10-QPeriod: Q3 FY2011

AFLAC INC Quarterly Report for Q3 Ended Sep 30, 2011

Filed November 4, 2011For Securities:AFL

Summary

Aflac Incorporated reported solid financial results for the third quarter and the first nine months of 2011, driven by a stronger yen and continued sales momentum, particularly in its Japan segment. Total revenues increased by 11.0% year-over-year in the third quarter, reaching $6.0 billion, while net earnings grew to $744 million ($1.59 per diluted share) from $690 million ($1.46 per diluted share) in the prior year's quarter. For the first nine months, total revenues were up 4.9% to $16.2 billion, though net earnings declined to $1.4 billion ($3.02 per diluted share) from $1.9 billion ($4.03 per diluted share) in the comparable period of 2010. This decline was largely attributable to significant realized investment losses, including other-than-temporary impairments totaling $1.1 billion during the nine-month period, primarily due to a strategic effort to reduce investment risk exposure. Despite these investment challenges, the company's core insurance operations, especially in Japan, demonstrated resilience, with Aflac Japan achieving record sales production for the third quarter. The company also continued its share repurchase program and increased its quarterly dividend, signaling confidence in its financial stability and future prospects.

Financial Highlights

30 data points
Beta

Revenue

$5.99B

Net Income

$736.00M

12.3% Net Margin

EPS (Diluted)

$0.79

Total Assets

$114.72B

Cash & Equivalents

$1.86B

Free Cash Flow

$3.11B

Financial Statements
Beta
Revenue$5.99B
SG&A Expenses$579.00M
Operating Income$1.18B
Interest Expense$52.00M
Net Income$736.00M
EPS (Basic)$0.79
EPS (Diluted)$0.79
Shares Outstanding (Basic)931.82M
Shares Outstanding (Diluted)935.59M

Key Highlights

  • 1Total revenues increased by 11.0% to $6.0 billion in Q3 2011, and by 4.9% to $16.2 billion for the first nine months of 2011.
  • 2Net earnings rose to $744 million ($1.59/share) in Q3 2011, up from $690 million ($1.46/share) in Q3 2010.
  • 3Aflac Japan reported record sales production for the third quarter, with new annualized premium sales increasing by 22.2% year-over-year.
  • 4The company experienced significant realized investment losses totaling $1.3 billion for the first nine months of 2011, primarily due to $1.1 billion in other-than-temporary impairments.
  • 5Shareholders' equity benefited from a net unrealized gain on investment securities of $708 million as of September 30, 2011, compared to $64 million at December 31, 2010.
  • 6Aflac repurchased 5.1 million shares of common stock in the open market during the first nine months of 2011 and increased its quarterly dividend to $0.33 per share.

Frequently Asked Questions

Aflac's revenue growth in the third quarter of 2011 was primarily driven by the stronger Japanese Yen relative to the U.S. Dollar and robust sales performance in its Japan segment, which saw a 22.2% increase in new annualized premium sales.

The decrease in net earnings for the first nine months of 2011 was primarily due to substantial realized investment losses, including $1.1 billion in other-than-temporary impairments. These losses were a result of strategic efforts to reduce the risk profile of the company's investment portfolio and continued declines in the creditworthiness of certain issuers.

Aflac is actively managing its investment portfolio by reducing exposure to peripheral Eurozone investments, certain perpetual securities, and concentrated positions. The company is also focusing on investing in investment-grade securities and has diversified its holdings, though it maintains a significant exposure to banks and financial institutions. The company also engaged in strategic derisking activities during the period.

The core insurance business, especially in Japan, remains strong. Aflac Japan achieved record sales for the third quarter, driven by successful product launches and expanded distribution channels like banks. Aflac U.S. also demonstrated positive sales growth, supported by enhanced products and marketing initiatives, indicating continued demand for its supplemental insurance products.