Aflac Inc.'s shares fell Wednesday after the insurance company reported a disappointing third-quarter profit.
THE SPARK: The company reported after the market closed Tuesday that its net income fell 31 percent as it absorbed the impact of the weaker yen in Japan, where it does a substantial portion of its business.
Aflac earned $1.47 per share on an adjusted basis, falling shy of the $1.48 per share that analysts polled by FactSet had forecast. Its revenue fell 14 percent to $5.89 billion; analysts were expecting $5.9 billion.
THE BIG PICTURE: Aflac said the yen has fallen by more than 20 percent against the dollar compared to a year ago. Because of that, Aflac Japan's premium income grew almost 7 percent in yen, but fell 15 percent in dollars, to $3.7 billion. U.S. premium income rose 3 percent to $1.3 billion.
The company also gave a modest full-year forecast, saying it expects 2014 operating earnings of $6.28 to $6.52 a share. Analysts had been expecting $6.52 a share.
THE ANALYSIS: Raymond James analyst Steven Schwartz downgraded his rating on the company to "Market Perform" from "Outperform" based on the value of the company's shares. Although its stock has sold at a premium to the industry in the past, the analyst said it is not clear that the company should get a premium at its current growth rates. However, he did note that the company's earnings stability is "unparalleled" in the sector.
SHARE ACTION: Aflac shares fell $1.98, a nearly 3 percent drop, to close at $65.02, far outpacing a broader market dip. Its stock price is up roughly 22 percent thus far in 2013.