To provide relief for New Mexico policy/certificate holders residing in Lincoln County and the Mescalero Apache Reservation and affected by the wildfires, Aflac will provide the following protections for policy/certificate holders:
In addition to the above, Aflac through Aflac Benefits Solutions will provide the following protections for Network Dental and Vision members and providers:
Affected members should contact Aflac Benefits Solutions at 855-819-1873, option 1, for assistance.
To help provide relief for Oregon policyholders residing in the state that have been affected by the wildfires, Aflac will provide a premium grace period starting July 12, 2024, and ending Nov. 11, 2024. This grace period also provides an extension of filing deadlines for claims and leniency for any other action required under the policy. Aflac will provide a replacement copy of the policy upon request by the policyholder.
For Network Dental and Vision Members:
This grace period also provides an extension of filing deadlines for claims; relaxation of prior authorization, precertification, and referral requirements; access to appropriate out-of-network providers due to unavailability on in-network providers or the members’ displacement; and leniency for any other action required under the certificate. A replacement copy of the certificate will be provided upon request by the certificate holder. Affected members should contact Aflac Benefit Solutions (formerly Argus Dental and Vision) at 855-819-1873, Option 1, for assistance.
To help provide relief for California policyholders residing in Los Angeles, Orange, Riverside, and San Bernardino counties affected by wildfires, Aflac will provide a premium grace period starting Sept. 5, 2024, and ending Nov. 11, 2024. This grace period also provides an extension of filing deadlines for claims and leniency for any other action required under the policy. Aflac will provide a replacement copy of the policy upon request by the policyholder.
For Network Dental and Vision Members:
This grace period also provides an extension of filing deadlines for claims; relaxation of prior authorization, precertification, and referral requirements; access to appropriate out-of-network providers due to unavailability on in-network providers or the members’ displacement; and leniency for any other action required under the certificate. A replacement copy of the certificate will be provided upon request by the certificate holder. Affected members should contact Aflac Benefit Solutions (formerly Argus Dental and Vision) at 855-819-1873, Option 1, for assistance.
To help provide relief for California policyholders residing in Lake County affected by wildfires, Aflac will provide a premium grace period starting Sept. 8, 2024, and ending Dec. 2, 2024. This grace period also provides an extension of filing deadlines for claims and leniency for any other action required under the policy. Aflac will provide a replacement copy of the policy upon request by the policyholder.
For Network Dental and Vision Members:
This grace period also provides an extension of filing deadlines for claims; relaxation of prior authorization, precertification, and referral requirements; access to appropriate out-of-network providers due to unavailability on in-network providers or the members’ displacement; and leniency for any other action required under the certificate. A replacement copy of the certificate will be provided upon request by the certificate holder. Affected members should contact Aflac Benefit Solutions (formerly Argus Dental and Vision) at 855-819-1873, Option 1, for assistance.
To help provide relief for Tennessee policyholders Aflac will provide a premium grace period starting Sept. 26, 2024, and ending Nov. 25, 2024. This grace period also provides an extension of filing deadlines for claims and leniency for any other action required under the policy. As further protection, insurance professionals licensed in other states, but not holding Tennessee licenses will be permitted to assist Aflac policyholders. Agents must contact Tennessee Department of Insurance for permission on a case-by-case basis for this accommodation. Aflac will provide a replacement copy of the policy upon request by the policyholder.
To help provide relief for North Carolina policyholders Aflac will provide a premium grace period starting Sept. 27, 2024, and ending Nov. 26, 2024. This grace period also provides an extension of filing deadlines for claims and leniency for any other action required under the policy. Aflac will provide a replacement copy of the policy upon request by the policyholder.
For Network Dental and Vision Members:
This grace period also provides an extension of filing deadlines for claims; relaxation of prior authorization, precertification, and referral requirements; access to appropriate out-of-network providers due to unavailability on in-network providers or the members’ displacement; and leniency for any other action required under the certificate. A replacement copy of the certificate will be provided upon request by the certificate holder. Affected members should contact Aflac Benefit Solutions (formerly Argus Dental and Vision) at 855-819-1873, Option 1, for assistance.
To help provide relief for Florida policyholders Aflac will provide a premium grace period starting Sept. 26, 2024, and ending Nov. 26, 2024. This grace period also provides an extension of filing deadlines for claims and leniency for any other action required under the policy. Aflac will provide a replacement copy of the policy upon request by the policyholder.
For Network Dental and Vision Members:
This grace period also provides an extension of filing deadlines for claims; relaxation of prior authorization, precertification, and referral requirements; access to appropriate out-of-network providers due to unavailability on in-network providers or the members’ displacement; and leniency for any other action required under the certificate. A replacement copy of the certificate will be provided upon request by the certificate holder. Affected members should contact Aflac Benefit Solutions (formerly Argus Dental and Vision) at 855-819-1873, Option 1, for assistance.
To help provide relief for Georgia policyholders Aflac will provide a premium grace period starting Sept. 24, 2024, and ending Nov. 25, 2024. This grace period also provides an extension of filing deadlines for claims and leniency for any other action required under the policy. Aflac will provide a replacement copy of the policy upon request by the policyholder.
