COLUMBUS, Ga., Jan. 30 /PRNewswire-FirstCall/ -- Aflac Incorporated
today reported its fourth quarter results.
Total revenues were $3.7 billion during the fourth quarter of 2006,
compared with $3.6 billion a year ago. Net earnings were $332 million, or
$.67 per diluted share, compared with $364 million, or $.72 per share, a
year ago. The decline in net earnings primarily resulted from lower
realized investment gains, which were $3 million, or $.01 per diluted share
in the fourth quarter of 2006, compared with $68 million, or $.14 per
share, a year ago. The significant realized investment gains in the fourth
quarter of 2005 resulted from a bond-swap program, which we completed in
the second quarter of 2006. The change in fair value of the interest rate
component of the cross- currency swaps related to the company's senior
notes, as required by SFAS 133, was immaterial in the fourth quarter of
2006. In the fourth quarter of 2005, the impact from SFAS 133 reduced net
earnings by $2 million, or $.01 per diluted share.
We believe that an analysis of operating earnings, a non-GAAP financial
measure, is vitally important to an understanding of Aflac's underlying
profitability drivers. We define operating earnings as the profits we
derive from our operations before realized investment gains and losses, the
impact from SFAS 133, and nonrecurring items. Management uses operating
earnings to evaluate the financial performance of Aflac's insurance
operations because realized gains and losses, the impact from SFAS 133, and
nonrecurring items tend to be driven by general economic conditions and
events, and therefore may obscure the underlying fundamentals and trends in
Aflac's insurance operations.
Furthermore, because a significant portion of our business is in Japan,
where our functional currency is the Japanese yen, we believe it is equally
important to understand the impact on operating earnings from translating
yen into dollars. We translate Aflac Japan's yen-denominated income
statement from yen into dollars using an average exchange rate for the
reporting period, and we translate the balance sheet using the exchange
rate at the end of the period. However, except for a limited number of
transactions, we do not actually convert yen into dollars. As a result, we
view foreign currency translation as a financial reporting issue for Aflac
and not as an economic event to our company or shareholders. Because
changes in exchange rates distort the growth rates of our operations, we
also encourage readers of our financial statements to evaluate our
financial performance excluding the impact of foreign currency translation.
The chart at the end of this release presents a comparison of selected
income statement items with and without foreign currency changes to
illustrate the effect of currency translation.
Operating earnings in the fourth quarter of 2006 were $329 million,
compared with $298 million in the fourth quarter of 2005. Operating
earnings per diluted share rose 11.9% to $.66, which was consistent with
our expectations as communicated in our third quarter earnings release,
compared with $.59 per share a year ago. The yen/dollar exchange rate did
not impact operating earnings on a per-share basis for the fourth quarter.
For the full year of 2006, our results were impacted by a weaker
yen/dollar exchange rate, compared with 2005. Total revenues were $14.6
billion, an increase of 1.8% over 2005. Net earnings were $1.5 billion, or
$2.95 per diluted share, compared with $1.5 billion, or $2.92 per share, in
2005. Like the fourth quarter, full-year net earnings were impacted by
lower realized investment gains in 2006, compared with 2005. Realized
investment gains were $51 million in 2006, or $.10 per diluted share,
compared with $167 million, or $.33 per share, in 2005. The impact of SFAS
133 was immaterial for the full year of 2006, compared with a loss of $10
million, or $.02 per diluted share, in 2005. Also affecting comparisons of
net earnings was the inclusion in 2005 of a benefit of $34 million, or $.07
per diluted share, from the release of a deferred tax asset valuation
allowance.
Operating earnings for the year were $1.4 billion, or $2.85 per diluted
share, compared with $1.3 billion, or $2.54 per share, in 2005. Excluding
the negative impact of $.08 per share from the weaker yen, operating
earnings per diluted share rose 15.4% for the year, which was slightly
better than our objective.
During the fourth quarter, we acquired 3.1 million shares of our stock,
bringing the total number of shares purchased in 2006 to 10.3 million. At
the end of December, we had approximately 36.6 million shares available for
repurchase under authorizations by the board of directors.
