Aflac Q3 Earnings Call Highlights

Key Points

• Aflac reported adjusted third-quarter earnings of $2.43 per diluted share; an actuarial-assumption review added $0.71 per share, while cybersecurity costs and below-expectation variable investment income weighed on results.
• Aflac raised its 2026 Japan pretax profit margin outlook to 35%–38%. Japan sales declined 4% in the quarter amid a temporary pause in sales initiatives after a cyber incident, but activities resumed in September and October sales met expectations.
• Aflac Japan ceded about 500 billion yen of cancer reserves to its Bermuda affiliate, which the company estimates will free up roughly $1 billion in capital over time. A $2.3 billion Japanese government bond repositioning is expected to add more than $30 million to annual investment income.

Aflac NYSE: AFL raised its full-year profit margin outlook for Japan after reporting third-quarter earnings that benefited from changes to actuarial assumptions and a reinsurance transaction that it expects to free up capital.

The insurer reported net earnings of $0.61 per diluted share and adjusted earnings of $2.43 per diluted share, Chairman and CEO Dan Amos said on the company’s earnings call. Chief Financial Officer Max Brodén said adjusted earnings per share were $2.46 excluding the effect of foreign currency, down 1.2% from a year earlier on that basis.

The quarterly review of actuarial assumptions increased earnings per share by $0.71, Brodén said. Results also included $40 million, or $0.06 per share, in cybersecurity expenses and enhancements in Japan. Variable investment income was $22 million, or $0.03 per share, below the company’s long-term return expectations.

Japan Sales Recover After Cybersecurity Disruption

Aflac Japan sales fell 4% to 18.8 billion yen in the third quarter, compared with a year-earlier period that followed the launch of Miraito Cancer Insurance. Sales increased 3% for the first nine months of 2026, and Amos said the company continues to expect full-year Japan sales to exceed 2025 levels.

Koichiro Yoshizumi, executive vice president of sales and marketing and alliance strategy at Aflac Life Insurance Japan, said through a translator that the company had suspended initiatives including direct mail and outbound customer calls while prioritizing customer support after a cyber incident. Those activities resumed in September, and sales returned to normal in the fourth quarter, he said. October sales were in line with expectations.

Amos said sales of the Tsumitas product increased both year over year and sequentially. Yoshizumi said Tsumitas represented approximately 20% of total Japan sales and was helping attract customers who could also purchase cancer and medical insurance.

Brodén said higher yen interest rates have made the company’s first-sector savings business attractive to grow, particularly with the use of reinsurance. He added that Aflac monitors the potential effect on its cost of capital if the business becomes too large. For now, he said, the existing WAYS block is running off faster than the company is adding Tsumitas business.

Japan’s net earned premiums declined 2% in yen terms during the quarter. Brodén said the company now expects the segment’s 2026 pretax profit margin to be between 35% and 38%. It expects the Japan benefit ratio to be slightly below its 60% to 63% range and the expense ratio to be at the lower end of its 20% to 23% range.

Reinsurance and Investment Moves

During the quarter, Aflac Japan ceded approximately 500 billion yen of cancer insurance reserves, measured on a Japanese Financial Services Agency basis, to Aflac Re Bermuda. Brodén estimated that the transaction would release approximately $1 billion of capital for redeployment over time.

After the transaction, roughly 15% of Aflac Japan’s FSA reserves had been ceded to Bermuda, up from about 10% beforehand, Brodén said. The company has an internal limit of 30%, leaving room for additional transactions. He cautioned that future activity may not follow a straight line and would be driven by Aflac Japan’s needs.

The company also repositioned $2.3 billion of Japanese government bonds in the quarter to take advantage of higher interest rates. Brodén said the activity would improve future annual net investment income by more than $30 million. Global Chief Investment Officer Brad Dyslin said Aflac had repositioned $7 billion through the program this year, but finding further opportunities becomes harder as more trades are completed.

U.S. Growth and Capital Returns

Aflac U.S. sales rose 3.5% in the third quarter, while net earned premiums increased 3.3%. The segment’s pretax profit margin was 27.7%, up 6 percentage points, primarily because of the actuarial assumption update, Brodén said.

For the full year, the company expects the U.S. benefit ratio to be below its 48% to 52% range and its pretax profit margin to be above the 17% to 20% range. The expense ratio is expected to be in the middle of the 36% to 39% range.

U.S. Deputy President Fred Simard said group earned premiums grew 17% in the quarter, while the individual platform shrank about 1.5%. Aflac President Virgil Miller said he expects fourth-quarter U.S. sales to improve from a year earlier, while noting that this year’s fourth quarter will include an extra week of productivity in the company’s sales count.

Aflac repurchased $804 million of stock and paid $305 million in dividends during the third quarter, Brodén said. The company ended the quarter with $2.7 billion in unencumbered liquidity, $1.7 billion above its minimum balance.

Leadership Changes Set for 2027

Amos said Shinsuke Morimoto will become president of Aflac Japan and Simard will become president of Aflac U.S., effective Jan. 1, 2027. Masatoshi Koide will become chairman of Aflac Japan, while Charles Lake will become an executive advisor of Aflac Japan and chairman of Aflac International. Amos described the changes as the result of a long-term succession planning process overseen by the board.

About Aflac (NYSE:AFL)

Aflac Incorporated NYSE: AFL is an insurance company specializing in supplemental health and life insurance. Through its policies, the company helps individuals and families manage expenses that may not be fully covered by major medical insurance, including deductibles, copayments and other out-of-pocket costs.

Aflac offers products such as accident, cancer, critical illness, hospital indemnity, dental and vision, disability, life and long-term care insurance. Many of its supplemental policies provide cash benefits directly to policyholders, who can generally use the funds according to their individual needs.

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