) first-quarter 2013 operating earnings per share of $1.69
comfortably surpassed the Zacks Consensus Estimate of $1.62 but
lagged the year-ago quarter earnings of $1.74 per share.
Operating earnings edged down 2.9% year over year to $790
million. A weak yen/dollar exchange rate had a negative impact of
15 cents per share on operating earnings.
Operating earnings in the reported quarter excluded the
after-tax negative impact of realized investment gains from
securities transactions and impairments of $42 million or 8 cents
per share compared with a loss of $81 million or 17 cents per
share in the year-ago quarter. It also excluded other operating
losses and hedge costs on investment totalling $3 million or 1
cent a share in the reported quarter. Additionally, a positive
impact of derivative and hedging activities worth $63 million or
14 cents per share affected the operating earnings as opposed to
$52 million or 11 cents per share recorded in the year-ago
Including one-time items, Aflac's GAAP net income in the
reported quarter rose 13.7% to $892 million or $1.90 per share
against $785 million or $1.68 per share in the year-ago period.
Total acquisition and operating expenses dipped 4.8% year over
year to $1.33 billion, whereas benefits and claims slid 3.4% to
However, total revenue for the reported quarter inched down
0.5% year over year to $6.21 billion, also falling short of the
Zacks Consensus Estimate of $6.27 billion. A weak yen and the
low-rate environment adversely affected the top line. While Aflac
Japan contributed about 77% to the total revenue, Aflac U.S.
contributed the remaining 23%.
Total revenue in
decreased 5.9% year over year to $4.6 billion, primarily owing to
decelerated sales from the third sector, bank channel and WAYS
products along with a weak average yen. Premium income from the
Japanese operations, in terms of dollars, was down 5.9% year over
year to $3.9 billion in the reported quarter.
Net investment income from the Japanese operations declined
7.6% year over year to $674 million. The growth was primarily
mitigated by a weak yen/dollar exchange rate, which was 92.59, or
14% weaker than the average rate of 79.59 in the year-ago
quarter. Consequently, pre-tax operating earnings stood at $989
million in Japan, dipping 4.8% over the prior-year quarter.
generated revenues of $1.4 billion, up 3.9% over the prior-year
quarter. Net investment income grew 3.4% year over year to $157
million. Premiums from the U.S. operations were up 4% year over
year to $1.3 billion. Given the lingering weakness in the U.S.
and limited growth in new sales, total new annualized sales
slipped 5.2% year over year to $322 million as more than 90% of
the accounts come from the small business market.
Subsequently, pre-tax operating earnings in the U.S. climbed
3.6% year over year to $281 million, whereas persistency was flat
at 74.7% from the year-ago quarter.
As of Mar 31, 2013, total investment and cash were $107.4
billion compared with $118.2 billion at 2012-end, while
shareholder equity totaled $15.5 billion as against $16.0 billion
during the comparable period, primarily due to changes in
investment valuation. Shareholder equity per share was $34.34 at
the end of Mar 2013, up from $34.16 per share reported at the end
At the end the Mar 2013, Aflac projected its risk-based
capital ratio to be higher than 630% at 2012-end, whereas its
solvency ratio in Japan is expected to exceed 669% at 2012-end.
During the reported quarter, net unrealized gain on investment
securities and derivatives were $2.0 billion as compared with
$2.6 billion in the prior quarter.
Meanwhile, annualized return on average shareholder equity for
the reported quarter was 22.6% against 14.5% in the prior
quarter. On an operating basis (excluding realized investment
losses and the impact of ASC 815 on net earnings, and unrealized
investment gains/losses in shareholder equity) Aflac's return on
average shareholder equity came in at 23.4%, up from 20.6% in the
Aflac bought back shares worth $150 million in the reported
quarter. This is in line with the company's target of buying back
shares worth $400-$600 million in 2013.
Concurrent with the release of the first-quarter result, Aflac
reiterated its 2013 outlook. New annualized sales in the U.S. are
projected to grow by nil to 5% in 2013, reflecting difficult
comps. Aflac Japan's third sector cancer and medical products
sales are also expected to exhibit nil to 5% growth.
Excluding currency fluctuations, Aflac anticipates earnings to
grow by 4%-7% or about $6.86-$7.06 per share in 2013.
Accordingly, if the yen averages 95-100 against dollar, the
earnings growth is expected within $5.99-$6.37 per share for
Under the same currency assumptions, operating earnings are
projected to be $1.41-$1.56 per share in the second quarter of
Concurrently, the board of Aflac announced a regular cash
dividend of 35 cents per share, which is payable on Jun 3, 2013
to its shareholders of record as on May 22, 2013.
Earlier, on Mar 1, 2013, Aflac paid a dividend of 35 cents per
share to its shareholders of record as on Feb 15, 2013.
Aflac carries a Zacks Rank #4 (Sell). Other strong performers
in the insurance sector include
Hilltop Holdings Inc.
Selective Insurance Group Inc.
), all of which carry a Zacks Rank #1 (Strong Buy).
AFLAC INC (AFL): Free Stock Analysis Report
AMERISAFE INC (AMSF): Free Stock Analysis
HILLTOP HLDGS (HTH): Free Stock Analysis
SELECT INS GRP (SIGI): Free Stock Analysis
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