AFLAC JAPAN
Aflac Japan produced strong financial results in the fourth quarter.
Premium income in yen rose 5.6%, and net investment income increased 6.5%.
Total revenues were up 5.5%. Due to improvement in the benefit and expense
ratios, the pretax operating profit margin expanded from 13.4% to 14.7%. As
a result, pretax operating earnings in yen increased 15.9%. For the year,
premium income in yen increased 5.9%, and net investment income rose 9.0%.
Investment income growth in yen terms was magnified for the year by the
weaker yen/dollar exchange rate because approximately 37% of Aflac Japan's
investment income was dollar-denominated. Total revenues were up 6.3%, and
pretax operating earnings grew 15.4%.
The average yen/dollar exchange rate in the fourth quarter of 2006 was
117.88, or .6% weaker than the average rate of 117.21 in the fourth quarter
of 2005. For the year, the average exchange rate was 116.31, or 5.5% weaker
than the rate of 109.88 a year ago.
Premium income in dollars was up 5.1% to $2.2 billion in the fourth
quarter. Net investment income rose 6.1% to $428 million. Total revenues
increased 5.1% to $2.6 billion. Pretax operating earnings were $388
million, or 15.3% higher than a year ago. For the year, Aflac Japan's
results in dollar terms were suppressed by the weaker yen/dollar exchange
rate in 2006. Premium income was $8.8 billion, up .2% from a year ago. Net
investment income was up 3.2% to $1.7 billion. Total revenues were up .6%
to $10.5 billion. Pretax operating earnings were $1.7 billion, or 9.1%
higher than a year ago.
As we stated in our third quarter earnings announcement, we had
anticipated a decline in Aflac Japan's new sales for the fourth quarter.
Aflac Japan's total new annualized premium sales declined 16.6% to 29.5
billion yen, or $251 million in the fourth quarter. For the year, total new
annualized premium sales were down 8.8% to 117.5 billion yen, or $1.0
billion. The sales declines for the fourth quarter and the year primarily
reflected industrywide weakness in the market for stand-alone medical
insurance as well as continued declines in the sale of Rider MAX. The
ordinary life category continued to show solid sales gains, benefiting from
the sale of WAYS, the innovative life insurance product we introduced in
January 2006. We continue to expect 2007 to be a challenging year from a
sales perspective and look for sales to again decline in the first half of
the year, followed by sales increases in the second half of 2007.
AFLAC U.S.
Throughout 2006, we were pleased with the performance of Aflac U.S. In
the fourth quarter, premium income increased 9.0% to $910 million. Net
investment income was up 11.0% to $120 million. Total revenues rose 9.3% to
$1.0 billion. During the fourth quarter, we increased Aflac U.S. claims
reserves by $28.3 million, which reflected a lengthening of cancer
treatment periods for claims incurred in 2006 and prior years. As a result,
the pretax profit margin declined from 13.6% a year ago to 12.2% and pretax
operating earnings were down 1.8% to $126 million. For the year, premium
income rose 9.5% to $3.6 billion. Net investment income increased 10.4% to
$465 million. Total revenues were up 9.5% to $4.0 billion. Pretax operating
earnings rose 11.4% to $585 million.
As we expected, Aflac U.S. total new annualized premium sales results
were very strong in the fourth quarter. Total new sales rose 21.2% to $447
million in the quarter. These record sales results were due, in part, to
the re- enrollment of a large payroll account. However, even excluding the
additional sales from that account, total new sales still grew at a strong
double-digit rate in the fourth quarter. For the year, total new annualized
premium sales increased 13.1% to $1.4 billion, which exceeded our 2006
sales objective of an 8% to 12% increase.
We believe our strong sales continued to benefit from the expansion of
our sales force. The total number of licensed sales associates at the end
of December was up 8.5% over a year ago to more than 68,300. The increase
in licensed associates benefited from solid new agent recruitment in the
year, including a very strong fourth quarter in which recruitment was up
15.1%. Most importantly, the number of producing sales associates also
increased. On an average weekly basis, the number of producing associates
was up 10.3% to approximately 11,000 in the fourth quarter. We expect our
sales momentum to continue into 2007. We believe our 2007 sales objective
of a 6% to 10% increase balances our enthusiasm for our U.S. business with
the challenging comparisons that we face due to the very strong sales we
produced in 2006.
