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On April 4, Zacks Investment Research upgraded StanCorp Financial Group Inc. (SFG - Analyst Report) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

StanCorp has successfully maintained its positive earnings streak in all of the last 4 quarters, with an average beat of 33%. The last reported quarter surpassed the Zacks Consensus Estimate by 26.3% and the year-ago quarter’s earnings by a substantial 67%.

StanCorp 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.

Benefit ratio, benefits to policyholders and interest credited as a percentage of premiums are improving at StanCorp. Employee Benefits benefit ratio was 78.9% in 2013, better than 83.9% in 2012, aided by pricing actions, which have started showing results in the group insurance businesses. Management expects Employee Benefits benefit ratio to range between 77% and 79% in 2014.

In addition, in its concerted effort to enhance its shareholder value, StanCorp bought back 1.6 million shares for $82.3 million. StanCorp has repurchased $1 billion worth of shares since it went public in 1999.

Consistent with its effort to return value to shareholders to leverage its sturdy capital position, the company envisions $40–$80 million worth of share repurchase in 2014. Besides buying back shares, the company has hiked its dividend consistently each year. StanCorp has increased its dividend at a 7-year CAGR of 9.3%. Its dividend yield of 1.70% figures better than the industry yield of 1.51%.

Meanwhile, the Zacks Consensus Estimate for 2014 has increased 0.8% to $5.18 per share over the last 60 days. With the company slated to release its first-quarter earnings results on April 30, the Zacks Consensus Estimate for the first quarter of 2014 is currently pegged at $1.23, reflecting a year-over-year increase of 15.1%. The long-term expected earnings growth rate for this stock is 6.4%    

Other Stocks to Consider

Investors interested in the life insurance industry may also consider stocks like Aviva plc (AV), Fidelity & Guaranty Life Common (FGL - Snapshot Report) and Primerica, Inc. (PRI - Snapshot Report). While Aviva holds the same Zacks Rank as StanCorp, Fidelity & Guaranty and Primerica carry a Zacks Rank #2 (Buy).

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