Aflac Incorporated Announces Fourth Quarter Results, Reports Fourth Quarter Net Earnings of $525 Million, 2018 Adjusted EPS Exceeds Guidance, Affirms 2019 Adjusted EPS Outlook, Increases First Quarter Cash Dividend 3.8%
Total revenues were
Net earnings in the fourth quarter of 2018 included pretax net realized investment losses of
The average yen/dollar exchange rate* in the fourth quarter of 2018 was 112.87, or 0.1% stronger than the average rate of 112.98 in the fourth quarter of 2017. For the full year, the average exchange rate was 110.39, or 1.6% stronger than the rate of 112.16 a year ago, which increased
Adjusted earnings* in the fourth quarter were
For the full year of 2018, total revenues were up 0.4% to
Total investments and cash at the end of
Shareholders' equity was
Shareholders' equity excluding AOCI was
In yen terms,
For the full year, premium income in yen was ¥1.4 trillion, or 1.5% lower than a year ago, reflecting the impact of certain policies reaching paid-up status. Net investment income, net of amortized hedge costs, increased 5.5% to ¥265.5 billion. Total revenues in yen were down 0.5% to ¥1.7 trillion. Pretax adjusted earnings were ¥354.2 billion, or 3.1% higher than a year ago.
For the quarter in dollar terms, premium income, net of reinsurance, decreased 0.7% to
For the full year in dollar terms, premium income, net of reinsurance, was
For the quarter, third sector sales, which include cancer, medical and income support products, increased 1.0% to ¥22.2 billion and total new annualized premium sales (sales) increased 2.2% to ¥24.2 billion, or
For the full year, third sector sales increased 1.6% and total sales increased 1.1% to ¥95.9 billion, or
AFLAC
Aflac
For the full year, premium income rose 2.6% to
Aflac
CORPORATE AND OTHER
For the quarter, total revenue increased 36.8% to
For the full year, total revenue increased 24.6% to
DIVIDEND
The board of directors declared the first quarter dividend of
OUTLOOK
Commenting on the company's results, Chairman and Chief Executive Officer
"
"Turning to our
"We remain committed to maintaining strong capital ratios on behalf of our policyholders and maintaining a strong risk-based capital ratio in the
"As we look to 2019, our objective is to produce stable adjusted earnings per diluted share of
About
Aflac herein means American Family Life Assurance Company of
A copy of Aflac's Financial Analysts Briefing (FAB) supplement for the quarter can be found on the "Investors" page at aflac.com.
*See Non-
AFLAC INCORPORATED AND SUBSIDIARIES CONDENSED INCOME STATEMENT |
|||||||||||
(UNAUDITED – IN MILLIONS, EXCEPT FOR SHARE AND PER-SHARE AMOUNTS) |
|||||||||||
THREE MONTHS ENDED |
2018 |
2017 |
% Change |
||||||||
Total revenues |
$ |
5,126 |
$ |
5,424 |
(5.5) |
% |
|||||
Benefits and claims, net |
2,925 |
3,007 |
(2.7) |
||||||||
Total acquisition and operating expenses |
1,479 |
1,418 |
4.3 |
||||||||
Earnings before income taxes |
722 |
999 |
(27.7) |
||||||||
Income taxes* |
197 |
(1,585) |
|||||||||
Net earnings* |
$ |
525 |
$ |
2,584 |
(79.7) |
% |
|||||
Net earnings per share – basic |
$ |
0.69 |
$ |
3.29 |
(79.0) |
% |
|||||
Net earnings per share – diluted |
0.69 |
3.27 |
(78.9) |
||||||||
Shares used to compute earnings per share (000): |
|||||||||||
Basic |
760,037 |
784,317 |
(3.1) |
% |
|||||||
Diluted |
765,103 |
790,080 |
(3.2) |
||||||||
Dividends paid per share |
$ |
0.26 |
$ |
0.23 |
13.0 |
% |
* This includes the company's estimated impact of Tax Reform of |
AFLAC INCORPORATED AND SUBSIDIARIES CONDENSED INCOME STATEMENT |
