Banking, finance, and taxes

Aflac Beat Earnings Estimates

Jon C. Ogg

Published: February 1, 2016 4:57 pm

Last Updated: January 13, 2020 1:47 pm

Aflac Inc. (NYSE: AFL) has managed to beat earnings, to show how much the yen in Japan is hurting its numbers and to talk up its buyback and dividend. Shares rose on the news.

Aflac said that its total revenues were down by 3.5% to $5.3 billion during the fourth quarter of 2015, compared with $5.5 billion in the fourth quarter of 2014. This revenue decline reflected the weaker yen to dollar exchange rate. Net earnings were $730 million, or $1.71 per share, versus $703 million or $1.57 per share a year ago.

Operating earnings in the fourth quarter were $668 million, compared with $581 million in the fourth quarter of 2014. Operating earnings per share rose 20.9% to $1.56 in the quarter from $1.29 a year ago. The weaker yen to dollar exchange rate decreased operating earnings per diluted share by $0.05 for the fourth quarter.

Thomson Reuters had the estimates pegged at $1.47 per share in earnings from operations and $5.21 billion in revenues. Aflac said that its fourth-quarter earnings included after-tax investment gains of $60 million, and its after-tax realized investment gains net of losses from securities transactions in the quarter were $77 million.

A significant portion of Aflac’s business is in Japan, so its yen to dollar conversion remains a risk. The average yen to dollar exchange rate in the fourth quarter of 2015 was 121.54 — some 5.8% weaker than the average rate of 114.44 in the fourth quarter of 2014. And for all of 2015, the average exchange rate of 120.99 was 12.8% weaker than the rate of 105.46 for 2014.

Total investments and cash at the end of December 2015 were $105.9 billion, up from $104.9 billion at September 30, 2015. During the fourth quarter, Aflac spent some $234 million to repurchase some 3.8 million of its common shares. During all of 2015, Aflac spent $1.3 billion to repurchase 21.2 million shares. The company still had 48.4 million shares available for purchase under its share repurchase authorizations.

Shareholders’ equity was $17.4 billion, or $40.96 per share, including a net unrealized gain on investment securities and derivatives of $3.0 billion. Aflac’s annualized return on average shareholders’ equity in the fourth quarter was 16.9%.