COLUMBUS, Ga., Oct. 24, 2019 /PRNewswire/ -- Aflac
Incorporated (NYSE: AFL) today reported its third quarter
results.
Total revenues were $5.5 billion
during the third quarter of 2019, compared with $5.6 billion in the third quarter of 2018. Net
earnings were $777 million, or
$1.04 per diluted share, compared
with $845 million, or $1.09 per diluted share a year ago.
Net earnings in the third quarter of 2019 included pretax net
realized investment losses of $119
million, or $0.16 per diluted
share, compared with pretax net gains of $88
million, or $0.11 per diluted
share a year ago. Included in those net losses were $18 million of losses related to impairments and
loan loss reserve changes. Pretax net realized losses also included
$18 million in gains from changes in
the fair value of equity securities and $91
million of losses from certain derivatives and foreign
currency activities, as well as a $28
million loss from sales and redemptions.
The average yen/dollar exchange rate* in the third quarter of
2019 was 107.31, or 3.9% stronger than the average rate of 111.48
in the third quarter of 2018. For the first nine months, the
average exchange rate was 109.16, or 0.3% stronger than
the rate of 109.54 a year ago.
Adjusted earnings* in the third quarter were $863 million, compared with $792 million in the third quarter of 2018,
reflecting an increase of 9.0%. Adjusted earnings included
$25 million related to a partial call
of a concentrated exposure. It also included $11 million of pretax variable investment income
on alternative investments, of which $8
million was above expectations. Adjusted earnings per
diluted share* increased 12.6% to $1.16 in the quarter. The stronger yen/dollar
exchange rate impacted adjusted earnings per diluted share by
$0.02. Adjusted earnings per diluted
share excluding the impact of foreign currency* increased 10.7% to
$1.14.
For the first nine months of 2019, total revenues
were up 0.4% to $16.7 billion, compared
with $16.6 billion in the first nine
months of 2018. Net earnings were $2.5 billion, or $3.37 per diluted share, compared with
$2.4 billion, or $3.08 per
diluted share, for the first nine months of 2018.
Adjusted earnings for the first nine months of
2019 were $2.6 billion, or $3.41 per diluted
share, compared with $2.4 billion, or $3.15 per
diluted share, in 2018. Adjusted earnings included
$25 million related to a partial call
of a concentrated exposure. It also included $29 million of pretax variable investment income
on alternative investments, of which $21
million was above expectations. The slightly
stronger yen/dollar exchange rate did not have a significant
impact on adjusted earnings per diluted share.
Total investments and cash at the end of September 2019 were $139.5
billion, compared with $124.2
billion at September 30, 2018. In the
third quarter, Aflac Incorporated repurchased $310 million, or 5.9 million of its common
shares. At the end of September, the company had 45.9 million
remaining shares authorized for repurchase.
Shareholders' equity was $29.4
billion, or $40.04 per share,
at September 30, 2019, compared with $23.2 billion, or $30.45 per share, at September 30, 2018.
Shareholders' equity at the end of the third quarter included a net
unrealized gain on investment securities and derivatives of
$8.9 billion, compared with a net
unrealized gain of $4.2 billion at
September 30, 2018. Shareholders' equity at the end of the
third quarter also included an unrealized foreign currency
translation loss of $1.5
billion, compared with an unrealized foreign currency
translation loss of $2.1 billion at
September 30, 2018. The annualized return on average
shareholders' equity in the third quarter was 10.8%.
Shareholders' equity excluding AOCI* was $22.2 billion, or $30.18 per share at September 30, 2019,
compared with $21.3 billion, or
$27.94 per share, at
September 30, 2018. The annualized adjusted return on equity
excluding foreign currency impact* in the third quarter was
15.4%.
AFLAC JAPAN
In yen terms, Aflac Japan's net premium income was ¥347.9
billion for the quarter, or 1.2% lower than a year ago, mainly due
to limited-pay products reaching paid-up status. Net investment
income, net of amortized hedge costs, increased 4.0% to ¥70.4
billion, primarily driven by call income and increased investments
in dollar-denominated floating rate assets. Total revenues in yen
declined 0.3% to ¥419.5 billion. Pretax adjusted earnings in yen
for the quarter increased 6.1% on a reported basis and 7.8% on a
currency-neutral basis. The pretax adjusted profit margin for the
Japan segment was 21.4%, compared
with 20.1% a year ago, benefiting from continued strength in
benefit ratios and favorable net investment income.
For the first nine months, premium income in yen
was ¥1,046.9 billion, or 1.0% lower than a year
ago. Net investment income, net of amortized hedge
costs, increased 3.4% to ¥204.2 billion. Total
revenues in yen were down 0.3% to ¥1,254.8
billion. Pretax adjusted earnings were ¥272.6 billion,
or 3.2% higher than a year ago.
In dollar terms, net premium income increased 2.6% to
$3.2 billion in the third quarter.
Net investment income, net of amortized hedge costs, increased 8.7%
to $659 million. Total revenues
increased by 3.6% to $3.9 billion.
Pretax adjusted earnings increased 10.8% to $838 million.