|||||||||||
(UNAUDITED – IN MILLIONS, EXCEPT FOR SHARE AND PER-SHARE AMOUNTS) |
|||||||||||
TWELVE MONTHS ENDED |
2018 |
2017 |
% Change |
||||||||
Total revenues |
$ |
21,758 |
$ |
21,667 |
0.4 |
% |
|||||
Benefits and claims, net |
12,000 |
12,181 |
(1.5) |
||||||||
Total acquisition and operating expenses |
5,775 |
5,468 |
5.6 |
||||||||
Earnings before income taxes |
3,983 |
4,018 |
(0.9) |
||||||||
Income taxes* |
1,063 |
(586) |
|||||||||
Net earnings* |
$ |
2,920 |
$ |
4,604 |
(36.6) |
% |
|||||
Net earnings per share – basic |
$ |
3.79 |
$ |
5.81 |
(34.8) |
% |
|||||
Net earnings per share – diluted |
3.77 |
5.77 |
(34.7) |
||||||||
Shares used to compute earnings per share (000): |
|||||||||||
Basic |
769,588 |
792,042 |
(2.8) |
% |
|||||||
Diluted |
774,650 |
797,861 |
(2.9) |
||||||||
Dividends paid per share |
$ |
1.04 |
$ |
0.87 |
19.5 |
% |
* This includes the company's estimated impact of Tax Reform of |
AFLAC INCORPORATED AND SUBSIDIARIES CONDENSED BALANCE SHEET |
|||||||||||
(UNAUDITED – IN MILLIONS, EXCEPT FOR SHARE AMOUNTS) |
|||||||||||
|
2018 |
2017 |
% Change |
||||||||
Assets: |
|||||||||||
Total investments and cash |
$ |
126,243 |
$ |
123,659 |
2.1% |
||||||
Deferred policy acquisition costs |
9,875 |
9,505 |
3.9 |
||||||||
Other assets |
4,288 |
4,053 |
5.8 |
||||||||
Total assets |
$ |
140,406 |
$ |
137,217 |
2.3% |
||||||
Liabilities and shareholders' equity: |
|||||||||||
Policy liabilities |
$ |
103,188 |
$ |
99,147 |
4.1% |
||||||
Notes payable |
5,778 |
5,289 |
9.2 |
||||||||
Other liabilities |
7,978 |
8,183 |
(2.5) |
||||||||
Shareholders' equity |
23,462 |
24,598 |
(4.6) |
||||||||
Total liabilities and shareholders' equity |
$ |
140,406 |
$ |
137,217 |
2.3% |
||||||
Shares outstanding at end of period (000) |
755,286 |
780,910 |
(3.3)% |
NON-
This earnings release includes references to Aflac's non-U.S. GAAP financial measures, adjusted earnings, adjusted earnings per diluted share, adjusted return on equity, amortized hedge costs, and adjusted book value. These measures are not calculated in accordance with U.S. GAAP. The measures exclude items that the company believes may obscure the underlying fundamentals and trends in insurance operations because they tend to be driven by general economic conditions and events or related to infrequent activities not directly associated with insurance operations. Management uses adjusted earnings, adjusted earnings per diluted share, and adjusted return on equity to evaluate the financial performance of Aflac's insurance operations on a consolidated basis and believes that a presentation of these measures is vitally important to an understanding of the underlying profitability drivers and trends of Aflac's insurance business. The company believes that amortized hedge costs, which are a component of adjusted earnings, measure the periodic currency risk management costs associated with hedging a portion of
Due to the size of
Aflac defines the non-
- Adjusted earnings are adjusted revenues less benefits and adjusted expenses. The adjustments to both revenues and expenses account for certain items that cannot be predicted or that are outside management's control. Adjusted revenues are
