Aflac Incorporated (AFL) Earnings & Analysis

Latest quarter

Aflac reported Q2 FY2026 revenue of $4.1 billion, compared with $4.2 billion in Q2 FY2025, a decline of −1.03%. Revenue as the consensus counts it was $4.2 billion, or 0.89% above the $4.2 billion consensus. Adjusted EPS as the consensus counts it was $1.75, below the $1.77 consensus by −1.13%.

The company reported diluted EPS of $1.63, compared with $1.11 a year earlier, an increase of 46.8%. Aflac reported that its gross margin rose to 49.2% from 45.6%, while operating margin increased to 24.2% from 19.8%. Free cash flow was $112.0 million, compared with $399.0 million a year earlier.

The filing said Japan’s yen-denominated adjusted revenues declined as net earned premiums and adjusted net investment income fell, while lower benefits, claims and adjusted expenses increased pretax adjusted earnings. Aflac U.S. reported higher net earned premiums from improved sales and persistency, while higher claims and variable expenses reduced pretax adjusted earnings.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

Dan Amos said Japan sales declined 5.6% in the quarter against a high comparison following the March 2025 launch of Miraito cancer insurance, while first-half sales rose 7%. He said sales of the refreshed Tsumitasu savings-type life product and Anshin Palette medical insurance grew year over year, and Aflac continued to expect Japan sales in 2026 to exceed 2025.

Amos said Aflac U.S. generated 2.6% year-over-year sales growth and 2.3% net earned premium growth, with momentum in group voluntary products and network dental and vision. Virgil Miller told analysts that group life, absence and disability, dental and vision, and group voluntary benefits rose 7.1% in the second quarter; group-product earned premium rose 13%. He said the company expected a stronger second half, weighted toward the fourth quarter, while continuing to support its agency force and sell individual traditional products.

Max Broden said Japan’s benefit ratio was 64% and that lower reserve remeasurement gains than planned affected the ratio. He said the company had not seen a significant lapse increase tied to inflation or interest rates, and attributed the year-over-year persistency decline more to lapse-and-reissue activity following product refreshes. Broden said reported persistency should stabilize as that activity declines.

Broden said Aflac U.S.’s benefit ratio was 49.5%, higher than a year earlier, driven by incurred group disability claims relative to favorable prior-year results. He said the company’s investment team repositioned $4.8 billion of the portfolio through switch trades and expected the program to increase annualized net investment income by over $50 million on a run-rate basis. Broden also said Aflac had $3.3 billion of unencumbered liquidity, repurchased $983 million of shares and paid $309 million in dividends in Q2.

In response to questions about Tsumitasu, Masatoshi Kuide said it accounted for 20% of total sales but that Aflac had not set a specific target or upper limit for first-sector product sales.

Guidance

Aflac now expects its U.S. net earned premium growth rate for FY2026 to be just below its 3.00%–6.00% guidance range, versus its prior expectation for the low end of that range. The company continues to expect U.S. net earned premium CAGR of 3.00%–6.00% for FY2025–FY2027.

For Japan, Aflac now expects the FY2026 benefit ratio to be at the high end of its 60%–63% range, excluding the third-quarter actuarial assumption review. Dan Amos said Aflac expects Japan sales in 2026 to exceed 2025 sales.