Aflac (AFL) Riding High on Strong U.S. and Japan Business

Aflac, Inc.'s AFL consistent operating performance has been backed by its industry leading market share and scale in Japan and the United States. The company has a recognized and powerful brand, diverse and productive distribution network, product innovation and customized high-quality service, and a strong capital position marked by stable earnings and strong cash flows.

Year to date, the stock has gained 19% compared with the industry’s rise of 10.3%.

The company’s superior operating profitability is underscored by the fact that it surpassed earnings estimates in 14 of the last 15 reported quarters.

Will the Profitability Continue?

Last year, Aflac successfully changed its Japan business from a branch to a subsidiary. Japan has been a significant business generator for the company. This change in operating structure better aligns Aflac with the global regulatory framework.

It also recently entered into an agreement with Japan Post. Per the agreement, Japan Post will buy 7% of the company’s shareholding. This deal is expected to drive business expansion in the region, thus aiding overall growth.

Aflac has suffered from low interest rates in Japan and has changed the product mix to emphasize sales of third-sector products, which are less prone to interest rate volatility.

Though Aflac anticipates that in its Japan business, total earned premium of third-sector and first-sector protection products combined will slightly decline due to limited pay policies reaching paid-up status and sales are expected to decline in low-to-mid single digits for 2019, the long-term picture remains bright.

In its U.S. business, the company continues to put up a good show, with continuous growth in premiums over the years. It has undertaken a number of growth initiatives in this segment such as the adoption of Everwell and One Pay Day for increased penetration, delivery of value-added services and increased client retention; product partnering to drive improved account values and employee access; and investment in administrative capabilities.

Per the company, investments made in distribution and customer experience will promote increased productivity, persistency, and improved long-term economics. In 2019, the company expects improvement in sales and 2-3% growth in earned premium.     

Aflac’s strong risk-adjusted capital position is another positive. The company has raised dividends for more than 35 consecutive years. The stock is known as dividend aristocrat and is viewed attractively by dividend seeking investors. We believe the company’s strong business fundamentals will drive its growth.

Zacks Rank and Other Stocks

The stock also carries a Zacks Rank #2 (Buy) and an impressive Value Score of B. Our research shows that stocks with a Value Style Score of A or B when combined with a Zacks Rank #1 (Strong Buy) or 2 offer the best opportunities in the value investing space.

Other stocks worth considering in the insurance space are FGL Holdings FG, Reinsurance Group of America, Inc. RGA and Torchmark Corp. TMK. Each of these stocks carries a Zacks Rank #2 (Buy).

You can see the complete list of today’s Zacks #1 Rank stocks here.

FGL Holdings beat estimates in each of the four quarters with an average positive surprise of 13.05%, Reinsurance Group surpassed estimates in two of the four reported quarters with an average positive surprise of 5.62%. Torchmark posted better-than-expected numbers in three of the four reported quarters with an average positive surprise of 2.27%.

Will you retire a millionaire?

One out of every six people retires a multimillionaire. Get smart tips you can do today to become one of them in a new Special Report, “7 Things You Can Do Now to Retire a Multimillionaire.”

Click to get it free >>

Click to get this free report

Aflac Incorporated (AFL): Free Stock Analysis Report

Reinsurance Group of America, Incorporated (RGA): Free Stock Analysis Report

Torchmark Corporation (TMK): Free Stock Analysis Report

FGL Holdings (FG): Free Stock Analysis Report

To read this article on click here.

Zacks Investment Research

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

Other Topics


Latest Markets Videos


Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at

Learn More