U.S. GAAP total revenues excluding realized investment gains and losses, except for amortized hedge costs related to foreign currency exposure management strategies and net interest cash flows from derivatives associated with certain investment strategies. Adjusted expenses areU.S. GAAP total acquisition and operating expenses including the impact of interest cash flows from derivatives associated with notes payable but excluding any nonrecurring or other items not associated with the normal course of the company's insurance operations and that do not reflect Aflac's underlying business performance. The most comparableU.S. GAAP measure is net earnings. - Adjusted earnings per share (basic or diluted) are the adjusted earnings for the period divided by the weighted average outstanding shares (basic or diluted) for the period presented. The most comparable
U.S. GAAP measure is net earnings per share. - Adjusted return on equity excluding foreign currency impact is calculated using adjusted earnings excluding the impact of the yen/dollar exchange rate, as reconciled with total
U.S. GAAP net earnings, divided by average shareholders' equity, excluding AOCI. The most comparableU.S. GAAP measure is return on average equity (ROE) as determined using net earnings and average total shareholders' equity. - Amortized hedge costs represent costs incurred in using foreign currency forward contracts to hedge the foreign exchange risk of a portion of
U.S. dollar-denominated assets in the company's Japan segment investment portfolio. These amortized hedge costs are derived from the difference between the foreign currency spot rate at time of trade inception and the contractual foreign currency forward rate, recognized on a straight line basis over the term of the hedge. There is no comparableU.S. GAAP financial measure for amortized hedge costs. - Adjusted book value is the
U.S. GAAP book value (representing total shareholders' equity), less AOCI as recorded on theU.S. GAAP balance sheet. The company considers adjusted book value important as it excludes AOCI, which fluctuates due to market movements that are outside management's control.
1 |
Beginning with the first quarter of 2018, the company began utilizing the term "adjusted earnings" for the measure formerly referred to as "operating earnings," on both a pretax and after-tax basis, as well as an absolute and per-share basis, and the term "adjusted return on equity" for the measure formerly referred to as "operating return on equity." This change only pertained to the label of the measure and did not alter its definition or calculation. |
RECONCILIATION OF NET EARNINGS TO ADJUSTED EARNINGS1 |
|||||||||||
(UNAUDITED – IN MILLIONS, EXCEPT FOR PER-SHARE AMOUNTS) |
|||||||||||
THREE MONTHS ENDED |
2018 |
2017 |
% Change |
||||||||
Net earnings |
$ |
525 |
$ |
2,584 |
(79.7) |
% |
|||||
Items impacting net earnings: |
|||||||||||
Realized investment (gains) losses |
322 |
(58) |
|||||||||
Other and non-recurring (income) loss |
2 |
31 |
|||||||||
Income tax (benefit) expense on items excluded |
(77) |
9 |
|||||||||
Tax reform adjustment 4 |
7 |
(1,933) |
|||||||||
Adjusted earnings |
779 |
633 |
23.1 |
% |
|||||||
Current period foreign currency impact 2 |
(1) |
N/A |
|||||||||
Adjusted earnings excluding current period foreign |
$ |
778 |
$ |
633 |
22.9 |
% |
|||||
Net earnings per diluted share |
$ |
0.69 |
$ |
3.27 |
(78.9) |
% |
|||||
Items impacting net earnings: |
|||||||||||
Realized investment (gains) losses |
0.42 |
(0.07) |
|||||||||
Other and non-recurring (income) loss |
— |
0.04 |
|||||||||
Income tax (benefit) expense on items excluded |
(0.10) |
0.01 |
|||||||||
Tax reform adjustment 4 |
0.01 |
(2.45) |
|||||||||
Adjusted earnings per diluted share |
1.02 |
0.80 |
27.5 |
% |
|||||||
Current period foreign currency impact 2 |
— |
N/A |
|||||||||
