Aflac Declines as Earnings Miss on Japan Sales

Aflac Inc. (AFL), the largest provider of supplemental health insurance, declined the most in six months after third-quarter profit fell and sales disappointed analysts.

Aflac dropped $2 or 3 percent to $65 at 9:36 a.m. in New York. The slump pared the Columbus, Georgia-based insurer’s gain for the year to 22 percent.

Third-quarter net income dropped 31 percent to $702 million, the company said in a statement late yesterday. Operating profit, which excludes some investment results, was $1.47 a share, missing by one cent the average estimate of 21 analysts in a Bloomberg survey.

The insurer has been hurt by “the lack of a new, blockbuster product that can propel growth in Japan for several quarters more,” RBC Capital Markets analysts led by Eric Berg said today in a note to investors. “It is also discouraging that there does not seem to be any turnaround under way in the U.S business despite the sluggish but nonetheless real improvement in the U.S. economy.”

New annualized premium sales in Japan fell 42 percent in the quarter to 32.4 billion yen ($330 million). In the U.S., sales fell 1.5 percent to $330 million. The insurer reached a deal in July with Japan Post to sell policies in as many as 20,000 post offices.

“It will take time for sales volumes to be meaningfully impacted” by the arrangement in Japan, the company’s largest market, Sandler O’Neill & Partners LP analysts led by Ed Shields said in a note yesterday.

Aflac yesterday projected 2014 earnings of $6.28 to $6.52 a share. That compares with the Sandler analysts’ estimate of $6.50.

“This guidance may disappoint investors,” they wrote.

To contact the reporters on this story: Marci Jacobs in New York at mjacobs63@bloomberg.net; Noah Buhayar in New York at nbuhayar@bloomberg.net

To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net

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