COLUMBUS, Ga., Oct. 26 /PRNewswire-FirstCall/ -- AFLAC Incorporated today
reported its third quarter results. Total revenues, which reflected a stronger
average yen/dollar exchange rate, were $3.3 billion in the third quarter, or
13.3% higher than a year ago. Net earnings were $301 million, or $.58 per
diluted share, compared with $237 million, or $.45 per diluted share, a year
ago. Net earnings in the third quarter of 2004 included a gain of $6 million,
or $.01 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. In the third quarter of 2003, net earnings included a
loss of $2 million, or $.01 per diluted share, from the effect of SFAS 133.
Realized investment losses were $.01 per diluted share in the third quarters
of 2004 and 2003.
We believe that an analysis of operating earnings, a non-GAAP financial
measure, is vitally important to an understanding of AFLAC's underlying
profitability drivers. 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 as
required by 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
of SFAS 133, and nonrecurring items tend to be driven by general economic
conditions and events, and therefore obscure the underlying fundamentals and
trends in AFLAC's insurance operations.
Operating earnings in the third quarter were $299 million, compared with
$245 million a year ago. On a per-share basis, operating earnings rose 23.4%
to $.58 per diluted share, compared with $.47 per share in the third quarter
of 2003. Excluding the benefit of $.02 per share from the stronger yen to the
dollar, operating earnings per share increased 19.1% for the quarter.
For the first nine months of 2004, total revenues rose 14.3% to $9.8
billion. Net earnings were $881 million, or $1.70 per diluted share, compared
with $723 million, or $1.38 per share, a year ago. Operating earnings were
$886 million, or $1.71 per diluted share, compared with $728 million, or $1.39
per share, in 2003. Excluding the benefit of $.07 per share from the stronger
yen, operating earnings per share increased 18.0% for the first nine months of
2004.
The board of directors declared the fourth quarter cash dividend. The
fourth quarter dividend of $.095 per share is payable on December 1, 2004, to
shareholders of record at the close of business on November 12, 2004.
Commenting on the company's results, Chairman and Chief Executive Officer
Daniel P. Amos stated: "Overall, we are very pleased with our financial
performance for the third quarter and first nine months of 2004. Yet, we are
disappointed that we did not produce better sales growth in Japan and the
United States.
"AFLAC Japan's total new annualized premium sales in the third quarter
declined 2.9% from a year ago to 28.6 billion yen, or $260 million. For the
nine months, total new annualized premium sales were down .4% to 89.2 billion
yen, or $818 million. Sales growth in the quarter was again impacted by sharp
declines in Rider MAX conversions and significantly lower sales from Dai-ichi
Mutual Life, compared with 2003. Conversions were down 54.3% from a year ago,
and sales through Dai-ichi dropped 32.0%. Excluding conversions and the
contribution from Dai-ichi, sales were up 4.5% for the quarter and 5.4% for
the nine months. We currently expect fourth quarter sales to increase at a
low-single-digit rate, which will result in flat sales to a slight increase
for the full year.
"AFLAC U.S. produced total new annualized premium sales in the third
quarter of $270 million, or 2.7% above the third quarter of 2003. For the
first nine months, new sales were up 7.6% to $843 million. Although we
believe the rate of sales growth in the fourth quarter will improve compared
with the third quarter, we still expect a low- to mid-single-digit sales
increase for the remaining three months of the year. Therefore, we do not
expect to meet our full-year sales objective of a 10% to 12% increase in 2004.
New sales in the third quarter were negatively impacted by the hurricanes that
devastated areas of the Southeast. Sales in Florida and Alabama were
especially soft compared with their rates of sales growth in the first half of
the year. However, we believe the overall weak sales growth primarily
resulted from the sweeping changes we made to our sales management team last
year. Those changes are continuing to impact recruiting, productivity and,
consequently, sales.
