COLUMBUS, Georgia, April 23 /PRNewswire-FirstCall/ -- Aflac
Incorporated today reported its first quarter results. (Logo:
http://www.newscom.com/cgi-bin/prnh/20041202/CLTH019LOGO ) Total
revenues were $4.3 billion during the first quarter of 2008,
compared with $3.8 billion in the first quarter of 2007. Net
earnings were $474 million, or $.98 per diluted share, compared
with $416 million, or $.84 per share, a year ago. Net earnings
included realized investment losses of $4 million, or $.01 per
diluted share, compared with $9 million of realized gains, or $.02
per diluted share a year ago. The impact on net earnings 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, increased net earnings by $3 million, or $.01
per diluted share in the first quarter of 2008. The impact from
SFAS 133 was immaterial in the first quarter of 2007. 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. 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.
Operating earnings in the first quarter of 2008 were $475 million,
compared with $407 million in the first quarter of 2007. Operating
earnings per diluted share rose 19.5% in the quarter to $.98,
compared with $.82 a year ago. The stronger yen/dollar exchange
rate increased operating earnings per diluted share by $.05 during
the quarter. Excluding the impact from the stronger yen, operating
earnings per share increased 13.4%. During the first quarter, we
acquired 12.5 million shares of Aflac stock through a previously
announced accelerated share repurchase program. At the end of the
first quarter, we had approximately 43 million shares available for
repurchase under authorizations by the board of directors. AFLAC
JAPAN Aflac Japan's financial results in the first quarter were
solid and consistent with our expectations. Total revenues rose
2.7%. Premium income in yen increased 3.6% in the first quarter of
2008, and net investment income rose .2%. Investment income growth
in yen terms was suppressed by the stronger yen/dollar exchange
rate because approximately 37% of Aflac Japan's first quarter
investment income was dollar-denominated. Excluding the impact of
the stronger yen, Aflac Japan's net investment income rose 5.1%.
Due to the continued improvement in the benefit ratio, the pretax
operating profit margin expanded from 17.6% to 18.0%. As a result,
pretax operating earnings in yen were up 4.8%. Adjusting for the
impact of the stronger yen on Aflac Japan's dollar-denominated
investment income, pretax earnings rose 10.6%. The average
yen/dollar exchange rate in the first quarter of 2008 was 105.06,
compared with an average rate of 119.48 in the first quarter of
2007. Aflac Japan's growth rates in dollar terms were significantly
enhanced as a result of the 13.7% strengthening of the average
exchange rate during the quarter. Total revenues were $3.1 billion,
an increase of 16.6%. Premium income in dollars was $2.6 billion in
the first quarter, up 17.7% over a year ago. Net investment income
rose 13.7% to $496 million. Pretax operating earnings climbed 19.2%
in the quarter to $554 million. Aflac Japan produced
better-than-expected sales in the first quarter. Total new sales
increased 5.0% to 27.6 billion yen, or $264 million in the first
quarter. We had anticipated that first quarter sales growth would
be below our annual objective due primarily to an expected slow
start in the recently opened bank channel. Bank channel sales were
276 million yen, or just 1% of total new sales in the first
quarter. However, as the year progresses, we expect to see further
sales gains in the bank channel. By April 1, 2008, 90 banks had
agreed to offer our products to their customers. Sales in the
quarter benefited from significant improvement in our stand-alone
medical insurance sales. Medical sales were up 17.6% and reflected
a strong contribution from Gentle EVER, our nonstandard medical
product. We were also pleased with the growth of cancer insurance
sales, which reflected the success of our new Cancer Forte product.
AFLAC U.S. Aflac U.S. produced strong financial results in the
first quarter. Total revenues were up 8.4% to $1.2 billion. Premium
income increased 9.3% to $1.1 billion. In late 2007, we transferred
$450 million from Aflac U.S. to Aflac Incorporated, which resulted
in reduced invested assets and slower investment income growth for
Aflac U.S. in the first quarter. Net investment income rose 1.3% to
$123 million. Pretax operating earnings were $191 million, an
increase of 12.6% over the first quarter of 2007. As expected,
Aflac U.S. sales were weak in the first quarter. Total new
annualized premium sales were $353 million, or .4% above the first
quarter of 2007. Our sales results primarily reflected a sharp
decline in January due to an administrative change in the
processing of conversions. That processing change shifted
approximately $8 million of conversion premium from the first
quarter of this year to the fourth quarter of 2007. Sales improved
in February and March, rising at mid-single-digit rates. The
hospital indemnity category continued to perform well, increasing
14.3% for the first three months of the year. We remain committed
and focused on enhancing the distribution side of our business. We
were pleased with recruitment in the quarter. We recruited
approximately 6,500 new sales associates, an increase of 8.6%,
compared with a year ago. The number of average weekly producing
sales associates rose .2% in the quarter. DIVIDEND The board of
directors declared the second quarter cash dividend of $.24 per
share. The second quarter dividend is payable on June 2, 2008, to
shareholders of record at the close of business on May 21, 2008.