For Network Dental and Vision Members:
This grace period also provides an extension of filing deadlines for claims; relaxation of prior authorization, precertification, and referral requirements; access to appropriate out-of-network providers due to unavailability on in-network providers or the members’ displacement; and leniency for any other action required under the certificate. A replacement copy of the certificate will be provided upon request by the certificate holder. Affected members should contact Aflac Benefit Solutions (formerly Argus Dental and Vision) at 855-819-1873, Option 1, for assistance.
To help provide relief for South Carolina policyholders Aflac will provide a premium grace period starting Sept. 25, 2024, and ending Nov. 25, 2024. This grace period also provides an extension of filing deadlines for claims and leniency for any other action required under the policy. Aflac will provide a replacement copy of the policy upon request by the policyholder.
For Network Dental and Vision Members:
This grace period also provides an extension of filing deadlines for claims; relaxation of prior authorization, precertification, and referral requirements; access to appropriate out-of-network providers due to unavailability on in-network providers or the members’ displacement; and leniency for any other action required under the certificate. A replacement copy of the certificate will be provided upon request by the certificate holder. Affected members should contact Aflac Benefit Solutions (formerly Argus Dental and Vision) at 855-819-1873, Option 1, for assistance.
To help provide relief for Florida policyholders Aflac will provide a premium grace period starting Oct. 5, 2024, and ending Dec. 10, 2024. This grace period also provides an extension of filing deadlines for claims and leniency for any other action required under the policy. Aflac will provide a replacement copy of the policy upon request by the policyholder.
For Network Dental and Vision Members:
This grace period also provides an extension of filing deadlines for claims; relaxation of prior authorization, precertification, and referral requirements; access to appropriate out-of-network providers due to unavailability on in-network providers or the members’ displacement; and leniency for any other action required under the certificate. A replacement copy of the certificate will be provided upon request by the certificate holder. Affected members should contact Aflac Benefit Solutions (formerly Argus Dental and Vision) at 855-819-1873, Option 1, for assistance.
To provide relief for New Mexico policy/certificate holders residing in Chavez County and affected by the severe flooding, Aflac will provide the following protections for policy/certificate holders:
In addition to the above, Aflac through Aflac Benefits Solutions will provide the following protections for Network Dental and Vision members and providers:
Affected members should contact Aflac Benefits Solutions at 855-819-1873, option 1, for assistance.
To help provide relief for California policyholders residing in Siskiyou County affected by wildfires, Aflac will provide a premium grace period starting July 3, 2024, and ending Dec. 31, 2024. This grace period also provides an extension of filing deadlines for claims and leniency for any other action required under the policy. Aflac will provide a replacement copy of the policy upon request by the policyholder
For Network Dental and Vision Members:
This grace period also provides an extension of filing deadlines for claims; relaxation of prior authorization, precertification, and referral requirements; access to appropriate out-of-network providers due to unavailability on in-network providers or the members’ displacement; and leniency for any other action required under the certificate. A replacement copy of the certificate will be provided upon request by the certificate holder. Affected members should contact Aflac Benefit Solutions (formerly Argus Dental and Vision) at 855-819-1873, Option 1, for assistance.
To help provide relief for California policyholders residing in Sierra County affected by wildfires, Aflac will provide a premium grace period starting Sept. 2, 2024, and ending Dec. 31, 2024. This grace period also provides an extension of filing deadlines for claims and leniency for any other action required under the policy. Aflac will provide a replacement copy of the policy upon request by the policyholder
For Network Dental and Vision Members:
This grace period also provides an extension of filing deadlines for claims; relaxation of prior authorization, precertification, and referral requirements; access to appropriate out-of-network providers due to unavailability on in-network providers or the members’ displacement; and leniency for any other action required under the certificate. A replacement copy of the certificate will be provided upon request by the certificate holder. Affected members should contact Aflac Benefit Solutions (formerly Argus Dental and Vision) at 855-819-1873, Option 1, for assistance.
To help provide relief for California policyholders residing in Ventura County affected by wildfires, Aflac will provide a premium grace period starting Nov. 6, 2024, and ending Jan. 07, 2025. This grace period also provides an extension of filing deadlines for claims and leniency for any other action required under the policy. Aflac will provide a replacement copy of the policy upon request by the policyholder
For Network Dental and Vision Members:
This grace period also provides an extension of filing deadlines for claims; relaxation of prior authorization, precertification, and referral requirements; access to appropriate out-of-network providers due to unavailability on in-network providers or the members’ displacement; and leniency for any other action required under the certificate. A replacement copy of the certificate will be provided upon request by the certificate holder. Affected members should contact Aflac Benefit Solutions (formerly Argus Dental and Vision) at 855-819-1873, Option 1, for assistance.
COLUMBUS, Ga., Oct. 31, 2022 /PRNewswire/ -- Aflac Incorporated (NYSE: AFL) today reported its third quarter results.
Total revenues were $4.8 billion in the third quarter of 2022, compared with $5.2 billion in the third quarter of 2021. Net earnings were $1.6 billion, or $2.53 per diluted share, compared with $888 million, or $1.32 per diluted share a year ago, reflecting a release of $695 million in deferred taxes in the third quarter.
