Rising Sales & Declining Cash Flows: The Aflac Investor Dilemma

Aflac Incorporated AFL is well-poised for growth on the back of expanding sales in both Japan and the United States, a trusted brand, innovative product offerings, strict underwriting discipline and effective cost management. The company’s stability, defensive business model and consistent capital deployment strategy remain major positives. Headquartered in Columbus, Aflac distributes its supplemental health and life insurance products through a wide network of brokers, banks, employers and corporate agencies.Let’s take a closer look.Aflac’s Rising Sales MomentumThe company’s sales in the Japan segment witnessed 18.7% year-over-year growth in the first half of the year to $236 million. Solid sales of Miraito and efforts to reach younger customers with the first sector product, Tsumitasu, will further boost the figures. U.S. sales climbed 3.1% year over year to $649 million during the same period, with group life and disability products playing a key role in supporting the momentum.Margin StrengthHigher premiums, disciplined underwriting and efficiency gains are expected to keep margins resilient. For 2025, the company projects pretax margins of 30-33% in Japan and 17-20% in the United States. Notably, the U.S. segment posted a 22.5% pretax margin in the second quarter, underscoring the impact of its cost-control measures.Resilient Core BusinessDemand for supplemental insurance remains robust as these products fill coverage gaps rather than compete with traditional offerings. This specialization provides Aflac with a relatively defensive revenue stream that is less vulnerable to economic swings.Shareholder Value Boosting EffortsShareholder rewards remain a priority for the company. In the second quarter alone, Aflac repurchased 7.9 million shares worth $829 million. In August, it authorized an additional 100 million shares for repurchase, bringing the total remaining authorization to roughly 130.9 million shares. The company also extended its dividend growth streak to 42 consecutive years in 2024. Overall, capital deployment reached $2.4 billion in the first half of 2025.AFL’s Earnings Surprise HistoryAflac’s earnings have outpaced the Zacks Consensus Estimate in two of the trailing four quarters and missed twice, the average surprise being 6.6%.Key ConcernsDespite its strengths, there are challenges to monitor. Operating cash flow has been in steady decline, down 15.2% in 2021, 23.2% in 2022, 17.8% in 2023, 15.1% in 2024 and another 10.5% in the first half of 2025. This ongoing trend could limit the company’s flexibility to pursue growth investments. Net earned premiums have also declined for four consecutive years, highlighting business headwinds. Nevertheless, we believe that a systematic and strategic plan of action will drive growth in the long term.How Are AFL’s Peers PerformingSeveral competitors, such as AMERISAFE, Inc. AMSF and Globe Life Inc. GL, are also making moves. AMERISAFE has carved out a niche in workers’ compensation for high-hazard industries, maintaining a strong voluntary retention rate of 93.8%. It also maintains a robust, debt-free balance sheet, offering significant financial flexibility for operations. However, AMSF’s operating cash flow has been inconsistent, with declines in four of the past five years.Globe Life offers life and supplemental health coverage in the domestic market, benefiting from its American Income distribution channel. Premium income and underwriting margins have grown steadily, while net investment income witnessed a 6% CAGR over the past three years. On the downside, Globe Life’s rising expenses and elevated debt levels remain concerns.7 Best Stocks for the Next 30 DaysJust released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."Since 1988, the full list has beaten the market more than 2X over with an average gain of +23.5% per year. So be sure to give these hand picked 7 your immediate attention. See them now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Aflac Incorporated (AFL): Free Stock Analysis Report AMERISAFE, Inc. (AMSF): Free Stock Analysis Report Globe Life Inc. (GL): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks