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 12, 2026 17:14 ET Major central bank action was the focus this week in economic news. The European Central Bank became the first major central bank to move in response to the rising inflationary pressures in the backdrop of the conflict in the Middle East. In North America, the U.S. inflation and trade data as well as Canada’s central bank decision gained attention. The Chinese trade data was the main news in Asia.