COLUMBUS, Ga., Jan. 30 /PRNewswire-FirstCall/ -- Aflac Incorporated
(NYSE:AFL) today reported its fourth quarter results. Total
revenues benefited from the strengthening of the yen to the dollar
in the fourth quarter, rising 9.0% to $4.0 billion, compared with
$3.7 billion in the fourth quarter of 2006. Net earnings were $382
million, or $.78 per diluted share, compared with $332 million, or
$.67 per share, a year ago. Net earnings included realized
investment losses of $1 million, or nil per diluted share, compared
with a gain of $3 million, or $.01 per diluted share in the fourth
quarter of 2006. 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, increased net earnings by $1
million, or nil per diluted share, in the fourth quarter of 2007.
The impact from SFAS 133 in the fourth quarter of 2006 was
immaterial to net earnings and net earnings 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 fourth quarter of
2007 were $382 million, compared with $329 million in the fourth
quarter of 2006. Operating earnings per diluted share rose 18.2% to
$.78, which was consistent with the expectations we communicated in
our third quarter earnings release, compared with $.66 per share a
year ago. Operating earnings in the fourth quarter benefited from a
change in accounting for internal replacements (SOP 05-1), which
increased operating earnings by $6 million, or $.01 per diluted
share, in the quarter. Operating earnings were also impacted by an
increase in benefit reserves for closed blocks of business in Japan
and the United States. The increase in reserves in the quarter
lowered operating earnings by $17 million, or $.03 per diluted
share. The stronger yen/dollar exchange rate increased operating
earnings per diluted share by $.01 for the fourth quarter. For the
full year of 2007, our results were suppressed by the weaker
yen/dollar exchange rate, compared with 2006. Total revenues were
$15.4 billion, an increase of 5.3% over 2006. Net earnings were
$1.6 billion, or $3.31 per diluted share, compared with $1.5
billion, or $2.95 per share, in 2006. Full-year net earnings were
impacted by lower realized investment gains in 2007, compared with
2006. Realized investment gains were $19 million in 2007, or $.04
per diluted share, compared with $51 million, or $.10 per share, in
2006. The impact of SFAS 133 was immaterial for both 2007 and 2006.
Operating earnings for the year were $1.6 billion, or $3.27 per
diluted share, compared with $1.4 billion, or $2.85 per share, in
2006. Excluding the negative impact of $.02 per share from the
weaker yen, operating earnings per diluted share rose 15.4% for the
year. That result was in line with our 2007 objective of a 15% to
16% increase in operating earnings per diluted share before the
impact of currency translation. During the fourth quarter, we
acquired 2.0 million shares of our stock, bringing the total number
of shares purchased in 2007 to 11.1 million. AFLAC JAPAN Aflac
Japan premium income in yen rose 4.0% in the fourth quarter. Net
investment income increased 4.6%. Investment income growth in yen
terms was lowered somewhat by the stronger yen/dollar exchange rate
because approximately 38% of Aflac Japan's fourth quarter
investment income was dollar-denominated. Total revenues were up
4.2%. Despite the previously mentioned adjustment to Aflac Japan
benefit reserves, the benefit ratio improved over a year ago. As a
result, the pretax operating profit margin expanded from 14.7% to
15.0%. Pretax operating earnings in yen increased 5.8%. For the
year, premium income in yen increased 4.3%, and net investment
income rose 8.0%. Total revenues were up 4.9%, and pretax operating
earnings grew 11.8%. The average yen/dollar exchange rate in the
fourth quarter of 2007 was 113.24, or 4.1% stronger than the
average rate of 117.88 in the fourth quarter of 2006. Although the
yen strengthened in relation to the dollar in the fourth quarter of
2007, the average yen/dollar exchange rate was weaker for the full
year, compared with 2006. For the year, the average exchange rate
was 117.93 in 2007, or 1.4% weaker than the rate of 116.31 a year
ago. Benefiting from the stronger average yen in the fourth
quarter, premium income in dollars increased 8.3% to $2.4 billion.
Net investment income rose 8.9% to $466 million. Total revenues
advanced 8.5% to $2.9 billion. Pretax operating earnings were $428
million, or 10.2% higher than a year ago. For the year, Aflac
Japan's results in dollar terms were suppressed by the weaker
yen/dollar exchange rate in 2007. Premium income was $9.0 billion,
up 3.1% from a year ago. Net investment income rose 6.7% to $1.8
billion. Total revenues were up 3.7% to $10.9 billion. Pretax
operating earnings were $1.8 billion, or 10.2% higher than a year
ago. Aflac Japan again posted sales gains that were in line with
our expectations. Total new annualized premium sales rose 2.7% to
30.3 billion yen, or $268 million, in the fourth quarter. For the
year, total new annualized premium sales were down 2.4% to 114.6
billion yen, or $974 million. Although overall sales growth was
again constrained by weakness in Rider MAX sales, stand-alone
medical sales were strong, rising 16.8% for the quarter. Sales of
medical insurance benefited from our new nonstandard medical
product, Gentle EVER. At the same time, we were pleased with the
sale of our cancer life insurance. Cancer life sales were down only
slightly in the quarter, compared with a year ago. Our fourth
quarter cancer life sales followed a very strong third quarter that
reflected our agents' focus on selling the product in advance of a
premium rate increase. We believe the consumer acceptance of our
newly introduced Cancer Forte product helped to mitigate some of
the sharp falloff in sales that usually follows a premium rate
increase. AFLAC U.S. Aflac U.S. premium income increased 10.9% to
$1.0 billion. Net investment income was up 6.2% to $127 million.
