COLUMBUS, Ga., Oct. 24 /PRNewswire-FirstCall/ -- Aflac Incorporated
today reported its third quarter results. Reflecting a weaker yen
to the dollar, total revenues were $3.7 billion during the third
quarter of 2006, unchanged from a year ago. Net earnings were $367
million, or $.73 per diluted share, compared with $455 million, or
$.90 per share, a year ago. The decline in net earnings primarily
resulted from lower realized investment gains, which were $7
million, or $.01 per diluted share in the third quarter of 2006,
compared with $89 million, or $.18 per share, a year ago. The
significant realized investment gains in the third quarter of 2005
resulted from a bond-swap program, which we completed in the second
quarter of 2006. Net earnings in the third quarter of 2006 also
included a loss of $3 million 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 2005, the impact from SFAS 133 reduced net earnings by
$1 million. In addition, net earnings in the third quarter of 2006
were lower than a year ago due to last year's benefit of $34
million, or $.07 per diluted share, from the release of a deferred
tax asset valuation allowance. 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 2006 were $363 million, compared with $333
million in the third quarter of 2005. Operating earnings per
diluted share rose 9.1% to $.72, compared with $.66 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 12.1%. For
the first nine months of 2006, our results were also impacted by
the weaker yen. Total revenues rose 1.2% to $10.9 billion, compared
with $10.8 billion in the first nine months of 2005. Net earnings
were $1.2 billion, or $2.29 per diluted share, compared with $1.1
billion, or $2.20 per share, for the first nine months of 2005.
Operating earnings for the nine months were $1.1 billion, or $2.19
per diluted share, compared with $994 million, or $1.96 per share,
in 2005. Excluding the negative impact of $.08 per share from the
weaker yen, operating earnings per diluted share rose 15.8% for the
first nine months. During the third quarter, we acquired 3.0
million shares of Aflac stock, bringing the total number of shares
purchased in the first nine months of 2006 to 7.1 million. At the
end of September, we had approximately 40 million shares available
for repurchase under authorizations by the board of directors. In
each of the last three years, we purchased approximately 10 million
shares and we also expect to purchase about 10 million shares for
the full year of 2006. Due to Aflac's very strong capital position,
we now anticipate purchasing approximately 12 million shares in
2007. AFLAC JAPAN Aflac Japan produced solid financial results in
the third quarter. Premium income in yen rose 5.8%, and net
investment income increased 9.6%. Investment income growth in yen
terms was magnified by the weaker yen/dollar exchange rate because
approximately 37% of Aflac Japan's third quarter investment income
was dollar-denominated. Total revenues were up 6.4%. Due to
improvement in the benefit ratio, the pretax operating profit
margin expanded from 15.1% to 15.4%. As a result, pretax operating
earnings in yen increased 8.4%. For the nine months, premium income
in yen increased 6.0%, and net investment income rose 9.9%. Total
revenues were up 6.6%, and pretax operating earnings grew 15.3%.
The average yen/dollar exchange rate in the third quarter of 2006
was 116.17, or 4.2% weaker than the average rate of 111.30 in the
third quarter of 2005. For the nine months, the average exchange
rate was 115.82, or 6.9% weaker than the rate of 107.79 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 1.2% to $2.2 billion in the third quarter.
Net investment income rose 4.9% to $430 million. Total revenues
increased 1.9% to $2.6 billion. Pretax operating earnings were $407
million, or 3.8% higher than a year ago. For the nine months,
premium income was $6.6 billion, down 1.4% from a year ago. Net
investment income was up 2.3% to $1.3 billion. Total revenues
declined .8% to $7.8 billion. Pretax operating earnings were $1.3
billion, or 7.3% higher than a year ago. As we mentioned in our
second quarter earnings announcement, we had anticipated a decline
in Aflac Japan's new sales for the third quarter. Aflac Japan's
total new annualized premium sales declined 11.9% to 27.3 billion
yen, or $235 million in the third quarter. For the nine months,
total new annualized premium sales were down 5.8% to 87.9 billion
yen, or $759 million. Although stand-alone medical coverage
remained our best-selling product category and we retained our
number one market position, medical sales were weak in the quarter.
WAYS, the innovative life insurance product we introduced in
January, continued to sell well. However, given the challenging
market in Japan, we continue to expect total new annualized premium
sales to decline for the balance of the year in Japan. AFLAC U.S.
Aflac U.S. produced a strong quarter from both a financial and
sales perspective. Premium income increased 9.5% to $898 million.
Net investment income was up 12.1% to $120 million. Total revenues
rose 9.8% to $1.0 billion. Pretax operating earnings were $162
million, an increase of 21.7%. For the first nine months, premium
income rose 9.6% to $2.6 billion. Net investment income increased
10.2% to $345 million. Total revenues were up 9.7% to $3.0 billion.
