COLUMBUS, Ga., Oct. 23 /PRNewswire-FirstCall/ -- Aflac Incorporated
today reported its third quarter results. Reflecting a weaker yen
to the dollar, total revenues rose 5.1% to $3.9 billion during the
third quarter of 2007, compared with $3.7 billion in the third
quarter of 2006. Net earnings were $420 million, or $.85 per
diluted share, compared with $367 million, or $.73 per share, a
year ago. Net earnings included realized investment gains of $1
million, or nil per diluted share, compared with $7 million, or
$.01 per diluted share in the third quarter of 2006. Net earnings
in the third quarter of 2007 also included a gain of $2 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 third
quarter of 2006, the impact from SFAS 133 reduced net earnings by
$3 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 third quarter of 2007 were $417 million, compared with $363
million in the third quarter of 2006. Operating earnings per
diluted share rose 18.1% to $.85, compared with $.72 a year ago.
Although the yen/dollar exchange rate was slightly weaker than a
year ago, it did not have a measurable impact on operating earnings
per diluted share. For the first nine months of 2007, our results
were impacted by the weaker yen. Total revenues rose 4.1% to $11.4
billion, compared with $10.9 billion in the first nine months of
2006. Net earnings were $1.3 billion, or $2.53 per diluted share,
compared with $1.2 billion, or $2.29 per share, for the first nine
months of 2006. Net earnings for the first nine months of 2007
included realized investment gains of $18 million, or $.04 per
diluted share, compared with $47 million, or $.10 per share for the
first nine months of 2006. The realized investment gains for the
first nine months of 2006 resulted from a bond-swap program that we
completed in mid-2006. Operating earnings for the first nine months
were $1.2 billion, or $2.49 per diluted share, compared with $1.1
billion, or $2.19 per share, in 2006. Excluding the negative impact
of $.03 per share from the weaker yen, operating earnings per
diluted share rose 15.1% for the first nine months of 2007. During
the third quarter, we acquired 2.0 million shares of Aflac stock,
bringing the total number of shares purchased in the first nine
months of 2007 to 9.1 million. At the end of September, we had 27.6
million shares available for purchase under our share repurchase
authorization. AFLAC JAPAN Aflac Japan premium income in yen rose
4.2% in the third quarter. Net investment income increased 7.7%.
Investment income growth in yen terms was magnified by the weaker
yen/dollar exchange rate because approximately 39% of Aflac Japan's
third quarter investment income was dollar-denominated. Total
revenues were up 4.3%. Reflecting continued improvement in the
benefit ratio, the pretax operating profit margin expanded from
15.4% to 17.2%. As a result, pretax operating earnings in yen
advanced 16.7%. For the first nine months, premium income in yen
increased 4.5%, and net investment income rose 9.1%. Total revenues
grew 5.2%, and pretax operating earnings were up 13.6%. The average
yen/dollar exchange rate in the third quarter of 2007 was 117.88,
or 1.5% weaker than the average rate of 116.17 in the third quarter
of 2006. For the first nine months, the average exchange rate was
119.37, or 3.0% weaker than the rate of 115.82 a year ago. Aflac
Japan's growth rates in dollar terms for both the third quarter and
first nine months were suppressed as a result of the weaker average
exchange rates. Reflecting the weaker yen, premium income in
dollars was up 2.8% to $2.3 billion in the third quarter. Net
investment income rose 6.2% to $456 million. Total revenues
increased 3.0% to $2.7 billion. Pretax operating earnings were $468
million, or 15.0% higher than a year ago. For the first nine
months, premium income was $6.7 billion, up 1.4% from a year ago.
Net investment income rose 5.9% to $1.3 billion. Total revenues
increased 2.1% to $8.0 billion. Pretax operating earnings were $1.4
billion, or 10.2% higher than a year ago. Aflac Japan continued to
generate improved sales results for both the third quarter and
first nine months of 2007. Total new annualized premium sales rose
2.2% to 27.9 billion yen, or $236 million, in the third quarter.
