As used in this Form 10-Q, the terms "StanCorp," "Company," "we," "us" and "our"
refer to StanCorp Financial Group, Inc. and its subsidiaries, unless the context
otherwise requires. The following analysis of the consolidated financial
condition and results of operations of StanCorp should be read in conjunction
with the unaudited consolidated financial statements and related condensed notes
thereto. See Item 1, "Financial Statements."

Our filings with the Securities and Exchange Commission ("SEC") include our
annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on
Form 8-K, proxy statements, registration statements and amendments to those
reports. Access to all filed reports is available free of charge on our website
at www.stancorpfinancial.com as soon as reasonably practicable after we
electronically file such material with, or furnish it to, the SEC. The SEC also
maintains an Internet site that contains reports, proxy and information
statements and other information regarding issuers that file electronically with
the SEC at www.sec.gov.

The following management assessment of the financial condition and results of
operations should be read in conjunction with the consolidated financial
statements and notes thereto in our 2011 Form 10-K and our current report on
Form 8-K dated July 18, 2012 which updated certain items in our annual report on
Form 10-K for the retrospective adoption of Accounting Standards Update ("ASU")
No. 2012-26, Accounting for Costs Associated with Acquiring or Renewing
Insurance Contracts. Those consolidated financial statements and certain
disclosures made in this Form 10-Q have been prepared in accordance with
accounting principles generally accepted in the United States of America
("GAAP") and require us to make estimates and assumptions that affect reported
amounts of assets and liabilities and disclosures of contingent assets and
contingent liabilities at the dates of the financial statements and the reported
amounts of revenues and expenses during each reporting period. The estimates
most susceptible to material changes due to significant judgment are identified
as critical accounting policies. The results of these estimates are critical
because they affect our profitability and may affect key indicators used to
measure our performance. See "Critical Accounting Policies and Estimates."

Financial measures that exclude after-tax net capital gains and losses are non-GAAP measures. To provide investors with a broader understanding of earnings, we provide 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.

We have made in this Form 10-Q, and from time to time may make in our public
filings, news releases and oral presentations and discussions, certain
statements, which are predictive in nature and not based on historical facts.
These statements are "forward-looking" and, accordingly, involve risks and
uncertainties that could cause actual results to differ materially from those
discussed or implied. Although such forward-looking statements have been made in
good faith and are based on reasonable assumptions, there is no assurance that
the expected results will be achieved. See "Forward-looking Statements."

Executive Summary

Financial Results Overview

The following table sets forth selected consolidated financial results:

                                               Three Months Ended                         Six Months Ended
                                                   June  30,                                 June  30,
                                           2012                 2011                 2012                 2011

                                                         (Dollars in millions except share data)
Net income                             $        20.0        $        17.8        $        55.2        $        51.1
After-tax net capital losses                    (2.5 )               (8.5 )               (2.6 )              (10.0 )

Net income excluding after-tax net
capital losses                         $        22.5        $        26.3   

$ 57.8 $ 61.1

Diluted earnings per common share:
Net income                             $        0.45        $        0.40        $        1.24        $        1.12
After-tax net capital losses                   (0.06 )              (0.19 )              (0.06 )              (0.22 )

Net income excluding after-tax net
capital losses                         $        0.51        $        0.59   

$ 1.30 $ 1.34

Diluted weighted-average common
shares outstanding                        44,354,720           45,056,472           44,407,325           45,619,277


Consolidated financial results for the second quarter and first six months of
2012 compared to the same periods of 2011 reflected a comparatively higher
benefit ratio in our Insurance Services segment, primarily due to less favorable
claims experience in our group long term disability business. The effect of the
less favorable claims experience in the group long term disability business was
partially offset by more favorable claims experience in our individual
disability business and a lower effective income tax rate. Diluted earnings per
share for the three and six months ended June 30, 2012 reflected the effect of a
decrease in diluted weighted-average common shares outstanding, which was
primarily due to share repurchases.

Outlook

We manage for long-term profitability by focusing on business diversification,
disciplined product pricing, sound underwriting, effective claims management and
high-quality customer service. We will address challenges that arise with
financial discipline.

Our earnings for the second quarter and first six months of 2012 were below our
expectations, which reflected an increased level of claims severity, continued
elevated claims incidence and the effect of low interest rates in our group long
term disability business. As a result of our recent experience surrounding
claims severity and claims incidence, we have continued to make adjustments to
our pricing and ensuring appropriate claims management resources in response to
the current environment.



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Table of Contents

Based on the results for the first six months of 2012, we expect that the 2012
annual benefit ratio for the group insurance business will exceed the guidance
range of 80% to 82% that we provided earlier this year. We expect the benefit
ratio to remain elevated while economic conditions improve and the effects of
our pricing actions take hold. As a result, we expect to be below our 2012
guidance range of $3.60 to $3.90 for net income per diluted share, excluding
after-tax net capital gains and losses, and below the guidance range of 9% to
10% for return on average equity, excluding after-tax net capital gains and
losses from net income and accumulated other comprehensive income ("AOCI") from
equity. Additionally, we expect our effective income tax rate for 2012 will be
below our guidance range of 26% to 27%.

We remain focused on continuing to provide excellent products and services to
our customers, enhancing our financial strength and increasing value to our
shareholders. We will continue to focus on optimizing shareholder value through
sustainable profitability by investing in new product and service capabilities
and through the strategic use of capital, as we believe these actions position
us well for growth as the economy recovers.

Primary Drivers of 2012 Results

The primary drivers of our results continue to be the group insurance benefit
ratio and group insurance premium growth. Our group insurance benefit ratio for
the first six months of 2012 was 86.0% and was outside our annual expected range
of 80.0% to 82.0%. During the first six months of 2012, the group insurance
benefit ratio was affected by comparatively higher claims severity and continued
high claims incidence. Claims experience can fluctuate widely from quarter to
quarter and tends to be more stable when measured over a longer period of time.
The benefit ratio is primarily affected by reserves established based on growth
of our in force block of business, claims experience and assumptions used to
establish related reserves, such as our discount rate.

The interest rate environment and its effect on our discount rate is a major
driver in our reserve levels. The discount rate used in the second quarter of
2012 for newly established long term disability claim reserves was 4.00%,
compared to 5.25% used for the second quarter of 2011 and 4.75% used for the
first quarter of 2012. A 25 basis point increase or decrease in the discount
rate results in a comparable increase or decrease in quarterly pre-tax income of
approximately $1.8 million. The decrease in the discount rate from the second
quarter of 2011 and the first quarter of 2012 was primarily the result of a
continued low interest rate environment. We will maintain our disciplined
approach to interest rate management given the uncertainty of the future
interest rate environment and the corresponding impact on new investment yields
and the discount rates used to establish claim reserves.

Our Insurance Services segment premiums increased 2.0% to $546.5 million and
3.0% to $1.10 billion for the second quarter and first six months of 2012
compared to the same periods of 2011, respectively, primarily due to the
favorable impact of experience rated refunds. Premium growth continues to be
affected by the economic environment, which has caused lower wage rate and job
growth for our group insurance customers.

Consolidated Results of Operations

Revenues

Revenues consist of premiums, administrative fees, net investment income and net
capital gains and losses. Historically, premium growth in our Insurance Services
segment and administrative fee revenue growth in our Asset Management segment
have been the primary drivers of consolidated revenue growth.

The following table sets forth consolidated revenues: