PORTLAND, Ore., July 21 /EMWNews/ -- StanCorp Financial

Group, Inc. (NYSE: SFG) today reported net income for the second quarter of

2008 of $0.98 per diluted share, compared to $0.97 per diluted share for

the second quarter of 2007. Net income for the same periods was $48.4

million and $52.1 million, respectively. After-tax net capital losses were

$14.0 million for the second quarter of 2008, compared to after-tax net

capital gains of $0.4 million for the second quarter of 2007. After-tax net

capital losses for the second quarter of 2008 primarily related to

impairment write-downs of previously disclosed debt security holdings of

bond insurers Ambac, Radian and MBIA.



    Net income excluding after-tax net capital gains and losses increased

31.3% to $1.26 per diluted share for the second quarter of 2008, compared

to $0.96 per diluted share for the second quarter of 2007 (see discussion

of non-GAAP financial measures below). The increase reflected comparatively

favorable claims experience for the group insurance businesses. In

addition, diluted weighted-average shares were 49.4 million in the second

quarter of 2008 compared to 53.7 million for the second quarter of 2007.



    "We are pleased to see sustained strength in our Insurance Services and

Asset Management segments," said Eric E. Parsons, chairman, president and

chief executive officer. "While asset impairments are never welcome, it was

prudent to recognize the reduced market value of holdings related to three

bond insurers. We had no material additions to our watchlist and our

mortgage loan portfolio continues to perform well. In an uncertain economic

environment, we continue to maintain our commitment to long-term financial

success."



    Operating expenses were $115.8 million for the second quarter of 2008,

compared to $105.7 million for the second quarter of 2007. The increase in

operating expenses was primarily driven by business growth in the Insurance

Services segment as evidenced by premium growth, as well as technology

infrastructure costs related to the integration of acquired businesses in

the Asset Management segment.



    Year-to-Date



    Net income for the first six months of 2008 was $2.00 per diluted

share, compared to net income of $1.86 per diluted share for the first six

months of 2007. Net income for these same periods was $98.7 million and

$100.4 million, respectively. After-tax net capital losses for the first

six months of 2008 were $16.8 million, compared to after-tax net capital

gains of $1.0 million for the first six months of 2007.



    Net income excluding after-tax net capital gains and losses for the

first six months of 2008 was $2.34 per diluted share, compared to $1.85 per

diluted share for the first six months of 2007. The increase was primarily

due to premium growth and comparatively favorable claims experience in the

group insurance businesses. Premium growth for the Insurance Services

segment between the comparative periods was 6.5%, and revenue growth for

the Asset Management segment was 9.8%. In addition, diluted

weighted-average shares were 49.4 million for the first six months of 2008

compared to 53.8 million for the first six months of 2007.






    Guidance



    For 2008, the Company expects:

    -- That its long-term target for return on average equity of 14% to 15%

will be met or exceeded,



    -- That its long-term target for earnings per diluted share growth of

12% to 15% will be achieved, and



    -- That its premium growth will be at or below the low end of its

previously stated 2008 range of 6% to 8%.



    The Company is maintaining its group insurance benefit ratio guidance

of 77.5% to 79.5%. However, actual experience over the past four years

indicates that the benefit ratio for 2008 could be at the lower end of the

range.



    The Company expects positive net cash flows in its asset management

businesses but will not provide specific short-term guidance with regard to

overall asset growth due to the current volatility in the equity markets.



    The Company's actual results for 2008 could differ from the ranges

described above due to many factors. For more information about factors

that may change the Company's 2008 financial results, see Forward-Looking

Information.






    Business Segments



    Insurance Services

    The Insurance Services segment reported income before income taxes of

$89.3 million for the second quarter of 2008, compared to $72.4 million for

the second quarter of 2007. Results for the second quarter of 2008 were

affected by premium growth and comparatively favorable claims experience in

the group insurance businesses.



    Premiums for the Insurance Services segment increased 4.1% to $534.0

million for the second quarter of 2008, compared to $512.9 million for the

second quarter of 2007. Premiums for the second quarter of 2007 included a

single premium of $19.3 million related to a reserve buyout. Adjusted for

the 2007 reserve buyout, premium growth for the second quarter of 2008 was

8.2%.



    Sales for group insurance products, reported as annualized new

premiums, were $43.0 million for the second quarter of 2008, compared to

$58.3 million for the second quarter of 2007. Adjusted for the 2007 reserve

buyout, sales growth for the second quarter of 2008 was 10.3%.