Pretax operating earnings rose 15.7% to $459 million. Aflac U.S.
sales results were strong in the third quarter. Despite challenging
comparisons to last year, total new annualized premium sales rose
11.7% to $332 million. For the nine months, total new annualized
premium sales increased 9.7% to $976 million. We believe our sales
results through September keep us solidly on track to achieve our
full-year sales objective of an 8% to 12% increase. We were also
pleased with our sales force expansion in the quarter. We recruited
approximately 6,600 new sales associates, which was 13.5% higher
than the third quarter of 2005. The total number of licensed sales
associates at the end of September rose 8.4% over a year ago. More
importantly, the number of producing sales associates also
increased. On an average weekly basis, the number of producing
associates was up 7.6% to approximately 10,200 in the third
quarter. DIVIDEND For the second time in 2006, the board of
directors has approved an increase in the cash dividend. The board
increased the cash dividend 23.1%, effective with the fourth
quarter payment. The fourth quarter dividend of $.16 per share is
payable on December 1, 2006, to shareholders of record at the close
of business on November 17, 2006. The board of directors also
approved an additional cash dividend increase, effective with the
first quarter of 2007. The first quarter cash dividend payment of
$.185 per share, which is 15.6% higher than the fourth quarter
payment of $.16 per share, is payable on March 1, 2007, to
shareholders of record at the close of business on February 16,
2007. As a result of these actions by the board, the dividend in
the first quarter of 2007 will be 42.3% higher than the dividend in
the first quarter of 2006. OUTLOOK Commenting on the company's
third quarter results, Chairman and Chief Executive Officer Daniel
P. Amos stated: "Overall, I am very pleased with Aflac's financial
performance during the third quarter and the first nine months of
the year. We continue to achieve our operational and financial
goals, and I believe we are poised to conclude another great year.
"Aflac U.S. is operating at a level that is consistent with, or
better than, our objectives. We believe our strong sales this year
demonstrate that we have taken the appropriate actions to enhance
our distribution. At the same time, the operating trends of our
U.S. operation remain very steady, with our benefit and expense
ratios and profit margin all falling in line with our expectations.
Aflac Japan is also meeting its expectations from a financial
perspective. Although new sales have fallen short of our initial
objective for the year, our top-line growth is still consistent
with our targets. The persistency of our business in Japan remains
outstanding. In addition, the benefit ratio has continued to
improve as we expected, which has resulted in better profitability.
"I remain very confident that we will achieve our primary financial
goal for 2006 of increasing operating earnings 15% to $2.92 per
diluted share, excluding foreign currency translation. Based on our
year-to-date results, achieving that goal suggests $.65 per diluted
share in the fourth quarter, before the impact of the yen. Assuming
the yen averages 115 to 120 to the dollar for the remainder of the
year, we would expect to report operating earnings of $.65 to $.66
per diluted share in the fourth quarter. For 2007 our goal remains
a 15% to 16% increase in operating earnings per diluted share,
excluding the impact of the yen, which we believe is also
reasonable and achievable. "Our board's decision to increase the
dividend a combined 42% by the end of the first quarter of 2007,
while also increasing our share repurchase by approximately 20%, is
a reflection of our continued confidence in our ability to achieve
our primary financial targets. It is also consistent with our
commitment to enhancing shareholder value. I'm very proud of our
track record of generating strong shareholder returns. For the last
one, five and 10 years, Aflac's total return has significantly
exceeded the returns of the S&P 500. And we believe that
achieving our earnings targets, increasing the cash dividend and
repurchasing our shares is an effective way to build on our record
of success." 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. Aflac's 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 Forbes magazine's Platinum 400 List of
America's Best Big Companies for five consecutive years. In January
2006, Aflac was included in Fortune magazine's list of the 100 Best
Companies to Work For in America for the eighth consecutive year.