For the first nine months, premium income in dollars
was $9.6 billion, or 0.6% lower than a year
ago. Net investment income, net of amortized hedge
costs, increased 4.3% to $1.9 billion. Total
revenues were up 0.2% to $11.5 billion. Pretax
adjusted earnings were $2.5 billion,
or 3.9% higher than a year ago.
For the quarter, new annualized premium sales (sales) for
protection-type first sector and third sector products decreased
21.5% to ¥18.2 billion, and total sales decreased 21.5% to ¥18.5
billion, or $172 million.
For the first nine months, sales for protection-type first
sector and third sector products decreased 14.5% to ¥60.0 billion,
and total sales decreased 14.7% to ¥61.2 billion, or $560 million.
AFLAC U.S.
Aflac U.S. net premium income rose 1.3% to $1.4 billion in the third quarter. Net investment
income decreased 2.1% to $183
million. Total revenues were up 0.9% to $1.6 billion. Pretax adjusted earnings were
$335 million, 0.3% higher than a year
ago, driven by an improvement in the benefit ratio partially offset
by higher anticipated expenses in the quarter. The pretax adjusted
profit margin for the U.S. segment was 20.6%, compared with 20.7% a
year ago.
For the first nine months, premium income rose 2.0% to
$4.4 billion. Net investment income
decreased slightly by 0.7% to $540
million. Total revenues were up 1.7% to $4.9 billion. Pretax adjusted earnings were
$996 million, 1.5% lower than a year
ago.
Aflac U.S. sales decreased 4.2% in the quarter to $344 million. For the first nine months, total
new sales decreased 1.6% to $1.0
billion.
CORPORATE AND OTHER
For the quarter, total revenue increased 18.3% to $97 million, reflecting net investment income of
$44 million and lower corporate
expenses. Net investment income, which increased $17 million, benefited from a $21 million pretax contribution from the
company's corporate hedging program. Pretax adjusted earnings were
a loss of $17 million, compared with
a loss of $29 million a year ago.
For the first nine months of the year, total revenue increased
17.1% to $287 million, reflecting net
investment income of $126 million.
Net investment income, which increased $52
million, benefited from a $61
million pretax contribution from the company's corporate
hedging program. Pretax adjusted earnings were a loss of
$62 million, compared with a loss of
$113 million a year ago.
DIVIDEND
The board of directors declared the fourth quarter dividend of
$0.27 per share, payable on
December 2, 2019 to shareholders of record at the close of
business on November 20, 2019.
OUTLOOK
Commenting on the company's results, Chairman and Chief
Executive Officer Daniel P. Amos
stated: "I am pleased with the company's overall financial results
that position us to exceed our original annual adjusted earnings
per share objective. At the same time, in both the U.S. and
Japan, we are concentrating on
investing in and executing on initiatives designed to drive future
earned premium growth.
"Aflac Japan, our largest earnings contributor, generated strong
financial results that were above our expectations for the quarter
and the first nine months of the year, primarily reflecting strong
investment income and improved benefit ratios. Sales of
protection-type first sector and third sector products were down in
the first nine months of the year, reflecting reduced sales of our
cancer insurance through Japan Post and following a strong 2018
with the launch of our revised cancer insurance product. We
continue to expect full-year Aflac Japan third sector and first
sector protection sales to be down in the mid-teens, with earned
premium growth in the range of 1% to 2%.
"Turning to our U.S. operations, we are pleased with the
financial performance of Aflac U.S. in the quarter, which is
significant because these results also reflect ongoing investment
in our platform, distribution and customer experience. While our
sales results were less than we expected for the quarter, keep in
mind, our production tends to be skewed toward the fourth quarter.
We expect full-year Aflac U.S. sales results to be flat to down
slightly, with earned premium growth in the 2% range.
"We remain committed to maintaining strong capital ratios on
behalf of our policyholders and balancing our financial strength
with reinvesting in our business, increasing the dividend, and
repurchasing shares. It goes without saying that we treasure our
record of dividend growth. With the fourth quarter's declaration,
2019 will mark the 37th consecutive year of dividend
increases. Our dividend track record is supported by the strength
of our capital and cash flows. We continue to anticipate that we'll
repurchase in the range of $1.3 to
$1.7 billion of our shares in 2019,
with the range allowing us to be more tactical in our deployment
strategy. As is always the case, this assumes stable capital
conditions and the absence of compelling alternatives. At the same
time, we recognize that prudent investment in our platform is
critical to our growth strategy and driving efficiencies that will
impact the bottom line for the long term.
"Having completed the first nine months of the year, I am
pleased with the company's overall results, which benefited from
timing of expenses, favorable investment results and continued
strength in pretax profit margins. We believe those results,
combined with our outlook for the remainder of 2019, well position
Aflac for another year of strong financial performance. We continue
to expect increased spending in the fourth quarter in support of
initiatives designed to drive future growth. We are upwardly
revising our 2019 adjusted earnings per diluted share outlook from
a range of $4.10 to $4.30 to a higher range of $4.35 to $4.45,
assuming the 2018 weighted average of ¥110.39 yen to the
dollar."
