-----BEGIN PRIVACY-ENHANCED MESSAGE-----
Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
Originator-Key-Asymmetric:
MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen
TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB
MIC-Info: RSA-MD5,RSA,
Tt8ZOzT2AaI48r2ul4OAOcRdEZm2SkQZNGgQThvxx/hn/5nlE4gG+NeJ82Okj9EI
GH1GF4eiMYX6tgecqxVf9Q==
UNITED STATES FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (Date of earliest event reported) January 31, 2005
AFLAC Incorporated |
||
(Exact name of Registrant as specified in its charter) |
GEORGIA |
001-07434 |
58-1167100 |
(State or other jurisdiction |
(Commission |
(IRS Employer Identification No.) |
of incorporation) |
File Number) |
|
1932 Wynnton Road, Columbus, Georgia |
31999 |
|
(Address of principal executive offices) |
(Zip Code) |
Registrant's telephone number, including area code: 706.323.3431
(Former name or former address, if changed since last report) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ] |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
[ ] |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
[ ] |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
[ ] |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Aflac Incorporated is providing its press release dated January 31, 2005 in which it reported its fourth quarter results and also its Fourth Quarter Report to Shareholders herein as Exhibits 99.1 and 99.2.
In accordance with General Instruction B.2 of Form 8-K, the information included or incorporated in this report (including Exhibits 99.1 and 99.2) shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 (the "Exchange Act"), nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as shall be set forth by specific reference in such filing.
(c) |
Exhibits. |
|
99.1 - |
Press release of Aflac Incorporated dated January 31, 2005 |
|
99.2 - |
Fourth Quarter Report to Shareholders 2004 |
|
1
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
AFLAC Incorporated |
||
/s/ Ralph A. Rogers |
January 31, 2005 |
|
(Ralph A. Rogers, Jr.) |
||
Senior Vice President, Financial Services |
||
Chief Accounting Officer |
||
2
EXHIBIT INDEX:
|
99.1 |
- |
Press release of Aflac Incorporated dated January 31, 2005 |
|
99.2 |
- |
Fourth Quarter Report to Shareholders 2004 |
3
EXHIBIT 99.1
AFLAC INCORPORATED ANNOUNCES FOURTH QUARTER RESULTS,
INCREASES QUARTERLY CASH DIVIDEND
COLUMBUS, Georgia - January 31, 2005 - Aflac Incorporated today reported its fourth quarter results.
Total revenues, which reflected a stronger average yen/dollar exchange rate, were $3.4 billion in the fourth quarter of 2004, or 21.1% higher than a year ago. Net earnings were $418 million, or $.81 per diluted share, compared with $73 million, or $.14 per diluted share, a year ago. Net earnings in the fourth quarter of 2004 included realized investment losses of $3 million, or $.01 per diluted share, compared with realized investment losses of $175 million, or $.34 per diluted share, in the fourth quarter of 2003. Net earnings in the fourth quarter also included a loss of $7 million, or $.02 per diluted share, as a result of the change in fair value of the interest rate component of the cross-currency swaps related to the company's senior notes as required by SFAS 133. In the fourth quarter of 2003, the impact from SFAS 133 reduced net earnings by $14 million, or $.02 per diluted share. Fourth quarter net earnings in 2004 also benefited by $128 million, or $.25 per diluted share, fro m a release of the valuation allowance for deferred tax assets resulting from passage of the American Jobs Creation Act of 2004.
We believe that an analysis of operating earnings, a non-GAAP financial measure, is vitally important to an understanding of Aflac's underlying profitability drivers. We define operating earnings as the profits we derive from our operations before realized investment gains and losses, the impact from SFAS 133, and nonrecurring items.
Management uses operating earnings to evaluate the financial performance of Aflac's insurance operations because realized gains and losses, the impact from SFAS 133, and nonrecurring items tend to be driven by general economic conditions and events, and therefore obscure the underlying fundamentals and trends in Aflac's insurance operations.
Operating earnings in the fourth quarter of 2004 were $300 million, compared with $262 million a year ago. Operating earnings per diluted share rose 18.0% to $.59, compared with $.50 per diluted share in the fourth quarter of 2003.
For the year, total revenues rose 16.0% to $13.3 billion in 2004. Net earnings were $1.3 billion, or $2.52 per diluted share, compared with $795 million, or $1.52 per diluted share, a year ago. Operating earnings were $1.2 billion, or $2.30 per diluted share, compared with $989 million, or $1.89 per diluted share, in 2003. Excluding the benefit of $.08 per share from the stronger yen, operating earnings per diluted share increased 17.5% for the year.
The board of directors increased the quarterly cash dividend 15.8% from $.095 to $.11 per share, effective with the first quarter of 2005. The first quarter dividend is payable on March 1, 2005, to shareholders of record at the close of business on February 18, 2005. This marks the 22nd consecutive year in which the cash dividend has been increased.
