COLUMBUS, Ga., Feb. 2 /PRNewswire-FirstCall/ -- AFLAC Incorporated today
reported its fourth quarter results.
Total revenues rose 6.8% to $2.8 billion in the fourth quarter, reflecting
the stronger yen/dollar exchange rate, compared with a year ago. Net earnings
were $73 million, or $.14 per diluted share, compared with $186 million, or
$.35 per share in the fourth quarter of 2002. Net earnings were significantly
influenced by realized investment losses in the quarter of $175 million, or
$.34 per diluted share. Realized investment losses were $4 million, or
$.01 per share, in the fourth quarter a year ago.
The large realized investment losses in the fourth quarter of 2003 related
primarily to the sale of our investment in Parmalat. Following disturbing
financial developments at Parmalat and several credit ratings downgrades of
its debt, we conducted an extensive analysis of our investment. Based on that
analysis, we sold all of our holdings in Parmalat and realized a pretax loss
of $257 million. Earlier in the quarter, we sold our investment in Levi
Strauss at a pretax loss of $38 million. In both cases, we concluded these
companies no longer met the profile of investments we want to retain in our
portfolio. The investment losses on Parmalat, Levi Strauss and other
investment transactions in the normal course of business decreased
consolidated pretax earnings by $284 million ($.34 per diluted share after
taxes). At the end of the year, only 2.8% of total company debt investments
were rated below investment grade, while 68.0% were rated "A" or better.
Net earnings in the fourth quarter also included a loss of $14 million, or
$.02 per diluted share, from the change in fair value of the interest rate
component of the cross-currency swaps related to the company's senior notes as
required by SFAS 133. That compares with a loss of $5 million, or $.01 per
diluted share, from SFAS 133 in the prior year's quarter. Net earnings in the
fourth quarter of 2002 also reflected a charge of $26 million, or $.05 per
diluted share, for our estimated portion of a life insurance industry
assessment for Japan's policyholder protection fund.
For the year, total revenues were $11.4 billion. Net earnings were
$795 million, or $1.52 per diluted share, compared with $821 million, or
$1.55 per share, in 2002.
Operating earnings, a non-GAAP financial measure, is the primary component
of our net earnings. As a result, our discussion of earnings and earnings
comparisons is directed toward operating earnings. We define operating
earnings as the profits we derive from our operations before realized
investment gains and losses, the change in the fair value of the interest rate
component of cross-currency swaps, and nonrecurring items. We believe that an
analysis of operating earnings is vitally important to an understanding of the
underlying profitability drivers and trends of our insurance business.
Operating earnings in the fourth quarter were a record $262 million,
compared with $221 million a year ago. On a per-share basis, operating
earnings rose 19.0% to $.50 per diluted share, compared with $.42 per share in
the fourth quarter of 2002. The stronger yen/dollar exchange rate increased
operating earnings per diluted share by $.02 in the fourth quarter.
For the year, operating earnings were $989 million, compared with $825
million a year ago. Operating earnings per diluted share rose 21.2% from
$1.56 to $1.89 in 2003. Excluding the $.06 per share benefit from the
stronger yen for the full year, operating earnings per diluted share rose
17.3%. That increase was in line with our upwardly revised 2003 target of a
17% increase in operating earnings per diluted share before the effect of
currency translation.
The board of directors increased the quarterly cash dividend for the 22nd
consecutive year. Effective with the first quarter of 2004, we raised the
quarterly cash dividend 18.8%, from $.08 to $.095 per share. The first
quarter dividend is payable on March 1, 2004, to shareholders of record at the
close of business on February 13, 2004.
The board of directors also authorized the purchase of up to 30 million
shares of AFLAC's common stock. This authorization is in addition to the
7.0 million shares that remained under a previous authorization as of
December 31, 2003, and brings the total number of shares available for
purchase to approximately 37 million. The company anticipates that the
repurchase of shares will be conducted from time to time in open market or
negotiated transactions, depending on market conditions.
Commenting on the company's results for the fourth quarter and the year,
Chairman and Chief Executive Officer Daniel P. Amos stated: "We are very
pleased with the way we concluded 2003. AFLAC Japan produced sales growth
that was in line with our expectations for the last three months of the year.
AFLAC Japan's total new annualized premium sales rose 8.7% to 31.7 billion yen,
or $291 million, in the fourth quarter. For the year, new sales were up 11.9%
to 121.2 billion yen, or $1.0 billion. Our annual sales results compared
favorably to our initial expectation of 5% to 10% sales growth in 2003. Our
objective for 2004 is to increase AFLAC Japan's total new annualized premium
sales 5% to 10% in yen terms.
"We were encouraged to see improvement in AFLAC U.S. sales in the final
quarter of the year. Total new sales increased 7.7% in the quarter to
$345 million, which exceeded our expectations. In fact, fourth-quarter sales
were the best in the company's history. For the year, new sales were up 5.4%
to $1.1 billion. Our objective for U.S. sales growth in 2004 is an increase
of 10% to 12%.
"Overall, we are very pleased with our financial performance in 2003.
Clearly, we experienced disappointment during the year, notably AFLAC U.S.
sales growth and the investment loss from Parmalat. Yet as we start 2004, we
believe we are positioned to see better U.S. sales growth, and the overall
quality of our investment portfolio remains high. At the same time, we had
our share of highlights in 2003. We were especially proud of AFLAC Japan's
strong sales and financial results. The strength of AFLAC Japan's financial
performance was the primary reason for increasing our 2003 earnings target and
then achieving that objective. And we were also pleased with the board of
directors' decision to increase the cash dividend twice in 2003.
