Aflac Inc., the largest seller of supplemental health insurance, said fourth-quarter profit climbed 8 percent on improved investing results.
Net income rose to $581 million, or $1.24 a share, from $538 million, or $1.15, a year earlier, the Columbus, Georgia- based company said today in a statement. Operating profit, which excludes some investment results, was $1.48 a share, matching the average estimate of 21 analysts in a Bloomberg survey.
Chief Investment Officer Eric Kirsch has favored U.S. corporate bonds over low-yielding Japanese government debt to boost returns on the portfolio backing obligations in Japan. Aflac, which uses a talking duck mascot to sell policies, counts Japan as its largest market.
“The main risk in the stock is how do you find something decent to do with all that money that you’re collecting,” said Bill Smead, chief investment officer of the $164.4 million Smead Value Fund, which has Aflac among its largest holdings. “They’ve got a very effective guy overseeing that.”
Kirsch, 52, was hired from Goldman Sachs Group Inc. in 2011 to revamp Aflac’s investments after bets on European banks soured. He added Lori Evangel from MetLife Inc. as chief risk officer last month, and said in December he may hire 15 to 30 people this year to help handle the portfolio of more than $120 billion.
Net realized investment losses were $111 million, compared with net losses of $146 million a year earlier. The insurer took impairments on securities from the Republic of Tunisia and Italian lender UniCredit SpA, according to the statement.
The shares gained 23 percent last year, the most since 2007. Profit in 2012 was $2.9 billion, up from $1.9 billion a year earlier.
Aflac gets most of its premium revenue in Japan and converts results from yen to dollars for reporting purposes. The yen weakened 10 percent in the fourth quarter to 86.75 per dollar, and traded at 93.52 at 4 p.m. in New York.
If the yen averages 90 per dollar this year, full-year operating profit may be $6.37 to $6.57 per share, Chief Executive Officer Dan Amos said in the statement. That forecast falls short of the $6.61 average estimate of 21 analysts surveyed by Bloomberg. Aflac fell 1.8 percent to $52.51 at 4:34 p.m. in New York.
“I would point out that 2013 earnings comparisons to 2012 will be more difficult because earnings in 2012 were significantly better than we originally anticipated,” Amos said in the statement.
New annualized premium sales in Japan rose 1.5 percent in the fourth quarter and 31 percent in 2012. In the U.S., sales rose less than 1 percent in 2012, and are projected to advance as much as 5 percent in 2013.
Operating earnings in 2012 were $6.60 per share, and Amos said in October that the figure would rise 4 percent to 7 percent in 2013, not accounting for currency fluctuations. The yen averaged about 80 per dollar in 2012. Book value, a measure of assets minus liabilities, rose to $34.16 per share as of Dec. 31 from $34.10 three months earlier.
Aflac said it will buy back $400 million to $600 million of shares this year. The firm repurchased $100 million in the fourth quarter of 2012.
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