Commenting on the company's results, Chairman and Chief Executive Officer Daniel P. Amos stated: "We were pleased that Aflac Japan's total new annualized premium sales were better than our expectations for the quarter. In the fourth quarter, new sales increased 5.3% from a year ago to a record 33.4 billion yen, or $316 million. New sales in the quarter benefited from solid sales growth of the medical and ordinary life categories. Total new annualized premium sales were up 1.1% to 122.5 billion yen, or $1.1 billion for the full year. New sales growth in 2004 was held down by declines in Rider MAX sales and conversions in addition to lower sales through Dai-ichi Mutual Life. Excluding sales through Dai-ichi, sales from our traditional channels were up 9.3% in the fourth quarter and 4.0% for the year.
"We introduced two new versions of EVER in January 2005 in order to better segment the market and extend the growth of medical sales. We believe the added benefits of the new products will appeal to a broader group of consumers. We also believe that the continued expansion of our product line and sales force, combined with Aflac's leading market position, will enable us to produce a 5% to 10% increase in total new annualized premium sales in yen for 2005.
"Aflac U.S. produced total new annualized premium sales in the fourth quarter of $343 million, a .5% decrease from the fourth quarter of 2003. For the year, total new sales were up 5.1% to $1.2 billion. These results were below our expectations for both the quarter and for the year. We continue to believe our slower sales growth has resulted primarily from the significant changes we made to our sales management team in 2003 and at the start of 2004. While we believe the basics of our infrastructure are in place, we will continue to focus on providing resources and support to strengthen, train, and grow our sales force.
"We are convinced that the best approach to the vast U.S. market potential is to expand our distribution system and our product line. In that regard, we were encouraged that recruitment of new sales associates picked up in the fourth quarter. New agent recruitment rose 5.9% in the fourth quarter, which was the largest increase we have experienced since the fourth quarter of 2002. We have also restructured our training department and are intensifying our training efforts, which we hope will lead to improved agent retention and productivity. In the product area, we recently developed an innovative vision product that will be rolled out to the market in mid-2005. We believe it is unique to the marketplace, and we look for vision care to be a solid addition to our already strong product line. We are convinced we are taking the correct steps to re-ignite new sales growth. However, we believe new sales in the first quarter of 2005 will likely decline, due in part to difficult comparisons to 2004. As a result, we believe it will be the second quarter at the earliest before we see improved growth. As such, we have established a target of a 3% to 8% increase in new sales for 2005.
"Our view of the U.S. and Japanese markets has not changed, and we remain encouraged about the outlook for our business. We believe rising out-of-pocket expenses for consumers will drive a growing need for the products we sell. Furthermore, we believe our business model is sound, and that our many competitive strengths are intact.
"We are very pleased that our financial results kept pace with our expectations throughout 2004. And we are proud that we exceeded our primary financial objective of increasing operating earnings per diluted share 17% in 2004, excluding the impact of the yen. Our ability to achieve financial targets when new sales are soft reflects the underlying strength of our operations. Due to that strength, our goals for 2005 and 2006 remain unchanged. Our objective is to increase operating earnings per diluted share by 15% in 2005 and 2006 before currency translation."
Aflac is the number one provider of guaranteed-renewable insurance in the United States and Japan. Aflac's innovative products provide protection to more than 40 million people and go beyond traditional insurance by directly paying claimants with cash benefits. Aflac's products are primarily sold at worksites in the United States. In Japan, Aflac is the largest life insurer in terms of individual insurance policies in force. In January 2005, Aflac was included in Fortune magazine's list of "The 100 Best Companies to Work For in America" for the seventh consecutive year. Aflac has also been included in Forbes magazine's "Platinum 400 List of Best Big Companies in America" for five consecutive years and in Fortune magazine's listing of "America's Most Admired Companies" for four consecutive years. Aflac Incorporated is a Fortune 500 company listed on the New York Stock Exchange under the symbol AFL. To find out more about Aflac, visit aflac.com.
Aflac Incorporated will webcast its fourth quarter analyst presentation on the Investor Relations page of aflac.com at 7:10 p.m. (EST), Wednesday, February 2.
