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Aflac Incorporated Announces Second Quarter Results, Declares Third Quarter Cash Dividend
COLUMBUS, Ga.
(Map)
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Reflecting a stronger yen to the dollar, total revenues increased 15.2% to
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
Operating earnings in the second quarter were
Results for the first six months of 2008 also benefited from a stronger
yen. Total revenues rose 14.5% to
AFLAC JAPAN
Aflac Japan's total revenues in yen were up 2.9%. Premium income in yen rose 3.6%, and net investment income declined .7% in the second quarter. Investment income growth in yen terms was suppressed by the stronger yen/dollar exchange rate because approximately 37% of Aflac Japan's second quarter investment income was dollar-denominated. Excluding the impact of the stronger yen, net investment income was up 5.0% in the quarter. Due to continued improvement in the benefit ratio, the pretax operating profit margin expanded from 17.4% to 18.2%. As a result, pretax operating earnings in yen increased 7.5%. For the first six months, premium income in yen increased 3.6%, and net investment income was down .3%. Total revenues were up 2.8%, and pretax operating earnings grew 6.1%.
The average yen/dollar exchange rate in the second quarter of 2008 was 104.50, or 15.6% stronger than the average rate of 120.78 in the second quarter of 2007. For the first six months, the average exchange rate was 104.77, or 14.7% stronger than the rate of 120.13 a year ago. Aflac Japan's growth rates in dollar terms for both the second quarter and first six months were magnified as a result of the stronger average yen/dollar exchange rates.
Reflecting the stronger yen, premium income in dollars rose 19.7% to
Aflac Japan's total new annualized premium sales declined 4.9% to
AFLAC U.S.
Aflac U.S. total revenues rose 8.4% to
Total new annualized premium sales rose 4.9% to
New agent recruitment continued to be solid this year. The number of newly recruited agents rose 4.2% in the second quarter to more than 6,700. Additionally, the average number of weekly producing sales associates increased, rising 6.3% in the second quarter. We continue to believe that the ongoing expansion of a productive sales force is an important driver of future sales growth. We also believe our success at increasing the number of producing sales associates has resulted from the enhanced training programs we have been implementing over the last few years.
DIVIDEND
The board of directors declared the third quarter cash dividend. The
third quarter dividend of
OUTLOOK
Commenting on the company's second quarter results, Chairman and Chief
Executive Officer
"I am encouraged by the improvement of our U.S. sales growth in the second quarter following a very slow start in the first quarter of this year. Knowing that we need a 12.5% increase in the second half of the year to meet the low end of our sales target, it will clearly be difficult to achieve the minimum of an 8% increase for 2008. As I have mentioned previously, we can't rule out that the U.S. economy is a contributing factor to slower sales growth. However, we still believe our products remain affordable to the average American consumer. And we are convinced that the protection our products provide is even more valuable when a significant health event occurs at a time of rising food and gas prices, and we're working to convey that message to consumers through our commercials and sales force.
"For Aflac Japan, we were not surprised to see weak second quarter sales. Yet, we did expect a sales increase in the quarter. With sales being flat for the first six months of the year, it will be more challenging to achieve our objective of a 3% to 7% sales increase for the year than anticipated. However, we expect to see improved sales growth in the second half of 2008, and I still believe our sales objective is achievable. My optimism for meeting our target is based on the strength of our product line and the new distribution opportunities through the bank channel and Japan Post.
"One of the very favorable attributes of Aflac's business model is our predictable earnings growth even in periods when sales are not as predictable. It appears that we are in one of those periods. However, even though our sales growth has been slower than we expected so far this year, our outlook for earnings has not changed. Our earnings growth primarily reflects our large and profitable block of in-force business. Importantly, the claims, expense and margin trends of our business in force remain predictable and very favorable. As a result, I believe we are well-positioned to achieve our earnings targets for 2008 and 2009.
"Our objective for 2008 remains an increase of 14% to 15% in operating
earnings per diluted share, excluding the impact of foreign currency.
Achieving that target would result in operating earnings of
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
A copy of Aflac's Financial Analyst Briefing (FAB) supplement for the second quarter of 2008 can be found on the "Investors" page at aflac.com.
