COLUMBUS, Ga., July 28, 2021 /PRNewswire/ -- Aflac
Incorporated (NYSE: AFL) today reported its second quarter
results.
Total revenues were $5.6 billion
in the second quarter of 2021, compared with $5.4 billion in the second quarter of 2020. Net
earnings were $1.1 billion, or
$1.62 per diluted share, compared
with $805 million, or $1.12 per diluted share a year ago, driven by
higher net investment gains.
Net earnings in the second quarter of 2021 included pretax
adjusted net investment gains* of $85
million, or $0.12 per diluted
share, compared with pretax adjusted net investment losses of
$166 million, or $0.23 per diluted share a year ago, which are
excluded from adjusted earnings*. The adjusted net investment gains
were driven by an increase in the fair value of equity securities
of $170 million, a decrease in the
allowance associated with the company's estimate of current
expected credit losses (CECL) of $12
million, net gains from sales and redemptions of
$6 million, all of which were
partially offset by net losses from certain derivatives and foreign
currency activities of $103
million.
The average yen/dollar exchange rate* in the second quarter of
2021 was 109.48, or 1.7% weaker than the average rate of 107.65 in
the second quarter of 2020. For the first six months, the
average exchange rate was 107.79, or 0.4% stronger than
the rate of 108.25 a year ago.
Total investments and cash at the end of June 2021 were $146.7
billion, compared with $142.2
billion at June 30, 2020. In
the second quarter, Aflac Incorporated repurchased $500 million, or 9.2 million of its common
shares. At the end of June 2021, the
company had 76.5 million remaining shares authorized for
repurchase.
Shareholders' equity was $33.7
billion, or $50.20 per share,
at June 30, 2021, compared with $29.4
billion, or $41.21 per share,
at June 30, 2020. Shareholders'
equity at the end of the second quarter included a net unrealized
gain on investment securities and derivatives of $10.0 billion, compared with a net unrealized
gain of $8.5 billion at June 30, 2020. Shareholders' equity at the end of
the second quarter also included an unrealized foreign currency
translation loss of $1.7 billion,
compared with an unrealized foreign currency translation loss of
$1.5 billion at June 30, 2020. The annualized return on average
shareholders' equity in the second quarter was 13.4%.
Adjusted earnings in the second quarter were $1.1 billion, compared with $921 million in the second quarter of 2020,
reflecting an increase of 17.3% driven by lower-than-expected
benefit ratios and higher net investment income, primarily in
Japan, and a favorable effective
tax rate. Adjusted earnings included pretax variable investment
income of $137 million on alternative
investments, which was $112 million
above long-term return expectations. Adjusted earnings per diluted
share* increased 24.2% to $1.59 in
the quarter. The weaker yen/dollar exchange rate impacted adjusted
earnings per diluted share by $0.01.
For the first six months of 2021, total adjusted
revenues were up 8.2% to $11.4 billion,
compared with $10.6 billion in the
first half of 2020. Net earnings were $2.4 billion, or $3.49 per diluted share, compared with
$1.4 billion, or $1.89 per
diluted share, for the first six months of 2020.
Adjusted earnings for the first half of
2021 were $2.1 billion, or $3.11 per diluted
share, compared with $1.8 billion, or $2.49 per
diluted share, in 2020. Adjusted earnings included
$171 million of pretax variable
investment income on alternative investments, which was
$137 million above long-term return
expectations. Excluding the positive impact of $0.01 per
share from the stronger yen/dollar exchange rate,
adjusted earnings per diluted share increased 24.5% to
$3.10 for the first six
months of 2021.
Shareholders' equity excluding AOCI (or adjusted book value*)
was $25.7 billion, or $38.27 per share at June 30, 2021, compared
with $22.7 billion, or $31.75 per share, at June
30, 2020. The annualized adjusted return on equity excluding
foreign currency impact* in the second quarter was 17.0%.
AFLAC JAPAN
In yen terms, Aflac Japan's net premium income was ¥327.1
billion for the quarter, or 3.8% lower than a year ago, mainly due
to limited-pay products reaching paid-up status and constrained
sales from the impact of pandemic conditions. Adjusted net
investment income* increased 27.4% to ¥86.7 billion, mainly due to
higher alternative and floating rate income and lower hedge costs.
Total adjusted revenues* in yen increased 1.4% to ¥414.8 billion.
Pretax adjusted earnings in yen for the quarter increased 22.0% on
a reported basis, due to higher net investment income and a decline
in the third sector benefit ratio from a reserve release resulting
from lower claims activity associated with pandemic conditions.
Pretax adjusted earnings increased 21.1% on a currency-neutral
basis. The pretax adjusted profit margin for the Japan segment was 26.5%, compared with 22.0% a
year ago. The increase in the profit margin is largely due to the
improvements in net investment income and the benefit ratio.
For the first six months, premium income in yen
was ¥657.7 billion, or 3.7% lower than a year
ago. Adjusted net investment
income increased 17.0% to ¥161.3 billion. Total
adjusted revenues in yen
were down 0.2% to ¥821.3 billion. Pretax
adjusted earnings were ¥203.8 billion, or 11.3% higher than a
year ago.
In dollar terms, net premium income decreased 5.4% to
$3.0 billion in the second quarter.
Adjusted net investment income increased 25.1% to $792 million. Total adjusted revenues declined by
0.4% to $3.8 billion. Pretax adjusted
earnings increased 19.7% to $1.0
billion.
For the first six months, premium income in dollars
was $6.1 billion, or 3.1% lower than a year
ago. Adjusted net investment
income increased 17.3% to $1.5 billion. Total
adjusted revenues were up 0.3% to $7.6 billion.
Pretax adjusted earnings were $1.9 billion,
or 11.6% higher than a year ago.
