After worries over its holdings of bank securities drove its share price down to its lowest level in nearly a decade last month, insurer Aflac Inc. (AFL) scheduled an additional conference call Tuesday to argue that the concern is overblown.

"If every single bank [whose securities] we own gets nationalized," Aflac could weather the potential losses without needing to raise additional capital, Chief Executive Daniel P. Amos said during Aflac's call Tuesday. "One consistent pattern in those nationalizations is securities with equity characteristics like shareholder rights are the securities that have not been assigned value by the nationalizing government," Amos said.

Aflac's holdings of the type of securities that include shareholder rights would result in a potential loss exposure of $100 million, Amos said. Expanding the definition of shareholder rights more broadly would bring that potential exposure to only $400 million in pre-tax losses, Amos said.

Even in that worst-case scenario, Aflac doesn't see a need to raise capital, Amos said, even if the company were to be downgraded because of the losses.

The conference call centered on the discussion of the securities rather than on the company's fourth-quarter earnings, and helped Aflac's share price hang on to its pre-market rise. Shares of Aflac recently traded up 6.4% to $25.20.

After the market close Monday, Aflac reported net income of $197 million, or 42 cents a share, down from $382 million, or 78 cents a share, a year earlier, on investment losses of $262 million, or 56 cents a share, compared with a loss of $1 million from a year earlier.

About $117 million of the loss was from the company's investment in three Icelandic banks. The company also reported losses of $125 million related to certain collateralized debt obligations.

Operating earnings, which exclude investment gains and losses, rose to 98 cents a share from 78 cents, just under the consensus estimate of $1.00 a share.

During the sometimes-contentious conference call, Amos and other Aflac executives went into detail about the $9.1 billion in perpetual debentures the insurer holds in its $68 billion investment portfolio, largely concentrated in European Union banks. The so-called hybrid securities have elements of both equity and debt. If the securities were to be considered equity similar to preferred shares, they might be more likely to be wiped out in a government takeover.

Amos and Chief Financial Officer Kriss Cloninger said that 72% of Aflac's bank hybrid holdings were of upper tier two securities, which were treated more like debt and were senior to tier one in payment rank.

In the nationalizations of U.K lender Northern Rock PLC, Anglo Irish Bank Corp. and Bradford and Bingley PLC, the banks continued to make payments on their perpetual debentures, Amos said. However, one analyst pointed out that at least one bank has pushed out the maturity date on some debt.

Morgan Stanley analyst Nigel Dally, whose research note first raised the issue, didn't raise the issue during the conference call.

Both Standard & Poor's and A. M. Best Co. have downgraded some of Aflac's ratings in the last few weeks, citing Aflac's concentration of investments in the securities. S&P said it might downgrade Aflac another notch if losses cut the insurer's statutory capital by $400 million, but Amos said that, even if the insurer were downgraded to single-A, it wouldn't need to raise capital.

Some analysts questioned the current fair value of $8 billion Aflac put on its portfolio of hybrid securities, which values the securities at 88% of their $9.1 billion cost, but Amos said press reports "exaggerated" the degree to which hybrid securities were discounted in the market, and that he had seen prices rise in recent weeks in some institutional trades.

-By Lavonne Kuykendall, Dow Jones Newswires; 312-750-4141; lavonne.kuykendall@dowjones.com

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