Aflac Drops on Sales Slump From U.S. to Japan

Aflac Inc. (AFL), the largest seller of supplemental health insurance, fell the most since February on a slump in U.S. sales.

The insurer slipped 2.8 percent to $61.40 at 9:55 a.m. in New York. The drop was the second-steepest in the 84-company Standard & Poor’s 500 Financials Index.

New annualized premium sales in the U.S. declined 8.2 percent in the second quarter to $334 million, the Columbus, Georgia-based insurer said in a statement late yesterday. In Japan, the company’s largest market, the figure fell 7.7 percent.

“The quarter was disappointing because sales of new insurance both here and in Japan came in, we believe, below Aflac’s expectations,” Eric Berg, an analyst with RBC Capital Markets, said in an investor note. “Sales in both markets have declined in five of the last six quarters on a year-over-year basis.”

Chief Executive Officer Daniel Amos is counting on sales through Japan Post offices to counter a decline through banks in that country. In the U.S., he announced a plan yesterday to revamp the sales force with the creation of the new position of market director. These salaried employees will qualify for performance-related bonuses as Aflac eliminates the commission-based position of state sales coordinator.

“These were individuals who worked as independent contractors, who got paid entirely on commission – and who, Aflac said, in too many cases, had become complacent on their jobs,” according to Berg’s note.

Aflac projected quarterly costs tied to U.S. sales initiatives will be about 2 cents a share, starting in the last three months of this year. Second-quarter net income fell about 8.8 percent to $810 million as gains from investments and derivatives narrowed, and the yen weakened against the dollar.

Genworth Financial Inc., which posted profit yesterday that missed analysts’ estimates, had the biggest slump in the financials index, dropping more than 8 percent.

To contact the reporter on this story: Kelly Gilblom in New York at kgilblom@bloomberg.net

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

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