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What Makes Aflac One of America's Best Companies

When most people hear Aflac (NYSE: AFL  ) , they think of the brilliant marketing campaign featuring a duck that annoyingly quacks the insurance company's name at prospective policyholders. But there's obviously much more to Aflac than a series of simple, albeit effective, television commercials.

The company was founded by three brothers in 1955 as the American Family Life Insurance Company -- it changed its name 10 years later to the now-familiar American Family Life Assurance Company, or Aflac. As its website would tell you, the impetus was simple: "The brothers knew that Americans need financial protection when an illness or accident strikes" and saw an opportunity to build a business around this need.

In the nearly 60 years since its founding, Aflac has gone on to become one of the giants in the insurance industry. Among other things, it provides coverage to over 50 million people worldwide, insures roughly one out of every four households in Japan, and is the largest provider of supplemental insurance in the United States. It shouldn't go without mentioning, moreover, that it was a pioneer in cancer insurance, debuting its self-described "ground-breaking cancer expense policy" in 1958.

The case for Aflac
To be considered as one of America's best companies, however, Aflac must do more than impress with its ingenious mascot and demonstrated marketing prowess. To be worthy, it must truly excel at satisfying each of its four stakeholders: customers, employees, shareholders, and the wider world around it.

With respect to customers, Aflac is known for two things. First, it pays its claims quickly. According to its website, the company processes most claims in about four business days. And second, its coverage is uniquely flexible, paying the coverage directly to the policyholder as opposed to a hospital or doctor. It's accordingly the policyholder's decision on how or even if the cash is ever used.

In terms of employees, this past year, Aflac was selected by Fortune for the 15th year in a row as one of the 100 Best Companies to Work For. What makes the company so great? According to the magazine: "The insurance giant hosts an annual six-day appreciation week; last year it included theme park visits, film showings, skating, and daily giveaways."

That being said, even a cursory glance at workplace-rating website reveals that the story is more nuanced, as the company scores a lackluster 2.9 out of 5 stars on overall workplace quality. Namely, while corporate employees appear to reap many of the benefits that Aflac is known for, the company's independent agents have a more jaded opinion of its operations. Among common complaints are an absence of salary, exaggerated profit potential, and a lack of support in the field.

With respect to shareholders, the picture is similarly two-sided. On one hand, its book value per share has nearly doubled since the end of 2007. On the other, however, Aflac's shares have underperformed the broader market by nearly 18 percentage points, returning a negative 4% compared to a positive 13% gain on the S&P 500. The one redeeming aspect here is its 2.7% dividend yield and the fact that Aflac has increased its dividend payout annually for the past 30 years, securing it a spot on the S&P 500's coveted list of dividend aristocrats.

Last but certainly not least, it wouldn't be fair to exclude one of Aflac's most laudable accomplishments, which speak to its place in the wider world. It's been recognized by the Ethisphere Institute -- an international think-tank dedicated to furthering business ethics, corporate responsibility, and environmental sustainability -- as being only one of six companies to have made its list of World's Most Ethical Companies since the list's inception in 2007. As the institute explains, it "recognizes companies that truly go beyond making statements about doing business 'ethically' and translate those words into action."

The Foolish bottom line
While Aflac has succeeded, to a large extent, in promoting a positive image of itself as an employer, investment, and corporate citizen, the quantity and consistency of negative feedback from its independent insurance agents on the workplace-rating website raises a possible red flag that investors should consider. Despite that red flag, we still believe Aflac is among the best companies in America.

Click here to read about the rest of The 25 Best Companies in America.


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