Net earnings in the third quarter of 2022 included net investment gains of $199 million, or $0.31 per diluted share, compared with net investment losses of $171 million, or $0.25 per diluted share a year ago. The net investment gains were driven by net gains from certain derivatives and foreign currency activities of $173 million and net gains from sales and redemptions of $59 million, both driven by foreign exchange. These net investment gains included a decrease of $22 million in the fair value of equity securities. These gains were partially offset by an increase in the allowance associated with the company's estimate of current expected credit losses (CECL) and impairments of $11 million.
Adjusted earnings* in the third quarter were $725 million, compared with $1.0 billion in the third quarter of 2021, reflecting a decrease of 29.7%. Adjusted earnings per diluted share* decreased 24.8% to $1.15 in the quarter. Adjusted earnings included a variable investment income loss of $40 million from alternative investments, which was $0.11 per share below return expectations. Additionally, adjusted earnings reflects $70 million, or $0.11 per share, of net investment income for a make-whole call of a security in the Japan segment. The weaker yen/dollar exchange rate impacted adjusted earnings per share by $0.08.
The average yen/dollar exchange rate in the third quarter of 2022 was 137.08, or 19.7% weaker than the average rate of 110.11 in the third quarter of 2021. For the first nine months, the average exchange rate was 126.65, or 14.3% weaker than the rate of 108.58 a year ago.
Total investments and cash at the end of September 2022 were $114.5 billion, compared with $146.0 billion at September 30, 2021. The decline in the portfolio is principally driven by the weaker yen and higher interest rates.
Shareholders' equity was $24.2 billion, or $38.71 per share, at September 30, 2022, compared with $33.6 billion, or $50.62 per share, at September 30, 2021. Shareholders' equity at the end of the third quarter included a net unrealized gain on investment securities and derivatives of $1.1 billion, compared with a net unrealized gain of $9.7 billion at September 30, 2021. Shareholders' equity at the end of the third quarter also included an unrealized foreign currency translation loss of $4.5 billion, compared with an unrealized foreign currency translation loss of $1.8 billion at September 30, 2021. The annualized return on average shareholders' equity in the third quarter was 25.3%.
For the first nine months of 2022, total revenues were down 7.1% to $15.5 billion, compared with $16.7 billion in the first nine months of 2021. Net earnings were $4.0 billion, or $6.25 per diluted share, compared with $3.3 billion, or $4.82 per diluted share, for the first nine months of 2021. Adjusted earnings for the first nine months of 2022 were $2.6 billion, or $4.03 per diluted share, compared with $3.2 billion, or $4.65 per diluted share, in 2021. Excluding the negative impact of $0.23 per share from the weaker yen/dollar exchange rate, adjusted earnings per diluted share decreased 8.4% to $4.26 for the first nine months of 2022.
Shareholders' equity excluding AOCI (or adjusted book value*) was $27.7 billion, or $44.34 per share at September 30, 2022, compared with $25.9 billion, or $39.06 per share, at September 30, 2021. The annualized adjusted return on equity excluding foreign currency impact* in the third quarter was 11.4%.
AFLAC JAPAN
In yen terms, Aflac Japan's net earned premiums were ¥309.9 billion for the quarter, or 4.1% lower than a year ago, mainly due to limited pay products reaching paid-up status and constrained sales from the impact of pandemic conditions. Adjusted net investment income increased 9.8% to ¥92.2 billion, mainly due to a weaker yen on the dollar-denominated investment income. Total adjusted revenues in yen declined 1.2% to ¥403.3 billion. Pretax adjusted earnings in yen for the quarter declined 19.2% on a reported basis to ¥86.9 billion, primarily due to a 940 basis point increase in the benefit ratio resulting from a wider scope of "deemed hospitalization" that was in effect through most of the third quarter. Pretax adjusted earnings decreased 27.9% on a currency-neutral basis. The pretax adjusted profit margin for the Japan segment decreased to 21.6%, compared with 26.3% a year ago.
For the first nine months, net earned premiums in yen were ¥939.5 billion, or 4.2% lower than a year ago. Adjusted net investment income increased 8.1% to ¥265.3 billion. Total adjusted revenues in yen were down 1.7% to ¥1.2 trillion. Pretax adjusted earnings were ¥298.8 billion, or 4.0% lower than a year ago.
In dollar terms, net earned premiums decreased 23.6% to $2.2 billion in the third quarter. Adjusted net investment income decreased 13.1% to $663 million. Total adjusted revenues declined by 21.4% to $2.9 billion. Pretax adjusted earnings declined 35.5% to $630 million.
For the first nine months, net earned premiums in dollars were $7.4 billion, or 18.4% lower than a year ago. Adjusted net investment income decreased 8.6% to $2.1 billion. Total adjusted revenues were down 16.4% to $9.5 billion. Pretax adjusted earnings were $2.4 billion, or 18.0% lower than a year ago.
For the quarter, total new annualized premium sales (sales) increased 10.2% to ¥13.9 billion, or $100 million, reflecting the August launch of a new cancer product through the agency channel. For the first nine months, total new sales decreased 4.1% to ¥38.5 billion, or $301 million.
AFLAC U.S.
Aflac U.S. net earned premiums declined 1.3% to $1.4 billion in the third quarter, impacted by lower year-to-date persistency. Adjusted net investment income decreased 3.1% to $185 million. Total adjusted revenues were down 1.1% to $1.6 billion. Pretax adjusted earnings were $309 million, 13.7% lower than a year ago, which was driven by elevated general expenses reflecting, in part, platform and growth investments, as well as the amortization of deferred acquisition costs driven by a slight drop in persistency. The pretax adjusted profit margin for the U.S. segment was 19.3%, compared with 22.2% a year ago.