DIVIDEND
As reported in October 2006, the board of directors approved an
increase in the quarterly cash dividend effective with the first quarter of
2007. The first quarter cash dividend of $.185 per share is 42.3% higher
than the first quarter 2006 dividend of $.13 per share. The first quarter
dividend is payable on March 1, 2007, to shareholders of record at the
close of business on February 16, 2007, and will mark the 24th consecutive
year in which the dividend has been increased.
OUTLOOK
Commenting on the company's fourth quarter and full-year results,
Chairman and Chief Executive Officer Daniel P. Amos stated: "The fourth
quarter of 2006 concluded another strong year for Aflac Incorporated from a
financial perspective. Both Aflac U.S. and Aflac Japan contributed to
record operating earnings. And we again achieved our primary financial
goal, which was to increase operating earnings per diluted share in 2006 by
15% before the impact of currency translation.
"We were particularly happy with the continued momentum in our U.S.
operation. We believe the many actions we have taken in recent years to
enhance our sales force infrastructure are paying off. Our expanded
distribution system and recent training initiatives have resulted in better
growth of producing sales associates, which in turn has benefited our
sales. At the same time, the underlying operating trends at Aflac U.S. have
been quite stable, and Aflac U.S. financial results were consistent with
our expectations for the year.
"Aflac Japan produced a very strong fourth quarter from a financial
standpoint, as it did in each quarter of last year. Although we were
disappointed with new sales, revenues were still in line with our
expectations due to the strong persistency of our business and improved
investment income growth. The premium from new sales greatly exceeded lost
premium from lapses. As a result, our annualized premiums in force in yen
still grew at a solid rate. And as we expected, the benefit ratio continued
to improve, which resulted in higher profit margins and rapid pretax
earnings growth.
"As we look to 2007, our financial outlook has not changed. Our
objective for 2007 is to increase operating earnings 15% to 16% to $3.28 to
$3.31 per diluted share, excluding the impact of the yen. We continue to
believe that is an achievable objective for this year. We will be
tirelessly working on improving our sales growth in Japan and maintaining
our momentum in the United States. And we believe we have the opportunity
to see 2007 emerge as another record year for Aflac Incorporated."
For more than 50 years, Aflac products have given policyholders the
opportunity to direct cash where it is needed most when a life-interrupting
medical event causes financial challenges. Aflac is the number one provider
of guaranteed-renewable insurance in the United States and the number one
insurance company in terms of individual insurance policies in force in
Japan. Our insurance products provide protection to more than 40 million
people worldwide. Aflac has been included in Fortune magazine's listing of
America's Most Admired Companies for six consecutive years and in Fortune
magazine's list of the 100 Best Companies to Work For in America for nine
consecutive years. Aflac has also been recognized three times by both
Fortune magazine's listing of the Top 50 Employers for Minorities and
Working Mother magazine's listing of the 100 Best Companies for Working
Mothers. Aflac Incorporated is a Fortune 500 company listed on the New York
Stock Exchange under the symbol AFL. To find out more about Aflac, visit
aflac.com.
A copy of Aflac's Financial Analyst Briefing (FAB) supplement for the
fourth quarter of 2006 can be found on the "Investors" page at aflac.com.
Aflac Incorporated will webcast its fourth quarter presentation via the
"Investors" page of aflac.com at 7:10 p.m. (EST) Wednesday, January 31.
