COLUMBUS, Ga., Jan. 30 /PRNewswire-FirstCall/ -- Aflac Incorporated
today reported its fourth quarter results. Total revenues were $3.7
billion during the fourth quarter of 2006, compared with $3.6
billion a year ago. Net earnings were $332 million, or $.67 per
diluted share, compared with $364 million, or $.72 per share, a
year ago. The decline in net earnings primarily resulted from lower
realized investment gains, which were $3 million, or $.01 per
diluted share in the fourth quarter of 2006, compared with $68
million, or $.14 per share, a year ago. The significant realized
investment gains in the fourth quarter of 2005 resulted from a
bond-swap program, which we completed in the second 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, was immaterial in the fourth quarter of 2006.
In the fourth quarter of 2005, the impact from SFAS 133 reduced net
earnings by $2 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 fourth quarter of 2006 were $329 million, compared
with $298 million in the fourth quarter of 2005. Operating earnings
per diluted share rose 11.9% to $.66, which was consistent with our
expectations as communicated in our third quarter earnings release,
compared with $.59 per share a year ago. The yen/dollar exchange
rate did not impact operating earnings on a per-share basis for the
fourth quarter. For the full year of 2006, our results were
impacted by a weaker yen/dollar exchange rate, compared with 2005.
Total revenues were $14.6 billion, an increase of 1.8% over 2005.
Net earnings were $1.5 billion, or $2.95 per diluted share,
compared with $1.5 billion, or $2.92 per share, in 2005. Like the
fourth quarter, full-year net earnings were impacted by lower
realized investment gains in 2006, compared with 2005. Realized
investment gains were $51 million in 2006, or $.10 per diluted
share, compared with $167 million, or $.33 per share, in 2005. The
impact of SFAS 133 was immaterial for the full year of 2006,
compared with a loss of $10 million, or $.02 per diluted share, in
2005. Also affecting comparisons of net earnings was the inclusion
in 2005 of a benefit of $34 million, or $.07 per diluted share,
from the release of a deferred tax asset valuation allowance.
Operating earnings for the year were $1.4 billion, or $2.85 per
diluted share, compared with $1.3 billion, or $2.54 per share, in
2005. Excluding the negative impact of $.08 per share from the
weaker yen, operating earnings per diluted share rose 15.4% for the
year, which was slightly better than our objective. During the
fourth quarter, we acquired 3.1 million shares of our stock,
bringing the total number of shares purchased in 2006 to 10.3
million. At the end of December, we had approximately 36.6 million
shares available for repurchase under authorizations by the board
of directors. AFLAC JAPAN Aflac Japan produced strong financial
results in the fourth quarter. Premium income in yen rose 5.6%, and
net investment income increased 6.5%. Total revenues were up 5.5%.
Due to improvement in the benefit and expense ratios, the pretax
operating profit margin expanded from 13.4% to 14.7%. As a result,
pretax operating earnings in yen increased 15.9%. For the year,
premium income in yen increased 5.9%, and net investment income
rose 9.0%. Investment income growth in yen terms was magnified for
the year by the weaker yen/dollar exchange rate because
approximately 37% of Aflac Japan's investment income was
dollar-denominated. Total revenues were up 6.3%, and pretax
operating earnings grew 15.4%. The average yen/dollar exchange rate
in the fourth quarter of 2006 was 117.88, or .6% weaker than the
average rate of 117.21 in the fourth quarter of 2005. For the year,
the average exchange rate was 116.31, or 5.5% weaker than the rate
of 109.88 a year ago. Premium income in dollars was up 5.1% to $2.2
billion in the fourth quarter. Net investment income rose 6.1% to
$428 million. Total revenues increased 5.1% to $2.6 billion. Pretax
operating earnings were $388 million, or 15.3% 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 2006. Premium
income was $8.8 billion, up .2% from a year ago. Net investment
income was up 3.2% to $1.7 billion. Total revenues were up .6% to
$10.5 billion. Pretax operating earnings were $1.7 billion, or 9.1%
higher than a year ago. As we stated in our third quarter earnings
announcement, we had anticipated a decline in Aflac Japan's new
sales for the fourth quarter. Aflac Japan's total new annualized
premium sales declined 16.6% to 29.5 billion yen, or $251 million
in the fourth quarter. For the year, total new annualized premium
sales were down 8.8% to 117.5 billion yen, or $1.0 billion. The
sales declines for the fourth quarter and the year primarily
reflected industrywide weakness in the market for stand-alone
medical insurance as well as continued declines in the sale of
Rider MAX. The ordinary life category continued to show solid sales
gains, benefiting from the sale of WAYS, the innovative life
insurance product we introduced in January 2006. We continue to
expect 2007 to be a challenging year from a sales perspective and
look for sales to again decline in the first half of the year,
followed by sales increases in the second half of 2007. AFLAC U.S.