Total revenues rose 10.4% to $1.1 billion. Pretax operating
earnings climbed 34.2% to $170 million, which primarily reflected
easy comparisons to the fourth quarter of 2006 when pretax
operating earnings declined 1.8%. For the year, premium income rose
10.8% to $3.9 billion. Net investment income increased 7.5% to $500
million. Total revenues were up 10.4% to $4.4 billion. Pretax
operating earnings rose 18.3% to $692 million. As we expected,
Aflac U.S. sales growth slowed somewhat in the fourth quarter,
compared with the first nine months of the year. Sales growth in
the fourth quarter of 2007 reflected difficult comparisons to the
fourth quarter of 2006 when sales benefited from the re-enrollment
of a large payroll account and rose 21.2%. Despite the tough
comparison, total new annualized premium sales were up 5.9% to $473
million in the fourth quarter. For the year, total new annualized
premium sales increased 9.5% to a record $1.6 billion. Our sales
results for the year were consistent with our 2007 sales objective
of a 6% to 10% increase. Sales in the fourth quarter benefited from
solid contributions in the hospital indemnity and cancer insurance
lines. Fourth quarter sales also reflected an administrative change
in the timing of sales associates' production credit for delay-bill
policy conversions. This change accelerated approximately $8
million of conversion premiums from the first quarter of 2008 to
the fourth quarter of 2007. Excluding the impact of the change in
conversion processing, total new annualized premium sales were up
4.0% for the fourth quarter and 8.9% for the year. We continue to
believe that expansion of our sales force is an important key to
sales growth. As we have repeatedly discussed, we have been
intensely focused on increasing the number of producing sales
associates. On an average weekly basis, the number of producing
associates was up 5.4% in the fourth quarter and 6.0% for the year.
OUTLOOK Commenting on the company's fourth quarter and full-year
results, Chairman and Chief Executive Officer Daniel P. Amos
stated: "I am very pleased with our results for 2007. Aflac Japan
and Aflac U.S. each achieved their sales objectives and produced
strong financial results in 2007, which contributed to a record
year in terms of operating earnings. I am especially proud that we
achieved our primary financial objective of a 15% to 16% increase
in operating earnings per diluted share, before the impact of
currency translation. 2007 was the 18th year in which we have
increased operating earnings per diluted share by at least 15%
before the impact of the yen. "From a financial perspective Aflac
Japan had both a strong fourth quarter and full year. Our top-line
growth was in line with our expectations, and as we expected, the
benefit ratio continued to improve, resulting in expanded profit
margins and strong pretax earnings growth. At the same time, Aflac
Japan built sales momentum throughout the year, which we expect to
continue in 2008. We look forward to new distribution opportunities
through the bank channel and Japan Post, and we believe our product
portfolio is well-positioned in the Japanese market. Our sales
objective for 2008 is an increase of 3% to 7%. "Aflac U.S. also
performed very well throughout the year. Our U.S. operation
generated strong financial results, highlighted by improved
operating trends and strong earnings growth. We were again pleased
with the sales momentum of Aflac U.S. We believe our sales growth
reflects a quality product line and enhanced training to a steadily
growing sales force. As we noted, sales in the fourth quarter
benefited from the change in our conversion processing practices,
and will take away from first-quarter 2008 sales. As a result, we
expect Aflac U.S. sales will be weak in the first quarter. However,
we believe a sales increase of 8% to 12% is an achievable objective
for 2008. We remain enthusiastic about the sales opportunities of
the vast and underpenetrated U.S. market. "I believe our earnings
outlook for 2008 remains very promising. Our objective for 2008 is
to increase operating earnings per diluted share 13% to 15%, or
$3.70 to $3.76, excluding the impact of the yen. Our confidence in
achieving that objective is based on the predictable earnings
characteristics of Aflac's large block of in-force business. Our
earnings target also reflects the opportunities we see in Japan and
the United States, as well as the product, distribution and
branding strengths we bring to these two large markets. We will
