Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

This Insurer Belongs in Your Portfolio: AFLAC Incorporated (AFL)

Prudential trades for 9.1 times 2012 earnings with 10% forward growth projected.  This is comparable to AFLAC’s numbers, with a slight edge going to AFLAC.

Hartford trades at 8.5 times 2012 earnings, with 8.8% forward growth projected.  However, Hartford’s success is highly dependent on the continued improvement of the equity markets as well as the company’s own restructuring.

As I mentioned already, I find AFLAC’s expected growth to be too low.  I believe that the company’s U.S. business will grow rapidly over the next several years.  The trend in primary insurance seems to be towards less and less coverage, further incentivizing people to purchase supplementary coverage.

Regardless of whether I’m correct, AFLAC is simply too cheap to ignore right now.  At just 7.7 times earnings, AFLAC is trading at a tremendous discount.  I should point out that one of the major reasons that insurance companies are trading at such a low P/E is the low interest rates that these companies rely on for income.

While the prevailing interest rates may stay low for several years to come, they won’t forever.  When interest rates begin to rise again, so will the valuation of AFLAC and its peers, and this company should trade for around 15 times earnings, or double what it currently does.  In this way, AFLAC may be one of the most underrated plays on the continuing economic recovery.

The article This Insurer Belongs in Your Portfolio originally appeared on and is written by Matthew Frankel.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.