COLUMBUS, Ga., April 26, 2016 /PRNewswire/ -- Aflac
Incorporated today reported its first quarter results.
Benefiting from the stronger yen/dollar exchange rate, total
revenues rose 4.3% to $5.5 billion
during the first quarter of 2016, compared with $5.2 billion in the first quarter of 2015. Net
earnings were $731 million, or
$1.74 per diluted share, compared
with $663 million, or $1.51 per share, a year ago.
Net earnings in the first quarter of 2016 included $50 million, or $.12 per diluted share, of after-tax net realized
investment gains from securities transactions and impairments,
compared with net after-tax gains of $40
million, or $.10 per diluted
share, a year ago. Included in the net investment gains in the
quarter are after-tax impairment losses of $10 million, or $.02 per diluted share. Hedging costs related to
certain dollar investments of Aflac Japan on an after-tax basis
were $29 million in the quarter, or
$.07 per diluted share. Realized
after-tax net investment gains from other derivative and hedging
activities in the quarter were $12
million, or $.03 per diluted
share. In addition, net earnings included a loss of
$28 million, or $.07 per diluted share, from other and
nonrecurring items.
Aflac believes that an analysis of operating earnings, a
non-GAAP financial measure, is vitally important to an
understanding of the company's underlying profitability drivers.
Aflac defines operating earnings as the profits derived from
operations, inclusive of interest cash flows associated with notes
payable, but before realized investment gains and losses from
securities transactions, impairments, and derivative and hedging
activities, as well as other and nonrecurring items. Aflac's
derivative activities are primarily used to hedge foreign exchange
and interest rate risk in the company's investment portfolio as
well as manage foreign exchange risk in certain notes payable and
forecasted cash flows denominated in yen. Management uses operating
earnings to evaluate the financial performance of Aflac's insurance
operations because realized gains and losses from securities
transactions, impairments, and derivative and hedging activities,
as well as other and nonrecurring items, tend to be driven by
general economic conditions and events or related to infrequent
activities not directly associated with the company's insurance
operations, and therefore may obscure the underlying fundamentals
and trends in Aflac's insurance operations.
Furthermore, because a significant portion of Aflac's business
is in Japan, where the functional
currency is the yen, the company believes it is equally important
to understand the impact on operating earnings from translating yen
into dollars. Aflac Japan's yen-denominated income statement is
translated from yen into dollars using an average exchange rate for
the reporting period, and the balance sheet is translated using the
exchange rate at the end of the period. However, except for certain
transactions such as profit repatriation, settlements of
reinsurance retrocessions, and the Aflac Japan dollar investment
program, the company does not actually convert yen into dollars. As
a result, Aflac views foreign currency translation as a financial
reporting issue rather than an economic event for the company or
its shareholders. Because changes in exchange rates distort the
growth rates of operations, readers of Aflac's financial statements
are also encouraged to evaluate financial performance excluding the
impact of foreign currency translation. The chart toward 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.
The average yen/dollar exchange rate in the first quarter of
2016 was 115.35, or 3.3% stronger than the average rate of 119.16
in the first quarter of 2015. Operating earnings in the first
quarter were $726 million, compared
with $678 million in the first
quarter of 2015. Operating earnings per diluted share in the
quarter increased by 12.3% from a year ago to $1.73. Included in first quarter operating
earnings is an adjustment of $8
million after-tax, or $.02 per
diluted share, accelerating the recognition of stock compensation
expense associated with retirement-eligible employees. The stronger
yen/dollar exchange rate increased operating earnings per diluted
share by $.03 for the first quarter.
Excluding the impact from the stronger yen, operating earnings per
diluted share increased 10.4%.
Total investments and cash at the end of March 2016 were $114.3
billion, compared with $105.9
billion at December 31,
2015.
In the first quarter, Aflac repurchased $600 million, or 10.2 million of its common
shares. At the end of March, the company had 38.2 million shares
available for purchase under its share repurchase
authorizations.
