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Aflac (AFL) Q1 Earnings Beat on Stronger Forex, View Intact

Aflac Incorporated’s AFL first-quarter 2016 operating earnings per share of $1.73 beat the Zacks Consensus Estimate by about 7% and improved 12.3% year over year.

Including one-time items, Aflac’s net income in the reported quarter increased 15.2% year over year to $1.74 per share.

Total revenue increased 4.3% year over year to $5.5 billion. The top-line improvement is attributable to a stronger yen-dollar exchange rate. Revenues surpassed the Zacks Consensus Estimate of $5.23 billion.

Total acquisition and operating expenses increased 3.7% year over year to $1.3 billion, while benefits and claims increased 2.5% year over year to $3.0 billion.

Detailed Analysis

Total revenue from Aflac Japan increased 3% year over year to $3.8 billion,. Premium income increased 3.3% to $3.2 billion during the quarter, while investment income increased 1.4% to $622 million. Pretax operating earnings were up 2.4% to $838 million from the prior-year quarter.

Aflac U.S. generated revenues of $1.5 billion, up 2.3% from the prior-year quarter. Net investment income grew 5.1% to $174 million, while premiums rose 2.1% to $1.4 billion. Consequently, total new annualized sales in Aflac U.S. increased 3.7% to $328 million. Pretax operating earnings in the U.S. soared 16.6% year over year to $332 million.

Financial Update

As of Mar 31, 2016, total investment and cash was $114.3 billion compared with $105.9 billion at year-end 2015. Shareholder equity totaled $20.0 billion against $18.6 billion at 2015 end.

Dividend Update

Aflac’s board of directors declared second-quarter 2016 cash dividend of 41 cents per share. The dividend is payable on Jun 1 to shareholders on record at the close of business as of May 18, 2016.

Share Repurchase Update

In the first quarter, the company spent $600 million to buy back 10.2 million common shares.  The company had 38.2 million shares remaining under its authorization.

Guidance Reiterated    

Along with the release of first-quarter results, Aflac reiterated its 2016 guidance. The company expects operating earnings per share between $6.17 and $6.41.The same for the second quarter is expected between $1.55 and $1.82.

For 2016, the company anticipates the new annualized premium growth for Aflac U.S. in the range of 3–5% as well as a long-term compound annual growth rate (CAGR) at or above the voluntary market growth rate of 5%.

For Aflac Japan, the company expects the sales of third-sector products in mid single digits compared with robust production results in 2015. The long-term CAGR is expected in the range of 4–6%.
    
Aflac also intends to repurchase $1.4 billion worth common stock through 2016.

Zacks Rank and Performance of Other Insurers

Aflac presently carries a Zacks Rank #2 (Buy). Among the other insurers that recently released their first-quarter earnings results, The Travelers Companies, Inc. TRV missed the Zacks Consensus Estimate, First American Financial FAF and RLI Corp. RLI beat the same.

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