Aflac 2008 Annual Report Download - page 54

50 Aflac Incorporated Annual Report for 2008
Prudent portfolio management dictates that we attempt to
match the duration of our assets with the duration of our
liabilities. Currently, when our debt and perpetual securities
mature, the proceeds may be reinvested at a yield below
that required for the accretion of policy benefit liabilities on
policies issued in earlier years. However, the long-term nature
of our business and our strong cash flows provide us with the
ability to minimize the effect of mismatched durations and/
or yields identified by various asset adequacy analyses. When
market opportunities arise, we dispose of selected debt and
perpetual securities that are available for sale to improve the
duration matching of our assets and liabilities, improve future
investment yields, and/or rebalance our portfolio. As a result,
dispositions before maturity can vary significantly from year to
year. Dispositions before maturity were approximately 4% of
the annual average investment portfolio of debt and perpetual
securities available for sale during the years ended December
31, 2008 and 2007 and 7% during the year ended December
31, 2006. Dispositions before maturity in 2006 were impacted
by the bond swaps we executed in the first half of 2006.
Financing Activities
Consolidated cash used by financing activities was $1.4 billion
in 2008, $655 million in 2007 and $434 million in 2006. 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. Cash returned to shareholders through treasury
stock purchases and dividends was $1.9 billion in 2008,
compared with $979 million in 2007 and $728 million in 2006.
In April 2009, our $450 million senior notes will mature. We
plan to either refinance, subject to market conditions, or use
existing cash to pay off the aforementioned senior notes.
We have no restrictive financial covenants related to our notes
payable. We were in compliance with all of the covenants of
our notes payable at December 31, 2008.
The following tables present a summary of treasury stock
activity during the years ended December 31.
Under share repurchase authorizations from our board of
directors, we purchased 23.2 million shares of our common
stock in 2008, funded with internal capital. The total 23.2
million shares comprised 12.5 million shares purchased
through an affiliate of Merrill Lynch, Pierce, Fenner &
Smith Incorporated (Merrill Lynch) and 10.7 million shares
purchased through Goldman, Sachs & Co. (GS&Co.).
On February 4, 2008, we entered into an agreement for an
accelerated share repurchase (ASR) program with Merrill
Lynch. Under the agreement, we purchased 12.5 million
shares of our outstanding common stock at $60.61 per share
for an initial purchase price of $758 million. The shares were
acquired as a part of previously announced share repurchase
authorizations by our board of directors and are held in
treasury. The ASR program was settled during the second
quarter of 2008, resulting in a purchase price adjustment of
$40 million, or $3.22 per share, paid to Merrill Lynch based
upon the volume-weighted average price of our common
stock during the ASR program period. The total purchase price
for the 12.5 million shares was $798 million, or $63.83 per
share.
On August 26, 2008, we entered into an agreement for a
share repurchase program with GS&Co. Under the agreement,
which had an original termination date of February 18, 2009,
we paid $825 million to GS&Co. for the repurchase of a
variable number of shares of our outstanding common stock
over the stated contract period. On October 2, 2008, due
to market conditions, we took early delivery of 10.7 million
shares, which we hold in treasury, at a total purchase price of
$683 million, or $63.87 per share. We also received unused
funds of $142 million from GS&Co.
As of December 31, 2008, a remaining balance of 32.4 million
shares were available for purchase; 2.4 million shares are the
remainder from a board authorization in 2006 and 30.0 million
shares were authorized by the board of directors for purchase
in January 2008. We do not plan to purchase any shares of our
common stock during the first half of 2009; however, we will
evaluate the market and our capital position to determine if
we will purchase any shares in the second half of the year.
Cash dividends paid in 2008 of $.96 per share increased 20.0%
over 2007. The 2007 dividend paid of $.80 per share increased
45.5% over 2006. The table at the top of the following page
presents the sources of dividends to shareholders for the years
ended December 31.
Treasury Stock Purchased
(In millions of dollars and thousands of shares) 2008 2007 2006
Treasury stock purchases $ 1,490 $ 606 $ 470
Shares purchased:
Open market 23,201 11,073 10,265
Other 146 559 55
Total shares purchased 23,347 11,632 10,320
Treasury Stock Issued
(In millions of dollars and thousands of shares) 2008 2007 2006
Stock issued from treasury $ 32 $ 47 $ 42
Shares issued 2,001 2,723 2,783