Aflac (AFL) Down 13% in 2020: Will It Bounce Again in 2021?

The yr 2020 has been lackluster for Aflac Inc. AFL because it noticed enterprise declines because of the impression of COVID-19 and a few company-specific components.

Its outcomes for the primary 9 months of 2020 suffered from a decline in gross sales of insurance coverage merchandise at Aflac Japan because of the impression of COVID-19 and decrease gross sales at its largest distribution agent – Japan Put up.

The united statessegment additionally noticed declines because of COVID-led social distancing efforts, which restricted face-to-face gross sales alternatives starting mid-March 2020. Additionally, low rates of interest weighed on funding revenue.

Buyers, thus, grew to become cautious on the corporate, as is obvious from its inventory worth decline of 13% yr thus far in contrast with the business’s 7.9% fall.

Different corporations in the identical area corresponding to The Allstate Corp. ALL, MetLife, Inc. MET, Unum Group UNM declined 3.1%, 4.4% and 19.2%, respectively, within the stated interval.

Nonetheless, efforts made by the corporate to extend gross sales in Japan and the USA ought to help its efficiency in 2021.  

In Japan, the corporate promoted a simplified most cancers rider within the fourth quarter and can launch a refreshed medical product in first-quarter 2021. In late October, it rolled out a expertise to pivot from face-to-face to digital gross sales and supply a completely digital expertise to prospects. The corporate can also be persevering with with junk mail. The mixture of product growth, a restoration in pandemic situations, and its alliance with Japan Put up are presupposed to be vital progress drivers in 2021. Aflac has additionally undertaken paperless initiatives throughout all operations in Japan. It is usually working to extend advertising for spreading consciousness about new merchandise.

Its U.S. section is more likely to achieve in 2021 from the buyout of Argus Dental & Imaginative and prescient, which has a robust fame for servicing Medicare and Medicaid dental and imaginative and prescient members. In the USA, the build-out of community dental and imaginative and prescient stays on monitor. The corporate efficiently filed its new community merchandise in 48 states, with approvals acquired in 37 states. It’s up and operating with gross sales in 10 states and expects to ramp up the identical shifting into 2021.

The corporate’s acquisition of Zurich North America’s U.S. Company Life and Pensions (Group Advantages) enterprise (accomplished in November 2020) will additional improve its place within the dealer distribution community in the USA. Whereas the acquisition had just a little impact on its fourth-quarter efficiency, it positions the corporate for an expanded capability in 2021.

Its client markets platform stays on monitor for progress, with hospital, accident and most cancers product filings anticipated to be accomplished in early 2021. The corporate additionally plans to incorporate life insurance coverage in 2021. The addition of life insurance coverage will additional help in gross sales enhance.

Aflac’s cost-saving initiative can also be more likely to help margins. The corporate provided a voluntary separation plan to eligible workers, which can scale back its U.S. insurance coverage and company workforce by roughly 9%. The corporate expects run-rate annual financial savings within the vary of $45-$50 million and can document a one-time expense related to the separation plan of roughly $45 million within the fourth quarter. Although these prices will drain margins within the close to time period, a extra agile workforce will enhance the section’s effectivity over medium-to-long time period.

Given the quite a few initiatives, the yr 2121 is more likely to be higher for the corporate.

Aflac at present carries a Zacks Rank #2 (Purchase). You’ll be able to see the entire checklist of right this moment’s Zacks #1 Rank (Robust Purchase) shares right here.

5 Shares Set to Double

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The Allstate Company (ALL): Free Inventory Evaluation Report
 
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