Aflac, the world's largest seller of supplemental disability insurance, sold its Greek sovereign debt holdings and reduced exposure to hybrid securities, easing investor fears about the company's exposure to risky assets.
Shares of the Columbus, Georgia-based company rose as much as 6 percent to $46.20 Monday on the New York Stock Exchange. The Dow Jones U.S. Life Insurance index rose about a percent to 434.34.
Aflac shares dropped significantly earlier last year, as worries over its risky investments in hybrid securities, which have characteristics of both stocks and bonds, issued by European banks grew wider.
On Monday, Aflac said it sold its entire holdings of Greek sovereign debt, totaling $270 million of par value, and exchanged a risky hybrid security for a higher-rated, fixed maturity debt instrument.
Aflac also reduced its risky European holdings through a privately negotiated deal with another European issuer.
The moves lowered the company's exposure to perpetual securities -- securities with no maturity date -- by $725 million of par value, or 8.4 percent of total perpetual securities at March 31, 2010, Aflac said in a statement.
The company still has exposure of $7.9 billion to hybrid securities at par value, company spokeswoman Laura Kane said.
Aflac is the only major U.S. insurer with significant exposure to Greek debt. It invests worldwide in more sovereign bonds than any other insurance company.
A majority of Aflac's profit comes from its Japan unit, which has grown significantly in the recent past. It competes with American International Group's Alico unit, which is getting sold to MetLife.
The company's exposure to troubled euro zone economy Italy stood at $269 million, while that to Spain was $355 million as of March 31, spokeswoman Kane said in an email.
In contrast, Aflac's main rival Unum Group has no sovereign exposure to Greece, although it has $50 million in bank papers in the euro zone, excluding Greece, a spokesman told Reuters earlier this year.
Although the latest deals resulted in losses on a statutory accounting basis, they are likely to add about 20 points to its risk-based capital ratio, Chief Financial Officer Kriss Cloninger said.
"We continue to believe our objectives of increasing operating earnings per diluted share 9 percent to 12 percent in 2010 and 8 percent to 12 percent in 2011, before the impact of currency translation, are achievable," Cloninger said.
Aflac sees a second-quarter charge of $67 million from selling Greek debt, and a realized gain of about $80 million from reduced exposure to hybrid debt in the same period.
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