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 Media contact -
Laura Kane, 706.596.3493, FAX: 706.320.2288, or (Logo:
http://www.newscom.com/cgi-bin/prnh/20041202/CLTH019LOGO )
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, fax, +1-706-324-6330, , or Media, Laura Kane, +1-706-596-3493,
fax, +1-706-320-2288, , both of Aflac Incorporated Web site:
http://www.aflac.com/
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