Throughout 2006, we were pleased with the performance of Aflac U.S.
In the fourth quarter, premium income increased 9.0% to $910
million. Net investment income was up 11.0% to $120 million. Total
revenues rose 9.3% to $1.0 billion. During the fourth quarter, we
increased Aflac U.S. claims reserves by $28.3 million, which
reflected a lengthening of cancer treatment periods for claims
incurred in 2006 and prior years. As a result, the pretax profit
margin declined from 13.6% a year ago to 12.2% and pretax operating
earnings were down 1.8% to $126 million. For the year, premium
income rose 9.5% to $3.6 billion. Net investment income increased
10.4% to $465 million. Total revenues were up 9.5% to $4.0 billion.
Pretax operating earnings rose 11.4% to $585 million. As we
expected, Aflac U.S. total new annualized premium sales results
were very strong in the fourth quarter. Total new sales rose 21.2%
to $447 million in the quarter. These record sales results were
due, in part, to the re- enrollment of a large payroll account.
However, even excluding the additional sales from that account,
total new sales still grew at a strong double-digit rate in the
fourth quarter. For the year, total new annualized premium sales
increased 13.1% to $1.4 billion, which exceeded our 2006 sales
objective of an 8% to 12% increase. We believe our strong sales
continued to benefit from the expansion of our sales force. The
total number of licensed sales associates at the end of December
was up 8.5% over a year ago to more than 68,300. The increase in
licensed associates benefited from solid new agent recruitment in
the year, including a very strong fourth quarter in which
recruitment was up 15.1%. Most importantly, the number of producing
sales associates also increased. On an average weekly basis, the
number of producing associates was up 10.3% to approximately 11,000
in the fourth quarter. We expect our sales momentum to continue
into 2007. We believe our 2007 sales objective of a 6% to 10%
increase balances our enthusiasm for our U.S. business with the
challenging comparisons that we face due to the very strong sales
we produced in 2006. DIVIDEND As reported in October 2006, the
board of directors approved an increase in the quarterly cash
dividend effective with the first quarter of 2007. The first
quarter cash dividend of $.185 per share is 42.3% higher than the
first quarter 2006 dividend of $.13 per share. The first quarter
dividend is payable on March 1, 2007, to shareholders of record at
the close of business on February 16, 2007, and will mark the 24th
consecutive year in which the dividend has been increased. OUTLOOK
Commenting on the company's fourth quarter and full-year results,
Chairman and Chief Executive Officer Daniel P. Amos stated: "The
fourth quarter of 2006 concluded another strong year for Aflac
Incorporated from a financial perspective. Both Aflac U.S. and
Aflac Japan contributed to record operating earnings. And we again
achieved our primary financial goal, which was to increase
operating earnings per diluted share in 2006 by 15% before the
impact of currency translation. "We were particularly happy with
the continued momentum in our U.S. operation. We believe the many
actions we have taken in recent years to enhance our sales force
infrastructure are paying off. Our expanded distribution system and
recent training initiatives have resulted in better growth of
producing sales associates, which in turn has benefited our sales.
At the same time, the underlying operating trends at Aflac U.S.
have been quite stable, and Aflac U.S. financial results were
consistent with our expectations for the year. "Aflac Japan
produced a very strong fourth quarter from a financial standpoint,
as it did in each quarter of last year. Although we were
disappointed with new sales, revenues were still in line with our
expectations due to the strong persistency of our business and
improved investment income growth. The premium from new sales
greatly exceeded lost premium from lapses. As a result, our
annualized premiums in force in yen still grew at a solid rate. And
as we expected, the benefit ratio continued to improve, which
resulted in higher profit margins and rapid pretax earnings growth.
"As we look to 2007, our financial outlook has not changed. Our
objective for 2007 is to increase operating earnings 15% to 16% to
$3.28 to $3.31 per diluted share, excluding the impact of the yen.
