COLUMBUS, Ga., Aug. 1, 2022
/PRNewswire/ -- Aflac Incorporated (NYSE: AFL) today reported its
second quarter results.
Total revenues were $5.4 billion
in the second quarter of 2022, compared with $5.6 billion in the second quarter of 2021. Net
earnings were $1.4 billion, or
$2.16 per diluted share, compared
with $1.1 billion, or $1.62 per diluted share a year ago.
Net earnings in the second quarter of 2022 included net
investment gains of $564 million, or
$0.88 per diluted share, compared
with net investment gains of $89
million, or $0.13 per diluted
share a year ago. The net investment gains were driven by net gains
from certain derivatives and foreign currency activities of
$618 million and net gains from sales
and redemptions of $115 million, both
driven by foreign exchange. These gains were partially offset by an
increase in the allowance associated with the company's estimate of
current expected credit losses (CECL) and impairments of
$34 million. These net investment
gains included a decrease of $135
million in the fair value of equity securities.
Adjusted earnings* in the second quarter were $939 million, compared with $1.1 billion in the second quarter of 2021,
reflecting a decrease of 13.1%. Adjusted earnings per diluted
share* decreased 8.2% to $1.46 in the
quarter. It included variable investment income from alternative
investments, which was $0.06 per
share above return expectations. Adjusted earnings per diluted
share excluded adjusted net investment gains* of $0.88 per share. The weaker yen/dollar exchange
rate impacted adjusted earnings per share by $0.09.
The average yen/dollar exchange rate in the second quarter of
2022 was 129.39, or 15.4% weaker than the average rate of 109.48 in
the second quarter of 2021. For the first six months, the average
exchange rate was 122.79, or 12.2% weaker than the rate of 107.79 a
year ago.
Total investments and cash at the end of June 2022 were $121.4
billion, compared with $146.7
billion at June 30, 2021. In
the second quarter, Aflac Incorporated deployed $650 million in capital to repurchase 11.2
million of its common shares. At the end of June 2022, the company had 36.6 million remaining
shares authorized for repurchase.
Shareholders' equity was $26.4
billion, or $41.59 per share,
at June 30, 2022, compared with $33.7
billion, or $50.20 per share,
at June 30, 2021. Shareholders'
equity at the end of the second quarter included a net unrealized
gain on investment securities and derivatives of $2.9 billion, compared with a net unrealized gain
of $10.0 billion at June 30, 2021. Shareholders' equity at the end of
the second quarter also included an unrealized foreign currency
translation loss of $3.3 billion,
compared with an unrealized foreign currency translation loss of
$1.7 billion at June 30, 2021. The annualized return on average
shareholders' equity in the second quarter was 19.9%.
For the first six months of 2022, total revenues were down 6.7%
to $10.7 billion, compared with
$11.4 billion in the first half of
2021. Net earnings were $2.4 billion,
or $3.73 per diluted share, compared
with $2.4 billion, or $3.49 per diluted share, for the first six months
of 2021. Adjusted earnings for the first half of 2022 were
$1.9 billion, or $2.88 per diluted share, compared with
$2.1 billion, or $3.11 per diluted share, in 2021. Excluding the
negative impact of $0.15 per share
from the weaker yen/dollar exchange rate, adjusted earnings per
diluted share decreased 2.9% to $3.02
for the first six months of 2022.
Shareholders' equity excluding AOCI (or adjusted book value*)
was $26.9 billion, or $42.45 per share at June 30, 2022, compared
with $25.7 billion, or $38.27 per share, at June
30, 2021. The annualized adjusted return on equity excluding
foreign currency impact* in the second quarter was 14.9%.
AFLAC JAPAN
In yen terms, Aflac Japan's net earned premiums were ¥313.2
billion for the quarter, or 4.2% 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 8.4% to ¥94.0 billion, mainly due to
higher floating rate income as well as the impact of a weaker yen
on the dollar-denominated investment income. Total adjusted
revenues in yen declined 1.6% to ¥408.3 billion. Pretax adjusted
earnings in yen for the quarter increased 1.6% on a reported basis
to ¥111.7 billion, due to higher reserve releases and adjusted net
investment income. Pretax adjusted earnings decreased 7.0% on a
currency-neutral basis. The pretax adjusted profit margin for the
Japan segment increased to 27.4%,
compared with 26.5% a year ago.
