Aflac Reports $629M Profit, Upgrades Full-Year Outlook
Oct. 27--Supplemental insurer Aflac reported a profit of $629 million in the third quarter of this year, while also sweetening the pot with an upgrade of its full-year outlook for operating earnings per share.
Aflac, headquartered on Wynnton Road in Columbus, revised its diluted operating earnings projection from a range of $6.17 to $6.41 per share to the loftier expectation of between $6.40 to $6.60 per share.
"Having completed the first nine months of the year, I am pleased with the company's overall results," Aflac Chairman and Chief Executive Officer Dan Amos said in a statement. "We believe those results, combined with our outlook for the remainder of 2016, well-position Aflac for another year of solid financial performance. As we continue to focus on initiatives designed to drive future growth, our expectation is to increase spending in the fourth quarter, particularly related to promotional and (information technology) initiatives."
The $629 million in net earnings ($1.54 per diluted share) were nearly 11 percent higher than the $567 million ($1.32 per share) posted by the supplemental health and life insurer in the same July-September quarter of last year. Total revenues came in at $5.7 billion, which was 13.4 percent than the just over $5 billion it took in a year ago.
Aflac prefers to view its overall financial picture through the lens of operating earnings, which take out one-time events such as investment gains and losses, hedging costs, and other such items. In that vein, it reported operating earnings of $748 million, which were 11.3 percent above the $672 million it saw in the same period a year ago. Operating earnings per diluted share in the quarter were $1.82, up 16.7 percent from last year.
For investors, the third quarter also was fortuitous, with Aflac reporting that its board of directors approved a 4.9 percent increase in the company's quarterly cash dividend. The fourth-quarter dividend of 43 cents per share is payable Dec. 1 to those owning stock shares as of Nov. 16. This makes it the 34th year in a row that Aflac has increased its cash dividend, making it a perpetual darling in the investment community.
The firm that is branded very heavily by its whimsical and wacky Aflac duck campaign also bought back $200 million worth of its common stock in the quarter, or about 2.7 million shares. Thus far this year it has repurchased $1.2 billion of its outstanding stock, or about 18.8 million shares. Fewer shares on the open market in theory make those remaining in the hands of investors more valuable.
(Aflac's Dan Amos lands on prestigious list for second time)
Aflac does about three-quarters of its insurance business in Japan, with the balance of policy sales and renewals in the United States. Amos called the results "solid" in Japan, both in the quarter and through the first nine months of the year, pointing out the company's third-sector sales of cancer and medical products performed nicely. The firm last month revised its third-sector sales as much as 5 percent higher for the year. The company is working to limit sales of interest rate-sensitive products, which is occurring.
"However, I would remind you that the fourth quarter presents difficult comparisons," Amos said. "Long-term, we continue to believe the compound annual growth rate for third sector sales will be in the range of 4 percent to 6 percent."
U.S. sales, meanwhile, were "disappointing" in the quarter, said Amos, although he said the U.S. has been performing "strong" financially overall this year with the company working to get its restructured sales infrastructure up to speed. Robin Wilkey, Aflac senior vice president of Investor and Rating Agency Relations, said the roughly year-old revamping of the sales force is showing improvement, although the change to performance-based incentives among top sales management has been difficult for some to grasp. Thus, some staffing changes have been taking place to get the right people into certain jobs.
"I believe the measures we've taken to strengthen our sales infrastructure are laying the groundwork for better sales opportunities in the future," Amos said. "I would also remind you that fourth quarter sales -- and particularly the last three weeks of the year -- significantly influence our annual sales results. Therefore, it becomes increasingly challenging to project full-year sales, even after the first nine months. Taking all these factors into consideration, we believe Aflac U.S. will require a particularly strong fourth quarter in order to meet the lower end of our 3 percent to 5 percent targeted increase for 2016."
Aflac released its third-quarter earnings report Thursday after the closing bell of the New York Stock Exchange. Its shares rose 41 cents to $70.21 apiece for the day. The stock's 52-week trading range is $54.57 to $74.50 per share.
Tony Adams: 706-571-8574, @ledgerbizz
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