COLUMBUS, Ga., April 25 /PRNewswire-FirstCall/ -- Aflac Incorporated
(NYSE: AFL) today reported its first quarter results.
Reflecting a weaker yen to the dollar, total revenues were unchanged at
$3.6 billion during the first quarter of 2006. Net earnings were $375
million, or $.74 per diluted share, compared with $328 million, or $.64 per
share, a year ago. Net earnings included realized investment gains of $9
million, or $.02 per diluted share, compared with realized investment gains
of $2 million, or nil per share, a year ago. Net earnings in the first
quarter of 2006 also included a gain of $2 million, or nil per diluted
share, 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. In the first quarter of 2005, the impact from SFAS 133 reduced
net earnings by $9 million, or $.02 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 2006 were $364 million,
compared with $335 million in the first quarter of 2005. Operating earnings
per diluted share rose 9.1% to $.72, compared with $.66 a year ago. The
weaker yen/dollar exchange rate lowered operating earnings per diluted
share by $.04 during the quarter. Excluding the impact from the weaker yen,
operating earnings per share increased 15.2%.
During the first quarter, we acquired 2.1 million shares of Aflac
stock. At the end of the first quarter, we had approximately 45 million
shares available for repurchase under authorizations by the board of
directors.
AFLAC JAPAN
Aflac Japan continued to produce solid results that were in line with
our expectations. Premium income in yen increased 6.2% in the first quarter
of 2006 and net investment income rose 11.2%. Investment income growth in
yen terms was magnified by the weaker yen/dollar exchange rate because
approximately 37% of Aflac Japan's first quarter investment income was
dollar- denominated. Total revenues rose 6.9%. Due to improvement in the
benefit ratio, the pretax operating profit margin expanded from 14.9% to
16.7%. As a result, pretax operating earnings in yen were up 19.2%.
The average yen/dollar exchange rate in the first quarter of 2006 was
116.90, compared with an average rate of 104.50 in the first quarter of
2005. Aflac Japan's growth rates in dollar terms were suppressed as a
result of the 10.6% weakening of the average exchange rate during the
quarter.
Reflecting the weaker yen, first quarter premium income in dollars
declined 5.1% to $2.1 billion. Net investment income was down .6% to $408
million. Total revenues were $2.6 billion, a decrease of 4.4%. Pretax
operating earnings were $425 million, or 6.6% higher than a year ago.
Aflac Japan's total new annualized premium sales declined 1.3% in the
first quarter to 29.4 billion yen, or $251 million. As we discussed
following our year-end earnings release, we expected weak first quarter
sales. First quarter sales reflected continued declines of Rider MAX sales
and conversions. We believe sales growth was also restrained by our agents'
efforts to assist with the conversion of a group of existing customers from
payroll to direct billing rates rather than concentrating on new sales. The
billing conversion program is now complete. Cancer life sales benefited
from the additional premium generated from billing mode conversions and
sales through Dai-ichi Mutual Life. Sales through Dai-ichi Life rose 5.1%
in the first quarter. Medical sales declined in the quarter, which we
believe resulted from the billing conversions as well as the introduction
of WAYS, an innovative new life product. We were very pleased with the
initial response to WAYS, which we launched in late January. Unlike
traditional life insurance, WAYS allows a policyholder to convert a portion
of the life insurance coverage to medical, nursing care, or fixed annuity
benefits at retirement age. Despite its recent introduction, WAYS accounted
for approximately 9% of first quarter sales. Our objective for the year is
to increase total new annualized premium sales 5% to 8% in yen.
AFLAC U.S.
Aflac U.S. produced solid financial results in the first quarter.
Premium income increased 10.1% to $866 million. Net investment income rose
8.3% to $110 million. Total revenues were up 10.0% to $980 million. Pretax
operating earnings were $147 million, an increase of 10.4%.
We were pleased with our U.S. sales results in the first quarter. Total
new annualized premium sales rose 11.4% to $318 million. Sales in the
quarter were led by accident/disability and cancer expense insurance, which
accounted for a combined 69% of sales in the quarter. We continued to be
pleased with the sales of recently introduced products, particularly our
revised hospital indemnity plan. Hospital indemnity sales were up 27.4% in
the quarter, accounting for approximately 12% of sales. We were also
encouraged to see continued expansion of our U.S. sales force. Newly
recruited sales associates rose 4.2% over 2005, and the number of producing
associates also increased. The number of average monthly producing
associates increased 2.7% in the quarter to more than 17,900. On an average
weekly basis, the number of producing associates rose 4.9% to more than
10,100. For the second quarter, we face a tougher sales comparison and
expect sales to be up in a range of mid- to upper-single digits, which
would keep us on track for our sales goal for 2006. Our objective for the
full year is an 8% to 12% increase in total new annualized premium sales.
DIVIDEND
The board of directors declared the second quarter cash dividend. The
second quarter dividend of $.13 per share is payable on June 1, 2006, to
shareholders of record at the close of business on May 19, 2006.