"We expect new agent recruiting in the United States to improve as sales
coordinators who were promoted at the start of the year become better adjusted
to the responsibilities of their new positions. We also believe we can
improve retention and productivity of sales associates as we continue to
intensely focus on recently adopted training initiatives. Ultimately, we
believe these actions will lead to better recruiting and faster sales growth
in the United States. We are also encouraged about the outlook for our
operations in Japan. Although we have seen a proliferation of supplemental
insurance products in recent years, AFLAC is still the best branded company
for the sale of cancer life and medical insurance, which represent our top two
product categories in Japan. We also plan to introduce a new medical
insurance product in early 2005 to extend our leadership position.
"Most important, our financial performance continues to be strong. The
financial results of AFLAC U.S. and AFLAC Japan have met or exceeded
expectations throughout the year. With our consolidated year-to-date
operating earnings running ahead of target, we plan to spend more on marketing
expenses in the fourth quarter to stimulate sales. As a result, we expect to
produce fourth quarter operating earnings per diluted share of approximately
$.57 before the impact of the yen. If the yen/dollar exchange rate averages
110 in the fourth quarter, reported operating earnings will likely be $.56 per
diluted share.
"Clearly, we are very confident that full-year operating earnings per
diluted share will increase 17% in 2004, excluding the impact of the yen. Our
goal is to increase operating earnings per diluted share by 15% in 2005 and
2006 before currency translation. We also believe our earnings targets for
the next two years are achievable. Our ability to generate strong earnings
growth despite slow sales growth reflects the underlying strength and
resilience of our operations and business model. We remain committed to
providing valued products and services to our customers, and solid growth for
our shareholders."
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 312,900 payroll
accounts. The company insures one out of four Japanese households and is the
largest life insurer in Japan in terms of individual insurance policies in
force. In January 2004, AFLAC was included in Fortune magazine's list of "The
100 Best Companies to Work For in America" 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. In March
2004, Fortune magazine included AFLAC in its annual listing of "America's Most
Admired Companies." AFLAC's Internet address is aflac.com.
A copy of AFLAC's third quarter report to shareholders can be found on the
investor relations page of aflac.com.
AFLAC Incorporated will webcast its third quarter conference call on the
investor relations page of aflac.com at 9 a.m. (EDT), Wednesday, October 27.
AFLAC INCORPORATED AND SUBSIDIARIES CONSOLIDATED SUMMARY OF EARNINGS
(UNAUDITED -- IN MILLIONS, EXCEPT FOR SHARE AND PER-SHARE AMOUNTS)
THREE MONTHS ENDED SEPTEMBER 30, 2004 2003 % Change
Total revenues $3,321 $2,931 13.3%
Operating earnings 299 245 22.4
Reconciling items, net of tax:
Realized investment gains (losses) (4) (6)
SFAS 133 6 (2)
Net earnings 301 237 26.9
Operating earnings per share - diluted .58 .47 23.4
Reconciling items, net of tax:
Realized investment gains (losses) (.01) (.01)
SFAS 133 .01 (.01)
Net earnings per share - diluted .58 .45 28.9
Net earnings per share - basic .59 .46 28.3
Cash dividends paid per share .095 .08 18.8
Shares used to compute earnings per
share (000):
Basic 506,599 513,385 (1.3)
Diluted 515,576 521,212 (1.1)
NINE MONTHS ENDED SEPTEMBER 30,
Total revenues $9,834 $8,600 14.3%
Operating earnings 886 728 21.7
Reconciling items, net of tax:
Realized investment gains (losses) (2) (16)
SFAS 133 (6) 11
Japan pension obligation transfer 3 -
Net earnings 881 723 21.9
Operating earnings per share - diluted 1.71 1.39 23.0
Reconciling items, net of tax:
Realized investment gains (losses) (.01) (.03)
SFAS 133 (.01) .02
Japan pension obligation transfer .01 -
Net earnings per share - diluted 1.70 1.38 23.2
Net earnings per share - basic 1.73 1.41 22.7
Cash dividends paid per share .285 .22 29.5
Shares used to compute earnings per
share (000):
Basic 508,286 513,888 (1.1)
Diluted 517,591 522,793 (1.0)
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