Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Here's Why You Should Add Aflac (AFL) Stock To Portfolio Now

Published 05/26/2017, 02:51 AM
Updated 07/09/2023, 06:31 AM

Aflac Inc. (NYSE:AFL) boasts an excellent franchise and strong market position in supplemental health insurance in both Japan and the U.S. Aflac U.S. continues to perform strongly as evident by increasing revenues since 2012.

The company has also achieved an increase in new annualized premium sales from $1.2 billion in 2005 to $1.5 billion in 2015. Though new annualized premiums sales declined 5.9% year over year to $113.7 billion in 2016, total revenue of $22.6 billion increased 8.1%.

Year to date, shares of the company have gained 6%, outperforming the 4.1% gain by the Zacks categorized Insurance Accident and Health industry.



Aflac is on track with its conversion in Japan from branch to a subsidiary. This conversion will enhance Aflac's flexibility by de-stacking the branch and converting it to an indirect subsidiary. It will remove the US RBC capital volatility from foreign exchange rate movements as well as Japan sovereign debt concentration risks.

The company has undertaken a change in product mix by emphasizing the sale of third sector products and pare down the sale of first sector products (which carry greater exposure to interest rate risk) to tackle the low interest rate headwind in its Japan business. It also recently made modifications to some of its third sector products to drive sales. Management expects long-term compound annual growth rate in third sector in the range of 4% to 6%.

Aflac continues to maintain strong risk-adjusted capital at its operating subsidiaries are supported by consistent earnings and good liquidity. The company has been buying back shares regularly. It has also increased its dividend for 34 consecutive years, thereby boosting its shareholders’ returns and confidence in it.

The company continues to anticipate share repurchase in the range of $1.3 million to $1.5 billion in 2017 with the majority taking place in the first half of the year. The company reaffirmed its guidance of deploying $2 billion to $2.2 billion to its shareholders in 2017. Aflac ended the quarter with $1.7 billion of excess liquidity. Leverage remains at the low end of its policy range of 20% to 25%.

The stock currently has a trailing 12-month P/E ratio of 11.09. This level compares favorably with 11.36 for the Zacks categorized Insurance Accident and Health industry. It also compares pretty favorably with the broader market, as the P/E for the S&P 500 is at 21.59.

The stock’s valuation looks a cheap when compared with its sub sector as well as with the broader market.

Aflac carries a Zacks Rank #2 (Buy). Other stocks with the same rank as Aflac are Prudential Financial Inc. (NYSE:PRU) , Old Republic International Corp. (NYSE:ORI) and Employers Holdings Inc. (NYSE:EIG) .You can see the complete list of today’s Zacks #1 Rank stocks here.

Prudential (LON:PRU) surpassed earnings estimates last quarter by 5.7%. It has also witnessed an upward revision in earnings estimates over the past 60 days.

Old Republic surpassed earnings estimates in two of the last four quarters with an average positive surprise of 11.4%.

Employers Holdings surpassed earnings estimates in three of the last four quarters with an average positive surprise of 19.9%.

Looking for Ideas with Even Greater Upside?

Today's investment ideas are short-term, directly based on our proven 1 to 3 month indicator. In addition, I invite you to consider our long-term opportunities. These rare trades look to start fast with strong Zacks Ranks, but carry through with double and triple-digit profit potential. Starting now, you can look inside our home run, value, and stocks under $10 portfolios, plus more.

Click here for a peek at this private information >>



Aflac Incorporated (AFL): Free Stock Analysis Report

Employers Holdings Inc (EIG): Free Stock Analysis Report

Old Republic International Corporation (ORI): Free Stock Analysis Report

Prudential Financial, Inc. (PRU): Free Stock Analysis Report

Original post

Zacks Investment Research

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.