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Aflac Incorporated (AFL), headquartered in Columbus, Georgia, provides supplemental health and life insurance products. Valued at $57.5 billion by market cap, AFL is the largest provider of supplemental insurance. Its products include accident and disability, cancer expense, short-term disability, sickness and hospital indemnity, hospital intensive care, and fixed-benefit dental plans.
Shares of this leading supplemental insurer have outperformed the broader market considerably over the past year. AFL has gained 33.8% over this time frame, while the broader S&P 500 Index ($SPX) has rallied nearly 19.6%. In 2024, AFL stock is up 22.7%, surpassing SPX’s 12% rise on a YTD basis.
Zooming in further, AFL’s outperformance looks less pronounced than iShares U.S. Insurance ETF (IAK). The exchange-traded fund has gained about 29.8% over the past year. Moreover, AFL’s gains on a YTD basis outshine the ETF’s 18.1% returns over the same time frame.
AFL’s overall performance can be attributed to lower expenses, higher investment income, and increased premium sales. Improving productivity, underwriting discipline, and expense management have boosted its margins. Moreover, management is optimistic about profitable growth in the U.S. business through improved productivity and new products and distribution strategies.
On Jul. 31, AFL shares closed up marginally after reporting its Q2 results. Its adjusted EPS of $1.83 exceeded Wall Street expectations of $1.59. The company’s revenue was $5.1 billion, surpassing Wall Street forecasts of $4.4 billion. The company’s new product launch, which includes a future nursing care coverage feature, helped revive sales, driving a 4.5% increase in sales for the quarter at its Japanese unit.
For the current fiscal year, ending in December, analysts expect AFL’s EPS to grow 8% to $6.73 on a diluted basis. The company’s earnings surprise history is mixed. It beat the consensus estimate in three of the last four quarters while missing the forecast on another occasion.
However, among the 16 analysts covering AFL stock, the consensus is a “Hold.” That’s based on two “Strong Buy” ratings, one “Moderate Buy,” 10 “Holds,” and three “Strong Sells.”
This configuration is less bullish than three months ago, with two analysts suggesting a “Strong Sell.”
On Aug. 4, Jefferies analyst Suneet Kamath maintained a “Hold” rating on AFL with a price target of $88, implying a potential downside of 13.1% from current levels.
While AFL currently trades above its mean price target of $90.21, the Street-high price target of $114 suggests an upside potential of 12.6%.
On the date of publication, Neha Panjwani did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
