COLUMBUS, Ga., July 25 /PRNewswire-FirstCall/ -- Aflac Incorporated
(NYSE:AFL) today reported its second quarter results. Reflecting a
weaker yen to the dollar, total revenues were $3.7 billion during
the second quarter of 2006, compared with $3.6 billion a year ago.
Net earnings were $408 million, or $.81 per diluted share, compared
with $336 million, or $.66 per share, a year ago. Net earnings
included realized investment gains of $31 million, or $.06 per
diluted share, compared with realized investment gains of $7
million, or $.01 per share, a year ago. The significant realized
investment gains in the quarter resulted from the bond- swap
program we initiated in the third quarter of 2005. Net earnings in
the second quarter of 2006 also included a gain 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 2005, the impact from SFAS 133 increased net earnings by
$3 million, or $.01 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 of 2006 were $376 million, compared with $326
million in the second quarter of 2005. Operating earnings per
diluted share rose 17.2% to $.75, compared with $.64 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 20.3%. For
the first six months of 2006, our results were also impacted by the
weaker yen. Total revenues rose 1.8% to $7.3 billion, compared with
$7.1 billion in the first half of 2005. Net earnings were $783
million, or $1.55 per diluted share, compared with $664 million, or
$1.30 per share, for the first six months of 2005. Operating
earnings for the six months were $740 million, or $1.47 per diluted
share, compared with $661 million, or $1.30 per share, in 2005.
Excluding the negative impact of $.06 per share from the weaker
yen, operating earnings per diluted share rose 17.7% for the first
six months. During the second quarter, we acquired 2.1 million
shares of Aflac stock, bringing the total number of shares
purchased in the first half of 2006 to 4.1 million. At the end of
June, we had approximately 43 million shares available for
repurchase under authorizations by the board of directors. AFLAC
JAPAN Aflac Japan produced solid financial results in the second
quarter. Premium income in yen rose 6.2% and net investment income
increased 9.0%. Investment income growth in yen terms was magnified
by the weaker yen/dollar exchange rate because approximately 37% of
Aflac Japan's second quarter investment income was
dollar-denominated. Total revenues were up 6.5%. Due to improvement
in the benefit and expense ratios, the pretax operating profit
margin expanded from 14.7% to 16.3%. As a result, pretax operating
earnings in yen increased 18.5%. For the six months, premium income
in yen increased 6.2%, and net investment income rose 10.1%. Total
revenues were up 6.7% and pretax operating earnings grew 18.9%. The
average yen/dollar exchange rate in the second quarter of 2006 was
114.43, or 5.9% weaker than the average rate of 107.63 in the
second quarter of 2005. For the six months, the average exchange
rate was 115.65, or 8.3% weaker than the rate of 106.04 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% to $2.2 billion in the second quarter. Net
investment income rose 2.6% to $422 million. Total revenues rose
.2% to $2.6 billion. Pretax operating earnings were $432 million,
or 11.5% higher than a year ago. For the six months, premium income
was $4.4 billion, down 2.6% from a year ago. Net investment income
was up 1.0% to $830 million. Total revenues declined 2.1% to $5.2
billion. Pretax operating earnings were $857 million, or 9.0%
higher than a year ago. Aflac Japan's total new annualized premium
sales declined 4.2% in the second quarter to 31.2 billion yen, or
$273 million. For the first six months, total new premium sales
were down 2.8% to 60.6 billion yen, or $524 million. As we
discussed at our May analyst meeting, sales in April were weaker
than expected. However, sales recovered in May and were also up for
the first three weeks of June. Unfortunately, sales for the last
few days of June were especially weak. From a product perspective,
the decline in second quarter sales primarily reflected weakness in
the medical product category. Rider MAX sales and conversions were
lower than a year ago, as were sales of our stand-alone medical
products. Sales of the cancer life category were strong in the
quarter, rising 14.2%, compared with the second quarter of 2005.
Cancer life sales through Dai-ichi Mutual Life were down 3.2%.
WAYS, the unique life insurance product we introduced in January,
also sold well in the quarter. WAYS allows a policyholder to
convert a portion of the life insurance coverage to medical,
nursing care, or fixed annuity benefits at retirement age. WAYS
sales were up 21.4% over the first quarter of 2006 and represented
approximately 10% of second quarter sales. AFLAC U.S. Aflac U.S.
also produced a solid quarter. Premium income increased 9.3% to
$878 million. Net investment income was up 10.0% to $115 million.
