After nearly two weeks of watching its stock price battered on the New York Stock Exchange, Aflac executives went on the offensive Monday.
The Columbus-based supplemental insurance company released fourth quarter and 2008 year-end earnings. What the reports showed was Aflac made $1.3 billion last year despite racking up $655 million in investment losses.
Potential problems with a portion of the company’s more than $68 billion investment portfolio started a run that has eaten away about 50 percent of the stock’s value in the last month. The real trouble started Jan. 22 when a Morgan Stanley financial analyst reported that more than $8 billion of the firm’s investments in European bank securities could be at risk if the banks were taken over by their governments. The stock fell 37 percent, or more than $13 per share, that day alone.
Aflac Senior Vice President for Investor Relations Ken Janke Jr. on Monday said, despite those investment concerns, the earnings release focus should be on one key number.
“The most important thing for your readers to understand is we didn’t lose money,” Janke said. “We made $1.3 billion for the year after incurring what I would consider unusually high investment losses for a company like Aflac.”
The earnings were released after the market closed Monday. Aflac’s stock closed at $23.03 per share, down 18 cents per share. The stock price was up more than 7 percent about 5 p.m. in afterhours trading.
Aflac executives, led by Chairman and Chief Executive Officer Dan Amos, will be talking with financial analysts over the next three days. It starts at 9 a.m. Tuesday morning with a conference call which can be heard on the Aflac Website, www.aflac.com. Amos will hold a second meeting Tuesday night in New York, that can also be heard on the Website.
“We have never done that before,” Janke said of making the second meeting available to the general public. “These are extraordinary times and we want to be responsive to what our owners and potential owners want to know.”
The first call will deal with the company’s investments, Janke said. The second will be more general.
“Although 2008 was marked by realized investment losses that were unusually high by Aflac standards, we believe our investment philosophy of matching our long-duration, yen-denominated liabilities with securities of comparable characteristics is the most prudent approach for us to take,” Amos said in a release. “That approach has served us very well in the past and we believe it will be effective in the future. We will also retain our conservative approach to managing our investment portfolio."
The highlights from the fourth quarter and 2008 year-end earnings release are:
• In the fourth quarter, total revenues were $4.3 billion, up 6 percent from the same period a year ago. The increase was in part due to the strengthening of the yen to the dollar.
• Quarterly net earnings were $197 million, or 42 cents per diluted share, compared with $382 million, or 78 cents per share, a year ago.
• For the year, total revenues were $16.6 billion, an increase of 7.5 percent over 2007.
• Yearly net earnings were $1.3 billion, or $2.62 per diluted share, compared with $1.6 billion, or $3.31 per share, in 2007. The net earnings decline was due to investment losses of $655 million.
Amos said in a news release he was pleased with the financial results.
The company is forecasting at least a $2 billion profit in 2009.
“It certainly proved to be a more challenging year than we anticipated due to continued economic deterioration,” Amos said in the statement. “Even though we did not meet our annual sales objectives for Aflac Japan or Aflac U.S. in 2008, we continued to build on the strong foundations of our insurance operations."
Amos cited accomplishments in Japan that included selling policies through a bank and the Japan Post Network Co. In the U.S., Aflac produced steady growth in new payroll accounts as well as the addition of new sales associates.
Aflac announced in October it will pay a quarterly dividend of 28 cents per share. That is a 16.7-percent increase over last year’s dividend. Janke said the company expects no change in the previous dividend announcement.