COLUMBUS, Ga., April 24 /PRNewswire-FirstCall/ -- Aflac Incorporated
(NYSE: AFL) today reported its first quarter results.
Total revenues were $3.8 billion during the first quarter of 2007,
compared with $3.6 billion in the first quarter of 2006. Net earnings were
$416 million, or $.84 per diluted share, compared with $375 million, or
$.74 per share, a year ago. Net earnings included realized investment gains
of $9 million, or $.02 per diluted share, unchanged from 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, was immaterial in the first quarter of
2007. In the first quarter of 2006, the impact from SFAS 133 benefited net
earnings by $2 million, or nil 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 first quarter of 2007 were $407 million,
compared with $364 million in the first quarter of 2006. Operating earnings
per diluted share rose 13.9% in the quarter to $.82, compared with $.72 a
year ago. The weaker yen/dollar exchange rate lowered operating earnings
per diluted share by $.01 during the quarter. Excluding the impact from the
weaker yen, operating earnings per share increased 15.3%.
During the first quarter, we acquired 5.1 million shares of Aflac
stock. At the end of the first quarter, we had approximately 32 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. Premium income in yen increased 4.9% in
the first quarter of 2007, and net investment income rose 9.2%. Investment
income growth in yen terms was magnified by the weaker yen/dollar exchange
rate because approximately 39% of Aflac Japan's first quarter investment
income was dollar-denominated. Total revenues rose 5.7%. Due to improvement
in the benefit ratio, the pretax operating profit margin expanded from
16.7% to 17.6%. As a result, pretax operating earnings in yen were up
11.8%.
The average yen/dollar exchange rate in the first quarter of 2007 was
119.48, compared with an average rate of 116.90 in the first quarter of
2006. Aflac Japan's growth rates in dollar terms were modestly suppressed
as a result of the 2.2% weakening of the average exchange rate during the
quarter.
Premium income in dollars was $2.2 billion in the first quarter, up
2.6% over a year ago. Net investment income rose 6.9% to $436 million.
Total revenues were $2.6 billion, an increase of 3.4%. Pretax operating
earnings increased 9.3% to $465 million.
As we had anticipated, Aflac Japan's total new annualized premium sales
declined in the first quarter. Total new sales decreased 10.6% to 26.3
billion yen, or $221 million in the first quarter. Aflac Japan's sales
continued to reflect weakness in the demand for supplemental medical
insurance. We also experienced lower sales in the ordinary life category
during the quarter as consumers awaited future declines in life insurance
premium rates due to new mortality tables that took effect April 2, 2007.
We were encouraged to see a double-digit increase in cancer insurance for
the quarter. We continue to expect 2007 to be a challenging year from a
sales perspective and believe sales will be lower in the second quarter,
compared with a year ago. However, we remain optimistic that sales will
recover with a modest increase in the second half of the year.
AFLAC U.S.
Aflac U.S. performed very well in the first quarter. Premium income
increased 10.9% to $961 million. Net investment income rose 10.3% to $122
million. Total revenues were up 10.7% to $1.1 billion. Pretax operating
earnings were $169 million, an increase of 15.4% over the first quarter of
2006.
We were also pleased with the continued momentum of our U.S. sales.
Total new annualized premium sales rose 10.6% to $352 million. Sales in the
quarter were again led by accident/disability and cancer expense insurance.
We remain very satisfied with our progress in the ongoing expansion of our
U.S. sales force. Despite the anticipated decline in newly recruited sales
associates, the number of average weekly producing sales associates, which
we believe to be a more meaningful metric, increased 6.8% in the quarter.
We believe the increase in producing sales associates reflects the success
of the training programs we implemented over the last few years. We remain
enthusiastic about the opportunities in the U.S. market, and continue to
look for total new annualized premium sales to increase 6% to 10% for the
full year.
DIVIDEND
The board of directors increased the quarterly dividend payment by
10.8%, effective with the second quarter. The second quarter cash dividend
of $.205 per share is 57.7% higher than the second quarter of 2006, and is
payable on June 1, 2007, to shareholders of record at the close of business
on May 18, 2007. This marks the third consecutive quarter of cash dividend
increases, and 2007 marks the 25th consecutive year in which the dividend
has been increased.
OUTLOOK
Commenting on the company's first quarter results, Chairman and Chief
Executive Officer Daniel P. Amos stated: "Overall, we are pleased with
Aflac's results for the first quarter of 2007 and with our outlook for the
remainder of the year.
"Although Japan remains a challenging market from a sales perspective,
Aflac Japan's financial results continue to reflect the many attractive
attributes of our business. Our persistency remained strong and despite a
sales decline, Aflac Japan's annualized premiums in force still rose 4.8%.
At the same time, our benefit ratio again improved, and our expense ratio
remained stable, resulting in improved profitability.
