Aflac WACC - Weighted Average Cost of Capital
The WACC of Aflac Inc (AFL) is 8.3%.
| Range | Selected | |
| Cost of equity | 7.5% - 10.1% | 8.8% |
| Tax rate | 13.5% - 15.0% | 14.25% |
| Cost of debt | 5.0% - 5.0% | 5% |
| WACC | 7.1% - 9.4% | 8.3% |
| Category | Low | High |
| Long-term bond rate | 3.9% | 4.4% |
| Equity market risk premium | 4.6% | 5.6% |
| Adjusted beta | 0.8 | 0.94 |
| Additional risk adjustments | 0.0% | 0.5% |
| Cost of equity | 7.5% | 10.1% |
| Tax rate | 13.5% | 15.0% |
| Debt/Equity ratio | 0.13 | 0.13 |
| Cost of debt | 5.0% | 5.0% |
| After-tax WACC | 7.1% | 9.4% |
| Selected WACC | 8.3% | |
| Debt/Equity | Unlevered | |||
| Peers | Company Name | ratio | Beta | beta |
| AFL | Aflac Inc | 0.13 | 0.46 | 0.41 |
| ATH | Athene Holding Ltd | 0.12 | 1.69 | 1.53 |
| BHF | Brighthouse Financial Inc | 1.13 | 0.26 | 0.13 |
| IAG.TO | iA Financial Corporation Inc | 0.15 | 1.29 | 1.15 |
| LNC | Lincoln National Corp | 1.06 | 1.21 | 0.64 |
| MET | MetLife Inc | 0.36 | 1.03 | 0.79 |
| PFG | Principal Financial Group Inc | 0.23 | 1.02 | 0.85 |
| SLF.TO | Sun Life Financial Inc | 0.41 | 0.1 | 0.08 |
| TRUP | Trupanion Inc | 0.06 | 1.17 | 1.11 |
| UNM | Unum Group | 0.27 | 0.74 | 0.61 |
| Low | High | |
| Unlevered beta | 0.62 | 0.81 |
| Relevered beta | 0.7 | 0.91 |
| Adjusted relevered beta | 0.8 | 0.94 |
Aflac's CAPM model and how its cost of Equity is calculated
The Cost of Equity reflects the return a company needs to deliver to shareholders to justify the risk of investing in its shares. It’s computed using the Capital Asset Pricing Model (CAPM), which blends the risk-free rate, the stock’s beta, and the market risk premium.
This method evaluates the stock’s risk compared to a safe investment and the market’s overall volatility.
Here’s how we figure out the cost of equity for Aflac:
cost_of_equity (8.80%) = risk_free_rate (4.15%) + equity_risk_premium (5.10%) * adjusted_beta (0.8) + risk_adjustments (0.25%)
We include the risk adjustments, which range from 0% to 1%, to keep our WACC conservatives, especially for companies traded in developing markets.