Amid a steady stream of numbers being tossed out at Aflac’s annual meeting of shareholders Monday, Dan Amos brought up a jaw-dropper to show how good the company’s stock has been to investors through the years.
“Those who invested in the company when Aflac was founded in 1955 have been extremely well rewarded,” said the firm’s chairman and chief executive officer.
Someone who purchased 1,000 shares of Aflac stock in 1955 — the year the company was founded in Columbus — would have paid $11,100 for them. But after 28 dividend or stock splits, those shares alone now would total more than 1.8 million.
“Those same shareholders who purchased 1,000 shares in 1955 would have received about $2.8 million in cash dividends this year alone,” he said. “What is impressive is that with the (stock) market’s close on Friday, the original investment of $11,100 is now worth an incredible $119.5 million.”
That extreme example was only a slice of the shareholder meeting at the Columbus Museum on Wynnton Road. Amos led off with an announcement that Audrey Boone Tillman is the firm’s new general counsel.
He then segued into a series of achievements that would make most shareholders happy. They included the fact that 2013 was the 24th year in a row that Aflac has reached its target for operating earnings per share.
It also was the 31st consecutive year in which the company has increased its cash dividend to shareholders, while also buying back about $800 million in common stock, making those shares still in investors’ hands that much more valuable.
The Fortune 500 company racked up a profit of $3.1 billion on total revenue of $23.9 billion in 2013. It sells voluntary supplemental health and life insurance policies in the U.S. and Japan. About 80 percent of its earnings come from the Asian nation.
The firm’s stock has stood the test of time as well, said Amos, with it returning value to shareholders over the last decade of 126 percent, including reinvested dividends. That compares to about 104 percent by the Dow Jones Industrials and the S&P 500, and nearly 114 percent by the S&P Life and Health index.
“As I’ve said before, numbers like these don’t just happen,” the CEO said. “It’s our dedicated team of Aflac employees who make the numbers happen.”
It also likely would not have occurred without the Aflac duck, which was hatched by Amos and an advertising firm 14 years ago. The entrance of the white-feathered fowl into the company’s ad campaign — particularly a long-running series of TV commercials — has helped push Aflac’s brand recognition sky high. The firm spent $95 million on advertising last year, far less than a number of its insurance competitors.
“During the first quarter of this year, we hit an all-time high of 94 percent name recognition in the United States. If there’s one thing that we can’t underestimate, it is the value of the Aflac brand,” said Amos, noting the number is higher, at 97 percent, in Japan.
A couple of more duck commercials are on the way. Aflac previewed them Monday, one that will debut on the NBC program, “The Voice,” in two weeks. One scene shows the tool-challenged duck getting into trouble with a nail gun, shooting out a fluorescent light overhead. The other, to air this summer, puts the duck in a yoga studio, stretching its wings and legs before snoozing on the floor in the middle of a class.
Just as he did in last week’s first-quarter earnings release, Amos said despite all of the positive momentum working in his company’s favor, there will be challenging “headwinds” this year.
“Those include a difficult low interest rate environment in Japan, sizeable expenditures in both the U.S. and Japan to enhance our operating infrastructure, and an increase in Japan’s consumption tax, rising from 5 percent to 8 percent, starting last month,” said the CEO, who sees those headwinds diminishing “significantly” in 2015.
After the annual meeting, Amos said the contract Aflac signed last year with Japan Post to sell its insurance products should be a solid distribution channel for years to come, keeping earnings flowing. Japan Post is the world’s largest insurance company in terms of assets, he said.
For the U.S., sales have been slower than the company would like, he said, with uncertainty in the marketplace from the national health-care system rollout part of the problem.
“But don’t lose a point that happened in the first quarter,” he said. “We don’t write unprofitable business. Note that our (U.S.) earnings were at an all-time high, up 7.9 percent.”
Amos said his company is accustomed to doing business in a country where national health care is the norm. That’s the case in Japan, where a quarter of the population has bought an Aflac insurance policy. That can be the case in the U.S. as well, he said.
“Although more competition and the delays that we’ve seen in implementation of the Affordable Care Act can represent challenges, I believe that, ultimately, national health care in the United States actually presents opportunity,” he said.