Aflac 2007 Annual Report Download - page 48

44 There’s Only One Aflac
and 2005 were impacted by the bond swaps we executed from
the third quarter of 2005 through the second quarter of 2006.
Financing Activities
Consolidated cash used by financing activities was $655
million in 2007, $434 million in 2006 and $196 million in
2005. In June 2007, we received $242 million in connection
with the Parent Company’s issuance of yen-denominated
Samurai notes, and we paid $242 million in connection with
the maturity of the 2002 Samurai notes. In June 2006, the
Parent Company paid $355 million in connection with the
maturity of the 2001 Samurai notes. In September 2006, the
Parent Company received $382 million from its issuance of
yen-denominated Uridashi notes. In October 2005, we paid
$261 million in connection with the maturity of the 2000
Samurai notes. In July 2005, the Parent Company received
$360 million from its issuance of yen-denominated Samurai
notes. Cash returned to shareholders through treasury stock
purchases and dividends was $979 million in 2007, compared
with $728 million in 2006 and $647 million in 2005.
The following tables present a summary of treasury stock
activity during the years ended December 31.
On February 4, 2008, we entered into an agreement for an
accelerated share repurchase (ASR) program with an affiliate
of Merrill Lynch, Pierce, Fenner & Smith Incorporated (Merrill
Lynch). Under the agreement, we purchased 12.5 million
shares of our outstanding common stock at $60.58 per share
for a total purchase price of $757 million. The repurchase was
funded with internal capital. The shares were acquired as a
part of previously announced share repurchase authorizations
by our board of directors and will be held in treasury. Under
the agreement, Merrill Lynch plans to purchase shares of our
common stock in the open market from time to time until it
has acquired a number of shares equivalent to the number of
shares we purchased from Merrill Lynch. At the end of this
period, we may receive, or may be required to remit, a
purchase price adjustment based upon the volume weighted-
average price of our common stock during the ASR program
period. Under the terms of the ASR we may elect to receive
or pay any settlement amount in cash or shares of our
common stock at our option. The completion and settlement
of the ASR program is expected to occur during the second
quarter of 2008, although the settlement may occur before
the second quarter at Merrill Lynch’s option.
Cash dividends paid in 2007 of $.80 per share increased 45.5%
over 2006. The 2006 dividend paid of $.55 per share increased
25.0% over 2005. The following table presents the sources of
dividends to shareholders for the years ended December 31.
Regulatory Restrictions
Aflac is domiciled in Nebraska and is subject to its regulations.
The Nebraska insurance department imposes certain
limitations and restrictions on payments of dividends,
management fees, loans and advances by Aflac to the Parent
Company. The Nebraska insurance statutes require prior
approval for dividend distributions that exceed the greater of
the net gain from operations, which excludes net realized
investment gains, for the previous year determined under
statutory accounting principles, or 10% of statutory capital and
surplus as of the previous year-end. In addition, the Nebraska
insurance department must approve service arrangements and
other transactions within the affiliated group of companies.
These regulatory limitations are not expected to affect the
level of management fees or dividends paid by Aflac to the
Parent Company. A life insurance company’s statutory capital
and surplus is determined according to rules prescribed by the
NAIC, as modified by the insurance department in the
insurance company’s state of domicile. Statutory accounting
rules are different from GAAP and are intended to emphasize
policyholder protection and company solvency.
The continued long-term growth of our business may require
increases in the statutory capital and surplus of our insurance
operations. Aflac’s insurance operations may secure additional
statutory capital through various sources, such as internally
generated statutory earnings or equity contributions by the
(In millions) 2007 2006 2005
Dividends paid in cash $ 373 $ 258 $ 209
Dividends declared but not paid (91) 91 –
Dividends through issuance of treasury shares 19 15 11
Total dividends to shareholders $ 301 $ 364 $ 220
Treasury Stock Purchased
(In millions of dollars and thousands of shares) 2007 2006 2005
Treasury stock purchases $ 606 $ 470 $ 438
Shares purchased:
Open market 11,073 10,265 10,000
Other 559 55 245
Total shares purchased 11,632 10,320 10,245
Treasury Stock Issued
(In millions of dollars and thousands of shares) 2007 2006 2005
Stock issued from treasury $47 $42 $50
Shares issued 2,723 2,783 3,637