Aflac Q2 Earnings Surpass Expectations with Strong Cancer Sales

Aflac Incorporated's Q2 2025 Results: Strong Performance with Mixed Outcomes

Aflac Incorporated reported second-quarter 2025 adjusted earnings per share (EPS) of $1.78, which exceeded the Zacks Consensus Estimate by 4.1%. Despite this positive surprise, the bottom line declined by 2.7% year over year. The company’s adjusted revenues for the quarter dropped 11.7% year over year to $4.5 billion, but still managed to beat the consensus mark by 2.3%.

The quarterly results were driven by strong performance in the Japan segment, particularly due to increased new annualized premium sales. This growth was fueled by high demand for the new Miraito cancer insurance product. Additionally, the U.S. business saw solid sales and persistency rates, contributing positively to the results. However, these gains were partially offset by higher acquisition and operating expenses, as well as reduced net investment income in the U.S. segment.

Adjusted Net Investment Income and Claims

Adjusted net investment income for the quarter stood at $1 billion, a slight increase of 0.3% year over year. Total net benefits and claims rose 4.6% year over year to $2 billion. Meanwhile, total acquisition and operating expenses climbed 10.9% year over year to $1.3 billion. Pre-tax earnings for the quarter came in at $822 million, representing a nearly three-fold decline from the previous year.

Segment Performance: Aflac Japan and Aflac U.S.

In the Japan segment, adjusted revenues reached $2.5 billion, up 1% year over year and surpassing the Zacks Consensus Estimate of $2.4 billion. Total net earned premiums improved 2.7% year over year to $1.76 billion, though it slightly missed the consensus forecast. Adjusted net investment income for the segment totaled $699 million, down 3.6% year over year. Pre-tax adjusted earnings fell 8.6% year over year to $790 million, which exceeded the consensus estimate of $750 million.

New annualized premium sales in Japan increased 23.2% year over year to $143 million, driven by strong sales of the Miraito product. The benefit ratio for the Japan segment was 66.5% in the quarter.

For the U.S. segment, adjusted revenues came in at $1.73 billion, a 2.6% increase year over year but just slightly below the Zacks Consensus Estimate of $1.74 billion. Total net earned premiums rose 3.4% year over year to $1.5 billion, supported by sales growth and strong persistency rates. Adjusted net investment income for the U.S. segment declined 5% year over year to $207 million. Pretax adjusted earnings for the segment inched up 1.3% year over year to $388 million, outperforming the consensus estimate of $352 million.

U.S. sales totaled $340 million, an increase of 2.7% year over year, driven by higher sales of group life and disability products. The benefit ratio for the U.S. segment was 47.3% in the quarter.

Financial Position and Capital Deployment

As of June 30, 2025, Aflac held total cash and cash equivalents of $7 billion, up 11.8% from the end of 2024. Total assets reached $124.7 billion, reflecting a 6.1% increase from the previous year. Adjusted debt for the quarter was $8.1 billion, up 12.8% from the end of 2024. Adjusted debt to adjusted capitalization, excluding accumulated other comprehensive income, rose 280 basis points to 22.5% at the end of the second quarter.

Total shareholders' equity increased 4.2% year over year to $27.2 billion. Adjusted book value per share rose 9.6% year over year to $50.86. Adjusted return on equity, excluding foreign currency impacts, was 16.4%, a decrease of 110 basis points from the previous year.

Aflac repurchased 7.9 million shares worth $829 million in the second quarter, leaving 30.9 million shares available for buyback as of the end of the quarter. The company also announced a dividend of 58 cents per share for the second quarter, set to be paid on September 2, 2025, to shareholders of record as of August 20.

Outlook for 2025

Aflac continues to project a benefit ratio of 64-66% for the Japan segment and 48-52% for the U.S. segment in 2025. The expense ratio is expected to remain within 20-23% for Japan and 36-39% for the U.S. Pretax profit margins are anticipated to stay within 30-33% for Japan and 17-20% for the U.S.

Performance of Other Insurers

Among other insurers that have reported second-quarter 2025 results, several showed strong performance. The Hartford Insurance Group, Inc. (HIG) reported adjusted operating earnings of $3.41 per share, exceeding the Zacks Consensus Estimate by 23.1%. HIG’s operating revenues rose 9.9% year over year to $4.9 billion, and earned premiums increased 6.9% year over year to $5.96 billion.

AXIS Capital Holdings Limited (AXS) reported second-quarter 2025 operating income of $3.29 per share, surpassing the Zacks Consensus Estimate by 14.2%. Net premiums written increased 4% year over year to $1.6 billion, while net investment income decreased 2% year over year to $187 million.

Travelers Companies, Inc. (TRV) posted core income of $6.51 per share, beating the Zacks Consensus Estimate by 83.8%. Total revenues increased 6.7% year over year to $12.1 billion, and net written premiums reached a record $11.5 billion. Underwriting profit for the quarter was $1 billion, compared to a loss of $65 million in the same period last year.