AFLAC INCORPORATED AND SUBSIDIARIES CONSOLIDATED SUMMARY OF EARNINGS
(UNAUDITED -- IN MILLIONS, EXCEPT FOR SHARE AND PER-SHARE AMOUNTS)
THREE MONTHS ENDED DECEMBER 31, |
2004 |
2003 |
% Change |
||||||||
Total revenues |
$ |
3,448 |
$ |
2,847 |
21.1 |
% |
|||||
Operating earnings |
300 |
262 |
14.8 |
||||||||
Reconciling items, net of tax: |
|||||||||||
Realized investment gains (losses) |
(3 |
) |
(175 |
) |
|||||||
Impact from SFAS 133 |
(7 |
) |
(14 |
) |
|||||||
Release of deferred tax asset valuation allowance |
128 |
- |
|||||||||
Net earnings |
418 |
73 |
475.1 |
||||||||
Operating earnings per share - diluted |
.59 |
.50 |
18.0 |
||||||||
Reconciling items, net of tax: |
|||||||||||
Realized investment gains (losses) |
(.01 |
) |
(.34 |
) |
|||||||
Impact from SFAS 133 |
(.02 |
) |
(.02 |
) |
|||||||
Release of deferred tax asset valuation allowance |
.25 |
- |
|||||||||
Net earnings per share - diluted |
.81 |
.14 |
478.6 |
||||||||
Net earnings per share - basic |
.83 |
.14 |
492.9 |
||||||||
Cash dividends paid per share |
.095 |
.08 |
18.8 |
||||||||
Shares used to compute earnings per share (000): |
|||||||||||
Basic |
504,495 |
511,239 |
(1.3 |
) |
|||||||
Diluted |
512,934 |
520,192 |
(1.4 |
) |
|||||||
TWELVE MONTHS ENDED DECEMBER 31, |
|||||||||||
Total revenues |
$ |
13,281 |
$ |
11,447 |
16.0 |
% |
|||||
Operating earnings |
1,186 |
989 |
19.9 |
||||||||
Reconciling items, net of tax: |
|||||||||||
Realized investment gains (losses) |
(5 |
) |
(191 |
) |
|||||||
Impact from SFAS 133 |
(13 |
) |
(3 |
) |
|||||||
Release of deferred tax asset valuation allowance |
128 |
- |
|||||||||
Japan pension obligation transfer |
3 |
- |
|||||||||
Net earnings |
1,299 |
795 |
63.3 |
||||||||
Operating earnings per share - diluted |
2.30 |
1.89 |
21.7 |
||||||||
Reconciling items, net of tax: |
|||||||||||
Realized investment gains (losses) |
(.01 |
) |
(.37 |
) |
|||||||
Impact from SFAS 133 |
(.03 |
) |
- |
||||||||
Release of deferred tax asset valuation allowance |
.25 |
- |
|||||||||
Japan pension obligation transfer |
.01 |
- |
|||||||||
Net earnings per share - diluted |
2.52 |
1.52 |
65.8 |
||||||||
Net earnings per share - basic |
2.56 |
1.55 |
65.2 |
||||||||
Cash dividends paid per share |
.38 |
.30 |
26.7 |
||||||||
Shares used to compute earnings per share (000): |
|||||||||||
Basic |
507,333 |
513,220 |
(1.1 |
) |
|||||||
Diluted |
516,421 |
522,138 |
(1.1 |
) |
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" to encourage companies to provide prospective information, so long as those informational statements are identified as forward-looking and are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those discussed. We desire to take advantage of these provisions. This document contains cautionary statements identifying important factors that could cause actual results to differ materially from those projected herein, and in any other statements made by company officials in oral discussions with the financial community and contained in documents filed with the Securities and Exchange Commission (SEC). Forward-looking statements are not based on historical information and relate to future operations, strategies, financial results or other developments. Furthermore, forward-looking information is subject to numerous assumptions, risks, and uncertainties. In particular, statements containing words such as "expect," "anticipate," "believe," "goal," "objective," "may," "should," "estimate," "intends," "projects," or similar words as well as specific projections of future results, generally qualify as forward-looking. Aflac undertakes no obligation to update such forward-looking statements.
We caution readers that the following factors, in addition to other factors mentioned from time to time in our reports filed with the SEC, could cause actual results to differ materially from those contemplated by the forward-looking statements: legislative and regulatory developments; assessments for insurance company insolvencies; competitive conditions in the United States and Japan; new product development; ability to attract and retain qualified sales associates; ability to repatriate profits from Japan; changes in U.S. and/or Japanese tax laws or accounting requirements; credit and other risks associated with Aflac's investment activities; significant changes in investment yield rates; fluctuations in foreign currency exchange rates; deviations in actual experience from pricing and reserving assumptions; level and outcome of litigation; downgrades in the company's credit rating; changes in rating agency policies or practices; subsidiary's ability to pay dividends to parent company; and general econo mic conditions in the United States and Japan.
Analyst and investor contact - Kenneth S. Janke Jr., 800.235.2667 - option 3, FAX: 706.324.6330, or kjanke@aflac.com
Media contact - Laura Kane, 706.596.3493, FAX: 706.320.2288, or lkane@aflac.com
EXHIBIT 99.2
Fourth
Quarter
Report
To
Shareholders
2004
Twelve Months Ended
December 31, 2004
HIGHLIGHTS
The fourth quarter concluded a year of record financial results for Aflac Incorporated. In every quarter of 2004, we were very pleased with the strong financial performance our operations produced. At the same time, however, we were disappointed with the rate of new sales growth in both Japan and the United States. Although new sales increased in each market for the year, we fell short of our sales growth targets. Yet despite weaker sales, we exceeded our primary financial objective of a 17% increase in operating earnings per diluted share for the year before the impact of currency translation.
