Aflac Inc., the largest seller of supplemental health insurance, fell the most since 2011 after forecasting profit that fell short of analysts’ estimates.
The insurer declined 3.6 percent to $51.59 at 11:22 a.m. in New York, the fifth-worst performance in the Standard & Poor’s 500 Index. Earlier, the decline was 7.5 percent, the steepest since August 2011. The Columbus, Georgia-based company gave 2013 earnings guidance yesterday after reporting fourth-quarter profit climbed 8 percent to $581 million, or $1.24 a share.
A weaker yen is pressuring results at Aflac, which gets most of its revenue in Japan. Operating profit may be $6.37 to $6.57 a share this year if the yen averages 90 per dollar, Chief Executive Officer Dan Amos said in a statement yesterday. That falls short of the $6.61 average estimate of 21 analysts surveyed by Bloomberg.
“What seems to be going on is that the slowdown in growth that has been under way for years in the U.S. for Aflac and the deterioration in profit margins in Aflac’s flagship Japan business may finally be showing up in lower profitability overall,” Eric Berg, an analyst at RBC Capital Markets, said in a note to clients today.
The yen weakened 10 percent in the fourth quarter to 86.75 per dollar and traded at 93.55 today in New York.
Berg cut his estimate for 2013 earnings per share to $6.45 from $7.04 “largely to reflect the negative impact from weaker yen forecasts.”
Aflac’s operating return on equity has long outstripped other life insurers, which has helped the company command a higher stock price relative to book value, a measure of assets minus liabilities, Berg said. The metric slipped to 21 percent in the fourth quarter from 25 percent in the prior quarter and 23 percent a year earlier.
“It is only one quarter, but it is concerning,” Berg wrote. “Should the ROE be headed down permanently and profoundly, the stock could get hit.”
New annualized premium sales in Japan rose 1.5 percent in the fourth quarter and 31 percent in 2012, Aflac said in the statement. In the U.S., sales rose less than 1 percent in 2012, and are projected to advance as much as 5 percent in 2013.