Aflac Inc. (AFL), the largest seller of supplemental health insurance, said third-quarter profit rose 36 percent as the company sold Japanese debt as part of a program to boost investment returns.
Net income increased to $1 billion, or $2.16 a share, from $736 million, or $1.57, a year earlier, the Columbus, Georgia- based firm said yesterday. Operating income, which excludes some investment results, was $1.77 a share, beating the $1.66 average estimate of 18 analysts in a Bloomberg survey. Sales of Japanese government bonds added $192 million to profit.
Chief Investment Officer Eric Kirsch is revising the portfolio after losses on European holdings. Kirsch, 52, who joined Aflac from Goldman Sachs Group Inc. (GS) last year, said in September he’s purchasing dollar-denominated corporate bonds, decreasing the allocation to Japanese government debt and avoiding private European assets to improve the return on investments.
“Our recently employed U.S. corporate bond program has been an effective means for enhancing our new money yields in Japan,” Chief Executive Officer Dan Amos said in a statement yesterday. The strategy “increases the opportunities to diversify the investment of our significant cash flows.”
Aflac reported net realized investment gains of $186 million, mostly from sales of Japanese government debt. That compares with net losses of $34 million a year earlier, when the insurer booked impairments on holdings of Brussels-based Dexia SA and BAWAG Capital Finance Jersey.
Aflac declared a quarterly dividend of 35 cents a share, a 6.1 percent increase from the 33-cent payout of the past four quarters. That missed the Bloomberg Dividend Forecast for a 3- cent boost to 36 cents.
The insurer, which uses a talking-duck mascot in television advertisements, rose 1.5 percent to $50.40 at 5:30 p.m. in extended trading yesterday in New York. Shares gained 15 percent this year through the end of regular trading, matching the increase of the 24-company KBW Insurance Index. (KIX)
Aflac gets most of its premium revenue in Japan and converts results from yen to dollars for reporting purposes. Japan sales will rise as much as 35 percent this year, Aflac said, boosting a July forecast for sales gains of 20 percent to 25 percent.
New annualized premium sales in Japan jumped 32 percent in the third quarter after rising 47 percent in the second quarter, the insurer said.
Fourth-quarter sales in Japan will be “‘somewhat suppressed,’’ rising as much as 15 percent, Amos said in the statement. U.S. sales will be little changed, he said.
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