Aflac Incorporated AFL is currently gaining on the back of a global economic recovery, which has led to a sales uptick in its U.S. business. The same is expected to happen for the Japan unit as well. A diversified product portfolio, sincere digital transformation efforts and solid financial position are other factors driving the stock.
Zacks Rank & Price Performance
Aflac carries a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The stock has gained 35.3% in a year compared with the industry’s rally of 26.7%. The Zacks Finance sector rose 21.1% in a year. The S&P Index increased 21.6% in the same time frame.
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Favorable Style Score
AFL is well-poised for progress, as is evident from its impressive VGM Score of B. Here V stands for Value, G for Growth and M for Momentum, with the score being a weighted combination of all three factors.
Impressive Earnings Surprise History
Aflac boasts of an impressive surprise history. It beat estimates in each of the trailing four quarters, the average surprise being 18.32%.
Positive Estimate Revision
The Zacks Consensus Estimate for 2022 earnings has moved north by 0.2% in the past 30 days.
The return on equity (ROE) of Aflac for the trailing 12 months is 11.8%, which remains higher than the industry average of 11.5%. This reflects AFL’s efficiency in utilizing its shareholders’ funds.
Aflac’s primary line of business is to offer supplemental health and life insurance products through broad distribution channels across Japan and the United States. For more than six decades, the accident and health insurer has been offering financial protection through supplemental insurance policies.
Despite being the largest insurer of Japan with respect to cancer and medical policies, and contributing the most to AFL’s earnings, the segment’s sales were hampered by the COVID-19 pandemic. However, with the state of emergency being removed across Japan in October 2021, Aflac remains optimistic about witnessing recovery in the segment’s sales figure in the fourth quarter of 2021. The company continues to unveil protection-linked product upgradations and introduce newer ones in view of an evolving medical environment. Consequently, the insurer aims to recover and attain annualized sales of 80 billion yen within the segment by 2025.
The second segment of Aflac (Aflac U.S.) designs insurance products for offering supplemental coverage to the nation’s customers, who are already covered under major medical or primary insurance policies. AFL has been pursuing constant initiatives to venture into newer businesses and expand its U.S. business. The launch of Aflac Dental and Vision Insurance in January 2021 bears testament to the same. Growing demand for dental and vision insurance products, and a strong portfolio of group life, disability and absence management products are likely to continue benefiting the Aflac U.S. segment in the days ahead. Segmental revenues are anticipated to grow within 3-5% by 2025.
Aflac has pursued digital transformation efforts, which have improved operational efficiencies for the company. Amid the volatilities inflicted by the pandemic, which restricted face-to-face sales opportunities, AFL undertook significant digital investments to transition to digital sales methods and enable hassle-free rendering of services.
A rising cash balance and solid cash-generating abilities enable Aflac to undertake growth-related initiatives and engage in prudent capital-deployment moves through share buybacks and dividend hikes. The company has been hiking dividends for 39 consecutive years. Its leverage ratio of 19.4% at the third-quarter end remains lower than the industry’s figure of 19.8%.
Stocks to Consider
Some better-ranked stocks in the insurance space include Fidelity National Financial, Inc. FNF, The Hartford Financial Services Group, Inc. HIG and Arch Capital Group Ltd. ACGL. While Fidelity National sports a Zacks Rank #1, Hartford Financial and Arch Capital carry a Zacks Rank #2 (Buy) at present.
Fidelity National’s earnings surpassed estimates in each of the last four quarters, the average surprise being 38.18%. The Zacks Consensus Estimate for FNF’s 2022 earnings has moved north by 4.6% in the past 60 days. Fidelity National has a Value Score of A.
The bottom line of Hartford Financial outpaced earnings estimates in three of the last four quarters and missed once, the average surprise being 34.94%. The Zacks Consensus Estimate for HIG’s 2022 earnings suggests an improvement of 23.9% from the year-ago reported figure, while the same for revenues suggests growth of 5.2%. The consensus mark has moved north by 0.4% in the past 30 days. Hartford Financial has a VGM Score of B.
Arch Capital’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 32.71%. The Zacks Consensus Estimate for ACGL’s 2022 earnings indicates a rise of 31.5% year over year, while the same for revenues suggests an improvement of 10.8%. The consensus mark has moved north by 1.2% in the past 30 days. Arch Capital boasts of an impressive VGM Score of A.
Shares of Fidelity National, Hartford Financial and Arch Capital have gained 35.4%, 35.9% and 34.7%, respectively, in a year.
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The Hartford Financial Services Group, Inc. (HIG): Free Stock Analysis Report
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