Aflac (AFL) is the global leader in cancer insurance.The company sells supplemental life, health, and accident insurance.
Aflac generates about 75% of its premium revenue in Japan.The remaining 25% of premium revenue comes from the United States.
Up to this point many of my Dividend Aristocrat reports have ended disappointingly.Most of the 17 Dividend Aristocrats analyzed up to this point have been ‘holds’, not ‘buys’.
This analysis is different. Aflac is a buy at current prices.I am currently long Aflac. This article will answer the following questions about Aflac:
Is the insurance industry stable enough for long-term investors?
The insurance industry is responsible for several phenomenal fortunes.
Warren Buffett’s Berkshire Hathaway (BRK-A) is the largest insurer in the world.The lesser known Shelby Davis made $900 million investing in insurance companies (including Aflac).Even hedge fund manager David Einhorn has entered the insurance industry with Greenlight Capital Re (GLRE).
The insurance industry has two primary characteristics that make it suitable for compounding wealth.
Insurance has not changed too much since Lloyd’s of London began selling marine insurance in the 17th century. Insurance uses the ‘law of large numbers’ to spread the risk of a negative event (like a car wreck, house fire, or cancer) over a large pool of people.If you pay a little each month, you will be covered in the case of a disaster.
The core concept of insurance has not changed much in the last 400 years, and it won’t change in the future.Technology and ‘big data’ only make calculating insurance risks easier. The nature of insurance makes it one of the most stable industries in the world.
The stability of the insurance industry is fairly obvious.The negative cost of capital aspect of insurance is less obvious.Here’s how it works:
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