For the first nine months, net earned premiums declined 1.0% to $4.2 billion. Adjusted net investment income increased 1.1% to $563 million. Total adjusted revenues were down 0.1% to $4.9 billion. Pretax adjusted earnings were $984 million, or 19.1% lower than a year ago.
Aflac U.S. sales increased 11.8% in the quarter to $334 million, reflecting continued improvement from investment in growth initiatives as well as productivity gains. For the first nine months of the year, total new sales increased 15.2% to $938 million.
CORPORATE AND OTHER
For the quarter, total adjusted revenues increased 1.4% to $73 million, primarily due to higher adjusted net investment income from higher interest rates and an increase in amortized hedge income, partially offset by higher tax credits expense and a reduction in total premiums as a result of significant yen weakening. Pretax adjusted earnings were a loss of $59 million, compared with a loss of $41 million a year ago, resulting from higher other adjusted expenses, interest expense, and benefits and claims (including the impact from "deemed hospitalization" benefits), partially offset by slightly higher total adjusted revenue.
For the first nine months, total adjusted revenues decreased 7.8% to $189 million. Pretax adjusted earnings were a loss of $179 million, compared with a loss of $144 million a year ago.
DIVIDEND AND CAPITAL RETURNED TO SHAREHOLDERS
The board of directors declared the fourth quarter dividend of $0.40 per share, payable on December 1, 2022 to shareholders of record at the close of business on November 16, 2022.
In the third quarter, Aflac Incorporated deployed $650 million in capital to repurchase 11.1 million of its common shares. At the end of September 2022, the company had 25.6 million remaining shares authorized for repurchase.
OUTLOOK
Commenting on the company's results, Chairman and Chief Executive Officer Daniel P. Amos stated: "The company generated solid earnings for the first nine months, despite the weakening yen. Pandemic conditions in Japan and the U.S. continued to move toward normalcy, contributing to positive sales growth in both segments in the third quarter and momentum into the fourth quarter.
"Looking at our operations in Japan, sales continued to improve in the quarter with the launch of our new cancer insurance product through agencies in August, generating an increase of 10.2%. Persistency remained strong in the third quarter. We continue to monitor evolving pandemic conditions, as this impacts our ability to meet face-to-face with customers, which continues to be key to a recovery in sales. We believe our benefit ratio will normalize in the fourth quarter given the narrowed scope for "deemed hospitalization" introduced toward the end of the third quarter. Taking these factors into account, we continue to expect stronger sales in the fourth quarter, assuming that productivity continues to improve at Japan Post and that we execute on our product introduction and refreshment plans.
"In the U.S., I am encouraged by the continued improvement in the productivity of our agents and brokers as we enter what is typically our strongest quarter of the year. This led to a strong third quarter that produced an 11.8% increase in sales. We continue to work toward reinforcing our leading position and generating stronger sales for the fourth quarter.
"As always, we are committed to prudent liquidity and capital management. We continue to generate strong investment results while remaining in a defensive position as we monitor evolving economic conditions. In addition, we have taken proactive steps in recent years to defend cash flow and deployable capital against a weakening yen. With the fourth quarter's declaration, 2022 will mark the 40th consecutive year of dividend increases. We treasure our track record of dividend growth and remain committed to extending it, supported by the strength of our capital and cash flows. At the same time, we remain in the market repurchasing shares with a tactical approach, focused on integrating the growth investments we have made in our platform to improve our strength and leadership position."
*See Non-U.S. GAAP Financial Measures section for an explanation of foreign exchange and its impact on the financial statements and definitions of the non-U.S. GAAP financial measures used in this earnings release, as well as a reconciliation of such non-U.S. GAAP financial measures to the most comparable U.S. GAAP financial measures.
ABOUT AFLAC INCORPORATED
Aflac Incorporated (NYSE: AFL) is a Fortune 500 company helping provide protection to more than 50 million people through its subsidiaries in Japan and the U.S., paying cash fast when policyholders get sick or injured. For more than six decades, insurance policies of Aflac Incorporated's subsidiaries have given policyholders the opportunity to focus on recovery, not financial stress. In the U.S., Aflac is the number one provider of supplemental health insurance products1. Aflac Life Insurance Japan is the leading provider of medical and cancer insurance in Japan, where it insures 1 in 4 households. In 2021, Aflac Incorporated was proud to be included as one of the World's Most Ethical Companies by Ethisphere for the 16th consecutive year. Also in 2021, the company was included in the Dow Jones Sustainability North America Index and became a signatory of the Principles for Responsible Investment (PRI). In 2022, Aflac Incorporated was included on Fortune's list of World's Most Admired Companies for the 21st time and Bloomberg's Gender-Equality Index for the third consecutive year. To find out how to get help with expenses health insurance doesn't cover, get to know us at aflac.com or aflac.com/español. Investors may learn more about Aflac Incorporated and its commitment to ESG and social responsibility at investors.aflac.com under "Sustainability."
