Aflac hits 52-week stock high; analyst says $72 per share on horizon

CEO Dan Amos says Japan Post a ‘game changer’ for the insurer

tadams@ledger-enquirer.comJuly 31, 2013 

A day after beating Wall Street’s profit expectations by more than a dime, Aflac received a dose of love from the investment community.

Shares of the Columbus-based supplemental health and life insurance company dipped sharply after the New York Stock Exchanges’s opening bell Wednesday, then began to battle back throughout the day.

After touching a 52-week high of $62.55 after lunch, the stock settled down for a gain of 83 cents, finishing at $61.68, up 1.3 percent from Tuesday’s close of $60.85 per share.

Aflac Chairman and Chief Executive Officer Dan Amos, appearing early Wednesday on the CNBC financial news segment, “Squawk Box,” stressed the importance of last week’s deal with Japan Post Group.

The agreement gives Aflac access to 20,000 post offices in the Asian nation, where its cancer policies will be sold to Japanese citizens. Another Japan Post insurance operation, Kampo, also will market the Columbus firm’s products at 79 locations.

“Most people don’t realize that Japan Post is the world’s largest insurance company with over $1 trillion in assets, and the largest employer in Japan,” said Amos, speaking from his company’s corporate headquarters on Wynnton Road. “They’re going to be selling for us, and that’s a real game changer for us. We are very excited about that and think it offers wonderful opportunities for us in the future.”

Aflac reported operating earnings of $759 million in the second quarter, which equaled $1.62 per share. That was better than the $1.51 market analysts had been anticipating. That came even with slowing sales in Japan.

But the firm also signaled that spending on a new medical product in August and on the Japan Post launch, as well as health-care reform preparation, will cut into profits in the third and fourth quarters.

“It’s a luxury we have, because earnings were so strong (in the first half) we want to prepare for 2014 and beyond,” said Amos, noting Aflac will achieve its stated full-year earnings target, something it has done 24 years in a row.

Sterne Agee research analyst John Nadel issued a note Wednesday reiterating his “buy” rating on Aflac stock, while also pegging the 52-week price target at $72 per share.

“For bulls, us included, 2Q results demonstrated better than expected earnings power, solid operating margins, a meaningful drop in lower margin first-sector sales, and solid performance of the investment portfolio,” he wrote.

The launch of Japan Post sales should begin Oct. 1, Nadel said, with the ramp-up taking place over several quarters. The cancer product sales are not included in the firm’s current sales target for this year, he said.

Aflac does about 75 percent of its business in Japan, with the balance in the U.S.

The company said Tuesday it expects full-year 2013 operating earnings to come in somewhere between $5.83 and $6.37 per share.

Analysts surveyed by Thomson Financial currently are projecting a consensus profit of $6.18 per share for the year. That includes earnings of $1.53 per share in the third quarter we’re now in, followed by $1.45 per share in the (October-December) fourth quarter.

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