COLUMBUS, Ga., Feb. 2 /PRNewswire-FirstCall/ -- Aflac Incorporated
today reported its fourth quarter results. Total revenues benefited
from the strengthening of the yen to the dollar in the fourth
quarter and rose 7.9% to $4.6 billion, compared with $4.3 billion
in the fourth quarter of 2008. Net earnings were $251 million, or
$.53 per diluted share, compared with $197 million, or $.42 per
share, a year ago. Aflac Incorporated's fourth quarter and
full-year results included the fourth quarter results of
Continental American Insurance Company (CAIC), which was acquired
by Aflac on October 1, 2009. CAIC's results were immaterial to
Aflac's consolidated fourth quarter and full-year results, and were
reflected in the Aflac U.S. reporting segment. Net earnings in the
fourth quarter included after-tax realized investment losses of
$307 million, or $.65 per diluted share, compared with losses of
$262 million, or $.56 per diluted share in the fourth quarter of
2008. Of the realized investment losses in the fourth quarter of
2009, $126 million resulted from impairment losses on three
perpetual securities. The impairment losses were determined using
the equity impairment method, which is required by generally
accepted accounting principles (GAAP) for perpetual securities
whose credit ratings are below investment grade. No impairment
charges were recorded on a statutory accounting basis for these
perpetual securities because Aflac's credit analysis indicates the
issuers of the perpetual securities that were impaired on a GAAP
basis will be able to meet their contractual obligations for
payment. Realized investment losses in the fourth quarter also
included charges of $110 million for the impairment of the
company's holdings of Takefuji Corp., a Japanese consumer finance
company, and $7 million for the impairment of other securities. In
addition, the company incurred net realized investment losses of
$64 million from sales and redemptions, which primarily reflected
the previously announced exchange of two Lloyds Banking Group
securities. 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 before realized investment gains and losses, the impact
from ASC 815 (or hedging activities, formerly referred to as 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 ASC 815, 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 Aflac's business is in Japan, where the
functional currency is the Japanese 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 a limited number of transactions, the
company does not actually convert yen into dollars. As a result,
Aflac views foreign currency as a financial reporting issue and not
as 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. Operating earnings in the fourth quarter were $558
million, compared with $458 million in the fourth quarter of 2008.
Operating earnings per diluted share rose 20.4% to $1.18, compared
with $.98 a year ago. The operating tax rate in the fourth quarter
declined following completion of an examination by the Internal
Revenue Service, which benefited operating earnings by $24 million,
or $.05 per diluted share. In addition, the stronger yen/dollar
exchange rate increased operating earnings per diluted share by
$.03 during the quarter. Results for the full year also benefited
from the stronger yen. Total revenues rose 10.3% to $18.3 billion,
compared with $16.6 billion a year ago. Net earnings were $1.5
billion, or $3.19 per diluted share, compared with $1.3 billion, or
$2.62 per share, in 2008. Operating earnings for the full year of
2009 were $2.3 billion, or $4.85 per diluted share, compared with
$1.9 billion, or $3.99 per share, in 2008. Excluding the benefit of
$.26 per share from the stronger yen, operating earnings per
diluted share rose 15.0% for the year. Excluding the impact of
foreign currency and the previously mentioned benefit from a
reduction in taxes, operating earnings per diluted share rose 13.8%
for the year. Total investments and cash at the end of December
2009 were $73.2 billion, compared with $71.6 billion at September
30, 2009. The increase in total investments and cash primarily
resulted from improvement in the fair values of the company's
investments since the end of the third quarter of 2009.
