Monday, Credit Suisse upgraded Aflac Inc. (AFL) shares to Outperform from Neutral and increased its price target to $60 from $52.
Analyst Gallagher upgraded the stock after sizing up potential losses and recent actions to restructure European banks' capital positions. The analyst's upgrade also considers: improved recent fundamental trends, including an uptick in persistency and a wider gap between incurred claims and benefits paid; reserve redundancy averaging over 20% per year, which he believes may fully offset AFL's prospective credit losses; and a potential RBC arbitrage as a result of a continued rally in bank hybrid security prices relative to NAIC capital charges.
With the assistance of global credit research colleagues, the analyst builds a scenario analysis for what he perceives is AFL's most at-risk investments, totaling $12.7 billion dollars and representing the majority of AFL's unrealized losses.
The analyst determines that AFL owns $1.8 billion of securities at risk of coupon deferral, $2.3 billion at heightened risk of principal loss; he deem $6.9 billion to be money good and $1.1 billion to be at a low probability of mild loss. The analyst expects AFL to maintain an RBC ratio in excess of 400% in the coming year.
The analyst believes AFL can achieve its intermediate low-double-digit EPS growth target versus his low-to-mid single digit growth forecasts for its peers. AFL also has the least capital-intensive business among its peers. The analyst based his new price target of $60 on 11x his 2010 EPS estimate of $5.25, to reflect his forecast of ROE's just north of 25% and steady earnings growth.
Currently, AFL is up $1.39 or 3.18% and trading at $45.04.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.