Aflac's split quarter: net earnings up 37.7%, adjusted earnings down 7.7% as yen weighs
The yen averaged 159.45 to the dollar in the second quarter, 9.3% weaker than a year earlier, and for cross-border supplemental insurers that exchange rate is not a footnote. Aflac Incorporated (NYSE: AFL) reported results on…
Key takeaways
- Aflac reported August 6 results showing net earnings up 37.7% to $825 million while adjusted earnings fell 7.7% to $883 million as a weaker yen weighed on results.
- The yen averaged 159.45 to the dollar in the second quarter, 9.3% weaker than a year earlier, costing $0.05 per share in adjusted earnings.
- Japan's pretax adjusted margin widened to 34.3% from 32.0% on lower claims, though net earned premiums in yen fell 3.7%.
- The US segment's pretax adjusted earnings fell 4.6% to $370 million as its margin contracted to 20.9% from 22.5% due to higher claims.
- Aflac returned $1.3 billion to shareholders in the quarter, including $983 million through buybacks, and declared a third-quarter dividend of $0.61 per share.
The yen averaged 159.45 to the dollar in the second quarter, 9.3% weaker than a year earlier, and for cross-border supplemental insurers that exchange rate is not a footnote. Aflac Incorporated (NYSE: AFL) reported results on August 6 that show the split plainly: net earnings climbed to $825 million while adjusted earnings fell 7.7% to $883 million.
The gap between those two figures starts with investment accounting. Investment losses shrank to $153 million from $421 million a year ago, lifting the reported net earnings number. Adjusted earnings remove those swings, and once currency is layered in, the picture shifts again. The 9.3% yen weakening cost $0.05 per share in adjusted earnings. Strip currency from the first half entirely and adjusted earnings per share rose 4.1%, to $3.57.
Japan's margin and what produced it
Japan's pretax adjusted margin widened to 34.3% from 32.0%, and yen-denominated pretax adjusted earnings grew 3.4%. The improvement came from lower claims, not a larger premium base. Net earned premiums in yen fell 3.7%, the result of a new external reinsurance arrangement and older limited-pay policies reaching paid-up status. Premium persistency eased to 92.7% from 93.7%. New quarterly sales dipped 5.6% against a tough prior-year comparison tied to the Miraito cancer product launch in March 2025. First-half Japan sales still rose 7.0% to 37.3 billion yen, supported by the refreshed Tsumitasu life policy and the new Anshin Palette medical product. Once currency is removed, pretax adjusted earnings in Japan fell 2.1%.
The US segment ran into pressure from a different direction. Net earned premiums rose 2.3% to $1.5 billion and sales grew 2.6% to $349 million, led by group voluntary benefits and dental and vision plans. Pretax adjusted earnings fell 4.6% to $370 million, however, and the margin contracted to 20.9% from 22.5% as claims consumed a larger share of premiums. The Corporate and Other segment swung to a $10 million pretax adjusted loss from a $20 million gain a year earlier, with interest expense up 21.6% to $62 million.
Against the backdrop of those results, Aflac returned $1.3 billion to shareholders in the quarter, $983 million of it through buybacks. Management pointed to 43 straight years of dividend increases through 2025 and said the board is on a path to extend that streak in 2026. A third-quarter dividend of $0.61 per share was declared, payable September 1 to holders of record on August 19, 2026. Adjusted book value per share, excluding foreign currency remeasurement, fell to $41.22 at June 30 from $42.97 a year earlier.
Hedge fund holders fell to 39 from 46 in the latest quarter. Short interest stands at 2.84% of the float. On balance, the stock traded at 15.20 times forward earnings as of September 18, a multiple that prices in steady profits rather than a recovery in Japan's yen-denominated premium base, which at 3.7% below year-earlier levels remains the macro caveat the broader cycle has not resolved.
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