AFLAC’s Earnings Call

From Seeking Alpha, here’s a key part of AFLAC’s ($AFL) earnings call. I highlight this because it hasn’t received much attention, but AFLAC actually raised its earnings guidance slightly for next year:

We increased our cash dividend to shareholders in 2011 for the 29th consecutive year. Our objective is to grow the dividend at the rate in line with our earnings per share before the impact of the yen. I believe dividends are an important component of the value we provide the investors. We will again evaluate a dividend increase as the year progresses, but I am confident we will extend our consecutive annual dividend increases to 30 years.

As we have indicated, given our capital structure, our ability to repurchase shares is largely tied to profit repatriation. We mentioned on our fourth quarter call, we estimated 2012 profit repatriation to be about JPY 25 billion, assuming no additional material investment losses through Aflac Japan’s FSA fiscal year end. We still believe that’s a reasonable estimate. We will make a decision about the amount of money we will transfer from Japan to the U.S. around mid-year. And thinking of that decision, we’ll be taking into consideration the needs of our stakeholders in Japan, including our policyholders, but we will continue to be cautious about deploying that capital. If we do purchase any shares this year, it would be late in the fourth quarter. Keep in mind there are many factors involved in this decision and we’ll closely monitor our options. Importantly, we don’t need to repurchase shares to make our 2012 earnings. Furthermore, assuming we incur no material investment losses between now and mid-2013, we would expect to maintain a strong solvency margin ratio and significant capacity for profit repatriation and share repurchase.

You’ll recall, we previously shared that our 2012 operating earnings objective was 2% to 5% growth before currency. We expect the new accounting for DAC to lower earnings per share by approximately $0.05 this year. However, we believe we can cover that impact and still achieve our original target of $6.46 to $6.65 per diluted share before the currency. That means our range for this year increased actually to 3% to 6% over the restated 2011 numbers. We will give you details about 2013 outlook at the analyst meeting next month, as we do each year. But I can say that we still expect the rate of earnings growth in 2013 to improve over 2012. I’m very excited about the opportunities ahead for Aflac.

Because of some accounting changes, AFLAC’s earnings for last year will be restated slightly lower. However, AFLAC says that its earnings-per-share target of $6.46 to $6.65 is still on. Previously, AFLAC had said that it sees earnings growing by 2% to 5% this year. Now that becomes 3% to 6%.

But here’s the key: AFLAC has said that earnings growth in 2013 will be better than 2012, and they reiterated that again today. So let’s say that AFLAC earns $6.60 per share this year. Considering they just beat earnings by a lot, I think it’s reasonable to assume they’ll be at the high end of the range. That translates to 5% growth for this year. If AFLAC accelerated to, say, 6% growth next year, that comes to earnings of $7 per share.

Posted by on April 25th, 2012 at 6:19 pm

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