*See Non-U.S. GAAP Financial Measures section for an explanation
of foreign exchange and its impact on the financial statements and
definitions of the non-U.S. GAAP financial measures used in this
earnings release, as well as a reconciliation of such non-U.S. GAAP
financial measures to the most comparable U.S. GAAP financial
measures.
ABOUT AFLAC INCORPORATED
Aflac Incorporated (NYSE:
AFL) is a Fortune 500 company, helping provide protection to more
than 50 million people through its subsidiaries in Japan and the U.S., where it is a leading
supplemental insurer by paying cash fast when policyholders get
sick or injured. For more than six decades, insurance policies of
Aflac Incorporated's subsidiaries have given policyholders the
opportunity to focus on recovery, not financial stress. Aflac Life
Insurance Japan is the leading provider of medical and cancer
insurance in Japan where it
insures 1 in 4 households. Through its trailblazing One Day
PaySM initiative in the United
States, for eligible claims, Aflac can process, approve and
electronically send funds to claimants for quick access to cash in
just one business day. For 13 consecutive years, Aflac has been
recognized by Ethisphere as one of the World's Most Ethical
Companies. In 2018, Fortune magazine recognized Aflac as one of the
100 Best Companies to Work for in America for the 20th consecutive
year and in 2019 Fortune included Aflac on its list of World's Most
Admired Companies for the 18th time. To find out more about One Day
PaySM and learn how to get help with expenses health
insurance doesn't cover, get to know us at aflac.com.
Aflac herein means American Family Life Assurance Company of
Columbus and American Family Life
Assurance Company of New
York.
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. (ET) on Friday, October 25,
2019.
AFLAC INCORPORATED
AND SUBSIDIARIES CONDENSED INCOME STATEMENT
|
(UNAUDITED – IN
MILLIONS, EXCEPT FOR SHARE AND PER-SHARE AMOUNTS)
|
|
|
|
|
|
|
|
THREE MONTHS ENDED
SEPTEMBER 30,
|
|
2019
|
|
2018
|
|
% Change
|
Total
revenues
|
|
$
|
5,536
|
|
|
$
|
5,577
|
|
|
(0.7)
|
%
|
Benefits and claims,
net
|
|
3,027
|
|
|
3,002
|
|
|
0.8
|
|
Total acquisition and
operating expenses
|
|
1,473
|
|
|
1,429
|
|
|
3.1
|
|
Earnings before
income taxes
|
|
1,036
|
|
|
1,146
|
|
|
(9.6)
|
|
Income
taxes
|
|
259
|
|
|
301
|
|
|
|
Net
earnings
|
|
$
|
777
|
|
|
$
|
845
|
|
|
(8.0)
|
%
|
Net earnings per
share – basic
|
|
$
|
1.05
|
|
|
$
|
1.10
|
|
|
(4.5)
|
%
|
Net earnings per
share – diluted
|
|
1.04
|
|
|
1.09
|
|
|
(4.6)
|
|
Shares used to
compute earnings per share (000):
|
|
|
|
|
|
|
Basic
|
|
739,946
|
|
|
767,049
|
|
|
(3.5)
|
%
|
Diluted
|
|
743,842
|
|
|
772,070
|
|
|
(3.7)
|
|
Dividends paid per
share
|
|
$
|
0.27
|
|
|
$
|
0.26
|
|
|
3.8
|
%
|
AFLAC INCORPORATED
AND SUBSIDIARIES CONDENSED INCOME STATEMENT
|
(UNAUDITED – IN
MILLIONS, EXCEPT FOR SHARE AND PER-SHARE AMOUNTS)
|
|
|
|
|
|
|
|
NINE MONTHS ENDED
SEPTEMBER 30,
|
|
2019
|
|
2018
|
|
% Change
|
Total
revenues
|
|
$
|
16,704
|
|
|
$
|
16,632
|
|
|
0.4
|
%
|
Benefits and claims,
net
|
|
8,958
|
|
|
9,075
|
|
|
(1.3)
|
|
Total acquisition and
operating expenses
|
|
4,358
|
|
|
4,296
|
|
|
1.4
|
|
Earnings before
income taxes
|
|
3,388
|
|
|
3,261
|
|
|
3.9
|
|
Income
taxes
|
|
865
|
|
|
866
|
|
|
|
Net
earnings
|
|
$
|
2,523
|
|
|
$
|
2,395
|
|
|
5.3
|
%
|
Net earnings per
share – basic
|
|
$
|
3.38
|
|
|
$
|
3.10
|
|
|
9.0
|
%
|
Net earnings per
share – diluted
|
|
3.37
|
|
|
3.08
|
|
|
9.4
|
|
Shares used to
compute earnings per share (000):
|
|
|
|
|
|
|
Basic
|
|
745,465
|
|
|
772,807
|
|
|
(3.5)
|
%
|
Diluted
|
|
749,452
|
|
|
777,867
|
|
|
(3.7)
|
|
Dividends paid per
share
|
|
$
|
0.81
|
|
|
$
|
0.78
|
|
|
3.8
|
%
|
AFLAC INCORPORATED
AND SUBSIDIARIES CONDENSED BALANCE SHEET
|
(UNAUDITED – IN
MILLIONS, EXCEPT FOR SHARE AMOUNTS)
|
|
|
|
|
|
|
|
SEPTEMBER
30,
|
|
2019
|
|
2018
|
|
% Change
|
Assets:
|
|
|
|
|
|
|
Total investments and
cash
|
|
$
|
139,510
|
|
|
$
|
124,214
|
|
|
12.3
|
%
|
Deferred policy
acquisition costs
|
|
10,148
|
|
|
9,622
|
|
|
5.5
|
|
Other
assets
|
|
4,479
|
|
|
4,105
|
|
|
9.1
|
|
Total
assets
|
|
$
|
154,137
|
|
|
$
|
137,941
|
|
|
11.7
|
%
|
Liabilities and
shareholders' equity:
|
|
|
|
|
|
|
Policy
liabilities
|
|
$
|
107,530
|
|
|
$
|
100,584
|
|
|
6.9
|
%
|
Notes
payable
|
|
6,233
|
|
|
5,279
|
|
|
18.1
|
|
Other
liabilities
|
|
10,936
|
|
|
8,844
|
|
|
23.7
|
|
Shareholders'
equity
|
|
29,438
|
|
|
23,234
|
|
|
26.7
|
|
Total liabilities and
shareholders' equity
|
|
$
|
154,137
|
|
|
$
|
137,941
|
|
|
11.7
|
%
|
Shares outstanding at
end of period (000)
|
|
735,130
|
|
|
763,113
|
|
|
