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Shares of Aflac Inc. slid on Wednesday after the life and supplemental health insurance company forecast slow future earnings growth and disclosed big losses on sales of its stake in Irish Life & Permanent PLC and holdings in Tunisia.
THE SPARK: The Columbus, Ga., company, which recently replaced the U.S. voice of its popular duck mascot, said late Tuesday that it expects 2011 earnings-per-share growth of around 8 percent. It forecast 2012 growth of 0 to 5 percent , barring currency fluctuations.
Aflac also disclosed in a regulatory filing that it booked after-tax losses of $47 million on the sale of its holdings in Irish Life, of $3 million through the sale of a portion of its holdings in the Republic of Tunisia.
THE BIG PICTURE: Aflac said last month that its first-quarter profit dropped 38 percent on investment losses, but adjusted results beat analyst expectations. The company earned $395 million, or 84 cents per share, in the three months that ended March 31, as it took a $376-million hit related to the sale of some bank holdings and depreciating investments.
Aflac mainly operates in the United States and Japan. Aflac Japan's first-quarter results reflected a charge of $37 million for claims related to the earthquake and tsunami that struck Japan on March 11, and $8 million in related operating costs.
THE ANALYSIS: Citi analyst Colin W. Devine said in a research note that the 2012 growth rate would represent the slowest in the company's history.
"While the reduced optimism for 2011 and modest goal for 2012 both came as somewhat of a surprise, they may be management's recognition of the combination of both a relatively mature market for the company's traditional critical illness and supplemental health products, as well as increasingly competitive landscape from both foreign and domestic players," Devine wrote.
FBR Capital Markets analyst Randy Binner said in a separate note that the company's guidance may be "overly conservative." The analyst added that they believe Aflac shares trade on earnings per share, and the stock will adjust to the lower outlook.
SHARE ACTION: The stock fell $3.38, or more than 6 percent, to $50.47 in morning trading, while broader indexes rose slightly.