    The benefit ratio for group insurance products for the second quarter

of 2008 was 74.4%, compared to 79.0% for the second quarter of 2007. Claims

experience can fluctuate widely from quarter to quarter and tends to be

more stable when measured over a longer period of time.



    The discount rate used in the second quarter of 2008 for

newly-established long term disability claim reserves was increased 25

basis points to 5.25% from the 5.00% used in the first quarter of 2008. The

discount rate used in the second quarter of 2007 was 5.50%.



    Asset Management



    The Asset Management segment reported income before income taxes of

$12.6 million for the second quarter of 2008 compared to $12.2 million for

the second quarter of 2007. The increase primarily reflected the impact of

increased revenues due to higher asset balances partially offset by

increased expenses related to integration and infrastructure work in the

retirement plans business.



    Revenues for this segment increased 13.6% to $88.8 million for the

second quarter of 2008, compared to $78.2 million for the second quarter of

2007.



    Assets under administration for the Asset Management segment, which

includes retirement plans, individual annuities and outside managed

commercial mortgage loans, increased 8.3% to $22.19 billion at June 30,

2008 compared to June 30, 2007. The increase reflected growth in retirement

plans customer deposits, individual annuities and mortgage loans under

management partially offset by declines in market values of equity assets

under administration.



    StanCorp Mortgage Investors originated $380.5 million and $395.9

million of commercial mortgage loans for the second quarters of 2008 and

2007, respectively. Mortgage loans managed for other investors were $2.26

billion at June 30, 2008, a 39.9% increase compared to June 30, 2007.



    Other



    The Other category includes net capital gains and losses, return on

capital not allocated to the product segments, holding company expenses,

interest on debt, and adjustments made in consolidation. The Other category

reported a loss before income taxes of $31.4 million for the second quarter

of 2008, compared to a loss before income taxes of $5.6 million for the

second quarter of 2007. The loss before income taxes for the second quarter

of 2008 included net capital losses of $21.6 million, compared to net

capital gains of $0.7 million for the second quarter of 2007. The increase

in net capital losses was primarily related to asset write-downs of fixed

maturity securities. The loss before income taxes also included additional

interest expense of $3.6 million compared to the second quarter of 2007,

which primarily resulted from $300 million in long-term debt issued in May

2007.



    Fixed Maturity Securities and Commercial Mortgage Loans



    At June 30, 2008, the Company's investment portfolio consisted of

approximately 57% fixed maturity securities, 42% commercial mortgage loans

and 1% in real estate. The overall rating of the fixed maturity securities

portfolio was A (Standard & Poor's) at June 30, 2008. The Company's

holdings in bond insurers Ambac, Radian and MBIA had a book value of

approximately $35 million. In the second quarter, the Company recognized

other-than-temporary impairments for these holdings of $18.9 million.



    At June 30, 2008, commercial mortgage loans in the Company's investment

portfolio totaled $3.97 billion on approximately 5,161 commercial mortgage

loans. The average loan-to-value ratio for the overall portfolio was 58.3%,

and the Company's average exposure was approximately $0.8 million per loan.

The Company has the contractual ability to pursue personal recourse on most

of the loans. Mortgage loans more than 60 days delinquent were 0.13% of the

portfolio balance at June 30, 2008, compared to 0.09% of the portfolio

balance at June 30, 2007. Commercial mortgage loan prepayment fees were

$2.2 million for the second quarter of 2008, compared to $2.4 million for

the second quarter of 2007. The Company does not have direct exposure to

sub prime or alt-A mortgages in its investment portfolio. There were no

material losses in our mortgage loan portfolio during the second quarter of

2008.



    Shares Outstanding



    Diluted weighted-average shares outstanding for the second quarters of

2008 and 2007 were 49.4 million and 53.7 million, respectively. During the

second quarter of 2008, the Company repurchased 0.1 million shares at a

total cost of $5.0 million, a volume weighted-average price of $50.52 per

common share. At June 30, 2008, the Company had 1.1 million shares

remaining under its repurchase program, which expires December 31, 2008.



    Non-GAAP Financial Measures



    Financial measures that exclude after-tax net capital gains and losses

and accumulated other comprehensive income (loss) are non-GAAP (Generally

Accepted Accounting Principles in the United States) measures. To provide

investors with a broader understanding of earnings, the Company provides

net income per diluted share excluding after-tax net capital gains and

losses, along with the GAAP measure of net income per diluted share,

because capital gains and losses are not likely to occur in a stable

pattern.



    Return on average equity excluding after-tax net capital gains and

losses from net income and accumulated other comprehensive income (loss)

from equity is furnished along with the GAAP measure of net income return

on average equity because management believes providing both measures gives

investors a broader understanding of return on equity. Measuring return on

average equity without accumulated other comprehensive income (loss)

excludes the effect of market value fluctuations of the Company's fixed

maturity securities primarily associated with changes in interest rates.

