The market's flight-to-safety in late 2008/early 2009 spared few sectors, and it did not exempt the insurance sector, the upside of which is an insurance value or two for investors, and Aflac is one.
Aflac Incorporated (NYSE: AFL) is another one of those insurers that was rudely treated by Wall Street during the panic and paranoia that gripped markets with the onset of the global financial crisis. And it was rude: the Street took AFL's shares from a high of $68 to about $11, basically on the fear that Alfac would incur major losses from European bank hybrid bonds, including the threat of bank nationalization. To be sure, given the opaqueness surrounding much of the financial crisis, an AFL hair-cut was in order, but an 80% price drop? Please.
Let's systematically look at AFL's holdings: top-grade corporate debt, no subprime holdings, and low commercial MBS and residential MBS holdings. Fort Knox it isn't, but the aforementioned holdings are more than adequate for an insurer.
Some bond risk exists, but the above does not justify ignoring the company's demonstrated supplemental health and life insurance businesses. Aflac is one of the largest sellers of supplemental insurance in the U.S. and is a major cancer-insurance company in Japan (14 million policies).
In general, analysts see AFL's revenue rising 10-12% in FY 2009, driven by increased distribution outlets in Japan, and higher investment income. The First Call FY 2009/FY 2010 EPS estimates for AFL are $4.66 to $5.08.
True, AFL is likely to struggle to meet U.S. sales growth targets in FY 2009 as it did in FY 2008, but recent sales force recruitment and training programs should begin to bear fruit by late FY 2009.
Stock Analysis: Aflac is a moderate-risk stock. Consider buying a 25% position in AFL now; then buy another 25% in three months, if U.S. economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your AFL position in the first half of 2009. Sell/Stop Loss if you were to buy shares in this company: $17.
Aflac Incorporated (NYSE: AFL) is another one of those insurers that was rudely treated by Wall Street during the panic and paranoia that gripped markets with the onset of the global financial crisis. And it was rude: the Street took AFL's shares from a high of $68 to about $11, basically on the fear that Alfac would incur major losses from European bank hybrid bonds, including the threat of bank nationalization. To be sure, given the opaqueness surrounding much of the financial crisis, an AFL hair-cut was in order, but an 80% price drop? Please.
Let's systematically look at AFL's holdings: top-grade corporate debt, no subprime holdings, and low commercial MBS and residential MBS holdings. Fort Knox it isn't, but the aforementioned holdings are more than adequate for an insurer.
Some bond risk exists, but the above does not justify ignoring the company's demonstrated supplemental health and life insurance businesses. Aflac is one of the largest sellers of supplemental insurance in the U.S. and is a major cancer-insurance company in Japan (14 million policies).
In general, analysts see AFL's revenue rising 10-12% in FY 2009, driven by increased distribution outlets in Japan, and higher investment income. The First Call FY 2009/FY 2010 EPS estimates for AFL are $4.66 to $5.08.
True, AFL is likely to struggle to meet U.S. sales growth targets in FY 2009 as it did in FY 2008, but recent sales force recruitment and training programs should begin to bear fruit by late FY 2009.
Stock Analysis: Aflac is a moderate-risk stock. Consider buying a 25% position in AFL now; then buy another 25% in three months, if U.S. economic conditions don't worsen substantially. Under any circumstance, don't buy more than 50% of your AFL position in the first half of 2009. Sell/Stop Loss if you were to buy shares in this company: $17.
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