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AFLAC Incorporated (AFL): The Real Duck Dynasty

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AFLAC Incorporated (NYSE:AFL) shares slumped after reporting fourth quarter results that signaled slowing growth. But don’t get your feathers ruffled–Aflac should keep investors happy as a duck in water.

The supplemental health and life insurer, best recognized by its signature mascot (a pristine white duck), reported that Q4 revenue rose 6.6% to 6.4 billion and net earnings were $581 million, or $1.24 a share. That was in comparison to $1.15 a share or $538 million during the same quarter a year ago. Operating earnings were $697 million, up from $684 million in Q4 2011. The company also completed the repurchase of 1.9 million shares and said additional buybacks will be implemented.

AFLAC Incorporated (NYSE:AFL)Over the past several years Aflac has been focused on shedding risker asset classes, predominantly in Europe, a move that is shoring up its balance sheet.

Things look just ducky for Aflac, and the company continues to paddle like the dickens to reward shareholders.  Aflac boast a 2.78% dividend yield (a 22% payout ratio) and has increased its dividend every year for the past 30. The latest increase came in December 2012, when the company raised its quarterly payout to 35 cents from 32 cents.

Following the modest earnings report, shares of the Columbus, OH based company sunk 7.5% intraday before finishing the trading day down 4.3% in a reflection that the market was looking for more. Volume was extremely active at nearly three times the stock’s daily average as investors took flight and fled. But it’s only a matter of time before market participants recognize Aflac’s strong business model and flock back to shares.

Weighing on the stock was the company’s comments that sales in Japan, its largest revenue stream, will slow this year as the weakening yen drags down earnings. Sales in the Asian nation were negatively impacted by a reduction in the so-called discounted advanced premium rate, which became effective in October. But Aflac has the most individual insurance polices of any insurance company in Japan, a presence that is irrefutably rewarding.

The company isn’t ducking pressing issues, and it continues to tread carefully both here and abroad. Alfac prudently uses debt and isn’t over-leveraged. The insurer reiterated its outlook for 2013 of earnings of $6.37 to $6.57 per share.

Health insurers like Aflac, and peers Humana Inc. (NYSE:HUM) and Wellpoint, Inc. (NYSE:WLP), all stand to benefit from Obamacare.

Officials at Louisville-based Humana see government run health insurance exchanges as a potential new avenue for business. Shares of Humana remain a favorite among scores of analysts based on valuation. But its revenue growth rate trails the industry average of 14%. The company has been on a buying spree of late, and it may take some time before all of the integrations pad Humana’s bottom line.

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