Aflac NYSE: AFL reported fourth-quarter 2025 net earnings per diluted share of $2.64 and adjusted earnings per diluted share of $1.57, capping a year in which net earnings per diluted share were $6.82 and adjusted earnings per diluted share were $7.49. Management highlighted strong sales momentum in Japan, steady premium trends in the U.S., and continued capital deployment through buybacks and dividends.
Japan: Sales surged on new cancer product as premiums continued to run off
Chairman and CEO Dan Amos said Aflac Japan delivered a 15.7% sales increase in the fourth quarter and a 16% increase for the full year 2025, driven largely by a 35.6% sales gain tied mainly to Moraito, a cancer insurance product launched in March. He also pointed to early “positive reception” for Anshin Palette, a medical product introduced in late December.
Amos said the company continues to promote third-sector protection to new and younger customers through its first-sector product Tsumitasu, which was repriced in September. Premium persistency in Japan was 93.1% for the year, which Amos described as strong despite lapses tied to Moraito’s launch.
Chief Financial Officer Max Brodin said Japan net earned premiums in yen terms declined 1.9% in the quarter. He also cited a company-defined “underlying earned premiums” measure—excluding deferred profit liability, paid-up policies, and reinsurance impacts—which declined 1.2%.
On profitability, Brodin said Japan’s total benefit ratio was 65% in the quarter, down 150 basis points year over year. He estimated reserve remeasurement gains were favorable to the benefit ratio by about 110 basis points in the period. Brodin said long-term experience trends for cancer and hospitalization “continue to be in place,” supporting favorable underwriting experience. Japan’s expense ratio was 22% for the quarter, up 120 basis points year over year, driven primarily by sales promotion expenses associated with higher sales. Japan’s pre-tax margin was 31.3%, down 30 basis points year over year.
During Q&A, management addressed investor questions about higher long-end Japanese yields and potential surrender pressure in interest-sensitive savings products. Brodin said Aflac had not experienced increased lapsation yet, but it is “something that we closely monitor.”
Looking ahead, Brodin provided 2026 expectations for Japan that included:
- Underlying earned premiums expected to decline 1% to 2%.
- Expense ratio expected in the 20% to 23% range.
- Benefit ratio expected in the 60% to 63% range.
- Pre-tax profit margin expected in the 33% to 36% range.
Asked about the lower benefit ratio embedded in guidance, Brodin cited three primary factors: a lower net premium ratio following an actuarial assumption update in the third quarter of 2025 (about 130 basis points), reserve releases from lapse-and-reissue activity tied to new product launches, and an in-force mix shift as an older savings block sold from 2010 through 2016 (the “old WAYS product”) runs off.
Management also addressed why strong sales are not yet translating into premium growth. Brodin said Japan’s in-force block is large and persistency is high, meaning new sales take time to move the total premium base. He added that after weaker sales during COVID, the company is “closing in on that gap” between sales and lapses, but still expects lapses to exceed total sales going into 2026.
U.S.: Premium growth and persistency held up as mix and claims pressured the benefit ratio
In the U.S., Amos said Aflac generated nearly $1.6 billion in new sales during 2025, with more than one-third coming in the fourth quarter. He said premium persistency remained strong at 79.2% and net earned premiums increased 2.9% for the year.
Brodin said fourth-quarter net earned premiums rose 4% and persistency declined 10 basis points year over year to 79.2%. The U.S. total benefit ratio was 48.6%, up 230 basis points from the prior-year quarter, driven by prior-year endorsements and higher claims activity in the individual voluntary block, as well as a higher benefit ratio in group life and disability. He estimated reserve remeasurement gains were favorable to the benefit ratio by roughly 140 basis points in the quarter.
The U.S. expense ratio was 40.4%, up 10 basis points year over year due primarily to timing of spending. Brodin said growth initiatives—group life and disability, network dental and vision, and direct-to-consumer—increased the expense ratio by 60 basis points in the quarter as those businesses scale. U.S. adjusted net investment income declined 2.8% on lower floating-rate assets and corresponding rates. The U.S. segment’s pre-tax margin was 17.4%, down 230 basis points year over year.
During Q&A, Aflac U.S. President Virgil Miller detailed sales by business line, saying life, accident and disability were up 11.3% for the year and network dental (dental product) was up 48.8%. The direct-to-consumer platform (“consumer markets”) rose 10.5%. Miller said these businesses combined represented 20% of the company’s total U.S. sales figure.
