COLUMBUS, Ga., Oct. 28 /PRNewswire-FirstCall/ -- Aflac Incorporated
(NYSE: AFL) today reported its third quarter results. Reflecting
the benefit from a stronger yen/dollar exchange rate, total
revenues rose 22.6% to $4.5 billion during the third quarter of
2009, compared with a year ago. Net earnings were $363 million, or
$.77 per diluted share, compared with $100 million, or $.21 per
share, a year ago. Net earnings in the third quarter of 2009
included after-tax realized investment losses of $226 million, or
$.48 per diluted share, compared with realized investment losses of
$389 million, or $.81 per share in the third quarter of 2008. Of
the realized investment losses in the third quarter of 2009, $212
million resulted from impairment losses on perpetual, or so-called
"hybrid," securities of four issuers. The impairment loss on the
perpetual securities was determined using the equity impairment
method because their credit ratings are below investment grade. No
impairment charges will be recorded on a statutory accounting basis
for these perpetual securities because Aflac's credit analysis
suggests that the issuers of the perpetual securities that were
impaired on a GAAP basis will be able to meet their contractual
obligations for payment. The company also realized investment
losses of $22 million from the impairment of a collateralized debt
obligation and $5 million primarily from the impairment of
collateralized mortgage obligations. In addition, the company
realized $13 million of investment gains from sales and redemptions
of investment securities. Aflac believes that an analysis of
operating earnings, a non-GAAP financial measure, is vitally
important to an understanding of the company's underlying
profitability drivers. Aflac defines operating earnings as the
profits derived from operations before realized investment gains
and losses, the impact from ASC 815 (or hedging activities,
formerly referred to as 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 ASC 815, 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
Aflac's business is in Japan, where the functional currency is the
Japanese yen, the company believes it is equally important to
understand the impact on operating earnings from translating yen
into dollars. Aflac Japan's yen-denominated income statement is
translated from yen into dollars using an average exchange rate for
the reporting period, and the balance sheet is translated using the
exchange rate at the end of the period. However, except for a
limited number of transactions, the company does not actually
convert yen into dollars. As a result, Aflac views foreign currency
as a financial reporting issue and not as an economic event for the
company or its shareholders. Because changes in exchange rates
distort the growth rates of operations, readers of Aflac's
financial statements are also encouraged to evaluate financial
performance excluding the impact of foreign currency translation.
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 third quarter were $589 million, compared with $493 million in
the third quarter of 2008. Operating earnings per diluted share
rose 22.5% to $1.25, compared with $1.02 a year ago. The stronger
yen/dollar exchange rate increased operating earnings per diluted
share by $.09 during the quarter. Excluding the impact from the
stronger yen, operating earnings per share increased 13.7%. Results
for the first nine months of 2009 also benefited from the stronger
yen. Total revenues rose 11.1% to $13.7 billion, compared with
$12.3 billion a year ago. Net earnings were $1.2 billion, or $2.66
per diluted share, compared with $1.1 billion, or $2.19 per share,
for the first nine months of 2008. Operating earnings for the first
nine months of 2009 were $1.7 billion, or $3.67 per diluted share,
compared with $1.5 billion, or $3.02 per share, in 2008. Excluding
the benefit of $.23 per share from the stronger yen, operating
earnings per diluted share rose 13.9% for the first nine months of
2009. Total investments and cash at the end of September 2009 were
$71.6 billion, compared with $65.6 billion at June 30, 2009. The
increase in total investments and cash reflected a stronger yen at
the end of the period and improvement in the fair values of the
company's investments, compared with invested asset values at the
end of the second quarter of 2009. Gross unrealized losses on
investment securities classified as available for sale were $3.8
billion at September 30, 2009, compared with $4.9 billion at June
30, 2009. Shareholders' equity was $7.9 billion at September 30,
2009, compared with $6.4 billion at June 30, 2009. Shareholders'
equity at September 30, 2009, included a net unrealized loss on
investment securities of $1.1 billion, compared with a net
unrealized loss of $2.1 billion at the end of June 2009.