(3.7)
|
%
|
NON-U.S. GAAP FINANCIAL MEASURES
This earnings release includes references to Aflac's non-U.S.
GAAP financial measures, adjusted earnings, adjusted earnings per
diluted share, adjusted return on equity, amortized hedge
costs/income, and adjusted book value. These measures are not
calculated in accordance with U.S. GAAP. The measures exclude items
that the company believes may obscure the underlying fundamentals
and trends in insurance operations because they tend to be driven
by general economic conditions and events or related to infrequent
activities not directly associated with insurance operations.
Management uses adjusted earnings, adjusted earnings per diluted
share, and adjusted return on equity to evaluate the financial
performance of Aflac's insurance operations on a consolidated basis
and believes that a presentation of these measures is vitally
important to an understanding of the underlying profitability
drivers and trends of Aflac's insurance business. The company
believes that amortized hedge costs/income, which are a component
of adjusted earnings, measure the periodic currency risk management
costs/income related to hedging certain foreign currency exchange
risks and are an important component of net investment income.
The company considers adjusted book value important as it excludes
accumulated other comprehensive income (AOCI), which fluctuates due
to market movements that are outside management's control.
Definitions of the company's non-U.S. GAAP financial measures and
reconciliations to the most comparable U.S. GAAP measures are
provided below and in the following schedules.
Due to the size of Aflac Japan, where the functional currency is
the Japanese yen, fluctuations in the yen/dollar exchange rate can
have a significant effect on reported results. In periods when the
yen weakens, translating yen into dollars results in fewer dollars
being reported. When the yen strengthens, translating yen into
dollars results in more dollars being reported. Consequently, yen
weakening has the effect of suppressing current period results in
relation to the comparable prior period, while yen strengthening
has the effect of magnifying current period results in relation to
the comparable prior period. A significant portion of the company's
business is conducted in yen and never converted into dollars but
translated into dollars for U.S. GAAP reporting purposes, which
results in foreign currency impact to earnings, cash flows and book
value on a U.S. GAAP basis. Because foreign exchange rates are
outside of management's control, Aflac believes it is important to
understand the impact of translating Japanese yen into U.S.
dollars. Adjusted earnings, adjusted earnings per diluted share,
and adjusted return on equity, all excluding current period foreign
currency impact, are computed using the average yen/dollar exchange
rate for the comparable prior year period, which eliminates
fluctuations driven solely by yen-to-dollar currency rate changes.
The average yen/dollar exchange rate is based on the published MUFG
Bank, Ltd. telegraphic transfer middle rate (TTM).
The company defines the non-U.S. GAAP financial measures
included in this earnings release as follows:
- Adjusted earnings are adjusted revenues less benefits and
adjusted expenses. The adjustments to both revenues and expenses
account for certain items that cannot be predicted or that are
outside management's control. Adjusted revenues are U.S. GAAP total
revenues excluding realized investment gains and losses, except for
amortized hedge costs/income related to foreign currency exposure
management strategies and net interest cash flows from derivatives
associated with certain investment strategies. Adjusted expenses
are U.S. GAAP total acquisition and operating expenses including
the impact of interest cash flows from derivatives associated with
notes payable but excluding any nonrecurring or other items not
associated with the normal course of the company's insurance
operations and that do not reflect the company's underlying
business performance. The most comparable U.S. GAAP measure is net
earnings.
- Adjusted earnings per share (basic or diluted) are the adjusted
earnings for the period divided by the weighted average outstanding
shares (basic or diluted) for the period presented. The most
comparable U.S. GAAP measure is net earnings per share.
- Adjusted return on equity excluding foreign currency impact is
calculated using adjusted earnings excluding the impact of the
yen/dollar exchange rate, as reconciled with total U.S. GAAP net
earnings, divided by average shareholders' equity, excluding AOCI.
