Aflac's third-quarter earnings were in line with the Zacks
Consensus Estimate but plunged from the year-ago quarter.
Decelerating sales, premiums and investment income in Japan, due to
unfavorable dollar/yen exchange rate dampened the results. However,
improved revenues from the U.S and expense reduction partially
offset the downsides. The capital position also remains modestly
favorable. Modest earnings guidance, healthy capital ratios, stable
ratings along with expanded share buybacks and dividend hike
instill confidence. Yet, we remain cautious over the weakness in
sales outlook, repatriation of funds and investment losses, given
the sluggish economy faced by Japan. Overall, a stable economy,
investment restructuring and the Japan Post agreement should help
Aflac gather momentum in the long run, negate interest and currency
risks, and provide more profitable investment opportunities,
justifying our Neutral recommendation.
Founded in 1955 and headquartered in Columbus, Georgia, Aflac
Inc., through its subsidiary American Family Life Assurance Company
of Columbus, provides supplemental health and life insurance. The
company was incorporated in 1973 under the laws of the state of
Georgia. Aflac offers voluntary insurance policies in Japan and the
U.S., all of which provide financial protection against income and
asset loss. The company sells its products through sales
associates, independent corporate/individual agencies and
affiliated corporate agencies. Aflac insurance products provide
protection to more than 50 million people across the U.S. and
Japan. As of Dec 31, 2012, Aflac Japan had 4,349 employees and
Aflac U.S. had 4,324 employees. Aflac's other operations include a
printing subsidiary, which had 292 employees as of Dec 31,
The company primarily derives its revenues from premiums
(principally supplemental health insurance), net investment income,
realized investment gains or losses and other income. Aflac
primarily operates in the U.S. and Japan.
Aflac U.S. (accounted for 22% of total revenues in 2012) markets
and administers group products through Continental American
Insurance Company (CAIC). It also offers insurance products,
including accident/disability plans, cancer plans, short-term
disability plans, sickness and hospital indemnity plans, hospital
intensive care plans, fixed-benefit dental plans, vision care
plans, long-term care plans and life insurance products.
Aflac Japan (78%) is a branch of Aflac that offers supplemental
insurance products including cancer plans, general medical
indemnity plans, medical/sickness riders, care plans, living
benefit life plans, ordinary life insurance plans and
Since its inception, Aflac spread its wings with well-fit
acquisitions and alliances in order to maintain a steady pace of
growth. In 2007, Japan Post Network Co Ltd., a subsidiary of Japan
Post Holdings Co. Ltd., selected Aflac Japan as the exclusive
provider of cancer insurance for distribution through the
nationwide postal office network. Japan Post Network operates
across approximately 24,000 post office locations throughout Japan.
In Oct 2008, Aflac started selling its Cancer Forte product through
Japan Post Network with its products being offered initially
through 300 of Japan's post offices. In 2009, Aflac purchased South
Carolina-based Continental American Insurance Group Inc. (CAIC) and
its wholly owned subsidiary for $100 million. Post acquisition,
CAIC is now known as Aflac Group Insurance.
Aflac has achieved acclaim over a short span of time. In 2013,
Aflac was recognized by Ethisphere magazine as one of the world's
most ethical companies, for the sixth consecutive year. In 2013,
the Fortune magazine recognized Aflac as one of the 100 best
companies operating in America for the 15th consecutive year.
Fortune also put Aflac on its global list of the most admired
companies in the Life and Health Insurance' category for the 12th
time in 2013. Aflac was considered as America's best-managed
company in the insurance category by Forbes magazine.
Aflac Inc. (AFL): Read the Full Research Report
AFLAC INC (AFL): Free Stock Analysis Report
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