Shareholders' equity per share was $16.85 at the end of the third
quarter of 2009, compared with $13.58 per share at the end of the
second quarter of 2009. The annualized return on average
shareholders' equity in the third quarter was 20.4%. On an
operating basis (excluding realized investment losses, the impact
of ASC 815 on net earnings, and unrealized investment gains/losses
in shareholders' equity), the annualized return on average
shareholders' equity was 27.0% for the third quarter of 2009. AFLAC
JAPAN In the third quarter, Aflac Japan's premium income in yen
rose 3.4%, and net investment income declined 2.0%. Investment
income growth in yen terms was suppressed by the stronger
yen/dollar exchange rate because approximately 33% of Aflac Japan's
third quarter investment income was dollar-denominated. Excluding
the impact of the stronger yen, net investment income increased
2.9% in the quarter. Total revenues in yen were up 2.6%. Due to
continued improvement in the benefit ratio, the pretax operating
profit margin expanded from 18.3% to 20.0%. As a result, pretax
operating earnings in yen increased 11.8%. For the first nine
months, premium income in yen increased 3.4%, and net investment
income was down .6%. Total revenues were up 2.8%, and pretax
operating earnings grew 10.6%. The average yen/dollar exchange rate
in the third quarter of 2009 was 93.56, or 15.1% stronger than the
average rate of 107.70 in the third quarter of 2008. For the first
nine months, the average exchange rate was 94.79, or 11.6% stronger
than the rate of 105.75 a year ago. Aflac Japan's growth rates in
dollar terms for both the third quarter and first nine months of
the year were magnified as a result of the stronger average
yen/dollar exchange rates. Reflecting the stronger yen, premium
income in dollars rose 18.9% to $3.1 billion in the third quarter.
Net investment income was up 12.7% to $568 million. Total revenues
increased 18.0% to $3.6 billion. Pretax operating earnings advanced
28.7% to $725 million. For the first nine months of the year,
premium income was $9.0 billion, or 15.4% higher than a year ago.
Net investment income rose 10.9% to $1.7 billion. Total revenues
were up 14.7% to $10.7 billion. Pretax operating earnings were $2.1
billion, or 23.4% higher than a year ago. Aflac Japan's total new
annualized premium sales increased 6.5% to ¥30.0 billion, or $320
million in the third quarter. For the first nine months of 2009,
total new annualized premium sales were up 3.7% to ¥87.5 billion,
or $922 million. The increase in third quarter sales reflected
strong results in the medical and ordinary life insurance product
categories. Although Aflac Japan's revised medical product was just
introduced in late August, the initial response from consumers was
very positive. As a result, medical sales rose 13.8% in the third
quarter. The ordinary life category was again led by strong child
endowment sales. In addition, sales through the bank channel
continued to improve. Bank channel sales in the third quarter rose
66.1%, compared with a year ago, to a record ¥2.2 billion. AFLAC
U.S. Aflac U.S. premium income increased 3.0% to $1.1 billion, and
net investment income was down 4.4% to $123 million. Total revenues
rose 2.2% to $1.2 billion in the third quarter. Pretax operating
earnings were $216 million, an increase of 5.7%. For the first nine
months of the year, premium income rose 3.6% to $3.3 billion. Net
investment income declined .4% to $375 million. Total revenues were
up 3.2% to $3.7 billion, and pretax operating earnings rose 5.6% to
$617 million. Aflac U.S. total new annualized premium sales
continued to reflect weak economic conditions in the United States.
