AFLAC INCORPORATED ANNOUNCES FOURTH QUARTER RESULT
AFLAC INCORPORATED ANNOUNCES FOURTH QUARTER RESULTS, 2012 EPS IN LINE WITH GUIDANCE AND OBJECTIVE, AFFIRMS 2013 OPERATING EPS TARGET, DECLARES FIRST QUARTER CASH DIVIDEND
COLUMBUS, Georgia – February 5, 2013 – Aflac Incorporated today reported its fourth quarter results.
Reflecting the weaker yen/dollar exchange rate, revenues rose 6.6% to $6.4 billion in the fourth quarter of 2012, compared with $6.0 billion in the fourth quarter of 2011. Net earnings were $581 million, or $1.24 per diluted share, compared with $538 million, or $1.15 per share, a year ago.
Net earnings in the fourth quarter of 2012 included after-tax realized investment losses, net of realized investment gains, of $111 million, or $.23 per diluted share, compared with net after-tax losses of $146 million, or $.30 per diluted share, a year ago. After-tax realized investment losses in the quarter were $217 million, or $.45 per diluted share. These losses primarily resulted from impairments taken on securities issued by the Republic of Tunisia and UniCredit SpA (HVB Funding Trusts). After-tax realized investment gains from securities transactions in the quarter were $76 million, or $.16 per diluted share. On an after-tax basis, hedge costs related to dollar investments of Aflac Japan were $3 million in the quarter, or $.01 per diluted share. Realized after-tax net investment gains from other derivative and hedging activities in the quarter were $33 million, or $.07 per diluted share.
Aflac believes that an analysis of operating earnings, a non-GAAP financial measure, is vitally important to an understanding of the company’s underlying profitability drivers. Aflac defines operating earnings as the profits derived from operations before realized investment gains and losses from securities transactions, impairments, and derivative and hedging activities, as well as nonrecurring items. Aflac’s derivative activities include: foreign currency, interest rate and credit default swaps in variable interest entities that are consolidated; foreign currency swaps associated with the company’s senior and subordinated notes; and foreign currency forwards used in hedging foreign exchange risk on U.S. dollar-denominated securities. Management uses operating earnings to evaluate the financial performance of Aflac’s insurance operations because realized gains and losses from securities transactions, impairments, and derivative and hedging activities, as well as nonrecurring items, tend to be driven by general economic conditions and events or related to infrequent activities not directly associated with the company’s insurance operations, and therefore may obscure the underlying fundamentals and trends in Aflac’s insurance operations.
Furthermore, because a significant portion of Aflac's business is in Japan, where the functional currency is the yen, the company believes it is equally important to understand the impact on operating earnings from translating yen into dollars. Aflac Japan’s yen-denominated income statement is translated from yen into dollars using an average exchange rate for the reporting period, and the balance sheet is translated using the exchange rate at the end of the period. However, except for a limited number of transactions, which includes the Aflac Japan dollar investment program, the company does not actually convert yen into dollars. As a result, Aflac views foreign currency as a financial reporting issue and not as an economic event for the company or its shareholders. Because changes in exchange rates distort the growth rates of operations, readers of Aflac's financial statements are also encouraged to evaluate financial performance excluding the impact of foreign currency translation. The chart toward the end of this release presents a comparison of selected income statement items with and without foreign currency changes to illustrate the effect of currency.
Operating earnings in the fourth quarter were $697 million, compared with $684 million in the fourth quarter of 2011. Operating earnings per diluted share rose 2.1% to $1.48 in the quarter, compared with
$1.45 a year ago. The weaker yen/dollar exchange rate decreased operating earnings per diluted share by $.04 for the fourth quarter. Excluding the impact from the weaker yen, operating earnings per share increased 4.8%.
For the full year, total revenues were up 14.4% to $25.4 billion, compared with $22.2 billion a year ago. Net earnings were $2.9 billion, or $6.11 per diluted share, compared with $1.9 billion, or $4.12 per share, in 2011. Operating earnings for the full year were $3.1 billion, or $6.60 per diluted share, compared with $2.9 billion, or $6.27 per diluted share, in 2011. Operating earnings per diluted share rose 5.3% for the year. For the year, the yen/dollar exchange rate was relatively flat. Excluding a $.01 per share benefit from the impact from foreign currency, operating earnings per diluted share rose 5.1% for the year.
Total investments and cash at the end of December 2012 were $118.2 billion, compared with $124.2 billion at September 30, 2012. Although negatively impacted by the weaker yen, total investments and cash continued to benefit from strong cash flows.
In the fourth quarter and for the full year, Aflac repurchased 1.9 million shares of its common stock. At the end of December, the company had 22.4 million shares available for purchase under its share repurchase authorization.
Shareholders’ equity was $16.0 billion at December 31, 2012, which was unchanged from September 30, 2012. Shareholders’ equity at the end of the fourth quarter included a net unrealized gain on investment securities and derivatives of $2.6 billion, compared with a net unrealized gain of $2.3 billion at the end of September 2012. Shareholders’ equity per share was $34.16 at December 31, 2012, compared with $34.10 per share at September 30, 2012. The annualized return on average shareholders’ equity in the fourth quarter was 14.5%. On an operating basis (excluding total net realized gains/losses in net earnings, and unrealized investment and derivative gains/losses in shareholders’ equity), the annualized return on average shareholders’ equity was 20.6% for the fourth quarter.
FAB Supplement2012 Q4 StatisticsView Documents