Aflac Incorporated AFL reported first-quarter 2025 adjusted earnings per share (EPS) of $1.66, which missed the Zacks Consensus Estimate by 1.2%. However, the bottom line was in line year over year. (See the Zacks Earnings Calendar to stay ahead of market-making news.)
Aflac’s revenues decreased from $5.4 billion in the year-ago quarter to $4.3 billion in the quarter under review. However, the top line missed the consensus mark by 1.3%.
Weaker-than-expected quarterly results were affected by lower premiums in the Japan segment and investment losses. Lower net benefits and claims, acquisition and operating expenses, improved net investment income and higher new annualized premiums sales in the Japan segment partially offset the negatives.
Aflac Incorporated Price, Consensus and EPS Surprise
Aflac Incorporated Price, Consensus and EPS Surprise
Adjusted net investment income decreased 2.2% year over year to $913 million.
Total net benefits and claims of $1.9 billion declined 3.2% year over year in the first quarter. Total acquisition and operating expenses increased 4.1% year over year to $1.3 billion.
Pre-tax earnings plunged 93.3% year over year to $145 million in the first quarter.
Inside Aflac’s Segments
Aflac Japan: The segment’s adjusted revenues decreased 8.1% year over year to $2.3 billion in the quarter under review and missed the Zacks Consensus Estimate by 5.3%. Total net earned premiums of $1.7 billion dipped 7.4% year over year due to limited pay products attaining paid-up status and the implementation of a reinsurance transaction earlier.
Adjusted net investment income decreased 9.6% year over year to $586 million. The segment’s pre-tax adjusted earnings amounted to $722 million, which decreased 10.9% year over year in the first quarter. This metric missed the consensus mark by 5.7%.
New annualized premium sales of $93 million improved 12.6% year over year due to strong first-sector sales and initial sales of a new insurance product. The segment's benefit ratio was 65.8% in the first quarter.
Aflac U.S.: The segment’s adjusted revenues increased 1.3% year over year to $1.7 billion in the quarter under review. However, it missed the Zacks Consensus Estimate by 1.4%. Total net earned premiums climbed 1.8% year over year to $1.4 billion due to sales recovery and improving persistency.
Adjusted net investment income of $202 million decreased 1.9% year over year. Pretax adjusted earnings of the segment were $358 million, up 0.6% year over year in the first quarter, due to lower expenses and higher premiums recognized. The metric beat the Zacks Consensus Estimate by 2.9%.
Aflac’s U.S. sales of $309 million rose 3.5% year over year due to higher sales of group products. The first-quarter benefit ratio came in at 47.7%.
Financial Position (As of March 31, 2025)
Aflac exited the first quarter with total cash and cash equivalents of $5.2 billion, which decreased from $6.2 billion at 2024-end. Total assets increased to $120.3 billion from $117.6 billion at 2024-end.
Adjusted debt increased to $7.5 billion from $7.2 billion at 2024-end. Adjusted debt to adjusted capitalization, excluding accumulated other comprehensive income, was 20.7%, which increased from 19.7% at 2024-end. While the company had debt maturities worth $83 million in less than a year, total debt maturities worth $3 billion are expected within the next five years.
Total shareholders' equity of $26.3 billion increased from $26.1 billion at 2024-end.
Adjusted book value per share increased 3.5% year over year to $51.98. Adjusted return on equity was 15.6%, excluding foreign currency impacts, and deteriorated 60 bps year over year.
AFL’s Capital Deployment
Aflac bought back 8.5 million shares worth $900 million in the first quarter. It had 38.8 million shares left for buyback as of the first-quarter end.
Management announced dividends of 58 cents per share for the second quarter. The dividend will be paid out on June 2, 2025, to shareholders of record as of May 21.
AFL’s 2025 Outlook
Aflac continues to estimate improved sales in its Japan business for 2025, buoyed by its focus on third-sector products and introducing these to younger customers. Management remains optimistic about profitable growth within its U.S. business. Improving productivity, underwriting discipline and expense management are likely to bolster its margins. New products and distribution strategies are expected to benefit both segments.
Aflac expects a benefit ratio of 64-66% for the Aflac Japan unit in 2025. The same is likely to be 48-52% in Aflac U.S.
The expense ratio for Aflac Japan and Aflac U.S. is estimated to be 20-23% and 36-39%, respectively, for 2025.
The pretax profit margin for Aflac Japan and Aflac U.S. is estimated to be 30-33% and 17-20%, respectively, for 2025.
AFL’s Zacks Rank & Key Picks
AFL currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader Finance space are Root Inc. ROOT, Kingstone Companies Inc. KINS and Heritage Insurance Holdings Inc. HRTG, each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Root’s current-year earnings of 18 cents per share has witnessed one upward revision in the past month against none in the opposite direction. Root beat earnings estimates in each of the trailing four quarters, with the average surprise being 195.3%. The consensus estimate for current-year revenues is pegged at $1.29 billion, implying 9.2% year-over-year growth.
The Zacks Consensus Estimate for Kingstone Companies’ current-year earnings is pegged at $1.90 per share. It has remained stable over the past week. The consensus estimate for Kingstone Companies’ current-year revenues is pegged at $214 million, suggesting 37.9% year-over-year growth.
The Zacks Consensus Estimate for Heritage Insurance’s current-year earnings of $2.43 per share has witnessed two upward revisions in the past 60 days against no movement in the opposite direction. Heritage Insurance beat earnings estimates in three of the trailing four quarters and missed once, with the average surprise being 328.6%. The consensus estimate for current-year revenues is pegged at $870.2 million, calling for 6.5% year-over-year growth.
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