For the first six months, net earned premiums in yen were ¥629.6
billion, or 4.3% lower than a year ago. Adjusted net investment
income increased 7.3% to ¥173.0 billion. Total adjusted revenues in
yen were down 2.0% to ¥804.9 billion. Pretax adjusted earnings were
¥211.9 billion, or 4.0% higher than a year ago.
In dollar terms, net earned premiums decreased 19.0% to
$2.4 billion in the second quarter.
Adjusted net investment income decreased 8.7% to $723 million. Total adjusted revenues declined by
16.8% to $3.2 billion. Pretax
adjusted earnings declined 14.3% to $860
million.
For the first six months, net earned premiums in dollars were
$5.1 billion, or 15.8% lower than a
year ago. Adjusted net investment income decreased 6.3% to
$1.4 billion. Total adjusted revenues
were down 14.0% to $6.6 billion.
Pretax adjusted earnings were $1.7
billion, or 8.9% lower than a year ago.
For the quarter, total new annualized premium sales (sales)
decreased 6.4% to ¥12.7 billion, or $98
million, reflecting the January
2021 launch of a new medical product and continued weakness
in sales recovery, in part constrained by pandemic conditions. For
the first six months, total new sales decreased 10.7% to ¥24.7
billion, or $201 million.
AFLAC U.S.
Aflac U.S. net earned premiums declined 1.0% to $1.4 billion in the second quarter, impacted by
lower year-to-date persistency. Adjusted net investment income
increased 2.1% to $193 million. Total
adjusted revenues were up 0.1% to $1.6
billion. Pretax adjusted earnings were $349 million, 15.5% lower than a year ago, which
was driven by higher incurred benefits and elevated expenses
reflecting, in part, platform and growth investments. The pretax
adjusted profit margin for the U.S. segment was 21.4%, compared
with 25.4% a year ago.
For the first six months, net earned premiums declined 0.8% to
$2.8 billion. Adjusted net investment
income increased 3.0% to $377
million. Total adjusted revenues were up 0.4% to
$3.3 billion. Pretax adjusted
earnings were $674 million, or 21.5%
lower than a year ago.
Aflac U.S. sales increased 15.6% in the quarter to $305 million, reflecting continued investment in
growth initiatives as well as productivity gains. For the first
half of the year, total new sales increased 17.2% to $604 million.
CORPORATE AND OTHER
For the quarter, total adjusted revenues decreased 16.0% to
$42 million. Pretax adjusted earnings
were a loss of $75 million, compared
with a loss of $76 million a year
ago. These results reflect higher adjusted net investment income
from higher interest rates offset by lower amortized hedge income
and the impact of federal tax credit investments as tax benefits
are recognized in a corresponding lower income tax expense. These
results also reflect the impact of foreign currency on total net
earned premiums and the corresponding benefits.
For the first six months, total adjusted revenues decreased
12.8% to $116 million. Pretax
adjusted earnings were a loss of $120
million, compared with a loss of $102
million a year ago.
DIVIDEND
The board of directors declared the third quarter dividend of
$0.40 per share, payable on
September 1, 2022 to shareholders of record at the close of
business on August 24, 2022.
OUTLOOK
Commenting on the company's results, Chairman and Chief
Executive Officer Daniel P. Amos
stated: "The company generated solid earnings for the first six
months, supported in part by the continuation of low benefit ratios
associated with pandemic conditions and better-than-expected
returns from alternative investments, despite the weakening yen. We
continue to remain cautiously optimistic as our efforts focus on
growth and efficiency initiatives amid this evolving pandemic
backdrop.
