COLUMBUS, Ga., April 28, 2015 /PRNewswire/ -- Aflac
Incorporated today reported its first quarter results.
Reflecting the weaker yen/dollar exchange rate, total revenues
fell 7.3% to $5.2 billion during the
first quarter of 2015, compared with $5.6
billion in the first quarter of 2014. Net earnings were
$663 million, or $1.51 per diluted share, compared with
$732 million, or $1.60 per share, a year ago.
Net earnings in the first quarter of 2015 included after-tax net
realized investment losses of $3
million, or nil per diluted share, compared with net
after-tax losses of $36 million, or
$.08 per diluted share, a year ago.
After-tax realized investment gains net of losses from securities
transactions in the quarter were $40
million, or $.10 per diluted
share. Hedging costs related to certain dollar investments of Aflac
Japan on an after-tax basis, were $9
million in the quarter, or $.02 per diluted share. Realized after-tax net
investment losses from other derivative and hedging activities in
the quarter were $34 million, or
$.08 per diluted share. In
addition, net earnings included a loss of $12 million, or $.03 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 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
2015 was 119.16, or 13.8% weaker than the average rate of 102.70 in
the first quarter of 2014. Operating earnings in the first quarter
were $678 million, compared with
$774 million in the first quarter of
2014. Operating earnings per diluted share in the quarter decreased
by 8.9% from a year ago to $1.54. The
weaker yen/dollar exchange rate decreased operating earnings per
diluted share by $.13 for the first
quarter. Excluding the impact from the weaker yen, operating
earnings per diluted share decreased 1.2%.
Total investments and cash at the end of March 2015 were $108.7
billion, compared with $107.3
billion at December 31,
2014.
In the first quarter, Aflac repurchased $600 million, or 9.8 million shares, of its
common stock. At the end of March, the company had 19.7 million
shares available for purchase under its share repurchase
authorizations.
Shareholders' equity was $18.6
billion, or $42.97 per share,
at March 31, 2015, compared with
$18.3 billion, or $41.47 per share, at December 31, 2014. Shareholders' equity at the
end of the first quarter included a net unrealized gain on
investment securities and derivatives of $5.0 billion, compared with a net unrealized gain
of $4.7 billion at the end of
December 2014. The annualized return
on average shareholders' equity in the first quarter was 14.3%. On
an operating basis (excluding total net realized investment
gains/losses in net earnings, unrealized investment gains/losses,
and derivative gains/losses in shareholders' equity), the
annualized return on average shareholders' equity was 19.8% for the
first quarter of 2015, or 21.5%, excluding the impact of the
yen.
AFLAC JAPAN
In yen terms, Aflac Japan's premium income rose .2% in the first
quarter. Net investment income increased 7.2%. Investment income
growth was magnified by the weaker yen/dollar exchange rate because
approximately 48% of Aflac Japan's first quarter investment income
was dollar-denominated, compared with 45% a year ago. Total
revenues were up 1.3% in the first quarter. The pretax operating
profit margin increased in the first quarter to 22.1% from 22.0% in
the prior year. Pretax operating earnings in yen increased 1.8% on
a reported basis and decreased 2.9% on a currency-neutral
basis.
Aflac Japan's growth rates in dollar terms for the first quarter
were suppressed as a result of the significantly weaker yen/dollar
exchange rate. Premium income decreased 13.5% to $3.1 billion in the first quarter. Net investment
income was down 7.5% to $613 million.
Total revenues decreased 12.6% to $3.7
billion. Pretax operating earnings declined 12.2% to
$819 million.
In the first quarter, total new annualized premium sales fell
2.2% to ¥27.0 billion, or $226
million. Third sector sales, which include cancer and
medical products, increased 21.3% in the quarter. As expected,
first sector sales, which include WAYS and child endowment,
declined 29.8% in the quarter primarily reflecting the continued
focus on the sale of third sector products.
AFLAC U.S.
Aflac U.S. premium income increased 3.5% to $1.3 billion in the first quarter. Net investment
income was up 3.3% to $166 million.
Total revenues increased 3.6% to $1.5
billion. The pretax operating profit margin was 18.9%,
compared with 20.8% a year ago. Pretax operating earnings were
$285 million, a decrease of 6.1% for
the quarter. The decline largely reflects the expenses that were
attributable to the changes made to our sales organization.
