COLUMBUS, Ga., July 23 /PRNewswire-FirstCall/ -- Aflac Incorporated
(NYSE: AFL) today reported its second quarter results. Reflecting a
stronger yen to the dollar, total revenues increased 15.2% to $4.3
billion during the second quarter of 2008, compared with $3.8
billion a year ago. Net earnings were $483 million, or $1.00 per
diluted share, compared with $415 million, or $.84 per share, a
year ago. Realized investment losses were $1 million, or nil per
diluted share in the second quarter of 2008, compared with realized
investment gains of $9 million, or $.02 per share a year ago. Net
earnings in the second quarter of 2008 included a loss of $3
million, or $.01 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
second quarter of 2007, the impact of SFAS 133 decreased net
earnings by $1 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 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 toward 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 second quarter were
$487 million, compared with $407 million in the second quarter of
2007. Operating earnings per diluted share rose 23.2% to $1.01,
compared with $.82 a year ago. The stronger yen/dollar exchange
rate increased operating earnings per diluted share by $.08 during
the quarter. Excluding the impact from the stronger yen, operating
earnings per share increased 13.4%. Results for the first six
months of 2008 also benefited from a stronger yen. Total revenues
rose 14.5% to $8.6 billion, compared with $7.5 billion in the first
half of 2007. Net earnings were $957 million, or $1.98 per diluted
share, compared with $831 million, or $1.68 per share, for the
first six months of 2007. Operating earnings for the first six
months of 2008 were $962 million, or $1.99 per diluted share,
compared with $814 million, or $1.64 per share, in 2007. Excluding
the benefit of $.13 per share from the stronger yen, operating
earnings per diluted share rose 13.4% for the first six months of
the year. AFLAC JAPAN Aflac Japan's total revenues in yen were up
2.9%. Premium income in yen rose 3.6%, and net investment income
declined .7% in the second quarter. Investment income growth in yen
terms was suppressed by the stronger yen/dollar exchange rate
because approximately 37% of Aflac Japan's second quarter
investment income was dollar-denominated. Excluding the impact of
the stronger yen, net investment income was up 5.0% in the quarter.
Due to continued improvement in the benefit ratio, the pretax
operating profit margin expanded from 17.4% to 18.2%. As a result,
pretax operating earnings in yen increased 7.5%. For the first six
months, premium income in yen increased 3.6%, and net investment
income was down .3%. Total revenues were up 2.8%, and pretax
operating earnings grew 6.1%. The average yen/dollar exchange rate
in the second quarter of 2008 was 104.50, or 15.6% stronger than
the average rate of 120.78 in the second quarter of 2007. For the
first six months, the average exchange rate was 104.77, or 14.7%
stronger than the rate of 120.13 a year ago. Aflac Japan's growth
rates in dollar terms for both the second quarter and first six
months were magnified as a result of the stronger average
yen/dollar exchange rates. Reflecting the stronger yen, premium
income in dollars rose 19.7% to $2.6 billion in the second quarter.
Net investment income was up 14.8% to $508 million. Total revenues
increased 18.9% to $3.1 billion. Pretax operating earnings advanced
24.3% to $573 million. For the first six months, premium income was
$5.2 billion, or 18.7% higher than a year ago. Net investment
income rose 14.3% to $1.0 billion. Total revenues were up 17.8% to
$6.2 billion. Pretax operating earnings were $1.1 billion, or 21.7%
higher than a year ago. Aflac Japan's total new annualized premium
sales declined 4.9% to 28.7 billion yen, or $274 million in the
second quarter. For the first six months, total new premium sales
were down .3% to 56.3 billion yen, or $537 million. Second quarter
sales results reflected an 11.1% decline in cancer product sales,
compared with a year ago. The decline in cancer insurance sales
reflected challenging comparisons to 2007 when cancer insurance
sales benefited from advanced purchases of our product prior to a
pending premium rate increase. In addition, our sales associates
focused on selling a lower premium cancer insurance product in the
second quarter that upgrades the coverage for existing
policyholders. Medical insurance sales rose 8.7% in the quarter,
benefiting from the sale of our nonstandard medical product, Gentle
EVER. Bank channel sales increased 146.4% in the second quarter,
compared with the first quarter. While that is a significant
improvement, we had expected the bank channel to do even better.
AFLAC U.S. Aflac U.S. total revenues rose 8.4% to $1.2 billion in
the second quarter. Premium income increased 9.5% to $1.1 billion
and net investment income was up .1% to $125 million. Pretax
operating earnings were $190 million, an increase of 11.1%. For the
first six months, total revenues were up 8.4% to $2.4 billion.