Aflac's results were again helped by the stronger yen in relation to the dollar. Reflecting the stronger yen, total revenues were $3.4 billion in the fourth quarter of 2004, up 21.1% from $2.8 billion in 2003. Net earnings were $418 million, or $.81 per diluted share, compared with $73 million, or $.14 per diluted share, a year ago. Net earnings in the fourth quarter of 2004 included realized investment losses of $3 million, or $.01 per diluted share, compared with realized investment losses of $175 million, or $.34 per diluted share, in the fourth quarter of 2003. Net earnings in the fourth quarter also included a loss of $7 million, or $.02 per diluted share, as a result of the change in fair value of the interest rate component of the cross-currency swaps related to the company's senior notes as required by SFAS 133. In the fourth quarter of 2003, the impact from SFAS 133 reduced net earnings by $14 million, or $.02 per diluted share. Fourth-quarter net earnings in 2 004 also benefited by $128 million, or $.25 per diluted share, from a release of the valuation allowance for deferred tax assets resulting from passage of the American Jobs Creation Act of 2004.
We believe that an analysis of operating earnings, a non-GAAP financial measure, is vitally important to an understanding of Aflac's underlying profitability drivers. We define operating earnings as the profits we derive from our operations before realized investment gains and losses, the impact from SFAS 133, and nonrecurring items.
Management uses operating earnings to evaluate the financial performance of Aflac's insurance operations because realized gains and losses, the impact from SFAS 133, and nonrecurring items tend to be driven by general economic conditions and events, and therefore can obscure the underlying fundamentals and trends in Aflac's insurance operations. A reconciliation of operating to net earnings appears on Page 5.
Furthermore, because a significant portion of our business is in Japan, we believe it is equally important to understand the impact on operating earnings from translating Japanese yen into U.S. dollars. We translate Aflac Japan's yen-denominated income statement from yen into dollars using an average exchange rate for the reporting period, and we translate the balance sheet using the exchange rate at the end of the period. However, except for a limited number of transactions, we do not actually convert yen into dollars. As a result, we view foreign currency translation as a financial reporting issue for Aflac and not an economic event to our company or shareholders. Because the effect of translating yen into dollars distorts the rate of growth of our insurance operations, we also encourage readers of our financial statements to evaluate our financial performance excluding the impact of foreign currency translation. The chart on Page 4 compares selected income statement i tems with and without foreign currency changes to illustrate the effect of the yen.
1
Operating earnings in the fourth quarter of 2004 were $300 million, compared with $262 million a year ago. Operating earnings per diluted share rose 18.0% to $.59, compared with $.50 per diluted share in the fourth quarter of 2003.
During the fourth quarter, we purchased 3.1 million shares of Aflac stock. That brought the total number of shares purchased in 2004 to 10 million. We had approximately 27 million shares available for purchase under authorization from the board of directors as of December 31, 2004.
Like the fourth quarter, our results for the year were favorably impacted by the stronger average yen/dollar exchange rate. Total revenues rose 16.0% to $13.3 billion in 2004, compared with $11.4 billion in 2003. Net earnings were $1.3 billion, or $2.52 per diluted share, compared with $795 million, or $1.52 per diluted share, a year ago. Net earnings included realized investment losses of $5 million, or $.01 per diluted share in 2004, compared with realized investment losses of $191 million, or $.37 per diluted share, a year ago. Net earnings also included a loss of $13 million, or $.03 per diluted share, from the impact from SFAS 133, compared with a loss of $3 million in 2003. In addition, net earnings in 2004 reflected a one-time gain of $3 million, or $.01 per diluted share, as a result of the transfer of certain Aflac Japan pension obligations to the Japanese government and a benefit of $128 million, or $.25 per diluted share, from the release of the valuation allo wance for deferred tax assets.
Operating earnings for the year were $1.2 billion, or $2.30 per diluted share, compared with $989 million, or $1.89 per diluted share, in 2003. Excluding the $.08 per share benefit from the stronger yen, operating earnings per diluted share increased 17.5%, which was better than our goal for the year.
In the fourth quarter of 2004, Aflac Japan's premium income in yen increased 6.8% and net investment income rose 4.8%. Investment income growth in yen terms was again restrained by the stronger yen/dollar exchange rate because approximately 30% of Aflac Japan's investment income is dollar-denominated. Total revenues were up 6.6%. The pretax operating profit margin improved to 13.9%, compared with 12.6% a year ago, due to a lower benefit ratio. As a result, pretax operating earnings increased 17.6% in the fourth quarter. For the year, premium income grew 6.7%, while net investment income increased 2.3%. Total revenues were up 6.0%, and pretax operating earnings rose 14.9%.
The average yen/dollar exchange rate of 106.26 in the fourth quarter was 2.6% stronger than the average rate of 109.06 in the fourth quarter of 2003. For the year, the average exchange rate was 108.26, or 7.1% stronger than the rate of 115.95 a year ago. The stronger yen in relation to the dollar for both the quarter and the year magnified the growth rates of Aflac Japan as reported in dollars.