For the first nine months, total new annualized premium sales were
down 4.1% to 84.3 billion yen, or $706 million. Cancer insurance
sales were again very strong, rising 21.8% over the third quarter
of 2006. We believe cancer insurance sales benefited from our
agents' focus on selling the product in advance of a scheduled
premium rate increase on newly issued cancer life policies, which
occurred on September 2. After several quarters of significant
declines, medical sales in the third quarter were only slightly
lower than a year ago. We believe the improvement in medical sales
reflected a favorable initial response to Gentle EVER, our new
medical product. Gentle EVER, a non-standard medical product, was
introduced on August 1. Our objective remains for Aflac Japan total
new annualized premium sales to be flat to up 4% in the second half
of 2007. AFLAC U.S. Aflac U.S. premium income increased 10.7% to
$993 million in the third quarter. Net investment income rose 5.4%
to $127 million. Total revenues were up 10.0% to $1.1 billion.
Pretax operating earnings were $182 million, an increase of 12.3%.
For the first nine months, premium income rose 10.8% to $2.9
billion. Net investment income increased 8.0% to $373 million.
Total revenues were up 10.4% to $3.3 billion. Pretax operating
earnings rose 13.9% to $523 million. Aflac U.S. sales were
consistent with our expectations. Total new annualized premium
sales rose 11.0% to $368 million in the third quarter. Aflac U.S.
sales in the third quarter were again led by our
accident/disability product line and cancer expense insurance. In
addition, our hospital indemnity category performed very well, with
sales rising 21.1% over the third quarter of 2006. For the nine
months, total new annualized premium sales increased 11.1% to $1.1
billion. As we have repeatedly discussed, we face a challenging
sales comparison in the fourth quarter of this year. Sales in the
fourth quarter of 2006 rose 21.2% due to the re- enrollment of a
large payroll account. Despite that difficult comparison, we still
believe we are well-positioned to achieve our sales objective of a
6% to 10% increase for the full year. We were also pleased with our
sales force expansion in the quarter. As expected, recruiting
remained lower than a year ago. However, we still recruited
approximately 6,200 new sales associates in the third quarter,
bringing the number of newly recruited sales associates to more
than 18,600 for the first nine months of the year. The total number
of licensed sales associates at the end of September rose 5.4% over
a year ago. Most importantly, the number of producing sales
associates again increased in line with our expectations. On an
average weekly basis, the number of producing associates was up
5.0% to approximately 10,700 in the third quarter. For the first
nine months, the number of average weekly producing associates rose
6.1% over a year ago. DIVIDEND The board of directors declared the
fourth quarter cash dividend. The fourth quarter dividend of $.205
per share is payable on December 3, 2007, to shareholders of record
at the close of business on November 16, 2007. OUTLOOK Commenting
on the company's third quarter results, Chairman and Chief
Executive Officer Daniel P. Amos stated: "I am very pleased with
Aflac's performance during the third quarter and for the first nine
months of 2007. Throughout this year, our operations in Japan and
the United States have met or exceeded our expectations. "Aflac
Japan has produced steady revenue growth and expanding profit
margins in 2007. As a result, Aflac Japan continued to generate
strong pretax operating earnings growth. At the same time, we
continue to believe Aflac Japan is building sales momentum, and we
remain encouraged about our sales outlook for the balance of this
year and into 2008. "Aflac U.S. is also performing very well this
year. Our persistency has been steady and our benefit and expense
ratios and profit margin have been in line with our expectations.