For the quarter, total new annualized premium sales (sales)
increased 38.4% to ¥13.6 billion, or $124
million. This reflects sales of our new medical product
and improved pandemic conditions compared to the prior year. For
the first six months, total new annualized premium sales (sales)
increased 15.7% to ¥27.6 billion, or $256
million.
AFLAC U.S.
Aflac U.S. net premium income declined 3.4% to $1.4 billion in the second quarter, mainly due to
constrained sales over the past year. Adjusted net investment
income increased 9.9% to $189 million
primarily due to higher variable net investment income. Total
adjusted revenues were down 1.8% to $1.6
billion, largely due to a decline in earned premium. Pretax
adjusted earnings were $413 million,
3.1% lower than a year ago, which was primarily driven by lower
earned premium and higher expenses despite lower benefits. The
pretax adjusted profit margin for the U.S. segment was 25.4%,
compared with 25.7% a year ago.
For the first six months, premium income declined 3.8% to
$2.8 billion. Adjusted net investment
income increased 5.2% to $366
million. Total adjusted revenues were down 2.7% to
$3.3 billion. Pretax adjusted
earnings were $859.0 million, or
14.2% higher than a year ago.
Aflac U.S. sales increased 64.1% in the quarter to $264 million, reflecting improved pandemic
conditions. For the first half of the year, total new sales
increased 6.6% to $515 million.
CORPORATE AND OTHER
For the quarter, total adjusted revenues decreased 50.0% to
$50 million, primarily due to a
$45 million decline in adjusted net
investment income, which includes the impact of the amortization of
an increased allocation to tax-favored investments as well as lower
yields. Pretax adjusted earnings were a loss of $76 million, compared with a loss of $30 million a year ago, primarily reflecting
lower adjusted net investment income.
For the first six months of the year, total adjusted revenues
decreased 34.8% to $133 million,
primarily due to a $65 million
decrease in adjusted net investment income. Pretax adjusted
earnings were a loss of $102 million,
compared with a loss of $28 million a
year ago.
DIVIDEND
The board of directors declared the third quarter dividend of
$0.33 per share, payable on
September 1, 2021 to shareholders of record at the close of
business on August 18, 2021.
OUTLOOK
Commenting on the company's results, Chairman and Chief
Executive Officer Daniel P. Amos
stated: "The company generated strong earnings for the first six
months, largely supported by low benefit ratios associated with
pandemic conditions and better-than-expected returns from
alternative investments. With respect to second quarter sales
results in the United States and
Japan, we continued to see
improvement and expect a stronger second half of the year in both
countries. We remain cautiously optimistic and vigilant as
vaccination efforts continue in the face of uncertainty associated
with emerging variants.
"Looking at our operations in Japan, second quarter sales improved year over
year, continuing to reflect a boost from the first quarter launch
of our new medical product. We continue to navigate evolving
pandemic conditions in Japan,
including the continued state of emergency in Tokyo and select prefectures. We are pleased
with the continued strengthening of our strategic alliance with
Japan Post Holdings, which includes initiatives to foster digital
transformation and innovation. In addition, Japan Post Group's
resumption of proactive sales paves the way for gradual improvement
in Aflac cancer insurance sales in the second half of the year.
"In the U.S., small businesses are still in recovery mode, which
we expect to continue through 2021. At the same time, larger
businesses remain focused on returning employees to the worksite,
rather than modifying the benefits for their employees. We continue
to work toward reinforcing our position and generating stronger
sales in the second half of 2021.
"As always, we remain committed to prudent liquidity and capital
management. We continue to maintain strong capital ratios on behalf
of our policyholders in both the U.S. and Japan. We treasure our 38-year track record of
dividend growth and remain committed to extending it, supported by
the strength of our capital and cash flows. At the same time, we
will continue to tactically repurchase shares, focused on
integrating the growth investments we have made in our platform. By
doing so, we look to emerge from this period in a continued
position of strength and leadership."
*See Non-U.S. GAAP Financial Measures section for an explanation
of foreign exchange and its impact on the financial statements and
definitions of the non-U.S. GAAP financial measures used in this
earnings release, as well as a reconciliation of such non-U.S. GAAP
financial measures to the most comparable U.S. GAAP financial
measures.
ABOUT AFLAC INCORPORATED
Aflac Incorporated (NYSE: AFL) is a Fortune 500 company helping
provide protection to more than 50 million people through its
subsidiaries in Japan and the
U.S., where it is a leading supplemental insurer by paying cash
fast when policyholders get sick or injured. For more than six
decades, insurance policies of Aflac Incorporated's subsidiaries
have given policyholders the opportunity to focus on recovery, not
financial stress. Aflac Life Insurance Japan is the leading
provider of medical and cancer insurance in Japan where it insures 1 in 4 households. For
15 consecutive years, Aflac Incorporated has been recognized by
Ethisphere as one of the World's Most Ethical Companies. In 2021,
Fortune included Aflac Incorporated on its list of World's Most
Admired Companies for the 20th time, and Bloomberg added Aflac
Incorporated to its Gender-Equality Index, which tracks the
financial performance of public companies committed to supporting
gender equality through policy development, representation and
transparency, for the second consecutive year. To find out how to
get help with expenses health insurance doesn't cover, get to know
us at aflac.com. Investors may learn more about Aflac Incorporated
and its commitment to ESG and social responsibility at
investors.aflac.com and esg.aflac.com.
A copy of Aflac's Financial Analysts Briefing (FAB) supplement
for the quarter can be found on the "Investors" page at
aflac.com.
Aflac Incorporated will webcast its quarterly conference call
via the "Investors" page of aflac.com at 9:00 a.m. (ET) on Thursday, July 29,
2021.
