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Aflac Acquires Argus, Expands U.S. Segment Product Suite

Zacks Equity Research

Aflac Inc. AFL has completed the buyout of Argus Holdings, LLC and its subsidiary Argus Dental & Vision, Inc. Notably, Argus is a premier benefits organization and national network dental and vision company, based in Florida. 

The Argus acquisition is a strategic fit for Aflac U.S. as it provides a platform to build out the company’s network in dental and vision products.

This acquisition reflects Aflac’s business reinvestment strategy. This move will aid the life and supplemental health insurer’s U.S. business, which has been performing better than Japan, its major business segment. Notably, the Japan business is suffering from low interest rates and compliance issues related to its strategic sales partner Japan Post.

In the first nine months of 2019, Aflac’s U.S. segment exceeded management’s expectation of pre-tax profit margin. This achievement came on the back of continuous investment in its platform, distribution and customer experience.

Nevertheless, sales at the U.S. segment remained somewhat challenged in 2019, compared with 2018. The third quarter witnessed weaker-than-expected sales. Therefore, Aflac anticipates full-year 2019 results to be flat to down slightly. The company seeks to grow profitable earned premium, which is estimated in the range of 2% in 2019.

The U.S. segment suffered from soft sales due to macroeconomic elements. Strong employment  led to fewer people taking up the independent commission sales role. This constrained sales agent recruiting and thereby sales.

However, a high employment scenario has driven demand for Aflac’s workplace Benefit Solutions.  Also, the company is advancing its direct-to-consumer platform, which will support sales. Overall, Aflac expects its U.S. segment to recover in 2020.

Aflac has not been a frequent acquirer. However, the fewer buyouts made by the company have aided its overall growth. In 2017, Aflac acquired HealthMarkets Insurance Company from HealthMarkets LLC, a Blackstone Group LP company.

The Argus acquisition is unlikely to have any material impact on the company’s 2019 earnings.

Year to date, the stock has gained 18.8% compared with its industry’s rise of 15.8%.

Aflac carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the same space are Employers Holdings Inc. EIG, Trupanion, Inc. TRUP and Kemper Corp. KMPR. While Employers Holdings sports a Zacks Rank #1 (Strong Buy), Trupanion and Kemper carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Employers Holdings, Trupanion and Kemper have surpassed estimates in the last reported quarter by 46.67%, 200% and 44.6%, respectively.

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Aflac Incorporated (AFL) : Free Stock Analysis Report
 
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