Despite falling short of its second-quarter earnings projections, Columbus-based supplemental insurance company Aflac has increased its earning projections for the year as a whole.
In a report released after the close of the New York Stock Exchange Tuesday, Aflac said it posted net earnings of $573 million, or $1.32 per diluted share, compared with $810 million, or $1.78 per share, a year ago. That’s a decline of 29.3 percent year over year.
Aflac’s revenue came in at $5.3 billion, down 9.4 percent from the same period a year ago when the company reported $5.8 billion in revenue.
Previously, Aflac has stated that operating earnings per diluted share would be up between 2 and 7 percent this year. That has been revised higher to between 4 and 7 percent, said Robin Wilkey, Aflac’s senior vice president of Investor and Rating Agency Relations. Aflac missed the industry analysts’ operating earnings projections by 2 cent per share.
“You are looking at a quarter, but it is better to be off 2 cents for the quarter, but to know you are going to be better than expected for the year,” Wilkey said. “It would have been worse to be better for the quarter and to say we are going to miss it for the year.”
Chairman and Chief Executive Officer Dan Amos said he is pleased with the direction the company is headed in halfway through the year.
“With the first half of the year complete, I am pleased with the company’s results,” Amos said in a statement. “Those results, combined with our outlook for the remainder of 2015, well position us for another year of solid financial performance. These results have also given us the confidence to upwardly revise our target for 2015 operating earnings per diluted share.
“If the yen averages 120 to 125 to the dollar for the third quarter, we would expect earnings in the third quarter to be approximately $1.40 to $1.53 per diluted share. Using that same exchange rate assumption for the remainder of 2015, we would expect full-year reported operating earnings to be about $5.88 to $6.17 per diluted share. As always, we are working very hard to achieve our earnings-per-share objective while also delivering on our promise to policyholders.”
Because more than 70 percent of Aflac’s business is done in Japan, where the currency is the yen, the impact on operating earnings from translating yen into dollars has always been a little tricky.
Aflac Japan’s yen-denominated income statement is translated from yen into dollars using an average exchange rate for the reporting period, and the balance sheet is translated using the exchange rate at the end of the period, according to the company.
However, except for certain transactions such as profit repatriation and the Aflac Japan dollar investment program, the company does not actually convert yen into dollars. As a result, Aflac views foreign currency translation as a financial reporting issue rather than an economic event for the company or its shareholders, it has stated over the years.
Amos said he was pleased that U.S. earnings rose 3.1 percent compared to being flat in the first quarter.
“I remain very encouraged that the changes we made in our management infrastructure last year are establishing a strong foundation for bigger and better opportunities for long-term sales growth,” Amos said. “We continue to receive outstanding feedback from policyholders and sales agents alike on ‘One Day Pay,’ which is our industry-leading claims practice that allows us to process, approve and pay eligible claims in just one day.”
While Aflac’s U.S. sales were higher, the sales of medical and cancer products in Japan soared. The company reported a 25.2 percent quarterly increase in sales of medical and cancer products in Japan.
“That is a phenomenal increase following three other phenomenal quarters,” Wilkey said. “We believe that those sales of medical and cancer products for the full year will be up 7 to 10 percent. That includes facing a very difficult comparison in the fourth quarter.”
In trading Tuesday, Aflac’s stock closed at $62.33 per share, up 80 cents or 1.3 percent.