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 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 investor contact - Kenneth S. Janke Jr.,
+1-800-235-2667 - option 3, FAX: +1-706-324-6330, , or Media
contact - 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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