1 LIMRA 2021 U.S. Supplemental Health Insurance Total Market Report
A copy of Aflac's Financial Analysts Briefing (FAB) supplement for the quarter can be found on the "Investors" page at aflac.com.
Aflac Incorporated will webcast its quarterly conference call via the "Investors" page of aflac.com at 8:00 a.m. (ET) on Tuesday, November 1, 2022.
Note: Tables within this document may not foot due to rounding.
AFLAC INCORPORATED AND SUBSIDIARIES CONDENSED INCOME STATEMENT | ||||||
(UNAUDITED – IN MILLIONS, EXCEPT FOR SHARE AND PER-SHARE AMOUNTS) | ||||||
THREE MONTHS ENDED SEPTEMBER 30, | 2022 | 2021 | % Change | |||
Total revenues | $ 4,820 | $ 5,237 | (8.0) % | |||
Benefits and claims, net | 2,340 | 2,609 | (10.3) | |||
Total acquisition and operating expenses | 1,377 | 1,515 | (9.1) | |||
Earnings before income taxes | 1,103 | 1,113 | (0.9) | |||
Income taxes | (493) | 225 | ||||
Net earnings | $ 1,596 | $ 888 | 79.7 % | |||
Net earnings per share – basic | $ 2.54 | $ 1.33 | 91.0 % | |||
Net earnings per share – diluted | 2.53 | 1.32 | 91.7 | |||
Shares used to compute earnings per share (000): | ||||||
Basic | 629,350 | 668,762 | (5.9) % | |||
Diluted | 631,946 | 671,925 | (5.9) | |||
Dividends paid per share | $ 0.40 | $ 0.33 | 21.2 % | |||
AFLAC INCORPORATED AND SUBSIDIARIES CONDENSED INCOME STATEMENT | ||||||
(UNAUDITED – IN MILLIONS, EXCEPT FOR SHARE AND PER-SHARE AMOUNTS) | ||||||
NINE MONTHS ENDED SEPTEMBER 30, | 2022 | 2021 | % Change | |||
Total revenues | $ 15,492 | $ 16,670 | (7.1) % | |||
Benefits and claims, net | 7,125 | 7,996 | (10.9) | |||
Total acquisition and operating expenses | 4,287 | 4,584 | (6.5) | |||
Earnings before income taxes | 4,080 | 4,090 | (0.2) | |||
Income taxes | 64 | 804 | ||||
Net earnings | $ 4,016 | $ 3,286 | 22.2 % | |||
Net earnings per share – basic | $ 6.28 | $ 4.84 | 29.8 % | |||
Net earnings per share – diluted | 6.25 | 4.82 | 29.7 | |||
Shares used to compute earnings per share (000): | ||||||
Basic | 639,862 | 678,509 | (5.7) % | |||
Diluted | 642,597 | 681,521 | (5.7) | |||
Dividends paid per share | $ 1.20 | $ 0.99 | 21.2 % | |||
AFLAC INCORPORATED AND SUBSIDIARIES CONDENSED BALANCE SHEET | ||||||
(UNAUDITED – IN MILLIONS, EXCEPT FOR SHARE AMOUNTS) | ||||||
SEPTEMBER 30, | 2022 | 2021 | % Change | |||
Assets: | ||||||
Total investments and cash | $ 114,528 | $ 146,004 | (21.6) % | |||
Deferred policy acquisition costs | 8,155 | 9,714 | (16.0) | |||
Other assets | 5,417 | 4,879 | 11.0 | |||
Total assets | $ 128,100 | $ 160,597 | (20.2) % | |||
Liabilities and shareholders' equity: | ||||||
Policy liabilities | $ 86,540 | $ 107,443 | (19.5) % | |||
Notes payable and lease obligations | 7,518 | 8,066 | (6.8) | |||
Other liabilities | 9,890 | 11,536 | (14.3) | |||
Shareholders' equity | 24,152 | 33,552 | (28.0) | |||
Total liabilities and shareholders' equity | $ 128,100 | $ 160,597 | (20.2) % | |||
Shares outstanding at end of period (000) | 623,868 | 662,817 | (5.9) % | |||
NON-U.S. GAAP FINANCIAL MEASURES
This document includes references to the Company's financial performance measures which are not calculated in accordance with United States generally accepted accounting principles (U.S. GAAP) (non-U.S. GAAP). The financial measures exclude items that the Company believes may obscure the underlying fundamentals and trends in insurance operations because they tend to be driven by general economic conditions and events or related to infrequent activities not directly associated with insurance operations.
Due to the size of Aflac Japan, where the functional currency is the Japanese yen, fluctuations in the yen/dollar exchange rate can have a significant effect on reported results. In periods when the yen weakens, translating yen into dollars results in fewer dollars being reported. When the yen strengthens, translating yen into dollars results in more dollars being reported. Consequently, yen weakening has the effect of suppressing current period results in relation to the comparable prior period, while yen strengthening has the effect of magnifying current period results in relation to the comparable prior period. A significant portion of the Company's business is conducted in yen and never converted into dollars but translated into dollars for U.S. GAAP reporting purposes, which results in foreign currency impact to earnings, cash flows and book value on a U.S. GAAP basis. Management evaluates the Company's financial performance both including and excluding the impact of foreign currency translation to monitor, respectively, cumulative currency impacts and the currency-neutral operating performance over time. The average yen/dollar exchange rate is based on the published MUFG Bank, Ltd. telegraphic transfer middle rate (TTM).
