Ditching risky investments puts pressure on Aflac's stock | Columbus Ledger-Enquirer

Dumping risky investments from its portfolio has proven draining for Aflac’s stock price over the last few weeks, with shares off nearly 25 percent from their March 1 high of $59.54.

They closed down 61 cents per share at $44.87 Wednesday. Dan Amos, chairman and chief executive officer of the Columbus-based supplemental insurer, said in an interview this week that a recent “analyst day” gathering at which he noted the firm’s de-risking efforts could hinder earnings growth sharply in 2012 appears to have contributed to the decline.

Though Aflac has not put out official guidance for next year, the CEO remarked to the stock market analysts that earnings growth over 2011 could range from 0 percent to 5 percent. That’s down from an 8 percent to 12 percent range this year.

“I went through the process that, since the financial crisis, how much we had de-risked already, but wanted to accelerate it this year and move on to something else,” Amos said.

The point, he said, was to let the market experts know the company would continue to shed dicey investments, but still be able to increase its dividend and earnings per share in 2012. The company’s annual dividend has gone up 28 straight years, with Amos expecting it do so again this year.

“The number we came up with is that we could do everything we wanted and be in the 0 to 5 number, not suggesting we’d be at 0, not even suggesting we would be at 5,” he said. “But the worst case scenario would be a zero.”

UBS Investment Research analyst Andrew Kligerman issued a report following Amos’ comments saying his “takeaways disappoint.” He pointed to the de-risking and a slowing of business in Japan next year as headwinds for the company’s balance sheet.

FBR Capital Markets analyst Randy Binner, in a report noted by online business site Market Watch, said he believed the informal forecast was possibly “overly conservative,” but that Aflac’s shares will track its earnings growth or decline. “As such, we would expect shares to adjust to the lower EPS outlook,” he said.

Aflac shares jumped more than $1 a share to $57 after the firm issued its first-quarter financial report April 27. The shares held their ground until the analyst gathering more than three weeks later and have been slipping since then.

In its first-quarter data, Aflac reported a realized investment loss of $376 million, most of that connected to sales of stakes in three Greek financial institutions -- Alpha Bank, National Bank of Greece and EFG Eurobank Ergasias.

“It’s one of those things that they wanted us to do it, but when we told them what it cost to do it, they weren’t happy with it,” Amos said of the Wall Street people.

“Since then financial stocks have all gotten hit,” he added. “I noticed that the banks had gotten hit these last five weeks, and we drifted a little lower with it and maybe even a little faster than most.”

But it’s not that the wheels have fallen off the Fortune 500 company that has ridden its duck advertising campaign to dizzying financial and pop-culture heights.

Amos said Aflac still expects to meet its 2011 guidance of increasing earnings at least 8 percent. That would be in the neighborhood of $6.21 per share, according to current Thomson Reuters consensus estimates by 21 market analysts who follow the company headquartered on Wynnton Road.

Under the worst-case scenario offered under the 2012 projection, Aflac would still bring home $6.21 per share or even higher if it reaches 5 percent growth in the range Amos suggested recently.

As for making it 30 straight hikes in the annual dividend next year, Amos said he couldn’t really discuss that at this point. But he then interjected, “We’ve had an increase every year since I’ve been CEO and I do not expect that to stop.”