Shareholders' equity was $20.0
billion, or $48.22 per share,
at March 31, 2016, compared with
$17.7 billion, or $41.73 per share, at December 31, 2015. Shareholders' equity at the
end of the first quarter included a net unrealized gain on
investment securities and derivatives of $4.7 billion, compared with a net unrealized gain
of $3.0 billion at the end of
December 2015. The annualized return
on average shareholders' equity in the first quarter was 15.5%. On
an operating basis (excluding net realized investment gains/losses
in net earnings as well as unrealized investment gains/losses and
derivative gains/losses in shareholders' equity), the annualized
return on average shareholders' equity was 19.3% for the first
quarter of 2016, or 18.5%, excluding the impact of the yen.
AFLAC JAPAN
In yen terms, Aflac Japan's premium income rose .1% in the first
quarter. Net investment income was down 1.7%. The decline in
investment income was largely attributable to the stronger
yen/dollar exchange rate because approximately 48% of Aflac Japan's
investment income was dollar-denominated, which was consistent with
a year ago. Total revenues were down .2% in the quarter. The pretax
operating profit margin fell slightly in the quarter to 22.0% from
22.1% in the prior year. Pretax operating earnings in yen decreased
.8% on a reported basis and increased .2% on a currency-neutral
basis.
Aflac Japan's growth rates in dollar terms for the quarter were
magnified as a result of the stronger yen/dollar exchange rate.
Premium income increased 3.3% to $3.2
billion in the quarter. Net investment income was up 1.4% to
$622 million. Total revenues
increased 3.0% to $3.8 billion.
Pretax operating earnings increased 2.4% to $838 million.
In the first quarter, total new annualized premium sales rose
15.5% to ¥31.2 billion, or $271
million. Third sector sales, which include cancer and
medical products, increased 1.0% to ¥18.3 billion, or $158.6 million. First sector sales, which include
WAYS and child endowment, increased 45.0% to ¥12.9 billion, or
$112.3 million.
AFLAC U.S.
Aflac U.S. premium income increased 2.1% to $1.4 billion in the first quarter. Net investment
income was up 5.1% to $174 million.
Total revenues increased 2.3% to $1.5
billion. The pretax operating profit margin rose to 21.5%,
compared with 18.9% a year ago. Pretax operating earnings were
$332 million, an increase of 16.6%
for the quarter.
Aflac U.S. total new annualized premium sales increased 3.7% in
the quarter to $328 million.
Additionally, persistency in the quarter was 76.6%, compared with
76.7% a year ago.
DIVIDEND
The board of directors declared the second quarter cash
dividend. The second quarter dividend of $.41 per share is payable on June 1, 2016, to shareholders of record at the
close of business on May 18,
2016.
OUTLOOK
Commenting on the company's first quarter results, Chairman and
Chief Executive Officer Daniel P.
Amos stated: "We are pleased with our overall financial
results in the first quarter of 2016. Aflac Japan, our largest
earnings contributor, generated solid financial results in yen
terms for the quarter. Sales of first sector products were elevated
in the quarter, consistent with our expectations. As we further
implement various measures later in the quarter, we expect to see a
sharp decline in first sector sales in the second half of the year.
Although sales of Aflac Japan's third sector products were up 1.0%
in the quarter, you'll recall we communicated in February that we
anticipate sales of third sector products will be down mid-single
digits for the full year following very robust production results
in 2015. While it's early in the year, we are running ahead of
expectations for sales of third sector products as of the end of
the first quarter. We continue to believe the long-term compound
annual growth rate for third sector products will be in the range
of 4% to 6%.
"In the first quarter, Aflac U.S. produced solid financial and
sales results. We continue to believe that the changes we made to
our career and broker management infrastructure have created a
foundation for greater long-term growth opportunities. The increase
in new annualized premium sales of 3.7% establishes a solid
baseline for our expectation of a 3% to 5% growth rate for the U.S.
in 2016. Keep in mind, we anticipate the achievement of our annual
U.S. sales target will be increasingly reliant on fourth quarter
production.
"We remain committed to maintaining strong capital ratios on
behalf of our policyholders and bondholders. Provided capital
conditions remain stable, we believe our financial strength in
Japan positions us to repatriate
in the range of ¥120 to ¥150 billion to the U.S. for the calendar
year 2016. This reinforces our plan to repurchase about
$1.4 billion of our shares in 2016,
with the majority concentrated in the first half of the year.