Shareholders' equity was $8.4 billion at December 31, 2009,
compared with $7.9 billion at September 30, 2009. Shareholders'
equity at the end of the year included a net unrealized loss on
investment securities of $640 million, compared with a net
unrealized loss of $1.1 billion at the end of the third quarter of
2009. Shareholders' equity per share was $17.96 at the end of the
year, compared with $16.85 per share at September 30, 2009. The
annualized return on average shareholders' equity in the fourth
quarter was 12.3%. On an operating basis (excluding realized
investment losses and the impact of ASC 815 on net earnings, and
unrealized investment gains/losses in shareholders' equity), the
annualized return on average shareholders' equity was 24.7% for the
fourth quarter of 2009. AFLAC JAPAN Aflac Japan premium income in
yen rose 3.3% in the fourth quarter. Net investment income rose
1.2%. Investment income growth in yen terms was restrained by the
stronger yen/dollar exchange rate because approximately 32% of
Aflac Japan's fourth quarter investment income was
dollar-denominated. Total revenues were up 3.4%. The benefit ratio
improved over a year ago, and as a result, the pretax operating
profit margin expanded from 16.3% to 18.7%. Pretax operating
earnings in yen rose 18.5% in the fourth quarter. For the year,
premium income in yen grew 3.3%, and net investment income was down
.1%. Total revenues were up 3.0%, and pretax operating earnings
increased 12.4%. The average yen/dollar exchange rate in the fourth
quarter of 2009 was 89.70, or 7.6% stronger than the average rate
of 96.55 in the fourth quarter of 2008. For the full year of 2009,
the average exchange rate was 93.49, or 10.7% stronger than the
rate of 103.46 in 2008. Reflecting a benefit from the stronger
average yen/dollar exchange rate in the fourth quarter, premium
income in dollars increased 10.7% to $3.2 billion. Net investment
income rose 8.5% to $592 million. Total revenues were $3.8 billion,
an increase of 10.8%. Pretax operating earnings climbed 27.6% to
$714 million. For the full year, Aflac Japan's results in dollar
terms also benefited from the stronger yen/dollar exchange rate.
Premium income rose 14.1% to $12.2 billion. Net investment income
increased 10.3% to $2.3 billion. Total revenues were up 13.7% to
$14.5 billion. Pretax operating earnings were $2.8 billion, an
increase of 24.4% over a year ago. Aflac Japan total new annualized
premium sales rose significantly in the fourth quarter, increasing
14.9% to Yen 34.8 billion, or $388 million. For the year, total new
sales were up 6.7% to Yen 122.3 billion, or $1.3 billion. Sales of
medical insurance were exceptionally strong, rising 57.7% in yen in
the fourth quarter. The tremendous increase in medical policy sales
reflected the successful promotion of Aflac Japan's revised medical
product that was launched in August 2009. Stand-alone medical was
the number one product category in the fourth quarter, accounting
for 43% of total new sales. Ordinary life insurance sales also
remained strong and primarily reflected favorable consumer
reception to the child endowment product that was introduced in
March 2009. Ordinary life sales rose 45.0% in yen in the fourth
quarter. Aflac Japan's total new premium sales also benefited from
continued improvement of sales through the bank channel. Bank
channel sales were a record Yen 2.9 billion in the fourth quarter,
rising 33.3% from the third quarter and 202.7% over the fourth
quarter of 2008. At the end of 2009, more than 350 banks had
agreements to offer Aflac products to their customers. AFLAC U.S.
Aflac U.S. premium income increased 5.2% to $1.1 billion in the
fourth quarter. Net investment income declined 3.1% to $124
million. Total revenues rose 4.3% to $1.3 billion. As a result of
higher benefit and expense ratios in the quarter, pretax operating
earnings declined 1.5% to $158 million. For the year, premium
income was up 4.0% to $4.4 billion. Net investment income declined
1.1% to $499 million. Total revenues were $5.0 billion, up 3.5%
from a year ago. Pretax operating earnings rose 4.1% to $776
million. As expected, Aflac U.S. sales growth was again challenged
by weak economic conditions. Total new annualized premium sales in
the fourth quarter were down 6.3% to $419 million. For the year,
total new sales declined 6.4% to $1.5 billion. In addition to the
weak economy, fourth quarter sales were impacted by the loss of a
large payroll account. However, the sales contribution of the newly
acquired Continental American Insurance Company (CAIC) largely
offset this impact. Sales through CAIC, recently rebranded as Aflac
Group Insurance, were $27 million in the fourth quarter of 2009.
