Rising Sales & Declining Cash Flows: The Aflac Investor Dilemma

Core Insights - Aflac Incorporated (AFL) is positioned for growth due to expanding sales in Japan and the U.S., a trusted brand, innovative products, strict underwriting discipline, and effective cost management [1][3][4] Sales Performance - Sales in Japan increased by 18.7% year-over-year in the first half of the year, reaching $236 million, driven by strong sales of Miraito and efforts to attract younger customers with Tsumitasu [3][9] - U.S. sales rose by 3.1% year-over-year to $649 million, with group life and disability products contributing significantly to this growth [3][9] Margin Analysis - The company anticipates pretax margins of 30-33% in Japan and 17-20% in the U.S. for 2025, with the U.S. segment achieving a 22.5% pretax margin in the second quarter due to cost-control measures [4][9] Business Resilience - Demand for supplemental insurance remains strong, as these products address coverage gaps rather than compete with traditional offerings, providing Aflac with a stable revenue stream less affected by economic fluctuations [5] Shareholder Value Initiatives - Aflac prioritized shareholder rewards, repurchasing 7.9 million shares worth $829 million in the second quarter and authorizing an additional 100 million shares for repurchase, totaling approximately 130.9 million shares remaining [6] - The company extended its dividend growth streak to 42 consecutive years in 2024, with total capital deployment reaching $2.4 billion in the first half of 2025 [6] Earnings Performance - Aflac's earnings have exceeded the Zacks Consensus Estimate in two of the last four quarters, with an average surprise of 6.6% [7] Industry Competitors - Competitors like AMERISAFE, Inc. and Globe Life Inc. are also active in the market, with AMERISAFE focusing on workers' compensation and maintaining a strong retention rate, while Globe Life benefits from steady premium income and underwriting margins [10][11]