Benefiting from the stronger yen, fourth quarter premium income in dollars increased 9.8% to $2.2 billion. Net investment income was up 7.8% to $406 million. Total revenues rose 9.7% to $2.6 billion. Pretax operating earnings were $359 million, an increase of 20.9% from a year ago. For the year in dollars, premium income rose 14.2% to $8.4 billion. Net investment income was up 9.6% to $1.6 billion. Total revenues were $9.9 billion, or 13.4% higher than a year ago. Pretax operating earnings were $1.4 billion, an increase of 23.1% over 2003.
2
In the fourth quarter, Japanese investment yields declined slightly, compared with the third quarter, although they were higher than in the fourth quarter of 2003. The yield of a composite index of 20-year Japanese government bonds averaged 2.08% in fourth quarter of 2004, compared with 2.24% in the third quarter and 1.87% a year ago. During the fourth quarter, we purchased yen-denominated investments at an average yield of 2.65%. Including dollar-denominated securities, our new money yield for the quarter was 2.86%.
We were pleased that Aflac Japan's total new annualized premium sales were better than our expectations for the quarter. In the fourth quarter, new sales increased 5.3% from a year ago to a record 33.4 billion yen, or $316 million. New sales in the quarter benefited from solid sales growth of the medical and ordinary life categories. Total new annualized premium sales were up 1.1% to 122.5 billion yen, or $1.1 billion for the full year. New sales growth in 2004 was held down by declines in Rider MAX sales and conversions in addition to lower sales through Dai-ichi Mutual Life. Excluding sales through Dai-ichi, sales from our traditional channels were up 9.3% in the fourth quarter and 4.0% for the year.
We introduced two new versions of EVER in January 2005 in order to better segment the market and extend the growth of medical sales. We believe the added benefits of the new products will appeal to a broader group of consumers. We also believe that the continued expansion of our product line and sales force, combined with Aflac's leading market position, will enable us to produce a 5% to 10% increase in total new annualized premium sales in yen for 2005.
Aflac U.S. premium income rose 11.9% to $753 million in the fourth quarter of 2004. Net investment income was up 6.1% to $101 million. Total revenues increased 11.2% to $857 million and pretax operating earnings grew 5.9% to $130 million. For the year, premium income was $2.9 billion, an increase of 13.1% over 2003. Net investment income rose 9.4% to $396 million. Total revenues increased 12.6% to $3.3 billion. Pretax operating earnings were up 11.5% to $502 million.
Aflac U.S. produced total new annualized premium sales in the fourth quarter of $343 million, a .5% decrease from the fourth quarter of 2003. For the year, total new sales were up 5.1% to $1.2 billion. These results were below our expectations for both the quarter and for the year. We continue to believe our slower sales growth has resulted primarily from the significant changes we made to our sales management team in 2003 and at the start of 2004. While we believe the basics of our infrastructure are in place, we will continue to expand, train and strengthen all areas of our sales force.
We are convinced that the best approach to the vast U.S. market potential is to expand our distribution system and our product line. In that regard, we were encouraged that recruitment of new sales associates picked up in the fourth quarter. New agent recruitment rose 5.9% in the fourth quarter, which was the largest increase we have experienced since the fourth quarter of 2002. We have also restructured our training department and are intensifying our training efforts, which we hope will lead to improved agent retention and productivity. In the product area, we recently developed an innovative vision product that will be rolled out to the market in mid-2005. We believe it is unique to the marketplace, and we look for vision care to be a solid addition to our already strong product line. We are convinced we are taking the correct steps to re-ignite new sales growth. However, we believe new sales in the first quarter of 2005 will likely decline, due in part to difficult comparisons to 2004. As a result, we believe it will be the second quarter at the earliest before we see improved growth. As such, we have established a target of a 3% to 8% increase in new sales for 2005.
3
DIVIDEND
The board of directors increased the quarterly cash dividend 15.8% from $.095 to $.11 per share, effective with the first quarter of 2005. The first quarter dividend is payable on March 1, 2005, to shareholders of record at the close of business on February 18, 2005. This marks the 22nd consecutive year in which the cash dividend has been increased.
Our view of the U.S. and Japanese markets has not changed, and we remain encouraged about the outlook for our business. We believe rising out-of-pocket expenses for consumers will drive a growing need for the products we sell. Furthermore, we believe our business model is sound, and that our many competitive strengths are intact.
We are very pleased that our financial results kept pace with our expectations throughout 2004. And we are proud that we exceeded our primary financial objective of increasing operating earnings per diluted share 17% in 2004, excluding the impact of the yen. Our ability to achieve financial targets when new sales are soft reflects the underlying strength of our operations. Due to that strength, our goals for 2005 and 2006 remain unchanged. Our objective is to increase operating earnings per diluted share by 15% in 2005 and 2006 before currency translation.
