COLUMBUS, Ga., Oct. 24 /PRNewswire-FirstCall/ -- Aflac Incorporated
(NYSE: AFL) today reported its third quarter results.
Total revenues were $3.7 billion in the third quarter, or 10.5% higher
than a year ago. Net earnings were $455 million, or $.90 per diluted share,
compared with $293 million, or $.57 per share, a year ago. Net earnings in
the third quarter of 2005 included realized investment gains of $89 million,
or $.18 per diluted share, compared with realized investment losses of $5
million, or $.01 per share, a year ago. The significant realized investment
gains in the quarter resulted from the execution of bond swaps that were
designed to take advantage of tax loss carryforwards and improve investment
income in future periods. In addition, net earnings in the third quarter
included a loss of $1 million, or $.01 per diluted share, resulting 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 2004, the impact from SFAS 133 increased net earnings by $6
million, or $.01 per diluted share. Net earnings in the third quarter of 2005
benefited by $34 million, or $.07 per diluted share, from the release of a
valuation allowance for deferred tax assets.
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 impact
from 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 SFAS 133, 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.
Operating earnings in the third quarter were $333 million, compared with
$292 million a year ago. On a per-share basis, operating earnings rose 15.8%
to $.66 per diluted share, compared with $.57 per share in the third quarter
of 2004. Although the yen was slightly weaker to the dollar compared with the
third quarter of 2004, the impact of foreign currency translation on a per-
share basis was not material in the quarter.
For the first nine months of 2005, total revenues rose 9.8% to $10.8
billion. Net earnings were $1.1 billion, or $2.20 per diluted share, compared
with $856 million, or $1.65 per share, a year ago. Operating earnings were
$994 million, or $1.96 per diluted share, compared with $860 million, or $1.66
per share, in 2004. Although the yen weakened to the dollar in the third
quarter, the yen was slightly stronger than a year ago for the nine months.
Excluding the benefit of $.02 per diluted share from the stronger yen,
operating earnings per share increased 16.9% for the first nine months of
2005, which is ahead of our annual target of a 15% increase before the effect
of the yen.
The board of directors declared the fourth quarter cash dividend of $.11
per share. The dividend is payable on December 1, 2005, to shareholders of
record at the close of business on November 18, 2005.
Commenting on the company's results, Chairman and Chief Executive Officer
Daniel P. Amos stated: "We are very pleased with our financial performance for
the third quarter and first nine months of 2005.
"Aflac Japan's total new annualized premium sales in the third quarter
increased 8.2% from a year ago to 31.0 billion yen, or $278 million. We were
pleased that our rate of sales growth improved significantly over the second
quarter. For the first nine months of 2005, total new annualized premium
sales were up 4.7% to 93.4 billion yen, or $865 million. As expected, sales
growth was restrained by continued sharp declines in Rider MAX sales.
However, we again produced significant increases in the sale of our medical
products. Sales of our popular EVER products rose 31.7% in the quarter and
accounted for 38% of Aflac Japan's total new sales. Dai-ichi Mutual Life's
sales of our cancer life product were also very strong, rising 19.0% over the
third quarter of 2004. Our objective for the full year is to increase total
new annualized premium sales 5% to 10%.
"Aflac U.S. produced strong sales results in the third quarter. Although
Hurricanes Katrina and Rita held back sales growth during September, total new
annualized premium sales still rose 10.0% to $297 million in the third
quarter. We were especially pleased with the initial market reception of
Vision Now, our new vision product. We began rolling out this innovative new
product in July, and third quarter sales were more than $8 million, which
exceeded our expectations. For the first nine months of the year, total new
sales were up 5.6% to $890 million. Our goal for the full year remains a 3%
to 8% increase in total new annualized premium sales. Recruitment of new sales
associates slowed compared with the first half of the year. We recruited more
than 5,700 new associates during the third quarter, which was 2.5% higher than
a year ago. We believe recruitment in the quarter was impacted in part by the
rollouts of our new vision and hospital indemnity products and the
introduction of new training programs. However, new agent recruitment through
the first nine months of the year rose 8.2%, which is consistent with our
expectation of a 5% to 10% increase for the year.
"Overall, Aflac's sales and financial performance for the third quarter
and first nine months of 2005 have been gratifying. We were especially
pleased to see Aflac U.S. post strong sales, and we believe we are making
steady progress at reestablishing better sales growth. To produce sustainable
sales momentum, we will continue our intense focus on the distribution side of
our business model. Through ongoing recruiting efforts and new and more
effective training programs, we are striving to expand the number of producing
sales associates, and therefore sales growth, in the future. We were also
pleased with Aflac Japan's marketing strength. Despite an increased number of
competing products in the market, Aflac Japan produced strong medical sales
growth in the quarter and through the first nine months of the year. And in
the process, Aflac has retained its leading position as the number one seller
of supplemental medical insurance policies in Japan.