AFLAC INCORPORATED AND SUBSIDIARIES CONDENSED INCOME STATEMENT
(UNAUDITED - IN MILLIONS, EXCEPT FOR SHARE AND PER-SHARE AMOUNTS)
THREE MONTHS ENDED DECEMBER 31, 2006 2005 % Change
Total revenues $3,687 $3,567 3.4 %
Benefits and claims 2,300 2,157 6.6
Total acquisition and operating expenses 880 851 3.4
Earnings before income taxes 507 559 (9.2)
Income taxes 175 195
Net earnings $332 $364 (8.8)%
Net earnings per share - basic $.67 $.73 (8.2)%
Net earnings per share - diluted .67 .72 (6.9)
Shares used to compute earnings
per share (000):
Basic 492,614 499,112 (1.3)%
Diluted 498,564 506,084 (1.5)
Dividends paid per share $.16 $.11 45.5 %
AFLAC INCORPORATED AND SUBSIDIARIES CONDENSED INCOME STATEMENT
(UNAUDITED - IN MILLIONS, EXCEPT FOR SHARE AND PER-SHARE AMOUNTS)
TWELVE MONTHS ENDED DECEMBER 31, 2006 2005 % Change
Total revenues $14,616 $14,363 1.8 %
Benefits and claims 9,016 8,890 1.4
Total acquisition and operating expenses 3,336 3,247 2.8
Earnings before income taxes 2,264 2,226 1.7
Income taxes 781 743
Net earnings $1,483 $1,483 - %
Net earnings per share - basic $2.99 $2.96 1.0 %
Net earnings per share - diluted 2.95 2.92 1.0
Shares used to compute earnings
per share (000):
Basic 495,614 500,939 (1.1)%
Diluted 501,827 507,704 (1.2)
Dividends paid per share $.55 $.44 25.0 %
AFLAC INCORPORATED AND SUBSIDIARIES CONDENSED BALANCE SHEET
(UNAUDITED - IN MILLIONS, EXCEPT FOR SHARE AMOUNTS)
DECEMBER 31, 2006 2005 % Change
Assets:
Total investments and cash $51,972 $48,989 6.1 %
Deferred policy acquisition costs 6,025 5,590 7.8
Other assets 1,808 1,782 1.4
Total assets $59,805 $56,361 6.1 %
Liabilities and shareholders' equity:
Policy liabilities $45,440 $42,329 7.3 %
Notes payable 1,426 1,395 2.2
Other liabilities 4,598 4,710 (2.4)
Shareholders' equity 8,341 7,927 5.2
Total liabilities and shareholders'
equity $59,805 $56,361 6.1 %
Shares outstanding at end of year (000) 492,550 498,894 (1.3)%
RECONCILIATION OF OPERATING EARNINGS TO NET EARNINGS
(UNAUDITED - IN MILLIONS, EXCEPT FOR PER-SHARE AMOUNTS)
THREE MONTHS ENDED DECEMBER 31, 2006 2005 % Change
Operating earnings $329 $298 10.5 %
Reconciling items, net of tax:
Realized investment gains (losses) 3 68
Impact from SFAS 133 - (2)
Net earnings $332 $364 (8.8)%
Operating earnings per diluted share $.66 $.59 11.9 %
Reconciling items, net of tax:
Realized investment gains (losses) .01 .14
Impact from SFAS 133 - (.01)
Net earnings per diluted share $.67 $.72 (6.9)%
RECONCILIATION OF OPERATING EARNINGS TO NET EARNINGS
(UNAUDITED - IN MILLIONS, EXCEPT FOR PER-SHARE AMOUNTS)
TWELVE MONTHS ENDED DECEMBER 31, 2006 2005 % Change
Operating earnings $1,432 $1,292 10.8 %
Reconciling items, net of tax:
Realized investment gains (losses) 51 167
Impact from SFAS 133 - (10)
Deferred tax asset valuation
allowance release - 34
Net earnings $1,483 $1,483 - %
Operating earnings per diluted share $2.85 $2.54 12.2 %
Reconciling items, net of tax:
Realized investment gains (losses) .10 .33
Impact from SFAS 133 - (.02)
Deferred tax asset valuation
allowance release - .07
Net earnings per diluted share $2.95 $2.92 1.0 %
FOREIGN CURRENCY TRANSLATION EFFECT ON OPERATING RESULTS(1)
(SELECTED PERCENTAGE CHANGES, UNAUDITED)
THREE MONTHS ENDED DECEMBER 31, 2006 Including Excluding
Currency Currency
Changes Changes(2)
Premium income 6.2% 7.1%
Net investment income 7.6 8.2
Total benefits and expenses 5.7 6.6
Operating earnings 10.5 10.6
Operating earnings per diluted share 11.9 11.9
(1) The numbers in this table are presented on an operating basis, as
previously described.
