Net Earnings Per Diluted Share: $0.05, significantly impacted by net investment losses. Adjusted Earnings Per Diluted Share: $1.66, unchanged from the first quarter of 2024. Japan Sales Increase: 12.6% year-over-year. Cancer Insurance Sales Increase in Japan: 6.3%. US Sales Increase: 3.5% year-over-year. Capital Deployed for Share Repurchase: $900 million for 8.5 million shares. Dividends Paid: $317 million in Q1 2025. Total Return to Shareholders: $1.2 billion in the first quarter of 2025. Adjusted Book Value Per Share Increase: 2.2%, excluding foreign currency remeasurement. Adjusted ROE: 12.7%, 15.6% excluding foreign currency remeasurement. Japan Net Earned Premiums Decline: 5% for the quarter. Japan Total Benefit Ratio: 65.8%, down 120 basis points year-over-year. Japan Expense Ratio: 19.6%, up 160 basis points year-over-year. US Net Earned Premium Increase: 1.8%. US Persistency Rate: 79.3%, up 60 basis points year-over-year. US Total Benefit Ratio: 47.7%, up 120 basis points from Q1 2024. US Expense Ratio: 37.6%, down 110 basis points year-over-year. Unencumbered Holding Company Liquidity: $4.3 billion. Capital Ratios: SMR above 950%, estimated regulatory ESR above 250%, combined RBC estimated greater than 600%. Leverage Ratio: 20.7%, within target range of 20% to 25%.

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Release Date: May 01, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Aflac Inc (NYSE:AFL) reported a 12.6% year-over-year sales increase in Japan, driven by strong cancer insurance sales. The company maintained strong premium persistency in Japan at 93.8%, reflecting customer recognition of product value. Aflac Inc (NYSE:AFL) deployed $900 million in capital to repurchase 8.5 million shares, demonstrating strong capital management. The company has a track record of 42 consecutive years of dividend growth, returning $1.2 billion to shareholders in Q1 2025. Aflac Inc (NYSE:AFL) reported a 3.5% year-over-year increase in U.S. sales, with strong performance in group life and disability segments.

Negative Points

Net earnings per diluted share were significantly impacted by net investment losses compared to gains in the previous year. Aflac Japan's net earned premiums declined by 5% in the quarter, with underlying earned premiums down 1.4%. The U.S. total benefit ratio increased by 120 basis points year-over-year, driven by business mix and lower remeasurement gains. Adjusted net investment income in yen terms was down 7.6% due to lower floating rate income and asset transfers. The expense ratio in Japan increased by 160 basis points year-over-year, primarily due to higher technology expenses.

Story Continues

Q & A Highlights

Q: Why did the ESR ratio decline significantly in Q1 despite the rise in Japan rates? A: Max Broden, CFO, explained that the decline was due to the strengthening of the yen, partially offset by higher Japan interest rates. Additionally, high dividends flowed from Aflac Japan to Aflac Inc., increasing cash balances despite significant capital deployment in dividends and buybacks.

Q: How is the new cancer product launch impacting sales, and what are the expectations for this year? A: Daniel Amos, CEO, and Masatoshi Koide, President of Aflac Japan, noted that the new cancer insurance launched in March is progressing as expected. The product features full and simple coverage, and sales have been positive across all channels. They expect third sector sales to grow with the new product lineup, forecasting 2025 sales to exceed 2024.

Q: What is the outlook for the medical insurance market in Japan given the competitive dynamics? A: Koichiro Yoshizumi, Senior Managing Executive Officer, stated that Aflac maintains the largest share of new cancer and medical insurance policies. Despite increased competition, Aflac leverages its long history and unique services to maintain a competitive advantage. They plan to revise product lines every two years to stay competitive.

Q: How should we think about the future use of Bermuda in terms of reinsuring the dependent balance sheet if the Yen continues to appreciate? A: Max Broden, CFO, clarified that the ability to execute reinsurance is not directly tied to ESR levels. Reinsurance transactions are structured to lower overall risk, which tends to increase the ESR. Aflac has a broad toolkit for managing capital and feels confident about their current ESR position.

Q: Is there any anti-US sentiment in Japan that could affect sales? A: Charles Lake, President of Aflac International, assured that there is no significant anti-US sentiment in Japan. The strong US-Japan alliance and economic relationship remain intact, with Japan being a major investor in the US. The trade talks have not affected the sentiment towards the US.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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