For the second time in three trading days, Columbus-based supplemental insurance company Aflac saw its stock take a big hit.
Shares of Aflac closed Monday at $19.62, down $4.87 or nearly 20 percent in trading on the New York Stock Exchange. Last Thursday, Aflac stock lost 36 percent of its value or $13.37 per share.
The stock price is at its lowest point in more than nine years.
The downward run has eaten 57 percent of the stock’s value since closing at $46.35 per share on Jan. 2.
In terms of dollars and cents, the losses have been staggering.
If someone owned 5,000 shares of Aflac stock on Jan. 2, it was worth more than $231,000. Those same 5,000 shares Monday afternoon had a value of $98,100.
Using another example, if someone held a $25,000 investment Aflac stock on Jan. 2, its value at market close Monday would have been $10,750.
The lastest loss appeared to be triggered when a Deutsche Bank analyst downgraded the stock because of its exposure to risky hybrid securities issued by European financial firms.
Darin Arita said the insurer’s investments in banks, including money-losing Royal Bank of Scotland, may be diluted by European governments, according to Bloomberg.com.
“The rapidly deteriorating state of the financial system has heightened the risks,” Arita said in a note to investors today explaining why he lowered the rating.
Last Thursday, Morgan Stanley analyst Nigel Dally recommended investors avoid buying Aflac before the release of fourth-quarter earnings on Feb. 2.
Because of the impending earnings release, Aflac is in a “quiet period” and company executives are are commenting on recent developments, spokesperson Laura Kane said.
“As soon as we release our earnings, we can start talking,” Kane said.
The company released the same statement Chairman and Chief Executive Officer Dan Amos made Friday.
“As we stand today, we remain very confident in our overall business model and our operations. We are equally confident with the quality of our balance sheet and our capital position. For many years we have pursued a consistent investment approach, which we believe is in the best interests of our policyholders and shareholders,” Amos said in the release.
Amos defended the company’s investments.
“That approach has proven to be effective and prudent, and we continue to believe it will be so in the future,” he said. “At the end of 2008, 98 percent of the debt securities and perpetual debentures that we own were investment grade. Going forward, our investment approach will continue to emphasize the purchase and ownership of securities that best match our policy liabilities and best serve our policyholders. When we release fourth quarter earnings in just over a week, we expect to report operating earnings per diluted share that are consistent with our stated earnings objective of a 15 percent increase. In addition, we see no change to our expected 2009 cash dividend payments.
Monday for the third consecutive trading day, Aflac’s shares traded well above normal volume.
Thursday more than 46.3 million shares changed hands, more than 35.5 million shares were traded Friday and 26.6 million Monday.
A normal trading day usually sees less than 4 million shares traded.
One Columbus stock broker, Stifel Nicolaus, Inc. Vice President and Branch Manager John Shinkle, suspects the stock is being hammered by short sellers, investors who sell borrowed stock at high prices in hopes of replacing it with stock purchased at a lower price.
“Aflac is in a quiet period and the shorts smell blood in the water and they are pouncing on it,” Shinkle said. “Aflac is virtually defenseless and can’t comment until it releases earnings on Monday.”