 |
As in most every year, AFLAC faced challenges in 2003. In Japan, our challenges were to invest effectively and prudently in a low-interest rate environment and to maintain sales momentum as the economy continued to struggle. In the United States, our primary challenge was to implement a plan that would revitalize new annualized premium sales growth, which did not meet our expectations in 2003. Despite facing those challenges, the internal performance measure we use to assess the growth of our business and effectiveness of management was consistent with our expectations for the year.
In terms of net earnings, however, that financial performance was masked by our decision to sell investment securities late in the year at a significant loss. Following disturbing financial developments at Parmalat and several credit ratings downgrades of its debt, we conducted an extensive analysis of our investment in the Italian dairy company. Based on that analysis, we sold all of our holdings in Parmalat at a pretax loss of $257 million. Shortly after that sale, allegations of massive fraud at Parmalat emerged. We also sold our investment in Levi Strauss at a pretax loss of $38 million. In both cases, we concluded these companies no longer fit the profile of investments we want to retain in our portfolio. The after-tax investment losses on Parmalat and Levi Strauss, combined with other investment transactions, reduced net earnings by $191 million in 2003.
Fortunately, our strong capital base was able to withstand sizable investment losses without any impact on our ratings, share repurchase activity, or dividend policy. We purchased 10.2 million shares of our stock last year. And in February 2004, the board of directors authorized the repurchase of up to an additional 30 million shares. That same strong capital base allowed us to increase the cash dividend twice in 2003. Last year was the 21st consecutive year we increased the cash dividend. And cash dividends paid per share in 2003 were 30.4% higher than in 2002.
Although Japan’s economy showed signs of improvement in 2003, it remained relatively weak overall. And while investment yields improved in the second half of 2003, they also remained low. Consumer spending failed to significantly improve as worries about job security persisted. But amid these concerns, AFLAC Japan produced strong results. New annualized premium sales once again exceeded our expectations. We produced solid topline growth in yen terms and our margins continued to improve.
|
|
