Aflac Inc. defended its capital position Friday after its stock price plunged more than 36 percent the day before.
The company said it did not see the need to raise any more cash and reaffirmed expectations of a 15 percent increase in earnings per diluted share for 2008. Nor should there be any changes to their expected 2009 cash dividend payments.
“As we stand today, we remain very confident in our overall business model and our operations,” Dan Amos, Aflac chairman and chief executive officer, said in a statement issued Friday morning. “We are equally confident with the quality of our balance sheet and our capital position.”
Using preliminary results, Aflac estimated its year-end risk-based capital ratio will fall between 425 percent and 475 percent.
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Officials also estimated its current excess capital position was approximately $500 million to $1 billion at the end of December 2008.
“We believe our capital position is more than adequate to support our current ratings,” said Kriss Cloninger III, Aflac chief financial officer, said in a statement.
“We continue to expect strong statutory earnings in the future, which we estimate were $1.5 billion for the full year of 2008. Accordingly, we do not see a need for raising additional capital.”
Aflac mentioned in Friday’s statement the company’s hybrid securities investments stand at $8.1 billion, about 11.8 percent of its consolidated investment portfolio of $68.6 billion.
The company said changes in the fair value of these securities do not impact their risk-based capital ratio.
Aflac shares hit a high of $28.44 in Friday morning trading before falling slightly.
By market close, shares were up $1.59, or 6.94 percent, at $24.49.
On Thursday, Aflac shares plummeted by more than 36 percent after Morgan Stanley analyst Nigel Dally told investors they should avoid buying Aflac stock before the supplemental insurer releases its fourth quarter earnings report next month.
He expressed concern about Aflac’s investments in hybrid securities issued by European financial firms.
The price of those securities had fallen sharply in the past week — in some cases below 50 cents on the dollar.
Investors were becoming increasingly concerned their issuing financial institutions may become nationalized, Dally wrote in the report.
Raymond James & Associates, a financial services holding firm that follows Aflac, also released a report to investors Friday arguing these hybrid securities fears were “overblown.”
Raymond James upgraded its investment recommendation of Aflac from “outperform” to “strong buy.”
Raymond James analysts said Aflac’s amount of exposure to hybrid securities was “not abnormal” and European bank nationalizations so far have not “wipe(d) out the owners of hybrid securities.”
If anything, they argued, the hybrid securities have not been guaranteed, and in at least one case, the financial institution is still making payments on its hybrid securities.
“So really, the question becomes how many banks will be nationalized and how many of these will not make payments on their hybrid securities?” analysts wrote in the report.
“Our guess is not many.”
Aflac will release its fourth quarter earnings Feb. 2.
On Friday, the Dow Jones Industrial average dipped 45.24 points — 0.56 percent — to 8,077.56.