The company defines the non-U.S. GAAP financial measures included in this earnings release as follows:
RECONCILIATION OF NET EARNINGS TO ADJUSTED EARNINGS | ||||||
(UNAUDITED – IN MILLIONS, EXCEPT FOR PER-SHARE AMOUNTS) | ||||||
THREE MONTHS ENDED SEPTEMBER 30, | 2022 | 2021 | % Change | |||
Net earnings | $ 1,596 | $ 888 | 79.7 % | |||
Items impacting net earnings: | ||||||
Adjusted net investment (gains) losses | (222) | 172 | ||||
Other and non-recurring (income) loss | (1) | 8 | ||||
Income tax (benefit) expense on items excluded | (648) | (37) | ||||
Adjusted earnings | 725 | 1,031 | (29.7) % | |||
Current period foreign currency impact 2 | 53 | N/A | ||||
Adjusted earnings excluding current period foreign | $ 778 | $ 1,031 | (24.5) % | |||
Net earnings per diluted share | $ 2.53 | $ 1.32 | 91.7 % | |||
Items impacting net earnings: | ||||||
Adjusted net investment (gains) losses | (0.35) | 0.26 | ||||
Other and non-recurring (income) loss | — | 0.01 | ||||
Income tax (benefit) expense on items excluded | (1.03) | (0.06) | ||||
Adjusted earnings per diluted share | 1.15 | 1.53 | (24.8) % | |||
Current period foreign currency impact 2 | 0.08 | N/A | ||||
Adjusted earnings per diluted share excluding | $ 1.23 | $ 1.53 | (19.6) % | |||
1 | Primarily reflects release of $695 million in deferred taxes in the third quarter. |
2 | Prior period foreign currency impact reflected as "N/A" to isolate change for current period only. |
3 | Amounts excluding current period foreign currency impact are computed using the average foreign currency exchange rate for the comparable prior-year period, which eliminates fluctuations driven solely by foreign currency exchange rate changes. |
RECONCILIATION OF NET EARNINGS TO ADJUSTED EARNINGS | ||||||
(UNAUDITED – IN MILLIONS, EXCEPT FOR PER-SHARE AMOUNTS) | ||||||
NINE MONTHS ENDED SEPTEMBER 30, | 2022 | 2021 | % Change | |||
Net earnings | $ 4,016 | $ 3,286 | 22.2 % | |||
Items impacting net earnings: | ||||||
Adjusted net investment (gains) losses | (923) | (216) | ||||
Other and non-recurring (income) loss | (1) | 67 | ||||
Income tax (benefit) expense on items excluded | (501) | 32 | ||||
Adjusted earnings | 2,591 | 3,169 | (18.2) % | |||
Current period foreign currency impact 2 | 147 | N/A | ||||
Adjusted earnings excluding current period foreign | $ 2,738 | $ 3,169 | (13.6) % | |||
Net earnings per diluted share | $ 6.25 | $ 4.82 | 29.7 % | |||
Items impacting net earnings: | ||||||
Adjusted net investment (gains) losses | (1.44) | (0.32) | ||||
Other and non-recurring (income) loss | — | 0.10 | ||||
Income tax (benefit) expense on items excluded | (0.78) | 0.05 | ||||
Adjusted earnings per diluted share | 4.03 | 4.65 | (13.3) % | |||
Current period foreign currency impact 2 | 0.23 | N/A | ||||
Adjusted earnings per diluted share excluding | $ 4.26 | $ 4.65 | (8.4) % | |||
1 | Primarily reflects release of $695 million in deferred taxes in the third quarter. |
2 | Prior period foreign currency impact reflected as "N/A" to isolate change for current period only. |
3 | Amounts excluding current period foreign currency impact are computed using the average foreign currency exchange rate for the comparable prior-year period, which eliminates fluctuations driven solely by foreign currency exchange rate changes. |
RECONCILIATION OF NET INVESTMENT (GAINS) LOSSES TO ADJUSTED NET INVESTMENT (GAINS) LOSSES | ||||||
(UNAUDITED – IN MILLIONS) | ||||||
THREE MONTHS ENDED SEPTEMBER 30, | 2022 | 2021 | % Change | |||
Net investment (gains) losses | $ (199) | $ 171 | (216.4) % | |||
Items impacting net investment (gains) losses: | ||||||
Amortized hedge costs | (28) | (20) | ||||
Amortized hedge income | 19 | 13 | ||||
Net interest cash flows from derivatives associated with certain investment strategies | (26) | (6) | ||||
Interest rate component of the change in fair value of foreign currency swaps on notes payable1 | 13 | 14 | ||||
Adjusted net investment (gains) losses | $ (222) | $ 172 | (229.1) % | |||
1 Amounts are included with interest expenses that are a component of adjusted expenses. | ||||||
RECONCILIATION OF NET INVESTMENT INCOME TO ADJUSTED NET INVESTMENT INCOME | ||||||
(UNAUDITED – IN MILLIONS) | ||||||
THREE MONTHS ENDED SEPTEMBER 30, | 2022 | 2021 | % Change | |||
Net investment income | $ 920 | $ 991 | (7.2) % | |||
Items impacting net investment income: | ||||||
Amortized hedge costs | (28) | (20) | ||||
Amortized hedge income | 19 | 13 | ||||
Net interest cash flows from derivatives associated with certain investment strategies | (26) | (6) | ||||
Adjusted net investment income | $ 885 | $ 978 | (9.5) % | |||
RECONCILIATION OF NET INVESTMENT (GAINS) LOSSES TO ADJUSTED NET INVESTMENT (GAINS) LOSSES | ||||||
