Aflac Boosts Japan Sales with Miraito Cancer Product Aiming for Pre-Pandemic Recovery

Key Highlights from Aflac's Q2 2025 Earnings Call

During Aflac Incorporated’s (AFL) second-quarter earnings call, the company shared a range of financial and strategic updates. CEO Daniel Paul Amos reported net earnings per diluted share of $1.11 and adjusted earnings per diluted share of $1.78 for the quarter. He described these results as “solid,” with strong performance contributing to a positive first half of the year.

Amos emphasized the growth in Japan, where sales increased by 23.2% year-over-year, driven largely by the Miraito cancer insurance product, which saw a 53% increase in sales. The success of Miraito was attributed to its innovative design and effective marketing. Additionally, the integration of actuarial, IT, and policy service teams in Japan supported agile product launches across various lines, including cancer, medical, asset formation, and nursing care.

In the U.S., new sales reached $340 million, up 2.7% compared to the same period last year. Amos highlighted strong premium persistency at 79.2% and a 3.4% increase in net earned premium, which he linked to more profitable growth and stronger underwriting discipline.

Aflac also demonstrated its commitment to returning value to shareholders. In the second quarter, the company deployed $829 million in capital to repurchase 7.9 million shares of stock and paid dividends of $312 million, totaling $1.1 billion returned to shareholders.

Financial Performance and Outlook

Max Kristian Broden, Senior EVP & CFO, provided further details on the company’s financials. Adjusted earnings per diluted share decreased by 2.7% year-over-year to $1.78, with a $0.04 positive impact from foreign exchange. Broden noted a 5.2% increase in adjusted book value per share (excluding FX) and an adjusted ROE of 13.7% (16.4% excluding FX).

Looking ahead, management maintained guidance for Japan’s earned premium trajectory, anticipating a negative 1% to 2% range for the year. Broden acknowledged that Miraito’s performance in Q2 pushed the company closer to the lower end of this range, though it remained in negative territory.

For the U.S., President Virgil Raynard Miller expressed confidence in a “stronger second half” of the year, citing a robust pipeline and expectations of stronger fourth-quarter enrollments. The expense ratio in Japan is expected to remain within the 20% to 23% range, with Broden suggesting it may fall toward the middle or lower end of that range.

Segment Performance and Financial Metrics

The Japan segment reported a 4.8% decline in net earned premiums, with underlying earned premiums down 1.1%. However, persistency improved by 40 basis points to 93.7%, and the pretax margin remained at 32%. The expense ratio rose slightly to 20.6%.

In the U.S., net earned premium increased by 3.4%, with persistency at 79.2%—up 50 basis points from the previous year. The expense ratio decreased to 36.3% (down 60 basis points), and the pretax margin stood at 22.5%.

Unencumbered holding company liquidity increased to $5.1 billion, $3.4 billion above the minimum balance. This was supported by a JPY 150 billion debt raise aimed at prefunding 2026 maturities. The company also recorded a $33 million increase in CECL reserves for commercial real estate, while decreasing reserves in first lien senior secured middle market loans by $23 million.

Q&A and Analyst Insights

Analysts raised several questions during the Q&A session. Ryan Joel Krueger asked about the sustainability of Miraito’s performance, to which Koichiro Yoshizumi responded that the product’s success is expected to continue for a longer period than previous cancer insurance products.

Broden explained that investment income in Japan was primarily driven by variable NII from the alternatives book, with some accelerated deployment to capitalize on attractive opportunities. On ESR calculation methods, Broden clarified that the company uses the regulatory model with USP, resulting in an approximate 30-point uplift over the regulatory model.

Concerns about sluggish U.S. sales were addressed by Miller, who emphasized deliberate actions to drive long-term sustainable value and anticipated improvement in the second half of the year. Broden also discussed the company’s approach to capital deployment, noting that the urgency to deploy capital has eased compared to previous periods when yields were lower.

Sentiment and Market Outlook

Analysts’ tone during the call was generally neutral to slightly positive, with a focus on the sustainability of growth in Japan, the impact of Miraito, and the flexibility of capital deployment. Management’s confident and detailed remarks reflected their focus on product innovation and capital discipline.

Compared to the previous quarter, sentiment was more optimistic regarding Japanese sales momentum, with the Miraito launch creating a more upbeat outlook. In the U.S., sales were described as sluggish but with expectations of improvement in the second half. Expense control remained a key priority, with improved efficiency in both regions.

Risks and Challenges

Management highlighted several risks and challenges, including the importance of persistency in offsetting reinsurance and paid-up policies in Japan. The expense ratio in Japan increased due to technology investments, and commercial real estate values remained distressed, affecting CECL reserves. Intensified competition in Japan’s medical insurance segment was also noted, with a new product expected within a year.

In the U.S., maintaining agent recruitment and productivity remains a key challenge.

Final Takeaway

Aflac’s Q2 2025 earnings call underscored the successful launch and sustained momentum of the Miraito cancer insurance product in Japan, which contributed significantly to sales growth. The company remains committed to disciplined capital deployment, maintaining strong liquidity, and driving growth through core and new products in both Japan and the U.S. Management expressed continued confidence in its strategy to deliver long-term value to shareholders while navigating competitive and market challenges.