Sterne Agee Lowers PT On StanCorp Financial To $46

Sterne Agee has published a research report on StanCorp Financial Group, Inc. SFG after the company reported a weak 4Q, causing Sterne to lower estimates and price target. In the report, Sterne Agee writes "SFG reported Op. EPS of $1.14, well below our $1.21 and consensus $1.26. Results missed us despite a low tax rate (+$0.03) and net favorable reserve items (+$0.10), not to mention no reduction in new claims discount rate (we had modeled 50bps reducing EPS by $0.05). All told, we view Core EPS in 4Q10 as $1.01, a meaningful shortfall, driven entirely by weak underwriting results in Insurance Services. Solid Asset Mgmt results (+$0.04 vs. us) provided a modest offset to a very high group benefits ratio of 80.5% (ex. reserve release) and IDI benefit ratio of 62.8% (ex. reserve addition). We expect the poor disability results will cause some angst for investors long other group insurers, including Hartford (HIG, $28.67, Neutral), Lincoln (LNC, $30.04, Neutral), MetLife (MET, $47.16, Buy), Principal (PFG, $33.64, Neutral), Prudential (PRU, $63.16, Buy) and Unum (UNM, $25.62, Neutral), though we note correlations of quarterly results across the group have historically proved relatively low." Sterne Agee has lowered the price target from $47 to $46 and maintains its Neutral rating. StanCorp Financial Group closed yesterday at $48.64.