Bloomberg News

Aflac Surges as Profit Beats Estimates on Japan Sales Gains

October 27, 2011

(Updates with buyback forecast in the seventh paragraph.)

Oct. 27 (Bloomberg) -- Aflac Inc., the world’s largest seller of supplemental health insurance, surged in New York trading as profit beat estimates on sales gains in its largest market and the company forecast increases in share repurchases.

Aflac jumped $3.87, or 9 percent, to $46.90 at 11:05 a.m. The company said late yesterday that third-quarter net income rose 7.8 percent to $744 million. Operating income of $1.66 a share beat the $1.60 average estimate of 20 analysts surveyed by Bloomberg.

Chief Executive Officer Dan Amos touted revenue gains in Japan on a conference call today, citing “tremendous sales momentum.” The results helped Columbus, Georgia-based Aflac, which gets about three quarters of its revenue in Japan, post its first increase in quarterly profit this year. In the first half, the company had recorded more than $1 billion of realized investment losses as European debt holdings declined.

“Production in the third quarter set all-time quarterly records,” Amos, 60, said of Japan on the call.

The 24-company KBW Insurance Index rose 3.9 percent as European leaders agreed to expand a bailout fund to stem the region’s debt crisis. Ameriprise Financial Inc. gained 13 percent and MGIC Investment Corp. gained 9.3 percent.

Aflac reported impairments on holdings of Belgium’s Dexia SA and BAWAG Capital Finance Jersey that contributed to realized investment losses of $83 million pretax in the third quarter. The company said it posted gains on the sale of Portuguese bank holdings that were previously impaired.

Share Buybacks

Stock buybacks may double to $600 million in 2012 from an estimated $300 million this year, Chief Financial Officer Kriss Cloninger said on the call. Repurchases may rise to $1.2 billion in 2013, Cloninger said. Aflac bought back 1 million shares in the third quarter, bringing the total for the year to 5.1 million.

“We’ll be able double share repurchase between 2011 and 2012 and double it again in 2013,” Cloninger said.

Aflac said it expects to record a charge of $500 million to $700 million after tax tied to its adoption on Jan. 1 of new rules on accounting for expenses tied to sales, known as deferred acquisition costs.

--With assistance from Maryellen Tighe in New York. Editors: Dan Kraut, Steve Dickson

To contact the reporter on this story: Andrew Frye in New York at afrye@bloomberg.net

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


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