Aflac was also included in Fortune magazine's list of the Top 50
Employers for Minorities in August 2005, and in September 2005,
Aflac Japan was named the Life Insurance Company of the Year at the
Asia Insurance Industry Awards, sponsored by the Asia Insurance
Review. 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 2006 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 9:00 a.m. (EDT), Wednesday, October 25. AFLAC
INCORPORATED AND SUBSIDIARIES CONDENSED INCOME STATEMENT (UNAUDITED
- IN MILLIONS, EXCEPT FOR SHARE AND PER-SHARE AMOUNTS) THREE MONTHS
ENDED SEPTEMBER 30, 2006 2005 % Change Total revenues $3,672 $3,669
.1% Benefits and claims 2,291 2,237 2.4 Total acquisition and
operating expenses 824 787 4.7 Earnings before income taxes 557 645
(13.5) Income taxes 190 190 Net earnings $367 $455 (19.2)% Net
earnings per share - basic $.74 $.91 (18.7)% Net earnings per share
- diluted .73 .90 (18.9) Shares used to compute earnings per share
(000): Basic 494,923 500,557 (1.1)% Diluted 500,952 507,323 (1.3)
Dividends paid per share $.13 $.11 18.2% AFLAC INCORPORATED AND
SUBSIDIARIES CONDENSED INCOME STATEMENT (UNAUDITED - IN MILLIONS,
EXCEPT FOR SHARE AND PER-SHARE AMOUNTS) NINE MONTHS ENDED SEPTEMBER
30, 2006 2005 % Change Total revenues $10,929 $10,796 1.2% Benefits
and claims 6,715 6,733 (.3) Total acquisition and operating
expenses 2,458 2,396 2.5 Earnings before income taxes 1,756 1,667
5.3 Income taxes 606 548 Net earnings $1,150 $1,119 2.8% Net
earnings per share - basic $2.32 $2.23 4.0% Net earnings per share
- diluted 2.29 2.20 4.1 Shares used to compute earnings per share
(000): Basic 496,626 501,555 (1.0)% Diluted 502,926 508,250 (1.0)
Dividends paid per share $.39 $.33 18.2% AFLAC INCORPORATED AND
SUBSIDIARIES CONDENSED BALANCE SHEET (UNAUDITED - IN MILLIONS,
EXCEPT FOR SHARE AMOUNTS) SEPTEMBER 30, 2006 2005 % Change Assets:
Total investments and cash $50,686 $49,917 1.5% Deferred policy
acquisition costs 5,930 5,621 5.5 Other assets 1,737 1,915 (9.3)
Total assets $58,353 $57,453 1.6% Liabilities and shareholders'
equity: Policy liabilities $44,968 $43,100 4.3% Notes payable 1,439
1,700 (15.3) Other liabilities 3,919 4,647 (15.7) Shareholders'
equity 8,027 8,006 .3 Total liabilities and shareholders' equity
$58,353 $57,453 1.6% Shares outstanding at end of period (000)
494,666 500,283 (1.1)% RECONCILIATION OF OPERATING EARNINGS TO NET
EARNINGS (UNAUDITED - IN MILLIONS, EXCEPT FOR PER-SHARE AMOUNTS)
THREE MONTHS ENDED SEPTEMBER 30, 2006 2005 % Change Operating
earnings $363 $333 8.9% Reconciling items, net of tax: Realized
investment gains (losses) 7 89 Impact from SFAS 133 (3) (1) Release
of deferred tax asset valuation allow - 34 Net earnings $367 $455
(19.2)% Operating earnings per diluted share $.72 $.66 9.1%
Reconciling items, net of tax: Realized investment gains (losses)
.01 .18 Impact from SFAS 133 - (.01) Release of deferred tax asset
valuation allow - .07 Net earnings per diluted share $.73 $.90
(18.9)% RECONCILIATION OF OPERATING EARNINGS TO NET EARNINGS
(UNAUDITED - IN MILLIONS, EXCEPT FOR PER-SHARE AMOUNTS) NINE MONTHS
ENDED SEPTEMBER 30, 2006 2005 % Change Operating earnings $1,103
$994 10.9% Reconciling items, net of tax: Realized investment gains
(losses) 47 99 Impact from SFAS 133 - (8) Release of deferred tax
asset valuation allow - 34 Net earnings $1,150 $1,119 2.8%
Operating earnings per diluted share $2.19 $1.96 11.7% Reconciling
items, net of tax: Realized investment gains (losses) .10 .19
Impact from SFAS 133 - (.02) Release of deferred tax asset
valuation allow - .07 Net earnings per diluted share $2.29 $2.20
4.1% FOREIGN CURRENCY TRANSLATION EFFECT ON OPERATING RESULTS (1)
(SELECTED PERCENTAGE CHANGES, UNAUDITED) THREE MONTHS ENDED
SEPTEMBER 30, 2006 Including Excluding Currency Currency Changes
Changes (2) Premium income 3.5% 6.7% Net investment income 5.1 7.4
Total benefits and expenses 3.0 6.2 Operating earnings 8.9 10.8
Operating earnings per diluted share 9.1 12.1 (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, 2006 Including
Excluding Currency Currency Changes Changes (2) Premium income 1.6%
7.0% Net investment income 3.8 7.7 Total benefits and expenses .5
5.8 Operating earnings 10.9 14.9 Operating earnings per diluted
share 11.7 15.8 (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 , or Media, Laura Kane,
+1-706-596-3493, fax, +1-706-320-2288, or , both of Aflac
Incorporated Web site: http://www.aflac.com/
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