Note: Tables within this document may not foot due to
rounding.
AFLAC INCORPORATED
AND SUBSIDIARIES CONDENSED INCOME STATEMENT
|
(UNAUDITED – IN
MILLIONS, EXCEPT FOR SHARE AND PER-SHARE AMOUNTS)
|
|
|
|
|
|
|
|
THREE MONTHS ENDED
JUNE 30,
|
|
2021
|
|
2020
|
|
% Change
|
Total
revenues
|
|
$
|
5,564
|
|
|
$
|
5,407
|
|
|
2.9
|
%
|
Benefits and claims,
net
|
|
2,653
|
|
|
2,897
|
|
|
(8.4)
|
|
Total acquisition and
operating expenses
|
|
1,538
|
|
|
1,440
|
|
|
6.8
|
|
Earnings before
income taxes
|
|
1,373
|
|
|
1,070
|
|
|
28.3
|
|
Income
taxes
|
|
268
|
|
|
265
|
|
|
|
Net
earnings
|
|
$
|
1,105
|
|
|
$
|
805
|
|
|
37.3
|
%
|
Net earnings per
share – basic
|
|
$
|
1.63
|
|
|
$
|
1.12
|
|
|
45.5
|
%
|
Net earnings per
share – diluted
|
|
1.62
|
|
|
1.12
|
|
|
44.6
|
|
Shares used to
compute earnings per share (000):
|
|
|
|
|
|
|
Basic
|
|
678,050
|
|
|
717,889
|
|
|
(5.5)
|
%
|
Diluted
|
|
680,920
|
|
|
719,764
|
|
|
(5.4)
|
|
Dividends paid per
share
|
|
$
|
0.33
|
|
|
$
|
0.28
|
|
|
17.9
|
%
|
AFLAC INCORPORATED
AND SUBSIDIARIES CONDENSED INCOME STATEMENT
|
(UNAUDITED – IN
MILLIONS, EXCEPT FOR SHARE AND PER-SHARE AMOUNTS)
|
|
|
|
|
|
|
|
SIX MONTHS ENDED
JUNE 30,
|
|
2021
|
|
2020
|
|
% Change
|
Total
revenues
|
|
$
|
11,433
|
|
|
$
|
10,569
|
|
|
8.2
|
%
|
Benefits and claims,
net
|
|
5,387
|
|
|
5,837
|
|
|
(7.7)
|
|
Total acquisition and
operating expenses
|
|
3,069
|
|
|
2,943
|
|
|
4.3
|
|
Earnings before
income taxes
|
|
2,977
|
|
|
1,789
|
|
|
66.4
|
|
Income
taxes
|
|
579
|
|
|
419
|
|
|
|
Net
earnings
|
|
$
|
2,398
|
|
|
$
|
1,370
|
|
|
75.0
|
%
|
Net earnings per
share – basic
|
|
$
|
3.51
|
|
|
$
|
1.90
|
|
|
84.7
|
%
|
Net earnings per
share – diluted
|
|
3.49
|
|
|
1.89
|
|
|
84.7
|
|
Shares used to
compute earnings per share (000):
|
|
|
|
|
|
|
Basic
|
|
683,464
|
|
|
721,128
|
|
|
(5.2)
|
%
|
Diluted
|
|
686,400
|
|
|
723,638
|
|
|
(5.1)
|
|
Dividends paid per
share
|
|
$
|
0.66
|
|
|
$
|
0.56
|
|
|
17.9
|
%
|
AFLAC INCORPORATED
AND SUBSIDIARIES CONDENSED BALANCE SHEET
|
(UNAUDITED – IN
MILLIONS, EXCEPT FOR SHARE AMOUNTS)
|
|
|
|
|
|
|
|
JUNE
30,
|
|
2021
|
|
2020
|
|
% Change
|
Assets:
|
|
|
|
|
|
|
Total investments and
cash
|
|
$
|
146,709
|
|
|
$
|
142,233
|
|
|
3.1
|
%
|
Deferred policy
acquisition costs
|
|
9,810
|
|
|
10,222
|
|
|
(4.0)
|
|
Other
assets
|
|
4,973
|
|
|
4,632
|
|
|
7.4
|
|
Total
assets
|
|
$
|
161,492
|
|
|
$
|
157,087
|
|
|
2.8
|
%
|
Liabilities and
shareholders' equity:
|
|
|
|
|
|
|
Policy
liabilities
|
|
$
|
108,286
|
|
|
$
|
109,103
|
|
|
(0.7)
|
%
|
Notes payable and
lease obligations
|
|
8,121
|
|
|
7,771
|
|
|
4.5
|
|
Other
liabilities
|
|
11,350
|
|
|
10,793
|
|
|
5.2
|
|
Shareholders'
equity
|
|
33,735
|
|
|
29,420
|
|
|
14.7
|
|
Total liabilities and
shareholders' equity
|
|
$
|
161,492
|
|
|
$
|
157,087
|
|
|
2.8
|
%
|
Shares outstanding at
end of period (000)
|
|
671,990
|
|
|
713,908
|
|
|
(5.9)
|
%
|
NON-U.S. GAAP FINANCIAL MEASURES
This document includes references to the Company's financial
performance measures which are not calculated in accordance with
United States generally accepted
accounting principles (U.S. GAAP) (non-U.S. GAAP). The financial
measures exclude items that the Company believes may obscure the
underlying fundamentals and trends in insurance operations because
they tend to be driven by general economic conditions and events or
related to infrequent activities not directly associated with
insurance operations.