Aflac U.S. total new annualized premium sales decreased .5% in
the quarter to $316 million.
Additionally, persistency in the quarter was 76.7%, compared with
76.3% a year ago.
DIVIDEND
The board of directors declared the second quarter cash
dividend. The second quarter dividend of $.39 per share is payable on June 1, 2015, to shareholders of record at the
close of business on May 20,
2015.
OUTLOOK
Commenting on the company's first quarter results, Chairman and
Chief Executive Officer Daniel P.
Amos stated: "Aflac Japan, our largest earnings contributor,
generated strong financial and sales results in yen terms for the
quarter. Sales of Aflac Japan's third sector products were up 21.3%
in the quarter, which was a great start toward our expectation that
third sector sales will average an increase of 15% for the first
nine months of this year. While we still believe that the sales
growth of third sector products will be down sharply in the fourth
quarter relative to the prior year due to difficult comparisons, we
will continue to look for ways to improve our fourth quarter
results.
"From a financial perspective, Aflac U.S. also performed well in
the first quarter. As I mentioned during the fourth quarter
conference call, we expected first quarter sales would be
challenging. However, as we've discussed, we made significant
changes to our distribution system in the U.S. market over the last
several months, and we still believe these changes will have a
beneficial impact on our organization. As such, we remain focused
on increasing Aflac U.S. sales 3% to 7% for the year. As always, we
will work toward expanding our distribution capabilities to access
employers of all sizes by seeking opportunities to leverage our
brand strength and attractive product portfolio in the evolving
health care environment.
"We remain committed to maintaining strong capital ratios on
behalf of our policyholders. We improved our capital position for
2015 by entering into a new reinsurance agreement on March 31, 2015, which released approximately ¥130
billion of Aflac Japan's regulatory reserves. Additionally, 90% of
that transaction was retroceded to an Aflac Incorporated subsidiary
effective April 1. As such, we expect
our capital ratios will remain strong. We believe this capital
strength puts us in an excellent position to repatriate about ¥200
billion to the United States for
the calendar year 2015, which reinforces our plan to repurchase
about $1.3 billion of our common
stock in 2015.
"I want to reiterate that our objective for 2015 is to increase
operating earnings per diluted share 2% to 7% on a currency neutral
basis. If the yen averages 120 to 125 to the dollar for the second
quarter, we would expect earnings in the second quarter to be
approximately $1.46 to $1.57 per
diluted share. Using that same exchange rate assumption, we would
expect full-year reported operating earnings to be about
$5.74 to $6.15 per diluted share. In
April, we executed a make-whole transaction to enhance our
consolidated capital position. As a result of this transaction, we
will incur a non-operating charge of approximately $.34 in the second quarter of 2015. However,
operating earnings per diluted share for the remainder of 2015 will
benefit by approximately $.07 due to
a net reduction in interest expense. Challenging financial markets
and significantly depressed interest rates make it difficult to
invest cash flows at attractive yields. Therefore, we will remain
very disciplined in selling first sector products in Japan, which will reduce investable cash
flows. As always, we are working very hard to achieve our
earnings-per-share objective while also delivering on our promise
to policyholders."
ABOUT AFLAC
When a policyholder gets sick or hurt, Aflac pays cash benefits
fast. For nearly 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 work
site. 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 nine
consecutive years, Aflac has been recognized by Ethisphere magazine
as one of the World's Most Ethical Companies. In 2015, Fortune
magazine recognized Aflac as one of the 100 Best Companies to Work
For in America for the 17th consecutive year. Also, in 2015,
Fortune magazine included Aflac on its list of Most Admired
Companies for the 14th time, ranking the company No. 1 in
innovation for the insurance, life and health category. 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 29, 2015.
