Aflac Reports Mixed Q2 Results as Japan Sales Decline, U.S. Segment Shows Momentum
The insurer posted adjusted earnings of $1.75 per share while navigating a challenging sales comparison in Japan and expense pressures across both core markets.
Mixed Performance Across Core Markets
Aflac Incorporated reported second quarter 2026 adjusted earnings per diluted share of $1.75, with net earnings of $1.63 per share, as the supplemental insurance giant navigated divergent performance across its two primary markets (earnings call, 2026-08-07).
The company's Japan segment faced a challenging comparison to the prior year, with sales declining 5.6% to ¥11 billion in the quarter. However, first-half sales were up 7% year-over-year, driven by strong performance from the Tsumitasu savings-type life insurance product and the Anshin Palette medical insurance product launched in December 2025 (earnings call, 2026-08-07).
"We were up against a strong second quarter in 2025 sales comparison following the launch of Miraito Cancer Insurance," Chairman and CEO Dan Amos explained (earnings call, 2026-08-07).
Japan Profitability Remains Robust
Despite the sales headwinds, Aflac Japan delivered strong profitability metrics. The segment's pretax margin expanded 230 basis points year-over-year to 34.3%, while the total benefit ratio declined 250 basis points to 64% (earnings call, 2026-08-07).
Net earned premiums in yen terms declined 3.7% for the quarter, though CFO Max Broden noted that underlying earned premiums—excluding reinsurance, paid-up policies, and deferred profit liability—fell just 1.4% (earnings call, 2026-08-07). Premium persistency remained solid at 92.7%.
The company updated its full-year benefit ratio guidance, now expecting to land at "the high end of our guidance range of 60% to 63%" for 2026, excluding the annual actuarial assumption review scheduled for Q3 (earnings call, 2026-08-07).
U.S. Business Builds Momentum
Aflac's U.S. segment showed stronger growth dynamics, with sales increasing 2.6% year-over-year and net earned premium rising 2.3%. The company highlighted particular strength in group voluntary products and network dental and vision offerings (earnings call, 2026-08-07).
Premium persistency in the U.S. improved 20 basis points to 79.4%, while the pretax margin stood at 20.9%, down 160 basis points from a particularly strong prior-year quarter (earnings call, 2026-08-07).
The U.S. benefit ratio increased 220 basis points to 49.5%, driven by an increase in incurred group disability claims "related to favorable results in the previous quarter," Broden said (earnings call, 2026-08-07).
Capital Deployment and Portfolio Management
Aflac returned $1.3 billion to shareholders in the second quarter through dividends and share repurchases, bringing the first-half total to $2.6 billion. The company maintained its 43-year streak of consecutive dividend increases (earnings call, 2026-08-07).
The investment team executed $4.8 billion in portfolio repositioning through switch trades during the quarter, capturing foreign currency gains and improving asset quality. These transactions are expected to increase net investment income by over $50 million annually "on a run rate basis" (earnings call, 2026-08-07).
Aflac's capital position remained strong with an estimated regulatory ESR of 226%, or 240% including the undertaking specific parameter. Combined RBC stood "slightly above 600%" (earnings call, 2026-08-07).
This article was generated by MarginX from the earnings call on 2026-08-07. It is not investment advice.