Aflac Hires Goldman, McKinsey To Consult On Investment Overhaul
February 01 2012 - 11:24AM
Dow Jones News
The new chief investment officer at Aflac Inc. (AFL) said the
insurer has brought in consultants from Goldman Sachs Group Inc.
(GS) and McKinsey & Co. as it looks to overhaul its $100
billion investment portfolio.
The insurer, which has already sold billions of dollars of
European securities, is looking to further reduce its exposure to
Europe and broaden its holdings elsewhere, Chief Investment Officer
Eric Kirsch said on a conference call with analysts and investors
Wednesday.
The newly announced review comes as Aflac took another hit to
its investment portfolio in the fourth quarter, recording $522
million in after-tax realized investment losses. The losses were
primarily writedowns of European securities Kirsch and his team
hope to sell, and were offset somewhat by $355 million in realized
gains.
The new charges caught some analysts off guard. Aflac had
promised earlier this year that realized losses from the company's
efforts to reduce exposure to Europe were "largely behind us."
But that was before the company brought in Kirsch on Nov. 1. On
Wednesday's conference call, Kirsch and Chief Executive Officer Dan
Amos said Aflac still hoped to reduce overall European holdings
and, in the fourth quarter, had called a halt to any new
investments in Europe.
Despite efforts to reduce its European exposure since 2008,
Aflac's European holdings are significantly higher than other U.S.
insurers.
Kirsch had previously worked as global head of insurance asset
management at Goldman Sachs Asset Management, the unit he will be
consulting for at Aflac.
He and the Goldman consultants are conducting a "strategic asset
allocation exercise," he said, which will take a "broad look at all
the investment opportunities that are appropriate for an insurance
company" like Aflac, which has operations in Japan and the U.S.
Aflac and Goldman are looking for "a broader set of asset
classes and investment opportunities that we can use in the
future--that have not been used historically at Aflac--which will
help us improve the overall quality of the earnings of our
portfolio," Kirsch said.
Management consultants from McKinsey, meanwhile, are doing "a
strategic review of our investment capabilities on a global basis,"
including in Japan and the company's headquarters in Columbus, Ga.,
he said.
McKinsey's work should be done around the end of next month,
while Goldman's should conclude in about five months, Kirsch
said.
He said the consultants the company had hired could "potentially
becomes outsourcing partners."
In recent trading, Aflac shares were down $1.29, or 2.67%, at
$46.94.
-By Erik Holm, Dow Jones Newswires; 212-416-2892;
erik.holm@dowjones.com
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