/s/ Daniel P. Amos |
|
Daniel P. Amos |
|
Chairman and Chief Executive Officer |
|
January 31, 2005 |
Foreign Currency Translation |
Three-Month Results |
Twelve-Month Results |
||||||||||||
Effect on Operating Results |
Including |
Excluding |
Including |
Excluding |
||||||||||
Currency |
Currency |
Currency |
Currency |
|||||||||||
Selected Percentage Changes (1) |
Changes |
Changes(2) |
Changes |
Changes(2) |
||||||||||
(For the periods ended |
Premium income |
10.4 |
% |
7.7 |
% |
13.9 |
% |
8.3 |
% |
|||||
December 31, 2004 - unaudited) |
||||||||||||||
Net investment income |
7.6 |
5.7 |
9.5 |
5.5 |
||||||||||
1 |
The numbers in this table are |
|||||||||||||
presented on an operating basis, |
Total benefits and |
|||||||||||||
which is described on Page 1. |
expenses |
9.4 |
6.7 |
12.2 |
6.7 |
|||||||||
2 |
Amounts excluding foreign |
Operating earnings |
14.8 |
13.2 |
19.9 |
15.9 |
||||||||
currency changes were |
||||||||||||||
determined using the same yen/ |
Operating earnings per |
|||||||||||||
dollar exchange rate for the |
diluted share |
18.0 |
16.0 |
21.7 |
17.5 |
|||||||||
current period as the comparable |
||||||||||||||
period in the prior year. |
||||||||||||||
4
Consolidated Statements of Earnings |
Aflac Incorporated and Subsidiaries |
||||||||||||||||||||
(In millions, except for share |
|||||||||||||||||||||
and per-share amounts - unaudited) |
Three Months Ended December 31, |
Twelve Months Ended December 31, |
|||||||||||||||||||
|
2004 |
2003 |
% Change |
2004 |
2003 |
% Change |
|||||||||||||||
Revenues: |
|||||||||||||||||||||
|
Premiums, principally |
||||||||||||||||||||
supplemental health insurance |
$ |
2,939 |
$ |
2,664 |
10.4 |
% |
$ |
11,302 |
$ |
9,921 |
13.9 |
% |
|||||||||
|
Net investment income |
509 |
473 |
7.6 |
1,957 |
1,787 |
9.5 |
||||||||||||||
|
Realized investment gains (losses) |
(4 |
) |
(284 |
) |
(12 |
) |
(301 |
) |
||||||||||||
|
Other income (losses) |
4 |
(6 |
) |
34 |
40 |
|||||||||||||||
|
Total revenues |
3,448 |
2,847 |
21.1 |
13,281 |
11,447 |
16.0 |
||||||||||||||
Benefits and expenses: |
|||||||||||||||||||||
|
Benefits and claims |
2,212 |
2,029 |
9.0 |
8,482 |
7,529 |
12.7 |
||||||||||||||
|
Acquisition and operating expenses: |
||||||||||||||||||||
Amortization of deferred |
|||||||||||||||||||||
|
policy acquisition costs |
137 |
123 |
519 |
464 |
||||||||||||||||
|
Insurance commissions |
323 |
305 |
1,252 |
1,146 |
||||||||||||||||
|
Insurance expenses |
285 |
258 |
1,098 |
982 |
||||||||||||||||
|
Interest expense |
6 |
6 |
23 |
22 |
||||||||||||||||
|
Other operating expenses |
35 |
20 |
100 |
79 |
||||||||||||||||
Total acquisition and |
|||||||||||||||||||||
|
operating expenses |
786 |
712 |
10.5 |
2,992 |
2,693 |
11.1 |
||||||||||||||
|
Total benefits and expenses |
2,998 |
2,741 |
9.4 |
11,474 |
10,222 |
12.2 |
||||||||||||||
|
Earnings before income taxes |
450 |
106 |
322.6 |
1,807 |
1,225 |
47.5 |
||||||||||||||
Income taxes |
32 |
33 |
508 |
430 |
|||||||||||||||||
|
Net earnings |
$ |
418 |
$ |
73 |
475.1 |
% |
$ |
1,299 |
$ |
795 |
63.3 |
% |
||||||||
Net earnings per share: |
|||||||||||||||||||||
|
Basic |
$ |
.83 |
$ |
.14 |
492.9 |
% |
$ |
2.56 |
$ |
1.55 |
65.2 |
% |
||||||||
|
Diluted |
.81 |
.14 |
478.6 |
2.52 |
1.52 |
65.8 |
||||||||||||||
Common shares used in computing EPS (In thousands): |
|||||||||||||||||||||
|
Basic |
504,495 |
511,239 |
(1.3 |
)% |
507,333 |
513,220 |
(1.1 |
)% |
||||||||||||
|
Diluted |
512,934 |
520,192 |
(1.4 |
) |
516,421 |
522,138 |
(1.1 |
) |
||||||||||||
Cash dividends per share |
$ |
.095 |
$ |
.08 |
18.8 |
% |
$ |
.38 |
$ |
.30 |
26.7 |
% |
|||||||||
5
Reconciliation of Operating to Net Earnings |
Aflac Incorporated and Subsidiaries |
||||||||||||||||||
(In millions, except for per-share |
|||||||||||||||||||
amounts - unaudited) |
Three Months Ended December 31, |
Twelve Months Ended December 31, |
|||||||||||||||||
|
2004 |
2003 |
% Change |
2004 |
2003 |
% Change |
|||||||||||||
Operating earnings |
$ |
300 |
$ |
262 |
14.8 |
% |
$ |
1,186 |
$ |
989 |
19.9 |
% |
|||||||
|
Reconciling items, net of tax: |
||||||||||||||||||
|
Realized investment gains (losses) |
(3 |
) |
(175 |
) |
(5 |
) |
(191 |
) |
||||||||||
Impact from SFAS 133 |
(7 |
) |
(14 |
) |
(13 |
) |
(3 |
) |
|||||||||||
Release of deferred tax asset |
|||||||||||||||||||
valuation allowance |
128 |
- |
128 |
- |
|||||||||||||||