"In looking ahead, we remain enthusiastic about the opportunities for
continued growth. Our objective for 2004 is a 17% increase in operating
earnings per diluted share before currency translation. And our objective for
2005 is to increase operating earnings per diluted share by 15% excluding the
impact of foreign currency translation. We view our earnings targets as
realistic and achievable. Furthermore, they reflect our conviction that the
U.S. and Japanese markets are perfectly suited to AFLAC's products. And we
believe our competitive strengths put us in a strong position to capitalize on
those opportunities."
AFLAC Incorporated (NYSE: AFL) is an international holding company. A
Fortune 500(R) company, AFLAC insures more than 40 million people worldwide.
It is a leading writer of insurance products marketed at the worksite in the
United States, offering policies to employees at more than 288,100 payroll
accounts. The company insures one out of four Japanese households and is the
largest life insurer in Japan in terms of individual policies in force. In
March 2003, Fortune magazine included AFLAC in its annual listing of
"America's Most Admired Companies." In July 2003, Fortune named AFLAC to its
list of "America's 50 Best Companies for Minorities." In January 2004, AFLAC
was included in Fortune magazine's list of "The 100 Best Companies to Work
for" for the sixth consecutive year. Also in January 2004, AFLAC was named to
Forbes magazine's "Platinum 400 List of Best Big Companies in America" for the
fifth consecutive year. AFLAC's Internet address is aflac.com.
A copy of AFLAC's Fourth Quarter Report to Shareholders can be found on
the investor relations page of aflac.com .
AFLAC Incorporated will webcast its fourth-quarter analyst presentation on
the investor relations page of aflac.com at 7:10 p.m. (EST), Wednesday,
February 4.
AFLAC INCORPORATED AND SUBSIDIARIES CONSOLIDATED SUMMARY OF EARNINGS
(UNAUDITED -- IN MILLIONS, EXCEPT FOR SHARE AND PER-SHARE AMOUNTS)
THREE MONTHS ENDED DECEMBER 31, 2003 2002 % Change
Total revenues $2,847 $2,666 6.8%
Net earnings 73 186 (61.0)
Items impacting net earnings,
net of tax:
Realized investment gains (losses) (175) (4)
SFAS 133 (14) (5)
Policyholder protection fund - (26)
Foreign currency translation* 13 1
Net earnings per basic share .14 .36 (61.1)
Net earnings per diluted share .14 .35 (60.0)
Items impacting net earnings per
diluted share, net of tax:
Realized investment gains (losses) (.34) (.01)
SFAS 133 (.02) (.01)
Policyholder protection fund - (.05)
Foreign currency translation* .02 -
Operating earnings 262 221 18.6
Operating earnings per basic share .51 .43 18.6
Operating earnings per diluted share .50 .42 19.0
Cash dividends paid per share .08 .06 33.3
Shares used to compute earnings
per share (000):
Basic 511,239 515,678 (.9)
Diluted 520,192 526,213 (1.1)
TWELVE MONTHS ENDED DECEMBER 31,
Total revenues $11,447 $10,257 11.6%
Net earnings 795 821 (3.1)
Items impacting net earnings,
net of tax:
Realized investment gains (losses) (191) (15)
SFAS 133 (3) 37
Policyholder protection fund - (26)
Foreign currency translation* 33 (10)
Net earnings per basic share 1.55 1.59 (2.5)
Net earnings per diluted share 1.52 1.55 (1.9)
Items impacting net earnings per
diluted share, net of tax:
Realized investment gains (losses) (.37) (.03)
SFAS 133 - .07
Policyholder protection fund - (.05)
Foreign currency translation* .06 (.02)
Operating earnings 989 825 20.0
Operating earnings per basic share 1.93 1.59 21.4
Operating earnings per diluted share 1.89 1.56 21.2
Cash dividends paid per share .30 .23 30.4
Shares used to compute earnings
per share (000):
Basic 513,220 517,541 (.8)
Diluted 522,138 528,326 (1.2)
*Foreign currency translation impact on AFLAC Japan segment and parent
company yen-denominated interest expense
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 discussed. 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 oral discussions 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," 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 in our reports filed with the SEC, could
cause actual results to differ materially from those contemplated by the
forward-looking statements: legislative and regulatory developments;
assessments for insurance company insolvencies; competitive conditions in the
United States and Japan; new product development; ability to attract and
retain qualified sales associates; ability to repatriate profits from Japan;
changes in U.S. and/or Japanese tax laws or accounting requirements; credit
and other risks associated with AFLAC's investment activities; significant
changes in interest rates; fluctuations in foreign currency rates; deviations
in actual experience from pricing and reserving assumptions; level and outcome
of litigation; downgrades in the company's credit rating; changes in rating
agency policies or practices; subsidiary's ability to pay dividends to parent
company, and general economic conditions in the United States and Japan.
Analyst and investor contact -- Kenneth S. Janke Jr., (800) 235-2667 --
option 3, FAX: (706) 324-6330, or kjanke@aflac.com
Media contact -- Laura Kane, (706) 596-3493, FAX: (706) 320-2288,
or lkane@aflac.com
SOURCE AFLAC Incorporated
CONTACT: Analysts and Investors, Kenneth S. Janke Jr., +1-800-235-2667,
ext. 3, or fax, +1-706-324-6330, or kjanke@aflac.com, or Media, Laura Kane,
+1-706-596-3493, or fax, +1-706-320-2288, or lkane@aflac.com, both of AFLAC
Incorporated