"Looking at our operations in Japan, persistency remained strong in the
second quarter, but sales were constrained as we continued to
operate in evolving pandemic conditions. This impacted our ability
to meet face-to-face with customers, which continues to be key to a
recovery in sales. Within this context, we continue to expect
stronger sales in the second half of the year assuming that those
conditions subside, productivity continues to improve at Japan
Post, and we execute on our product introduction and refreshment
plans.
"In the U.S., I am pleased with the continued momentum in our
core voluntary business and contribution from newly acquired growth
platforms of dental, vision, and group benefits. We continue to
work toward reinforcing our position and generating stronger sales
for the year, while we keep an eye on potential
headwinds.
"As always, we are committed to prudent liquidity and capital
management. We continue to generate strong investment results while
remaining in a defensive position as we monitor evolving economic
conditions. In addition, we have taken proactive steps in recent
years to defend cash flow and deployable capital against a
weakening yen. We treasure our 39-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 remain
in the market repurchasing shares with a tactical approach, 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., 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. In the U.S., Aflac is the number
one provider of supplemental health insurance
products1. Aflac Life Insurance Japan is the leading
provider of medical and cancer insurance in Japan, where it insures 1 in 4 households. In
2021, Aflac Incorporated was proud to be included as one of the
World's Most Ethical Companies by Ethisphere for the 16th
consecutive year. Also in 2021, the company was included in the Dow
Jones Sustainability North America Index and became a signatory of
the Principles for Responsible Investment (PRI). In 2022, Aflac
Incorporated was included on Fortune's list of World's Most Admired
Companies for the 21st time and Bloomberg's Gender-Equality Index
for the third consecutive year. To find out how to get help with
expenses health insurance doesn't cover, get to know us at
aflac.com or aflac.com/español. Investors may learn more about
Aflac Incorporated and its commitment to ESG and social
responsibility at investors.aflac.com under "Sustainability."
1
|
LIMRA 2021 U.S.
Supplemental Health Insurance Total Market Report
|
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 8:00 a.m. (ET) on Tuesday, August 2,
2022.
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,
|
|
2022
|
|
2021
|
|
% Change
|
Total
revenues
|
|
$
5,400
|
|
$
5,564
|
|
(2.9) %
|
Benefits and claims,
net
|
|
2,298
|
|
2,653
|
|
(13.4)
|
Total acquisition and
operating expenses
|
|
1,401
|
|
1,538
|
|
(8.9)
|
Earnings before income
taxes
|
|
1,701
|
|
1,373
|
|
23.9
|
Income taxes
|
|
313
|
|
268
|
|
|
Net earnings
|
|
$
1,388
|
|
$
1,105
|
|
