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AFLAC Inc. (AFL)
Q1 2010 Earnings Call
April 28, 2010 09:00 am ET
Ken Janke - SVP, IR
Dan Amos - Chairman and CEO
Kriss Cloninger III - President, CFO, Treasurer, and Director
Charles Lake II - Chairman, Aflac Japan
Tohru Tonoike - President and COO, Aflac Japan
Paul Amos II - President and COO, Aflac US
W. Jeremy Jeffery - SVP, Investments and Chief Investment Officer
Jimmy Bhullar - JPMorgan
Steven Schwartz - Raymond James & Associates
Nigel Dally - Morgan Stanley
Ed Spehar - Bank of America
Eric Berg - Barclays Capital
Randy Binner - FBR Capital Markets
Suneet Kamath - Sanford C. Bernstein
Darin Arita - Deutsche Bank
Andrew Kligerman - UBS
Previous Statements by AFL
» AFLAC Inc. Q4 2009 Earnings Call Transcript
» AFLAC Inc. Q3 2009 Earnings Call Transcript
» AFLAC Inc. Q2 2009 Earnings Call Transcript
I would now like to turn the call over to Mr. Ken Janke, Senior Vice President of Investor Relations. Thank you. You may begin.
Thank you, Caroline. Good morning, everybody, and welcome to our first quarter call. Joining me in Columbus today is Dan Amos, Chairman and CEO; Kriss Cloninger, President and CFO; Paul Amos, President of AFLAC and COO of our US Operations; Jerry Jeffery, Senior Vice President and Chief Investment Officer; and Tohru Tonoike, President and COO of AFLAC Japan, joins us from Tokyo.
Before we begin this morning, let me remind you that some of the statements in this teleconference are forward-looking within the meaning of federal securities laws. Although we believe these statements are reasonable, we can give no assurance they will prove to be accurate because they are prospective in nature. The actual results in the future could differ materially from those we discuss today. As such, we'd encourage you to look at our recent quarterly press release for some of the various risk factors that could affect our future results.
Now, I'll turn the program over to Dan who will talk about our quarter and operations in Japan and in the United States. I'll follow up with just few financial highlights for the quarter, and then we'll take your questions. Dan?
Thank you, Ken. Good morning and thank you for joining us. Overall, we're very pleased with our results for the first quarter and believe we're on track for achieving our primary financial objectives for both capital levels and earnings growth this year.
Let me begin this morning's call with a review of our insurance operations beginning with AFLAC Japan. AFLAC Japan produced strong financial results in the first quarter. Revenue growth was in line with our expectation. In addition, our pre-tax margin continued to expand as expected, resulting in strong earnings growth for the quarter.
We were especially pleased with the continued sales momentum in the quarter. In fact AFLAC Japan generated the largest first quarter production in its 36 year history. Total new sales for the quarter rose 10% to 30.3 billion yen. Our first quarter sales continue to benefit from strong consumer response to the recent product introductions, effective promotions and channel expansion.
First quarter medical sales were again strong, increasing 21.4% over the first quarter of 2009. Medical sales reflected the successful revision of our popular medical product ever. As you know, we promoted this revised product with the maneki-neko duck campaign, which became an overnight sensation in Japan last year. Our commercial featuring maneki-neko duck was the number one rated television ad among 2,300 ads running on the major TV stations in Japan when we first released it last year. In addition, the jingle from the commercial was the most popular cell phone download in Japan for six days in a row after it was released. Today, we have distributed approximately 1.6 million maneki-neko ducks through Japan.
We continue to produce strong sales in our ordinary life category. Ordinary life sales were up 64.4% in the first quarter, with the new child endowment product accounting for approximately 44% of the total ordinary life sales. We sold more than 29,900 child endowment policies in the first quarter at an average premium of 155,600 yen per policy. Although the child endowment product has a lower margin than the health products, the premium is almost three times higher than the cancer and the medical product. As such, it's a solid contributor to both the top and bottom lines. In addition, we've been able to leverage our child endowment sales through cross selling. In fact, for every 10 child endowment plans sold, our agents sold two additional policies to the same customers.
We also experienced strong gains in the bank channel sales in the first quarter. March was the single largest month of production from this channel and bank channel sales were a record 3.1 billion yen in the quarter. That represents 6.5% increase over the fourth quarter of 2009 and a 206.6% increase over a year ago. At the end of March, a total of 352 banks represented AFLAC Japan. We have a strong position within the bank channel and have significantly more bank selling for third sector products than any other insurer operating in Japan.
We believe our objective of a zero to 5% growth in 2010 is reasonable and our first quarter sales results are a good start toward achieving that objective. However, we do not expect second quarter sales to be as strong as the first quarter largely due to tougher comparisons. I'll remind you, for instance, that we introduced our popular child endowment product last March. As such, growth rates in the ordinary life product category for the remainder of the year will be much lower than we've produced in the last several quarters.