AFLAC INCORPORATED
AND SUBSIDIARIES CONDENSED INCOME STATEMENT
|
(UNAUDITED – IN
MILLIONS, EXCEPT FOR SHARE AND PER-SHARE AMOUNTS)
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED
MARCH 31,
|
|
2015
|
|
|
2014
|
|
%
Change
|
|
|
|
|
|
|
|
|
|
Total
revenues
|
$
|
5,226
|
|
$
|
5,640
|
|
(7.3)
|
%
|
|
|
|
|
|
|
|
|
|
Benefits and
claims
|
|
2,952
|
|
|
3,220
|
|
(8.3)
|
|
|
|
|
|
|
|
|
|
|
Total acquisition and
operating expenses
|
|
1,261
|
|
|
1,316
|
|
(4.2)
|
|
|
|
|
|
|
|
|
|
|
Earnings before
income taxes
|
|
1,013
|
|
|
1,104
|
|
(8.3)
|
|
|
|
|
|
|
|
|
|
|
Income
taxes
|
|
350
|
|
|
372
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings
|
$
|
663
|
|
$
|
732
|
|
(9.4)
|
%
|
|
|
|
|
|
|
|
|
|
Net earnings per
share – basic
|
$
|
1.52
|
|
$
|
1.61
|
|
(5.6)
|
%
|
|
|
|
|
|
|
|
|
|
Net earnings per
share – diluted
|
|
1.51
|
|
|
1.60
|
|
(5.6)
|
|
|
|
|
|
|
|
|
|
|
Shares used to
compute earnings per share (000):
|
|
|
|
|
|
|
|
|
|
Basic
|
437,306
|
|
454,731
|
|
(3.8)
|
%
|
|
Diluted
|
439,927
|
|
457,699
|
|
(3.9)
|
|
|
|
|
|
|
|
|
|
|
Dividends paid per
share
|
$
|
.39
|
|
$
|
.37
|
|
5.4
|
%
|
|
|
|
AFLAC INCORPORATED
AND SUBSIDIARIES CONDENSED BALANCE SHEET
|
(UNAUDITED – IN
MILLIONS, EXCEPT FOR SHARE AMOUNTS)
|
|
|
|
|
|
|
|
|
MARCH
31,
|
|
2015
|
|
|
2014
|
|
%
Change
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments and
cash
|
$
|
108,711
|
|
$
|
110,493
|
|
(1.6)
|
%
|
|
|
|
|
|
|
|
|
|
Deferred policy
acquisition costs
|
|
8,319
|
|
|
8,965
|
|
(7.2)
|
|
|
|
|
|
|
|
|
|
|
Other
assets
|
|
4,371
|
|
|
3,834
|
|
14.0
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
$
|
121,401
|
|
$
|
123,292
|
|
(1.5)
|
%
|
|
|
|
|
|
|
|
|
|
Liabilities and
shareholders' equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Policy
liabilities
|
$
|
85,564
|
|
$
|
92,890
|
|
(7.9)
|
%
|
|
|
|
|
|
|
|
|
|
Notes
payable
|
|
6,282
|
|
|
4,913
|
|
27.9
|
|
|
|
|
|
|
|
|
|
|
Other
liabilities
|
|
10,918
|
|
|
9,813
|
|
11.3
|
|
|
|
|
|
|
|
|
|
|
Shareholders'
equity
|
|
18,637
|
|
|
15,676
|
|
18.9
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
shareholders' equity
|
$
|
121,401
|
|
$
|
123,292
|
|
(1.5)
|
%
|
|
|
|
|
|
|
|
|
|
Shares outstanding at
end of period (000)
|
|
433,771
|
|
|
454,028
|
|
(4.5)
|
%
|
|
|
|
|
|
|
RECONCILIATION OF
OPERATING EARNINGS TO NET EARNINGS
|
|
(UNAUDITED – IN
MILLIONS, EXCEPT FOR PER-SHARE AMOUNTS)
|
|
|
|
|
|
|
|
|
|
THREE MONTHS
ENDED MARCH 31,
|
|
2015
|
|
|
2014
|
|
%
Change
|
|
|
|
|
|
|
|
|
|
|
|
Operating
earnings
|
$
|
678
|
|
$
|
774
|
|
(12.5)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Reconciling items,
net of tax:
|
|
|
|
|
|
|
|
|
|
Realized investment
gains (losses):
|
|
|
|
|
|
|
|
|
|
Securities transactions and
impairments
|
|
40
|
|
|
25
|
|
|
|
|
Hedge costs
related to
foreign
|
|
|
|
|
|
|
|
|
|
currency investments
|
|
(9)
|
|
|
(6)
|
|
|
|
|
Impact of other
derivative/hedging activities
|
|
(34)
|
|
|
(55)
|
|
|
|
|
Other and non-recurring income (loss)
|
|
(12)
|
|
|
(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings
|
$
|
663
|
|
$
|
732
|
|
(9.4)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings
per diluted share
|
$
|
1.54
|
|
$
|
1.69
|
|
(8.9)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Reconciling items,
net of tax:
|
|
|
|
|
|
|
|
|
|
Realized investment gains
(losses):
|
|
|
|
|
|
|
|
|
|
Securities transactions and
impairments
|
|
.10
|
|
|
.05
|
|
|
|
|
Hedge
costs related to
foreign
|
|
|
|
|
|
|
|
|
|
currency
investments
|
|
(.02)
|
|
|
(.01)
|
|
|
|
|
Impact of other derivative/hedging activities