Our sales results have also been strong during the first nine
months of the year. And we believe our focus on training and
enhancing the capabilities of our distribution will continue to
enhance our future sales activities. "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 115 to 120 to the dollar for the remainder of the year, we
would expect to report operating earnings of $3.24 to $3.28 per
diluted share for the full year. For the fourth quarter of 2007, we
expect operating earnings will be in the range of $.75 to $.79 per
diluted share. As we look to 2008, I believe we are also
well-positioned to achieve our objective of increasing operating
earnings per diluted share by 13% to 15%, before the impact of the
yen." 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 third quarter of 2007 can
be found on the "Investors" page at aflac.com. Aflac Incorporated
will webcast its third quarter conference call via the "Investors"
page of aflac.com at 9:30 a.m. (EDT), Wednesday, October 24. AFLAC
INCORPORATED AND SUBSIDIARIES CONDENSED INCOME STATEMENT (UNAUDITED
- IN MILLIONS, EXCEPT FOR SHARE AND PER-SHARE AMOUNTS) THREE MONTHS
ENDED SEPTEMBER 30, 2007 2006 % Change Total revenues $3,861 $3,672
5.1% Benefits and claims 2,331 2,291 1.7 Total acquisition and
operating expenses 888 824 7.8 Earnings before income taxes 642 557
15.1 Income taxes 222 190 Net earnings $420 $367 14.4% Net earnings
per share - basic $.86 $.74 16.2% Net earnings per share - diluted
.85 .73 16.4 Shares used to compute earnings per share (000): Basic
487,065 494,923 (1.6)% Diluted 492,819 500,952 (1.6) 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) NINE MONTHS ENDED SEPTEMBER 30, 2007
2006 % Change Total revenues $11,376 $10,929 4.1% Benefits and
claims 6,855 6,715 2.1 Total acquisition and operating expenses
2,608 2,458 6.1 Earnings before income taxes 1,913 1,756 8.9 Income
taxes 662 606 Net earnings $1,251 $1,150 8.8% Net earnings per
share - basic $2.56 $2.32 10.3% Net earnings per share - diluted
2.53 2.29 10.5 Shares used to compute earnings per share (000):
Basic 488,493 496,626 (1.6)% Diluted 494,555 502,926 (1.7)
Dividends paid per share $.595 $.39 52.6% AFLAC INCORPORATED AND
SUBSIDIARIES CONDENSED BALANCE SHEET (UNAUDITED - IN MILLIONS,
EXCEPT FOR SHARE AMOUNTS) SEPTEMBER 30, 2007 2006 % Change Assets:
Total investments and cash $55,073 $50,686 8.7% Deferred policy
acquisition costs 6,481 5,930 9.3 Other assets 2,022 1,737 16.4
Total assets $63,576 $58,353 9.0% Liabilities and shareholders'
equity: Policy liabilities $49,335 $44,968 9.7% Notes payable 1,454
1,439 1.0 Other liabilities 4,336 3,781 14.7 Shareholders' equity
8,451 8,165 3.5 Total liabilities and shareholders' equity $63,576
$58,353 9.0% Shares outstanding at end of period (000) 487,752
494,666 (1.4)% 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 SEPTEMBER 30, 2007 2006 %
Change Operating earnings $417 $363 15.0% Reconciling items, net of
tax: Realized investment gains (losses) 1 7 Impact from SFAS 133 2
(3) Net earnings $420 $367 14.4% Operating earnings per diluted
share $.85 $.72 18.1% Reconciling items, net of tax: Realized
investment gains (losses) - .01 Impact from SFAS 133 - - Net
earnings per diluted share $.85 $.73 16.4% RECONCILIATION OF
OPERATING EARNINGS TO NET EARNINGS (UNAUDITED - IN MILLIONS, EXCEPT
FOR PER-SHARE AMOUNTS) NINE MONTHS ENDED SEPTEMBER 30, 2007 2006 %
Change Operating earnings $1,232 $1,103 11.7% Reconciling items,
net of tax: Realized investment gains (losses) 18 47 Impact from
SFAS 133 1 - Net earnings $1,251 $1,150 8.8% Operating earnings per
diluted share $2.49 $2.19 13.7% Reconciling items, net of tax:
Realized investment gains (losses) .04 .10 Impact from SFAS 133 - -
Net earnings per diluted share $2.53 $2.29 10.5% FOREIGN CURRENCY
TRANSLATION EFFECT ON OPERATING RESULTS(1) (SELECTED PERCENTAGE
CHANGES, UNAUDITED) THREE MONTHS ENDED SEPTEMBER 30, 2007 Including
Excluding Currency Currency Changes Changes(2) Premium income 5.1 %
6.1% Net investment income 7.9 8.6 Total benefits and expenses 3.3
4.4 Operating earnings 15.0 15.8 Operating earnings per diluted
share 18.1 18.1 (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) NINE MONTHS ENDED
SEPTEMBER 30, 2007 Including Excluding Currency Currency Changes
Changes(2) Premium income 4.1 % 6.3% Net investment income 7.2 8.7
Total benefits and expenses 3.2 5.3 Operating earnings 11.7 13.3
Operating earnings per diluted share 13.7 15.1 (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. (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:
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 Web site:
http://www.aflac.com/
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