The Yen’s Impact on AFLAC’s Earnings

I’ve been watching AFLAC‘s ($AFL) investor presentation. Since so much of AFLAC’s business is generated in Japan, the yen-to-dollar exchange rate can add or detract to the company’s bottom line.

To their benefit, AFLAC prefers to gauge their performance before the impact of currencies. Here’s how it works: The stronger the yen, the more it helps AFLAC. Last quarter, the exchange rate added four cents to AFLAC’s earnings.

The average exchange rate last year was 79.75. If that holds true for 2012, AFL sees full-year earnings between $6.46 and $6.65.

If the exchange rate is 70, AFLAC estimates that will add 60 cents per share to 2012’s bottom line. If it’s 75, that will add 27 cents per share. At 80, it’s minus one penny. At 75, it’s minus 25 cents per share.

The latest exchange rate is 79.9460. I don’t anticipate this being a major issue for AFLAC this year, but I wanted investors to know the dynamics because this can have a big impact on their business.

On May 15th and 16th, the company will have more to say about guidance for 2013.

Posted by on May 7th, 2012 at 1:11 pm

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