Tickers in this Article: AFL, UNM, AIZ, SFG, BRK.A
Don't you just hate television ads? Besides those starring animals, they're pretty hard to stomach. Why is it so much more entertaining to watch a duck is screaming "Aflac" at the top of its lungs as opposed to listening to some diatribe from a supposedly earnest actor about the merits of insurance. Humor sells, 100% of the time. Aflac knows this, using the duck 45 times in ads since its introduction in 2000. Great advertising sucks you in, but good products and service is what makes you buy. Aflac does both.

IN PICTURES: 10 Insurance Tips For Homeowners

2008 Investment Gains/Losses – Accident & Health Insurance
Investment Losses
% of Rev
Aflac (NYSE:AFL)
$1.0 billion
$16.6 billion
$465.9 million
$10.0 billion
Assurant (NYSE:AIZ)
$428.7 million
$8.6 billion
StanCorp Financial (NYSE:SFG)
$128.8 million
$2.7 billion
Berkshire Hathaway (NYSE:BRK.A)
$7.5 billion
$107.8 billion

Looking Forward
Based on the table above, If you look at the table above, it's easy to conclude 2008 wasn't a good year for insurance company investment portfolios. Not even Warren Buffet escaped the markets wrath, generating investment losses of $7.5 billion in its insurance operations. However, just like Berkshire Hathaway, Aflac is looking forward - not backward - confident that operationally it is extremely sound.

At the end of April, it announced first-quarter earnings, and they were solid. Revenues grew 12.9%, from $4.3-4.8 billion and bottom line earnings per share grew 24.5%, from 98 cents-$1.22 year-over-year.

A good portion of the increase is due to the stronger Yen. Aflac generated $3.6 billion, or 75% of its total revenue, from its Japanese operations in Q1, growing them by 16.2%. In contrast, U.S. sales grew 4.7% to $1.2 billion. What's the big sales driver in Japan? Sadly, it's cancer insurance. Up 7.4% in the quarter, the product accounted for 34.3% of all new sales. Overall, Aflac sold 1.2 million new policies in the first quarter generating $643 million in new annualized premiums. If that's what it can do in a down economy, investors should be looking forward to economic recovery. (Some things shouldn't be left to chance, find out more in Five Insurance Policies Everyone Should Have and 15 Insurance Policies You Don't Need.)

Good Reputation

Insurance products, and those who sell them, have the most undeservingly-negative reputation in the financial services industry. A reputation, once gained, is hard to lose. Aflac need not worry. The Reputation Institute recently said Aflac had the best reputation of any insurance company in the entire world. Furthermore, it was one of the top 50 companies in the U.S. Not to be outdone, Institutional Investor magazine named CFO Kriss Cloninger one of America's best finance people. With the company since 1992, his reputation among the 350 institutional money managers surveyed for this honor is exemplary. It was the first public company to allow shareholders to vote on executive compensation. Even better, it sought out their opinion on future pay structure. That's investor relations at its best.

The Bottom Line
When I'm analyzing a stock, it's important not to just look at the numbers. Consideration of what industry professionals think about a company, and pure gut feelings, should also come into play. In this case, it's a little of both. Aflac has a sterling reputation of hawking products that aren't easy to sell, especially in a poor economy. They do so with style and grace, not to mention humor. The May 25 issue of Forbes Magazine had some stock picks from Ariel Investments CEO John Rogers, Jr., and one of them is Aflac. The Chicago-based money manager believes its stock is trading at 56% of intrinsic value - bottom line, you'd better get Aflac while it's still on sale. (Financial statements don't tell you everything about a company's health. Investigate the management behind the numbers in Evaluating A Company's Management.)

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