Columbus-based supplemental insurance company Aflac reported first-quarter earnings on Tuesday that met the expectations of industry analysts.
Aflac reported net earnings of $663 million or $1.51 per diluted share for the quarter. That compares to net earnings of $732 million or $1.60 per share for the first quarter of 2014.The company’s revenue fell 7.3 percent compared with the first quarter of 2014. Total revenues for the first quarter was $5.2 billion, compared to $5.6 billion in the same period a year ago.
Aflac has improved its capital position, Chairman and Chief Executive Officer Dan Amos said in the earnings release. It is being done by bringing about 200 million yen back to the U.S. this year. Aflac does about 75 percent of its business in Japan, where the yen is the currency. Most of that business is done in yen.
The 200 million yen will translate into about $1.68 billion.
“We remain committed to maintaining strong capital ratios on behalf of our policyholders,” Amos said. “We improved our capital position for 2015 by entering into a new reinsurance agreement on March 31, 2015, which released approximately 130 billion (yen) of Aflac Japan’s regulatory reserves.”
This reinforces the company’s plan to repurchase about $1.3 billion of our common stock in 2015, Amos said.
Aflac Japan’s growth rates in dollar terms for the first quarter were suppressed as a result of the significantly weaker yen/dollar exchange rate, the company stated.
“We have been saying for 15 years or longer that we are not in control of the yen,” said Robin Wilkey, Aflac’s senior vice president of Investor and Rating Agency Relations. “We take payment in yen and payout in yen. And our profit is in yen.”
The average yen/dollar exchange rate in the first quarter of 2015 was 119.16, or 13.8 percent weaker than the average rate of 102.70 in the first quarter of 2014, according to the earnings release.
The good news for Aflac’s U.S. operation is premium income increased 3.5 percent to $1.3 billion in the first quarter. Net investment income was also up 3.3 percent to $166 million and total revenues increased 3.6 percent to $1.5 billion, according to the earnings release.
The U.S. numbers come as the company is making changes to its distribution system, said Amos.
“We made significant changes to our distribution system in the U.S. market over the last several months, and we still believe these changes will have a beneficial impact on our organization,” Amos said. “As such, we remain focused on increasing Aflac U.S. sales 3 percent to 7 percent for the year. As always, we will work toward expanding our distribution capabilities to access employers of all sizes by seeking opportunities to leverage our brand strength and attractive product portfolio in the evolving health care environment.”
Aflac has announced a second-quarter cash dividend 39 cents per share is payable on June 1 to shareholders of record at the close of business on May 20, according to the earnings release.