Aflac Incorporated ( AFL Quick Quote AFL - Free Report) is benefiting from a well-performing Japan business, expansion of product offerings and solid capital position
The company has an impressive surprise history. It beat estimates in each of the trailing four quarters, the average surprise being 15.07%.
Aflac’s trailing 12-month return on equity (ROE) reinforces its growth potential. The company’s ROE of 11.7% compares favorably with the
industry’s ROE of 11.5%. What’s Driving the Stock?
With the company’s primary line of business being supplemental health and life insurance products, this Zacks Rank #3 (Hold) company sells these products through its broad distribution channels across the United States and Japan. The well-performing segment of the company — Aflac Japan — has been providing a boost to the company’s revenues in 2020, which accounted for 68% of the same.
Being the largest insurer of Japan with respect to cancer and medical policies in force, the insurance products of Aflac Japan empower consumers to pay medical and nonmedical costs not reimbursed by the health insurance system of the nation. During 2020, the individual policies in force of Aflac Japan not only crossed 24 million in the country but the segment also emerged as the highest seller of cancer insurance policies countrywide.
Meanwhile, Aflac U.S. designs insurance products for offering supplemental coverage to its U.S. customers, who are already covered under major medical or primary insurance policies. The company has also been striving to expand its U.S. product portfolio by venturing into newer businesses. Its launch of Aflac Dental and Vision Insurance in January 2021 bears testament to the same. Further, it strives to provide enhanced benefits solutions for helping the vast workforce across the United States.
Amid the stringent lockdowns and social-distancing measures observed on account of the COVID-19 pandemic, the company ramped up digital investments for transitioning to digital sales methods.
Furthermore, the company has been committed to enhancing shareholder value. Based on a robust capital position, the company hiked its dividend at a six-year CAGR of 8.7%. Its leverage ratio has been improving as indicated by the company’s total debt to total capital of 19.1% as of Dec 31, 2020 comparing favorably with the industry’s figure of 19.4%. Its times interest earned of 18.2x remains higher than the industry's figure of 16x, reflecting the company’s ability to make interest payments.
Shares of Aflac have gained 37.6% in the past six months compared with the industry’s rally of 36.6%.
Stocks to Consider
Some better-ranked stocks in the insurance space are
Employers Holdings, Inc. ( EIG Quick Quote EIG - Free Report) , James River Group Holdings, Ltd. ( JRVR Quick Quote JRVR - Free Report) and First American Financial Corporation ( FAF Quick Quote FAF - Free Report) . While Employers Holdings sports a Zacks Rank #1 (Strong Buy), James River Group and First American Financial carry a Zacks Rank #2 (Buy). You can see . the complete list of today’s Zacks #1 Rank stocks here
Employers Holdings, James River Group and First American Financial have a trailing four-quarter earnings surprise of 98.07%, 11.63% and 15.86%, on average, respectively.
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