Bearish stock to watch: AFLAC Incorporated (NYSE: AFL)

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AFLAC Incorporated (NYSE: AFL) stock fell over 1.9% in the pre-market session on April 30th, 2020 (as of 8:32 am GMT-4; Source: Google finance) as the company missed the analysts’ estimates for total revenues in the first quarter of 2020. The topline and net earnings were affected during the period due to an increase in net investment losses. The company incurred net investment losses on the back of multiple factors, that comprised of a decline in the fair value of equity securities of $149 million, losses aroused from certain derivatives and foreign currency activities of $146 million, incurred credit losses of $145 million, of which $65 million resulted from application of the new Current Expected Credit Losses (CECL) accounting standard and losses derived from sales and redemptions of $7 million. Total investments and cash at the end of March 2020 stood at $137.0 billion, compared with $131.4 billion at March 31, 2019. Shareholders’ equity was $26.4 billion at March 31, 2020 compared to $26.0 billion at March 31, 2019.

The sales production in both Japan and the U.S. had begun to fall off in March, and the decline increased in the month of April, due to a reduction in face-to-face activity. While the respective sales platforms and distribution partners are working to adapt to the new environment, the company expects to see these trends point to depressed sales at least until the COVID-19 restrictions subside. Due to the global COVID-19 pandemic, it is challenging to forecast for the company with reasonable accuracy the full duration, magnitude, and pace of recovery across the distribution and operations. Therefore, the company has withdrawn the adjusted earnings guidance for 2020.

AFL in the first quarter of FY 20 has reported 8 percent increase in the adjusted earnings per share of $1.21, beating the analysts’ estimates for the adjusted earnings per share of $1.10. The company had reported 8.8 percent fall in the adjusted revenue to $5.16 billion in the first quarter of FY 20, missing the analysts’ estimates for revenue of $5.5 billion, according to analysts polled by FactSet.

In the first quarter, AFL had repurchased $449 million, or 10.0 million of its common shares. At the end of March 2020, the company had 27.1 million remaining shares authorized for repurchase. The company has declared the second quarter dividend of $0.28 per share, payable on June 1, 2020 to shareholders of record at the close of business on May 20, 2020.

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