Aflac Inc.’s (NYSE:AFL) first-quarter 2017 earnings of $1.67 per share surpassed the Zacks Consensus Estimate by 3.09% but decreased 3.5% year over year.
Total revenues decreased 2.6% year over year to $5.3 billion and fell short of the Zacks Consensus Estimate of $5.55 billion.
The decrease in revenue and net earnings was due to realized gains and losses in the year go quarter and lower premium and investment income in the Japan segment which has been suffering due to a prolonged low-interest-rate environment.
Segments Results
At its Japan segment, premium income, net of reinsurance agreements, increased 0.5% year over year to $3.2 billion. Net investment income, which includes amortized hedge costs on foreign investments, decreased 5.4% year over year to $557 million.
Total revenue declined slightly by 0.4% year over year to $3.8 billion. Pretax operating earnings decreased 4.7% to $769 million.
Given the company’s efforts to change its product mix by emphasizing sale of third sector products and reducing the sale of first sector products (having high sensitivity to interest rates), sales from the former increased 7.6% year over year, while that for the other decreased 29.2%. The company expects long-term compound annual growth rate for third sector product sales in the range of 4% to 6%.
The company’s U.S. segment benefited from recent investments. This drove a 1.7% year-over-year increase in premium income to $1.4 billion in the first quarter. Net investment income increased 2.0% year over year to $178 million.
Total revenues increased 1.7% to $1.6 billion. The pretax operating profit margin for the U.S. segment was 19.7%, down 180 basis points year over year. In this segment, the company expects a long-term compound annual growth rate of 3% to 5% in new annualized premium sales.
Dividend and Financial Update
The company spent $600 million on buying back shares. At the end of the first quarter, the company had 18.3 million shares available for purchase under its share repurchase authorization.
Shareholders' equity was $17.7 billion at Mar 31, 2017, up 3.5% year over year.
The company announced 43 cents quarterly dividend which will be paid on Jun 1, 2017, to shareholders of record at the close of business on May 24, 2017.
Guidance
The company expects to buy back $1.3–$1.5 billion worth shares in 2017. The company reiterated its 2017 earnings guidance at $6.40 to $6.65, assuming an average exchange rate of 108.70 yen to the dollar in 2016. If the yen averages 105 to 115 to the dollar in the second quarter, operating earnings, a non-U.S. GAAP measure, will be approximately $1.55 to $1.70 per diluted share.
Zacks Rank and Other Releases
Aflac carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Among other companies that have reported from the same space, Amerisafe Inc. (NASDAQ:AMSF) delivered an earnings miss of 21.11% in the first quarter, while Unum Group (NYSE:UNM) and Employers Holdings Inc. (NYSE:EIG) beat estimates by 1.96% and 11.76%, respectively.
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Aflac Incorporated (AFL): Free Stock Analysis Report
Unum Group (UNM): Free Stock Analysis Report
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Employers Holdings Inc (EIG): Free Stock Analysis Report
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