The most comparable U.S. GAAP financial measure is return on
average equity (ROE) as determined using net earnings and average
total shareholders' equity.
- Amortized hedge costs/income represent costs/income incurred or
recognized in using foreign currency forward contracts to hedge
certain foreign exchange risks in the company's Japan segment (costs) or in the Corporate and
Other segment (income). These amortized hedge costs/income are
derived from the difference between the foreign currency spot rate
at time of trade inception and the contractual foreign currency
forward rate, recognized on a straight line basis over the term of
the hedge. There is no comparable U.S. GAAP financial measure for
amortized hedge costs/income.
- Adjusted book value is the U.S. GAAP book value (representing
total shareholders' equity), less AOCI as recorded on the U.S. GAAP
balance sheet. The company considers adjusted book value important
as it excludes AOCI, which fluctuates due to market movements that
are outside management's control.
- Adjusted book value per share is the adjusted book value at the
period end divided by the outstanding common shares at the period
end. The most comparable U.S. GAAP measure is total book value per
share.
RECONCILIATION OF
NET EARNINGS TO ADJUSTED EARNINGS1
|
(UNAUDITED – IN
MILLIONS, EXCEPT FOR PER-SHARE AMOUNTS)
|
|
|
|
|
|
|
|
THREE MONTHS ENDED
SEPTEMBER 30,
|
|
2019
|
|
2018
|
|
% Change
|
|
|
|
|
|
|
|
Net
earnings
|
|
$
|
777
|
|
|
$
|
845
|
|
|
(8.0)
|
%
|
|
|
|
|
|
|
|
Items impacting net
earnings:
|
|
|
|
|
|
|
Realized investment
(gains) losses
|
|
119
|
|
|
(88)
|
|
|
|
Other and
non-recurring (income) loss
|
|
—
|
|
|
3
|
|
|
|
Income tax (benefit)
expense on items excluded
from adjusted earnings
|
|
(33)
|
|
|
21
|
|
|
|
Tax
reform adjustment 4
|
|
—
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
Adjusted
earnings
|
|
863
|
|
|
792
|
|
|
9.0
|
%
|
Current period
foreign currency impact 2
|
|
(15)
|
|
|
N/A
|
|
|
|
Adjusted earnings
excluding current period foreign
currency impact
3
|
|
$
|
848
|
|
|
$
|
792
|
|
|
7.1
|
%
|
|
|
|
|
|
|
|
Net earnings per
diluted share
|
|
$
|
1.04
|
|
|
$
|
1.09
|
|
|
(4.6)
|
%
|
|
|
|
|
|
|
|
Items impacting net
earnings:
|
|
|
|
|
|
|
Realized investment
(gains) losses
|
|
0.16
|
|
|
(0.11)
|
|
|
|
Other and
non-recurring (income) loss
|
|
—
|
|
|
—
|
|
|
|
Income tax (benefit)
expense on items excluded
from adjusted earnings
|
|
(0.04)
|
|
|
0.03
|
|
|
|
Tax
reform adjustment 4
|
|
—
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
Adjusted earnings per
diluted share
|
|
1.16
|
|
|
1.03
|
|
|
12.6
|
%
|
Current period
foreign currency impact 2
|
|
(0.02)
|
|
|
N/A
|
|
|
|
Adjusted earnings per
diluted share excluding
current period foreign
currency impact 3
|
|
$
|
1.14
|
|
|
$
|
1.03
|
|
|
10.7
|
%
|
|
|
1
|
Amounts may not foot
due to rounding.
|
2
|
Prior period foreign
currency impact reflected as "N/A" to isolate change for current
period only.
|
3
|
Amounts excluding
current period foreign currency impact are computed using the
average yen/dollar exchange rate for the comparable prior-year
period, which eliminates fluctuations driven solely by
yen-to-dollar currency rate changes.
|
4
|
An adjustment of $11
million was made in the three- month period ended September 30,
2018, as a result of return-to-provision adjustments and various
amended returns filed by the Company.
