Aflac sidestepped a natural disaster in its biggest market and a potential public relations nightmare to better its core earnings, but overall first-quarter profit suffered from losses in its investment portfolio.
The Columbus-based supplemental insurer reported Wednesday operating profit grew nearly 16 percent to $771 million for the first quarter vs. $666 million in the quarter a year ago.
Net income in the first quarter dropped 38 percent to $395 million, including $376 million in investment losses in Greek banks. Earnings per diluted share were 84 cents vs. $1.35 in first quarter 2010.
Aflac, which sells products such as cancer and supplemental life insurance, generates about three-fourths of its revenue from Japan. The island nation was stricken by an earthquake and tsunami last month that killed thousands.
The net impact of the disaster to Aflac during the first quarter was $12 million. This included a $37 million provision related to disaster claims, offset by $25 million in reserve releases and reinsurance.
Revenue ticked up 1 percent across Aflac’s network to $5.12 billion.
One in four Japanese households buys Aflac insurance products, and the company has 5,000 employees there.
Damage to a key nuclear power facility stoked health fears among the Japanese public. At first, Wall Street was jittery, too, causing an initial 10 percent drop to Aflac’s stock price, which has since partially rebounded. Aflac doesn't insure property, and its life and health insurance policies are relatively small.
The company largely avoided fallout from insensitive remarks on Twitter about the disaster by Gilbert Gottfried, the comedian and U.S. voice to its iconic duck mascot. The company fired Gottfried, whose voice never appeared in Japan, and this week named a Minnesota radio station sales manager as his replacement.
“With one quarter of the year complete, we continue to believe we are positioned for another year of solid financial performance,” Aflac Chairman and CEO Dan Amos said in an earnings statement.
The company said it expects operating earnings of $1.51 to $1.57 per diluted share in the second quarter. Earnings estimates next year are expected to be lower than full year 2011 predictions.
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