Aflac Values $750M Notes - Analyst Blog
February 09 2012 - 12:22PM
Zacks
Yesterday, Aflac Inc. (AFL) announced the
pricing of long-term fixed rate notes worth $750 million in two
tranches. One set of 5-year senior notes are priced at par value of
$400 million with a coupon rate of 2.65%. These notes are issued at
a price of $99.911 that should generate yield of 2.669%.
The other tranche of 10-year fixed rate senior notes are priced
at par value of $350 million with a coupon rate of 4.00%. These
notes are issued at a price of $99.820 and are expected to yield
4.022%.
Management plans to use the proceeds from the sale of these
notes to repay Aflac’s 1.87% Samurai notes worth $347 million (26.6
billion yen) that is due in June 2012. The remaining amount of the
proceeds is expected to inject ample liquidity by utilizing funds
for general corporate and capital purposes.
Earnings Review
Aflac reported fourth quarter operating earnings per share of
$1.48, which came in 3 cents below the Zacks Consensus Estimate of
$1.51 but were comfortably higher than $1.33 reported in the
year-ago quarter.
Operating earnings escalated 10.0% year over year to $691
million. A stronger yen/dollar exchange rate helped increase
operating earnings by 6 cents per share. However, total revenue for
the reported quarter rose 12.9% year over year to $5.98 billion,
although it was lower than the Zacks Consensus Estimate of $6.2
billion.
Despite the ongoing derisking activities, total revenue
benefited from the strengthening of yen against the dollar along
with consistent improvement in the U.S. and better-than-expected
performance in Japan. Total acquisition and operating expenses
spurted 5.9% year over year to $1.45 billion, while benefits and
claims climbed 13.4% year over year to about $3.70 billion.
Given the caution related to problem investments in Europe and
others, the Zacks Consensus Estimate for the first quarter of 2012
is currently pegged at $1.67 per share, about 2% higher than the
year-ago quarter. In the last 7 days post earnings, 3 of the 17
firms revised their estimates upwards, while a couple of downward
revisions were witnessed.
Overall, Aflac’s strong brand name and solid business model
enabled it to improve earnings considerably faster than other life
and health insurers such as Unum Group (UNM) and
Catalyst Health Solutions Inc. (CHSI).
Moreover, the company’s strong capital and surplus cash position
is expected to mitigate balance-sheet risks and provide liquidity
cushion in the long run, as well as return value to shareholders
consistently. Hence, we continue to retain our long-term Neutral
stance on the stock, with a Zacks Rank #3, implying a short-term
Hold rating.
AFLAC INC (AFL): Free Stock Analysis Report
CATALYST HEALTH (CHSI): Free Stock Analysis Report
UNUM GROUP (UNM): Free Stock Analysis Report
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