continue to build on our strengths and position Aflac for another
record year." 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 ten 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 fourth quarter of 2007
can be found on the "Investors" page at aflac.com. Aflac
Incorporated will webcast its fourth quarter presentation via the
"Investors" page of aflac.com at 6:40 p.m. (EST) on Thursday,
January 31. AFLAC INCORPORATED AND SUBSIDIARIES CONDENSED INCOME
STATEMENT (UNAUDITED - IN MILLIONS, EXCEPT FOR SHARE AND PER-SHARE
AMOUNTS) THREE MONTHS ENDED DECEMBER 31, 2007 2006 % Change Total
revenues $4,018 $3,687 9.0% Benefits and claims 2,431 2,300 5.7
Total acquisition and operating expenses 1,002 880 13.8 Earnings
before income taxes 585 507 15.4 Income taxes 203 175 Net earnings
$382 $332 15.1% Net earnings per share - basic $.79 $.67 17.9% Net
earnings per share - diluted .78 .67 16.4 Shares used to compute
earnings per share (000): Basic 486,017 492,614 (1.3)% Diluted
492,240 498,564 (1.3) Dividends paid per share $.205 $.16 28.1%
AFLAC INCORPORATED AND SUBSIDIARIES CONDENSED INCOME STATEMENT
(UNAUDITED - IN MILLIONS, EXCEPT FOR SHARE AND PER-SHARE AMOUNTS)
TWELVE MONTHS ENDED DECEMBER 31, 2007 2006 % Change Total revenues
$15,393 $14,616 5.3% Benefits and claims 9,285 9,016 3.0 Total
acquisition and operating expenses 3,609 3,336 8.2 Earnings before
income taxes 2,499 2,264 10.4 Income taxes 865 781 Net earnings
$1,634 $1,483 10.2% Net earnings per share - basic $3.35 $2.99
12.0% Net earnings per share - diluted 3.31 2.95 12.2 Shares used
to compute earnings per share (000): Basic 487,869 495,614 (1.6)%
Diluted 493,971 501,827 (1.6) Dividends paid per share $.80 $.55
45.5% AFLAC INCORPORATED AND SUBSIDIARIES CONDENSED BALANCE SHEET
(UNAUDITED - IN MILLIONS, EXCEPT FOR SHARE AMOUNTS) DECEMBER 31,
2007 2006 % Change Assets: Total investments and cash $57,056
$51,972 9.8% Deferred policy acquisition costs 6,654 6,025 10.4
Other assets 2,095 1,808 15.9 Total assets $65,805 $59,805 10.0%
Liabilities and shareholders' equity: Policy liabilities $50,676
$45,440 11.5% Notes payable 1,465 1,426 2.7 Other liabilities 4,869
4,598 5.9 Shareholders' equity 8,795 8,341 5.4 Total liabilities
and shareholders' equity $65,805 $59,805 10.0% Shares outstanding
at end of year (000) 486,530 492,550 (1.2)% RECONCILIATION OF
OPERATING EARNINGS TO NET EARNINGS (UNAUDITED - IN MILLIONS, EXCEPT
FOR PER-SHARE AMOUNTS) THREE MONTHS ENDED DECEMBER 31, 2007 2006 %
Change Operating earnings $382 $329 15.9% Reconciling items, net of
tax: Realized investment gains (losses) (1) 3 Impact from SFAS 133
1 - Net earnings $382 $332 15.1% Operating earnings per diluted
share $.78 $.66 18.2% Reconciling items, net of tax: Realized
investment gains (losses) - .01 Impact from SFAS 133 - - Net
earnings per diluted share $.78 $.67 16.4% RECONCILIATION OF
OPERATING EARNINGS TO NET EARNINGS (UNAUDITED - IN MILLIONS, EXCEPT
FOR PER-SHARE AMOUNTS) TWELVE MONTHS ENDED DECEMBER 31, 2007 2006 %
Change Operating earnings $1,613 $1,432 12.7% Reconciling items,
net of tax: Realized investment gains (losses) 19 51 Impact from
SFAS 133 2 - Net earnings $1,634 $1,483 10.2% Operating earnings
per diluted share $3.27 $2.85 14.7% Reconciling items, net of tax:
Realized investment gains (losses) .04 .10 Impact from SFAS 133 - -
Net earnings per diluted share $3.31 $2.95 12.2% FOREIGN CURRENCY
TRANSLATION EFFECT ON OPERATING RESULTS(1) (SELECTED PERCENTAGE
CHANGES, UNAUDITED) THREE MONTHS ENDED DECEMBER 31, 2007 Including
Excluding Currency Currency Changes Changes(2) Premium income 9.0%
6.0% Net investment income 8.4 6.4 Total benefits and expenses 7.9
5.0 Operating earnings 15.9 13.9 Operating earnings per diluted
share 18.2 16.7 (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. FOREIGN CURRENCY TRANSLATION EFFECT ON OPERATING RESULTS(1)
(SELECTED PERCENTAGE CHANGES, UNAUDITED) TWELVE MONTHS ENDED
DECEMBER 31, 2007 Including Excluding Currency Currency Changes
Changes(2) Premium income 5.4% 6.2% Net investment income 7.5 8.1
Total benefits and expenses 4.4 5.2 Operating earnings 12.7 13.4
Operating earnings per diluted share 14.7 15.4 (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, including increased uncertainty in the U.S. and
international financial markets. (Logo:
http://www.newscom.com/cgi-bin/prnh/20041202/CLTH019LOGO ) Analyst
and investor contact - Kenneth S. Janke Jr., 800.235.2667, opt. 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, opt.
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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