In the third quarter, total new sales declined 7.2% to $342
million. For the nine months, total new sales were $1.0 billion, or
6.4% lower than a year ago. However, growth in the number of new
payroll accounts remained strong and encouraging. Newly established
payroll accounts rose 15.0% in the third quarter and 11.5% for the
first nine months of the year. New agent recruitment also remained
solid. Newly recruited agents rose 9.4% during the third quarter to
more than 7,000. For the first nine months, new agent recruitment
was 16.4% higher than a year ago. DIVIDEND The board of directors
declared the fourth quarter cash dividend. The fourth quarter
dividend of $.28 per share is payable on December 1, 2009, to
shareholders of record at the close of business on November 18,
2009. OUTLOOK Commenting on the company's third quarter results,
Chairman and Chief Executive Officer Daniel P. Amos stated: "I
continue to be encouraged by our financial and operating
performance so far this year, especially in light of the weak
economic conditions. Although net earnings continued to reflect
larger-than-usual realized investment losses, the losses in the
third quarter were significantly lower than a year ago. In
addition, Aflac's operating earnings growth was again robust and
consistent with our objective for the year. I am also very pleased
that our overall capital position remained strong. Despite pressure
from credit rating downgrades on some of our investments, we
estimate that our risk-based capital ratio was 405% at the end of
September, which exceeds our internal target. "We remain cautious
on the outlook for new sales in the United States due to ongoing
economic weakness. It's clear that Aflac U.S. new annualized
premium sales will fall short of our annual objective of flat to 5%
growth this year. However, through new agent recruitment, effective
training programs and new payroll account growth, we continue to
believe we are positioning Aflac U.S. for a better sales year in
2010. In our largest market, we believe Aflac Japan will achieve
its annual objective of flat sales to a 5% increase for the full
year. With a tremendous consumer response to our recently
introduced products and continued growth through the bank channel,
we also believe we can extend Aflac Japan's sales momentum into
2010. Overall, we have great confidence in our business model and
in the need for our products in Japan and the United States. "We
are also confident we will achieve our 2009 objective of a 13% to
15% increase in operating earnings per diluted share, excluding the
impact of foreign currency. If the yen averages 90 to 95 to the
dollar in the last three months of the year, we would expect
reported operating earnings to be in the range of $1.08 to $1.16
per diluted share in the fourth quarter. Under that scenario, we
would expect full-year operating earnings per diluted share to be
in the range of $4.75 to $4.83. For 2010, our objective remains a
9% to 12% increase in operating earnings per diluted share before
the impact of the yen/dollar exchange rate. Although we are keenly
focused on achieving our 2009 and 2010 earnings targets, our
primary objective is to maintain a strong balance sheet that our
customers and owners can rely on in this challenging environment."
ABOUT AFLAC 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. As 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, Aflac
insurance products provide protection to more than 40 million
people worldwide. Aflac has been recognized by Ethisphere magazine
as one of the World's Most Ethical Companies for three consecutive
years and was also named by the Reputation Institute as the Most
Reputable Company in the Global Insurance Industry for two
consecutive years. In 2009 Fortune magazine recognized Aflac as one
of the 100 Best Companies to Work For in America for the eleventh
consecutive year. Fortune magazine also ranked Aflac No. 1 on its
global list of the Most Admired Companies in the Life and Health
Insurance category. Aflac appears on Hispanic Enterprise magazine's
list of the 50 Best Companies for Supplier Diversity and on Black
Enterprise magazine's list of the 40 Best Companies for Diversity.
