How did the Japanese yen's strength impact Aflac's results?

The strengthening of the Japanese yen against the U.S. dollar provided a significant tailwind to Aflac's reported financial results. Aflac Japan is the company's largest segment, and yen-denominated revenues and earnings translated into more U.S. dollars, boosting overall reported revenues, net investment income, and pretax operating earnings. Management views this translation effect as a financial reporting consideration rather than an economic change to the business.

What is the company's outlook for the U.S. market?

Aflac's U.S. sales faced challenges due to weak economic conditions, with total new annualized premium sales declining. However, the company is actively pursuing growth through expanding its broker channel relationships and introducing new products. Management remains optimistic about the long-term potential of the U.S. market, believing that health care reform and economic recovery will increase the need for Aflac's supplemental products.

How did the company manage investment portfolio risks, particularly regarding other-than-temporary impairments?

Aflac experienced a significant reduction in other-than-temporary impairment losses in Q2 2010 compared to the prior year. The company's investment strategy focuses on investment-grade fixed-income securities to provide stable income. While market volatility and credit spread widening did result in some unrealized losses on available-for-sale securities, Aflac's credit analysis indicated that the majority of these declines were temporary, and the company did not have the intent or need to sell these securities prior to recovery.

What is the company's capital position and liquidity?

Aflac maintained a strong capital position and adequate liquidity. The company's statutory capital and surplus remained robust, with its risk-based capital (RBC) ratio significantly exceeding regulatory minimums. The company also had ample cash and cash equivalents to meet its operational needs, with dividends paid to shareholders and no significant share repurchases during the quarter, although the board maintained authorization for future repurchases.

AFL 10-Q Quarterly Report Q2 FY2010 — Revenue, Net Income, EPS

Summary

Aflac Incorporated reported strong financial results for the second quarter and first half of 2010, with net earnings increasing significantly year-over-year. This growth was primarily driven by a stronger Japanese yen relative to the U.S. dollar, which positively impacted revenue and earnings when translated. Lower realized investment losses, particularly from the absence of significant other-than-temporary impairment charges seen in the prior year, also contributed to the improved performance. The company's core insurance operations in both Japan and the U.S. showed resilience. Aflac Japan continued to benefit from a favorable sales environment for its popular child endowment and medical products, alongside a growing distribution network through banks. Aflac U.S. sales faced headwinds from the weak economic climate, but the company was actively pursuing growth through broker channels and new product offerings. Overall, Aflac demonstrated robust capital position and liquidity, with a strong yen providing a tailwind to reported financial metrics. The company maintained its financial strength, and management expressed confidence in achieving its full-year earnings guidance.

Financial Highlights

30 data points

Beta

Revenue

$4.98B

Net Income

$581.00M

0.1% Net Margin

EPS (Diluted)

$0.61

Total Assets

$91.24B

Cash & Equivalents

$2.18B

Free Cash Flow

$1.75B

Financial Statements

Beta

Revenue	$4.98B
SG&A Expenses	$508.00M
Operating Income	$978.00M
Interest Expense	$33.00M
Net Income	$581.00M
EPS (Basic)	$0.62
EPS (Diluted)	$0.61
Shares Outstanding (Basic)	937.65M
Shares Outstanding (Diluted)	945.08M

Key Highlights

1Net earnings surged in Q2 2010 to $581 million ($1.23/share) from $314 million ($0.67/share) in Q2 2009.
2Total revenues increased 15.5% to $5.0 billion in Q2 2010 compared to the prior year, benefiting from a stronger Japanese yen.
3Aflac Japan's pretax operating earnings grew 17.4% year-over-year in Q2 2010, driven by premium growth and a favorable sales mix.
4Aflac U.S. showed improved pretax operating earnings, up 15.0% year-over-year in Q2 2010, despite a challenging economic environment.
5The company realized net investment losses of $89 million in Q2 2010, a significant improvement from $383 million in losses in Q2 2009, with a notable reduction in other-than-temporary impairment charges.
6The company's effective income tax rate for the first six months of 2010 was 34.7%, compared to 34.3% in the prior year.
7Aflac ended the period with a strong capital position, and continued to navigate market risks with a focus on investment quality and duration matching.

AFLAC INC Quarterly Report for Q2 Ended Jun 30, 2010

Summary

Financial Highlights

Key Highlights

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