AFLAC Incorporated : Aflac Hires Goldman, McKinsey To Consult On Investment Overhaul
02/01/2012| 11:10am US/Eastern
By Erik Holm
The new chief investment officer at Aflac Inc. (>> AFLAC Incorporated) said the insurer has brought in consultants from Goldman Sachs Group Inc. (>> Goldman Sachs Group, Inc.) and McKinsey & Co. as it looks to overhaul its $100 billion investment portfolio.
The insurer, which has already sold billions of dollars of European securities, is looking to further reduce its exposure to Europe and broaden its holdings elsewhere, Chief Investment Officer Eric Kirsch said on a conference call with analysts and investors Wednesday.
The newly announced review comes as Aflac took another hit to its investment portfolio in the fourth quarter, recording $522 million in after-tax realized investment losses. The losses were primarily writedowns of European securities Kirsch and his team hope to sell, and were offset somewhat by $355 million in realized gains.
The new charges caught some analysts off guard. Aflac had promised earlier this year that realized losses from the company's efforts to reduce exposure to Europe were "largely behind us."
But that was before the company brought in Kirsch on Nov. 1. On Wednesday's conference call, Kirsch and Chief Executive Officer Dan Amos said Aflac still hoped to reduce overall European holdings and, in the fourth quarter, had called a halt to any new investments in Europe.
Despite efforts to reduce its European exposure since 2008, Aflac's European holdings are significantly higher than other U.S. insurers.
Kirsch had previously worked as global head of insurance asset management at Goldman Sachs Asset Management, the unit he will be consulting for at Aflac.
He and the Goldman consultants are conducting a "strategic asset allocation exercise," he said, which will take a "broad look at all the investment opportunities that are appropriate for an insurance company" like Aflac, which has operations in Japan and the U.S.
Aflac and Goldman are looking for "a broader set of asset classes and investment opportunities that we can use in the future--that have not been used historically at Aflac--which will help us improve the overall quality of the earnings of our portfolio," Kirsch said.
Management consultants from McKinsey, meanwhile, are doing "a strategic review of our investment capabilities on a global basis," including in Japan and the company's headquarters in Columbus, Ga., he said.
McKinsey's work should be done around the end of next month, while Goldman's should conclude in about five months, Kirsch said.
He said the consultants the company had hired could "potentially becomes outsourcing partners."
In recent trading, Aflac shares were down $1.29, or 2.67%, at $46.94.
-By Erik Holm, Dow Jones Newswires; 212-416-2892;