Aflac (TG:AFL)
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Aflac Inc.'s (AFL) first-quarter net income rose 20% as the supplemental insurer increased its income in its U.S. and Japanese businesses and was able to manage its net investment losses for the quarter.

Meanwhile, the company issued second-quarter guidance slightly below analysts' expectations.

The company reported first-quarter net income of $569 million, or $1.22 a share, up from $474 million, or 98 cents a share, a year earlier.

Aflac's stock has been recovering during the recent broad market rally, particularly after Standard & Poor's recently said the company's ratings were no longer on watch for a downgrade.

Aflac's first-quarter investment performance will likely hold off negative ratings actions, for now at least. After affirming its ratings last week, S&P said it would likely downgrade Aflac if losses reduce its net statutory capital too much.

Aflac took $42 million in impairment charges on its nearly $8 billion in so-called hybrid securities holdings. Those securities, perpetual debentures issued by mostly European Union banks, have been downgraded along with the banks that issued them, raising fears that dividends on the securities could be eliminated in a bank takeover.

Aflac estimated its risk-based capital ratio stood at 479% at the end of the quarter, up slightly from 476.5% at the end of 2008.

Aflac reported gross unrealized investment losses of $5.9 billion, compared with $4.1 billion at the end of the year.

Revenue rose 13% to $4.82 billion.

Analysts polled by Thomson Reuters expected earnings of $1.16 a share on revenue of $4.77 billion.

Premium income in yen grew by 3.6% in the company's large Japanese operations. Reflecting the stronger yen, premium income in dollars increased 17% to $3 billion.

Aflac U.S. posted a 5% increase in total premium income to $1.1 billion. Total revenue in the U.S. grew by 4.7% to $1.2 billion.

The company also reiterated that it expects 2009 sales in the U.S. and Japan to be flat to up 5%, though "continued or further economic weakness would likely result in a need to revisit those targets," said Daniel P. Amos, Aflac's chief executive, in a press release.

Meanwhile, Aflac also said that it expects 2009 operating earnings per share to be at the low end of its target of 13% to 15% growth target, assuming the same average exchange rate as last year. An increase of 13% in operating earnings equates to $4.51 a share.

The company previously said it expected 2009 earnings of $4.51 to $4.59, excluding the effect of the yen.

For the second quarter, Aflac expects operating earnings of $1.11 to $1.14 a share, slightly below analysts' latest estimate for earnings of $1.15.

The company declared a second-quarter dividend of 28 cents a share, a 4-cent increase from the previous quarter, and said it does not expect to buy back any shares in 2009.

Shares closed Wednesday at $29.13 and dropped 1.3% to $28.75 in after-market trading.

-By Lavonne Kuykendall, Dow Jones Newswires; 312-750-4141; lavonne.kuykendall@dowjones.com

-By Jennifer Hoyt, Dow Jones Newswires; 201-938-2474; jennifer.hoyt@dowjones.com