AFLAC Upgrade

Barron’s has Sandler O’Neil’s upgrade of AFLAC (AFL):

We are upgrading shares of Aflac to Buy from Hold and are increasing our price target to $63 from $54 following a recent analyst day in Tokyo.

We believe that sales of third-sector supplemental-type insurance products will continue to have growth in Japan given the country’s aging population, increasing out-of-pocket medical expenses for consumers, and a government cancer-awareness initiative.

Aflac’s sales through the bank channel will continue to increase over time, and Aflac has more bank distribution relationships than any of its competitors. The bank channel will account for an increasing proportion of Aflac’s sales.

Aflac’s new product sales appear to have continued their upward trajectory, although year-over-year comparisons will be challenging due to significant sales growth in second-half 2009. The child-endowment product will continue to have strong sales, and we expect cancer products will begin to reverse recent declines in sales.

The margins for the child endowment product are a little better than we had thought — management stated margins are about 5% and are similar to medical products.

We are adjusting our 2010 operating earnings-per-share estimate to $5.45 up from $5.44 to account for incremental strength in the Japan operations. We are also increasing our 2011 EPS estimate to $6.00 from $5.95 to account for stronger results in the Japan segment. Consensus EPS estimates are currently $5.46 and $5.99 for 2010 and 2011, respectively.

The stock broke $53 this morning.

Posted by on September 20th, 2010 at 1:16 pm


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.