Aflac And Its Duck Still Making Money: 5 Things To Know About Earnings

Columbus Ledger-Enquirer (GA)

Feb. 01--The U.S. Tax Cut and Jobs Act certainly had an impact on the earnings of Aflac's quarterly financial report, as it has on the numbers of other companies benefiting from the major legislation that took effect in late 2017.

That's why, on paper at least, the fourth-quarter profit reported Thursday by the Columbus-based supplemental health and life insurer had an odd appearance.

The company that sells policies in the U.S. and Japan reported net earnings of $525 million, or 69 cents per share, in the October-December period of 2018. That was down just under 80 percent from nearly $2.6 billion it posted in the same period the year prior.

But don't be alarmed. The kicker in the financial washing machine was the $1.93 billion Tax Cut and Jobs Act benefit received and reported by Aflac in the final quarter of 2017, which also impacted the firm's full-year 2018 figures.

By boiling it all down and subtracting the tax benefit and other one-time items such as a $322 million investment loss, Aflac's net earnings in the fourth quarter of 2018 came in at $779 million, about 23 percent higher than the adjusted net earnings of $633 million that it reported in same period of 2017.

Eliminating one-time events such as investment gains and losses and windfall tax benefits typically give investors and analysts who follow companies a solid view of a firm's recurring business and health.

"We are pleased with the company's overall performance for the year," Aflac Chairman and Chief Executive Officer Dan Amos said in a statement, pointing to the increased adjusted earnings. "Improved profitability is particularly impressive when considering we have stepped-up investment in our core technology platforms and growth initiatives. Investing in growth and innovation is a critical strategic focus for 2019."

Here are other highlights of the financial report released Thursday by Aflac, which hatched its popular duck commercials years ago, turbocharging its brand awareness and subsequent profits:

Starting with dividend dessert

Aflac's board of directors approved a first-quarter dividend of 27 cents per share, which is payable March 1 to those holding the company's shares as of Feb. 20.

"I am pleased with the board's decision to increase the dividend, coming off our 36th consecutive year of dividend increases and a recognition of the stability of our earnings and capital generation," Amos said. "It also demonstrates our commitment to rewarding our shareholders."

Share repurchases continue

Like many American companies, Aflac continued to buy back shares of its common stock in 2018. That includes a repurchase of 8.5 million shares valued at $378 million in the fourth quarter and 28.9 million shares worth $1.3 billion.

The company said it has 69 million shares left to purchase under an authorization approved by its board of directors. And, of course, fewer shares of Aflac stock on the open market in theory make those remaining in current investors' hands that much more valuable.

Back to the bottom line

Aflac reported its $525 million fourth-quarter profit on total revenue of $5.1 billion, which was down 5.5 percent from the $5.4 billion it racked up in the final period of 2017.

For all of 2018, the company's profit, or net earnings, came in at $2.9 billion, which was down nearly 37 percent from $4.6 billion in 2017. Again, the federal Tax Cuts and Job Act benefit contributed to that disparity in reported numbers.

Adjusted net earnings for 2018 were $3.2 billion, or $4.16 per diluted share, which was nearly 19 percent higher than the $2.7 billion, or $3.40 per share, the firm saw in 2017.

It all came on total revenue of $21.7 billion in 2018, which is 0.4 percent more than the $21.6 it posted for all of 2017.

Prognostication for the coming year

This one straight from the CEO: "As we look to 2019, our objective is to produce stable adjusted earnings per diluted share of $4.10 to $4.30, assuming the 2018 weighted-average exchange rate of 110.39 yen to the dollar. As always, we are working very hard to achieve our earnings-per-share objective while also ensuring we deliver on our promise to policyholders."

How's the stock faring?

Aflac released its earnings report Thursday after the close of the New York Stock Exchange. In trading beforehand, shares rose 32 cents to $47.70 by the closing bell. The stock's 52-week trading range is a low of $41.41 up to a high of $48.36.

And don't forget, the company split its stock shares in 2018, which if that had not happened its closing price on Thursday would have been somewhere in the neighborhood of $95 per share.

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