Japan pension obligation transfer |
- |
- |
3 |
- |
|||||||||||||||
Net Earnings |
$ |
418 |
$ |
73 |
475.1 |
% |
$ |
1,299 |
$ |
795 |
63.3 |
% |
|||||||
Operating earnings per share - diluted |
$ |
.59 |
$ |
.50 |
18.0 |
% |
$ |
2.30 |
$ |
1.89 |
21.7 |
% |
|||||||
|
Reconciling items, net of tax: |
||||||||||||||||||
|
Realized investment gains (losses) |
(.01 |
) |
(.34 |
) |
(.01 |
) |
(.37 |
) |
||||||||||
Impact from SFAS 133 |
(.02 |
) |
(.02 |
) |
(.03 |
) |
- |
||||||||||||
Release of deferred tax asset |
|||||||||||||||||||
valuation allowance |
.25 |
- |
.25 |
- |
|||||||||||||||
Japan pension obligation transfer |
- |
- |
.01 |
- |
|||||||||||||||
Net earnings per share - diluted |
$ |
.81 |
$ |
.14 |
478.6 |
% |
$ |
2.52 |
$ |
1.52 |
65.8 |
% |
|||||||
6
Consolidated Balance Sheets |
Aflac Incorporated and Subsidiaries |
|||||||||
(In millions, except for share and per-share amounts - unaudited) December 31, |
2004 |
2003 |
||||||||
Assets: |
||||||||||
Investments and cash: |
||||||||||
|
Securities available for sale, at fair value: |
|||||||||
|
Fixed maturities |
$ |
29,166 |
$ |
26,495 |
|||||
|
Perpetual debentures |
4,019 |
3,349 |
|||||||
|
Equity securities |
77 |
73 |
|||||||
|
Securities held to maturity, at amortized cost: |
|||||||||
|
Fixed maturities |
10,080 |
8,752 |
|||||||
|
Perpetual debentures |
4,759 |
4,297 |
|||||||
|
Other investments |
41 |
32 |
|||||||
|
Cash and cash equivalents |
3,813 |
1,052 |
|||||||
|
Total investments and cash |
51,955 |
44,050 |
|||||||
Receivables, primarily premiums |
417 |
547 |
||||||||
Accrued investment income |
495 |
456 |
||||||||
Deferred policy acquisition costs |
5,595 |
5,044 |
||||||||
Property and equipment, net |
515 |
518 |
||||||||
Other |
349 |
349 |
||||||||
|
Total assets |
$ |
59,326 |
$ |
50,964 |
|||||
Liabilities and Shareholders' equity: |
||||||||||
Liabilities: |
||||||||||
|
Policy liabilities: |
|||||||||
|
Future policy benefits |
$ |
39,360 |
$ |
35,588 |
|||||
Unpaid policy claims |
2,355 |
2,115 |
||||||||
|
Unearned premiums |
593 |
516 |
|||||||
|
Other policyholders' funds |
1,248 |
1,021 |
|||||||
|
Notes payable |
1,429 |
1,409 |
|||||||
|
Income taxes |
2,583 |
2,189 |
|||||||
|
Payables for return of cash collateral on loaned securities |
2,887 |
374 |
|||||||
|
Other |
1,298 |
1,106 |
|||||||
|
Total liabilities |
51,753 |
44,318 |
|||||||
Shareholders' equity: |
||||||||||
|
Common stock |
65 |
65 |
|||||||
|
Additional paid-in capital |
468 |
417 |
|||||||
|
Retained earnings |
6,992 |
5,885 |
|||||||
|
Accumulated other comprehensive income: |
|||||||||
|
Unrealized foreign currency translation gains |
220 |
213 |
|||||||
|
Unrealized gains on investment securities |
2,417 |
2,316 |
|||||||
|
Minimum pension liability adjustment |
(28 |
) |
(36 |
) |
|||||
|
Treasury stock |
(2,561 |
) |
(2,214 |
) |
|||||
|
Total shareholders' equity |
7,573 |
6,646 |
|||||||
Total liabilities and shareholders' equity |
$ |
59,326 |
$ |
50,964 |
||||||
Shareholders' equity per share |
$ |
15.04 |
$ |
13.03 |
||||||
Shares outstanding at end of period (In thousands) |
503,608 |
509,892 |
||||||||
7
FORWARD-LOOKING INFORMATION
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" to encourage companies to provide prospective information, so long as those informational statements are identified as forward-looking and are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those discussed. We desire to take advantage of these provisions. This document contains cautionary statements identifying important factors that could cause actual results to differ materially from those projected herein, and in any other statements made by company officials in oral discussions with the financial community and contained in documents filed with the Securities and Exchange Commission (SEC). Forward-looking statements are not based on historical information and relate to future operations, strategies, financial results or other developments. Furthermore, forward-looking information is subject to numerous assumptions, risks, and uncer
tainties. In particular, statements containing words such as "expect," "anticipate," "believe," "goal," "objective," "may," "should," "estimate," "intends," "projects," or similar words as well as specific projections of future results, generally qualify as forward-looking. Aflac undertakes no obligation to update such forward-looking statements.