Management believes that measuring return on average equity without

accumulated other comprehensive income (loss) is important to investors

because the turnover of the Company's portfolio of fixed maturity

securities may not be such that unrealized gains and losses reflected in

accumulated other comprehensive income (loss) are ultimately realizable.

Furthermore, for the purpose of calculating this ratio, management believes

exclusion of other comprehensive income (loss) provides investors with a

better measure of return.

    About StanCorp Financial Group, Inc.



    StanCorp Financial Group, Inc., through its subsidiaries marketed as

The Standard -- Standard Insurance Company, The Standard Life Insurance

Company of New York, Standard Retirement Services, StanCorp Mortgage

Investors, StanCorp Investment Advisers, StanCorp Real Estate, StanCorp

Equities, and StanCorp Trust Company -- is a leading provider of financial

products and services. StanCorp's subsidiaries serve approximately 8.5

million customers nationwide as of June 30, 2008, with group and individual

disability insurance, group life, AD&D and dental insurance, retirement

plans products and services, individual annuities and investment advice.

For more information about StanCorp Financial Group, Inc., visit its Web

site at http://www.stancorpfinancial.com.



    Conference Call



    StanCorp management will hold an investor and analyst conference call

to review StanCorp's second quarter 2008 results on July 22, 2008, at noon

Eastern time (9:00 a.m. Pacific time). To listen to the live webcast of

this conference call, logon to http://www.stancorpfinancial.com/investors.

Windows Media Player(TM) will be required to listen to the webcast. A

webcast replay will be available starting approximately two hours after the

original broadcast. The replay will be available through September 12,

2008.



    A telephone replay of the conference call will also be available

approximately two hours after the conference call by dialing (800) 642-1687

or (706) 645-9291 and entering conference identification number 53288913.

The replay will be available through July 31, 2008.



    Forward-Looking Information



    Some of the statements contained in this earnings release, including

those relating to the Company's strategy and growth prospects and other

statements that are predictive in nature, that depend on or refer to future

events or conditions or that include words such as "expects,"

"anticipates," "intends," "plans," "believes," "estimates," "seeks" and

similar expressions, are forward-looking statements within the meaning of

Section 21E of the Securities Exchange Act of 1934, as amended. These

statements are not historical facts but instead represent only management's

expectations, estimates and projections regarding future events. Similarly,

these statements are not guarantees of future performance and involve

uncertainties that are difficult to predict, which may include, but are not

limited to, the factors discussed below. As a provider of financial

products and services, the Company's results of operations may vary

significantly in response to economic trends, interest rate changes,

investment performance and claims experience. Caution should be used when

extrapolating historical results or conditions to future periods.



    The Company's actual results and financial condition may differ,

perhaps materially, from the anticipated results and financial condition in

any such forward-looking statements. Given these uncertainties or

circumstances, readers are cautioned not to place undue reliance on such

statements. The Company undertakes no obligation to publicly update or

revise any forward-looking statements, whether as a result of new

information, future events or otherwise.



    The following factors could cause results to differ materially from

management expectations as suggested by such forward-looking statements:



    -- Growth of sales, premiums and annuity deposits, cash flows, gross

profits and profitability.



    -- Availability of capital required to support business growth and the

effective utilization of excess capital.



    -- Integration and performance of business acquired through reinsurance

or acquisition.



    -- Financial strength and credit ratings.



    -- Changes in the regulatory environment at the state or federal level

or changes in U.S. GAAP accounting principles, practices or policies.



    -- Findings in litigation or other legal proceedings.



    -- Receipt of dividends from, or contributions to, our subsidiaries.



    -- Adequacy of the diversification of risk by product offerings and

customer industry, geography and size.



    -- Adequacy of asset/liability management.



    -- Events of terrorism, natural disasters or other catastrophic events.



    -- Changes in federal or state income taxes.



    -- Growth in assets under administration including performance of

equity investments in the separate account.



    -- Benefit ratios, including changes in claims incidence, severity and

recovery.



    -- Levels of persistency.



    -- Adequacy of reserves established for future policy benefits.



    -- The effect of changes in interest rates on reserves, policyholder

funds, investment income and commercial mortgage loan prepayment fees.



    -- The impact of rising benefit costs on employer budgets for employee

benefits.



    -- Levels of employment and wage growth.



    -- Competition from other insurers and financial services companies,

including the ability to competitively price our products.



