(Updates in fourth paragraph with impairment charge on hybrid
securities.)
DOW JONES NEWSWIRES
Aflac Inc.'s (AFL) second-quarter profit fell 35% as the
supplemental insurer reported large investment losses.
Meanwhile, the company backed its 2009 outlook for its Japanese
operations, but said it doesn't expect to post sales growth this
year in its U.S. division.
The company also announced that it plans to acquire Continental
American Insurance Co., based in South Carolina, for $100
million.
Analysts have been concerned about Aflac's concentration in
perpetual debentures, which are hybrid securities that combine
elements of equity and debt, largely issued by European banks.
Aflac said it realized $93 million in impairment losses on hybrid
securities of two issuers. The company said it wouldn't record any
impairment charge under statutory accounting, which is watched by
insurance regulators, because it believes the hybrid issuers will
continue to make payments.
The company reported second-quarter earnings of $314 million, or
67 cents a share, down from $483 million, or $1 a share, a year
earlier. The latest results included investment losses of 53 cents
a share.
Operating earnings rose to $1.20 a share from $1.01 a year
earlier. Aflac said in April it expected operating earnings of
$1.11 to $1.14 a share.
Revenue fell 0.5% to $4.31 billion. Analysts polled by Thomson
Reuters expected revenue of $4.68 billion.
Premium income in yen grew 3.1% in the company's large Japanese
operations. Reflecting the stronger yen, premium income in dollars
increased 11% to $2.9 billion.
Aflac U.S. posted a 2.8% increase in total premium income to
$1.1 billion. Total revenue in the U.S. grew by 2.7% to $1.2
billion.
The company also reiterated that it expects 2009 sales in Japan
to be flat to 5% higher. However, the company now says it doesn't
expect Aflac U.S. to generate sales growth in 2009. The company
previously said it expected Aflac U.S. sales to be flat to up 5%
for the year.
Aflac said its objective for 2009 remains an increase of 13% to
15% in operating earnings per diluted share, excluding the impact
of foreign currency. An increase of 13% in operating earnings per
diluted share would equal $4.51 in 2009, assuming the same average
exchange rate as last year.
The company expects third-quarter operating earnings of $1.19 to
$1.22 a share. Analysts expect $1.16 a share.
Shares closed Wednesday at $35.45 and were unchanged in recent
after-hours activity.
-By Jennifer Hoyt Cummings, Dow Jones Newswires; 212-416-2474;
jennifer.cummings@dowjones.com