"I want to reiterate that our annual objective is to produce
operating earnings per diluted share of $6.17 to $6.41, assuming the 2015 average
exchange rate of 120.99 yen to the
dollar. If the yen averages ¥105 to ¥115 to the dollar for the
second quarter, we would expect earnings in the second quarter to
be approximately $1.55 to $1.82 per
diluted share. I would remind you that with interest rates at
significantly depressed levels and a return to market volatility,
it is difficult to invest cash flows at attractive yields while
maintaining a prudent risk tolerance. Additionally, we expect 2016
benefit ratios will continue to be strong in both the U.S. and
Japan, recognizing that the first
quarter is typically more favorable than the rest of the year. We
are well-positioned in the two best insurance markets in the world
and are working very hard to achieve our earnings-per-share
objective while also ensuring we deliver on our promise to
policyholders."
ABOUT AFLAC
When a policyholder gets sick or hurt, Aflac pays cash benefits
fast. For six decades, Aflac insurance policies have given
policyholders the opportunity to focus on recovery, not financial
stress. In the United States,
Aflac is the leading provider of voluntary insurance at the
worksite. Through its trailblazing One Day PaySM
initiative, Aflac U.S. can receive, process, approve and disburse
payment for eligible claims in one business day. In Japan, Aflac is the leading provider of
medical and cancer insurance and insures one in four households.
Aflac individual and group insurance products help provide
protection to more than 50 million people worldwide. For 10
consecutive years, Aflac has been recognized by Ethisphere
as one of the World's Most Ethical Companies. In 2016,
Fortune magazine recognized Aflac as one of the 100 Best
Companies to Work For in America for the 18th consecutive year and
included Aflac on its list of Most Admired Companies for the 15th
time, ranking the company No. 1 in innovation for the insurance,
life and health category for the second consecutive year. In 2015,
Aflac's contact centers were recognized by J.D. Power by providing
"An Outstanding Customer Service Experience" for the Live Phone
Channel. Aflac Incorporated is a Fortune 500 company listed on the
New York Stock Exchange under the symbol AFL. To find out more
about Aflac and One Day PaySM, visit aflac.com or
espanol.aflac.com.
A copy of Aflac's Financial Analysts Briefing (FAB) supplement
for the quarter can be found on the "Investors" page at
aflac.com.
Aflac Incorporated will webcast its quarterly conference call
via the "Investors" page of aflac.com at 9:00 a.m. (EDT) on Wednesday, April 27, 2016.
AFLAC INCORPORATED
AND SUBSIDIARIES CONDENSED INCOME STATEMENT
|
(UNAUDITED – IN
MILLIONS, EXCEPT FOR SHARE AND PER-SHARE AMOUNTS)
|
|
THREE MONTHS ENDED
MARCH 31,
|
|
2016
|
|
|
2015
|
|
%
Change
|
|
Total
revenues
|
$
|
5,451
|
|
$
|
5,226
|
|
4.3
|
%
|
|
|
|
|
|
|
|
|
|
Benefits and
claims
|
|
3,025
|
|
|
2,952
|
|
2.5
|
|
|
|
|
|
|
|
|
|
|
Total acquisition and
operating expenses
|
|
1,309
|
|
|
1,261
|
|
3.7
|
|
|
|
|
|
|
|
|
|
|
Earnings before
income taxes
|
|
1,117
|
|
|
1,013
|
|
10.4
|
|
|
|
|
|
|
|
|
|
|
Income
taxes
|
|
386
|
|
|
350
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings
|
$
|
731
|
|
$
|
663
|
|
10.2
|
%
|
|
|
|
|
|
|
|
|
|
Net earnings per
share – basic
|
$
|
1.75
|
|
$
|
1.52
|
|
15.1
|
%
|
|
|
|
|
|
|
|
|
|
Net earnings per
share – diluted