    -- Concentration of risk that is especially inherent in group life

products.



    -- Ability of reinsurers to meet their obligations.



    -- Availability, adequacy and pricing of reinsurance and catastrophe

reinsurance coverage and potential charges incurred.



    -- Losses from a disease pandemic.



    -- Achievement of anticipated levels of operating expenses.



    -- Credit quality of the holdings in our investment portfolios.



    -- The condition of the economy and expectations for interest rate

changes.



    -- The effect of changing levels of commercial mortgage loan prepayment

fees on cash flows.



    -- Experience in delinquency rates or loss experience in our commercial

mortgage loan portfolio.



    -- Concentration of commercial mortgage loan assets collateralized in

California.



    -- Environmental liability exposure resulting from commercial mortgage

loan and real estate investments.










                        StanCorp Financial Group, Inc.

          Consolidated Statements of Income and Comprehensive Income

                  (Amounts in millions - except share data)



                                   Three Months Ended       Six Months Ended

                                        June 30,                 June 30,

                                     2008        2007        2008        2007

     Revenues:                          Unaudited               Unaudited

       Premiums:

        Insurance Services         $534.0      $512.9    $1,068.3    $1,002.7

        Asset Management              9.0         5.2        15.2         7.4

           Total premiums           543.0       518.1     1,083.5     1,010.1

     Administrative fees:

       Insurance Services             2.4         1.9         4.7         3.9

       Asset Management              31.7        29.4        60.5        56.8

       Other                         (3.2)       (2.9)       (6.4)       (5.8)

         Total administrative

          fees                       30.9        28.4        58.8        54.9

     Net investment income:

       Insurance Services            85.3        81.5       168.2       161.1

       Asset Management              48.1        43.6        88.0        84.9

       Other                          3.2         5.6         9.2         8.0

         Total net investment

          income                    136.6       130.7       265.4       254.0

     Net capital gains

      (losses)                      (21.6)        0.7       (26.0)        1.6

        Total revenues              688.9       677.9     1,381.7     1,320.6

    Benefits and expenses:

      Benefits to policyholders     409.2       409.9       820.9       791.9

      Interest credited              27.8        28.0        49.0        53.6

      Operating expenses            115.8       105.7       232.7       212.0

      Commissions and bonuses        54.9        46.4       112.1        96.4

      Premium taxes                   9.4         9.3        18.4        18.2

      Interest expense                9.9         6.3        19.6        10.8

      Net increase in deferred

       acquisition costs,

       value of business

       acquired and

       intangibles                   (8.6)       (6.7)      (17.6)      (15.1)

        Total benefits and

         expenses                   618.4       598.9     1,235.1     1,167.8



    Income (loss) before

     income taxes:

      Insurance Services             89.3        72.4       168.2       139.5

      Asset Management               12.6        12.2        20.9        22.6

      Other                         (31.4)       (5.6)      (42.5)       (9.3)

        Total income before

         income taxes                70.5        79.0       146.6       152.8

      Income taxes                   22.1        26.9        47.9        52.4

      Net income                     48.4        52.1        98.7       100.4



    Other comprehensive loss,

     net of tax:

      Unrealized gains or

       losses on securities

       available-for sale:

        Unrealized capital

         losses on securities

         available-for-sale, net    (78.1)      (54.8)      (57.6)      (46.2)

        Reclassification

         adjustment for net

         capital (gains) losses

         included in

         net income, net              0.1        (1.5)       (1.1)       (1.8)

      Employee benefit plans:

        Prior service cost

         arising during the

         period, net                  -           -           -          (1.4)

        Reclassification

         adjustment for

         amortization to net

         periodic

         pension cost, net            0.2         0.2         0.4         0.5

          Total                     (77.8)      (56.1)      (58.3)      (48.9)

    Comprehensive income

     (loss)                        $(29.4)      $(4.0)      $40.4       $51.5



    Net income per common

     share:

      Basic                         $0.99       $0.98       $2.02       $1.88

      Diluted                        0.98        0.97        2.00        1.86



    Weighted-average common

     shares outstanding:

      Basic                    48,943,331  53,195,859  48,950,232  53,311,550

      Diluted                  49,414,086  53,735,309  49,387,519  53,846,800







                        StanCorp Financial Group, Inc.