25.6 %
|
Net earnings per share
– basic
|
|
$ 2.17
|
|
$ 1.63
|
|
33.1 %
|
Net earnings per share
– diluted
|
|
2.16
|
|
1.62
|
|
33.3
|
Shares used to compute
earnings per share (000):
|
|
|
|
|
|
|
Basic
|
|
640,707
|
|
678,050
|
|
(5.5) %
|
Diluted
|
|
643,243
|
|
680,920
|
|
(5.5)
|
Dividends paid per
share
|
|
$ 0.40
|
|
$ 0.33
|
|
21.2 %
|
AFLAC INCORPORATED
AND SUBSIDIARIES CONDENSED INCOME STATEMENT
|
(UNAUDITED – IN
MILLIONS, EXCEPT FOR SHARE AND PER-SHARE AMOUNTS)
|
|
|
|
|
|
|
|
SIX MONTHS ENDED
JUNE 30,
|
|
2022
|
|
2021
|
|
% Change
|
Total
revenues
|
|
$ 10,672
|
|
$ 11,433
|
|
(6.7) %
|
Benefits and claims,
net
|
|
4,785
|
|
5,387
|
|
(11.2)
|
Total acquisition and
operating expenses
|
|
2,910
|
|
3,069
|
|
(5.2)
|
Earnings before income
taxes
|
|
2,977
|
|
2,977
|
|
—
|
Income taxes
|
|
557
|
|
579
|
|
|
Net earnings
|
|
$
2,420
|
|
$
2,398
|
|
0.9 %
|
Net earnings per share
– basic
|
|
$ 3.75
|
|
$ 3.51
|
|
6.8 %
|
Net earnings per share
– diluted
|
|
3.73
|
|
3.49
|
|
6.9
|
Shares used to compute
earnings per share (000):
|
|
|
|
|
|
|
Basic
|
|
645,205
|
|
683,464
|
|
(5.6) %
|
Diluted
|
|
648,010
|
|
686,400
|
|
(5.6)
|
Dividends paid per
share
|
|
$ 0.80
|
|
$ 0.66
|
|
21.2 %
|
AFLAC INCORPORATED
AND SUBSIDIARIES CONDENSED BALANCE SHEET
|
(UNAUDITED – IN
MILLIONS, EXCEPT FOR SHARE AMOUNTS)
|
|
|
|
|
|
|
|
JUNE
30,
|
|
2022
|
|
2021
|
|
% Change
|
Assets:
|
|
|
|
|
|
|
Total investments and
cash
|
|
$ 121,415
|
|
$ 146,709
|
|
(17.2) %
|
Deferred policy
acquisition costs
|
|
8,458
|
|
9,810
|
|
(13.8)
|
Other assets
|
|
5,756
|
|
4,973
|
|
15.7
|
Total
assets
|
|
$ 135,629
|
|
$ 161,492
|
|
(16.0) %
|
Liabilities and
shareholders' equity:
|
|
|
|
|
|
|
Policy
liabilities
|
|
$
90,618
|
|
$ 108,286
|
|
(16.3) %
|
Notes payable and lease
obligations
|
|
7,416
|
|
8,121
|
|
(8.7)
|
Other
liabilities
|
|
11,208
|
|
11,350
|
|
(1.3)
|
Shareholders'
equity
|
|
26,387
|
|
33,735
|
|
(21.8)
|
Total liabilities and
shareholders' equity
|
|
$ 135,629
|
|
$ 161,492
|
|
(16.0) %
|
Shares outstanding at
end of period (000)
|
|
634,526
|
|
671,990
|
|
(5.6) %
|
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 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 Corporate and other. 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,
|
|
2022
|
|
2021
|
|
% Change
|
|
|
|
|
|
|
|
Net earnings
|
|
$ 1,388
|
|
$
1,105
|
|
25.6 %
|
|
|
|
|
|
|
|
Items impacting net
earnings:
|
|
|
|
|
|
|
Adjusted net
investment (gains) losses
|
|
(567)
|
|
(85)
|
|
|
Other and
non-recurring (income) loss
|
|
—
|
|
53
|
|
|
Income tax (benefit)
expense on items excluded
from adjusted earnings
|
|
119
|
|
7
|
|
|
|
|
|
|
|
|
|
Adjusted
earnings
|
|
939
|
|
1,080
|
|
(13.1) %
|
Current period foreign
currency impact 1
|
|
57
|
|
N/A
|
|
|
Adjusted earnings
excluding current period foreign
currency impact 2
|
|
$
996
|
|
$
1,080
|
|
(7.8) %
|
|
|
|
|
|
|
|
Net earnings per
diluted share
|
|
$
2.16
|
|
$ 1.62
|
|
33.3 %
|
|
|
|
|
|
|
|
Items impacting net
