AFLAC’s Earnings Jump 20%

It’s been a tough year for Aflac’s (AFL) stock, but the company is still delivering on earnings. At one point, the stock was going for about two times this year’s estimate. Now that’s a scared market!
Now we have some results to look at. First-quarter net came in at $1.22 a share, six cents more than consensus. For last year’s Q1, AFL earned 98 cents. So they’re growing, there’s no doubt about that. With Aflac’s cash flow, there’s no need for them to dump any holdings at whatever price they can get.
Wall Street got itself freaked out because Aflac had investments in these “hybrid securities” in a lot of bum European banks. The company has said there’s nothing to worry about. Wall Street, however, is still very clearly worried.

Shareholders equity, a measure of assets minus liabilities, fell 21 percent to $5.2 billion as of March 31 from $6.6 billion at the end of 2008 on the declining value of holdings. The net unrealized loss on investments widened to $3 billion compared with $1.2 billion three months earlier. Unrealized losses, which don’t count against earnings, are monitored by ratings firms, regulators and investors as a measure of financial strength.
North American insurers posted more than $190 billion of writedowns and unrealized losses tied to the collapse of the mortgage market since the beginning of 2007, with Aflac accounting for $3.6 billion through the end of last year.
Aflac, whose policies supplement work and government- sponsored health-insurance plans, holds hybrid securities in 38 issuers spread across 15 countries across Europe and in Japan and Australia, Aflac said in February. About 20 percent of the portfolio is in the U.K., Aflac said.
In Japan, Aflac’s biggest market, the company sold new policies worth 27.5 billion yen ($293 million) falling from $264 million in the same period a year earlier. Premium income rose to $3 billion in the quarter from $2.6 billion as the yen strengthened against the dollar a year earlier.
U.S. sales of new policies fell to $351 million from $353 million first quarter of 2008, Aflac said in its statement.

As far as future guidance, the company expects 2009 operating EPS to grow at the low end of their 13% to 15% target, which translates to about $4.51 a share. That means the stock is trading at 6.6 times forward earnings. Of course, movements in the yen can affect things a lot. For Q2, Aflac sees operating EPS ranging for $1.11 to $1.14. At the current price, the stock yields 4.1%. As today’s report shows, Aflac is an excellent stock to own.

Posted by on April 30th, 2009 at 9:59 am


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