Miller also said Aflac’s traditional voluntary benefits business has been “flat to negative” in recent years, which can mask stronger growth in group-related lines when looking at the consolidated sales number. He said group benefits sales growth was 14%, citing broker-driven momentum, and pointed to a focus in 2026 on unifying the group experience through platform and technology investments, alongside continued investment in traditional products and agency distribution.
Brodin’s 2026 outlook for the U.S. included:
- Net earned premium growth expected toward the lower end of the 3% to 6% range.
- Benefit ratio expected in the 48% to 52% range.
- Expense ratio expected in the 36% to 39% range.
- Pre-tax profit margin expected in the 17% to 20% range.
He said the benefit ratio outlook reflects, among other items, product benefit increases (endorsements) on certain individual products—citing cancer and accident—and an expected mix shift as higher-benefit-ratio group lines become a larger share of the in-force portfolio.
Capital deployment, liquidity changes, and reinsurance plans
Amos said Aflac increased its first-quarter 2026 dividend by 5.2% and emphasized the company’s record of 43 consecutive years of dividend increases. In 2025, Aflac repurchased $3.5 billion of stock (33 million shares) and paid $1.2 billion in dividends, returning nearly $4.8 billion to shareholders. Brodin added that in the fourth quarter alone, the company repurchased $800 million of stock and paid $303 million in dividends.
On liquidity and capital flexibility, Brodin said Aflac enhanced its flexibility by $2 billion in the third quarter of 2025 through two off-balance sheet pre-capitalized trusts (PCAPS). As a result, the company lowered its minimum holding company liquidity balance by $750 million to $1 billion. Aflac Inc. unencumbered liquidity ended the quarter at $4.1 billion, $3.1 billion above the minimum; Brodin said the full PCAP facility remains undrawn.
Brodin said adjusted leverage was 21.4%, within the company’s 20% to 25% target range, and noted that holding about 63% of debt in yen is part of an enterprise hedging program to protect the economic value of Aflac Japan in U.S. dollar terms.
He also cited capital ratios at quarter-end including an SMR above 970%, an estimated regulatory ESR (with undertaking specific parameter) of 253%—with USP benefiting ESR by 18 points—and an estimated combined RBC of 575%.
Investments and credit performance
Brodin said the company recorded no charge-offs in its commercial real estate portfolio during the quarter and did not foreclose on any properties. He said charge-offs of $22 million were recorded on first lien senior secured middle market loans. For U.S. statutory reporting, Aflac recorded a $3 million valuation allowance on mortgage loans as an unrealized loss. On a Japan FSA basis, he reported net realized gains of JPY 380 million for securities impairments in the quarter and a valuation allowance of JPY 87 million related to transitional real estate loans.
In response to a question on AI-related investment exposure, Global Chief Investment Officer Brad Dyslin said Aflac’s credit portfolio has about 1.5% exposure to software-related companies, split between the middle market loan portfolio and investment-grade holdings, and said the company is monitoring AI-related risks but feels comfortable with its exposure.
Operational focus: AI as an “assist” tool and distribution expansion
Miller said Aflac is exploring AI across the business, including claims and enrollment, but described the technology as an “assist” to employees rather than a replacement. He said more than 60% of claims in the traditional business are automated using machine learning techniques, while final adjudication decisions still involve a person.
On distribution and consumer dynamics, Miller said the company saw no material impact from inflation, unemployment, or interest rates on operations in 2025. He also said Aflac increased career recruiting and improved conversion to sellers, noting a deliberate focus on the career channel. He referenced increased activity in the direct-to-consumer channel from individuals affected by ACA-related changes, while emphasizing that Aflac’s products are sold alongside major medical coverage.
About Aflac NYSE: AFL
Aflac Incorporated (American Family Life Assurance Company of Columbus) is a provider of supplemental insurance products designed to help policyholders manage out-of-pocket health care and living expenses. The company underwrites a range of individual and group policies that typically pay cash benefits directly to insureds when covered events occur, enabling greater financial flexibility for medical treatment, hospital stays, critical illness, and related costs. Aflac's product mix includes supplemental health insurance, life insurance and other specialty coverages intended to complement primary medical plans.
Founded in the mid-20th century and headquartered in Columbus, Georgia, Aflac distributes its products through a combination of employer-sponsored programs, independent brokers and agents, and direct marketing.
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