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Here's Why You Should Add Aflac (AFL) to Your Portfolio
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Aflac Incorporated (AFL - Free Report) is well-poised to grow on the back of its cost-curbing measures, global investments, growing network in the domestic market and expanding product suite.
Based in Columbus, GA, Aflac operates as a supplemental health and life insurance products provider. It has strong footprints in the United States and Japan. The company has a market cap of $47.8 billion.
Zacks Rank & Price Performance
AFL currently carries a Zacks Rank #2 (Buy). In the past year, the stock has gained 13.8% compared with the industry’s growth of 11.6%.
Image Source: Zacks Investment Research
Trend in Estimates
The Zacks Consensus Estimate for AFL’s 2023 earnings is pegged at $6.30 per share, indicating an 18.2% increase from the year-ago reported figure of $5.33.The estimate rose 4.7% in the past 60 days. The consensus mark for current-year revenues is $18.4 billion.
Key Drivers
Aflac expects improved sales in its Aflac Japan segment, driven by strategic initiatives such as product launches, updates and distribution strategies. Moreover, the positive performance of Japan Post contributes to the anticipated growth. A medical product launched in mid-September has shown a promising start, further bolstering the company's outlook.
Management expresses confidence in the robust sales performance within its U.S. business. The anticipated strength is attributed to improving productivity and contributions from various platforms, including network, dental, vision, and group life and disability. Aflac recently revealed that its strategic alliance with Trupanion will focus on growing its pet insurance business footprint in North America. This will further boost the U.S. results in the future. These factors are poised to sustain positive results for the company. Our model estimate for revenues in the U.S. segment implies a rise of 2.4% year over year in 2023.
A significant improvement in the company’s expense ratio is expected to contribute to a decline in the combined ratio below the previous year's level. Projections from our model indicate a combined ratio of 67.9% for 2023, showcasing an improvement from 74.6% a year ago, which is expected to enhance the company's margins.
The implementation of cost-saving initiatives is anticipated to be a driving force for bottom-line growth. Our forecasts suggest a more than 8% year-over-year decline in total benefits and expenses for 2023. AFL's commitment to maintaining an agile workforce is poised to enhance efficiency in the medium to long term.
Aflac's robust balance sheet, highlighted by $5.5 billion in cash and cash equivalents as of Sep 30, 2023, positions the company favorably for initiatives aimed at enhancing shareholder value. With expected debt maturities of $1.3 billion over the next five years, Aflac maintains financial flexibility.
In the third quarter, the company showed confidence in its financial position by repurchasing 9.4 million shares, amounting to $700 million. As of the end of the third quarter, it still had 86.4 million shares available for further buybacks, highlighting its commitment to returning value to shareholders.
However, Aflac’s net cash from operations declined 15.2% in 2021, 23.2% in 2022 and 17.2% in the first nine months of 2023. This sustained trend could potentially impact the company's ability to support and sustain future operations. However, we believe that a systematic and strategic plan of action will drive growth in the long term.
The Zacks Consensus Estimate for Assurant’s current-year earnings indicates a 31% year-over-year increase. It beat earnings estimates in all the past four quarters, with an average surprise of 42.4%. Also, the consensus mark for AIZ’s 2023 revenues suggests 5.4% year-over-year growth.
HCI Group’s earnings outpaced estimates in each of the last four quarters, the average surprise being 519.6%. The Zacks Consensus Estimate for HCI’s 2023 earnings is pegged at $5.2 per share. A loss of $5.48 per share was reported in the prior year. The consensus estimate for revenues suggests growth of 5.5% from the year-ago reported figure.
The Zacks Consensus Estimate for Brown & Brown’s current-year earnings is pegged at $2.76 per share, which indicates 21.1% year-over-year growth. It has witnessed five upward estimate revisions against none in the opposite direction during the past six months. BRO beat earnings estimates in each of the past four quarters, with an average surprise of 12.3%.
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Here's Why You Should Add Aflac (AFL) to Your Portfolio
Aflac Incorporated (AFL - Free Report) is well-poised to grow on the back of its cost-curbing measures, global investments, growing network in the domestic market and expanding product suite.
