SANFORD BERNSTEIN: Aflac Earnings Have The Potential To Get Slammed By The Japan Disaster

Insurers have been the most talked about group under threat in the wake of the Japanese disaster, and now we have a bit more clarity on exposures for some of the industry’s biggest names.

In its breakdown of insurance firms, Sanford Bernstein found that Aflac, Prudential and MetLife have the most to lose in Japan.

In terms of earnings exposure, Aflac (AFL) is in the worst position at 80%, while Prudential has 41% of its earnings exposed to the market. MetLife has a smaller 24% exposure. In the wake of the quake, Sanford Bernstein rates Aflac market perform, and both Prudential and Met Life outperform.

MetLife, Aflac and Prudential are all down today over 2%.

From Sanford Bernstein on Aflac’s problems (emphasis ours):

Risks to AFL’s ability to miss our price target include a prolonged decline in sales growth in either the company’s US or Japan segments. Potential challenges in Japan include increased competition and increased regulatory scrutiny around sales or claims paying practices. A long-term decline in sales trends could cause the company to miss our double digit EPS growth expectation. A second risk is if the margin improvement we expect out of AFL Japan fails to materialise. Credit losses represent a third risk.

Note the make up of each company’s business in Japan, with Aflac having significant exposure to both cancer and accident and health. That’s not exactly a property problem, which is what everyone has been talking about thus far.

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Photo: Sanford Bernstein


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