earnings:
|
|
|
|
|
|
|
Adjusted net
investment (gains) losses
|
|
(0.88)
|
|
(0.12)
|
|
|
Other and
non-recurring (income) loss
|
|
—
|
|
0.08
|
|
|
Income tax (benefit)
expense on items excluded
from adjusted earnings
|
|
0.19
|
|
0.01
|
|
|
|
|
|
|
|
|
|
Adjusted earnings per
diluted share
|
|
1.46
|
|
1.59
|
|
(8.2) %
|
Current period foreign
currency impact 1
|
|
0.09
|
|
N/A
|
|
|
Adjusted earnings per
diluted share excluding
current period foreign currency impact
2
|
|
$
1.55
|
|
$ 1.59
|
|
(2.5) %
|
|
|
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 EARNINGS TO ADJUSTED EARNINGS
|
(UNAUDITED – IN
MILLIONS, EXCEPT FOR PER-SHARE AMOUNTS)
|
|
|
|
|
|
|
|
SIX MONTHS ENDED
JUNE 30,
|
|
2022
|
|
2021
|
|
% Change
|
|
|
|
|
|
|
|
Net earnings
|
|
$
2,420
|
|
$
2,398
|
|
0.9 %
|
|
|
|
|
|
|
|
Items impacting net
earnings:
|
|
|
|
|
|
|
Adjusted net
investment (gains) losses
|
|
(701)
|
|
(388)
|
|
|
Other and
non-recurring (income) loss
|
|
—
|
|
59
|
|
|
Income tax (benefit)
expense on items excluded
from adjusted earnings
|
|
147
|
|
69
|
|
|
|
|
|
|
|
|
|
Adjusted
earnings
|
|
1,866
|
|
2,138
|
|
(12.7) %
|
Current period foreign
currency impact 1
|
|
94
|
|
N/A
|
|
|
Adjusted earnings
excluding current period foreign
currency impact 2
|
|
$
1,960
|
|
$
2,138
|
|
(8.3) %
|
|
|
|
|
|
|
|
Net earnings per
diluted share
|
|
$
3.73
|
|
$
3.49
|
|
6.9 %
|
|
|
|
|
|
|
|
Items impacting net
earnings:
|
|
|
|
|
|
|
Adjusted net
investment (gains) losses
|
|
(1.08)
|
|
(0.57)
|
|
|
Other and
non-recurring (income) loss
|
|
—
|
|
0.09
|
|
|
Income tax (benefit)
expense on items excluded
from adjusted earnings
|
|
0.23
|
|
0.10
|
|
|
|
|
|
|
|
|
|
Adjusted earnings per
diluted share
|
|
2.88
|
|
3.11
|
|
(7.4) %
|
Current period foreign
currency impact 1
|
|
0.15
|
|
N/A
|
|
|
Adjusted earnings per
diluted share excluding
current period foreign currency impact
2
|
|
$
3.02
|
|
$
3.11
|
|
(2.9) %
|
|
|
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,
|
|
2022
|
|
2021
|
|
% Change
|
|
|
|
|
|
|
|
Net investment (gains)
losses
|
|
$
(564)
|
|
$ (89)
|
|
533.7 %
|
|
|
|
|
|
|
|
Items impacting net
investment (gains) losses:
|
|
|
|
|
|
|
Amortized hedge
costs
|
|
(30)
|
|
(17)
|
|
|
Amortized hedge
income
|
|
14
|
|
16
|
|
|
Net interest cash
flows from derivatives associated
with certain investment
strategies
|
|
(1)
|
|
(9)
|
|
|
Interest rate
component of the change in fair value of foreign
currency swaps on notes
payable1
|
|
12
|
|
14
|
|
|
|
|
|
|
|
|
|
Adjusted net investment
(gains) losses
|
|
$
(567)
|
|
$ (85)
|
|
567.1 %
|
|
|
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,
|
|
2022
|
|
2021
|
|
% Change
|
|
|
|
|
|
|
|
Net investment
income
|
|
$
937
|
|
$
993
|
|
(5.6) %
|
|
|
|
|
|
|
|
Items impacting net
investment income:
|
|
|
|
|
|
|
Amortized hedge
costs
|
|
(30)
|
|
(17)
|
|
|
Amortized hedge
income
|
|
14
|
|
16
|
|
|
Net interest cash
flows from derivatives associated
with certain investment
strategies
|
|
(1)
