Q4 2023 Summary
Published Jan 4, 2025, 1:15 AM UTCInitial Price$76.63October 1, 2023
Final Price$82.50December 31, 2023
Price Change$5.87
% Change+7.66%
- Aflac is tapping into the significant opportunity in the U.S. pet insurance market, which has very low penetration. They have a partnership and ownership stake with Trupanion, allowing their distribution to earn additional commissions and capturing significant economics over time.
- Aflac is actively reducing U.S. expenses, with the expense ratio expected to decrease to 35% to 37% over time, as businesses grow to scale and improve profitability. This should enhance margins and lead to a more efficient operation.
- Aflac has strong capital levels and significant capital generation, with an underlying capital generation of $2.6 billion to $3 billion annually. They plan to deploy this capital effectively through dividends, share buybacks, and capital efficiency initiatives, including internal reinsurance.
- Aflac has lowered its Japan sales target from JPY 80 billion to JPY 67-73 billion by 2026, indicating expectations of slower growth in the Japanese market. The company acknowledges that achieving the original target will take longer due to market challenges.
- The company's commercial real estate watch list is higher than that of peers, primarily due to significant exposure to transitional real estate with shorter maturities, leading to elevated potential foreclosures. This could negatively impact the investment portfolio and earnings.
- Net investment income growth in Japan may be flattening, as Aflac has reached a steady state in its allocation between yen and dollar assets, potentially limiting future increases in net investment income from investments in Japan.