COLUMBUS, Georgia, April 23 /PRNewswire-FirstCall/ -- Aflac
Incorporated today reported its first quarter results.
(Logo: http://www.newscom.com/cgi-bin/prnh/20041202/CLTH019LOGO )
Total revenues were $4.3 billion during the first quarter of 2008,
compared with $3.8 billion in the first quarter of 2007. Net earnings were
$474 million, or $.98 per diluted share, compared with $416 million, or
$.84 per share, a year ago. Net earnings included realized investment
losses of $4 million, or $.01 per diluted share, compared with $9 million
of realized gains, or $.02 per diluted share a year ago. The impact on net
earnings from 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, increased net earnings by $3 million, or $.01 per diluted
share in the first quarter of 2008. The impact from SFAS 133 was immaterial
in the first quarter of 2007.
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. 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.
Operating earnings in the first quarter of 2008 were $475 million,
compared with $407 million in the first quarter of 2007. Operating earnings
per diluted share rose 19.5% in the quarter to $.98, compared with $.82 a
year ago. The stronger yen/dollar exchange rate increased operating
earnings per diluted share by $.05 during the quarter. Excluding the impact
from the stronger yen, operating earnings per share increased 13.4%.
During the first quarter, we acquired 12.5 million shares of Aflac
stock through a previously announced accelerated share repurchase program.
At the end of the first quarter, we had approximately 43 million shares
available for repurchase under authorizations by the board of directors.
AFLAC JAPAN
Aflac Japan's financial results in the first quarter were solid and
consistent with our expectations. Total revenues rose 2.7%. Premium income
in yen increased 3.6% in the first quarter of 2008, and net investment
income rose .2%. Investment income growth in yen terms was suppressed by
the stronger yen/dollar exchange rate because approximately 37% of Aflac
Japan's first quarter investment income was dollar-denominated. Excluding
the impact of the stronger yen, Aflac Japan's net investment income rose
5.1%. Due to the continued improvement in the benefit ratio, the pretax
operating profit margin expanded from 17.6% to 18.0%. As a result, pretax
operating earnings in yen were up 4.8%. Adjusting for the impact of the
stronger yen on Aflac Japan's dollar-denominated investment income, pretax
earnings rose 10.6%.
The average yen/dollar exchange rate in the first quarter of 2008 was
105.06, compared with an average rate of 119.48 in the first quarter of
2007. Aflac Japan's growth rates in dollar terms were significantly
enhanced as a result of the 13.7% strengthening of the average exchange
rate during the quarter.
Total revenues were $3.1 billion, an increase of 16.6%. Premium income
in dollars was $2.6 billion in the first quarter, up 17.7% over a year ago.
Net investment income rose 13.7% to $496 million. Pretax operating earnings
climbed 19.2% in the quarter to $554 million.
Aflac Japan produced better-than-expected sales in the first quarter.
Total new sales increased 5.0% to 27.6 billion yen, or $264 million in the
first quarter. We had anticipated that first quarter sales growth would be
below our annual objective due primarily to an expected slow start in the
recently opened bank channel. Bank channel sales were 276 million yen, or
just 1% of total new sales in the first quarter. However, as the year
progresses, we expect to see further sales gains in the bank channel. By
April 1, 2008, 90 banks had agreed to offer our products to their
customers. Sales in the quarter benefited from significant improvement in
our stand-alone medical insurance sales. Medical sales were up 17.6% and
reflected a strong contribution from Gentle EVER, our nonstandard medical
product. We were also pleased with the growth of cancer insurance sales,
which reflected the success of our new Cancer Forte product.
AFLAC U.S.
Aflac U.S. produced strong financial results in the first quarter.
Total revenues were up 8.4% to $1.2 billion. Premium income increased 9.3%
to $1.1 billion. In late 2007, we transferred $450 million from Aflac U.S.
to Aflac Incorporated, which resulted in reduced invested assets and slower
investment income growth for Aflac U.S. in the first quarter. Net
investment income rose 1.3% to $123 million. Pretax operating earnings were
$191 million, an increase of 12.6% over the first quarter of 2007.
As expected, Aflac U.S. sales were weak in the first quarter. Total new
annualized premium sales were $353 million, or .4% above the first quarter
of 2007. Our sales results primarily reflected a sharp decline in January
due to an administrative change in the processing of conversions. That
processing change shifted approximately $8 million of conversion premium
from the first quarter of this year to the fourth quarter of 2007. Sales
improved in February and March, rising at mid-single-digit rates. The
hospital indemnity category continued to perform well, increasing 14.3% for
the first three months of the year.
We remain committed and focused on enhancing the distribution side of
our business. We were pleased with recruitment in the quarter. We recruited
approximately 6,500 new sales associates, an increase of 8.6%, compared
with a year ago. The number of average weekly producing sales associates
rose .2% in the quarter.
DIVIDEND
The board of directors declared the second quarter cash dividend of
$.24 per share. The second quarter dividend is payable on June 2, 2008, to
shareholders of record at the close of business on May 21, 2008.
OUTLOOK
Commenting on the company's first quarter results, Chairman and Chief
Executive Officer Daniel P. Amos stated: "Although we have completed just
one quarter, I believe we are on track for another record year from a
financial perspective.
"Aflac Japan posted a very good quarter, producing financial results
that were consistent with our targets. We were especially pleased to see a
continued recovery in new sales. Our sales increase of 5.0% exceeded our
expectations. Furthermore, the addition of banks as a distribution channel
should help Aflac Japan achieve its sales objective of a 3% to 7% increase
in yen for 2008.
