Aflac Stock Moving Into Proverbial Sweet Spot Range For A Split

May 01--It's a question that Dan Amos acknowledges hearing from time to time, but certainly right around the moment each year that Aflac gathers its loyal shareholders for an annual meeting at the Columbus Museum.

That seemingly simple question: Is the company considering a stock split?

The curiosity has become even more plausible this year, with the supplemental health and life insurer's stock treading steadily above $70 per share approaching three months. The stock actually closed just above $75 per share two times last week, on Tuesday and then again Thursday. It reached an all-time high of $76.88 in active trading on Friday before slipping a bit to close at just under $75.

That performance is the proverbial sweet spot for the board of directors' stated criteria for possibly voting on a two-for-one stock split, which would give shareholders twice the number of stock notes in their hands at half the pre-split price. A share of $75 would become two shares valued at $37.50 apiece. In essence, note holders would double their stock ownership without having to purchase anything.

"As I've stated in the past, we believe that our stock price should be above $75 per share for a period of six months before the board will consider a stock split," Amos, Aflac's chairman and chief executive officer, told those at the annual meeting. "Now that is not $75 one day. That's over a period of six months."

The CEO also explained that many companies, including its insurance competitors, are not doing stock splits at the rate they were in the past. In an interview after the meeting, he explained that the reason Aflac does leave a stock split plainly on the table as a possibility is that its shareholder base has a sizeable number of individual investors. Nearly one in three stocks are owned by individuals. Institutional investors, such as mutual fund managers, comprise the rest of the outstanding shares on the market.

"We are skewed more with individual shareholders than a lot of companies," said Amos, who joked that he doesn't have a feel for when that stated six months above $75 per share might occur. "You know, tell me what the stock's going to do and I'll tell you what the chances are."

Few, if anyone, would likely remember the last time Aflac's stock did split. The last one took place in 2001, when the adjusted price -- after a two-to-one split -- was $26.95 per share.

Split or not, Amos on Monday pointed out, as he typically does during the annual meeting, that those who do purchase and hold on to their shares are generally rewarded nicely through the years.

The classic example is that someone who purchased 1,000 shares of Aflac stock in its founding year of 1955, paying $11,100 -- then watching them split and grow in value with cash dividends time after time and year after year -- would now own about 1.9 million shares. That would give those stockholders $3.3 million in cash dividends this year alone. At Friday's closing stock price, that initial $11,100 investment would be worth $141.7 million.

"Some of the original shareholders are here today," Amos noted. "In fact, my favorite shareholder, who is an original, and that is my mother Jean Amos, is right here. We're always pleased to have those original shareholders here, and it's a privilege to talk with you and thank you."

Annual meetings are meant to be a parade of highlights, and the Aflac gatherings are filled with them. That included the basic financial numbers of the company, which reported net earnings of nearly $2.7 billion on total revenues of just under $22.6 billion in 2016. About 75 percent of the insurer's business comes from Japan; the balance in the U.S.

Aflac increased its cash dividend to shareholders for the 34th year in a row, a record that few companies have achieved, Amos said. The dividends, along with stock repurchases by the firm, returned about $2.1 billion to shareholders last year.

The company also has managed to retain its brand awareness in both the U.S. and Japan, with more than 9 of 10 consumers recognizing the company's name, much of the visibility coming through its Aflac duck commercials and social media campaigns. In Japan alone, the company insures one of four households with medical, cancer and other policies.

Aflac's "One Day Pay" initiative also has proven a major success, the CEO said, with the insurer paying 1.8 million claims in 2016 with a zero error rate due to technology that requires all submissions to be filled out properly before being accepted. Amos said surveys have found that 95 percent of policyholders said they would refer the company to other people because of their experience with One Day Pay, which processes a submitted insurance claim within a day, getting the money into the hands of the consumer fast.

"Now think about that for a second," he said. "In America today, we can't get 95 percent of the people to agree on getting free money ... By making the decision to pursue one-day claims, we created a game changer in the insurance industry. In fact, to date, no one does one-day pay but Aflac.

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