New agent recruitment slowed somewhat in the fourth quarter,
although recruitment was 10.6% higher for the full year. New
payroll account growth also remained strong, rising 7.4% in the
fourth quarter and 10.6% for the year. DIVIDEND The board of
directors declared the first quarter cash dividend. The first
quarter cash dividend of $.28 per share is payable on March 1,
2010, to shareholders of record at the close of business on
February 16, 2010. OUTLOOK Commenting on the company's fourth
quarter and full-year results, Chairman and Chief Executive Officer
Daniel P. Amos stated: "Despite the discouraging economic backdrop
during 2009, Aflac emerged with a very solid year from a financial
perspective. Growth of operating earnings per diluted share was in
line with our goal of a 13% to 15% increase before the impact of
foreign currency. In fact, 2009 was the 20th consecutive year in
which we've met our earnings objective. We generated significant
growth during that 20-year period, reflecting the strength of our
insurance operations. "Aflac Japan in particular had a great 2009.
We successfully launched new products last year, which contributed
significantly to our strong sales results, exceeding our objective
for the year. We also continued to make strides in expanding our
distribution system. In 2009, we experienced strong agency
recruitment and increased the number of banks that are offering our
products to their customers. 2009 also marked our 35th year of
operating in Japan, and we were pleased that we could commemorate
our anniversary by achieving a major milestone: Surpassing 20
million individual insurance policies in force in Japan. We were
especially proud to have reached that milestone a year earlier than
we had expected. "As we discussed throughout 2009, sales growth in
the United States proved to be sensitive to the very weak economic
conditions. As a result, Aflac U.S. fell short of its sales target
in 2009. However, we remain convinced that the underlying need for
our products has not changed. Furthermore, we still believe the
sales opportunities in the United States are vast. As such, we
continued to strengthen our U.S. operations last year through new
product introductions, new agent recruitment, intensified training,
payroll account growth and targeted advertising that continues to
clarify exactly how our products help consumers and employers. We
also added to our product and distribution capabilities with the
acquisition of CAIC, now called Aflac Group Insurance. As we look
ahead, we believe we can leverage this new group product platform
in the insurance broker market, while also helping our existing
sales force gain better access to the large payroll account market.
"We maintained a high level of confidence in the quality of our
balance sheet in 2009. We believed then, and continue to believe
today, that our investment approach of effectively matching assets
to policy liabilities is the most prudent approach for our
policyholders and shareholders. More than anything, we have been
intensely focused on assessing our capital level. Despite the
negative impact of realized investment losses and credit rating
downgrades on some investments we hold, Aflac's capital position
from a U.S. regulatory standpoint remained strong in 2009. In
addition, we enhanced the capital position of our principal life
insurance subsidiary at the end of 2009 with a $500 million
contribution from the parent company. Although we have not yet
finalized our statutory financial statements, we estimate that our
risk-based capital ratio exceeded 475% at December 31, 2009, which
included approximately 40 percentage points from the capital
contribution. "As we look to sales opportunities in 2010, we
believe it makes sense to remain cautious. Economies around the
globe appear to be recovering, but the timing of full recovery
remains uncertain. As such, we have set targets of flat sales to a
5% increase in both our U.S. and Japanese operations. Our objective
for 2010 operating earnings growth remains unchanged. Our goal is
to increase operating earnings per share 9% to 12% this year to
$5.29 to $5.43 per diluted share, excluding the impact of the yen.
If the yen averages 90 to 95 to the dollar for the full year, we
would expect reported earnings to be in the range of $5.24 to $5.56
per diluted share." ABOUT AFLAC When a policyholder gets sick or
hurt, Aflac pays cash benefits fast. For 55 years, Aflac products
have given policyholders the opportunity to focus on recovery, not
financial stress. In the United States, Aflac is the number one
provider of guaranteed-renewable insurance. In Japan, Aflac is the
number one insurance company in terms of individual insurance
policies in force. Aflac insurance products provide protection to
more than 50 million people worldwide. Aflac has been recognized by
Ethisphere magazine as one of the World's Most Ethical Companies
for three consecutive years and was also named by the Reputation
Institute as the Most Reputable Company in the Global Insurance
Industry for two consecutive years. In 2010, Fortune magazine
recognized Aflac as one of the 100 Best Companies to Work For in
America for the twelfth consecutive year. Fortune magazine also
ranked Aflac No. 1 on its global list of the Most Admired Companies
in the Life and Health Insurance category. Aflac was also named by
Forbes magazine as America's Best-Managed Company in the Insurance
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, visit aflac.com. A copy of Aflac's Financial Analysts
Briefing (FAB) supplement for the fourth quarter of 2009 can be
found on the "Investors" page at aflac.com, along with a complete
listing of Aflac's investment holdings in the financial sector and
a separate listing of the company's investments in perpetual
securities. Aflac Incorporated will webcast its fourth quarter
conference call via the "Investors" page of aflac.com at 9:00 a.m.
