Monday morning at the Columbus Museum, Aflac Inc., Chairman and Chief Executive Officer Dan Amos decided to answer the questions before the nearly 250 shareholders could ask them.
At the annual meeting, Amos spent about half of his 30 minute address talking about Aflac’s stock price, which is down about 50 percent from a year ago. He also spent considerable time talking about “perpetual securities,” the investment instruments that helped to drive the price down dramatically since Jan. 22, when the stock fell nearly 37 percent in one day.
“My challenge is to answer all the questions before they are asked,” Amos said after the meeting.
The 57-year-old CEO who has been at the company’s helm for nearly two decades, met that challenge head on.
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“My guess is that your first question is -- what are perpetual, or so-called hybrid securities?” Amos said. “These financial instruments have characteristics of both stocks and bonds, although we consider them to be more like bonds.”
Amos then went on to explain them in detail.
“I guess your next question is -- why did we buy the perpetual securities?” Amos said. “...The perpetual securities we purchased from the early ‘90s through 2005 provided us with long-duration securities that we needed to support our policy liabilities.”
He said that the investment premise for the hybrid products bought from European banks has been vindicated in some ways.
“Many governments have taken extraordinary measures in the current financial crisis to ensure that these large banking institutions continue to operate effectively,” Amos said. “The governments of Europe and Great Britain understand these banks underpin the economies of their respective countries. In that regard, we believe that governments and banks are working to restore the capital markets to normalcy as soon as possible.”
Other than the questions about the investment portfolio, Amos also tackled questions about the dividends. As many companies have been cutting back, or even eliminating, dividend payments to shareholders, Aflac continues to pay a healthy dividend. It plans to pay shareholders a quarterly dividend of 28 cents per share each this year.
“There is no doubt that in recent months, many companies have come under enormous pressure from many institutional investors to cut dividends out of a desire to be more conservative,” Amos said. “But I want you to know that your Board of Directors absolutely understands that cutting dividends would have an enormous impact on tens of thousands of individual investors.”
George Nader, a West Point, Ga., businessman who has been investing in Aflac for more than 30 years, could not agree more.
“It is one of the few companies I know of that keeps increasing the dividend,” Nader said. “That is very important to me.”
Amos said he was confident Aflac would get through the turbulent economic times, but it would not be easy.
“The reality is that despite volatility in the financial markets, we have maintained our focus on controlling the things we have the power to control,” Amos said. “We can and we will control our efforts to build our business and taking care of our customers, employees, sales associates and, most importantly, our shareholders.”