NU Online News Service, Oct. 22, 2003, 6:01 p.m. EDT – AFLAC Inc., Columbus, Ga., says an adjustment to the value of the swaps it uses for hedging purposes cut its third quarter net income 1%.

AFLAC, which sells life insurance and a variety of supplemental life and health insurance products, is reporting $237 million in net income for the latest quarter on $2.9 billion in revenue, compared with $240 million in net income on $2.7 billion in revenue for the third quarter of 2002.

Operating income, which excludes the effects of investment losses and accounting adjustments, increased to $245 million, from $210 million.

AFLAC depends heavily on the sale of cancer insurance and other products in Japan. Statement of Financial Accounting Standards Number 133 requires AFLAC to adjust its net income to reflect fluctuations in the value of the interest rate component of cross-currency swaps that the company uses to buffer some of its corporate notes against changes in exchange rates.

The latest SFAS 133 adjustment cost AFLAC $2 million. The SFAS 133 adjustment for the third quarter of 2002 added $33 million to AFLAC’s net income. If AFLAC did not have to make the SFAS adjustments, its third quarter earnings would be 15% higher than its earnings for the third quarter of 2002.

Sales in the United States were softer than the company had hoped, but sales of a new stand-alone medical insurance policy in Japan increased 71%, to the equivalent of $234 million, AFLAC says.