|
RECONCILIATION OF
NET EARNINGS TO ADJUSTED EARNINGS1
|
(UNAUDITED – IN
MILLIONS, EXCEPT FOR PER-SHARE AMOUNTS)
|
|
|
|
|
|
|
|
NINE MONTHS ENDED
SEPTEMBER 30,
|
|
2019
|
|
2018
|
|
% Change
|
|
|
|
|
|
|
|
Net
earnings
|
|
$
|
2,523
|
|
|
$
|
2,395
|
|
|
5.3
|
%
|
|
|
|
|
|
|
|
Items impacting net
earnings:
|
|
|
|
|
|
|
Realized investment
(gains) losses
|
|
49
|
|
|
(25)
|
|
|
|
Other and
non-recurring (income) loss
|
|
1
|
|
|
73
|
|
|
|
Income tax (benefit)
expense on items excluded
from adjusted earnings
|
|
(15)
|
|
|
(7)
|
|
|
|
Tax
reform adjustment 4
|
|
—
|
|
|
$
|
11
|
|
|
|
|
|
|
|
|
|
|
Adjusted
earnings
|
|
2,558
|
|
|
2,447
|
|
|
4.5
|
%
|
Current period
foreign currency impact 2
|
|
(2)
|
|
|
N/A
|
|
|
|
Adjusted earnings
excluding current period foreign
currency impact
3
|
|
$
|
2,556
|
|
|
$
|
2,447
|
|
|
4.5
|
%
|
|
|
|
|
|
|
|
Net earnings per
diluted share
|
|
$
|
3.37
|
|
|
$
|
3.08
|
|
|
9.4
|
%
|
|
|
|
|
|
|
|
Items impacting net
earnings:
|
|
|
|
|
|
|
Realized investment
(gains) losses
|
|
0.07
|
|
|
(0.03)
|
|
|
|
Other and
non-recurring (income) loss
|
|
—
|
|
|
0.09
|
|
|
|
Income tax (benefit)
expense on items excluded
from adjusted earnings
|
|
(0.02)
|
|
|
(0.01)
|
|
|
|
Tax
reform adjustment 4
|
|
—
|
|
|
$
|
0.01
|
|
|
|
|
|
|
|
|
|
|
Adjusted earnings per
diluted share
|
|
3.41
|
|
|
3.15
|
|
|
8.3
|
%
|
Current period
foreign currency impact 2
|
|
—
|
|
|
N/A
|
|
|
|
Adjusted earnings per
diluted share excluding
current period foreign
currency impact 3
|
|
$
|
3.41
|
|
|
$
|
3.15
|
|
|
8.3
|
%
|
|
|
1
|
Amounts may not foot
due to rounding.
|
2
|
Prior period foreign
currency impact reflected as "N/A" to isolate change for current
period only.
|
3
|
Amounts excluding
current period foreign currency impact are computed using the
average yen/dollar exchange rate for the comparable prior-year
period, which eliminates fluctuations driven solely by
yen-to-dollar currency rate changes.
|
4
|
An adjustment of $11
million was made in the three- month period ended September 30,
2018, as a result of return-to-provision adjustments and various
amended returns filed by the Company.
|
RECONCILIATION OF
U.S. GAAP BOOK VALUE TO ADJUSTED BOOK
VALUE 1
|
(UNAUDITED - IN
MILLIONS, EXCEPT FOR SHARE AND PER-SHARE AMOUNTS)
|
|
|
|
|
|
|
|
SEPTEMBER
30,
|
|
2019
|
|
2018
|
|
%
Change
|
U.S. GAAP book
value
|
|
$
|
29,438
|
|
|
$
|
23,234
|
|
|
|
Less:
|
|
|
|
|
|
|
Unrealized foreign
currency translation gains (losses)
|
|
(1,479)
|
|
|
(2,113)
|
|
|
|
Unrealized gains
(losses) on securities and derivatives
|
|
8,937
|
|
|
4,216
|
|
|
|
Pension liability
adjustment
|
|
(207)
|
|
|
(194)
|
|
|
|
Total AOCI
|
|
7,251
|
|
|
1,909
|
|
|
|
Adjusted book value
2
|
|
$
|
22,187
|
|
|
$
|
21,325
|
|
|
|
Add:
|
|
|
|
|
|
|
Unrealized foreign
currency translation gains (losses)
|
|
(1,479)
|
|
|
(2,113)
|
|
|
|
Adjusted book value
including unrealized foreign currency
translation gains (losses)
3
|
|
$
|
20,708
|
|
|
$
|
19,212
|
|
|
|
|
|
|
|
|
|
|
Number of outstanding
shares at end of period (000)
|
|
735,130
|
|
|
763,113
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP book value
per common share
|
|
$
|
40.04
|
|
|
$
|
30.45
|
|
|
31.5
|
%
|
Less:
|
|
|
|
|
|
|
Unrealized foreign
currency translation gains (losses)
per common share
|
|
(2.01)
|
|
|
(2.77)
|
|
|
|
Unrealized gains
(losses) on securities and derivatives
per common share
|
|
12.16
|
|
|
5.52
|
|
|
|
Pension liability
adjustment per common share
|
|
(0.28)
|
|
|
(0.25)
|
|
|
|
Total AOCI per common
share
|
|
9.86
|
|
|
2.50
|
|
|
|
Adjusted book value
per common share 4
|
|
$
|
30.18
|
|
|
$
|
27.94
|
|
|
8.0
|
%
|
Add:
|
|
|
|
|
|
|
Unrealized foreign
currency translation gains (losses)
per common share
|
|
(2.01)
|
|
|
(2.77)
|
|
|
|
Adjusted book value
including foreign currency translation
gains (losses) per common share
3
|
|
$
|
28.17
|
|
|
$
|
25.18
|
|
|
11.9
|
%
|
|
|
1
|
Amounts may not foot
due to rounding.
|
2
|
Adjusted book value
is the U.S. GAAP book value (representing total shareholder's
equity), excluding AOCI (as recorded on the U.S. GAAP balance
sheet).
|
3
|
Adjusted book value
including unrealized foreign currency translation gains (losses) is
adjusted book value plus unrealized foreign currency translation
gains (losses).
|
4
|
Adjusted book value
per share is the adjusted book value at the period ended divided by
the ending outstanding common shares for the period presented. The
most comparable U.S. GAAP measure is total book value per
share.
|
RECONCILIATION OF
U.S. GAAP RETURN ON EQUITY (ROE) TO ADJUSTED
ROE 1
|
(EXCLUDING IMPACT OF
FOREIGN CURRENCY)
|
|
|
|
|
|
THREE MONTHS ENDED
SEPTEMBER 30,
|
|
2019
|
|
2018
|
Net earnings - U.S.
