Aflac Boosts Shareholders' Value Through Share Buybacks

Zacks Equity Research
·3-min read

Aflac Incorporated’s AFL board of directors recently authorized an increase in its existing share repurchase program in a bid to return more value to shareholders. This latest authorization will enable the company to buy back additional shares of up to 100 million. The increased authorization has left 121.9 million shares under the company’s existing share buyback program.

Aflac has bought back 15.2 million shares worth $637 million year to date, which includes 5.2 million shares bought back for $188 million in the second quarter. Continued share buybacks clearly hints toward the company’s sound capital position amid the ongoing coronavirus crisis, which has compelled most insurance companies to temporarily suspend their share buyback programs. Notably, repurchases are also likely to provide a boost to the company’s bottom line.

Not only share buybacks, Aflac also remains committed to boost shareholder value via dividend hikes. This Zacks Rank #3 (Hold) accident and health insurer has increased dividends for 37 straight years, the latest hike of 3.7% being announced this year in February related to first quarter dividend. Such initiatives not only reflect the operational and financial strength of the company but also make the stock attractive to yield-seeking investors.

Also, its return on equity — a profitability measure of how efficiently the company is utilizing its shareholders funds — is 11.98%, higher than the industry average 11.89%.

A solid financial position backed by a strong balance sheet and robust cash flows over the years has enabled Aflac to support growth initiatives and prudent capital allocation. The company had $5.5 billion in cash and cash equivalents at the end of second-quarter 2020.

One of the leading providers of supplemental health and life insurance products in the United States and Japan, Aflac continues to maintain strong risk-adjusted return on capital at its operating subsidiaries supported by good liquidity and judicious capital deployment.

However, shares of this accident and health insurer have lost 28.9% in a year compared with the industry’s decline of 24.5%. Nevertheless, we believe the company’s numerous growth initiatives for enhancing product offerings and broadening distribution network are likely to drive its shares in the days ahead.

Stocks to Consider

Some better-ranked stocks in the insurance space are Old Republic International Corporation ORI, The Allstate Corporation ALL and Assurant, Inc. AIZ. While Allstate sports a Zacks Rank #1 (Strong Buy), Old Republic and Assurant carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Old Republic, Allstate and Assurant have a trailing four-quarter earnings surprise of 36.72%, 25.24% and 6.00%, on average, respectively.

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