Aflac Posts Quacking Good Results

By Steve Tuckey

October 25, 2005 at 08:00 PM

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Robust Japan sales and cost savings helped fuel a 55% rise in net earnings at Aflac Inc.[@@]

Aflac, Columbus, Ga., an insurer that sells supplemental life and health products, is reporting $455 million in net income on $3.7 billion in revenue, up from $293 million in net income on $3.3 billion in revenue for the third quarter of 2004.

Net results for the latest quarter include $89 million in gains realized on investments sold or re-valued during the quarter. That compares with $5 million in net investment losses posted during the third quarter of 2004.

Analysts say earnings at Aflac, which is best known for selling cancer insurance in Japan and creating the Aflac Duck, beat their expectations.

Sales in Japan increased 8.2% between the third quarter of 2004 and the latest quarter.

Suneet Kamath, a senior life insurance analyst at Sanford C. Bernstein & Company L.L.C. New York, says the sales increase in Japan beat his firm's forecast of 8% growth.

Because sales and profits appear to be higher than Aflac had expected in Japan, Aflac operations in Japan probably "will spend even more on advertising in the fourth quarter of this year," Kamath writes.

Hurricanes Katrina and Rita shaved about 1% off the growth rate in the U.S., which came in at 10%, Kamath says.

Jason Zucker, an analyst at Fox-Pitt, Kelton, New York, is welcoming Aflac's introduction of a vision care product in the United States.

The vision care product seems to be popular with Aflac's sales force, Zucker says.

If the new vision care product is as successful as the dental product Aflac introduced 5 years ago has been, the vision care product should have a big effect on 2006 U.S. sales, Zucker says.

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