|
|
(.08)
|
|
|
(.12)
|
|
|
|
|
Other and
non-recurring income (loss)
|
|
(.03)
|
|
|
(.01)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings per
diluted share
|
$
|
1.51
|
|
$
|
1.60
|
|
(5.6)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EFFECT OF FOREIGN
CURRENCY ON OPERATING
RESULTS1 (SELECTED PERCENTAGE CHANGES, UNAUDITED)
|
|
|
|
THREE MONTHS ENDED
MARCH 31, 2015
|
Including Currency Changes
|
Excluding Currency Changes2
|
|
|
|
Premium
income
|
(8.7)
|
%
|
1.5
|
%
|
|
|
|
|
|
Net investment
income
|
(5.4)
|
|
.8
|
|
|
|
|
|
|
Total benefits and
expenses
|
(7.1)
|
|
3.0
|
|
|
|
|
|
|
Operating
earnings
|
(12.5)
|
|
(5.0)
|
|
|
|
|
|
|
Operating earnings
per diluted share
|
(8.9)
|
|
(1.2)
|
|
|
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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015 OPERATING
EARNINGS PER SHARE SCENARIOS
|
|
|
|
|
|
|
|
|
|
|
Average
Exchange
Rate
|
|
|
Annual Operating EPS
|
|
%
Growth Over
2014
|
|
Yen
Impact
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100
|
|
|
$
|
6.47
|
-
|
6.77
|
|
5.0
|
-
|
9.9%
|
|
$ .18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
105.46*
|
|
|
|
6.29
|
-
|
6.59
|
|
2.1
|
-
|
7.0
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
115
|
|
|
|
6.01
|
-
|
6.31
|
|
(2.4)
|
-
|
2.4
|
|
(.28)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
125
|
|
|
|
5.77
|
-
|
6.07
|
|
(6.3)
|
-
|
(1.5)
|
|
(.52)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
135
|
|
|
|
5.56
|
-
|
5.86
|
|
(9.7)
|
-
|
(4.9)
|
|
(.73)
|
|
|
*Actual 2014
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 financial and capital markets
risk; fluctuations in foreign currency exchange rates; significant
changes in investment yield rates; credit and other risks
associated with Aflac's investment in perpetual securities;
differing judgments applied to investment valuations; significant
valuation judgments in determination of amount of impairments taken
on our investments; limited availability of acceptable
yen-denominated investments; concentration of our investments in
any particular single-issuer or sector; concentration of business
in Japan; decline in
creditworthiness of other financial institutions; deviations in
actual experience from pricing and reserving assumptions;
subsidiaries' ability to pay dividends to Aflac Incorporated;
ineffective risk management policies and procedures; changes in law
or regulation by governmental authorities; ability to attract and
retain qualified sales associates and employees; decreases in our
financial strength or debt ratings; ability to continue to develop
and implement improvements in information technology systems;
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; changes in U.S. and/or Japanese accounting standards;
failure to comply with restrictions on patient privacy and
information security; level and outcome of litigation; ability to
effectively manage key executive succession; catastrophic events
including, but not necessarily limited to, epidemics, pandemics,
tornadoes, hurricanes, earthquakes, tsunamis, acts of terrorism and
damage incidental to such events; ongoing changes in our industry;
events that damage our reputation; increased expenses for pension
and other postretirement plans; and failure of internal controls or
corporate governance policies and procedures.
Logo -
http://photos.prnewswire.com/prnh/20100423/CL92305LOGO
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-declares-second-quarter-cash-dividend-affirms-2015-operating-eps-target-300073770.html
SOURCE Aflac Incorporated