GAAP ROE 2
|
|
10.8
|
%
|
|
14.4
|
%
|
Impact of excluding
unrealized foreign currency translation gains (losses)
|
|
(0.7)
|
|
|
(1.3)
|
|
Impact of excluding
unrealized gains (losses) on securities and derivatives
|
|
4.1
|
|
|
3.0
|
|
Impact of excluding
pension liability adjustment
|
|
(0.1)
|
|
|
(0.1)
|
|
Impact of excluding
AOCI
|
|
3.3
|
|
|
1.6
|
|
U.S. GAAP ROE - less
AOCI
|
|
14.1
|
|
|
16.0
|
|
Differences between
adjusted earnings and net earnings 3
|
|
1.6
|
|
|
(1.0)
|
|
Adjusted ROE -
reported
|
|
15.7
|
|
|
15.0
|
|
Less: Impact of
foreign currency 4
|
|
0.3
|
|
|
N/A
|
|
Adjusted ROE,
excluding impact of foreign currency
|
|
15.4
|
|
|
15.0
|
|
|
|
1
|
Amounts presented may
not foot due to rounding.
|
2
|
U.S. GAAP ROE is
calculated by dividing net earnings (annualized) by average
shareholders' equity.
|
3
|
See separate
reconciliation of net income to adjusted earnings.
|
4
|
Impact of foreign
currency is calculated by restating all yen components of the
income statement to the weighted average yen rate for the
comparable prior year period. The impact is the difference of the
restated adjusted earnings compared to reported adjusted earnings.
For comparative purposes, only current period income is restated
using the weighted average prior period exchange rate, which
eliminates the foreign currency impact for the current period. This
allows for equal comparison of this financial measure.
|
RECONCILIATION OF
U.S. GAAP RETURN ON EQUITY (ROE) TO ADJUSTED
ROE 1
|
(EXCLUDING IMPACT OF
FOREIGN CURRENCY)
|
|
|
|
|
|
NINE MONTHS ENDED
SEPTEMBER 30,
|
|
2019
|
|
2018
|
Net earnings - U.S.
GAAP ROE 2
|
|
12.7
|
%
|
|
13.4
|
%
|
Impact of excluding
unrealized foreign currency translation gains (losses)
|
|
(1.0)
|
|
|
(1.2)
|
|
Impact of excluding
unrealized gains (losses) on securities and derivatives
|
|
3.8
|
|
|
3.3
|
|
Impact of excluding
pension liability adjustment
|
|
(0.1)
|
|
|
(0.1)
|
|
Impact of excluding
AOCI
|
|
2.7
|
|
|
1.9
|
|
U.S. GAAP ROE - less
AOCI
|
|
15.5
|
|
|
15.2
|
|
Differences between
adjusted earnings and net earnings 3
|
|
0.2
|
|
|
0.3
|
|
Adjusted ROE -
reported
|
|
15.7
|
|
|
15.6
|
|
Less: Impact of
foreign currency 4
|
|
—
|
|
|
N/A
|
|
Adjusted ROE,
excluding impact of foreign currency
|
|
15.7
|
|
|
15.6
|
|
|
|
1
|
Amounts presented may
not foot due to rounding.
|
2
|
U.S. GAAP ROE is
calculated by dividing net earnings (annualized) by average
shareholders' equity.
|
3
|
See separate
reconciliation of net income to adjusted earnings.
|
4
|
Impact of foreign
currency is calculated by restating all yen components of the
income statement to the weighted average yen rate for the
comparable prior year period. The impact is the difference of the
restated adjusted earnings compared to reported adjusted earnings.
For comparative purposes, only current period income is restated
using the weighted average prior period exchange rate, which
eliminates the foreign currency impact for the current period. This
allows for equal comparison of this financial measure.
|
EFFECT OF FOREIGN
CURRENCY ON ADJUSTED RESULTS1
|
(SELECTED PERCENTAGE
CHANGES, UNAUDITED)
|
|
THREE MONTHS ENDED
SEPTEMBER 30, 2019
|
|
Including
Currency
Changes
|
|
Excluding
Currency
Changes2
|
Net premium income
3
|
|
2.2
|
%
|
|
(0.5)
|
%
|
Net investment income
4
|
|
8.1
|
|
|
6.5
|
|
Total benefits and
expenses
|
|
1.6
|
|
|
(1.0)
|
|
Adjusted
earnings
|
|
9.0
|
|
|
7.1
|
|
Adjusted earnings per
diluted share
|
|
12.6
|
|
|
10.7
|
|
|
|
1
|
Refer to previously
defined adjusted earnings and adjusted earnings per diluted
share.
