01—Abstract
Summary
Summary of the 10-K filed February 27, 2012. Cited figures are marked; the original filing is the authoritative source.
Aflac Incorporated's 2011 annual report (10-K) highlights a year of revenue growth driven by a stronger Japanese Yen, though net earnings saw a decline primarily due to significant realized investment losses.
The company's core business remains robust, with strong performance in its Japan segment contributing the majority of revenues and assets. Aflac Japan continues to lead in cancer and medical insurance sales, benefiting from an aging population and increased consumer interest in supplemental health products, alongside a growing contribution from the bank distribution channel. The U.S. segment also experienced sales growth, driven by a focus on field force support and product enhancements.
Risks highlighted include adverse effects from global capital market and economic conditions, potential impairments on investment portfolios, and regulatory changes. The company continues to manage its investment portfolio by strategically reducing exposure to peripheral Eurozone countries and perpetual securities. Despite these challenges, Aflac maintains a strong capital and solvency position, supported by consistent premium growth and a diversified investment strategy.
02—Key points
Key Highlights
- Total revenues increased by 6.9% to $22.2 billion, primarily driven by a stronger Japanese Yen.
- Net earnings decreased to $2.0 billion ($4.18 per diluted share) from $2.3 billion ($4.95 per diluted share) in 2010, largely due to $1.6 billion in pretax net realized investment losses.
- Aflac Japan remains the dominant segment, accounting for 75% of total revenues and 87% of total assets.
- Aflac Japan saw new annualized premium sales increase by 18.6% in yen, exceeding expectations, driven by strong sales of the WAYS product through the bank channel.
- Aflac U.S. achieved sales growth of 6.8% in new annualized premiums, exceeding internal expectations, supported by enhanced products and increased sales force recruiting.
- The company's investment portfolio saw strategic "derisking" efforts, reducing exposure to peripheral Eurozone countries and perpetual securities.
- Shareholders' equity increased to $13.5 billion, with the company repurchasing approximately 6.0 million shares of common stock in 2011.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2011filed February 27, 2012Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Revenue | $22.17B$20.73B | +6.9% |
| SG&A Expenses | $2.34B$2.16B | +8.2% |
| Operating Income | $4.50B$3.98B | +13.0% |
| Interest Expense | $196.00M$149.00M | +31.5% |
| Net Income | $1.94B$2.33B | −16.8% |
| EPS (Basic) | $2.08$2.48 | −16.1% |
| EPS (Diluted) | $2.06$2.46 | −16.3% |
| Shares Outstanding (Basic) | 933.04M938.08M | −0.5% |
| Shares Outstanding (Diluted) | 938.74M946.17M | −0.8% |
05—Questions
Frequently Asked Questions
What was the primary driver of Aflac's revenue growth in 2011?
Aflac's revenue growth in 2011 was primarily driven by the strengthening of the Japanese Yen against the U.S. Dollar, which positively impacted the translation of Aflac Japan's yen-denominated revenues and assets into U.S. Dollars.
What caused the significant decrease in net earnings in 2011 compared to 2010?
The decrease in net earnings was primarily due to substantial realized investment losses, totaling $1.6 billion on a pretax basis, which included $1.9 billion in other-than-temporary impairment losses on certain securities.
How diversified is Aflac's business geographically?
Aflac's business is significantly concentrated in Japan, with the Japan segment accounting for 75% of total revenues and 87% of total assets in 2011. While the U.S. segment contributes to overall results, Japan remains the dominant market.
What is Aflac's strategy for managing its investment portfolio in light of market risks?
Aflac strategically manages its investment portfolio by adhering to prudent standards for credit quality, diversifying across sectors and geographies, and actively reducing exposure to higher-risk assets. In 2011, this included reducing exposure to peripheral Eurozone countries, certain perpetual securities, and specific financial institutions.
06—Continue