Aflac Misses Q2 EPS Estimates Despite Solid US Sales Growth

AFL's quarterly earnings were affected by lower net investment income and unfavorable foreign exchange movements. Nevertheless, the downside was partly offset by improved U.S. sales and continued strong policy persistency.

Aflac Incorporated Price, Consensus and EPS Surprise

AFL’s Q2 Performance

Adjusted net investment income declined 9.6% year over year to $937 million.

Net benefits and claims were $1.9 billion, which declined 7.9% year over year. Total acquisition and operating expenses decreased 4.4% year over year to $1.3 billion.

Pre-tax earnings increased 21% year over year to $995 million.

Inside Aflac’s Segments

Aflac Japan: The segment’s adjusted revenues dipped 12.6% year over year to $2.2 billion in the second quarter and missed the Zacks Consensus Estimate by 0.9%.  Net earned premiums of $1.5 billion slipped 12.7% year over year and missed the consensus mark by 1.5%.

Adjusted net investment income decreased 11.9% year over year to $616 million. The unit’s pretax adjusted earnings declined 6.2% to $741 million and missed the consensus mark by 3.4%.

New annualized premium sales fell 5.6% to $123 million due to a high prior-year sales base for Miraito cancer insurance, partly offset by strong growth in the refreshed Tsumitasu savings-type life insurance and Anshin Palette.

Aflac U.S.: Adjusted revenues of $1.8 billion grew 2.5% year over year and beat the Zacks Consensus Estimate by 0.3%. Net earned premiums advanced 2.3% year over year to $1.5 billion, attributable to higher sales and sustained strong persistency. The metric beat the consensus mark by 0.2%.

Adjusted net investment income totaled $208 million, up 0.5% year over year. Pretax adjusted earnings of the segment decreased 4.6% year over year to $370 million. The metric beat the consensus mark of $ 357.6 million.

The unit's sales rose 2.6% year over year to $349 million, driven by strong group voluntary benefits and network dental and vision product sales.

AFL’s Q2 Financial Position

Aflac exited the second quarter with total investments and cash of $103 billion, down from the 2025-end level of $103.8 billion. Total assets declined to $116 billion from $116.5 billion as of 2025-end.

Adjusted debt amounted to $7.8 billion, up from $7.7 billion recorded as of Dec. 31, 2025. Adjusted debt to adjusted capitalization, excluding accumulated other comprehensive income, was 21.8%, which improved 40 basis points (bps) from the 2025-end level.

Total shareholders' equity rose to $30.3 billion from $29.5 billion as of 2025-end.

Adjusted book value per share increased 6.2% year over year to $55.01. Adjusted return on equity, excluding foreign currency impacts, remained flat year over year at 16.6%.

AFL’s Capital Deployment

Aflac returned $1.3 billion to shareholders in the second quarter of 2026 through $983 million in share repurchases and $309 million in dividends.

AFL’s 2026 Outlook

Aflac still expects a benefit ratio of 60-63% for the Aflac Japan unit in 2026. The metric for the Aflac U.S. unit is still projected to be in the 48-52% range.

The expense ratio for Aflac Japan is still estimated to be 20-23%. The same for Aflac U.S. is reiterated to be in the band of 36-39%.

Underlying earned premiums are projected to witness a year-over-year decline of 1-2% for the Japan unit in 2026. Net earned premiums for the U.S. unit are anticipated to be at the lower end of the 3-6% range.

The pretax profit margin for Aflac Japan is still estimated to be between 33% and 36%, and the same for Aflac U.S. is projected to be in the range of 17-20% for 2026.

Zacks Rank

AFL currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Insurers

Several companies in the insurance space, including Globe Life Inc. GL, Lincoln National Corporation LNC and MetLife, Inc. MET, have already reported their results for the June quarter of 2026. Here’s how they have performed:

Globe Life reported second-quarter 2026 net operating income of $3.61 per share, which lagged the Zacks Consensus Estimate of $3.67 by 1.6% but rose 10% year over year on higher insurance underwriting income. Operating revenues increased 8% to $1.60 billion, beating the consensus estimate by 0.6%, driven by higher premium revenues, stronger underwriting income and increased investment income. GL’s Premium growth reflected continued strength across its life and health insurance businesses.

Lincoln National Corporation reported second-quarter 2026 adjusted earnings per share of $2.24, which surpassed the Zacks Consensus Estimate by 12%. The bottom line declined 5.1% year over year. LNC’s adjusted operating revenues grew 4.2% year over year to $4.93 billion, surpassing the Zacks Consensus Estimate by 1.4%. The quarterly earnings were supported by higher net investment income and lower expenses. Improved profitability in the Life Insurance and Retirement Plan Services segments also contributed to the upside. Nevertheless, these gains were partly offset by lower sales in the Annuities and Group Protection segments.

MetLife reported second-quarter 2026 adjusted operating earnings per share of $2.43, which beat the Zacks Consensus Estimate by 5.6%. The bottom line advanced 20% year over year. Adjusted operating revenues improved 6.4% year over year to $19.1 billion. The top line missed the consensus mark by 1.4%. MetLife’s second-quarter earnings benefited from improved net investment income, favorable underwriting results and solid business volume growth across segments. Growth in adjusted PFOs and strong performances in Group Benefits, Asia and EMEA also supported results. However, higher expenses and a wider-than-expected loss in the Corporate & Other unit partially offset the upside.

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