Aflac Inc. ( AFL Quick Quote AFL - Free Report) is well poised for growth on the back of recovery in top-line strength and other strategic measures. These include product introductions, expansion of virtual sales platform, resumption of sales via Japan Post and a solid balance sheet.
Last year, the company’s revenues suffered pandemic-led disruptions in face-to-face sales of insurance policies. Per the company, physical sales are best suited to selling products to its customers.
The insurer was steadfast in constructing a virtual digital sales platform, which will to some extent contribute to its sales. Its increased use of the virtual medium can be found in the second quarter when it processed more than 14,000 online applications as compared to nearly 8,000 in the first quarter. In fact, partly owing to this virtual platform, sales improved year over year for the first time during the pandemic in the June quarter in both the United States and Japan segments.
The company’s U.S segment is well placed. Sales are set to rise in this unit owing to the acquisition of Argus Holdings in 2019, which expanded its product suite by adding dental and vision products. Expansion into the vision and dental insurance marketplaces positions Aflac U.S. well for long-term success. Alongside strong persistency (solid premium persistency shows customer retention), underwriting profits and investment income continue to drive the pre-tax margins at this segment.
Aflac’s Japan segment is set for revival. Product development, online or digitally-assisted sales and specific sales efforts on the Japan Post platform will boost long-term growth. Sales are set to improve in the coming quarters owing to resumed sales activity at the Japan Post. Also, the launch of a cancer insurance product at the start of this year will aid sales.
The product pipeline comprising short-term health and income support as well as care product target supplemental elderly care. These will meaningfully bolster future sales. Japan’s aging population and the anticipated continued shift in the financial burden from government levels to individuals bode well for sales growth of these products.
Apart from taking measures to augment its sales, Aflac Japan is trying to make itself paperless, which means, all the processing will be technologically driven. This will bump up operational efficiency in the long run.
With regard to its investment income, which is another component of the insurer’s revenues, Aflac did an impressive job by investing in variable assets. Since interest rates in fixed investments have been low over the past many years and will remain so in the foreseeable future, the company is investing in other assets. Courtesy of its superior returns on variable investments, net investment was up in the first six months of 2021.
Aflac is firing on all cylinders to keep its business prospering. What attracts investors the most is its infallible dividend, which has been growing consistently from the past 38 consecutive years. Also, its low dividend payout ratio of 10.4% vouches for the company's ability to maintain and increase dividend payouts going forward.
Given its well-placed growth strategies and an improving economy, shares are sure to gain further. Other stocks in the insurance industry include The
Hartford Financial Services Group, Inc. ( HIG Quick Quote HIG - Free Report) , MetLife, Inc. ( MET Quick Quote MET - Free Report) and American International Group, Inc. ( AIG Quick Quote AIG - Free Report) .