Aflac reports $716 million profit, will pay 45-cent cash dividend

Buoyed by solid sales in Japan and a resurgent performance in the U.S., supplemental insurer Aflac on Wednesday reported a profit of $716 million in the third quarter of this year, a nearly 14 percent increase from the same July-September period of 2016.

The company, headquartered in Columbus, also said it will pay a cash dividend of 45 cents per share payable Dec. 1 to those owning stock as of Nov. 15. That is a 4.7 percent increase in the dividend, with this marking the 35th year in a row that the investor-favorite dividend has risen.

“We are pleased that our third quarter and year-to-date financial results in both Japan and the U.S. reflected solid performance and continued our progress toward achieving the company’s objectives for 2017,” Aflac Chairman and Chief Executive Officer Dan Amos said in a statement.

The firm’s diluted net earnings of $1.80 per share came on total revenues in the quarter of $5.5 billion, which were down just under 4 percent from the $5.7 billion posted by Aflac a year ago.

Operating earnings per share, which subtract financial items such as one-time investment gains and losses, came in at $1.70 per share, down from $1.74 a year ago.

As Aflac explains each quarter about its insurance business in Japan — which makes up about 75 percent of overall company sales — the volatile Japanese yen-to-dollar rate impacted its financial numbers. In the third quarter a year ago, the rate was stronger than in this year’s three-month period, putting an 8-percent crimp in the firm’s figures.

“The main thing is our currency-neutral results, where you exclude the impact of the yen, continued to be very strong and were up for the quarter, and up a little more than 4 percent for the year,” said Aflac Chief Financial Officer Fred Crawford.

Both Amos and Crawford pointed out things are going so well at Aflac thus far this year its overall projections for operating earnings per share for all of 2017 are now 30 to 35 cents higher. Excluding the impact of the yen, the range now is $6.75 to $6.95 per share.

“That’s a pretty good increase and gives you a good idea of the momentum that we have from an earnings perspective and margin perspective year to date,” Crawford said. “So the $1.70 (operating earnings per share) that we’re reporting — once you keep in mind that it has about a 7-cent impact per share related to just the yen — is really up nicely on a currency-neutral basis, and that’s what will drive investor interest.”

The executives also applauded the strong third-sector policy sales in Japan, which includes cancer coverage. Amos said the long-term growth rate target for such business is 4 percent to 6 percent through 2019. The target for increasing sales in the U.S. over that time is 3 percent to 5 percent.

Crawford in particular noted the 7.5 percent increase in U.S. sales during the quarter. The company has been working hard in recent years to improve its sales force and ramp up business in the U.S. Aside from getting good productivity from sales agents, Aflac also has been placing more of an emphasis on larger companies, which includes brokerage and group sales, while also improving products it offers to employers, he said.

“To be able to grow quarter over quarter on our size and our market share, a little better than 7 percent sales growth, is a strong result and much stronger than you’ve seen from us in recent time,” Crawford said. “It’s still early. Dan Amos would be the first one to say I’m not necessarily going to declare some sort of victory on a new growth rate for the company that is sustainable. But we have been out there saying we intend to grow this business 3 to 5 percent ... This puts us squarely on track for that for the year.”

Amos also commented on Aflac’s strong capital position, which put the company into position to not only increase the cash dividend for shareholders, but also to repurchase shares of its common stock and reinvest in its business. That included buying back 2.7 million common shares at a price of $219 million in the quarter. Through the first nine months of this year, the firm has repurchased 13.9 million shares at a cost of $1 billion. More stock buybacks in the fourth quarter are expected.

“We continue to anticipate that we’ll repurchase in the range of $1.3 to $1.5 billion of our shares in 2017, which also assumes stable capital conditions and the absence of compelling alternatives,” said Amos, who sees the year unfolding well overall for Aflac. Thus, the projected earnings per share increase.

“Having completed the first nine months of the year, I am pleased with the company’s overall results,” he said. “We believe those results, combined with our outlook for the remainder of 2017, well position Aflac for another year of solid financial performance. We continue to expect increased spending in the fourth quarter in support of initiatives designed to drive future growth.”

Through the first nine months of 2017, Aflac reported a profit, or net earnings, of just over $2 billion, up nearly 6 percent from $1.9 billion during the same January through September period of 2016. That equates to diluted net earnings per share of $5.05, an increase from $4.59. Subtracting one-time gains and losses, operating earnings per share came in at $5.20, up from $5.06 the year prior.

Total revenues in the first nine months were $16.2 billion, down just over 2 percent from the $16.6 billion the firm reported a year ago.

Aflac released its third-quarter report after the stock markets’ close Wednesday. In trading amid an overall down market, its shares fell 49 cents to $84.07 in trading on the New York Stock Exchange. That’s not far off the stock’s 52-week high of $85.24 per share. The low mark for the past year is $66.50 per share.

This story was originally published October 25, 2017 at 5:44 PM with the headline "Aflac reports $716 million profit, will pay 45-cent cash dividend."