"We remain excited about our prospects in the U.S. market, and we are
very pleased with the momentum of Aflac U.S. The steady expansion of our
base of producing sales associates remains the key to capitalizing on the
opportunities in the vast U.S. market. We believe our commitment to
training has resulted in a continued increase in the number of producing
sales associates. We are also pleased with the stable operating trends of
Aflac U.S., which have resulted in consistent growth of pretax earnings.
"Based on our first quarter results, we remain very optimistic about
achieving our financial targets for the year. Our primary financial goal
for 2007 is to produce 15% to 16% growth in operating earnings per diluted
share, excluding the impact of the yen. We believe that goal reasonably
reflects the challenges and opportunities we see in the two largest
insurance markets in the world. And the board of directors' decision to
increase the cash dividend again reflects our strong capital position and
our commitment to increasing value to Aflac's shareholders."
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 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,
visitaflac.com.
A copy of Aflac's Financial Analysts Briefing (FAB) supplement for the
first quarter of 2007 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 Wednesday, April
25.
AFLAC INCORPORATED AND SUBSIDIARIES CONDENSED INCOME STATEMENT
(UNAUDITED - IN MILLIONS, EXCEPT FOR SHARE AND PER-SHARE AMOUNTS)
THREE MONTHS ENDED MARCH 31, 2007 2006 % Change
Total revenues $ 3,751 $ 3,559 5.4 %
Benefits and claims 2,258 2,181 3.5
Total acquisition and operating
expenses 857 803 6.7
Earnings before income taxes 636 575 10.7
Income taxes 220 200
Net earnings $ 416 $ 375 10.9 %
Net earnings per share - basic $ .85 $ .75 13.3 %
Net earnings per share - diluted .84 .74 13.5
Shares used to compute earnings per
share (000):
Basic 490,554 498,037 (1.5)%
Diluted 496,658 504,574 (1.6)
Dividends paid per share $ .185 $ .13 42.3 %
AFLAC INCORPORATED AND SUBSIDIARIES CONDENSED BALANCE SHEET
(UNAUDITED - IN MILLIONS, EXCEPT FOR SHARE AMOUNTS)
MARCH 31, 2007 2006 % Change
Assets:
Total investments and cash $ 53,268 $ 48,865 9.0 %
Deferred policy acquisition
costs 6,157 5,706 7.9
Other assets 1,767 1,565 12.8
Total assets $ 61,192 $ 56,136 9.0 %
Liabilities and shareholders'
equity:
Policy liabilities $ 46,651 $ 43,358 7.6 %
Notes payable 1,434 1,400 2.4
Other liabilities 4,618 3,663 26.0
Shareholders' equity 8,489 7,715 10.0
Total liabilities and
shareholders' equity $ 61,192 $ 56,136 9.0 %
Shares outstanding at end
of period (000) 488,832 498,431 (1.9)%
Prior-year amounts have been adjusted for adoption of SAB 108 on
January 1, 2006.
RECONCILIATION OF OPERATING EARNINGS TO NET EARNINGS
(UNAUDITED - IN MILLIONS, EXCEPT FOR PER-SHARE AMOUNTS)
THREE MONTHS ENDED MARCH 31, 2007 2006 % Change
Operating earnings $ 407 $ 364 11.8 %
Reconciling items, net of tax:
Realized investment gains
(losses) 9 9
Impact from SFAS 133 -- 2
Net earnings $ 416 $ 375 10.9 %
Operating earnings per diluted
share $ .82 $ .72 13.9 %
Reconciling items, net of tax:
Realized investment gains
(losses) .02 .02
Impact from SFAS 133 -- --
Net earnings per diluted share $ .84 $ .74 13.5 %
FOREIGN CURRENCY TRANSLATION EFFECT ON OPERATING RESULTS(1)
(SELECTED PERCENTAGE CHANGES, UNAUDITED)
Including Excluding
THREE MONTHS ENDED MARCH 31, 2007 Currency Currency
Changes Changes(2)
Premium income 5.0 % 6.6 %
Net investment income 7.9 9.1
Total benefits and expenses 4.4 6.0
Operating earnings 11.8 13.0
Operating earnings per diluted
share 13.9 15.3
(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 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 parent company; ineffectiveness of
hedging strategies; catastrophic events; and general economic conditions in
the United States and Japan.
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
(Logo: http://www.newscom.com/cgi-bin/prnh/20041202/CLTH019LOGO )
SOURCE Aflac Incorporated
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Related links:
http://www.aflac.com
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CONTACT:
Analyst and investors, Kenneth S. Janke Jr.,
+1-800-235-2667 option 3, fax, +1-706-324-6330, kjanke@aflac.com,
or Media, Laura Kane, +1-706-596-3493, fax, +1-706-320-2288,
lkane@aflac.com, both of Aflac Incorporated
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