"As we look to the balance of the year and beyond, we remain enthusiastic
about growth opportunities for Aflac U.S. and Aflac Japan. We believe aging
populations and increased out-of-pocket expenses for consumers in both markets
will continue to drive demand for our products. We also remain optimistic
about achieving our financial goals. Our objective for 2005 is to increase
operating earnings per diluted share 15% before the impact of foreign currency
translation. Based on the strong results we have produced so far this year,
we plan on increasing our sales promotion activities in the fourth quarter.
However, we still expect to meet or exceed our earnings objective for the
year. At the same time, we have retained our objectives of 15% growth in
operating earnings per diluted share before the impact of the yen for 2006,
and 13% to 16% growth before currency fluctuations in 2007. When we
established these financial objectives, we did so using what we considered to
be reasonable assumptions. In light of our current results and the overall
strength of our operations, we still consider those assumptions to be
reasonable, and we also believe our earnings objectives are achievable."
For 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. Aflac is 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's insurance
products provide protection to more than 40 million people worldwide. Aflac
has been included in both Fortune magazine's listing of America's Most Admired
Companies and Forbes magazine's Platinum 400 List of America's Best Big
Companies for five consecutive years. In January 2005, Aflac was included in
Fortune magazine's list of the 100 Best Companies to Work For in America for
the seventh consecutive year. Aflac was also included in Fortune magazine's
list of the Top 50 Employers for Minorities in August 2005, and in September
2005, Aflac Japan was named the Life Insurance Company of the Year at the Asia
Insurance Industry Awards, sponsored by the Asia Insurance Review. 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 third quarter report to shareholders can be found on the
"For Investors" page of aflac.com.
Aflac Incorporated will webcast its third quarter conference call on the
"For Investors" page of aflac.com on Tuesday, October 25 at 1:30 p.m. (EDT).
AFLAC INCORPORATED AND SUBSIDIARIES CONSOLIDATED SUMMARY OF EARNINGS
(UNAUDITED - IN MILLIONS, EXCEPT FOR SHARE AND PER-SHARE AMOUNTS)
THREE MONTHS ENDED SEPTEMBER 30, 2005 2004* % Change
Total revenues $3,669 $3,321 10.5%
Operating earnings 333 292 14.2
Reconciling items, net of tax:
Realized investment gains (losses) 89 (5)
Impact from SFAS 133 (1) 6
Release of deferred tax
asset valuation allowance 34 -
Net earnings 455 293 55.2
Operating earnings per share - diluted .66 .57 15.8
Reconciling items, net of tax:
Realized investment gains (losses) .18 (.01)
Impact from SFAS 133 (.01) .01
Release of deferred tax
asset valuation allowance .07 -
Net earnings per share - diluted .90 .57 57.9
Net earnings per share - basic .91 .58 56.9
Cash dividends paid per share .11 .095 15.8
Shares used to compute earnings
per share (000):
Basic 500,557 506,599 (1.2)
Diluted 507,323 515,576 (1.6)
NINE MONTHS ENDED SEPTEMBER 30,
Total revenues $10,796 $9,834 9.8%
Operating earnings 994 860 15.5
Reconciling items, net of tax:
Realized investment gains (losses) 99 (1)
Impact from SFAS 133 (8) (6)
Release of deferred tax
asset valuation allowance 34 -
Japanese pension obligation transfer - 3
Net earnings 1,119 856 30.7
Operating earnings per share - diluted 1.96 1.66 18.1
Reconciling items, net of tax:
Realized investment gains (losses) .19 (.01)
Impact from SFAS 133 (.02) (.01)
Release of deferred tax
asset valuation allowance .07 -
Japanese pension obligation transfer - .01
Net earnings per share - diluted 2.20 1.65 33.3
Net earnings per share - basic 2.23 1.68 32.7
Cash dividends paid per share .33 .285 15.8
Shares used to compute earnings
per share (000):
Basic 501,555 508,286 (1.3)
Diluted 508,250 517,591 (1.8)
*Adjusted to include stock option expense resulting from adoption of SFAS
123R
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
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," "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 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 and customer response to new
products and new marketing initiatives; 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
investment yield rates; fluctuations in foreign currency exchange rates;
deviations in actual experience from pricing and reserving assumptions
including, but not limited to, morbidity, mortality, persistency, expenses,
and investment yields; 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; ineffectiveness of
hedging strategies used to minimize the exposure of our shareholders' equity
to foreign currency translation fluctuations; catastrophic events; 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