We caution readers that the following factors, in addition to other factors mentioned from time to time in our reports filed with the SEC, could cause actual results to differ materially from those contemplated by the forward-looking statements: legislative and regulatory developments; assessments for insurance company insolvencies; competitive conditions in the United States and Japan; new product development; ability to attract and retain qualified sales associates; ability to repatriate profits from Japan; changes in U.S. and/or Japanese tax laws or accounting requirements; credit and other risks associated with Aflac's investment activities; significant changes in investment yield rates; fluctuations in foreign currency exchange rates; deviations in actual experience from pricing and reserving assumptions; level and outcome of litigation; downgrades in the company's credit rating; changes in rating agency policies or practices; subsidiary's ability to pay dividends to parent company; and general economi
c conditions in the United States and Japan.
8
Aflac Incorporated
9
H5RA/K(
MX"23@`?-M+"79T(9^%?UC&7+-R+#4!R8VQ>KEH_[;YL,$I6J4A6P_[+QP"S+
M<]AWH?5YVU#K0[T44%'`2ASI"_GOMX_@"H*\DE^EA!N=(CW
MS>G6U/Z'%T]735J"ITAQM5%-@HZE'H?1L*/48---Y#&DWS-&_S>NDQM5B5
MK2+S[U)5GG'M-'%#CBI?'3(7I@`PTP8%*LP458^E!R"2B;,7T*&"EBIH`M_A
MRD\`8YU=;C#:M+! U!%5![Z%@@7/YH["(-&E\5B$!O-X
M;F">$*==F69S.9O+A-@\Y6HG`CC@%IC`7%G+LA?Q>0AH&8_I;!W"-]U5-IF:
M5N(\8=2J1,7>.&00UTA&24!UI@R29D&7K`T9FM)?1+.([\@I6^"YHH!U*L7#
M!U>JJ_%"^4W[FRPM>1O?-V`SS>G%D]25A@2(>GSE;XC"0>)-F1'FU!P=(G%:
M2\ OYK2J%]RS,_V[^:JU)P(=EIL$<
M% U%A]%=Z&'T-'H%G4)GT-<$
M!L&6X$4((T@)BP@J0CVABS!(V$GXB'"&<(TP37A*)!+Y1`$QA)A$+"!6$)N)
MO<2MQ`/$X\1+Q+O$61*)9$7R(D60TDDRDH'41=I"VD?ZC'29-$UZ3J:1' '
MXPR1XP1"&,)Y$+8K#`0]XN(4@3Z7P@LAE[,/>`\YSV:SF[+\NNON/Z$HF]ZIBNK@)HNHL$U4YB"6'
M$$3%3':ZISR8:#CY,;%R_>VG'8\?A^LO+.
MP+FFM53=H/_L9[`V!5_(!`1^.?^TQ#KM_^8F>789^YS,N/F(QPHV$\/N /4L_K/U_`:+36?S.3CRR/0:#R#M"ST_C2Z_W[4B3]
M%1R*3K'X\?CX1"IP^K8SD%AM,^?@]&5GM+-I#J?WW8\XLEHEN7:Q@W/;=>W0
M[_D,PPTB)\[4*&MT&L/5WZ!IN_L;VWT#XZ5BWTTE1_SQ?)I0ZH'/K\%[B*_5
MC3]\(XCORJ88V"J'5H&]J,3H8PQ1690@F5MR*L'L,AZDZ'2.+*,*;
>3%?_I?SL@^.JRKC\'OOWGMW6Z@-Q1:(`_=:V(2DA"[0&BM([XJ*
MXM`L+0V!PK!TE!E;E4@:&+[:T%%IIJ1-*2W]M`$E`TTQVRU@:C+358*@Y`B$..D@8UR77!T75`511"(:!G@A4AM99@U&QOT
MF$H[1&6#IP*1]'GB3'&3*(AI\I!G1H4-)-8*"VVVUP]EAP-#W`+48EVR!JY\
MTG:'BW%J:
T,LDL
ML:.-S>X0S