|
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, which eliminates dollar-based fluctuations driven solely from
currency rate changes.
|
3
|
Net of
reinsurance
|
4
|
Less amortized hedge
costs/income on foreign investments
|
EFFECT OF FOREIGN
CURRENCY ON ADJUSTED RESULTS1
|
(SELECTED PERCENTAGE
CHANGES, UNAUDITED)
|
|
NINE MONTHS ENDED
SEPTEMBER 30, 2019
|
|
Including
Currency
Changes
|
|
Excluding
Currency
Changes2
|
Net premium income
3
|
|
0.2
|
%
|
|
(0.1)
|
%
|
Net investment income
4
|
|
5.2
|
|
|
5.0
|
|
Total benefits and
expenses
|
|
0.1
|
|
|
(0.2)
|
|
Adjusted
earnings
|
|
4.5
|
|
|
4.5
|
|
Adjusted earnings per
diluted share
|
|
8.3
|
|
|
8.3
|
|
|
|
1
|
Refer to previously
defined adjusted earnings and adjusted earnings per diluted
share.
|
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, which eliminates dollar-based fluctuations driven solely from
currency rate changes.
|
3
|
Net of
reinsurance
|
4
|
Less amortized hedge
costs/income on foreign investments
|
|
|
|
2019 ADJUSTED
EARNINGS PER SHARE1 SCENARIOS2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-Average
Yen/Dollar
Exchange
Rate
|
|
|
|
Adjusted
Earnings
Per
Diluted
Share
|
|
|
|
Foreign
Currency
Impact
|
|
|
100
|
|
|
|
$ 4.50
|
-
|
$ 4.60
|
|
|
|
|
$ 0.15
|
|
|
|
105
|
|
|
|
4.43
|
-
|
4.53
|
|
|
|
|
0.08
|
|
|
|
110.393
|
|
|
|
4.35
|
-
|
4.45
|
|
|
|
|
-
|
|
|
|
115
|
|
|
|
4.28
|
-
|
4.38
|
|
|
|
|
(0.07)
|
|
|
|
120
|
|
|
|
4.21
|
-
|
4.31
|
|
|
|
|
(0.14)
|
|
|
|
|
1
|
A non-U.S. GAAP
financial measure, adjusted earnings per share (basic or diluted)
are the adjusted earnings for the period divided by the
weighted average outstanding shares (basic or diluted) for
the period presented. In reliance on the "unreasonable efforts"
exception in Item 10(e)(1)(i)(B) of SEC Regulation S-K, a
quantitative reconciliation to the most comparable U.S. GAAP
measure is not provided for this financial measure. Forward-looking
information with regard to the most comparable U.S. GAAP financial
measure, earnings per share, is not available without
unreasonable effort. This is due to the unpredictable and
uncontrollable nature of these reconciling items, which would
require an unreasonable effort to forecast and we believe would
result in such a broad range of projected values that would not be
meaningful to investors. For this reason, we believe that the
probable significance of such information is low.
|
2
|
Table recasts all
quarters to the average exchange rate.
|
3
|
Actual 2018
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. The company desires 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,"
"outlook" 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.
The company cautions 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:
- events related to the ongoing Japan Post
investigation
- difficult conditions in global capital
markets and the economy
- exposure to significant interest rate
risk
- concentration of business in
Japan
- foreign currency fluctuations in the
yen/dollar exchange rate
- limited availability of acceptable
yen-denominated investments
- U.S. tax audit risk related to conversion
of the Japan branch to a subsidiary
- deviations in actual experience from
pricing and reserving assumptions
- ability to continue to develop and
implement improvements in information technology systems
- competitive environment and ability to
anticipate and respond to market trends
- ability to protect the Aflac brand and the
Company's reputation
- ability to attract and retain qualified
sales associates, brokers, employees, and distribution
partners
- 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
- failure to comply with restrictions on
patient privacy and information security
- extensive regulation and changes in law or
regulation by governmental authorities
|
- tax rates applicable to the Company may
change
- defaults and credit downgrades of
investments
- decline in creditworthiness of other
financial institutions
- significant valuation judgments in
determination of amount of impairments taken on the Company's
investments
- subsidiaries' ability to pay dividends to
the Parent Company
- decreases in the Company's financial
strength or debt ratings
- inherent limitations to risk management
policies and procedures
- concentration of the Company's investments
in any particular single-issuer or sector
- differing judgments applied to investment
valuations
- ability to effectively manage key
executive succession
- catastrophic events including, but not
necessarily limited to, epidemics, pandemics, tornadoes,
hurricanes, earthquakes, tsunamis, war or other military action,
terrorism or other acts of violence, and damage incidental to such
events
- changes in accounting standards
- increased expenses and reduced
profitability resulting from changes in assumptions for pension and
other postretirement benefit plans
- level and outcome of litigation
- allegations or determinations of worker
misclassification in the United States
|
Analyst and investor contact - David A.
Young, 706.596.3264 or 800.235.2667 or dyoung@aflac.com
Media contact - Catherine H.
Blades, 706.596.3014; FAX: 706.320.2288 or
cblades@aflac.com
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SOURCE Aflac Incorporated