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 Media contact - Laura Kane, 706.596.3493,
FAX: 706.320.2288, or
http://www.newscom.com/cgi-bin/prnh/20041202/CLTH019LOGO
http://photoarchive.ap.org/ DATASOURCE: Aflac Incorporated CONTACT:
Analyst and investors, Kenneth S. Janke Jr., +1-800-235-2667 -
option 3, or Fax, +1-706-324-6330, or , or Media, Laura Kane,
+1-706-596-3493, or Fax, +1-706-320-2288, or , both of Aflac
Incorporated Web site: http://www.aflac.com/
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