Due to the size of Aflac Japan, where the functional currency is
the Japanese yen, fluctuations in the yen/dollar exchange rate can
have a significant effect on reported results. In periods when the
yen weakens, translating yen into dollars results in fewer dollars
being reported. When the yen strengthens, translating yen into
dollars results in more dollars being reported. Consequently, yen
weakening has the effect of suppressing current period results in
relation to the comparable prior period, while yen strengthening
has the effect of magnifying current period results in relation to
the comparable prior period. A significant portion of the Company's
business is conducted in yen and never converted into dollars but
translated into dollars for U.S. GAAP reporting purposes, which
results in foreign currency impact to earnings, cash flows and book
value on a U.S. GAAP basis. Management evaluates the Company's
financial performance both including and excluding the impact of
foreign currency translation to monitor, respectively, cumulative
currency impacts on book value and the currency-neutral operating
performance over time. The average yen/dollar exchange rate is
based on the published MUFG Bank, Ltd. telegraphic transfer middle
rate (TTM).
The company defines the non-U.S. GAAP financial measures
included in this earnings release as follows:
- Adjusted earnings are adjusted revenues less benefits and
adjusted expenses. Adjusted earnings per share (basic or diluted)
are the adjusted earnings for the period divided by the weighted
average outstanding shares (basic or diluted) for the period
presented. The adjustments to both revenues and expenses account
for certain items that cannot be predicted or that are outside
management's control. Adjusted revenues are U.S. GAAP total
revenues excluding adjusted net investment gains and losses.
Adjusted expenses are U.S. GAAP total acquisition and operating
expenses including the impact of interest cash flows from
derivatives associated with notes payable but excluding any
nonrecurring or other items not associated with the normal course
of the Company's insurance operations and that do not reflect the
Company's underlying business performance. Management uses adjusted
earnings and adjusted earnings per diluted share to evaluate the
financial performance of the Company's insurance operations on a
consolidated basis and believes that a presentation of these
financial measures is vitally important to an understanding of the
underlying profitability drivers and trends of the Company's
insurance business. The most comparable U.S. GAAP financial
measures for adjusted earnings and adjusted earnings per share
(basic or diluted) are net earnings and net earnings per share,
respectively.
- Adjusted earnings excluding current period foreign currency
impact are computed using the average foreign currency exchange
rate for the comparable prior-year period, which eliminates
fluctuations driven solely by foreign currency exchange rate
changes. Adjusted earnings per diluted share excluding current
period foreign currency impact is adjusted earnings excluding
current period foreign currency impact divided by the weighted
average outstanding diluted shares for the period presented. The
Company considers adjusted earnings excluding current period
foreign currency impact and adjusted earnings per diluted share
excluding current period foreign currency impact important because
a significant portion of the Company's business is conducted in
Japan and foreign exchange rates
are outside management's control; therefore, the Company believes
it is important to understand the impact of translating foreign
currency (primarily Japanese yen) into U.S. dollars. The most
comparable U.S. GAAP financial measures for adjusted earnings
excluding current period foreign currency impact and adjusted
earnings per diluted share excluding current period foreign
currency impact are net earnings and net earnings per share,
respectively.
- Adjusted return on equity is adjusted earnings divided by
average shareholders' equity, excluding accumulated other
comprehensive income (AOCI). Management uses adjusted return on
equity to evaluate the financial performance of the Company's
insurance operations on a consolidated basis and believes that a
presentation of this financial measure is vitally important to an
understanding of the underlying profitability drivers and trends of
the Company's insurance business. The Company considers adjusted
return on equity important as it excludes components of AOCI, which
fluctuate due to market movements that are outside management's
control. The most comparable U.S. GAAP financial measure for
adjusted return on equity is return on average equity (ROE) as
determined using net earnings and average total shareholders'
equity.
- Adjusted return on equity excluding foreign currency impact is
adjusted earnings excluding the current period foreign currency
impact divided by average shareholders' equity, excluding AOCI. The
Company considers adjusted return on equity excluding foreign
currency impact important as it excludes changes in foreign
currency and components of AOCI, which fluctuate due to market
movements that are outside management's control. The most
comparable U.S. GAAP financial measure for adjusted return on
equity excluding foreign currency impact is ROE as determined using
net earnings and average total shareholders' equity.
- Amortized hedge costs/income represent costs/income incurred or
recognized as a result of using foreign currency derivatives to
hedge certain foreign exchange risks in the Company's Japan segment or in the Corporate and Other
segment. These amortized hedge costs/ income are estimated at the
inception of the derivatives based on the specific terms of each
contract and are recognized on a straight-line basis over the term
of the hedge. The Company believes that amortized hedge
costs/income measure the periodic currency risk management
costs/income related to hedging certain foreign currency exchange
risks and are an important component of net investment income.
There is no comparable U.S. GAAP financial measure for amortized
hedge costs/ income.
- Adjusted book value is the U.S. GAAP book value (representing
total shareholders' equity), less AOCI as recorded on the U.S. GAAP
balance sheet. Adjusted book value per common share is adjusted
book value at the period end divided by the ending outstanding
common shares for the period presented. The Company considers
adjusted book value and adjusted book value per common share
important as they exclude AOCI, which fluctuates due to market
movements that are outside management's control. The most
comparable U.S. GAAP financial measures for adjusted book value and
adjusted book value per common share are total book value and total
book value per common share, respectively.
- Adjusted book value including unrealized foreign currency
translation gains and losses is adjusted book value plus unrealized
foreign currency translation gains and losses. Adjusted book value
including unrealized foreign currency translation gains and losses
per common share is adjusted book value plus unrealized foreign
currency translation gains and losses at the period end divided by
the ending outstanding common shares for the period presented. The
Company considers adjusted book value including unrealized foreign
currency translation gains and losses, and its related per share
financial measure, important as they exclude certain components of
AOCI, which fluctuate due to market movements that are outside
management's control; however, it includes the impact of foreign
currency as a result of the significance of Aflac's Japan operation. The most comparable U.S. GAAP
financial measures for adjusted book value including unrealized
foreign currency translation gains and losses and adjusted book
value including unrealized foreign currency translation gains and
losses per common share are total book value and total book value
per common share, respectively.