(EST) on Wednesday, February 3, 2010. AFLAC INCORPORATED AND
SUBSIDIARIES CONDENSED INCOME STATEMENT
--------------------------------------------------------------
(UNAUDITED - IN MILLIONS, EXCEPT FOR SHARE AND PER-SHARE AMOUNTS)
THREE MONTHS ENDED DECEMBER 31, 2009 2008 % Change ---- ----
-------- Total revenues $4,597 $4,260 7.9% Benefits and claims
2,956 2,835 4.3 Total acquisition and operating expenses 1,298
1,124 15.5 Earnings before income taxes 343 301 13.8 Income taxes
92 104 Net earnings $251 $197 27.3% Net earnings per share - basic
$.54 $.42 28.6% Net earnings per share - diluted .53 .42 26.2
Shares used to compute earnings per share (000): Basic 467,128
465,450 .4% Diluted 471,121 468,978 .5 Dividends paid per share
$.28 $.24 16.7% AFLAC INCORPORATED AND SUBSIDIARIES CONDENSED
INCOME STATEMENT
--------------------------------------------------------------
(UNAUDITED - IN MILLIONS, EXCEPT FOR SHARE AND PER-SHARE AMOUNTS)
TWELVE MONTHS ENDED DECEMBER 31, 2009 2008 % Change ---- ----
------- Total revenues $18,254 $16,554 10.3% Benefits and claims
11,308 10,499 7.7 Total acquisition and operating expenses 4,711
4,141 13.8 Earnings before income taxes 2,235 1,914 16.8 Income
taxes 738 660 Net earnings $1,497 $1,254 19.3% Net earnings per
share - basic $3.21 $2.65 21.1% Net earnings per share - diluted
3.19 2.62 21.8 Shares used to compute earnings per share (000):
Basic 466,552 473,405 (1.4)% Diluted 469,063 478,815 (2.0)
Dividends paid per share $1.12 $.96 16.7% AFLAC INCORPORATED AND
SUBSIDIARIES CONDENSED BALANCE SHEET
----------------------------------------------------------
(UNAUDITED - IN MILLIONS, EXCEPT FOR SHARE AMOUNTS) DECEMBER 31,
2009 2008 % Change ---- ---- -------- Assets: Total investments and
cash $73,192 $68,550 6.8% Deferred policy acquisition costs 8,533
8,237 3.6 Other assets 2,381 2,544 (6.4) Total assets $84,106
$79,331 6.0% Liabilities and shareholders' equity: Policy
liabilities $69,245 $66,219 4.6% Notes payable 2,599 1,721 51.0
Other liabilities 3,845 4,752 (19.1) Shareholders' equity 8,417
6,639 26.8 Total liabilities and shareholders' equity $84,106
$79,331 6.0% Shares outstanding at end of year (000) 468,568
466,615 .4% RECONCILIATION OF OPERATING EARNINGS TO NET EARNINGS
---------------------------------------------------- (UNAUDITED -
IN MILLIONS, EXCEPT FOR PER-SHARE AMOUNTS) THREE MONTHS ENDED
DECEMBER 31, 2009 2008 % Change ---- ---- -------- Operating
earnings $558 $458 21.9% Reconciling items, net of tax: Realized
investment gains (losses) (307) (262) Impact from ASC 815 (formerly
SFAS 133) - 1 Extinguishment of debt - - Net earnings $251 $197
27.3% Operating earnings per diluted share $1.18 $.98 20.4%
Reconciling items, net of tax: Realized investment gains (losses)
(.65) (.56) Impact from ASC 815 (formerly SFAS 133) - -
Extinguishment of debt - - Net earnings per diluted share $.53 $.42
26.2% RECONCILIATION OF OPERATING EARNINGS TO NET EARNINGS
---------------------------------------------------- (UNAUDITED -
IN MILLIONS, EXCEPT FOR PER-SHARE AMOUNTS) TWELVE MONTHS ENDED
DECEMBER 31, 2009 2008 % Change ---- ---- -------- Operating
earnings $2,277 $1,912 19.1% Reconciling items, net of tax:
Realized investment gains (losses) (788) (655) Impact from ASC 815
(formerly SFAS 133) (3) (3) Extinguishment of debt 11 - Net
earnings $1,497 $1,254 19.3% Operating earnings per diluted share
$4.85 $3.99 21.6% Reconciling items, net of tax: Realized
