COLUMBUS, Ga., July 24 /PRNewswire-FirstCall/ -- Aflac Incorporated
(NYSE: AFL) today reported its second quarter results.
(Logo: http://www.newscom.com/cgi-bin/prnh/20041202/CLTH019LOGO )
Reflecting a weaker yen to the dollar, total revenues were $3.8 billion
during the second quarter of 2007, compared with $3.7 billion a year ago.
Net earnings were $415 million, or $.84 per diluted share, compared with
$408 million, or $.81 per share, a year ago. Net earnings included realized
investment gains of $9 million, or $.02 per diluted share. Realized
investment gains in the second quarter of 2006 of $31 million, or $.06 per
share, reflected the completion of a bond-swap program that began in 2005.
Net earnings in the second quarter of 2007 also included a loss of $1
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 second quarter of
2006, the impact from SFAS 133 increased net earnings by $1 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 second quarter were $407 million, compared
with $376 million in the second quarter of 2006. Operating earnings per
diluted share rose 9.3% to $.82, compared with $.75 a year ago. The weaker
yen/dollar exchange rate lowered operating earnings per diluted share by
$.02 during the quarter. Excluding the impact from the weaker yen,
operating earnings per share increased 12.0%.
Results for the first six months of 2007 were also impacted by the
weaker yen. Total revenues rose 3.6% to $7.5 billion, compared with $7.3
billion in the first half of 2006. Net earnings were $831 million, or $1.68
per diluted share, compared with $783 million, or $1.55 per share, for the
first six months of 2006. Operating earnings for the first six months of
2007 were $814 million, or $1.64 per diluted share, compared with $740
million, or $1.47 per share, in 2006. Excluding the negative impact of $.03
per share from the weaker yen, operating earnings per diluted share rose
13.6% for the first six months.
During the second quarter, we acquired 2.0 million shares of Aflac
stock, bringing the total number of shares purchased in the first half of
2007 to 7.1 million. At the end of June, we had 29.6 million shares
available for repurchase under authorizations by the board of directors.
AFLAC JAPAN
Aflac Japan premium income in yen rose 4.3%, and net investment income
increased 10.6% in the second quarter. Investment income growth in yen
terms was magnified by the weaker yen/dollar exchange rate because
approximately 40% of Aflac Japan's second quarter investment income was
dollar-denominated. Total revenues were up 5.5%. Due to continued
improvement in the benefit ratio, the pretax operating profit margin
expanded from 16.3% to 17.4%. As a result, pretax operating earnings in yen
increased 12.6%. For the six months, premium income in yen increased 4.6%,
and net investment income rose 9.9%. Total revenues were up 5.6% and pretax
operating earnings grew 12.2%.
The average yen/dollar exchange rate in the second quarter of 2007 was
120.78, or 5.3% weaker than the average rate of 114.43 in the second
quarter of 2006. For the six months, the average exchange rate was 120.13,
or 3.7% weaker than the rate of 115.65 a year ago. Aflac Japan's growth
rates in dollar terms for the second quarter and first six months were
suppressed as a result of the weaker average exchange rates.
Reflecting the weaker yen, premium income in dollars declined 1.1% to
$2.2 billion in the second quarter. Net investment income was up 4.8% to
$442 million. Total revenues were unchanged at $2.6 billion. Pretax
operating earnings increased 6.7% to $461 million. For the six months,
premium income was $4.4 billion, or .7% higher than a year ago. Net
investment income rose 5.8% to $878 million. Total revenues were up 1.7% to
$5.3 billion. Pretax operating earnings were $926 million, or 8.0% higher
than a year ago.
Aflac Japan's sales results for both the second quarter and the first
half of the year were better than we expected. Total new annualized premium
sales declined 3.5% in the second quarter to 30.1 billion yen, or $249
million. For the first six months, total new premium sales were down 6.9%
to 56.4 billion yen, or $470 million. Sales in the second quarter continued
to reflect lower medical sales, compared with a year ago. However, we again
experienced a significant increase in cancer insurance sales for the
quarter, which rose 22.7% over the second quarter of 2006. In addition,
ordinary life sales recovered somewhat from the first quarter of 2007. We
remain encouraged about the prospects for improvement, and we continue to
believe we will produce a modest sales increase in the second half of the
year.
AFLAC U.S.
