10-QPeriod: Q3 FY2005

AFLAC INC Quarterly Report for Q3 Ended Sep 30, 2005

Filed November 8, 2005For Securities:AFL

Summary

Aflac Inc. reported strong financial performance for the nine months ended September 30, 2005, driven by significant growth in both its U.S. and Japan segments. Net earnings increased by 30.7% to $1.119 billion, or $2.20 per diluted share, compared to the prior year. This growth was fueled by robust premium income from both Aflac Japan and Aflac U.S., with Aflac Japan remaining the primary contributor to consolidated earnings. The company also benefited from realized investment gains and a favorable tax rate due to the release of a valuation allowance for deferred tax assets. Total revenues rose by 10.0% to $10.796 billion. Aflac Japan saw its pretax operating earnings increase by 15.0% to $1.178 billion, despite currency headwinds. Aflac U.S. also demonstrated solid performance with pretax operating earnings up 7.6% to $396 million. The company's financial position remains strong, with total assets of $57.453 billion and shareholders' equity of $8.006 billion. Management remains optimistic about achieving its earnings per share objectives for the full year.

Key Highlights

  • 1Net earnings increased by 30.7% to $1.119 billion for the nine months ended September 30, 2005, compared to $856 million in the prior year.
  • 2Diluted earnings per share rose to $2.20 for the nine months ended September 30, 2005, from $1.65 in the prior year.
  • 3Total revenues grew by 10.0% to $10.796 billion for the nine months ended September 30, 2005, up from $9.834 billion.
  • 4Aflac Japan, the company's largest segment, reported a 15.0% increase in pretax operating earnings to $1.178 billion.
  • 5Aflac U.S. showed a 7.6% increase in pretax operating earnings, reaching $396 million.
  • 6The effective income tax rate decreased to 32.9% for the nine-month period due to the release of a valuation allowance for deferred tax assets.
  • 7Total shareholders' equity increased to $8.006 billion as of September 30, 2005, from $7.576 billion at the end of the prior year.

Frequently Asked Questions

Aflac's earnings growth was primarily driven by a strong increase in premium income from both its Aflac Japan and Aflac U.S. segments. Additionally, the company benefited from realized investment gains and a reduction in its effective income tax rate due to the release of a valuation allowance for deferred tax assets.

Aflac Japan, the larger segment, showed a 15.0% increase in pretax operating earnings, contributing significantly to the company's overall performance. Aflac U.S. also demonstrated solid growth with a 7.6% increase in pretax operating earnings. While Aflac Japan faced currency headwinds, its performance remained robust.

Management expressed optimism about meeting or exceeding its earnings objective for 2005, projecting net earnings per diluted share of at least $2.56, representing a 14.8% increase over 2004. They also maintained objectives for 15% growth in 2006 and 13% to 16% growth in 2007.

Yes, Aflac adopted SFAS 123R, 'Share-Based Payment,' effective January 1, 2005. This required the company to recognize compensation expense for stock options, and prior year results were adjusted accordingly. The adoption of this standard impacted the presentation of expenses and earnings per share, though the primary drivers of operating performance remained consistent.