OUTLOOK
Commenting on the company's first quarter results, Chairman and Chief
Executive Officer Daniel P. Amos stated: "We are pleased with Aflac's start
in 2006. Our strong results were masked by the weaker yen compared with the
first quarter of last year. However, in its local currency, Aflac Japan
continued to post strong financial results, which were consistent with our
expectations. At the same time, Aflac U.S. performed well in the quarter,
achieving its sales and financial targets.
"Based on our first quarter results, we are optimistic about achieving
our financial objectives for the year. Our primary financial goal for 2006
is to increase operating earnings per diluted share 15%, excluding foreign
currency translation. For 2007 our goal is to produce 15% to 16% growth in
operating earnings per diluted share, excluding the impact of the yen. The
yen may remain weak and suppress our reported financial performance, yet we
believe Aflac is fundamentally very strong. We also believe we are
well-positioned in the two largest insurance markets in the world."
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. Aflac's 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
Forbes magazine's Platinum 400 List of America's Best Big Companies for
five consecutive years. In January 2006, Aflac was included in Fortune
magazine's list of the 100 Best Companies to Work For in America for the
eighth consecutive year. Aflac was also included in Fortune magazine's list
of the Top 50 Employers for Minorities in August 2005, and in September
2005, Aflac Japan was named the Life Insurance Company of the Year at the
Asia Insurance Industry Awards, sponsored by the Asia Insurance Review.
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
first quarter of 2006 can be found in the "Company Financials" section of
the "For Investors" page at aflac.com.
Aflac Incorporated will webcast its first quarter conference call on
the "For Investors" page of aflac.com at 9:00 a.m. (EDT), Wednesday, April
26.
AFLAC INCORPORATED AND SUBSIDIARIES CONDENSED INCOME STATEMENT
(UNAUDITED - IN MILLIONS, EXCEPT FOR SHARE AND PER-SHARE AMOUNTS)
THREE MONTHS ENDED MARCH 31, 2006 2005 % Change
Total revenues $3,559 $3,559 -%
Benefits and claims 2,181 2,266 (3.7)
Total expenses 803 787 2.1
Earnings before income taxes 575 506 13.4
Income taxes 200 178
Net earnings $375 $328 14.2%
Net earnings per share - basic $.75 $.65 15.4%
Net earnings per share - diluted .74 .64 15.6
Shares used to compute earnings
per share (000):
Basic 498,037 502,706 (.9)%
Diluted 504,574 509,449 (1.0)
Dividends paid per share $.13 $.11 18.2%
AFLAC INCORPORATED AND SUBSIDIARIES CONDENSED BALANCE SHEET
(UNAUDITED - IN MILLIONS, EXCEPT FOR SHARE AMOUNTS)
MARCH 31, 2006 2005 % Change
Assets:
Total investments and cash $48,865 $49,755 (1.8)%
Deferred policy acquisition costs 5,706 5,583 2.2
Other assets 1,565 1,703 (8.1)
Total assets $56,136 $57,041 (1.6)%
Liabilities and shareholders' equity:
Policy liabilities $43,358 $43,313 .1%
Notes payable 1,400 1,398 .1
Other liabilities 3,802 4,554 (16.5)
Shareholders' equity 7,576 7,776 (2.6)
Total liabilities and shareholders'
equity $56,136 $57,041 (1.6)%
Shares outstanding at end of
period (000) 498,431 501,987 (.7)%
RECONCILIATION OF OPERATING EARNINGS TO NET EARNINGS
(UNAUDITED - IN MILLIONS, EXCEPT FOR PER-SHARE AMOUNTS)
THREE MONTHS ENDED MARCH 31, 2006 2005 % Change
Operating earnings $ 364 $ 335 8.8%
Reconciling items, net of tax:
Realized investment gains (losses) 9 2
Impact from SFAS 133 2 (9)
Net earnings $ 375 $ 328 14.2%
Operating earnings per diluted share $ .72 $ .66 9.1%
Reconciling items, net of tax:
Realized investment gains (losses) .02 -
Impact from SFAS 133 - (.02)
Net earnings per diluted share $ .74 $ .64 15.6%
FOREIGN CURRENCY TRANSLATION EFFECT ON OPERATING RESULTS(1)
(SELECTED PERCENTAGE CHANGES, UNAUDITED)
Including Excluding
Currency Currency
THREE MONTHS ENDED MARCH 31, 2006 Changes Changes(2)
Premium income (1.2)% 7.2%
Net investment income 1.9 7.8
Total benefits and expenses (2.2) 6.0
Operating earnings 8.8 15.2
Operating earnings per diluted share 9.1 15.2
(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
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CONTACT:
Analyst and investors, Kenneth S. Janke Jr.,
+1-800-235-2667 - option 3, or Fax, +1-706-324-6330, or
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
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