When Nigel Dally comments, Aflac stock moves — one way or the other.
The Morgan Stanley financial analyst was the first to question the Columbus-based supplemental insurance company’s asset portfolio and potential risks with investments in European banks under the threat of nationalization.
Dally’s warning caused a 36 percent one-day drop in the stock back in late January.
This week, after a look at what would happen to insurance stocks if they came under severe stress, Dally concluded in a report released by Morgan Stanley that Aflac was one of four companies “positioned to weather the storm.”
That created a storm of its own Wednesday as the stock rose 30 percent in value, posting a one-day gain of $4.89 per share. In trading on the New York Stock Exchange, Aflac closed at $21.04 per share.
Normal trading in Aflac is about 11.3 million shares a day. On Wednesday, more than 22 million shares changed hands. It traded in a range of $15.72 to $21.09.
The Morgan Stanley report came as insurance giant American International Group experiences a full financial meltdown. Aflac, Prudential, MetLife and RGA are the four of the eight best-positioned companies, according to Morgan Stanley. Lincoln, Hartford, Genworth and Principal have the “least room to maneuver,” according to the report.
Fears raised in Dally’s Jan. 22 report caused shares to plummet to $22.61 from $35.81 per share.
Dally, based in New York, raised concern over the company’s exposure to hybrid securities investments issued by European financial firms. He recommended investors avoid buying Aflac stock before the supplemental insurer released its fourth quarter earnings report Feb. 2.
He said Columbus-based Aflac may have invested too heavily in the securities, which have fallen in price in the past week — in some cases below 50 cents on the dollar.
Aflac had about $7 billion of its $68 billion investment portfolio in those securities.
The fourth-quarter earnings met expectations and the company announced a $1.3 billion profit for 2008.