- Adjusted net investment income is net investment income
adjusted for i) amortized hedge cost/income related to foreign
currency exposure management strategies and certain derivative
activity, and ii) net interest cash flows from foreign currency and
interest rate derivatives associated with certain investment
strategies, which are reclassified from net investment gains and
losses to net investment income. The Company considers adjusted net
investment income important because it provides a more
comprehensive understanding of the costs and income associated with
the Company's investments and related hedging strategies. The most
comparable U.S. GAAP financial measure for adjusted net investment
income is net investment income.
- Adjusted net investment gains and losses are net investment
gains and losses adjusted for i) amortized hedge cost/income
related to foreign currency exposure management strategies and
certain derivative activity, ii) net interest cash flows from
foreign currency and interest rate derivatives associated with
certain investment strategies, which are both reclassified to net
investment income, and iii) the impact of interest cash flows from
derivatives associated with notes payable, which is reclassified to
interest expense as a component of total adjusted expenses. The
Company considers adjusted net investment gains and losses
important as it represents the remainder amount that is considered
outside management's control, while excluding the components that
are within management's control and are accordingly reclassified to
net investment income and interest expense. The most comparable
U.S. GAAP financial measure for adjusted net investment gains and
losses is net investment gains and losses.
RECONCILIATION OF
NET EARNINGS TO ADJUSTED EARNINGS
|
(UNAUDITED – IN
MILLIONS, EXCEPT FOR PER-SHARE AMOUNTS)
|
|
|
|
|
|
|
|
THREE MONTHS ENDED
JUNE 30,
|
|
2021
|
|
2020
|
|
% Change
|
|
|
|
|
|
|
|
Net
earnings
|
|
$
|
1,105
|
|
|
$
|
805
|
|
|
37.3
|
%
|
|
|
|
|
|
|
|
Items impacting net
earnings:
|
|
|
|
|
|
|
Adjusted net
investment (gains) losses
|
|
(85)
|
|
|
166
|
|
|
|
Other and
non-recurring (income) loss
|
|
53
|
|
|
—
|
|
|
|
Income tax (benefit)
expense on items excluded
from adjusted earnings
|
|
7
|
|
|
(50)
|
|
|
|
|
|
|
|
|
|
|
Adjusted
earnings
|
|
1,080
|
|
|
921
|
|
|
17.3
|
%
|
Current period
foreign currency impact1
|
|
6
|
|
|
N/A
|
|
|
|
Adjusted earnings
excluding current period foreign
currency impact2
|
|
$
|
1,086
|
|
|
$
|
921
|
|
|
17.9
|
%
|
|
|
|
|
|
|
|
Net earnings per
diluted share
|
|
$
|
1.62
|
|
|
$
|
1.12
|
|
|
44.6
|
%
|
|
|
|
|
|
|
|
Items impacting net
earnings:
|
|
|
|
|
|
|
Adjusted net
investment (gains) losses
|
|
(0.12)
|
|
|
0.23
|
|
|
|
Other and
non-recurring (income) loss
|
|
0.08
|
|
|
—
|
|
|
|
Income tax (benefit)
expense on items excluded
from adjusted earnings
|
|
0.01
|
|
|
(0.07)
|
|
|
|
|
|
|
|
|
|
|
Adjusted earnings per
diluted share
|
|
1.59
|
|
|
1.28
|
|
|
24.2
|
%
|
Current period
foreign currency impact1
|
|
0.01
|
|
|
N/A
|
|
|
|
Adjusted earnings per
diluted share excluding
current period foreign currency
impact2
|
|
$
|
1.59
|
|
|
$
|
1.28
|
|
|
24.2
|
%
|
|
1 Prior
period foreign currency impact reflected as "N/A" to isolate change
for current period only.
|
2 Amounts excluding
current period foreign currency impact are computed using the
average foreign currency exchange rate
for the comparable prior-year period,
which eliminates fluctuations driven solely by foreign currency
exchange rate changes.
|
RECONCILIATION OF
NET EARNINGS TO ADJUSTED EARNINGS
|
(UNAUDITED – IN
MILLIONS, EXCEPT FOR PER-SHARE AMOUNTS)
|
|
|
|
|
|
|
|
SIX MONTHS ENDED
JUNE 30,
|
|
2021
|
|
2020
|
|
% Change
|
|
|
|
|
|
|
|
Net
earnings
|
|
$
|
2,398
|
|
|
$
|
1,370
|
|
|
75.0
|
%
|
|
|
|
|
|
|
|
Items impacting net
earnings:
|
|
|
|
|
|
|
Adjusted net
investment (gains) losses
|
|
(388)
|
|
|
614
|
|
|
|
Other and
non-recurring (income) loss
|
|
59
|
|
|
15
|
|
|
|
Income tax (benefit)
expense on items excluded from
adjusted earnings
|
|
69
|
|
|
(196)
|
|
|
|
|
|
|
|
|
|
|
Adjusted
earnings
|
|
2,138
|
|
|
1,803
|
|
|
18.6
|
%
|
Current period
foreign currency impact1
|
|
(7)
|
|
|
N/A
|
|
|
|
Adjusted earnings
excluding current period foreign
currency
impact2
|
|
$
|
2,131
|
|
|
$
|
1,803
|
|
|
18.2
|
%
|
|
|
|
|
|
|
|
Net earnings per
diluted share
|
|
$
|
3.49
|
|
|
$
|
1.89
|
|
|
84.7
|
%
|
|
|
|
|
|
|
|
Items impacting net
earnings:
|
|
|
|
|
|
|
Adjusted net
investment (gains) losses
|
|
(0.57)
|
|
|
0.85
|
|
|
|
Other and
non-recurring (income) loss
|
|
0.09
|
|
|
0.02
|
|
|
|
Income tax (benefit)
expense on items excluded from
adjusted earnings
|
|
0.10
|
|
|
(0.27)
|
|
|
|
|
|
|
|
|
|
|
Adjusted earnings per
diluted share
|
|
3.11
|
|
|
2.49
|
|
|
24.9
|
%
|
Current period
foreign currency impact1
|
|
(0.01)
|
|
|
N/A
|
|
|
|
Adjusted earnings per
diluted share excluding
current period foreign
currency impact2
|
|
$
|
3.10
|
|
|
$
|
2.49
|
|
|
24.5
|
%
|
|
1
Prior period foreign currency impact reflected as "N/A" to isolate
change for current period only.