Aflac was also named by Forbes magazine as America's Best-Managed
Company in the Insurance category. Aflac Incorporated is a Fortune
500 company listed on the New York Stock Exchange under the symbol
AFL. To find out more about Aflac, visit aflac.com. A copy of
Aflac's Financial Analysts Briefing (FAB) supplement for the third
quarter of 2009 can be found on the "Investors" page at aflac.com,
along with a complete listing of Aflac's investment holdings in the
financial sector and a separate listing of the company's
investments in perpetual securities. Aflac Incorporated will
webcast its third quarter conference call via the "Investors" page
of aflac.com at 9:00 a.m. (EDT) on Thursday, October 29. AFLAC
INCORPORATED AND SUBSIDIARIES CONDENSED INCOME STATEMENT (UNAUDITED
- IN MILLIONS, EXCEPT FOR SHARE AND PER-SHARE AMOUNTS) THREE MONTHS
ENDED SEPTEMBER 30, 2009 2008 % Change ---- ---- -------- Total
revenues $4,526 $3,691 22.6% Benefits and claims 2,817 2,551 10.4
Total acquisition and operating expenses 1,160 992 16.9 Earnings
before income taxes 549 148 270.6 Income taxes 186 48 Net earnings
$363 $100 263.1% Net earnings per share - basic $.78 $.21 271.4%
Net earnings per share - diluted .77 .21 266.7 Shares used to
compute earnings per share (000): Basic 466,586 475,357 (1.8)%
Diluted 469,714 480,745 (2.3) Dividends paid per share $.28 $.24
16.7% AFLAC INCORPORATED AND SUBSIDIARIES CONDENSED INCOME
STATEMENT (UNAUDITED - IN MILLIONS, EXCEPT FOR SHARE AND PER-SHARE
AMOUNTS) NINE MONTHS ENDED SEPTEMBER 30, 2009 2008 % Change ----
---- -------- Total revenues $13,657 $12,294 11.1% Benefits and
claims 8,351 7,664 9.0 Total acquisition and operating expenses
3,413 3,016 13.1 Earnings before income taxes 1,893 1,614 17.3
Income taxes 648 557 Net earnings $1,245 $1,057 17.8% Net earnings
per share - basic $2.67 $2.22 20.3% Net earnings per share -
diluted 2.66 2.19 21.5 Shares used to compute earnings per share
(000): Basic 466,362 476,076 (2.0)% Diluted 468,378 482,113 (2.8)
Dividends paid per share $.84 $.72 16.7% AFLAC INCORPORATED AND
SUBSIDIARIES CONDENSED BALANCE SHEET (UNAUDITED - IN MILLIONS,
EXCEPT FOR SHARE AMOUNTS) SEPTEMBER 30, 2009 2008 % Change ----
---- -------- Assets: Total investments and cash $71,625 $60,727
17.9% Deferred policy acquisition costs 8,552 7,445 14.9 Other
assets 2,439 2,285 6.7 Total assets $82,616 $70,457 17.3%
Liabilities and shareholders' equity: Policy liabilities $69,543
$58,175 19.5% Notes payable 2,231 1,568 42.3 Other liabilities
2,960 4,214 (29.8) Shareholders' equity 7,882 6,500 21.3 Total
liabilities and shareholders' equity $82,616 $70,457 17.3% Shares
outstanding at end of period (000) 467,777 476,553 (1.8)%
RECONCILIATION OF OPERATING EARNINGS TO NET EARNINGS (UNAUDITED -
IN MILLIONS, EXCEPT FOR PER-SHARE AMOUNTS) THREE MONTHS ENDED
SEPTEMBER 30, 2009 2008 % Change ---- ---- -------- Operating
earnings $589 $493 19.6% Reconciling items, net of tax: Realized
investment gains (losses) (226) (389) Impact from ASC 815 (formerly
SFAS 133) - (4) Extinguishment of debt - - Net earnings $363 $100
263.1% Operating earnings per diluted share $1.25 $1.02 22.5%
Reconciling items, net of tax: Realized investment gains (losses)
(.48) (.81) Impact from ASC 815 (formerly SFAS 133) - -
Extinguishment of debt - - Net earnings per diluted share $.77 $.21
266.7% RECONCILIATION OF OPERATING EARNINGS TO NET EARNINGS
(UNAUDITED - IN MILLIONS, EXCEPT FOR PER-SHARE AMOUNTS) NINE MONTHS
ENDED SEPTEMBER 30, 2009 2008 % Change ---- ---- -------- Operating
earnings $1,719 $1,455 18.1% Reconciling items, net of tax:
Realized investment gains (losses) (482) (394) Impact from ASC 815