OUTLOOK Commenting on the company's first quarter results, Chairman
and Chief Executive Officer Daniel P. Amos stated: "Although we
have completed just one quarter, I believe we are on track for
another record year from a financial perspective. "Aflac Japan
posted a very good quarter, producing financial results that were
consistent with our targets. We were especially pleased to see a
continued recovery in new sales. Our sales increase of 5.0%
exceeded our expectations. Furthermore, the addition of banks as a
distribution channel should help Aflac Japan achieve its sales
objective of a 3% to 7% increase in yen for 2008. "Our financial
results for Aflac U.S. were also good. Our top line was consistent
with our outlook and pretax operating earnings were better than
expected, although we anticipated our sales would be a bit higher.
However, from the start of February through the third week of
April, our U.S. sales increased 6.5%. It will clearly be more
challenging to achieve our 2008 sales objective of an 8% to 12%
increase, but we still believe it is attainable. "As a result of
our solid first quarter, our increased confidence has allowed us to
narrow our target from a 13% to 15% increase in operating earnings
per diluted share this year, before the effect of foreign currency,
to a 14% to 15% increase. A 14% to 15% increase would result in
$3.73 to $3.76 in reported operating earnings per diluted share,
assuming the same average exchange rate in 2008, compared with
2007. However, so far this year the yen is significantly stronger
to the dollar than it was a year ago. If the stronger yen persists
throughout the year, it will favorably impact our reported results
in dollar terms. Assuming the yen averages 100 to 105 for the year,
we would expect to report operating earnings per diluted share of
$3.95 to $4.09 in 2008. Using that same exchange rate assumption,
we would expect second quarter operating earnings to be $1.00 to
$1.02 per diluted share." 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 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 Analysts Briefing
(FAB) supplement for the first quarter of 2008 can be found on the
"Investors" page at aflac.com. Aflac Incorporated will webcast its
first quarter conference call on the "Investors" page of aflac.com
at 9:00 a.m. (EDT) on Thursday, April 24. AFLAC INCORPORATED AND
SUBSIDIARIES CONDENSED INCOME STATEMENT (UNAUDITED - IN MILLIONS,
EXCEPT FOR SHARE AND PER-SHARE AMOUNTS) THREE MONTHS ENDED MARCH
31, 2008 2007 % Change Total revenues $4,267 $3,751 13.8% Benefits
and claims 2,538 2,258 12.4 Total acquisition and operating
expenses 1,003 857 17.0 Earnings before income taxes 726 636 14.1
Income taxes 252 220 Net earnings $474 $416 13.9% Net earnings per
share - basic $.99 $.85 16.5% Net earnings per share - diluted .98
.84 16.7 Shares used to compute earnings per share (000): Basic
478,138 490,554 (2.5)% Diluted 484,417 496,658 (2.5) Dividends paid
per share $.24 $.185 29.7% AFLAC INCORPORATED AND SUBSIDIARIES
CONDENSED BALANCE SHEET (UNAUDITED - IN MILLIONS, EXCEPT FOR SHARE
AMOUNTS) MARCH 31, 2008 2007 % Change Assets: Total investments and
cash $62,788 $53,268 17.9% Deferred policy acquisition costs 7,354
6,157 19.4 Other assets 2,127 1,767 20.4 Total assets $72,269
$61,192 18.1% Liabilities and shareholders' equity: Policy
liabilities $57,796 $46,651 23.9% Notes payable 1,606 1,434 12.0
Other liabilities 4,733 4,618 2.5 Shareholders' equity 8,134 8,489
(4.2) Total liabilities and shareholders' equity $72,269 $61,192
18.1% Shares outstanding at end of period (000) 475,091 488,832
(2.8)% RECONCILIATION OF OPERATING EARNINGS TO NET EARNINGS
(UNAUDITED - IN MILLIONS, EXCEPT FOR PER-SHARE AMOUNTS) THREE
MONTHS ENDED MARCH 31, 2008 2007 % Change Operating earnings $475
$407 16.6% Reconciling items, net of tax: Realized investment gains
(losses) (4) 9 Impact from SFAS 133 3 - Net earnings $474 $416
13.9% Operating earnings per diluted share $.98 $.82 19.5%
Reconciling items, net of tax: Realized investment gains (losses)
(.01) .02 Impact from SFAS 133 .01 - Net earnings per diluted share
$.98 $.84 16.7% EFFECT OF FOREIGN CURRENCY ON OPERATING RESULTS(1)
(SELECTED PERCENTAGE CHANGES, UNAUDITED) THREE MONTHS ENDED MARCH
31, 2008 Including Excluding Currency Currency Changes Changes(2)
Premium income 15.2% 5.4% Net investment income 10.9 4.3 Total
benefits and expenses 13.7 4.1 Operating earnings 16.6 10.5
Operating earnings per diluted share 19.5 13.4 (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. 2008 OPERATING EARNINGS
PER SHARE SCENARIOS Average Annual Exchange Operating % Growth Yen
Rate EPS Over 2007 Impact 100 $4.06 - 4.09 24.2 - 25.1% $.33 105
3.95 - 3.98 20.8 - 21.7 .22 110 3.86 - 3.89 18.0 - 19.0 .13 115
3.78 - 3.81 15.6 - 16.5 .05 117.93* 3.73 - 3.76 14.1 - 15.0 - 120
3.70 - 3.73 13.1 - 14.1 (.03) 125 3.63 - 3.66 11.0 - 11.9 (.10)
*Actual 2007 weighted-average exchange rate 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, including changes to health care and
health insurance delivery; 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 the 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. 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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