"Our financial results for Aflac U.S. were also good. Our top line was
consistent with our outlook and pretax operating earnings were better than
expected, although we anticipated our sales would be a bit higher. However,
from the start of February through the third week of April, our U.S. sales
increased 6.5%. It will clearly be more challenging to achieve our 2008
sales objective of an 8% to 12% increase, but we still believe it is
attainable.
"As a result of our solid first quarter, our increased confidence has
allowed us to narrow our target from a 13% to 15% increase in operating
earnings per diluted share this year, before the effect of foreign
currency, to a 14% to 15% increase. A 14% to 15% increase would result in
$3.73 to $3.76 in reported operating earnings per diluted share, assuming
the same average exchange rate in 2008, compared with 2007. However, so far
this year the yen is significantly stronger to the dollar than it was a
year ago. If the stronger yen persists throughout the year, it will
favorably impact our reported results in dollar terms. Assuming the yen
averages 100 to 105 for the year, we would expect to report operating
earnings per diluted share of $3.95 to $4.09 in 2008. Using that same
exchange rate assumption, we would expect second quarter operating earnings
to be $1.00 to $1.02 per diluted share."
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 seven years and in Fortune magazine's
list of the 100 Best Companies to Work For in America for ten 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 Analysts Briefing (FAB) supplement for the
first quarter of 2008 can be found on the "Investors" page at aflac.com.
Aflac Incorporated will webcast its first quarter conference call on
the "Investors" page of aflac.com at 9:00 a.m. (EDT) on Thursday, April 24.
AFLAC INCORPORATED AND SUBSIDIARIES CONDENSED INCOME STATEMENT
(UNAUDITED - IN MILLIONS, EXCEPT FOR SHARE AND PER-SHARE AMOUNTS)
THREE MONTHS ENDED MARCH 31, 2008 2007 % Change
Total revenues $4,267 $3,751 13.8%
Benefits and claims 2,538 2,258 12.4
Total acquisition and operating expenses 1,003 857 17.0
Earnings before income taxes 726 636 14.1
Income taxes 252 220
Net earnings $474 $416 13.9%
Net earnings per share - basic $.99 $.85 16.5%
Net earnings per share - diluted .98 .84 16.7
Shares used to compute earnings per
share (000):
Basic 478,138 490,554 (2.5)%
Diluted 484,417 496,658 (2.5)
Dividends paid per share $.24 $.185 29.7%
AFLAC INCORPORATED AND SUBSIDIARIES CONDENSED BALANCE SHEET
(UNAUDITED - IN MILLIONS, EXCEPT FOR SHARE AMOUNTS)
MARCH 31, 2008 2007 % Change
Assets:
Total investments and cash $62,788 $53,268 17.9%
Deferred policy acquisition costs 7,354 6,157 19.4
Other assets 2,127 1,767 20.4
Total assets $72,269 $61,192 18.1%
Liabilities and shareholders' equity:
Policy liabilities $57,796 $46,651 23.9%
Notes payable 1,606 1,434 12.0
Other liabilities 4,733 4,618 2.5
Shareholders' equity 8,134 8,489 (4.2)
Total liabilities and shareholders'
equity $72,269 $61,192 18.1%
Shares outstanding at end of
period (000) 475,091 488,832 (2.8)%
RECONCILIATION OF OPERATING EARNINGS TO NET EARNINGS
(UNAUDITED - IN MILLIONS, EXCEPT FOR PER-SHARE AMOUNTS)
THREE MONTHS ENDED MARCH 31, 2008 2007 % Change
Operating earnings $475 $407 16.6%
Reconciling items, net of tax:
Realized investment gains (losses) (4) 9
Impact from SFAS 133 3 -
Net earnings $474 $416 13.9%
Operating earnings per diluted share $.98 $.82 19.5%
Reconciling items, net of tax:
Realized investment gains (losses) (.01) .02
Impact from SFAS 133 .01 -
Net earnings per diluted share $.98 $.84 16.7%
EFFECT OF FOREIGN CURRENCY ON OPERATING RESULTS(1)
(SELECTED PERCENTAGE CHANGES, UNAUDITED)
THREE MONTHS ENDED MARCH 31, 2008 Including Excluding
Currency Currency
Changes Changes(2)
Premium income 15.2% 5.4%
Net investment income 10.9 4.3
Total benefits and expenses 13.7 4.1
Operating earnings 16.6 10.5
Operating earnings per diluted share 19.5 13.4
(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.
2008 OPERATING EARNINGS PER SHARE SCENARIOS
Average Annual
Exchange Operating % Growth Yen
Rate EPS Over 2007 Impact
100 $4.06 - 4.09 24.2 - 25.1% $.33
105 3.95 - 3.98 20.8 - 21.7 .22
110 3.86 - 3.89 18.0 - 19.0 .13
115 3.78 - 3.81 15.6 - 16.5 .05
117.93* 3.73 - 3.76 14.1 - 15.0 -
120 3.70 - 3.73 13.1 - 14.1 (.03)
125 3.63 - 3.66 11.0 - 11.9 (.10)
*Actual 2007 weighted-average exchange rate
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, including changes to health care and health
insurance delivery; 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 and
employees; 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 the parent company;
ineffectiveness of hedging strategies; catastrophic events; and general
economic conditions in the United States and Japan, including increased
uncertainty in the U.S. and international financial markets.
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,
kjanke@aflac.com, or Media, Laura Kane, +1-706-596-3493, or FAX,
+1-706-320-2288, or lkane@aflac.com, both of Aflac Incorporated
|