Premium income rose 9.4% to $2.1 billion. Net investment income
increased .7% to $248 million. Pretax operating earnings rose 11.8%
to $380 million. Total new annualized premium sales rose 4.9% to
$383 million in the second quarter of 2008. Although second quarter
sales growth was below our annual target of an 8% to 12% increase,
the rate of growth improved significantly over the first quarter of
2008. For the six months, total new annualized premium sales
increased 2.7% to $736 million. New agent recruitment continued to
be solid this year. The number of newly recruited agents rose 4.2%
in the second quarter to more than 6,700. Additionally, the average
number of weekly producing sales associates increased, rising 6.3%
in the second quarter. We continue to believe that the ongoing
expansion of a productive sales force is an important driver of
future sales growth. We also believe our success at increasing the
number of producing sales associates has resulted from the enhanced
training programs we have been implementing over the last few
years. DIVIDEND The board of directors declared the third quarter
cash dividend. The third quarter dividend of $.24 per share is
payable on September 2, 2008, to shareholders of record at the
close of business on August 20, 2008. OUTLOOK Commenting on the
company's second quarter results, Chairman and Chief Executive
Officer Daniel P. Amos stated: "I am pleased with Aflac's financial
performance for the first half of 2008. In both the United States
and Japan, our financial results have met or exceeded our
expectations so far this year. "I am encouraged by the improvement
of our U.S. sales growth in the second quarter following a very
slow start in the first quarter of this year. Knowing that we need
a 12.5% increase in the second half of the year to meet the low end
of our sales target, it will clearly be difficult to achieve the
minimum of an 8% increase for 2008. As I have mentioned previously,
we can't rule out that the U.S. economy is a contributing factor to
slower sales growth. However, we still believe our products remain
affordable to the average American consumer. And we are convinced
that the protection our products provide is even more valuable when
a significant health event occurs at a time of rising food and gas
prices, and we're working to convey that message to consumers
through our commercials and sales force. "For Aflac Japan, we were
not surprised to see weak second quarter sales. Yet, we did expect
a sales increase in the quarter. With sales being flat for the
first six months of the year, it will be more challenging to
achieve our objective of a 3% to 7% sales increase for the year
than anticipated. However, we expect to see improved sales growth
in the second half of 2008, and I still believe our sales objective
is achievable. My optimism for meeting our target is based on the
strength of our product line and the new distribution opportunities
through the bank channel and Japan Post. "One of the very favorable
attributes of Aflac's business model is our predictable earnings
growth even in periods when sales are not as predictable. It
appears that we are in one of those periods. However, even though
our sales growth has been slower than we expected so far this year,
our outlook for earnings has not changed. Our earnings growth
primarily reflects our large and profitable block of in-force
business. Importantly, the claims, expense and margin trends of our
business in force remain predictable and very favorable. As a
result, I believe we are well-positioned to achieve our earnings
targets for 2008 and 2009. "Our objective for 2008 remains an
increase of 14% to 15% in operating earnings per diluted share,
excluding the impact of foreign currency. Achieving that target
would result in operating earnings of $3.73 to $3.76 per diluted
share this year, assuming the same average exchange rate we
experienced in 2007. However, through the first half of 2008, the
yen has been significantly stronger to the dollar, compared with a
year ago. If the stronger yen persists throughout the year, it will
continue to benefit our reported results in dollar terms. Assuming
the yen averages 105 to 110 for the full year, we would expect to
report operating earnings per diluted share of $3.86 to $3.98 in
2008. Using that same exchange rate assumption, we would expect
third quarter operating earnings to be $.98 to $1.01 per diluted
share. For 2009, our objective remains a 13% to 15% increase in
operating earnings per diluted share before the impact of the
yen/dollar exchange rate." 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 list 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 been recognized three times by both Fortune magazine's list of
the Top 50 Employers for Minorities and Working Mother magazine's
list of the 100 Best Companies for Working Mothers and has also
been included in Ethisphere magazine's list of the World's Most
Ethical Companies for two consecutive years. 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
second quarter of 2008 can be found on the "Investors" page at
aflac.com. Aflac Incorporated will webcast its second quarter
conference call on the "Investors" page of aflac.com at 9:00 a.m.
