AFLAC INC Quarterly Report for Q3 Ended Sep 30, 2008

Summary

Aflac Incorporated reported solid financial results for the nine months ended September 30, 2008, despite a challenging economic environment. Total revenues increased to $12.29 billion, up from $11.38 billion in the prior year period. Net earnings were $1.06 billion, a decrease from $1.25 billion in the same period last year, primarily impacted by significant realized investment losses in the third quarter of 2008, totaling $597 million. These losses were largely attributed to write-downs of investments in Lehman Brothers, Washington Mutual, and certain perpetual debentures, reflecting market volatility. The company's core insurance operations remained robust, with Aflac Japan continuing to be the primary contributor to earnings. Aflac Japan's pretax operating earnings increased to $1.69 billion, driven by premium income growth and stable operating expenses. Aflac U.S. also showed positive operational performance, with pretax operating earnings rising to $11.9$ billion. The company demonstrated a commitment to returning capital to shareholders, with significant share repurchases and an increase in dividends paid. Despite economic headwinds and investment market turmoil, Aflac maintained a strong capital position and adequate liquidity. The company's management remains focused on its long-term strategy, emphasizing product development, sales force expansion, and prudent investment management. The potential impact of the Icelandic bank failures was noted as a significant event expected to result in a substantial charge in the fourth quarter.

Key Highlights

• 1Total revenues increased to $12.29 billion for the nine months ended September 30, 2008, compared to $11.38 billion in the prior year period.
• 2Net earnings decreased to $1.06 billion from $1.25 billion year-over-year, significantly impacted by $597 million in realized investment losses in Q3 2008, including write-downs of Lehman Brothers and Washington Mutual.
• 3Aflac Japan remains the dominant segment, with pretax operating earnings rising to $1.69 billion.
• 4Aflac U.S. also showed growth in pretax operating earnings to $11.9 billion.
• 5The company experienced a net change in cash and cash equivalents of -$1.05 billion for the nine months ended September 30, 2008.
• 6A significant after-tax charge of approximately $110 million is expected in Q4 2008 due to impairments on investments in Icelandic banks.
• 7The company repurchased approximately 23.2 million shares in 2008 as of September 30, 2008, demonstrating a commitment to shareholder returns.

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