Aflac Incorporated AFL reported fourth-quarter 2024 adjusted earnings per share (EPS) of $1.56, which missed the Zacks Consensus Estimate by 3.7%. However, the bottom line increased 24.8% year over year.
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Aflac’s revenues increased from $3.8 billion in the year-ago quarter to $4.3 billion in the quarter under review. However, the top line missed the consensus mark by 2.7%.
Weaker-than-expected quarterly results were affected by lower premiums in the Japan segment and reduced Aflac’s U.S. sales. 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 increased 21% year over year to $962 million.
Total net benefits and claims of $1.9 billion decreased 8.6% year over year in the fourth quarter. Total acquisition and operating expenses decreased 2.9% year over year to $1.3 billion.
Pre-tax earnings skyrocketed more than seven-fold year over year to $2.1 billion in the fourth quarter.
Inside AFL’s Segments
Aflac Japan: The segment’s adjusted revenues decreased 5.6% year over year to $2.4 billion in the quarter under review and missed the Zacks Consensus Estimate by 4.2%. Total net earned premiums of $1.7 billion dipped 8.2% year over year due to limited pay products attaining paid-up status and the implementation of a reinsurance transaction earlier.
Adjusted net investment income increased 1.5% year over year to $665 million. Pre-tax adjusted earnings of the segment amounted to $747 million, which decreased 1.1% year over year in the fourth quarter. This metric missed the consensus mark by 2.1%.
New annualized premium sales of $113 million improved 9% year over year due to strong new first-sector sales. The segment's benefit ratio was 66.5% in the fourth quarter.
Aflac U.S.: The segment’s adjusted revenues increased 2% year over year to $1.7 billion in the quarter under review. However, this missed the Zacks Consensus Estimate by 2.5%. Total net earned premiums climbed 2.7% year over year to $1.4 billion due to sales recovery and improving persistency.
Adjusted net investment income of $213 million rose 0.9% year over year. Pretax adjusted earnings of the segment were $330 million, up 9.3% year over year in the fourth quarter due to lower expenses and higher premiums recognized. The metric beat the Zacks Consensus Estimate by 0.5%.
Aflac’s U.S. sales of $534 million declined 4.5% year over year. The fourth-quarter benefit ratio came in at 46.3%.
Full-Year Update
Adjusted 2024 EPS improved 15.7% from a year ago to $7.21. Total revenues rose 1.2% to $18.9 billion. While net earned premiums decreased 4.8% to $13.4 billion, adjusted net investment income rose 12.1% to $3.9 billion.
Financial Position (As of Dec. 31, 2024)
Aflac exited the fourth quarter with total cash and cash equivalents of $6.2 billion, which increased from $4.3 billion at 2023-end. Total assets fell to $117.6 billion from $126.7 billion at 2023-end.
Adjusted debt increased to $7.2 billion from $6.8 billion at 2023-end. Adjusted debt to adjusted capitalization, excluding accumulated other comprehensive income, was 19.7%, which remained stable from 2023-end. While the company had no debt maturities in less than a year, total debt maturities worth $1.8 billion are expected within the next five years.
Total shareholders' equity of $26.1 billion increased from $22 million at 2023-end.
Adjusted book value per share increased 11.2% year over year to $52.87. Adjusted return on equity was 17.3%, excluding foreign currency impacts, improved 170 bps year over year.
Capital Deployment
Aflac bought back 7 million shares worth $750 million in the fourth quarter. It had 47.3 million shares left for buyback as of the fourth-quarter end.
Management announced dividends of 58 cents per share for the first quarter. The dividend will be paid out on March 3, 2025, to shareholders of record as of Feb. 19.
Outlook
Aflac estimates 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.
AFL 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.
Zacks Rank
Aflac currently has 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
Of the insurance industry players that have reported fourth-quarter 2024 results so far, the bottom-line results of W. R. Berkley Corporation WRB, The Travelers Companies, Inc. TRV and Brown & Brown, Inc. BRO beat the Zacks Consensus Estimate.
W.R. Berkley reported a fourth-quarter 2024 operating income of $1.13 per share, which beat the Zacks Consensus Estimate by 20.2%. The bottom line improved 17.7% year over year. Net premiums written were $2.9 billion, up 8% year over year. Operating revenues were $3.5 billion, up 9.2% year over year. The top line beat the consensus estimate by 4.2%. Net investment income grew 1.3% to $317.4 million.
Catastrophe losses of $79.6 million in the quarter were wider than the $32 million incurred in the year-ago quarter. The consolidated combined ratio (a measure of underwriting profitability) deteriorated 180 bps year over year to 90.2. Net premiums written in the Insurance segment increased 9.8% year over year to $2.6 billion. Net premiums written in the Reinsurance & Monoline Excess segment decreased 5.5% year over year to $316 million.
Travelers’ fourth-quarter 2024 core income of $9.15 per share beat the Zacks Consensus Estimate by 39.3% and improved 30.5% year over year. Total revenues increased 10.4% from the year-ago quarter to $11.9 billion. The top-line figure beat the Zacks Consensus Estimate by 1%. Net written premiums increased 7% year over year to a record $10.7 billion. Net investment income increased 26% year over year to $955 million.
Travelers witnessed an underwriting gain of $1.4 billion, up 30.5% year over year. The consolidated underlying combined ratio of 84 improved 190 bps year over year. Net written premiums in the Business Insurance unit increased 9% year over year to about $5.4 billion. The combined ratio improved 130 bps year over year to 85.2. Segment income of $1.2 billion increased 24.1% year over year. Bond & Specialty Insurance segment’s net written premiums increased 7% year over year to $1 billion. The combined ratio deteriorated 540 bps year over year to 82.7.
Brown & Brown reported fourth-quarter 2024 adjusted earnings of 86 cents per share, which beat the Zacks Consensus Estimate by 14.7%. The bottom line increased 48.3% year over year. Total revenues of $1.2 billion beat the consensus estimate by 6.4%. The top line improved 15.4% year over year. Commission and fees grew 15.4% year over year to $1.1 billion.
Organic revenues improved 13.8% to $1.1 billion. Investment income increased 22.2% year over year to $22 million. Adjusted EBITDAC was $390 million, up 22.6% year over year. The EBITDAC margin expanded 190 bps year over year to 32.9%.
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