) fourth-quarter 2012 operating earnings per share of $1.48 came
in line with the Zacks Consensus Estimate and were slightly ahead
of the year-ago quarter's earnings of $1.45. Operating earnings
edged up 2.0% year over year to $697 million. A weak yen/dollar
exchange rate had a negative impact of 4 cents per share on the
Operating earnings in the reported quarter primarily excluded
the after-tax negative impact of realized investment gains from
securities transactions and impairments of $141 million or 29
cents per share compared with $168 million or 35 cents per share
in the year-ago quarter. It also excluded other operating losses
and hedge costs on investment totaling $8 million or 2 cents a
share in the reported quarter. Additionally, a positive impact of
derivative and hedging activities worth $33 million or 7 cents
per share affected the operating earnings as opposed to $22
million or 5 cents per share recorded in the year-ago period.
Including one-time items, Aflac's GAAP net income in the
reported quarter rose about 8.0% to $581 million or $1.24 per
share against $538 million or $1.16 per share in the year-ago
period. Total acquisition and operating expenses moved up 3.4%
year over year to $1.51 billion, while benefits and claims jumped
7.8% year over year to about $4.0 billion.
Total revenue for the reported quarter augmented 6.6% year
over year to $6.38 billion, but fell short of the Zacks Consensus
Estimate of $6.61 billion. Despite the ongoing derisking
activities, weak yen and the low-rate environment, total revenue
benefited from consistent improvements in the U.S. and Japan.
While Aflac Japan contributed about 80% to the total revenue,
Aflac U.S. contributed the remaining 20%.
Total revenue in Japan increased 5.4% year over year to $5.1
billion. Reflecting the accelerated sales from the bank channel
and WAYS product, but partially offset by weak average yen.
Premium income from the Japanese operations, in terms of dollars,
was up 6.1% year over year to $4.4 billion in the reported
Net investment income from the Japanese operations inched up
0.3% year over year to $711 million. The growth was primarily
mitigated by a weak yen/dollar exchange rate, which was 80.93, or
4.4% weaker than the average rate of 77.35 in the year-ago
quarter. However, higher benefit ratio, weak yen and other
expenses resulted in pre-tax operating earnings of $906 million
in Japan, dipping 0.5% over the prior-year quarter.
Aflac U.S. generated revenue of $1.4 billion, up 5.8% over the
prior-year quarter. Net investment income grew 4.4% year over
year to $156 million. Premiums from the U.S. operations were up
5.5% 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 0.7% year over year to $444 million as more than
90% of the accounts come from the small business market.
Subsequently, pre-tax operating earnings in the U.S. climbed
5.9% year over year to $208 million, whereas persistency improved
to 77.1% from 76.2% in the year-ago quarter.
Highlights of Full-Year 2012
For full-year 2012, Aflac reported operating earnings per
share of $6.60, which breezed past the Zacks Consensus Estimate
of $6.59 but modestly grew from $6.27 recorded in 2011. Operating
earnings climbed 5.1% year over year to $3.1 billion. A slightly
weak yen/dollar exchange rate had a positive impact of 1 cent on
operating earnings in 2012.
Including one-time items, GAAP net income surged 48.0% to
$2.87 billion or $6.11 per share in 2012 versus $1.94 billion or
$4.12 per share in 2011.
Total revenue for the reported quarter inflated 14.4% year
over year to $25.36 billion, also exceeding the Zacks Consensus
Estimate of $25.73 billion. Total acquisition and operating
expenses climbed up 4.8% year over year to $5.73 billion in 2012,
while benefits and claims spiked 11.5% to $15.33 billion.
As of Dec 31, 2012, total investment and cash were $118.2
billion compared with $103.46 billion at 2011-end, while
shareholders' equity totaled $16.0 billion as against $13.50
billion during the comparable period. Shareholders' equity per
share was $34.16 at the end of 2012, up from $27.76 per share
reported at the end of 2011.
At the end of 2012, Aflac projected its risk-based capital
ratio to be higher than the targeted range of 400%-500%, compared
with 493% at 2011-end, while its solvency ratio of 628% in Japan
exceeded the target range of 500%-600%. During the reported
quarter, net unrealized gain on investment securities and
derivatives were $2.6 billion as compared with $2.3 billion in
the prior quarter.
Meanwhile, annualized return on average shareholders' equity
for the reported quarter was 14.5% against 27.0% 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 shareholders' equity) Aflac's return
on average shareholders' equity came in at 20.6%, up from 25.2%
in the previous quarter.
Aflac bought back 1.9 million shares for $100 million in the
reported quarter and full-year 2012, while 22.4 million shares
remain available for repurchases under the current authorization.
The company plans to buyback shares worth $400-$600 million in
Concurrent with the release of the fourth-quarter result,
Aflac provided its 2013 outlook. New annualized sales are
projected to grow by 0%-5% in 2013, reflecting difficult comps.
Aflac Japan's third sector cancer and medical products sales are
also expected to exhibit 0%-5% growth.
Excluding currency fluctuations, Aflac anticipates the
earnings to grow by 4%-7% or about $6.86-$7.06 per share in 2013.
Accordingly, if the yen averages 90 against dollar, the earnings
growth is expected to be within $6.37-$6.57 per share for
Concurrently, the board of Aflac announced a regular cash
dividend of 35 cents per share, which is payable on Mar 1, 2013
to its shareholders of record as on Feb 15, 2013.
Earlier, on Dec 3, 2012, Aflac paid a dividend of 35 cents per
share to its shareholders of record as on Nov 14, 2012, up 6.1%
from the prior-year earnings of 33 cents a share.
Aflac carries a Zacks Rank #3 (Hold). Other strong performers
in the insurance sector include
HCC Insurance Holdings Inc.
Selective Insurance Group Inc.
), all of which carry a Zacks Rank #1 (Strong Buy).
AFLAC INC (AFL): Free Stock Analysis Report
HCC INS HLDGS (HCC): Free Stock Analysis
RLI CORP (RLI): Free Stock Analysis Report
SELECT INS GRP (SIGI): Free Stock Analysis
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