investment gains (losses) (1.67) (1.37) Impact from ASC 815
(formerly SFAS 133) (.01) - Extinguishment of debt .02 - Net
earnings per diluted share $3.19 $2.62 21.8% EFFECT OF FOREIGN
CURRENCY ON OPERATING RESULTS(1)
------------------------------------------------- (SELECTED
PERCENTAGE CHANGES, UNAUDITED) Including Excluding THREE MONTHS
ENDED DECEMBER 31, 2009 Currency Currency Changes Changes(2)
------- --------- Premium income 9.2 % 2.9 % Net investment income
5.9 1.2 Total benefits and expenses 7.5 1.4 Operating earnings 21.9
18.1 Operating earnings per diluted share 20.4 17.3 (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 TWELVE MONTHS
ENDED DECEMBER 31, 2009 Currency Currency Changes Changes(2)
------- --------- Premium income 11.2 % 3.3 % Net investment income
7.3 1.6 Total benefits and expenses 9.4 1.7 Operating earnings 19.1
12.5 Operating earnings per diluted share 21.6 15.0 (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. 2010 OPERATING EARNINGS
PER SHARE SCENARIOS -------------------------------------------
Average Annual Exchange Operating % Growth Yen Rate EPS Over 2009
Impact -------- --- --------- ------ 85 $5.61 - 5.76 15.7 - 18.8%
$.33 90 5.41 - 5.56 11.5 - 14.6 .13 93.49* 5.29 - 5.43 9.1 - 12.0 -
95 5.24 - 5.38 8.0 - 10.9 (.05) 100 5.08 - 5.22 4.7 - 7.6 (.21)
*Actual 2009 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: difficult
conditions in global capital markets and the economy generally;
governmental actions for the purpose of stabilizing the financial
markets; defaults and downgrades in certain securities in our
investment portfolio; impairment of financial institutions; credit
and other risks associated with Aflac's investment in perpetual
securities; differing judgments applied to investment valuations;
subjective determinations of amount of impairments taken on our
investments; realization of unrealized losses; limited availability
of acceptable yen-denominated investments; concentration of our
investments in any particular sector; concentration of business in
Japan; ongoing changes in our industry; exposure to significant
financial and capital markets risk; fluctuations in foreign
currency exchange rates; significant changes in investment yield
rates; deviations in actual experience from pricing and reserving
assumptions; subsidiaries' ability to pay dividends to the Parent
Company; changes in law or regulation by governmental authorities;
ability to attract and retain qualified sales associates and
employees; ability to continue to develop and implement
improvements in information technology systems; changes in U.S.
and/or Japanese accounting standards; decreases in our financial
strength or debt ratings; level and outcome of litigation; ability
to effectively manage key executive succession; catastrophic
events; and failure of internal controls or corporate governance
policies and procedures. Analyst and investor contact - Kenneth S.
Janke Jr., 800.235.2667 - option 3, FAX: 706.324.6330, or Media
contact - Laura Kane, 706.596.3493, FAX: 706.320.2288, or (Logo:
http://www.newscom.com/cgi-bin/prnh/20041202/CLTH019LOGO)
http://www.newscom.com/cgi-bin/prnh/20041202/CLTH019LOGODATASOURCE:
Aflac Incorporated CONTACT: Analyst and investors: Kenneth S. Janke
Jr., 1-800-235-2667 - option 3, FAX: +1-706-324-6330, or , or
Media: Laura Kane, +1-706-596-3493, FAX: +1-706-320-2288, Web Site:
http://www.aflac.com/
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