Aflac Inc., the largest seller of supplemental health insurance, posted profit that beat analysts’ estimates as its Japan unit invested more funds in dollar- denominated securities. The insurer raised its dividend 5.4 percent.
Third-quarter net income climbed 0.6 percent to $706 million, or $1.56 a share, from $702 million, or $1.50, a year earlier, the Columbus, Georgia-based insurer said yesterday in a statement. Operating profit, which excludes some investing results, was $1.51 a share, eight cents more than the average estimate of 19 analysts surveyed by Bloomberg.
Aflac is working to boost investment income, which has been pressured by interest rates near record lows. The insurer hired Chief Investment Officer Eric Kirsch from Goldman Sachs Group Inc. in 2011 and has shifted some investments from Japanese government debt to U.S. corporate bonds.
“Aflac Japan, our largest earnings contributor, generated strong financial results,” Chief Executive Officer Dan Amos said in yesterday’s statement.
The shares rose 2 percent to $60.71 at 4:55 p.m. yesterday in late trading in New York. The shares fell 11 percent this year through the close of regular trading, compared with the 7.4 percent advance of the Standard & Poor’s 500 Index.
Amos, 63, has worked to reverse sales slumps in the U.S. and in Japan, where Aflac does about three-quarters of its business. A decline in the yen weighed on profits as the insurer converts results from the Japanese currency to U.S. dollars for reporting purposes.
Investment income in Japan increased 7.8 percent as Aflac directed more funds to dollar-denominated assets, the insurer said. In the U.S, investment income increased 1.6 percent, Aflac said.
New annualized premium sales fell 21 percent in Japan, while declining less than 1 percent in the U.S.
Aflac has “faced a more challenging climate in Japan,” Tom Gallagher, an analyst at Credit Suisse Group AG, said in a research note before results were announced. “Meanwhile, the U.S. is dealing with a restructuring of its sales management, which may lead to further weakness in sales and revenues.”
To boost sales in Japan, Aflac struck a deal to offer coverage through Japan Post offices. In the U.S., the insurer is revamping its sales force by eliminating the position of state sales coordinator in favor of salaried market directors.
Aflac increased its quarterly dividend to 39 cents a share from 37 cents, and said it expects to repurchase $1.3 billion of stock next year.
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