Analyze Aflac as a case study. You may use only (1) the information contained at the company website (i.e., documents with www.aflac.com in the URL or linked directly to the company website), (2) information available at and published by Hoovers (available through the library’s electronic databases; contact the library for a password required to access the premium areas from off campus), and (3) articles less than 30 days old (at the time you access them) available online at the Wall Street Journal.
Please note that anything published by a third party is not permitted. For example, if Hoover’s, the company web site, or the WSJ links to an article published by a trade journal, you cannot use that information.
Your work will be graded with the 25-question instrument presented in the course. It is likely that you will desire additional information that would be helpful in analyzing the case.
Please note that while you are responsible for using the information available at the aforementioned web sites, but you will not be held responsible for material that is not available at these particular sites.
I understand that this may limit your ability to fully address some of the issues; you should combine your own experience with the web material that is available at these sites and do the best you can. You should follow the template on the following pages; headings are already provided to get you started.
NOTE ON WEB RESEARCH: Do your web research early. Web sites and Internet service providers go down from time to time. Temporary problems with the Internet will not result in an extension of the due date, regardless of when they occur.
NOTE ON REFERENCES: You must provide the URL (in a footnote) for all material—NO EXCEPTIONS. For this exam, no additional information beyond the URL is needed (of course, complete citations are required on your team project). NO DIRECT QUOTES FROM ANY SOURCES ARE PERMITTED FOR THIS ASSIGNMENT. You must use and cite all sources, including only sources listed above.
NOTE ON INTRODUCTION: I did not include the introduction heading in the case analysis section below. For this exam, you are not required to introduce the firm.
NOTE ON CORPORATE LEVEL: Remember that if you are analyzing a firm with multiple business units, you may emphasize the primary business unit in your case. If a single business unit accounts for the vast majority of revenues, you may argue this point in the industry analysis section and spend the remainder of the analysis concentrating on that industry. In this case, the other business units should be acknowledged in the corporate strategy section and possibly other sections as well.
PLEASE READ
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CASE ANALYSIS: AFLAC MARKET ANALYSISIdentification of the Industry
The America Life Assurance Company of Columbus (AFLAC) Incorporated is a Group that was formed with an objective to provide additional health and life insurance incentives (AFLAC Incorporated). The Group also provides a multiplicity of services including affordable healthcare plans, medical and sickness assistance including cancer plans, and general health check expense plans (AFLAC Incorporated)[1].
The other services provided by the Group include accident plans that cater for all forms of injuries and traumas associated with accidents, living benefit plans that help individuals to invest and plan (AFLAC Incorporated).Moreover, there are accident plans and specific sickness plans, which particularly target cancer (AFLAC Incorporated).
AFLAC’s cancer life insurance scheme allows investors to benefit from fixed daily life insurance services for both inpatient and outpatient services that relate to can cancer (AFLAC Incorporated).In addition, the service guarantees lump sum benefits in case a patient is diagnosed with internal cancer (AFLAC Incorporated). AFLAC’s hospital indemnity services provide day-to-day services for hospitalization due to instances such as accidents or general sickness (AFLAC Incorporated).
The other types of additional health insurance services provided by AFLAC include care for patients in intensive care units, and care for patients involved in accidents affected by any kind of disability (AFLAC Incorporated). Additionally, the Group offers hospital indemnity incentives, general long-term care, specialized services for short-term disability, as well as treatment plan for dental problems (AFLAC Incorporated).
AFLAC Group operates in two major destinations: the United States and Japan (Press Release Story)[2]. Overall, the Group insures more tan 40 million people worldwide, and is a leader in the range of insurance products sold in the United States (Press Release Story).Industry Profitability
AFLAC Incorporated has noted mixed results in recent years. Most of the results have been characterized by declines in profit due to a number of reasons.
For instance, in the fourth quarter of 2003 the Group recorded a 61 per cent decline in profit due to the losses in incurred from the collapse giant Italian dairy, Parmalat (“AFLAC profit falls on Parmalat scandal”)[3]. AFLAC Incorporated had massively invested in the fallen dairy (“AFLAC profit falls on Parmalat scandal”).
As a result of the collapse of Parmalat, AFLAC Incorporated recorded a loss of $257 million when it sold its stocks in the collapsed company. (“AFLAC profit falls on Parmalat scandal”).
Parmalat was then under investigation for allegations that its managers were involved in fraud involving million of United States dollars, (“AFLAC profit falls on Parmalat scandal”). Consequently, AFLAC sold its stake of $428 million in Parmalat in December 2003 after its credit rating was devalued and considered as being at a junk status (“AFLAC profit falls on Parmalat scandal”).
Although AFLAC Incorporated realized the advantage of a stronger yen versus dollar exchange rate in the year 2008, its investment plans resulted in caused it to realize declines in profit (AFLAC profit dips 19% in 2008)[4].
The Group recorded a net income of $1.3 billion and associated earnings valued at $2.62 per share in 2008 (AFLAC profit dips 19% in 2008). This compares to a slightly higher value of $1.6 billion in earnings and share value of $3.31 per share in the year 2007(AFLAC profit dips 19% in 2008).
AFLAC Incorporated realized more investment losses in 2008 as opposed to the gains realized in 2007(AFLAC profit dips 19% in 2008). The group’s investment losses in 2008 were noted to be $655 million; as compared to the $19 million gains that were recorded in 2007, (AFLAC profit dips 19% in 2008).
Other details that pertain to AFLAC’s profitability are shown in the annual income statement for the last three years (Table 1).