Adjusted earnings per diluted share excluding current period foreign currency impact 3 |
$ |
1.02 |
$ |
0.80 |
27.5 |
% |
1 |
Amounts may not foot due to rounding. |
2 |
Prior period foreign currency impact reflected as "N/A" to isolate change for current period only. |
3 |
Amounts excluding current period foreign currency impact are computed using the average yen/dollar exchange rate for the comparable prior-year period, which eliminates fluctuations driven solely by yen-to-dollar currency rate changes. |
4 |
The impact of Tax Reform was estimated in 2017, and adjustments were recorded in 2018 for return-to-provision adjustments, various amended returns filed by the company, and final true-ups of deferred tax liabilities. |
RECONCILIATION OF NET EARNINGS TO ADJUSTED EARNINGS1 |
|||||||||||
(UNAUDITED – IN MILLIONS, EXCEPT FOR PER-SHARE AMOUNTS) |
|||||||||||
TWELVE MONTHS ENDED |
2018 |
2017 |
% Change |
||||||||
Net earnings |
$ |
2,920 |
$ |
4,604 |
(36.6) |
% |
|||||
Items impacting net earnings: |
|||||||||||
Realized investment (gains) losses |
297 |
— |
|||||||||
Other and non-recurring (income) loss |
75 |
69 |
|||||||||
Income tax (benefit) expense on items excluded |
(83) |
(24) |
|||||||||
Tax reform adjustment 4 |
18 |
$ |
(1,933) |
||||||||
Adjusted earnings |
3,226 |
2,716 |
18.8 |
% |
|||||||
Current period foreign currency impact 2 |
(28) |
N/A |
|||||||||
Adjusted earnings excluding current period foreign currency impact 3 |
$ |
3,198 |
$ |
2,716 |
17.7 |
% |
|||||
Net earnings per diluted share |
$ |
3.77 |
$ |
5.77 |
(34.7) |
% |
|||||
Items impacting net earnings: |
|||||||||||
Realized investment (gains) losses |
0.38 |
— |
|||||||||
Other and non-recurring (income) loss |
0.10 |
0.08 |
|||||||||
Income tax (benefit) expense on items excluded from adjusted earnings |
(0.11) |
(0.03) |
|||||||||
Tax reform adjustment 4 |
0.02 |
$ |
(2.42) |
||||||||
Adjusted earnings per diluted share |
4.16 |
3.40 |
22.4 |
% |
|||||||
Current period foreign currency impact 2 |
(0.04) |
N/A |
|||||||||
Adjusted earnings per diluted share excluding current period foreign currency impact 3 |
$ |
4.13 |
$ |
3.40 |
21.5 |
% |
1 |
Amounts may not foot due to rounding. |
2 |
Prior period foreign currency impact reflected as "N/A" to isolate change for current period only. |
3 |
Amounts excluding current period foreign currency impact are computed using the average yen/dollar exchange rate for the comparable prior-year period, which eliminates fluctuations driven solely by yen-to-dollar currency rate changes. |
4 |
The impact of Tax Reform was estimated in 2017, and adjustments were recorded in 2018 for return-to-provision adjustments, various amended returns filed by the company, and final true-ups of deferred tax liabilities. |
RECONCILIATION OF |
|||||||||||
(UNAUDITED - IN MILLIONS, EXCEPT FOR SHARE AND PER-SHARE AMOUNTS) |
|||||||||||
|
2018 |
2017 |
% Change |
||||||||
|
$ |
23,462 |
$ |
24,598 |
|||||||
Less: |
|||||||||||
Unrealized foreign currency translation gains (losses) |
(1,847) |
(1,750) |
|||||||||
Unrealized gains (losses) on securities and derivatives |
4,210 |
5,941 |
|||||||||
Pension liability adjustment |
(212) |
(163) |
|||||||||
Total AOCI |
2,151 |
4,028 |
|||||||||
Adjusted book value 2 |
$ |
21,311 |
$ |
20,570 |
|||||||
Add: |
|||||||||||
Unrealized foreign currency translation gains (losses) |
(1,847) |
(1,750) |
|||||||||
Adjusted book value including unrealized foreign currency translation gains (losses) 3 |
$ |
19,464 |
$ |
18,820 |
|||||||
Number of outstanding shares at end of period (000) |
