It was a good news for Aflac investors today, as the Columbus-based supplemental insurance company released third-quarter earnings after the close of trading on the New York Stock Exchange.
Operating earnings in the third quarter were $831 million, or $1.77 per share. That far outpaced the $1.66 per share that Wall Street analysts were expecting.
Net earnings for the first three quarters of the year was $2.3 billion, or $4.87 per diluted share, compared with $1.4 billion, or $2.98 per diluted share, for the first nine months of 2011.
The quarterly success could be traced to a couple of factors.
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First, Aflac revised its tax rate for the year and also underwent a "tax exam" that looked at what the company paid in 2008 and 2009. That produced a $47 million net gain, which amounted to 10 cents per share. Even without the unexpected gain, the company would have exceeded analysts' expectations.
The company also produced record sales growth in Japan, where it does more than 80 percent of its business. The Japanese success was fueled by a hybrid life-medical product that is sold through banks.
"We remain pleased with Aflac's financial performance for the first nine months of 2012," Aflac Chairman and Chief Executive Officer Dan Amos said in statement. "Aflac Japan had another impressive quarter, continuing tremendous sales momentum, especially through the bank channel. Aflac Japan's third quarter production came in much stronger than we expected and set an all-time record for new annualized premium sales for the fifth quarter in a row."
The good news for local investors is that Aflac announced a dividend increase for the 30th consecutive year. The board of directors approved an increase in the cash dividend of 35 cents per share, payable Dec. 3 to shareholders of record at the close of business Nov. 14. The dividend increased by 2 cents, or a 6.1 percent hike.
In Japan over the first nine months of the year, premium income increased 9.4 percent and net investment income rose 6.4 percent, the company reported. Total revenues were up 9 percent and pretax operating earnings grew 1.4 percent.
The big number was premium income in dollars rose 9.6 percent to $4.4 billion in the third quarter. For the first nine months of the year, new annualized premium sales were up 43.4 percent or about $2 billion.
The Aflac U.S. numbers faced a tough comparison to the Japan growth. Total U.S. revenues rose 5.2 percent to $1.4 billion in the third quarter. Premium income increased 5.2 percent to $1.3 billion, and net investment income was up 3.5 percent to $153 million, according to an Aflac release.
Amos was pleased with the U.S. numbers.
"From a financial perspective, Aflac U.S. continues to perform very well this year," the CEO said. "While new sales growth has been constrained, our top-line growth has been consistently strong throughout the year, primarily reflecting an improvement in persistency with each quarter. Aflac U.S. has experienced top- and bottom-line growth that's been better than expected. However, sales remain challenging."
Robin Wilkey, Aflac senior vice president of investor and rating agency relations, called it a "great quarter" but explained the challenges in the U.S. market in simple terms. She stated that policy retention was strong, even if new sales were slow.
"What we are seeing in this economy is people are not changing jobs nearly as much," Wilkey said. "That means they tend to keep their benefits more."
She pointed out that 90 percent of Aflac's U.S. business was with small companies, employing 100 or fewer people.
"One of the reasons for the new sales challenges is the businesses are not hiring as much and the optimism for the future is not good," she said.
In his forecast for the remainder of 2012, Amos said U.S. sales will likely finish flat compared to last year.