Aflac U.S. premium income increased 10.7% to $972 million in the second
quarter. Net investment income was up 8.4% to $124 million. Total revenues
rose 10.6% to $1.1 billion. Pretax operating earnings were $171 million, an
increase of 14.1%. For the first six months, premium income rose 10.8% to
$1.9 billion. Net investment income increased 9.4% to $246 million. Total
revenues were up 10.7% to $2.2 billion. Pretax operating earnings rose
14.7% to $340 million.
We were again pleased with our sales results in the United States.
Total new annualized premium sales rose 11.8% to $365 million in the second
quarter. We experienced strong sales of our leading accident/disability
product line as well as our hospital indemnity category. For the six
months, total new annualized premium sales increased 11.2% to $717 million.
Despite a slight decline in newly recruited sales associates in the
second quarter, the 6.7% increase in average weekly producing sales
associates demonstrates that our training philosophies and programs are
working. Focusing on average weekly producing associates provides a more
meaningful measure of our recruiting success, and our increase in this area
shows that we're recruiting better and smarter. We believe our sales
results for the first half of the year keep us firmly on track to achieve
our full-year sales objective of a 6% to 10% increase.
DIVIDEND
The board of directors declared the third quarter cash dividend. The
third quarter dividend of $.205 per share is payable on September 4, 2007,
to shareholders of record at the close of business on August 17, 2007.
OUTLOOK
Commenting on the company's second quarter results, Chairman and Chief
Executive Officer Daniel P. Amos stated: "We are very pleased with Aflac's
performance for the first half of 2007. From both a sales and financial
perspective, our operations in Japan and the United States have met or
exceeded our expectations so far this year.
"Aflac Japan has produced solid top-line growth in 2007, which has
benefited from strong persistency and investment income. At the same time,
our profit margin has continued to expand as we expected, which resulted in
strong pretax earnings growth. While Japan is still a challenging market,
we believe we are positioned to see a modest sales increase in the second
half of the year. Aflac Japan recently announced that on August 1, we will
introduce Gentle EVER, a new stand-alone medical product, which we believe
will benefit our sales results in the third and fourth quarters.
"Aflac U.S. has also produced financial results that reflect strong
underlying fundamentals that are consistent with our expectations. We
believe the United States remains a very large and attractive market for
the sale of our products. And we are also convinced that our emphasis on
increasing the number of producing sales associates is an important factor
in our improved sales momentum.
"I remain confident that we will achieve our primary financial goal for
2007 of increasing operating earnings per diluted share by 15% to 16%, or
$3.28 to $3.31, excluding foreign currency translation. Assuming the yen
averages 120 to 125 to the dollar for the remainder of the year, we would
expect to report operating earnings of $3.21 to $3.24 per diluted share for
the full year. In light of the weak yen to the dollar, we expect third
quarter operating earnings will be in the range of $.80 to $.82 per diluted
share. Reflecting the strength of our operations, I also believe our 2008
goal of a 13% to 15% increase in operating earnings per diluted share,
excluding the impact of the yen, is a reasonable and achievable target."
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, visit
aflac.com.
A copy of Aflac's Financial Analyst Briefing (FAB) supplement for the
second quarter of 2007 can be found on the "Investors" page at aflac.com.
Aflac Incorporated will webcast its second quarter conference call on
the "Investors" page of aflac.com at 9:00 a.m. (EDT), Wednesday, July 25.