(formerly SFAS 133) (3) (4) Extinguishment of debt 11 - Net
earnings $1,245 $1,057 17.8% Operating earnings per diluted share
$3.67 $3.02 21.5% Reconciling items, net of tax: Realized
investment gains (losses) (1.02) (.82) Impact from ASC 815
(formerly SFAS 133) (.01) (.01) Extinguishment of debt .02 - Net
earnings per diluted share $2.66 $2.19 21.5% EFFECT OF FOREIGN
CURRENCY ON OPERATING RESULTS(1) (SELECTED PERCENTAGE CHANGES,
UNAUDITED) Including Excluding Currency Currency THREE MONTHS ENDED
SEPTEMBER 30, 2009 Changes Changes(2) --------- ---------- Premium
income 14.2% 3.2% Net investment income 8.6 .8 Total benefits and
expenses 12.3 1.6 Operating earnings 19.6 11.0 Operating earnings
per diluted share 22.5 13.7 (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 Currency Currency NINE MONTHS ENDED SEPTEMBER 30, 2009
Changes Changes(2) --------- ---------- Premium income 11.9% 3.5%
Net investment income 7.7 1.7 Total benefits and expenses 10.1 1.9
Operating earnings 18.1 10.8 Operating earnings per diluted share
21.5 13.9 (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. 2009 OPERATING EARNINGS PER SHARE SCENARIOS
------------------------------------------- Average Annual Exchange
Operating % Growth Yen Rate EPS Over 2008 Impact -------- ---
--------- ------ 85 $5.04 - 5.12 26.3 - 28.3% $.53 90 4.87 - 4.96
22.1 - 24.3 .37 95 4.73 - 4.81 18.5 - 20.6 .22 100 4.59 - 4.68 15.0
- 17.3 .09 103.46* 4.51 - 4.59 13.0 - 15.0 - 105 4.47 - 4.55 12.0 -
14.0 (.04) 110 4.37 - 4.44 9.5 - 11.3 (.15) *Actual 2008
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: difficult conditions in global capital markets and the
economy generally; governmental actions for the purpose of
stabilizing the financial markets; defaults and downgrades in
certain securities in our investment portfolio; impairment of
financial institutions; credit and other risks associated with
Aflac's investment in perpetual securities; differing judgments
applied to investment valuations; subjective determinations of
amount of impairments taken on our investments; realization of
unrealized losses; limited availability of acceptable
yen-denominated investments; concentration of our investments in
any particular sector; concentration of business in Japan; ongoing
changes in our industry; exposure to significant financial and
capital markets risk; fluctuations in foreign currency exchange
rates; significant changes in investment yield rates; deviations in
actual experience from pricing and reserving assumptions;
subsidiaries' ability to pay dividends to the Parent Company;
changes in regulation by governmental authorities; ability to
attract and retain qualified sales associates and employees;
ability to continue to develop and implement improvements in
information technology systems; changes in U.S. and/or Japanese
accounting standards; decreases in our financial strength or debt
ratings; level and outcome of litigation; ability to effectively
manage key executive succession; catastrophic events; and failure
of internal controls or corporate governance policies and
procedures. (Logo:
http://www.newscom.com/cgi-bin/prnh/20041202/CLTH019LOGO ) Analyst
and investor contact - Kenneth S. Janke Jr., 800.235.2667 - option
3, FAX: 706.324.6330, or Media contact - Laura Kane, 706.596.3493,
FAX: 706.320.2288, or
http://www.newscom.com/cgi-bin/prnh/20041202/CLTH019LOGODATASOURCE:
Aflac Incorporated CONTACT: Analyst and investor contact; Kenneth
S. Janke Jr., +1-800-235-2667 - option 3, FAX: +1-706-324-6330, ,
or Media contact; Laura Kane, +1-706-596-3493, FAX:
+1-706-320-2288, Web Site: http://www.aflac.com/
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