|
|
1.74
|
|
|
1.51
|
|
15.2
|
|
|
|
|
|
|
|
|
|
|
Shares used to
compute earnings per share (000):
|
|
|
|
|
|
|
|
|
|
Basic
|
418,748
|
|
437,306
|
|
(4.2)
|
%
|
|
Diluted
|
420,920
|
|
439,927
|
|
(4.3)
|
|
|
|
|
|
|
|
|
|
|
Dividends paid per
share
|
$
|
.41
|
|
$
|
.39
|
|
5.1
|
%
|
|
AFLAC INCORPORATED
AND SUBSIDIARIES CONDENSED BALANCE SHEET
|
(UNAUDITED – IN
MILLIONS, EXCEPT FOR SHARE AMOUNTS)
|
|
|
|
|
|
|
|
|
MARCH
31,
|
|
2016
|
|
|
2015
|
|
%
Change
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments and
cash
|
$
|
114,320
|
|
$
|
108,711
|
|
5.2
|
%
|
|
|
|
|
|
|
|
|
|
Deferred policy
acquisition costs
|
|
8,929
|
|
|
8,319
|
|
7.3
|
|
|
|
|
|
|
|
|
|
|
Other
assets
|
|
4,517
|
|
|
4,325
|
|
4.4
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
$
|
127,766
|
|
$
|
121,355
|
|
5.3
|
%
|
|
|
|
|
|
|
|
|
|
Liabilities and
shareholders' equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Policy
liabilities
|
$
|
94,128
|
|
$
|
85,564
|
|
10.0
|
%
|
|
|
|
|
|
|
|
|
|
Notes
payable
|
|
4,984
|
|
|
6,236
|
|
(20.1)
|
|
|
|
|
|
|
|
|
|
|
Other
liabilities
|
|
8,633
|
|
|
10,918
|
|
(20.9)
|
|
|
|
|
|
|
|
|
|
|
Shareholders'
equity
|
|
20,021
|
|
|
18,637
|
|
7.4
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
shareholders' equity
|
$
|
127,766
|
|
$
|
121,355
|
|
5.3
|
%
|
|
|
|
|
|
|
|
|
|
Shares outstanding at
end of period (000)
|
|
415,203
|
|
|
433,771
|
|
(4.3)
|
%
|
|
RECONCILIATION OF
OPERATING EARNINGS TO NET EARNINGS
|
(UNAUDITED – IN
MILLIONS, EXCEPT FOR PER-SHARE AMOUNTS)
|
|
|
|
|
|
|
|
|
|
THREE MONTHS
ENDED MARCH 31,
|
|
2016
|
|
|
2015
|
|
%
Change
|
|
|
|
|
|
|
|
|
|
|
|
Operating
earnings
|
$
|
726
|
|
$
|
678
|
|
7.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Reconciling items,
net of tax:
|
|
|
|
|
|
|
|
|
|
Realized investment
gains (losses):
|
|
|
|
|
|
|
|
|
|
Securities transactions and
impairments
|
|
50
|
|
|
40
|
|
|
|
|
Hedge costs
related to
foreign
|
|
|
|
|
|
|
|
|
|
currency investments
|
|
(29)
|
|
|
(9)
|
|
|
|
|
Impact of other
derivative/hedging activities
|
|
12
|
|
|
(34)
|
|
|
|
|
Other and non-recurring income (loss)
|
|
(28)
|
|
|
(12)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings
|
$
|
731
|
|
$
|
663
|
|
10.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings
per diluted share
|
$
|
1.73
|
|
$
|
1.54
|
|
12.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Reconciling items,
net of tax:
|
|
|
|
|
|
|
|
|
|
Realized investment gains
(losses):
|
|
|
|
|
|
|
|
|
|
Securities transactions and
impairments
|
|
.12
|
|
|
.10
|
|
|
|
|
Hedge
costs related to
foreign
|
|
|
|
|
|
|
|
|
|
currency
investments
|
|
(.07)
|
|
|
(.02)
|
|
|
|
|
Impact of other derivative/hedging activities
|
|
.03
|
|
|
(.08)
|
|
|
|
|
Other and
non-recurring income (loss)
|
|
(.07)
|
|
|
(.03)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings per
diluted share
|
$
|
1.74
|
|
$
|
1.51
|
|
15.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
EFFECT OF FOREIGN
CURRENCY ON OPERATING RESULTS1
(SELECTED PERCENTAGE
CHANGES, UNAUDITED)
|
|
|
|
THREE MONTHS ENDED
MARCH 31, 2016
|
Including
Currency
Changes
|
Excluding
Currency
Changes2
|
|
|
|
Premium
income
|
3.8
|
%
|
1.6
|
%
|
|
|
|
|
|
Net investment
income
|
2.4
|
|
1.1
|
|
|
|
|
|
|
Total benefits and
expenses
|
2.3
|
|
.1
|
|
|
|
|
|
|
Operating
earnings
|
7.1
|
|
5.2
|
|
|
|
|
|
|
Operating earnings
per diluted share
|
12.3
|
|
10.4
|
|
|
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.
