AFLAC Earns $1.69 per Share for Q1

AFLAC‘s ($AFL) earnings results are out. The company earned $1.69 per share in operating earnings for the first three months of the year. The answer to the big question is yes, the yen took a bit out of their bottom line — 15 cents per share was lost due to currency. That’s actually not as much as I thought.

For Q1 last year, the company earned $1.74 per share in operating earnings. If we discount currency moves, AFLAC’s earnings rose by 5.7% last quarter. The company expects Q2 operating earnings to range between $1.41 and $1.56 per share. Assuming the yen averages 95 to 100 per dollar for the year, AFLAC expects full-year earnings between $5.99 and $6.37 per share.

Commenting on the company’s first quarter results, Chairman and Chief Executive Officer Daniel P. Amos stated: “Although the underlying strong results were masked by a significantly weaker yen, we are pleased with our overall results in the first quarter of 2013. Aflac Japan produced solid financial results that exceeded our expectations for the quarter. Aflac Japan’s overall sales were up due to the advanced purchases of products prior to a scheduled premium increase. Third sector sales on the other hand, were down for the first quarter as expected. However, we believe consumer response to our third sector products will be strong in the second half of 2013. As such, we continue to expect that Aflac Japan’s sales of third sector products will be flat to up 5% for the year.

“While Aflac U.S. sales declined in the quarter, we believe sales will be weighted more toward the latter half of the year. Therefore, we are retaining our objective of a flat to 5% sales increase for the year. The foundation of Aflac U.S. is strong and we are focused on expanding our reach to employees at companies of all sizes. We continue to look for opportunities to leverage our strong brand and relevant product portfolio in the evolving health care environment.

“Low investment yields, particularly in Japan, remain a significant challenge. As such, we continue to invest a significant portion of our cash flows in U.S. corporate bonds. This strategy provides greater liquidity, enhances flexibility for our portfolio and increases the opportunity to diversify the investment of our significant cash flows beyond Japanese Government Bonds, with the objective of producing higher returns. In light of 10-year JGB yields hitting historical lows, we want to be flexible in our asset allocation. Given significant changes impacting financial markets including Japanese interest rates and the yen/dollar exchange rate, our investment team is carefully monitoring Japan’s monetary and fiscal policies to evaluate investment options related to our JGB asset allocation.

“The strength of our regulatory capital ratios demonstrates our commitment to maintaining financial strength on behalf of our policyholders and bondholders. As we have communicated over the past several years, sustaining strong RBC and SMR ratios remains a priority for us. While we have not yet completed our statutory financial statements for the first quarter, we estimate our quarterly RBC ratio at March 31 was above our 2012 year-end ratio of 630%. We believe Aflac Japan’s SMR will also improve over its year-end 2012 level of 669%.

“We communicated last quarter our intention is to purchase $400 to $600 million of our shares this year. We purchased approximately $150 million of our shares in the first quarter of 2013. Given the strength of our capital ratios and parent company liquidity, we are even more comfortable with that range.

“Reflecting the underlying strength of the business, we still expect to have another good year for Aflac. I want to reiterate that our objective for 2013 has not changed: To increase operating earnings per diluted share 4% to 7%, or approximately $6.86 to $7.06 per share, on a currency neutral basis. Assuming we achieve our earnings objective and the yen averages 95 to 100 to the dollar for 2013, we would expect to report operating earnings of $5.99 to $6.37 per diluted share for the full year. Additionally, for the second quarter of 2013, using the same currency assumptions, we expect operating earnings will be in the range of $1.41 to $1.56 per diluted share.”

Posted by on April 24th, 2013 at 4:48 pm

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