Summary of Aflac Incorporated Q1 2026 Earnings Call

1Key Financial Results and Metrics

Net Earnings: $1.98 per diluted share; adjusted earnings of $1.75 per diluted share, a 6.6% year-over-year increase.

Aflac Japan: Sales increased by 25.5% driven by new products; however, net earned premiums in yen declined 3.8%.

Aflac U.S.: Sales rose 2.9% year-over-year; net earned premium increased by 3.5%. Premium persistency remained strong at 79.3%.

Adjusted Return on Equity (ROE): 12.8%, 16.4% excluding foreign currency remeasurement.

Capital Management: Returned $1.3 billion to shareholders through dividends and share repurchases; unencumbered liquidity of $3.4 billion.

2Strategic Updates and Business Highlights

Aflac Japan's marketing and sales transformation continues to yield strong results, particularly with the launch of new medical and cancer insurance products.

The company is focusing on enhancing distribution channels and maintaining strong persistency rates to mitigate lapses.

Aflac has entered a reinsurance transaction with Japan Post Insurance, marking a strategic expansion in its reinsurance franchise.

The U.S. segment is seeing growth in group voluntary products, with a notable 12.4% increase in group business.

3Forward Guidance and Outlook

Aflac Japan aims for sales growth in 2026 to exceed JPY 80 billion, up from JPY 74 billion in 2025.

The company maintains a full-year benefit ratio guidance for the U.S. segment at 42% to 52%.

Aflac expects continued solid performance in both segments, despite challenges in the underlying earned premium growth.

4Bad News, Challenges, or Points of Concern

Aflac Japan's underlying earned premiums have declined by 1.3%, indicating potential headwinds in premium growth despite strong sales.

The benefit ratio in Japan remains high at 62.9%, with expectations for improvement dependent on favorable claims experience and premium mix.

The Corporate & Other segment reported breakeven pretax adjusted earnings, down from a $43 million gain last year, attributed to lower investment income and higher costs.

Concerns about the impact of inflation and rising costs on consumer behavior and agent recruiting were noted, though persistency remains stable.

5Notable Q&A Insights

Capital Generation: The external reinsurance deal had a minor impact on capital, with no significant headwinds affecting the Estimated Solvency Ratio (ESR).

Lapse and Reissue Activity: Changes in lapse behavior, particularly among younger policyholders, may have minor impacts on internal rate of return (IRR) but are expected to stabilize.

Benefit Ratio Management: The company anticipates improvements in the Japan benefit ratio, aiming for a target range of 60% to 63% as favorable trends in claims are expected to continue.

Reinsurance Opportunities: Aflac sees potential for growth in the reinsurance market, with plans to selectively target sizable blocks in Japan over time.

U.S. Market Dynamics: No significant pressure from state regulators on product rates was reported, and the company remains optimistic about maintaining growth in the U.S. despite competitive pressures. Overall, Aflac's first quarter results reflect a strong start to 2026, with strategic initiatives in both Japan and the U.S. driving sales growth, though challenges in premium growth and benefit ratios remain areas of focus.