This article is sponsored by College Readiness Consulting!
What Is Aflac’s Business Model? A Step-by-Step Breakdown of America’s Favorite Duck-Based Dividend Machine
When you hear “Aflac!”, you probably think of that quacking duck, Nick Saban, or Deion Sanders. But behind these mascots is a multibillion-dollar insurance empire built on a surprisingly simple — and incredibly profitable — business model.
Let’s break it down step-by-step, duck-style.
Step 1: Sell Supplemental Insurance (The Stuff Health Insurance Doesn’t Cover)
Aflac doesn’t sell major medical insurance. Instead, they specialize in “supplemental insurance.”
Translation: Aflac pays you, the policyholder, cash directly when bad things happen — accidents, cancer, hospital stays, lost income, etc.
So while your main health insurance covers hospitals and doctors, Aflac covers your wallet.
Example: You break your leg. Your health insurance pays the hospital.
Aflac pays you $1,000 to help cover rent, groceries, or Uber Eats — no questions asked.
Step 2: Make It Voluntary (So Employers Don’t Foot the Bill)
Here’s the genius: Aflac mostly sells through employers — but their policies are employee-paid.
- Employers offer Aflac as a payroll-deductible option.
- Employees choose what they want.
- Aflac handles the rest.
Employers love it because it boosts benefits without raising their costs. And Aflac gets recurring premium revenue with little friction.
Step 3: Go Big in Japan (Really)
Fun fact: 70%+ of Aflac’s revenue comes from Japan — not America.
In Japan, Aflac is the #1 cancer insurance provider and has distribution deals with major banks and post offices. It’s a wildly profitable, low-churn market.
Aflac Japan is the quiet, dependable engine that keeps the duck flying.
Step 4: Collect Premiums, Invest the Float
Like all insurance companies, Aflac makes money before they even pay a single claim:
- Collect monthly premiums from policyholders.
- Invest that money (aka the “float”) in bonds, Treasuries, and other safe assets.
- Earn interest while hoping claims stay low.
This investment income is a huge profit driver — especially when interest rates are high.
Step 5: Payouts Are Predictable — So Margins Are Strong
Because most of Aflac’s products are fixed-benefit, they know exactly what they’ll pay:
- $X per hospital stay
- $Y per accident
- $Z per cancer diagnosis
That makes risk more predictable and claims more manageable, which keeps margins healthy and earnings smooth.
Why the Stock Is a Dividend Beast
- Aflac has raised its dividend for 40+ consecutive years.
- It has a low payout ratio, strong free cash flow, and billions in buybacks.
- It’s the type of stock retirees love and funds respect— durable, boring, and quietly compounding.
TL;DR — How Aflac Makes Money
| Step | What Happens | Why It Works |
| 1 | Sells supplemental insurance | Pays policyholders directly |
| 2 | Offers it through employers | High-volume, low-cost distribution |
| 3 | Dominates in Japan | Stable, high-margin market |
| 4 | Invests the float | Extra profits before claims |
| 5 | Pays fixed benefits | Predictable claims = fat margins |
Final Thought
Aflac doesn’t try to cure cancer. But they’ll pay you $10,000 if you get it.
It’s not flashy, but it’s private sector insurance at its cleanest: help people financially when life goes sideways — and make a steady return doing it.
Also… the duck slaps.
DISCLAIMER: This analysis of the aforementioned stock security is in no way to be construed, understood, or seen as formal, professional, or any other form of investment advice. We are simply expressing our opinions regarding a publicly traded entity.
© 2025 MacroHint.com. All rights reserved