UBS on U.S. Life Insurance: Trading Places - Sell StanCorp Financial (SFG) and Buy Unum Group (UNM)

July 18, 2012 12:17 PM EDT
Get Alerts SFG Hot Sheet
Price: $114.97 --0%

Rating Summary:
    1 Buy, 10 Hold, 3 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 35 | Down: 31 | New: 11
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UBS on U.S. Life Insurance: Trading Places - StanCorp Financial (NYSE: SFG) and Unum Group (NYSE: UNM)

Analyst, Suneet Kamath, said, "We are initiating on UNM at Buy and on SFG at Sell. We argue that UNM ROE will expand toward 12% over the next 5 years, while SFG’s ROE will likely be closer to 9%. SFG trades at premiums of 29% on P/B and 64% on P/E to UNM, despite a lower ROE and our view that it has greater EPS risk to low interest rates."

Other highlighed points include: 1) Greater interest rate sensitivity and EPS risk at SFG, UNM better equipped to weather low rate environment; and 2) UNM has greater capital flexibility and positions for accretive buybacks.

UNM's price target $26, SFG's $29.

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