|
2016 OPERATING
EARNINGS PER SHARE SCENARIOS
|
|
|
|
|
|
|
|
|
|
|
|
Average
Exchange
Rate
|
|
Annual
Operating
EPS
|
|
% Growth
Over 2015
|
|
Yen
Impact
|
|
|
|
|
|
|
|
|
|
|
|
105
|
|
$ 6.66
|
-
|
6.90
|
|
8.1
|
-
|
12.0%
|
|
$ .49
|
|
|
|
|
|
|
|
|
|
|
|
110
|
|
6.49
|
-
|
6.73
|
|
5.4
|
-
|
9.3
|
|
.32
|
|
|
|
|
|
|
|
|
|
|
|
115
|
|
6.34
|
-
|
6.58
|
|
2.9
|
-
|
6.8
|
|
.17
|
|
|
|
|
|
|
|
|
|
|
|
120.99*
|
|
6.17
|
-
|
6.41
|
|
.2
|
-
|
4.1
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
125
|
|
6.07
|
-
|
6.31
|
|
(1.5)
|
-
|
2.4
|
|
(.10)
|
|
|
|
|
|
|
|
|
|
|
|
*Actual 2015
weighted-average exchange rate
|
FORWARD-LOOKING INFORMATION
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: difficult
conditions in global capital markets and the economy; governmental
actions for the purpose of stabilizing the financial markets;
defaults and credit downgrades of securities in our investment
portfolio; exposure to significant interest rate risk;
concentration of business in Japan; limited availability of acceptable
yen-denominated investments; failure to comply with restrictions on
patient privacy and information security; foreign currency
fluctuations in the yen/dollar exchange rate; deviations in actual
experience from pricing and reserving assumptions; subsidiaries'
ability to pay dividends to Aflac Incorporated; ability to continue
to develop and implement improvements in information technology
systems; concentration of our investments in any particular
single-issuer or sector; decline in creditworthiness of other
financial institutions; ability to attract and retain qualified
sales associates and employees; differing judgments applied to
investment valuations; significant valuation judgments in
determination of amount of impairments taken on our investments;
credit and other risks associated with Aflac's investment in
perpetual securities; decreases in our financial strength or debt
ratings; inherent limitations to risk management policies and
procedures; extensive regulation and changes in law or regulation
by governmental authorities; interruption in telecommunication,
information technology and other operational systems, or a failure
to maintain the security, confidentiality or privacy of sensitive
data residing on such systems; catastrophic events including, but
not necessarily limited to, epidemics, pandemics, tornadoes,
hurricanes, earthquakes, tsunamis, acts of terrorism and damage
incidental to such events; changes in U.S. and/or Japanese
accounting standards; ability to effectively manage key executive
succession; level and outcome of litigation; increased expenses and
reduced profitability resulting from changes in assumptions for
pension and other postretirement benefit plans; ongoing changes in
our industry; loss of consumer trust resulting from events external
to our operations; failure of internal controls or corporate
governance policies and procedures.
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Analyst and investor contact – Robin Y.
Wilkey, 706.596.3264 or 800.235.2667; FAX: 706.324.6330 or
rwilkey@aflac.com
Media contact – Catherine Blades,
706.596.3014; FAX: 706.320.2288 or cblades@aflac.com
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/aflac-incorporated-announces-first-quarter-results-affirms-2016-operating-eps-and-sales-outlook-declares-second-quarter-cash-dividend-300257904.html
SOURCE Aflac Incorporated