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Aflac Inc. (NYSE: AFL) reported Wednesday that its second-quarter profit fell 35 percent, mostly due investment losses stemming from the holdings of commercial lender CIT Group Inc.
Aflac, the world’s largest seller of supplemental health insurance, said that its net income declined to $314 million, or 67 cents a share, from $483 million, or $1 a share, the same period a year earlier. The company had realized investment losses of $249 million, about 40 percent tied to CIT debt, Aflac said.
The insurer has dropped about 36 percent in the past year of New York trading on speculation losses on hybrid securities issued by unprofitable European banks would drain assets, according to Bloomberg.
Aflac CEO Daniel Amos said the company is reducing the size of new investments tied to individual companies and diversifying holdings among firms in more industries to reduce potential losses from defaults. The company wrote down investments last year in financial firms including Lehman Brothers Holdings Inc., failed lender Washington Mutual Inc. and Icelandic banks.
Of the investment losses in the quarter, $104 million resulted from CIT holdings, which were sold at the impaired book value, the company said. The insurer also realized $93 million in losses on hybrid securities and $51 million in losses on fixed-maturity securities of Kommunalkredit Austria AG.
Operating income, which excludes some investment results, was $1.20 a share, beating the average $1.14 estimate of 16 analysts surveyed by Bloomberg.
North American insurers posted more than $200 billion of writedowns and unrealized losses tied to the collapse of the mortgage market since the beginning of 2007, with Aflac accounting for $5.2 billion of that total.
Aflac, whose policies supplement work and government-sponsored health-insurance plans, holds hybrid securities in 38 issuers spread across 15 countries in Europe and in
Aflac shares fell $1.57, or 4.3 percent, to $35.03 at the close of New York Stock Exchange composite trading on Wednesday.
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