We continue to believe that is an achievable objective for this
year. We will be tirelessly working on improving our sales growth
in Japan and maintaining our momentum in the United States. And we
believe we have the opportunity to see 2007 emerge as another
record year for Aflac Incorporated." 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
six 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 fourth quarter of 2006
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 7:10 p.m. (EST) Wednesday, January
31. AFLAC INCORPORATED AND SUBSIDIARIES CONDENSED INCOME STATEMENT
(UNAUDITED - IN MILLIONS, EXCEPT FOR SHARE AND PER-SHARE AMOUNTS)
THREE MONTHS ENDED DECEMBER 31, 2006 2005 % Change Total revenues
$3,687 $3,567 3.4 % Benefits and claims 2,300 2,157 6.6 Total
acquisition and operating expenses 880 851 3.4 Earnings before
income taxes 507 559 (9.2) Income taxes 175 195 Net earnings $332
$364 (8.8)% Net earnings per share - basic $.67 $.73 (8.2)% Net
earnings per share - diluted .67 .72 (6.9) Shares used to compute
earnings per share (000): Basic 492,614 499,112 (1.3)% Diluted
498,564 506,084 (1.5) Dividends paid per share $.16 $.11 45.5 %
AFLAC INCORPORATED AND SUBSIDIARIES CONDENSED INCOME STATEMENT
(UNAUDITED - IN MILLIONS, EXCEPT FOR SHARE AND PER-SHARE AMOUNTS)
TWELVE MONTHS ENDED DECEMBER 31, 2006 2005 % Change Total revenues
$14,616 $14,363 1.8 % Benefits and claims 9,016 8,890 1.4 Total
acquisition and operating expenses 3,336 3,247 2.8 Earnings before
income taxes 2,264 2,226 1.7 Income taxes 781 743 Net earnings
$1,483 $1,483 - % Net earnings per share - basic $2.99 $2.96 1.0 %
Net earnings per share - diluted 2.95 2.92 1.0 Shares used to
compute earnings per share (000): Basic 495,614 500,939 (1.1)%
Diluted 501,827 507,704 (1.2) Dividends paid per share $.55 $.44
25.0 % AFLAC INCORPORATED AND SUBSIDIARIES CONDENSED BALANCE SHEET
(UNAUDITED - IN MILLIONS, EXCEPT FOR SHARE AMOUNTS) DECEMBER 31,
2006 2005 % Change Assets: Total investments and cash $51,972
$48,989 6.1 % Deferred policy acquisition costs 6,025 5,590 7.8
Other assets 1,808 1,782 1.4 Total assets $59,805 $56,361 6.1 %
Liabilities and shareholders' equity: Policy liabilities $45,440
$42,329 7.3 % Notes payable 1,426 1,395 2.2 Other liabilities 4,598
4,710 (2.4) Shareholders' equity 8,341 7,927 5.2 Total liabilities
and shareholders' equity $59,805 $56,361 6.1 % Shares outstanding
at end of year (000) 492,550 498,894 (1.3)% RECONCILIATION OF
OPERATING EARNINGS TO NET EARNINGS (UNAUDITED - IN MILLIONS, EXCEPT
FOR PER-SHARE AMOUNTS) THREE MONTHS ENDED DECEMBER 31, 2006 2005 %
Change Operating earnings $329 $298 10.5 % Reconciling items, net
of tax: Realized investment gains (losses) 3 68 Impact from SFAS
133 - (2) Net earnings $332 $364 (8.8)% Operating earnings per
diluted share $.66 $.59 11.9 % Reconciling items, net of tax:
Realized investment gains (losses) .01 .14 Impact from SFAS 133 -
(.01) Net earnings per diluted share $.67 $.72 (6.9)%
RECONCILIATION OF OPERATING EARNINGS TO NET EARNINGS (UNAUDITED -
IN MILLIONS, EXCEPT FOR PER-SHARE AMOUNTS) TWELVE MONTHS ENDED
DECEMBER 31, 2006 2005 % Change Operating earnings $1,432 $1,292
10.8 % Reconciling items, net of tax: Realized investment gains
(losses) 51 167 Impact from SFAS 133 - (10) Deferred tax asset
valuation allowance release - 34 Net earnings $1,483 $1,483 - %
Operating earnings per diluted share $2.85 $2.54 12.2 % Reconciling
items, net of tax: Realized investment gains (losses) .10 .33
Impact from SFAS 133 - (.02) Deferred tax asset valuation allowance
release - .07 Net earnings per diluted share $2.95 $2.92 1.0 %
FOREIGN CURRENCY TRANSLATION EFFECT ON OPERATING RESULTS(1)
(SELECTED PERCENTAGE CHANGES, UNAUDITED) THREE MONTHS ENDED
DECEMBER 31, 2006 Including Excluding Currency Currency Changes
Changes(2) Premium income 6.2% 7.1% Net investment income 7.6 8.2
Total benefits and expenses 5.7 6.6 Operating earnings 10.5 10.6
Operating earnings per diluted share 11.9 11.9 (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, 2006 Including
Excluding Currency Currency Changes Changes(2) Premium income 2.7%
7.0% Net investment income 4.8 7.8 Total benefits and expenses 1.8
6.0 Operating earnings 10.8 13.9 Operating earnings per diluted
share 12.2 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; 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:
Analysts and investors - Kenneth S. Janke Jr., +1-800-235-2667,
option 3, or fax +1-706-324-6330, 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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