755,286 |
780,910 |
|||||||||
|
$ |
31.06 |
$ |
31.50 |
(1.4) |
% |
|||||
Less: |
|||||||||||
Unrealized foreign currency translation gains (losses) per common share |
(2.45) |
(2.24) |
|||||||||
Unrealized gains (losses) on securities and derivatives per common share |
5.57 |
7.61 |
|||||||||
Pension liability adjustment per common share |
(0.28) |
(0.21) |
|||||||||
Total AOCI per common share |
2.85 |
5.16 |
|||||||||
Adjusted book value per common share 2 |
$ |
28.22 |
$ |
26.34 |
7.1 |
% |
|||||
Add: |
|||||||||||
Unrealized foreign currency translation gains (losses) per common share |
(2.45) |
(2.24) |
|||||||||
Adjusted book value including foreign currency translation gains (losses) per common share 3 |
$ |
25.77 |
$ |
24.10 |
6.9 |
% |
1 |
Amounts may not foot due to rounding. |
2 |
Adjusted book value is the |
3 |
Adjusted book value including unrealized foreign currency translation gains (losses) is adjusted book value plus unrealized foreign currency translation gains (losses). |
RECONCILIATION OF |
||||||||
(EXCLUDING IMPACT OF FOREIGN CURRENCY) |
||||||||
THREE MONTHS ENDED |
2018 |
2017 |
||||||
Net earnings - |
9.0 |
% |
44.4 |
% |
||||
Impact of excluding unrealized foreign currency translation gains (losses) |
(0.9) |
(4.0) |
||||||
Impact of excluding unrealized gains (losses) on securities and derivatives |
1.9 |
13.1 |
||||||
Impact of excluding pension liability adjustment |
(0.1) |
(0.4) |
||||||
Impact of excluding AOCI |
0.9 |
8.7 |
||||||
|
9.9 |
53.1 |
||||||
Differences between adjusted earnings and net earnings 3 |
4.8 |
(40.0) |
||||||
Adjusted ROE - reported |
14.6 |
13.1 |
||||||
Less: Impact of foreign currency 4 |
— |
N/A |
||||||
Adjusted ROE, excluding impact of foreign currency |
14.6 |
13.0 |
1 |
Amounts presented may not foot due to rounding. |
2 |
|
3 |
See separate reconciliation of net income to adjusted earnings. |
4 |
Impact of foreign currency is calculated by restating all yen components of the income statement to the weighted average yen rate for the comparable prior year period. The impact is the difference of the restated adjusted earnings compared to reported adjusted earnings. For comparative purposes, only current period income is restated using the weighted average prior period exchange rate, which eliminates the foreign currency impact for the current period. This allows for equal comparison of this financial measure. |
RECONCILIATION OF |
||||||||
(EXCLUDING IMPACT OF FOREIGN CURRENCY) |
||||||||
TWELVE MONTHS ENDED |
2018 |
2017 |
||||||
Net earnings - |
12.2 |
% |
20.4 |
% |
||||
Impact of excluding unrealized foreign currency translation gains (losses) |
(1.0) |
(2.0) |
||||||
Impact of excluding unrealized gains (losses) on securities and derivatives |
3.0 |
5.8 |
||||||
Impact of excluding pension liability adjustment |
(0.1) |
(0.2) |
||||||
Impact of excluding AOCI |
1.8 |
3.6 |
||||||
|
13.9 |
24.0 |
||||||
Differences between adjusted earnings and net earnings 3 |
1.5 |
(9.8) |
||||||
Adjusted ROE - reported |
15.4 |
14.2 |
||||||
Less: Impact of foreign currency 4 |
0.1 |
N/A |
||||||
Adjusted ROE, excluding impact of foreign currency |
15.3 |
14.1 |
1 |
Amounts presented may not foot due to rounding. |
2 |
|
3 |
See separate reconciliation of net income to adjusted earnings. |
4 |
