Aflac Inc.AFL

Morningstar Rating

Stock Research and Analysis

by Drew Woodbury

A unique distribution model and first mover advantage in Japan leave Aflac with an enviable competitive position. By focusing on supplemental insurance products Aflac has been able to consistently generate excess returns for shareholders, a rarity for Read more

Bulls Say

Clients, especially in Japan, are very sticky once they purchase policies. Persistency in Japan usually hovers around 95% as the average customers stays with Aflac for nearly 20 years.

Japanese demographic trends are working to increase demand for supplemental policies. As the nation gets older they will increasingly demand coverage to augment the state-run healthcare system.

The deregulation of the financial system in Japan has allowed Aflac to sell its policies through banks or the post office, places where Japanese customers are used to conducting financial transactions.

Aflac's payroll deduction system helps enable it to be the low-cost provider for the supplemental policies in which it it specializes. Read more

Bears Say

Once Japan Post is fully privatized it may choose to issue its own supplemental policies. This could impact Aflac's sales through Japan Post as well as its competitive position.

Deregulation in Japan has allowed large life insurance companies to compete directly with Aflac in issuing supplemental policies.

Customer retention is much lower in the United States (around 75%) than in Japan. As Aflac attempts to grow in this underpenetrated market it could have a negative impact on profitability. Read more

Strategy

Aflac continues to focus on internal growth in its two markets. Opportunities are greatest in the underserved U.S. small-business market. The firm is also seeking to offer new products and product enhancements Read more

Management

Daniel Amos has held a long tenure with the firm that was started by his family in 1955. He joined the firm in 1973 and has been CEO since 1990 and Chairman since 2001. While we would prefer Amos' current roles be separated, we applaud Amos for the Read more

Profile

Aflac offers supplemental health insurance and life insurance in the two largest insurance markets in the world, the U.S. and Japan. In addition to its cancer policies, Read more

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