|
2 Amounts excluding
current period foreign currency impact are computed using the
average foreign currency exchange rate
for the comparable prior-year period,
which eliminates fluctuations driven solely by foreign currency
exchange rate changes.
|
RECONCILIATION OF
NET INVESTMENT (GAINS) LOSSES TO ADJUSTED NET INVESTMENT (GAINS)
LOSSES
|
(UNAUDITED – IN
MILLIONS)
|
|
|
|
|
|
|
|
THREE MONTHS ENDED
JUNE 30,
|
|
2021
|
|
2020
|
|
% Change
|
|
|
|
|
|
|
|
Net investment
(gains) losses
|
|
$
|
(89)
|
|
|
$
|
170
|
|
|
(152.4)
|
%
|
|
|
|
|
|
|
|
Items impacting net
investment (gains) losses:
|
|
|
|
|
|
|
Amortized hedge
costs
|
|
(17)
|
|
|
(50)
|
|
|
|
Amortized hedge
income
|
|
16
|
|
|
27
|
|
|
|
Net interest cash
flows from derivatives associated with certain investment
strategies
|
|
(9)
|
|
|
6
|
|
|
|
Interest rate
component of the change in fair value of
foreign currency swaps on notes
payable1
|
|
14
|
|
|
14
|
|
|
|
|
|
|
|
|
|
|
Adjusted net
investment (gains) losses
|
|
$
|
(85)
|
|
|
$
|
166
|
|
|
(151.2)
|
%
|
|
1 Amounts are
included with interest expenses that are a component of adjusted
expenses.
|
RECONCILIATION OF
NET INVESTMENT INCOME TO ADJUSTED NET INVESTMENT
INCOME
|
(UNAUDITED – IN
MILLIONS)
|
|
|
|
|
|
|
|
THREE MONTHS ENDED
JUNE 30,
|
|
2021
|
|
2020
|
|
% Change
|
|
|
|
|
|
|
|
Net investment
income
|
|
$
|
993
|
|
|
$
|
870
|
|
|
14.1
|
%
|
|
|
|
|
|
|
|
Items impacting net
investment income:
|
|
|
|
|
|
|
Amortized hedge
costs
|
|
(17)
|
|
|
(50)
|
|
|
|
Amortized hedge
income
|
|
16
|
|
|
27
|
|
|
|
Net interest cash
flows from derivatives associated with certain investment
strategies
|
|
(9)
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
Adjusted net
investment income
|
|
$
|
983
|
|
|
$
|
853
|
|
|
15.2
|
%
|
RECONCILIATION OF
NET INVESTMENT (GAINS) LOSSES TO ADJUSTED NET INVESTMENT (GAINS)
LOSSES
|
(UNAUDITED – IN
MILLIONS)
|
|
|
|
|
|
|
|
SIX MONTHS ENDED
JUNE 30,
|
|
2021
|
|
2020
|
|
% Change
|
|
|
|
|
|
|
|
Net investment
(gains) losses
|
|
$
|
(396)
|
|
|
$
|
633
|
|
|
(162.6)
|
%
|
|
|
|
|
|
|
|
Items impacting net
investment (gains) losses:
|
|
|
|
|
|
|
Amortized hedge
costs
|
|
(36)
|
|
|
(105)
|
|
|
|
Amortized hedge
income
|
|
33
|
|
|
56
|
|
|
|
Net interest cash
flows from derivatives associated with certain investment
strategies
|
|
(17)
|
|
|
—
|
|
|
|
Interest rate
component of the change in fair value of
foreign currency swaps on notes
payable1
|
|
27
|
|
|
30
|
|
|
|
|
|
|
|
|
|
|
Adjusted net
investment (gains) losses
|
|
$
|
(388)
|
|
|
$
|
614
|
|
|
(163.2)
|
%
|
|
1 Amounts are
included with interest expenses that are a component of adjusted
expenses.
