Q Should I hold my shares of Aflac Inc.? They haven't done as well as I'd hoped. - PD, via the Internet.

A The famous Aflac duck isn't the only one squawking these days.

Some shareholders are sounding off about weak returns from the firm's risky investment portfolio, which resulted in a 35 percent decline in the insurer's second-quarter profits.

A large portion of that portfolio is invested in preferred securities of European financial institutions, a strategy that worked well for years until money problems increased their possibility of being nationalised. The company's holdings in CIT Group Inc. have especially been draining.

Nonetheless, Aflac operating earnings that excluded those investment losses were up, and overall financials have remained resilient despite the difficult economy. The company continues to move ahead, most recently paying $100 million to purchase South Carolina-based Continental American Insurance Co., a private company specialising in group insurance products.

Shares of Aflac are down seven percent this year following last year's 25 percent decline. The firm has a reputation for quality corporate governance and dedication to shareholder values.

Aflac offers supplemental health insurance and life insurance in the US and Japan. For 2009 the company expects its Japanese sales to be flat to five percent higher. Deregulation in Japan has opened banks as a new channel for selling its insurance products there. It expects no sales growth in its US operations this year.

Consensus rating on Aflac stock is between "buy" and "hold", according to Thomson Reuters. It includes six "strong buys", one "buy", nine "holds" and two "underperforms".

Daniel Amos, CEO since 1990 and chairman since 2001, transformed Aflac from a one-product company known for its cancer policies to one that now also offers accident, disability and long-term care insurance. He personally owns several hundred million dollars worth of the company's stock.

Primarily selling policies to consumers at their workplaces through independent distributors, Aflac is a low-cost provider with higher profit margins than its competitors. It invests significantly in technology in order to reduce costs and create new products.

Earnings are expected to increase 18 percent this year versus the five percent decline forecast for the accident and health insurance industry. Next year's earnings are projected to increase nine percent compared with 21 percent expected industry-wide.

The five-year annualised return of 14 percent compares to 12 percent forecast for its peers.

Andrew Leckey answers questions only through the column. Address inquiries to Andrew Leckey, 555 N Central Ave., Suite 302, Phoenix, AZ 85004-1248, or by e-mail at andrewinv@aol.com

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