|
|
(9)
|
|
|
|
|
|
|
|
|
|
Adjusted net investment
income
|
|
$
920
|
|
$
983
|
|
(6.4) %
|
RECONCILIATION OF
NET INVESTMENT (GAINS) LOSSES TO ADJUSTED NET INVESTMENT (GAINS)
LOSSES
|
(UNAUDITED – IN
MILLIONS)
|
|
|
|
|
|
|
|
SIX MONTHS ENDED
JUNE 30,
|
|
2022
|
|
2021
|
|
% Change
|
|
|
|
|
|
|
|
Net investment (gains)
losses
|
|
$
(686)
|
|
$
(396)
|
|
73.2 %
|
|
|
|
|
|
|
|
Items impacting net
investment (gains) losses:
|
|
|
|
|
|
|
Amortized hedge
costs
|
|
(55)
|
|
(36)
|
|
|
Amortized hedge
income
|
|
25
|
|
33
|
|
|
Net interest cash
flows from derivatives associated
with certain investment
strategies
|
|
(10)
|
|
(17)
|
|
|
Interest rate
component of the change in fair value of foreign
currency swaps on notes
payable1
|
|
25
|
|
27
|
|
|
|
|
|
|
|
|
|
Adjusted net investment
(gains) losses
|
|
$
(701)
|
|
$
(388)
|
|
80.7 %
|
|
|
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,
|
|
2022
|
|
2021
|
|
% Change
|
|
|
|
|
|
|
|
Net investment
income
|
|
$
1,840
|
|
$
1,918
|
|
(4.1) %
|
|
|
|
|
|
|
|
Items impacting net
investment income:
|
|
|
|
|
|
|
Amortized hedge
costs
|
|
(55)
|
|
(36)
|
|
|
Amortized hedge
income
|
|
25
|
|
33
|
|
|
Net interest cash
flows from derivatives associated
with certain investment
strategies
|
|
(10)
|
|
(17)
|
|
|
|
|
|
|
|
|
|
Adjusted net investment
income
|
|
$
1,800
|
|
$
1,898
|
|
(5.2) %
|
RECONCILIATION OF
U.S. GAAP BOOK VALUE TO ADJUSTED BOOK VALUE
|
(UNAUDITED - IN
MILLIONS, EXCEPT FOR SHARE AND PER-SHARE AMOUNTS)
|
|
|
|
|
|
|
|
JUNE
30,
|
|
2022
|
|
2021
|
|
%
Change
|
U.S. GAAP book
value
|
|
$
26,387
|
|
$
33,735
|
|
|
Less:
|
|
|
|
|
|
|
Unrealized foreign
currency translation gains (losses)
|
|
(3,289)
|
|
(1,661)
|
|
|
Unrealized gains
(losses) on securities and derivatives
|
|
2,901
|
|
9,959
|
|
|
Pension liability
adjustment
|
|
(160)
|
|
(279)
|
|
|
Total AOCI
|
|
(548)
|
|
8,019
|
|
|
Adjusted book
value
|
|
$
26,935
|
|
$
25,716
|
|
|
Add:
|
|
|
|
|
|
|
Unrealized foreign
currency translation gains (losses)
|
|
(3,289)
|
|
(1,661)
|
|
|
Adjusted book value
including unrealized foreign currency translation gains
(losses)
|
|
$
23,646
|
|
$
24,055
|
|
|
|
|
|
|
|
|
|
Number of outstanding
shares at end of period (000)
|
|
634,526
|
|
671,990
|
|
|
|
|
|
|
|
|
|
U.S. GAAP book value
per common share
|
|
$
41.59
|
|
$
50.20
|
|
(17.2) %
|
Less:
|
|
|
|
|
|
|
Unrealized foreign
currency translation gains (losses) per common share
|
|
(5.18)
|
|
(2.47)
|
|
|
Unrealized gains
(losses) on securities and derivatives per common share
|
|
4.57
|
|
14.82
|
|
|
Pension liability
adjustment per common share
|
|
(0.25)
|
|
(0.42)
|
|
|
Total AOCI per common
share
|
|
(0.86)
|
|
11.93
|
|
|
Adjusted book value per
common share
|
|
$
42.45
|
|
$
38.27
|
|
10.9 %
|
Add:
|
|
|
|
|
|
|
Unrealized foreign
currency translation gains (losses) per common share
|
|
(5.18)
|
|
(2.47)
|
|
|
Adjusted book value
including unrealized foreign currency translation gains (losses)
per common share
|
|
$
37.27
