10-QPeriod: Q1 FY2010

AFLAC INC Quarterly Report for Q1 Ended Mar 31, 2010

Filed May 7, 2010For Securities:AFL

Summary

Aflac Incorporated (AFL) reported strong first-quarter 2010 results, with net earnings increasing by 11.8% year-over-year to $636 million, or $1.35 per diluted share. Total revenues grew by 5.1% to $5.1 billion, driven by growth in both Aflac Japan and Aflac U.S. segments. The company's performance benefited from a stronger Japanese Yen, which positively impacted reported U.S. dollar results. While the company experienced net realized investment losses of $46 million, this was primarily due to other-than-temporary impairments totaling $42 million. The company's investment portfolio saw a significant reduction in gross unrealized losses on available-for-sale debt and perpetual securities, primarily due to improved fair values. Management remains confident in the company's financial condition and its ability to meet policyholder obligations.

Financial Highlights

29 data points
Beta

Revenue

$5.07B

Net Income

$636.00M

12.6% Net Margin

EPS (Diluted)

$0.68

Total Assets

$85.18B

Cash & Equivalents

$1.61B

Free Cash Flow

$1.28B

Financial Statements
Beta
Revenue$5.07B
SG&A Expenses$481.00M
Interest Expense$33.00M
Net Income$636.00M
EPS (Basic)$0.68
EPS (Diluted)$0.68
Shares Outstanding (Basic)935.85M
Shares Outstanding (Diluted)944.90M

Key Highlights

  • 1Net earnings increased 11.8% to $636 million ($1.35 per diluted share) for Q1 2010, compared to $569 million ($1.22 per diluted share) in Q1 2009.
  • 2Total revenues rose 5.1% to $5.1 billion, with Aflac Japan contributing significantly to overall growth.
  • 3Aflac Japan's pretax operating earnings increased by 20.5% in USD, driven by premium income growth and improved benefit ratios.
  • 4Aflac U.S. saw a 19.4% increase in pretax operating earnings, though total new annualized premium sales decreased by 10.0% due to challenging economic conditions.
  • 5The company experienced net realized investment losses of $46 million, including $42 million in other-than-temporary impairments, a decrease from $234 million in impairments in the prior year.
  • 6Gross unrealized losses on available-for-sale debt and perpetual securities decreased significantly by $2.3 billion, indicating improving market conditions.
  • 7The company's capital position remains strong, with a debt-to-capital ratio of 21.9% and a high risk-based capital ratio for its insurance subsidiaries.

Frequently Asked Questions

In the first quarter of 2010, Aflac reported net earnings of $636 million, an increase of 11.8% from $569 million in the same period of 2009. Diluted earnings per share were $1.35, up from $1.22. Total revenues increased by 5.1% to $5.1 billion, compared to $4.8 billion in the prior year.

The strengthening Japanese Yen positively impacted Aflac's reported U.S. dollar results. While Aflac Japan's operations are primarily in Yen, translating these results into U.S. dollars magnified the reported growth. Management views foreign currency translation as a financial reporting issue and evaluates performance excluding this impact.

Aflac reported net realized investment losses of $46 million for the quarter, which included $42 million in other-than-temporary impairment charges. This is a significant improvement from the $234 million in impairments recognized in the first quarter of 2009. The company's investment portfolio also saw a substantial decrease in unrealized losses.

Aflac maintains a diversified portfolio of primarily fixed-income investments. The company actively monitors its investments for impairment and manages interest rate and currency risks through asset-liability matching and hedging strategies. The investment portfolio experienced improved fair values, leading to a reduction in unrealized losses.