|
RECONCILIATION OF
NET INVESTMENT INCOME TO ADJUSTED NET INVESTMENT
INCOME
|
(UNAUDITED – IN
MILLIONS)
|
|
|
|
|
|
|
|
SIX MONTHS ENDED
JUNE 30,
|
|
2021
|
|
2020
|
|
% Change
|
|
|
|
|
|
|
|
Net investment
income
|
|
$
|
1,918
|
|
|
$
|
1,774
|
|
|
8.1
|
%
|
|
|
|
|
|
|
|
Items impacting net
investment income:
|
|
|
|
|
|
|
Amortized hedge
costs
|
|
(36)
|
|
|
(105)
|
|
|
|
Amortized hedge
income
|
|
33
|
|
|
56
|
|
|
|
Net interest cash
flows from derivatives associated with certain investment
strategies
|
|
(17)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Adjusted net
investment income
|
|
$
|
1,898
|
|
|
$
|
1,725
|
|
|
10.0
|
%
|
RECONCILIATION OF
U.S. GAAP BOOK VALUE TO ADJUSTED BOOK
VALUE
|
(UNAUDITED - IN
MILLIONS, EXCEPT FOR SHARE AND PER-SHARE AMOUNTS)
|
|
|
|
|
|
|
|
JUNE
30,
|
|
2021
|
|
2020
|
|
%
Change
|
U.S. GAAP book
value
|
|
$
|
33,735
|
|
|
$
|
29,420
|
|
|
|
Less:
|
|
|
|
|
|
|
Unrealized foreign
currency translation gains (losses)
|
|
(1,661)
|
|
|
(1,469)
|
|
|
|
Unrealized gains
(losses) on securities and derivatives
|
|
9,959
|
|
|
8,496
|
|
|
|
Pension liability
adjustment
|
|
(279)
|
|
|
(277)
|
|
|
|
Total AOCI
|
|
8,019
|
|
|
6,750
|
|
|
|
Adjusted book
value
|
|
$
|
25,716
|
|
|
$
|
22,670
|
|
|
|
Add:
|
|
|
|
|
|
|
Unrealized foreign
currency translation gains (losses)
|
|
(1,661)
|
|
|
(1,469)
|
|
|
|
Adjusted book value
including unrealized foreign currency
translation gains (losses)
|
|
$
|
24,055
|
|
|
$
|
21,201
|
|
|
|
|
|
|
|
|
|
|
Number of outstanding
shares at end of period (000)
|
|
671,990
|
|
|
713,908
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP book value
per common share
|
|
$
|
50.20
|
|
|
$
|
41.21
|
|
|
21.8
|
%
|
Less:
|
|
|
|
|
|
|
Unrealized foreign
currency translation gains (losses)
per common share
|
|
(2.47)
|
|
|
(2.06)
|
|
|
|
Unrealized gains
(losses) on securities and derivatives
per common share
|
|
14.82
|
|
|
11.90
|
|
|
|
Pension liability
adjustment per common share
|
|
(0.42)
|
|
|
(0.39)
|
|
|
|
Total AOCI per common
share
|
|
11.93
|
|
|
9.45
|
|
|
|
Adjusted book value
per common share
|
|
$
|
38.27
|
|
|
$
|
31.75
|
|
|
20.5
|
%
|
Add:
|
|
|
|
|
|
|
Unrealized foreign
currency translation gains (losses)
per common share
|
|
(2.47)
|
|
|
(2.06)
|
|
|
|
Adjusted book value
including unrealized foreign currency
translation gains (losses) per common
share
|
|
$
|
35.80
|
|
|
$
|
29.70
|
|
|
20.5
|
%
|
RECONCILIATION OF
U.S. GAAP RETURN ON EQUITY (ROE) TO ADJUSTED
ROE
|
(EXCLUDING IMPACT OF
FOREIGN CURRENCY)
|
|
|
|
|
|
THREE MONTHS ENDED
JUNE 30,
|
|
2021
|
|
2020
|
U.S. GAAP ROE - Net
earnings1
|
|
13.4
|
%
|
|
11.5
|
%
|
Impact of excluding
unrealized foreign currency translation gains (losses)
|
|
(0.9)
|
|
|
(0.8)
|
|
Impact of excluding
unrealized gains (losses) on securities and derivatives
|
|
4.9
|
|
|
3.7
|
|
Impact of excluding
pension liability adjustment
|
|
(0.1)
|
|
|
(0.1)
|
|
Impact of excluding
AOCI
|
|
3.9
|
|
|
2.8
|
|
U.S. GAAP ROE - less
AOCI
|
|
17.3
|
|
|
14.3
|
|
Differences between
adjusted earnings and net earnings2
|
|
(0.4)
|
|
|
2.1
|
|
Adjusted ROE -
reported
|
|
16.9
|
|
|
16.4
|
|
Less: Impact of
foreign currency3
|
|
(0.1)
|
|
|
N/A
|
|
Adjusted ROE,
excluding impact of foreign currency
|
|
17.0
|
|
|
16.4
|
|
|
1 U.S. GAAP
ROE is calculated by dividing net earnings (annualized) by average
shareholders' equity.
|
2 See
separate reconciliation of net income to adjusted
earnings.
|
3 Impact of
foreign currency is calculated by restating all foreign currency
components of the income
statement to the weighted average
foreign currency exchange rate for the comparable prior year
period.
The impact is the difference of the
restated adjusted earnings compared to reported adjusted
earnings.
For comparative purposes, only current
period income is restated using the weighted average prior
period exchange rate,
which eliminates the foreign currency impact for the current
period. This allows
for equal comparison of this financial
measure.
|
RECONCILIATION OF
U.S. GAAP RETURN ON EQUITY (ROE) TO ADJUSTED
ROE
|
(EXCLUDING IMPACT OF
FOREIGN CURRENCY)
|
|
|
|
|
|
SIX MONTHS ENDED
JUNE 30,
|
|
2021
|
|
2020
|
U.S. GAAP ROE - Net
earnings1
|
|
14.3
|
%
|
|
9.4
|
%
|
Impact of excluding
unrealized foreign currency translation gains (losses)
|
|
(0.8)
|
|
|
(0.6)
|
|
Impact of excluding
unrealized gains (losses) on securities and derivatives
|
|
5.7
|
|
|
3.6
|
|
Impact of excluding
pension liability adjustment
|
|
(0.2)
|
|
|
(0.1)
|
|
Impact of excluding
AOCI
|
|
4.8
|
|
|
2.8
|
|
U.S. GAAP ROE - less
AOCI
|
|
19.1
|
|
|
12.2
|
|
Differences between
adjusted earnings and net earnings2
|
|
(2.1)
|
|
|
3.8
|
|
Adjusted ROE -
reported
|
|
17.0
|
|
|
16.0
|
|
Less: Impact of
foreign currency3
|
|
0.1
|
|
|
N/A
|
|
Adjusted ROE,
excluding impact of foreign currency
|
|
16.9
|
|
|
16.0
|
|
|
1 U.S. GAAP ROE is
calculated by dividing net earnings (annualized) by average
shareholders' equity.
