On Oct 7, 2016, we issued an updated research report on AFLAC Inc. (AFL - Analyst Report) .
The Columbus, OH-based Accident and Health insurance company’s top-line has been growing steadily over the past few quarters. led by continuous increase in annualized premium sales. It has undertaken initiatives to tackle the negative interest rate in Japan by limiting the sale of its first-sector products and emphasizing the sale of third-sector products.
Aflac’s commendable liquidity along with persistently strong earnings has led to the effective maintenance of risk-adjusted capital. The company also remains focused on increasing shareholders’ value through several capital employment strategies like share buybacks and dividend payments. Aflac has increased its dividend for 33 consecutive years. The company is on track to achieve its target of share repurchase worth $1.4 billion by the end of 2016.
The company scores strongly with the credit rating agencies. Recently, credit rating giant A. M. Best affirmed both the Issuer Credit Rating (ICR) and Financial Strength Rating (FSR). This reflects investors confidence on the stock.
However, insurers like Amerisafe Inc. (AMSF - Analyst Report) , Unum Group (UNM - Analyst Report) , Hartford Financial Services Inc. (HIG - Analyst Report) to name a few, have been affected by the persistently low interest rate and Aflac is no exception to this trend.
The slowdown in Japanese economy has added to the company’s woes. The forex volatility that resulted in the depreciation of the Japanese yen, has lowered the company’s profitability from the region. Nevertheless, the initial quarters of 2016 have started facing favorability in the forex market with a stronger yen/dollar exchange rate. Aflac’s exposure to the weak Japanese economy has also led to it receive negative ratings from Fitch.
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