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Reasons to Keep Aflac in Your Current Investment Portfolio

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Aflac Inc. (NYSE:AFL)

Aflac Inc. (NYSE:AFL) has a world-class investment platform, cost-cutting efforts, and a rebounding U.S. company. AFL shares rose 7.5% last year despite several restraints.

Aflac Inc. (NYSE:AFL) is a $37.5 billion health and life insurance provider. Strong in the U.S. and Japan. Columbus, GA-based AFL should gain from increased interest rates. This Zacks #3 (Hold) stock has strong prospects and is worth holding.

Forecasting

For current-year earnings at AFL, the Zacks Consensus Estimate is $5.33 per share, up six cents from 60 days ago. Estimates rose 1.1%. Aflac has beaten profits in the last four quarters, averaging 9%.

Aflac price and EPS surprise

The current-year revenue forecast is $19.6 billion. Aflac Inc. (NYSE:AFL) expects better sales in its Aflac Japan sector in the second half of 2022 due to pandemic-linked volatility, Japan Post productivity gains, and product introduction and refreshment initiatives.

Factors

Growth investments and productivity gains boosted Aflac Inc. (NYSE:AFL) U.S. sales by 16.9% in 2021 and 17.2% in the first half of 2022. The U.S. is recovering faster than Japan from pandemic-induced volatility. The recovery of the U.S. economy led to more face-to-face meetings and enrollments, which boosted sales.

Aflac Inc. (NYSE:AFL) initiatives to extend its U.S. product line are commendable. Argus Dental & Vision’s acquisition boosted its U.S. sector. The takeover of Zurich North America’s U.S. Corporate Life and Pensions division strengthened its broker distribution network. Aflac expands its dental network and prepares the platform for larger volumes as it pushes upmarket and delivers a direct-to-consumer individual product.

Future U.S. sales will likely be driven by product developments, new introductions, virtual sales channels, face-to-face encounters, and agent recruitment. Japan Post’s productivity gains and other variables may boost sales in Japan.

Its investment expansion is notable. Aflac Inc. (NYSE:AFL) Global Investments took a minority investment in Varagon Capital Partners, L.P. It will invest $3 billion over multiple years in middle-market loans through Varagon. Despite challenges, the investment platform should provide risk-adjusted net investment income.

It partnered with Denham Capital. Aflac Inc. (NYSE:AFL) has committed $2.1 billion to start a new lending platform focused on sustainable infrastructure projects. Aflac owns 24.9% of Denham’s Sustainable Infrastructure. The corporation also invests $100 million in the sustainable infrastructure Denham Equity Fund.

As hospital utilization in Japan remained low, its benefit ratio improved in the first half of 2022. A lower benefit ratio could help profitability. Also, cost-cutting will boost profits. The company’s voluntary separation plan reduced U.S. insurance and corporate staff by 9%. Medium- to long-term efficiency will grow with a more nimble workforce.

Priorities

Several reasons are slowing the stock’s growth.

First-half 2022 net cash from operations for Aflac Inc. (NYSE:AFL) fell 24%. Free cash flow after dividends fell 14.9% year over year. A more excellent price-to-book ratio (1.4X) suggests stretched value. We believe a strategic plan will drive long-term growth.

Featured Image – Megapixl © Pattanaphongphoto

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