Aflac, Synovus and Global Payments — a new company formed by the merger of Global Payments and TSYS — all announced their third-quarter financial results in the past few weeks. How did the Columbus-affiliated companies fare?
It’s been a busy few months. TSYS completed its merger with Global Payments. Japan Post’s improper sales cases might affect Aflac’s profitability.
Here’s what you need to know.
Aflac Incorporated, a Fortune 500 company and insurer based in Columbus, reported a Q3 profit of $777 million, down from net earnings of $845 million over the same period last year.
Some key points include:
▪ Total revenue dropped slightly from roughly $5.6 billion in Q3 2018 to $5.5 billion in Q3 2019.
▪ For the first nine months of the year, total revenues were up. Aflac reported total revenues of $16.7 billion in 2019, compared to $16.6 billion in 2018.
▪ Total investments and cash through Sept. 30 were $139.5 billion, compared to $124.2 billion over the same period in 2018.
Aflac Japan, the company’s largest earnings contributor, generated financial results above expectations for the quarter and the year so far, said Aflac’s Chairman and Chief Executive Officer Daniel P. Amos.
“Sales of protection-type first sector and third sector products were down in the first nine months of the year, reflecting reduced sales of our cancer insurance through Japan Post and following a strong 2018 with the launch of our revised cancer insurance product. We continue to expect full-year Aflac Japan third sector and first sector protection sales to be down in the mid-teens, with earned premium growth in the range of 1% to 2%,” Amos said in a statement.
Sales results for the company’s U.S. operations were less than expected for the quarter, but production tends to be skewed towards Q4, Amos said.
“We are pleased with the financial performance of Aflac U.S. in the quarter, which is significant because these results also reflect ongoing investment in our platform, distribution and customer experience,” he said. “We expect full-year Aflac U.S. sales results to be flat to down slightly, with earned premium growth in the 2% range.”
A potential risk factor for the company moving forward is the ongoing internal investigation into Japan Post Holdings’ improper sales practices. The Tokyo-based company’s biggest shareholder is the Japanese government, and it sells Aflac insurance policies in its post offices throughout Japan. Aflac has done business with Japan Post since 2008.
Japan Post Insurance said in August that around 183,000 policies that were sold from 2013 to 2018 could have been disadvantageous to customers, and sister company Japan Post Bank admitted to improperly selling around 19,500 investment trust products to senior citizens. Insurance Business Asia reported in October that the company discovered 6,327 cases that violated laws or the company’s internal rules.
Japan Post’s investigation is ongoing, according to the Aflac’s quarterly filing with the Securities and Exchange Commission.
In July, Aflac announced it was voluntarily reviewing the sales of cancer products through Japan Post and its sister companies. Of the 1.2 million policies with new contracts dated from April 1, 2014 to August 1, 2019, the company identified a number of lapsed and reissued policies — less than 1% (.006%) — where “coverage of the old and new policies were the same and did not align with customer intent,” Aflac reported to the Security and Exchange Commission.
“The sale of Aflac Japan cancer policies has continued through (Japan Post Co.) and (Japan Post Insurance.) However, in connection with these developments, the Company has observed a material decrease of sales in those channels and anticipates depressed sales for the duration of 2019 while the (Japan Post Insurance) investigation continues and the JapanPost Group continues to take remedial measures,” according to Aflac’s filing.
Want to know more about Aflac’s Q3 earnings report? Read here.
The merger between Atlanta’s Global Payments and Columbus’ TSYS finalized in September — the biggest news for both companies this quarter. The new company retained the Global Payments name and has dual headquarters in Columbus and Atlanta.
“We are already making significant progress on the integration of our two leading pure play payments businesses,” said Cameron Bready, Global Payments’ president and chief operating officer.
Data from this report includes 2018 data from the old Global Payments company only. The 2019 data only includes TSYS-affiliated financials from Sept. 18, the date the merger closed, until Sept. 30, Global Payments officials said.
Global Payments reported a net income of nearly $106 million in Q3 2019, down from nearly $186 million in net income reported in Q3 2018.
Some other key points include:
▪ Revenues were up. Global Payments reported revenues of roughly $1.11 billion in Q3 2019, up from nearly $858 million in Q3 2018.
▪ Revenues also have been up for the first nine months of the year. Global Payments reported $2.92 billion in revenue as of Sept. 30, as opposed to roughly $2.49 billion over the same period in 2018.
▪ Adjusted earnings per share grew 18.1% in Q3 2019 to $1.70, compared to $1.44 in Q3 2018.
▪ The company also announced new partnerships with Citi and Desjardins, Canada’s leading financial cooperative group.
“We are pleased with our outstanding financial results in the third quarter,” Paul Todd, senior executive Vice President and chief financial officer said in a statement. “We now expect adjusted net revenue plus network fees for 2019 to range from $5.60 billion to $5.63 billion, reflecting growth of 41% to 42% over 2018. We are also increasing our 2019 outlook for adjusted earnings per share to a range of $6.12 to $6.20, reflecting growth of 18% to 20% over 2018.”
In outlining future risks Global Payments could face, the company said it plans to incur substantial costs related to the merger and that combining with TSYS may prove more difficult than anticipated.
“It is possible that the integration process could result in the loss of key employees, the disruption of our ongoing business or inconsistencies in standards, controls, procedures and policies that adversely affect our ability to maintain relationships with clients, customers, commercial counterparties and employees or to achieve the anticipated benefits and cost savings of the merger,” the company said in its filing with the Securities and Exchange Commission.
Last month, company officials said Global Payments aims to save approximately $300 million over the next three years by combining business operations, eliminating duplicate corporate and operational structures and executing other changes. The merger could bring new operations to Columbus but could result in some employees losing their jobs.
“There will be some jobs within the combined company that will be eliminated,” Troy Woods, TSYS’ former president and CEO who now serves as chairman of the board for Global Payments, told the Ledger last month. “It’s way too early to handicap the details of how many and where they will be.”
“It would be a mistake to think that ... any and all affected team members will be TSYS Columbus, Georgia, affected team members. ...It just depends on a lot of circumstances.”
Want to read more about Global Payments’ Q3 report? Read below.
Synovus, a financial services company based in Columbus, reported Q3 2019 profit of approximately $136 million, an increase from a reported net income of $109 million reported a year ago.
Some points of interest from the company’s report include:
▪ Total loans ended the quarter at $36.42 billion, up $279.3 million or 3.1% annualized from the previous quarter.
▪ Total deposits ended the quarter at $37.43 billion, down $533.7 million or 5.6% annualized from Q2 2019.
▪ Total revenues were $491.7 million in the third quarter, up $3.8 million from the previous quarter.
“Our team continues to execute on our strategic priorities, with core transaction deposit growth of $525.5 million,strong funded loan production of $2.6 billion, and solid fee income growth led by our mortgage, wealth, and capital markets teams,” said Kessel D. Stelling, Synovus chairman and CEO. “Credit quality remains strong, and we continue to focus on efficiency and expense management, the crisp execution of our (FCB Financial Holdings) acquisition, talent and technology, and growth in our core business and specialty lines.”
Want to know more about Synovus’ earnings? Read here?