|
2 See
separate reconciliation of net income to adjusted
earnings.
|
3 Impact of
foreign currency is calculated by restating all foreign currency
components of the income
statement to the weighted average foreign
currency exchange rate for the comparable prior year period.
The impact is the difference of the
restated adjusted earnings compared to reported adjusted
earnings.
For comparative purposes, only current
period income is restated using the weighted average prior
period exchange rate, which eliminates the
foreign currency impact for the current period. This allows
for equal comparison of this financial
measure.
|
EFFECT OF FOREIGN
CURRENCY ON ADJUSTED RESULTS1
|
(SELECTED PERCENTAGE
CHANGES, UNAUDITED)
|
|
THREE MONTHS ENDED
JUNE 30, 2021
|
|
Including
Currency
Changes
|
|
Excluding
Currency
Changes2
|
Net premium
income3
|
|
(4.8)
|
%
|
|
(3.7)
|
%
|
Adjusted net
investment income4
|
|
15.2
|
|
|
15.9
|
|
Total benefits and
expenses
|
|
(4.6)
|
|
|
(3.5)
|
|
Adjusted
earnings
|
|
17.3
|
|
|
17.9
|
|
Adjusted earnings per
diluted share
|
|
24.2
|
|
|
24.2
|
|
|
1 Refer to previously
defined adjusted earnings and adjusted earnings per diluted
share.
|
2 Amounts excluding
currency changes were determined using the same foreign currency
exchange
rate for the current period as the
comparable period in the prior year, which eliminates
dollar-based
fluctuations driven solely from currency
rate changes.
|
3 Net of
reinsurance
|
4 Refer to previously
defined adjusted net investment income.
|
EFFECT OF FOREIGN
CURRENCY ON ADJUSTED RESULTS1
|
(SELECTED PERCENTAGE
CHANGES, UNAUDITED)
|
|
SIX MONTHS ENDED
JUNE 30, 2021
|
|
Including
Currency
Changes
|
|
Excluding
Currency
Changes2
|
Net premium
income3
|
|
(3.3)
|
%
|
|
(3.7)
|
%
|
Adjusted net
investment income4
|
|
10.0
|
|
|
9.9
|
|
Total benefits and
expenses
|
|
(4.2)
|
|
|
(4.5)
|
|
Adjusted
earnings
|
|
18.6
|
|
|
18.2
|
|
Adjusted earnings per
diluted share
|
|
24.9
|
|
|
24.5
|
|
|
1 Refer to previously
defined adjusted earnings and adjusted earnings per diluted
share.
|
2 Amounts excluding
currency changes were determined using the same foreign currency
exchange
rate for the current period as the
comparable period in the prior year, which eliminates
dollar-based
fluctuations driven solely from currency
rate changes.
|
3 Net of
reinsurance
|
4 Refer to previously
defined adjusted net investment income.
|
FORWARD-LOOKING INFORMATION
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. The company desires 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,"
"outlook" 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.
The company cautions 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:
- difficult conditions in global capital markets and the
economy, including those caused by COVID-19
- defaults and credit downgrades of investments
- exposure to significant interest rate risk
- concentration of business in Japan
- limited availability of acceptable yen-denominated
investments
- foreign currency fluctuations in the yen/dollar exchange
rate
- differing judgments applied to investment
valuations
- significant valuation judgments in determination of expected
credit losses recorded on the Company's investments
- decreases in the Company's financial strength or debt
ratings
- decline in creditworthiness of other financial
institutions
- concentration of the Company's investments in any particular
single-issuer or sector
- the effects of COVID-19, and any resulting economic effects
and government interventions, on the Company's business and
financial results
- ability to attract and retain qualified sales associates,
brokers, employees, and distribution partners
- deviations in actual experience from pricing and reserving
assumptions
- ability to continue to develop and implement improvements in
information technology systems
- interruption in telecommunication, information technology
and other operational systems, or a failure to maintain the
security, confidentiality or privacy of sensitive data residing on
such systems
- subsidiaries' ability to pay dividends to the Parent
Company
- inherent limitations to risk management policies and
procedures
- the level of sales of Aflac Japan products in the Japan Post
channel
- tax rates applicable to the Company may change
- failure to comply with restrictions on policyholder privacy
and information security
- extensive regulation and changes in law or regulation by
governmental authorities
- competitive environment and ability to anticipate and
respond to market trends
- catastrophic events, including, but not limited to, as a
result of climate change, epidemics, pandemics (such as the
coronavirus COVID-19), tornadoes, hurricanes, earthquakes,
tsunamis, war or other military action, terrorism or other acts of
violence, and damage incidental to such events
- ability to protect the Aflac brand and the Company's
reputation
- ability to effectively manage key executive
succession
- changes in accounting standards
- level and outcome of litigation
- allegations or determinations of worker misclassification in
the United States
Analyst and investor contact - David A.
Young, 706.596.3264 or 800.235.2667 or dyoung@aflac.com
Media contact - Ines Gutzmer,
762.207.7601 or igutzmer@aflac.com
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SOURCE Aflac Incorporated