Rating Action on StanCorp - Analyst Blog
June 24 2011 - 11:14AM
Zacks
A.M. Best has affirmed the issuer credit rating (ICR) of “bbb+” and debt ratings
of “bbb+” on $250 million 6.875% senior unsecured notes, due
2012 and “bbb-” on $300 million 6.900% junior subordinated
debentures, due 2067 of StanCorp Financial Group
(SFG). However, the rating agency has downgraded the outlook to
negative from stable.
Also, A.M. Best affirmed the ICR of “a+” and financial strength
rating (FSR) of A (Excellent) of Standard Insurance Company and The
Standard Life Insurance Company of New York, the insurance
subsidiaries of StanCorp. The outlook of ICR was lowered to
negative from stable while the outlook of FSR was maintained at
stable.
The downgraded outlook of the ICR was due to higher claims at
long-term disability business experienced by the companies. To add
to its woes, the lower
interest rate environment continues to weigh on the long-term
disability business.
The rating agency also remains concerned about the commercial mortgage loan
portfolio (40% of its total invested assets). StanCorp incurred
losses on the sale of a number of properties from a single
borrower, which were foreclosed in 2010 and expects to sell off the
remaining properties over the next one year. Also, the rating
agency expects a significant portion of the mortgage loan portfolio
represented by retail and office properties to report higher
delinquencies.
However, the rating
affirmations came on the back of solid risk-adjusted
capitalization, sustained operating profitability and strong
presence in the employee benefits market. The asset management
segment continues to deliver solid revenues and offer
cross-selling opportunities within the employee benefits
market.
The Zacks Consensus Estimate for second-quarter 2011 is $1.06
per share. For full years 2011 and 2012, the Zacks Consensus
Estimates are, respectively, $4.22 per share and $5.19 per
share.
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).
METLIFE INC (MET): Free Stock Analysis Report
PRINCIPAL FINL (PFG): Free Stock Analysis Report
STANCORP FNL CP (SFG): Free Stock Analysis Report
UNUM GROUP (UNM): Free Stock Analysis Report
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