Bloomberg News

Aflac May Sell Bonds After $610 Million Loss on Europe Banks

June 23, 2011

(Updates shares in the fifth paragraph.)

June 23 (Bloomberg) -- Aflac Inc., the largest seller of supplemental health insurance, may issue as much as 100 billion yen ($1.24 billion) in debt as it records losses tied to investments in banks from Greece, Ireland and Portugal.

Second-quarter losses on the assets will probably be about $610 million, the Columbus, Georgia-based insurer said today in a statement.

Chief Executive Officer Dan Amos has added investments in public utilities and Japanese government debt as he seeks to limit losses on holdings tied to Europe, where the continent’s leaders are discussing how to stave off a Greek default. Aflac last year dumped its sovereign debt from Greece at a loss.

“It’s a legacy position,” said Edward Shields, an analyst at Sandler O’Neill & Partners LP, of Aflac’s investments in Europe. “In large part, it was a search for yield.” He rates the company “buy.”

Aflac fell 32 cents to $45.05 at 4:02 p.m. in New York Stock Exchange composite trading. The company has dropped about 20 percent this year.

Aflac will take a loss of about $165 million on the sale of investments in Greek and Irish financial institutions, the insurer said as it amended a 2009 filing with Japanese overseers tied to the possible issuance of debt. Aflac projected about $445 million of impairment losses on investments in Portugal banks. The company previously had disclosed $72 million in losses on the Ireland and Greece financial-firm securities.

Flashing Red

European Central Bank President Jean-Claude Trichet has said risk signals for financial stability in the euro area are flashing “red” as the debt crisis threatens to infect banks.

Aflac, which gets most of its revenue outside the U.S., has previously taken losses on holdings in Icelandic banks and the Republic of Tunisia.

“We are executing on our plan to proactively derisk our investment portfolio,” Amos said in today’s statement. The insurer is scheduled to post complete second-quarter results on July 27.

--With assistance from Brooke Sutherland in New York. Editors: Dan Kraut, Rick Green

To contact the reporter on this story: Noah Buhayar in New York at nbuhayar@bloomberg.net

To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net


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