|
|
$
35.80
|
|
4.1 %
|
RECONCILIATION OF
U.S. GAAP RETURN ON EQUITY (ROE) TO ADJUSTED
ROE
|
(EXCLUDING IMPACT OF
FOREIGN CURRENCY)
|
|
|
|
|
|
THREE MONTHS ENDED
JUNE 30,
|
|
2022
|
|
2021
|
U.S. GAAP ROE - Net
earnings1
|
|
19.9 %
|
|
13.4 %
|
Impact of excluding
unrealized foreign currency translation gains (losses)
|
|
(2.2)
|
|
(0.9)
|
Impact of excluding
unrealized gains (losses) on securities and derivatives
|
|
3.4
|
|
4.9
|
Impact of excluding
pension liability adjustment
|
|
(0.1)
|
|
(0.1)
|
Impact of excluding
AOCI
|
|
1.0
|
|
3.9
|
U.S. GAAP ROE - less
AOCI
|
|
20.8
|
|
17.3
|
Differences between
adjusted earnings and net earnings2
|
|
(6.7)
|
|
(0.4)
|
Adjusted ROE -
reported
|
|
14.1
|
|
16.9
|
Less: Impact of foreign
currency3
|
|
(0.9)
|
|
N/A
|
Adjusted ROE, excluding
impact of foreign currency
|
|
14.9
|
|
16.9
|
|
|
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,
|
|
2022
|
|
2021
|
U.S. GAAP ROE - Net
earnings1
|
|
16.2 %
|
|
14.3 %
|
Impact of excluding
unrealized foreign currency translation gains (losses)
|
|
(1.6)
|
|
(0.8)
|
Impact of excluding
unrealized gains (losses) on securities and derivatives
|
|
3.8
|
|
5.7
|
Impact of excluding
pension liability adjustment
|
|
(0.1)
|
|
(0.2)
|
Impact of excluding
AOCI
|
|
2.1
|
|
4.8
|
U.S. GAAP ROE - less
AOCI
|
|
18.3
|
|
19.1
|
Differences between
adjusted earnings and net earnings2
|
|
(4.2)
|
|
(2.1)
|
Adjusted ROE -
reported
|
|
14.1
|
|
17.0
|
Less: Impact of foreign
currency3
|
|
(0.7)
|
|
N/A
|
Adjusted ROE, excluding
impact of foreign currency
|
|
14.8
|
|
17.0
|
|
|
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, 2022
|
|
Including
Currency
Changes
|
|
Excluding
Currency
Changes2
|
Net earned
premiums3
|
|
(13.3) %
|
|
(3.4) %
|
Adjusted net investment
income4
|
|
(6.4) %
|
|
(1.4)
|
Total benefits and
expenses
|
|
(10.6)
|
|
(0.4)
|
Adjusted
earnings
|
|
(13.1)
|
|
(7.8)
|
Adjusted earnings per
diluted share
|
|
(8.2)
|
|
(2.5)
|
|
|
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.
|
EFFECT OF FOREIGN
CURRENCY ON ADJUSTED RESULTS1
|
(SELECTED PERCENTAGE
CHANGES, UNAUDITED)
|
|
SIX MONTHS ENDED
JUNE 30, 2022
|
|
Including
Currency
Changes
|
|
Excluding
Currency
Changes2
|
Net earned
premiums3
|
|
(11.1) %
|
|
(3.3) %
|
Adjusted net investment
income4
|
|
(5.2) %
|
|
(1.1)
|
Total benefits and
expenses
|
|
(8.4)
|
|
(0.3)
|
Adjusted
earnings
|
|
(12.7)
|
|
(8.3)
|
Adjusted earnings per
diluted share
|
|
(7.4)
|
|
(2.9)
|
|
|
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
- global fluctuations in interest rates and 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 its variants (both known and
emerging), and any resulting economic effects and government
interventions, on the Company's business and financial
results
- the Company's 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
- operational risks of third party vendors
- 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 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