(UNAUDITED – IN MILLIONS) | ||||||
NINE MONTHS ENDED SEPTEMBER 30, | 2022 | 2021 | % Change | |||
Net investment (gains) losses | $ (885) | $ (224) | 295.1 % | |||
Items impacting net investment (gains) losses: | ||||||
Amortized hedge costs | (84) | (55) | ||||
Amortized hedge income | 44 | 45 | ||||
Net interest cash flows from derivatives associated with certain investment strategies | (36) | (23) | ||||
Interest rate component of the change in fair value of foreign currency swaps on notes payable1 | 38 | 41 | ||||
Adjusted net investment (gains) losses | $ (923) | $ (216) | 327.3 % | |||
1 Amounts are included with interest expenses that are a component of adjusted expenses. | ||||||
RECONCILIATION OF NET INVESTMENT INCOME TO ADJUSTED NET INVESTMENT INCOME | ||||||
(UNAUDITED – IN MILLIONS) | ||||||
NINE MONTHS ENDED SEPTEMBER 30, | 2022 | 2021 | % Change | |||
Net investment income | $ 2,760 | $ 2,908 | (5.1) % | |||
Items impacting net investment income: | ||||||
Amortized hedge costs | (84) | (55) | ||||
Amortized hedge income | 44 | 45 | ||||
Net interest cash flows from derivatives associated with certain investment strategies | (36) | (23) | ||||
Adjusted net investment income | $ 2,684 | $ 2,875 | (6.6) % | |||
RECONCILIATION OF U.S. GAAP BOOK VALUE TO ADJUSTED BOOK VALUE | ||||||
(UNAUDITED - IN MILLIONS, EXCEPT FOR SHARE AND PER-SHARE AMOUNTS) | ||||||
SEPTEMBER 30, | 2022 | 2021 | % Change | |||
U.S. GAAP book value | $ 24,152 | $ 33,552 | ||||
Less: | ||||||
Unrealized foreign currency translation gains (losses) | (4,455) | (1,760) | ||||
Unrealized gains (losses) on securities and derivatives | 1,102 | 9,700 | ||||
Pension liability adjustment | (158) | (278) | ||||
Total AOCI | (3,511) | 7,662 | ||||
Adjusted book value | $ 27,663 | $ 25,890 | ||||
Add: | ||||||
Unrealized foreign currency translation gains (losses) | (4,455) | (1,760) | ||||
Adjusted book value including unrealized foreign currency translation gains (losses) | $ 23,208 | $ 24,130 | ||||
Number of outstanding shares at end of period (000) | 623,868 | 662,817 | ||||
U.S. GAAP book value per common share | $ 38.71 | $ 50.62 | (23.5) % | |||
Less: | ||||||
Unrealized foreign currency translation gains (losses) per common share | (7.14) | (2.66) | ||||
Unrealized gains (losses) on securities and derivatives per common share | 1.77 | 14.63 | ||||
Pension liability adjustment per common share | (0.25) | (0.42) | ||||
Total AOCI per common share | (5.63) | 11.56 | ||||
Adjusted book value per common share | $ 44.34 | $ 39.06 | 13.5 % | |||
Add: | ||||||
Unrealized foreign currency translation gains (losses) per common share | (7.14) | (2.66) | ||||
Adjusted book value including unrealized foreign currency translation gains (losses) per common share | $ 37.20 | $ 36.41 | 2.2 % | |||
RECONCILIATION OF U.S. GAAP RETURN ON EQUITY (ROE) TO ADJUSTED ROE | ||||
(EXCLUDING IMPACT OF FOREIGN CURRENCY) | ||||
THREE MONTHS ENDED SEPTEMBER 30, | 2022 | 2021 | ||
U.S. GAAP ROE - Net earnings1 | 25.3 % | 10.6 % | ||
Impact of excluding unrealized foreign currency translation gains (losses) | (3.6) | (0.7) | ||
Impact of excluding unrealized gains (losses) on securities and derivatives | 1.9 | 4.0 | ||
Impact of excluding pension liability adjustment | (0.1) | (0.1) | ||
Impact of excluding AOCI | (1.9) | 3.2 | ||
U.S. GAAP ROE - less AOCI | 23.4 | 13.8 | ||
Differences between adjusted earnings and net earnings2 | (12.8) | 2.2 | ||
Adjusted ROE - reported | 10.6 | 16.0 | ||
Less: Impact of foreign currency3 | (0.8) | N/A | ||
Adjusted ROE, excluding impact of foreign currency | 11.4 | 16.0 | ||
1 | U.S. GAAP ROE is calculated by dividing net earnings (annualized) by average shareholders' equity. |
2 | See separate reconciliation of net income to adjusted earnings. |
3 | Impact of foreign currency is calculated by restating all foreign currency components of the income statement to the weighted average foreign currency exchange rate for the comparable prior year period. The impact is the difference of the restated adjusted earnings compared to reported adjusted earnings. For comparative purposes, only current period income is restated using the weighted average prior period exchange rate, which eliminates the foreign currency impact for the current period. This allows for equal comparison of this financial measure. |
RECONCILIATION OF U.S. GAAP RETURN ON EQUITY (ROE) TO ADJUSTED ROE | ||||
(EXCLUDING IMPACT OF FOREIGN CURRENCY) | ||||
NINE MONTHS ENDED SEPTEMBER 30, | 2022 | 2021 | ||
U.S. GAAP ROE - Net earnings1 | 18.7 % | 13.1 % | ||
Impact of excluding unrealized foreign currency translation gains (losses) | (2.3) | (0.7) | ||
Impact of excluding unrealized gains (losses) on securities and derivatives | 3.8 | 5.2 | ||