AFLAC INCORPORATED AND SUBSIDIARIES CONDENSED INCOME STATEMENT
(UNAUDITED - IN MILLIONS, EXCEPT FOR SHARE AND PER-SHARE AMOUNTS)
THREE MONTHS ENDED JUNE 30, 2007 2006 % Change
Total revenues $3,764 $3,697 1.8%
Benefits and claims 2,266 2,243 1.0
Total acquisition and operating expenses 863 830 3.9
Earnings before income taxes 635 624 1.7
Income taxes 220 216
Net earnings $415 $408 1.7%
Net earnings per share - basic $.85 $.82 3.7%
Net earnings per share - diluted .84 .81 3.7
Shares used to compute earnings per
share (000):
Basic 487,900 496,951 (1.8)%
Diluted 494,227 503,286 (1.8)
Dividends paid per share $.205 $.13 57.7%
AFLAC INCORPORATED AND SUBSIDIARIES CONDENSED INCOME STATEMENT
(UNAUDITED - IN MILLIONS, EXCEPT FOR SHARE AND PER-SHARE AMOUNTS)
SIX MONTHS ENDED JUNE 30, 2007 2006 % Change
Total revenues $7,515 $7,256 3.6%
Benefits and claims 4,524 4,424 2.2
Total acquisition and operating expenses 1,720 1,633 5.3
Earnings before income taxes 1,271 1,199 6.0
Income taxes 440 416
Net earnings $831 $783 6.1%
Net earnings per share - basic $1.70 $1.57 8.3%
Net earnings per share - diluted 1.68 1.55 8.4
Shares used to compute earnings per
share (000):
Basic 489,219 497,491 (1.7)%
Diluted 495,435 503,927 (1.7)
Dividends paid per share $.39 $.26 50.0%
AFLAC INCORPORATED AND SUBSIDIARIES CONDENSED BALANCE SHEET
(UNAUDITED - IN MILLIONS, EXCEPT FOR SHARE AMOUNTS)
JUNE 30, 2007 2006 % Change
Assets:
Total investments and cash $52,197 $49,795 4.8%
Deferred policy acquisition costs 6,096 5,895 3.4
Other assets 1,821 1,742 4.5
Total assets $60,114 $57,432 4.7%
Liabilities and shareholders' equity:
Policy liabilities $45,722 $44,964 1.7%
Notes payable 1,392 1,071 30.0
Other liabilities 4,810 4,089 17.6
Shareholders' equity 8,190 7,308 12.1
Total liabilities and shareholders'
equity $60,114 $57,432 4.7%
Shares outstanding at end of period
(000) 488,483 497,124 (1.7)%
Prior-year amounts have been adjusted for adoption of SAB 108 as of
January 1, 2006.
RECONCILIATION OF OPERATING EARNINGS TO NET EARNINGS
(UNAUDITED - IN MILLIONS, EXCEPT FOR PER-SHARE AMOUNTS)
THREE MONTHS ENDED JUNE 30, 2007 2006 % Change
Operating earnings $407 $376 8.4%
Reconciling items, net of tax:
Realized investment gains (losses) 9 31
Impact from SFAS 133 (1) 1
Net earnings $415 $408 1.7%
Operating earnings per diluted share $.82 $.75 9.3%
Reconciling items, net of tax:
Realized investment gains (losses) .02 .06
Impact from SFAS 133 - -
Net earnings per diluted share $.84 $.81 3.7%
RECONCILIATION OF OPERATING EARNINGS TO NET EARNINGS
(UNAUDITED - IN MILLIONS, EXCEPT FOR PER-SHARE AMOUNTS)
SIX MONTHS ENDED JUNE 30, 2007 2006 % Change
Operating earnings $814 $740 10.1%
Reconciling items, net of tax:
Realized investment gains (losses) 18 41
Impact from SFAS 133 (1) 2
Net earnings $831 $783 6.1%
Operating earnings per diluted share $1.64 $1.47 11.6%
Reconciling items, net of tax:
Realized investment gains (losses) .04 .08
Impact from SFAS - -
Net earnings per diluted share $1.68 $1.55 8.4%
FOREIGN CURRENCY TRANSLATION EFFECT ON OPERATING RESULTS(1)
(SELECTED PERCENTAGE CHANGES, UNAUDITED)
THREE MONTHS ENDED JUNE 30, 2007 Including Excluding
Currency Currency
Changes Changes(2)
Premium income 2.2% 6.2%
Net investment income 5.6 8.4
Total benefits and expenses 1.8 5.7
Operating earnings 8.4 11.2
Operating earnings per diluted share 9.3 12.0
(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)
SIX MONTHS ENDED JUNE 30, 2007 Including Excluding
Currency Currency
Changes Changes(2)
Premium income 3.6% 6.4%
Net investment income 6.8 8.7
Total benefits and expenses 3.1 5.8
Operating earnings 10.1 12.1
Operating earnings per diluted share 11.6 13.6
(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
SOURCE Aflac Incorporated
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Related links:
http://www.aflac.com/
Photo Notes:
NewsCom: http://www.newscom.com/cgi-bin/prnh/20041202/CLTH019LOGO
AP Archive: http://photoarchive.ap.org
PRN Photo Desk, photodesk@prnewswire.com
CONTACT:
Analyst and investor contact - Kenneth S.
Janke Jr., +1-800-235-2667 - option 3, FAX: +1-706-324-6330,
kjanke@aflac.com, or Media contact - Laura Kane, +1-706-596-3493,
FAX: +1-706-320-2288, lkane@aflac.com, both of Aflac Incorporated
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