COLUMBUS, Ga., April 25, 2006 /PRNewswire-FirstCall via COMTEX News Network/ -- Aflac Incorporated
(NYSE: AFL) today reported its first quarter results.
Reflecting a weaker yen to the dollar, total revenues were unchanged at
$3.6 billion during the first quarter of 2006. Net earnings were $375
million, or $.74 per diluted share, compared with $328 million, or $.64 per
share, a year ago. Net earnings included realized investment gains of $9
million, or $.02 per diluted share, compared with realized investment gains of
$2 million, or nil per share, a year ago. Net earnings in the first quarter
of 2006 also included a gain of $2 million, or nil 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
first quarter of 2005, the impact from SFAS 133 reduced net earnings by $9
million, or $.02 per diluted share.
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.
Furthermore, because a significant portion of our business is in Japan,
where our functional currency is the Japanese yen, we believe it is equally
important to understand the impact on operating earnings from translating yen
into dollars. We translate Aflac Japan's yen-denominated income statement
from yen into dollars using an average exchange rate for the reporting period,
and we translate the balance sheet using the exchange rate at the end of the
period. However, except for a limited number of transactions, we do not
actually convert yen into dollars. As a result, we view foreign currency
translation as a financial reporting issue for Aflac and not as an economic
event to our company or shareholders. Because changes in exchange rates
distort the growth rates of our operations, we also encourage readers of our
financial statements to evaluate our financial performance excluding the
impact of foreign currency translation. The chart at 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 translation.
Operating earnings in the first quarter of 2006 were $364 million,
compared with $335 million in the first quarter of 2005. Operating earnings
per diluted share rose 9.1% to $.72, compared with $.66 a year ago. The
weaker yen/dollar exchange rate lowered operating earnings per diluted share
by $.04 during the quarter. Excluding the impact from the weaker yen,
operating earnings per share increased 15.2%.
During the first quarter, we acquired 2.1 million shares of Aflac stock.
At the end of the first quarter, we had approximately 45 million shares
available for repurchase under authorizations by the board of directors.
AFLAC JAPAN
Aflac Japan continued to produce solid results that were in line with our
expectations. Premium income in yen increased 6.2% in the first quarter of
2006 and net investment income rose 11.2%. Investment income growth in yen
terms was magnified by the weaker yen/dollar exchange rate because
approximately 37% of Aflac Japan's first quarter investment income was dollar-
denominated. Total revenues rose 6.9%. Due to improvement in the benefit
ratio, the pretax operating profit margin expanded from 14.9% to 16.7%. As a
result, pretax operating earnings in yen were up 19.2%.
The average yen/dollar exchange rate in the first quarter of 2006 was
116.90, compared with an average rate of 104.50 in the first quarter of 2005.
Aflac Japan's growth rates in dollar terms were suppressed as a result of the
10.6% weakening of the average exchange rate during the quarter.
Reflecting the weaker yen, first quarter premium income in dollars
declined 5.1% to $2.1 billion. Net investment income was down .6% to $408
million. Total revenues were $2.6 billion, a decrease of 4.4%. Pretax
operating earnings were $425 million, or 6.6% higher than a year ago.
Aflac Japan's total new annualized premium sales declined 1.3% in the
first quarter to 29.4 billion yen, or $251 million. As we discussed following
our year-end earnings release, we expected weak first quarter sales. First
quarter sales reflected continued declines of Rider MAX sales and conversions.
We believe sales growth was also restrained by our agents' efforts to assist
with the conversion of a group of existing customers from payroll to direct
billing rates rather than concentrating on new sales. The billing conversion
program is now complete. Cancer life sales benefited from the additional
premium generated from billing mode conversions and sales through Dai-ichi
Mutual Life. Sales through Dai-ichi Life rose 5.1% in the first quarter.
Medical sales declined in the quarter, which we believe resulted from the
billing conversions as well as the introduction of WAYS, an innovative new
life product. We were very pleased with the initial response to WAYS, which
we launched in late January. Unlike traditional life insurance, WAYS allows a
policyholder to convert a portion of the life insurance coverage to medical,
nursing care, or fixed annuity benefits at retirement age. Despite its recent
introduction, WAYS accounted for approximately 9% of first quarter sales. Our
objective for the year is to increase total new annualized premium sales 5% to
8% in yen.
AFLAC U.S.
Aflac U.S. produced solid financial results in the first quarter. Premium
income increased 10.1% to $866 million. Net investment income rose 8.3% to
$110 million. Total revenues were up 10.0% to $980 million. Pretax operating
earnings were $147 million, an increase of 10.4%.
We were pleased with our U.S. sales results in the first quarter. Total
new annualized premium sales rose 11.4% to $318 million. Sales in the quarter
were led by accident/disability and cancer expense insurance, which accounted
for a combined 69% of sales in the quarter. We continued to be pleased with
the sales of recently introduced products, particularly our revised hospital
indemnity plan. Hospital indemnity sales were up 27.4% in the quarter,
accounting for approximately 12% of sales. We were also encouraged to see
continued expansion of our U.S. sales force. Newly recruited sales associates
rose 4.2% over 2005, and the number of producing associates also increased.