Impact of excluding pension liability adjustment | (0.1) | (0.1) | ||
Impact of excluding AOCI | 1.4 | 4.3 | ||
U.S. GAAP ROE - less AOCI | 20.0 | 17.3 | ||
Differences between adjusted earnings and net earnings2 | (7.1) | (0.6) | ||
Adjusted ROE - reported | 12.9 | 16.7 | ||
Less: Impact of foreign currency3 | (0.7) | N/A | ||
Adjusted ROE, excluding impact of foreign currency | 13.6 | 16.7 | ||
1 | U.S. GAAP ROE is calculated by dividing net earnings (annualized) by average shareholders' equity. |
2 | See separate reconciliation of net income to adjusted earnings. |
3 | Impact of foreign currency is calculated by restating all foreign currency components of the income statement to the weighted average foreign currency exchange rate for the comparable prior year period. The impact is the difference of the restated adjusted earnings compared to reported adjusted earnings. For comparative purposes, only current period income is restated using the weighted average prior period exchange rate, which eliminates the foreign currency impact for the current period. This allows for equal comparison of this financial measure. |
EFFECT OF FOREIGN CURRENCY ON ADJUSTED RESULTS1 | ||||
(SELECTED PERCENTAGE CHANGES, UNAUDITED) | ||||
THREE MONTHS ENDED SEPTEMBER 30, 2022 | Including Currency Changes | Excluding Currency Changes2 | ||
Net earned premiums3 | (16.5) % | (3.2) % | ||
Adjusted net investment income4 | (9.5) % | (0.8) | ||
Total benefits and expenses | (9.8) | 4.9 | ||
Adjusted earnings | (29.7) | (24.5) | ||
Adjusted earnings per diluted share | (24.8) | (19.6) | ||
1 | Refer to previously defined adjusted earnings and adjusted earnings per diluted share. |
2 | Amounts excluding currency changes were determined using the same foreign currency exchange rate for the current period as the comparable period in the prior year, which eliminates dollar-based fluctuations driven solely from currency rate changes. |
3 | Net of reinsurance |
4 | Refer to previously defined adjusted net investment income. |
EFFECT OF FOREIGN CURRENCY ON ADJUSTED RESULTS1 | ||||
(SELECTED PERCENTAGE CHANGES, UNAUDITED) | ||||
NINE MONTHS ENDED SEPTEMBER 30, 2022 | Including Currency Changes | Excluding Currency Changes2 | ||
Net earned premiums3 | (12.9) % | (3.3) % | ||
Adjusted net investment income4 | (6.6) % | (1.0) | ||
Total benefits and expenses | (8.8) | 1.4 | ||
Adjusted earnings | (18.2) | (13.6) | ||
Adjusted earnings per diluted share | (13.3) | (8.4) | ||
1 | Refer to previously defined adjusted earnings and adjusted earnings per diluted share. |
2 | Amounts excluding currency changes were determined using the same foreign currency exchange rate for the current period as the comparable period in the prior year, which eliminates dollar-based fluctuations driven solely from currency rate changes. |
3 | Net of reinsurance |
4 | Refer to previously defined adjusted net investment income. |
FORWARD-LOOKING INFORMATION
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" to encourage companies to provide prospective information, so long as those informational statements are identified as forward-looking and are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those included in the forward-looking statements. The company desires to take advantage of these provisions. This document contains cautionary statements identifying important factors that could cause actual results to differ materially from those projected herein, and in any other statements made by company officials in communications with the financial community and contained in documents filed with the Securities and Exchange Commission (SEC). Forward-looking statements are not based on historical information and relate to future operations, strategies, financial results or other developments. Furthermore, forward-looking information is subject to numerous assumptions, risks and uncertainties. In particular, statements containing words such as "expect," "anticipate," "believe," "goal," "objective," "may," "should," "estimate," "intends," "projects," "will," "assumes," "potential," "target," "outlook" or similar words as well as specific projections of future results, generally qualify as forward-looking. Aflac undertakes no obligation to update such forward-looking statements.
The company cautions readers that the following factors, in addition to other factors mentioned from time to time, could cause actual results to differ materially from those contemplated by the forward-looking statements:
Analyst and investor contact - David A. Young, 706.596.3264 or 800.235.2667 or dyoung@aflac.com
Media contact - Ines Gutzmer, 762.207.7601 or igutzmer@aflac.com
SOURCE Aflac Incorporated