Total revenues rose 9.2% to $994 million. Pretax operating earnings
were $150 million, an increase of 15.1%. For the first six months,
premium income rose 9.7% to $1.7 billion. Net investment income
increased 9.1% to $225 million. Total revenues were up 9.6% to $2.0
billion. Pretax operating earnings rose 12.7% to $297 million.
Aflac U.S. sales results were consistent with our expectations for
the second quarter. Total new annualized premium sales rose 6.3% to
$327 million. For the six months, total new annualized premium
sales increased 8.8% to $645 million. We again experienced solid
growth from the hospital indemnity product line. Hospital indemnity
sales were up 20.8% in the second quarter, accounting for
approximately 13% of sales. Our sales force continued to grow
through June. We recruited approximately 6,800 new sales
associates, which was .8% higher than the second quarter of 2005.
The total number of licensed agents was up 5.8% over a year ago.
The number of producing sales associates also increased. The number
of average monthly producing associates rose 1.0% in the quarter to
more than 17,500. On an average weekly basis, the number of
producing associates was up 2.7% to more than 9,900. DIVIDEND The
board of directors declared the third quarter cash dividend. The
third quarter dividend of $.13 per share is payable on September 1,
2006, to shareholders of record at the close of business on August
18, 2006. 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 financial performance for
the first half of 2006. In terms of pretax operating earnings, both
Aflac U.S. and Aflac Japan surpassed our expectations. As a result,
we exceeded our primary financial objective of increasing operating
earnings per share by 15% before the impact of the yen. At the same
time, we are encouraged that the sales activities of Aflac U.S.
were in line with our expectations. We believe third quarter sales
for Aflac U.S. will likely increase at a rate similar to our second
quarter results. However, we expect to see stronger sales in the
fourth quarter, which we believe will enable us to achieve our
objective of an 8% to 12% sales increase for the year. "Our sales
in Japan, on the other hand, were disappointing. While Aflac
Japan's sales decline in the first quarter was expected, the drop
in second quarter sales was not. As I have stated previously,
Japan's medical insurance market has become increasingly crowded
with products that compete with Aflac's market-leading policies.
Additionally, our preliminary research indicates medical sales for
the entire industry were down for the first half of this year.
Although we believe our coverage represents a superior value, it's
becoming more difficult for us to attract customers who are
policyholders of other companies. Given the current market
environment, we believe Aflac Japan's sales will likely be flat to
down single digits for the remainder of the year. "Most
importantly, we continue to believe our operations in Japan are
well-positioned to achieve their financial targets for the year
despite slower sales. Our persistency in Japan remains strong, and
improved investment income growth has benefited our operations in
Japan, as has continued improvement in our profit margin. We also
expect Aflac U.S. to continue generating financial results that are
in line with our objectives. As such, I am very confident that we
will achieve our primary financial goal for 2006 of increasing
operating earnings per diluted share 15%, excluding foreign
currency translation. For 2007 our goal remains a 15% to 16%
increase in operating earnings per diluted share, excluding the
impact of the yen. We believe our earnings goal for 2007 is
achievable as well." 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 second quarter of 2006 can be
found in the "Company Financials" section of the "For Investors"
page at aflac.com. Aflac Incorporated will webcast its second