(EDT), Thursday, July 24. AFLAC INCORPORATED AND SUBSIDIARIES
CONDENSED INCOME STATEMENT (UNAUDITED - IN MILLIONS, EXCEPT FOR
SHARE AND PER-SHARE AMOUNTS) THREE MONTHS ENDED JUNE 30, 2008 2007
% Change Total revenues $4,336 $3,764 15.2% Benefits and claims
2,575 2,266 13.6 Total acquisition and operating expenses 1,021 863
18.4 Earnings before income taxes 740 635 16.5 Income taxes 257 220
Net earnings $483 $415 16.4% Net earnings per share - basic $1.02
$.85 20.0% Net earnings per share - diluted 1.00 .84 19.0 Shares
used to compute earnings per share (000): Basic 474,383 487,900
(2.8)% Diluted 480,828 494,227 (2.7) Dividends paid per share $.24
$.205 17.1% AFLAC INCORPORATED AND SUBSIDIARIES CONDENSED INCOME
STATEMENT (UNAUDITED - IN MILLIONS, EXCEPT FOR SHARE AND PER-SHARE
AMOUNTS) SIX MONTHS ENDED JUNE 30, 2008 2007 % Change Total
revenues $8,603 $7,515 14.5% Benefits and claims 5,113 4,524 13.0
Total acquisition and operating expenses 2,024 1,720 17.7 Earnings
before income taxes 1,466 1,271 15.3 Income taxes 509 440 Net
earnings $957 $831 15.2% Net earnings per share - basic $2.01 $1.70
18.2% Net earnings per share - diluted 1.98 1.68 17.9 Shares used
to compute earnings per share (000): Basic 476,261 489,219 (2.6)%
Diluted 482,623 495,435 (2.6) Dividends paid per share $.48 $.39
23.1% AFLAC INCORPORATED AND SUBSIDIARIES CONDENSED BALANCE SHEET
(UNAUDITED - IN MILLIONS, EXCEPT FOR SHARE AMOUNTS) JUNE 30, 2008
2007 % Change Assets: Total investments and cash $60,892 $52,197
16.7% Deferred policy acquisition costs 7,194 6,096 18.0 Other
assets 2,466 1,821 35.4 Total assets $ 70,552 $60,114 17.4%
Liabilities and shareholders' equity: Policy liabilities $ 55,881
$45,722 22.2% Notes payable 1,539 1,392 10.6 Other liabilities
5,233 4,810 8.8 Shareholders' equity 7,899 8,190 (3.6) Total
liabilities and shareholders' equity $70,552 $60,114 17.4% Shares
outstanding at end of period (000) 476,027 488,483 (2.5)%
RECONCILIATION OF OPERATING EARNINGS TO NET EARNINGS (UNAUDITED -
IN MILLIONS, EXCEPT FOR PER-SHARE AMOUNTS) THREE MONTHS ENDED JUNE
30, 2008 2007 % Change Operating earnings $487 $407 19.7%
Reconciling items, net of tax: Realized investment gains (losses)
(1) 9 Impact from SFAS 133 (3) (1) Net earnings $483 $415 16.4%
Operating earnings per diluted share $1.01 $.82 23.2% Reconciling
items, net of tax: Realized investment gains (losses) - .02 Impact
from SFAS 133 (.01) - Net earnings per diluted share $1.00 $.84
19.0% RECONCILIATION OF OPERATING EARNINGS TO NET EARNINGS
(UNAUDITED - IN MILLIONS, EXCEPT FOR PER-SHARE AMOUNTS) SIX MONTHS
ENDED JUNE 30, 2008 2007 % Change Operating earnings $962 $814
18.1% Reconciling items, net of tax: Realized investment gains
(losses) (5) 18 Impact from SFAS 133 - (1) Net earnings $957 $831
15.2% Operating earnings per diluted share $1.99 $1.64 21.3%
Reconciling items, net of tax: Realized investment gains (losses)
(.01) .04 Impact from SFAS 133 - - Net earnings per diluted share
$1.98 $1.68 17.9% EFFECT OF FOREIGN CURRENCY ON OPERATING
RESULTS(1) (SELECTED PERCENTAGE CHANGES, UNAUDITED) Including
Excluding THREE MONTHS ENDED JUNE 30, 2008 Currency Currency
Changes Changes(2) Premium income 16.5% 5.4% Net investment income
11.2 3.7 Total benefits and expenses 14.9 4.0 Operating earnings
19.7 10.3 Operating earnings per diluted share 23.2 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. EFFECT OF
FOREIGN CURRENCY ON OPERATING RESULTS(1) (SELECTED PERCENTAGE
CHANGES, UNAUDITED) Including Excluding SIX MONTHS ENDED JUNE 30,
2008 Currency Currency Changes Changes(2) Premium income 15.8% 5.4%
Net investment income 11.1 4.0 Total benefits and expenses 14.3 4.0
Operating earnings 18.1 10.4 Operating earnings per diluted share
21.3 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 (Logo:
http://www.newscom.com/cgi-bin/prnh/20041202/CLTH019LOGO )
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, Fax: +1-706-324-6330, ; or Media, Laura Kane,
+1-706-596-3493, Fax: +1-706-320-2288, , both for Aflac
Incorporated Web site: http://www.aflac.com/
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