                         Consolidated Balance Sheets

                            (Dollars in millions)



                                                  June 30,       December 31,

                                                    2008             2007

    Assets:                                       Unaudited

     Investments:

      Fixed maturity securities                   $5,285.9         $4,997.1

      Short-term investments                           1.8              4.5

      Commercial mortgage loans, net               3,967.8          3,657.7

      Real estate, net                                72.2             71.8

      Policy loans                                     3.8              3.9

        Total investments                          9,331.5          8,735.0

     Cash and cash equivalents                        72.2            205.8

     Premiums and other receivables                  101.5            106.8

     Accrued investment income                       100.5             93.1

     Amounts recoverable from reinsurers             937.8            929.6

     Deferred acquisition costs, value

      of business acquired,

      intangibles and goodwill, net                  345.7            324.8

     Property and equipment, net                     134.0            126.9

     Deferred tax assets, net                         11.9              -

     Other assets                                     33.7             74.5

     Separate account assets                       4,157.8          4,386.4

         Total assets                            $15,226.6        $14,982.9



    Liabilities and equity:

     Liabilities:

      Future policy benefits and claims           $5,246.0         $5,158.7

      Other policyholder funds                     3,533.3          3,153.8

      Deferred tax liabilities                         -               15.6

      Short-term debt                                 22.0              4.0

      Long-term debt                                 562.3            562.6

      Other liabilities                              239.4            272.8

      Separate account liabilities                 4,157.8          4,386.4

        Total liabilities                         13,760.8         13,553.9



    Contingencies and commitments



    Shareholders' equity:

      Preferred stock, 100,000,000

       shares authorized; none issued                  -                -

      Common stock, no par, 300,000,000

       shares authorized; 49,029,174

       and 49,155,131 shares

       issued at June 30, 2008

       and December 31, 2007,

       respectively                                  263.5            267.1

      Accumulated other comprehensive

       income (loss)                                 (41.5)            16.8

      Retained earnings                            1,243.8          1,145.1

        Total shareholders' equity                 1,465.8          1,429.0

         Total liabilities and

          shareholders' equity                   $15,226.6        $14,982.9







                        StanCorp Financial Group, Inc.

        Statistical and Operating Data at or for the Periods Indicated

                            (Dollars in millions)





                                         Three Months Ended  Six Months Ended

                                              June 30,           June 30,

                                             2008   2007      2008      2007

                                              Unaudited         Unaudited

    Benefit ratio:

      % of total revenues:

        Group Insurance (including interest

         credited)                            64.6%  68.9%     65.7%     69.0%

        Individual Disability Insurance       61.9   59.3      57.8      49.2

        Insurance Services segment

         (including interest credited)        64.4   68.2      65.1      67.5

      % of total premiums:

        Group Insurance (including interest

         credited)                            74.4%  79.0%     75.5%     79.3%

        Individual Disability Insurance       84.3   84.2      76.9      68.5

        Insurance Services segment

         (including interest credited)        75.0   79.3      75.6      78.6



    Reconciliation of non-GAAP financial

     measures:

      Net income                             $48.4  $52.1     $98.7    $100.4

          After-tax net capital gains

           (losses)                          (14.0)   0.4     (16.8)      1.0

      Net income excluding after-tax net

       capital gains (losses)                $62.4  $51.7    $115.5     $99.4



      Net capital gains (losses)            $(21.6)  $0.7    $(26.0)     $1.6

          Taxes on net capital gains

           (losses)                           (7.6)   0.3      (9.2)      0.6

      After-tax net capital gains (losses)  $(14.0)  $0.4    $(16.8)     $1.0



      Diluted earnings per common share:

      Net income                             $0.98  $0.97     $2.00     $1.86

          After-tax net capital gains

           (losses)                          (0.28)  0.01     (0.34)     0.01

      Net income excluding after-tax net

       capital gains (losses)                $1.26  $0.96     $2.34     $1.85



      Shareholders' equity                                 $1,465.8  $1,439.7

          Accumulated other comprehensive

           loss                                               (41.5)    (57.0)

      Shareholders' equity excluding

       accumulated other

        comprehensive loss                                 $1,507.3  $1,496.7





      Net income return on average equity                      13.6%     13.8%

      Net income return on average equity

       (excluding accumulated

         other comprehensive loss)                             13.5      13.5

      Net income return on average equity

       (excluding after-tax net

        capital gains (losses) and

         accumulated other comprehensive

         loss)                                                 15.8      13.4



    Statutory data - insurance

     subsidiaries:

      Net gain from operations before

       federal income taxes                   $86.2  $56.6   $162.7    $113.9

      Net gain from operations after

       federal income taxes and

        before net realized capital gains

         (losses)                              57.2   36.2    113.3      74.3





                                                         June 30, December 31,

                                                              2008       2007

                                                         Unaudited



      Capital and surplus                                  $1,146.5  $1,047.8

      Asset valuation reserve                                 101.5     102.2