The number of average monthly producing associates increased 2.7% in the
quarter to more than 17,900. On an average weekly basis, the number of
producing associates rose 4.9% to more than 10,100. For the second quarter,
we face a tougher sales comparison and expect sales to be up in a range of
mid- to upper-single digits, which would keep us on track for our sales goal
for 2006. Our objective for the full year is an 8% to 12% increase in total
new annualized premium sales.
DIVIDEND
The board of directors declared the second quarter cash dividend. The
second quarter dividend of $.13 per share is payable on June 1, 2006, to
shareholders of record at the close of business on May 19, 2006.
OUTLOOK
Commenting on the company's first quarter results, Chairman and Chief
Executive Officer Daniel P. Amos stated: "We are pleased with Aflac's start in
2006. Our strong results were masked by the weaker yen compared with the
first quarter of last year. However, in its local currency, Aflac Japan
continued to post strong financial results, which were consistent with our
expectations. At the same time, Aflac U.S. performed well in the quarter,
achieving its sales and financial targets.
"Based on our first quarter results, we are optimistic about achieving our
financial objectives for the year. Our primary financial goal for 2006 is to
increase operating earnings per diluted share 15%, excluding foreign currency
translation. For 2007 our goal is to produce 15% to 16% growth in operating
earnings per diluted share, excluding the impact of the yen. The yen may
remain weak and suppress our reported financial performance, yet we believe
Aflac is fundamentally very strong. We also believe we are well-positioned in
the two largest insurance markets in the world."
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. 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 Fortune magazine's listing of America's
Most Admired Companies for six consecutive years and Forbes magazine's
Platinum 400 List of America's Best Big Companies for five consecutive years.
In January 2006, Aflac was included in Fortune magazine's list of the 100 Best
Companies to Work For in America for the eighth 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 Financial Analyst Briefing (FAB) supplement for the
first quarter of 2006 can be found in the "Company Financials" section of the
"For Investors" page at aflac.com.
Aflac Incorporated will webcast its first quarter conference call on the
"For Investors" page of aflac.com at 9:00 a.m. (EDT), Wednesday, April 26.
AFLAC INCORPORATED AND SUBSIDIARIES CONDENSED INCOME STATEMENT
(UNAUDITED - IN MILLIONS, EXCEPT FOR SHARE AND PER-SHARE AMOUNTS)
THREE MONTHS ENDED MARCH 31, 2006 2005 % Change
Total revenues $3,559 $3,559 -%
Benefits and claims 2,181 2,266 (3.7)
Total expenses 803 787 2.1
Earnings before income taxes 575 506 13.4
Income taxes 200 178
Net earnings $375 $328 14.2%
Net earnings per share - basic $.75 $.65 15.4%
Net earnings per share - diluted .74 .64 15.6
Shares used to compute earnings
per share (000):
Basic 498,037 502,706 (.9)%
Diluted 504,574 509,449 (1.0)
Dividends paid per share $.13 $.11 18.2%
AFLAC INCORPORATED AND SUBSIDIARIES CONDENSED BALANCE SHEET
(UNAUDITED - IN MILLIONS, EXCEPT FOR SHARE AMOUNTS)
MARCH 31, 2006 2005 % Change
Assets:
Total investments and cash $48,865 $49,755 (1.8)%
Deferred policy acquisition costs 5,706 5,583 2.2
Other assets 1,565 1,703 (8.1)
Total assets $56,136 $57,041 (1.6)%
Liabilities and shareholders' equity:
Policy liabilities $43,358 $43,313 .1%
Notes payable 1,400 1,398 .1
Other liabilities 3,802 4,554 (16.5)
Shareholders' equity 7,576 7,776 (2.6)
Total liabilities and shareholders'
equity $56,136 $57,041 (1.6)%
Shares outstanding at end of
period (000) 498,431 501,987 (.7)%
RECONCILIATION OF OPERATING EARNINGS TO NET EARNINGS
(UNAUDITED - IN MILLIONS, EXCEPT FOR PER-SHARE AMOUNTS)
THREE MONTHS ENDED MARCH 31, 2006 2005 % Change
Operating earnings $ 364 $ 335 8.8%
Reconciling items, net of tax:
Realized investment gains (losses) 9 2
Impact from SFAS 133 2 (9)
Net earnings $ 375 $ 328 14.2%
Operating earnings per diluted share $ .72 $ .66 9.1%
Reconciling items, net of tax:
Realized investment gains (losses) .02 -
Impact from SFAS 133 - (.02)
Net earnings per diluted share $ .74 $ .64 15.6%
FOREIGN CURRENCY TRANSLATION EFFECT ON OPERATING RESULTS(1)
(SELECTED PERCENTAGE CHANGES, UNAUDITED)
Including Excluding
Currency Currency
THREE MONTHS ENDED MARCH 31, 2006 Changes Changes(2)
Premium income (1.2)% 7.2%
Net investment income 1.9 7.8
Total benefits and expenses (2.2) 6.0
Operating earnings 8.8 15.2
Operating earnings per diluted share 9.1 15.2
(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.
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:
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.
(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 kjanke@aflac.com
Media contact - Laura Kane, 706.596.3493, FAX: 706.320.2288, or
lkane@aflac.com
SOURCE Aflac Incorporated
Analyst and investors, Kenneth S. Janke Jr., +1-800-235-2667 - option 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