If you want a stable source of income in the form of dividends along with steady growth, look no further Aflac Inc. AFL. The company has a portfolio of life insurance and cancer care products. Its wide presence in Japan, which is an aging nation, provides it with an attractive growth opportunity.
Your life insurance business will also gain as COVID-19 once again awakened people’s awareness to cover insurance.
Aflac suffered premium falls in 2020 due to lower sales of its supplemental healthcare products. These products are offered by employers to their employees. An increase in the unemployment rate due to COVID-19 in 2020 weighed on the company’s sales. In addition, premiums fell 2.3% in 2020 and fell 3.7% in the first quarter of 2021.
The Japanese business will be restored
However, with things looking Aflac, the company will soon regain its lost sales. In its Japanese business, sales will be driven by the launch of its updated medical product in the first quarter of 2021. The company also incorporated technology to support its face-to-face and virtual sales. and provide a fully digital customer experience.
Management expects the merger of product development, improved pandemic conditions and the company’s alliance with Japan Post to be major catalysts at the start of the second half of 2021.
In addition, Aflac’s largest sales channel, Japan Post Group, resumed sales of financial products in April this year. The latter was forced to stop selling health insurance products after being found guilty of having relied on the proper means to sell the policies. After the investigation, it started selling again. This development will lead to a gradual increase in cancer insurance sales during the second half of the year.
American businesses with solid foundations
Speaking of another segment of the company, which is the business of the United States, there are several factors that work in favor of its growth. The acquisition of Argus Dental & Vision in 2019 helped progress in this segment. Argus has a strong reputation for serving Medicare and Medical members and vision members. In the United States, the company launched Aflac Dental and Vision, which is now available in 40 states with more chances of getting online year-round.
The acquisition by Aflac of the Business and Corporate Pensions (Group Benefits) business in the United States of America in Zurich (completed in November 2020) will further strengthen its position in the US brokerage distribution network. . The purchase puts the company well for an expanded capacity in 2021.
Aflac is making great efforts to leverage technology to improve efficiency. To that end, it launched an enhanced registration platform called Everwell 2.0 in September 2020. It also introduced its direct digital platform to the consumer in the first week of January. It offers critical illnesses, accidents and cancer and is approved to sell all three products in approximately 30 states with more states and products expected to enter service year-round. We believe that these product introductions and technology integration will increase sales.
The story goes on
Divided track to maintain
The most attractive facet of Aflac is its dividend policy, which has grown by 38 consecutive years. The company had many years in which its revenues experienced heavy wear and tear, but it remained with its dividend commitment. Its dividend payment ratio of less than 20% makes it quite sustainable. Its dividend yield of 2.34% is in line with the industry average.
We are confident that in no case will it deviate from its dividend growth trajectory. However, its sales and revenue trajectory should be closely monitored. Therefore, we advise you to stay up to date on stocks until their numbers give us a clear direction.
Zacks ranking and price performance
So far, the shares have gained 27% compared to the 21% growth of their industry.
Other actions that share the same space are a group UNM, Allstate Corp. ALL i Humana Inc. HUM among others. Each of these shares has gained 32%, 25% and 7.9%, respectively, over the same time period.
Aflac currently has a rank of Zacks # 3 (Hold). You can see Here you will find the full list of current Zacks # 1 ranking stocks (Strong Buy)
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