buy).

Why Reiterate?

StanCorp’s third-quarter 2013 operating net earnings of $1.45 per share exceeded the Zacks Consensus Estimate by 39% and year ago earnings by 38%. The improvement came on the back of increased favorable claims experience in the group insurance business and higher earnings in the company’s Asset Management segment.

StanCorp has been witnessing rising earnings estimates. The Zacks Consensus Estimate for 2013 rose nearly 13.3% to $5.02 as all eight estimates moved north over the last 60 days. The same for 2014 also rose 7.8% to $4.96, as again all eight estimates were raised over the same time frame.

StanCorp Financial delivered positive earnings surprise in the previous four quarters with an average beat of 28.3%. The long-term expected earnings growth rate for this stock is 13.1%.

In its concerted effort to return more value to its shareholders, recently the board of directors of StanCorp approved an 18% dividend hike in its annual dividend to $1.10 per share. With respect to share buyback, in the first nine months, the company spent $70.9 million to buyback 1.45 million shares, substantially up from $10 million spent to buyback 0.3 million shares.

StanCorp’s Asset Management segment continues to deliver better numbers, benefiting from higher administrative fee revenues and net investment income stemming from an increase in assets under administration and lower benefits to policyholders due to favorable mortality experience in the individual annuity business. The segment’s contribution to total revenue increased as well.

Additionally, StanCorp’s investment portfolio continues to perform well with no considerable exposure to high-risk asset classes.

Other Stock to Consider

Other insurers, which look attractive at current level, are Old Republic International Corporation (ORI - Snapshot Report) with Zacks Rank #1, whereas American Equity Investment Life Holding Co. (AEL - Snapshot Report), and Primerica, Inc (PRI - Snapshot Report) come with Zacks Rank #2 (Buy).

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