Aflac Incorporated will webcast its second quarter conference call on the
"Investors" page of aflac.com at
AFLAC INCORPORATED AND SUBSIDIARIES CONDENSED INCOME STATEMENT
(UNAUDITED - IN MILLIONS, EXCEPT FOR SHARE AND PER-SHARE AMOUNTS)
THREE MONTHS ENDED JUNE 30, 2008 2007 % Change
Total revenues $4,336 $3,764 15.2%
Benefits and claims 2,575 2,266 13.6
Total acquisition and operating expenses 1,021 863 18.4
Earnings before income taxes 740 635 16.5
Income taxes 257 220
Net earnings $483 $415 16.4%
Net earnings per share - basic $1.02 $.85 20.0%
Net earnings per share - diluted 1.00 .84 19.0
Shares used to compute earnings per
share (000):
Basic 474,383 487,900 (2.8)%
Diluted 480,828 494,227 (2.7)
Dividends paid per share $.24 $.205 17.1%
AFLAC INCORPORATED AND SUBSIDIARIES CONDENSED INCOME STATEMENT
(UNAUDITED - IN MILLIONS, EXCEPT FOR SHARE AND PER-SHARE AMOUNTS)
SIX MONTHS ENDED JUNE 30, 2008 2007 % Change
Total revenues $8,603 $7,515 14.5%
Benefits and claims 5,113 4,524 13.0
Total acquisition and operating expenses 2,024 1,720 17.7
Earnings before income taxes 1,466 1,271 15.3
Income taxes 509 440
Net earnings $957 $831 15.2%
Net earnings per share - basic $2.01 $1.70 18.2%
Net earnings per share - diluted 1.98 1.68 17.9
Shares used to compute earnings per
share (000):
Basic 476,261 489,219 (2.6)%
Diluted 482,623 495,435 (2.6)
Dividends paid per share $.48 $.39 23.1%
AFLAC INCORPORATED AND SUBSIDIARIES CONDENSED BALANCE SHEET
(UNAUDITED - IN MILLIONS, EXCEPT FOR SHARE AMOUNTS)
JUNE 30, 2008 2007 % Change
Assets:
Total investments and cash $60,892 $52,197 16.7%
Deferred policy acquisition costs 7,194 6,096 18.0
Other assets 2,466 1,821 35.4
Total assets $ 70,552 $60,114 17.4%
Liabilities and shareholders' equity:
Policy liabilities $ 55,881 $45,722 22.2%
Notes payable 1,539 1,392 10.6
Other liabilities 5,233 4,810 8.8
Shareholders' equity 7,899 8,190 (3.6)
Total liabilities and
shareholders' equity $70,552 $60,114 17.4%
Shares outstanding at end
of period (000) 476,027 488,483 (2.5)%
RECONCILIATION OF OPERATING EARNINGS TO NET EARNINGS
(UNAUDITED - IN MILLIONS, EXCEPT FOR PER-SHARE AMOUNTS)
THREE MONTHS ENDED JUNE 30, 2008 2007 % Change
Operating earnings $487 $407 19.7%
Reconciling items, net of tax:
Realized investment gains (losses) (1) 9
Impact from SFAS 133 (3) (1)
Net earnings $483 $415 16.4%
Operating earnings per diluted share $1.01 $.82 23.2%
Reconciling items, net of tax:
Realized investment gains (losses) - .02
Impact from SFAS 133 (.01) -
Net earnings per diluted share $1.00 $.84 19.0%
RECONCILIATION OF OPERATING EARNINGS TO NET EARNINGS
(UNAUDITED - IN MILLIONS, EXCEPT FOR PER-SHARE AMOUNTS)
SIX MONTHS ENDED JUNE 30, 2008 2007 % Change
Operating earnings $962 $814 18.1%
Reconciling items, net of tax:
Realized investment gains (losses) (5) 18
Impact from SFAS 133 - (1)
Net earnings $957 $831 15.2%
Operating earnings per diluted share $1.99 $1.64 21.3%
Reconciling items, net of tax:
Realized investment gains (losses) (.01) .04
Impact from SFAS 133 - -
Net earnings per diluted share $1.98 $1.68 17.9%
EFFECT OF FOREIGN CURRENCY ON OPERATING RESULTS(1)
(SELECTED PERCENTAGE CHANGES, UNAUDITED)
Including Excluding
THREE MONTHS ENDED JUNE 30, 2008 Currency Currency
Changes Changes(2)
Premium income 16.5% 5.4%
Net investment income 11.2 3.7
Total benefits and expenses 14.9 4.0
Operating earnings 19.7 10.3
Operating earnings per diluted share 23.2 13.4
(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
SIX MONTHS ENDED JUNE 30, 2008 Currency Currency
Changes Changes(2)
Premium income 15.8% 5.4%
Net investment income 11.1 4.0
Total benefits and expenses 14.3 4.0
Operating earnings 18.1 10.4
Operating earnings per diluted share 21.3 13.4
(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.
2008 OPERATING EARNINGS PER SHARE SCENARIOS
Average Annual
Exchange Operating % Growth Yen
Rate EPS Over 2007 Impact
100 $4.06 - 4.09 24.2 - 25.1% $.33
105 3.95 - 3.98 20.8 - 21.7 .22
110 3.86 - 3.89 18.0 - 19.0 .13
115 3.78 - 3.81 15.6 - 16.5 .05
117.93* 3.73 - 3.76 14.1 - 15.0 -
120 3.70 - 3.73 13.1 - 14.1 (.03)
125 3.63 - 3.66 11.0 - 11.9 (.10)
* Actual 2007 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: legislative and regulatory developments, including changes
to health care and health insurance delivery; assessments for insurance
company insolvencies; competitive conditions in
Analyst and investor contact -
option 3, FAX: 706.324.6330, or kjanke@aflac.com
Media contact -
(Logo: http://www.newscom.com/cgi-bin/prnh/20041202/CLTH019LOGO )
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