) reported fourth-quarter 2013 operating earnings per share of
$1.40, which beat the Zacks Consensus Estimate by a penny.
However, results dipped 5.4% from the year-ago quarter figure of
Operating earnings also tumbled 6.8% year over year to $651
million, primarily on deteriorating Japan sales. A weak
yen/dollar exchange rate had a negative impact of 18 cents per
share on operating earnings.
Nonetheless, including one-time items, Aflac's GAAP net income
in the reported quarter increased 16.1% to $675 million or $1.45
per share from $581 million or $1.24 per share in the year-ago
period. Conversely, total acquisition and operating expenses
decreased 8.6% year over year to $1.38 billion, whereas benefits
and claims plunged 14.9% to $3.4 billion.
Further, total revenue dropped 9% year over year to $5.80
billion, also lagging the Zacks Consensus Estimate of $5.96
billion. A weak yen and the low-rate environment adversely
affected the results. While Aflac Japan contributed about 76% to
total revenue, Aflac U.S. contributed the remaining 24%.
Total revenue in
plunged 15.9% year over year to $4.3 billion, primarily owing to
decelerated sales from WAYS products along with a weak average
yen, which led to 59.5% decline in bank channel sales. The
downfall was partially offset by 15.7% increase in sales of
cancer and other medical products. Premium income, in terms of
dollars, decreased 17.3% year over year to $3.6 billion in the
Net investment income from the Japanese operations declined
6.5% year over year to $665 million. The growth was primarily
mitigated by a weak yen/dollar exchange rate, which was 100.54,
or 19.5% weaker than the average rate of 80.93 in the year-ago
quarter. Consequently, pre-tax operating earnings stood at $853
million in Japan, down 5.9% over the prior-year quarter.
On the other hand, Aflac
generated revenues of $1.4 billion, up 1.4% over the prior-year
quarter. Net investment income grew 2% to $159 million, whereas
premiums were up 2% to $1.3 billion. Given the sluggishness in
the U.S. market and limited growth in new sales, total new
annualized sales plunged 10.4% year over year to $397 million as
more than 90% of the accounts come from the small business
Subsequently, pre-tax operating earnings in the U.S. slipped
1.3% year over year to $205 million, whereas persistency
deteriorated to 76.8% from 77.1% in the year-ago quarter.
Operating margin also edged down to 14.2% from 14.6% in the
Highlights of Full-Year 2013
For full-year 2013, Aflac reported operating earnings per
share of $6.18, a penny higher than the Zacks Consensus Estimate
but slipped 6.4% from $6.60 recorded in 2012. Operating earnings
declined 6.8% year over year to $2.89 billion. A slightly weak
yen/dollar exchange rate had a negative impact of 76 cents on
operating earnings in 2012.
Including one-time items, GAAP net income jumped 10.2% to
$3.16 billion or $6.76 per share in 2013 versus $2.87 billion or
$6.11 per share in 2012.
Total revenue for the reported quarter decreased 5.6% year
over year to $23.94 billion, although it breezed past the Zacks
Consensus Estimate of $23.84 billion. Total acquisition and
operating expenses also reduced 7.4% year over year to $5.31
billion in 2013, while benefits and claims plummeted 9.9% to
As of Dec 31, 2013, total investment and cash were $108.5
billion compared with $118.2 billion at 2012-end, while
shareholder equity totaled $14.6 billion as against $16.0 billion
during the comparable period, primarily due to changes in
investment valuation. During the reported quarter, net unrealized
gain on investment securities and derivatives were $1.0 billion
as compared with a gain of $135 million in the prior quarter.
At the end of Dec 2013, Aflac projected its risk-based capital
ratio to be over 750%, higher than 630% at 2012-end, while its
solvency ratio in Japan is expected to be more than 750%, up from
669% at 2012-end.
Meanwhile, annualized return on average shareholder equity for
the reported quarter was 18.4% against 19.8% 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 18.5%, down from 19.4% in
the previous quarter.
Share Repurchase Update
Aflac bought back about 7.6 million shares worth $502 million
during the reported quarter, while 13.2 million shares were
repurchased for $800 million in 2013.
On Nov 13, 2013, the board of Aflac sanctioned a new share
repurchase program for 40 million shares, to commence with
immediate effect. Including these, about 49.2 million shares were
available for repurchase as of Dec 31, 2013.
Concurrent with the release of the fourth-quarter results,
Aflac detailed its 2014 outlook.
Excluding currency fluctuations, Aflac anticipates operating
earnings to grow 2%-5% or about $6.28-6.52 per share in 2014.
Earnings per share are expected to benefit from higher share
buybacks, which are projected to be worth between $800 million
and $1.0 billion in 2014.
Aflac Japan's third sector cancer and medical products sales
are likely to exhibit growth at 2%-7%. Sales in the U.S. are
projected to grow by nil to 5% in 2014. The guidance reflects the
negative impact of difficult comps, low interest rate
environment, higher capital expenditures, currency fluctuations
and an increase in Japan's consumption tax that rises from 5% to
8% effective Apr 2014.
Concurrently, the board of Aflac declared its regular cash
dividend of 37 cents per share, payable on Mar 3, 2014 to the
shareholders of record as on Feb 14.
Earlier, on Dec 2, 2013, Aflac paid a dividend of 37 cents per
share to its shareholders of record as on Nov 20. This payout
recorded a hike of 5.7% from the prior 35 cents, marking the 31
consecutive year of dividend rise.
Other Stocks to Consider
Aflac currently carries a Zacks Rank #4 (Sell). Better-ranked
American International Group Inc.
), each carrying a Zacks Rank #2 (Buy).
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