Impact of foreign currency is calculated by restating all yen components of the income statement to the weighted average yen rate for the comparable prior year period. The impact is the difference of the restated adjusted earnings compared to reported adjusted earnings. For comparative purposes, only current period income is restated using the weighted average prior period exchange rate, which eliminates the foreign currency impact for the current period. This allows for equal comparison of this financial measure. |
EFFECT OF FOREIGN CURRENCY ON ADJUSTED RESULTS1 |
||||||
(SELECTED PERCENTAGE CHANGES, UNAUDITED) |
||||||
THREE MONTHS ENDED |
Including Currency Changes |
Excluding Currency Changes2 |
||||
Net premium income 3 |
0.2 |
% |
0.2 |
% |
||
Net investment income 4 |
9.5 |
9.4 |
||||
Total benefits and expenses |
0.2 |
0.2 |
||||
Adjusted earnings |
23.1 |
22.9 |
||||
Adjusted earnings per diluted share |
27.5 |
27.5 |
1 |
Refer to previously defined adjusted earnings and adjusted earnings per diluted share. |
2 |
Amounts excluding currency changes were determined using the same yen/dollar exchange rate for the current period as the comparable period in the prior year, which eliminates dollar-based fluctuations driven solely from currency rate changes. |
3 |
Net of reinsurance |
4 |
Less amortized hedge costs on foreign investments |
EFFECT OF FOREIGN CURRENCY ON ADJUSTED RESULTS1 |
||||||
(SELECTED PERCENTAGE CHANGES, UNAUDITED) |
||||||
TWELVE MONTHS ENDED |
Including Currency Changes |
Excluding Currency Changes2 |
||||
Net premium income 3 |
0.8 |
% |
(0.3) |
% |
||
Net investment income 4 |
8.4 |
7.7 |
||||
Total benefits and expenses |
0.7 |
(0.3) |
||||
Adjusted earnings |
18.8 |
17.8 |
||||
Adjusted earnings per diluted share |
22.4 |
21.5 |
1 |
Refer to previously defined adjusted earnings and adjusted earnings per diluted share. |
2 |
Amounts excluding currency changes were determined using the same yen/dollar exchange rate for the current period as the comparable period in the prior year, which eliminates dollar-based fluctuations driven solely from currency rate changes. |
3 |
Net of reinsurance |
4 |
Less amortized hedge costs on foreign investments |
2019 ADJUSTED EARNINGS PER SHARE1 SCENARIOS2 |
||||||||||||||
Weighted-Average |
Adjusted Earnings |
Foreign |
||||||||||||
100 |
|
- |
|
|
||||||||||
105 |
4.18 |
- |
4.38 |
0.08 |
||||||||||
110.393 |
4.10 |
- |
4.30 |
- |
||||||||||
115 |
4.03 |
- |
4.23 |
(0.07) |
||||||||||
120 |
3.96 |
- |
4.16 |
(0.14) |
1 |
A non- |
2 |
Table recasts all quarters to the average exchange rate. |
3 |
Actual 2018 weighted-average exchange rate |
FORWARD-LOOKING INFORMATION
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" to encourage companies to provide prospective information, so long as those informational statements are identified as forward-looking and are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those included in the forward-looking statements. The Company desires to take advantage of these provisions. This document contains cautionary statements identifying important factors that could cause actual results to differ materially from those projected herein, and in any other statements made by company officials in communications with the financial community and contained in documents filed with the
The Company cautions readers that the following factors, in addition to other factors mentioned from time to time, could cause actual results to differ materially from those contemplated by the forward-looking statements: difficult conditions in global capital markets and the economy; exposure to significant interest rate risk; concentration of business in
Analyst and investor contact -
Media contact -
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