Based in Columbus, GA, Aflac operates as a supplemental health and life insurance products provider. It has strong footprints in the United States and Japan. The company has a market cap of $47.8 billion.
Zacks Rank & Price Performance
AFL currently carries a Zacks Rank #2 (Buy). In the past year, the stock has gained 13.8% compared with the industry’s growth of 11.6%.
Image Source: Zacks Investment Research
Trend in Estimates
The Zacks Consensus Estimate for AFL’s 2023 earnings is pegged at $6.30 per share, indicating an 18.2% increase from the year-ago reported figure of $5.33.The estimate rose 4.7% in the past 60 days. The consensus mark for current-year revenues is $18.4 billion.
Key Drivers
Aflac expects improved sales in its Aflac Japan segment, driven by strategic initiatives such as product launches, updates and distribution strategies. Moreover, the positive performance of Japan Post contributes to the anticipated growth. A medical product launched in mid-September has shown a promising start, further bolstering the company's outlook.
Management expresses confidence in the robust sales performance within its U.S. business. The anticipated strength is attributed to improving productivity and contributions from various platforms, including network, dental, vision, and group life and disability. Aflac recently revealed that its strategic alliance with Trupanion will focus on growing its pet insurance business footprint in North America. This will further boost the U.S. results in the future. These factors are poised to sustain positive results for the company. Our model estimate for revenues in the U.S. segment implies a rise of 2.4% year over year in 2023.
A significant improvement in the company’s expense ratio is expected to contribute to a decline in the combined ratio below the previous year's level. Projections from our model indicate a combined ratio of 67.9% for 2023, showcasing an improvement from 74.6% a year ago, which is expected to enhance the company's margins.
The implementation of cost-saving initiatives is anticipated to be a driving force for bottom-line growth. Our forecasts suggest a more than 8% year-over-year decline in total benefits and expenses for 2023. AFL's commitment to maintaining an agile workforce is poised to enhance efficiency in the medium to long term.
Aflac's robust balance sheet, highlighted by $5.5 billion in cash and cash equivalents as of Sep 30, 2023, positions the company favorably for initiatives aimed at enhancing shareholder value. With expected debt maturities of $1.3 billion over the next five years, Aflac maintains financial flexibility.
In the third quarter, the company showed confidence in its financial position by repurchasing 9.4 million shares, amounting to $700 million. As of the end of the third quarter, it still had 86.4 million shares available for further buybacks, highlighting its commitment to returning value to shareholders.
However, Aflac’s net cash from operations declined 15.2% in 2021, 23.2% in 2022 and 17.2% in the first nine months of 2023. This sustained trend could potentially impact the company's ability to support and sustain future operations. However, we believe that a systematic and strategic plan of action will drive growth in the long term.
Other Stocks to Consider
Some other top-ranked stocks in the broader Finance space are Assurant, Inc. (AIZ - Free Report) , HCI Group, Inc. (HCI - Free Report) and Brown & Brown, Inc. (BRO - Free Report) . Assurant and HCI Group sport a Zacks Rank #1 (Strong Buy), while Brown & Brown carries a Zacks Rank #2 at present.You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Assurant’s current-year earnings indicates a 31% year-over-year increase. It beat earnings estimates in all the past four quarters, with an average surprise of 42.4%. Also, the consensus mark for AIZ’s 2023 revenues suggests 5.4% year-over-year growth.
HCI Group’s earnings outpaced estimates in each of the last four quarters, the average surprise being 519.6%. The Zacks Consensus Estimate for HCI’s 2023 earnings is pegged at $5.2 per share. A loss of $5.48 per share was reported in the prior year. The consensus estimate for revenues suggests growth of 5.5% from the year-ago reported figure.
The Zacks Consensus Estimate for Brown & Brown’s current-year earnings is pegged at $2.76 per share, which indicates 21.1% year-over-year growth. It has witnessed five upward estimate revisions against none in the opposite direction during the past six months. BRO beat earnings estimates in each of the past four quarters, with an average surprise of 12.3%.