Aflac Inc.’s (AFL) first quarter earnings per share of $1.41 were ahead of the Zacks Consensus Estimate of $1.32. This compared favorably with earnings of $1.22 in the year-ago quarter.
Earnings in the reported quarter excluded after-tax realized investment losses of $30 million or 6 cents per share, compared to losses of $10 million or $0.02 per share that were totally offset by a gain of $10 million or $0.02 per share from the extinguishment of debt in the prior-year quarter. Earnings for the reported quarter benefited from top-line growth and a stronger yen/dollar exchange rate that helped increase earnings per share by 5 cents.
Including one-time investment losses, GAAP net income for the reported quarter came in at $636 million or $1.35 per share, compared to $569 million or $1.22 in the year-ago period. Total acquisition and operating expenses increased 8.6% year-over-year to $1.23 billion, while benefits and claims were up 1.6% year-over-year to about $2.86 billion.
Total revenue for the reported quarter increased 5.1% year-over-year to $5.07 billion. Total revenue benefited from a stronger yen against the dollar. While Aflac Japan contributed 74.5% to total revenue, Aflac U.S. contributed the remaining 25.5%.
Reflecting the stronger average yen, premium income from the Japanese operations in dollars was up 6.5% year-over-year to $3.2 billion in the reported quarter. Premiums from the U.S. operations were up 3.5% year-over-year to $1.1 billion.
Net investment income from the Japanese operations during the reported quarter increased 5.8% to $593 million primarily due to a stronger yen/dollar exchange rate. Net investment income from the U.S. operation was up 5.6% year-over-year to $132 million.
Total investments and cash as of Mar 31, 2010 were $74 billion, compared to $61.7 billion at Mar 31, 2009. The increase in total investments and cash primarily resulted from improvement in the fair values of Aflac’s investments since the end of 2009. As of Mar 31, 2010, Aflac’s risk-based capital ratio exceeded 525%, compared with 479% at the end of 2009 due to declines in realized investment losses.
The annualized return on average shareholders equity for the reported quarter was 29.2%. On an operating basis (excluding realized investment losses and the impact of ASC 815 on net earnings, and unrealized investment gains/losses in shareholders’ equity) the return on average shareholders equity came in at 28.9%.
Outlook 2010
Concurrent with its first quarter’s result release, Aflac reiterated its outlook for 2010 and also provided second quarter earnings projections. The company has set targets of flat to a 5% increase in sales in both its U.S. and Japanese operations.
The company expects operating earnings per share to increase by 9%-12% in 2010, in the range of $5.29-$5.43 per share, excluding the impact of the yen. If the yen remains stronger and averages around 90-95 to a dollar for the full year, the company anticipates earnings in the range of $5.24 $5.56 per share.
For second quarter 2010, Aflac expects operating earnings in the range of $1.33-$1.38 per share, using the same exchange rate assumption.
Dividend Update
The board of Aflac has declared the second quarter cash dividend of 28 cents per share for its common stock shareholders. This will be paid on Jun 1, 2010 to shareholders of record as on May 19, 2010.
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