Aflac Inc. (AFL): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report


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Aflac's fourth-quarter earnings underperformed the Zacks Consensus Estimate and the year-ago results despite lower share count and expense control. Top line decelerated owing to reduced sales and premiums along with unfavorable dollar/yen exchange rate in Japan. These were partially offset by marginal improvement in the U.S. operations. We remain cautious of the tepid growth guidance and investment returns, given the sluggish economy faced in Japan. Yet, Aflac's product expertise, healthy capital ratios, dividend hike, accelerated buybacks and better-than-expected profit repatriation in 2014 boost confidence. Overall, a stable economy and investment restructuring should help gather momentum in the long run, negate interest and currency risks, and enhance financials, justifying our Neutral recommendation on the stock.


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, 2013, Aflac Japan had 4,524 employees and Aflac U.S. had 4,335 employees. Aflac's other operations include a printing subsidiary, which had 282 employees as of Dec 31, 2013.

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 26% of total revenue in 2013) 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 (74%) 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 annuities.

Since its inception, Aflac has grown steadily with strategic acquisitions and alliances. 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 global acclaim over a short span of time. This year, Aflac was recognized by Ethisphere magazine as one of the world's most ethical companies, for the 8th consecutive year. In 2014 itself, the Fortune magazine recognized Aflac as one of the 100 best companies operating in America for the 16th consecutive year. Fortune also put Aflac on its global list of the most admired companies in the Life and Health Insurance' category for the 13th time in 2014. Aflac has also been considered as America's best-managed company in the insurance category by Forbes magazine.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Stocks

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