quarter conference call on the "For Investors" page of aflac.com at
9:00 a.m. (EDT), Wednesday, July 26. AFLAC INCORPORATED AND
SUBSIDIARIES CONDENSED INCOME STATEMENT (UNAUDITED - IN MILLIONS,
EXCEPT FOR SHARE AND PER-SHARE AMOUNTS) THREE MONTHS ENDED JUNE 30,
2006 2005 % Change Total revenues $3,697 $3,567 3.6 % Benefits and
claims 2,243 2,229 .6 Total acquisition and operating expenses 830
822 .9 Earnings before income taxes 624 516 21.0 Income taxes 216
180 Net earnings $408 $336 21.6 % Net earnings per share - basic
$.82 $.67 22.4 % Net earnings per share - diluted .81 .66 22.7
Shares used to compute earnings per share (000): Basic 496,951
501,426 (.9)% Diluted 503,286 508,002 (.9) Dividends paid per share
$.13 $.11 18.2 % AFLAC INCORPORATED AND SUBSIDIARIES CONDENSED
INCOME STATEMENT (UNAUDITED - IN MILLIONS, EXCEPT FOR SHARE AND
PER-SHARE AMOUNTS) SIX MONTHS ENDED JUNE 30, 2006 2005 % Change
Total revenues $7,256 $7,127 1.8 % Benefits and claims 4,424 4,495
(1.6) Total acquisition and operating expenses 1,633 1,609 1.5
Earnings before income taxes 1,199 1,023 17.2 Income taxes 416 359
Net earnings $783 $664 18.0 % Net earnings per share - basic $1.57
$1.32 18.9 % Net earnings per share - diluted 1.55 1.30 19.2 Shares
used to compute earnings per share (000): Basic 497,491 502,063
(.9)% Diluted 503,927 508,722 (.9) Dividends paid per share $.26
$.22 18.2 % AFLAC INCORPORATED AND SUBSIDIARIES CONDENSED BALANCE
SHEET (UNAUDITED - IN MILLIONS, EXCEPT FOR SHARE AMOUNTS) JUNE 30,
2006 2005 % Change Assets: Total investments and cash $49,795
$50,547 (1.5)% Deferred policy acquisition costs 5,895 5,586 5.5
Other assets 1,742 1,862 (6.5) Total assets $57,432 $57,995 (1.0)%
Liabilities and shareholders' equity: Policy liabilities $44,964
$43,068 4.4 % Notes payable 1,071 1,369 (21.8) Other liabilities
4,228 5,099 (17.1) Shareholders' equity 7,169 8,459 (15.2) Total
liabilities and shareholders' equity $57,432 $57,995 (1.0)% Shares
outstanding at end of period (000) 497,124 501,172 (.8)%
RECONCILIATION OF OPERATING EARNINGS TO NET EARNINGS (UNAUDITED -
IN MILLIONS, EXCEPT FOR PER-SHARE AMOUNTS) THREE MONTHS ENDED JUNE
30, 2006 2005 % Change Operating earnings $376 $326 15.3 %
Reconciling items, net of tax: Realized investment gains (losses)
31 7 Impact from SFAS 133 1 3 Net earnings $408 $336 21.6 %
Operating earnings per diluted share $.75 $.64 17.2 % Reconciling
items, net of tax: Realized investment gains (losses) .06 .01
Impact from SFAS 133 - .01 Net earnings per diluted share $.81 $.66
22.7 % RECONCILIATION OF OPERATING EARNINGS TO NET EARNINGS
(UNAUDITED - IN MILLIONS, EXCEPT FOR PER-SHARE AMOUNTS) SIX MONTHS
ENDED JUNE 30, 2006 2005 % Change Operating earnings $740 $661 12.0
% Reconciling items, net of tax: Realized investment gains (losses)
41 9 Impact from SFAS 133 2 (6) Net earnings $783 $664 18.0 %
Operating earnings per diluted share $1.47 $1.30 13.1 % Reconciling
items, net of tax: Realized investment gains (losses) .08 .01
Impact from SFAS 133 - (.01 ) Net earnings per diluted share $1.55
$1.30 19.2 % FOREIGN CURRENCY TRANSLATION EFFECT ON OPERATING
RESULTS(1) (SELECTED PERCENTAGE CHANGES, UNAUDITED) THREE MONTHS
ENDED JUNE 30, 2006 Including Excluding Currency Currency Changes
Changes(2) Premium income 2.4 % 7.1 % Net investment income 4.5 7.8
Total benefits and expenses .7 5.3 Operating earnings 15.3 18.7
Operating earnings per diluted share 17.2 20.3 (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. FOREIGN CURRENCY
TRANSLATION EFFECT ON OPERATING RESULTS(1) (SELECTED PERCENTAGE
CHANGES, UNAUDITED) SIX MONTHS ENDED JUNE 30, 2006 Including
Excluding Currency Currency Changes Changes(2) Premium income .6 %
7.1 % Net investment income 3.2 7.8 Total benefits and expenses
(.8) 5.7 Operating earnings 12.0 17.0 Operating earnings per
diluted share 13.1 17.7 (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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