(2) Amounts excluding currency changes were determined using the same
yen/dollar exchange rate for the current period as the comparable
period in the prior year.
FOREIGN CURRENCY TRANSLATION EFFECT ON OPERATING RESULTS(1)
(SELECTED PERCENTAGE CHANGES, UNAUDITED)
TWELVE MONTHS ENDED DECEMBER 31, 2006 Including Excluding
Currency Currency
Changes Changes(2)
Premium income 2.7% 7.0%
Net investment income 4.8 7.8
Total benefits and expenses 1.8 6.0
Operating earnings 10.8 13.9
Operating earnings per diluted share 12.2 15.4
(1) The numbers in this table are presented on an operating basis, as
previously described.
(2) Amounts excluding currency changes were determined using the same
yen/dollar exchange rate for the current period as the comparable
period in the prior year.
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" to encourage companies to provide prospective information, so long
as those informational statements are identified as forward-looking and are
accompanied by meaningful cautionary statements identifying important
factors that could cause actual results to differ materially from those
included in the forward-looking statements. We desire to take advantage of
these provisions. This document contains cautionary statements identifying
important factors that could cause actual results to differ materially from
those projected herein, and in any other statements made by company
officials in communications with the financial community and contained in
documents filed with the Securities and Exchange Commission (SEC).
Forward-looking statements are not based on historical information and
relate to future operations, strategies, financial results or other
developments. Furthermore, forward- looking information is subject to
numerous assumptions, risks, and uncertainties. In particular, statements
containing words such as "expect," "anticipate," "believe," "goal,"
"objective," "may," "should," "estimate," "intends," "projects," "will,"
"assumes," "potential," "target," or similar words as well as specific
projections of future results, generally qualify as forward-looking. Aflac
undertakes no obligation to update such forward-looking statements.
We caution readers that the following factors, in addition to other
factors mentioned from time to time could cause actual results to differ
materially from those contemplated by the forward-looking statements:
legislative and regulatory developments; assessments for insurance company
insolvencies; competitive conditions in the United States and Japan; new
product development and customer response to new products and new marketing
initiatives; ability to attract and retain qualified sales associates;
ability to repatriate profits from Japan; changes in U.S. and/or Japanese
tax laws or accounting requirements; credit and other risks associated with
Aflac's investment activities; significant changes in investment yield
rates; fluctuations in foreign currency exchange rates; deviations in
actual experience from pricing and reserving assumptions including, but not
limited to, morbidity, mortality, persistency, expenses, and investment
yields; level and outcome of litigation; downgrades in the company's credit
rating; changes in rating agency policies or practices; subsidiary's
ability to pay dividends to parent company; ineffectiveness of hedging
strategies used to minimize the exposure of our shareholders' equity to
foreign currency translation fluctuations; catastrophic events; and general
economic conditions in the United States and Japan.
(Logo: http://www.newscom.com/cgi-bin/prnh/20041202/CLTH019LOGO )
Analyst and investor contact -
Kenneth S. Janke Jr., 800.235.2667 - option 3, FAX: 706.324.6330, or
kjanke@aflac.com
Media contact -
Laura Kane, 706.596.3493, FAX: 706.320.2288, or lkane@aflac.com
SOURCE Aflac Incorporated
 back to top
Related links:
http://www.aflac.com/
Photo Notes:http://www.newscom.com/cgi-bin/prnh/20041202/CLTH019LOGO
AP Archive: http://photoarchive.ap.org
PRN Photo Desk, photodesk@prnewswire.com
CONTACT:
Analysts and investors - Kenneth S. Janke
Jr., +1-800-235-2667, option 3, or fax +1-706-324-6330, or
kjanke@aflac.com, Media - Laura Kane, +1-706-596-3493, or fax
+1-706-320-2288, or lkane@aflac.com, both of Aflac Incorporated
|
