Aflac Q2 earnings beat as benefit ratios stay low, strong returns from alt investments

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Aflac (NYSE:AFL) stock is advancing 3.3% in Monday afterhours trading after the life and health insurer’s Q2 results came in stronger than expected, highlighted by a continuation of low benefit ratios and robust returns from alternative investments.

Sales in its Japan business, though, came under pressure amid a weaker yen and “as we continued to operate in evolving pandemic conditions,” said CEO and Chairman Daniel P. Amos. Still, “we continue to expect stronger sales in the second half of the year assuming that those conditions subside, productivity continues to improve at Japan Post, and we execute on our product introduction and refreshment plans.”

Adjusted EPS of $1.46 at June 30 exceeded the average analyst estimate of $1.28 but slid from $1.59 in the year-ago period. The weaker yen/dollar exchange rate hurt EPS by $0.09.

Q2 revenue of $5.4B also topped the consensus of $4.79B and slipped from $5.6B in Q2 of last year.

Total investments and cash at the end of June were $121.4B, down from $146.7B at June 30, 2021. During Q2, Aflac (AFL) deployed $650M in capital to repurchase 11.2M of its common shares. At the end of June, the company had 36.6M remaining shares authorized for repurchase.

In dollar terms, Aflac Japan’s net earned premiums decreased 4.2% Y/Y to $2.4B, mainly due to limited pay products reaching paid-up status and constrained sales. Adjusted net investment income gained 8.4% Y/Y to $714.14M, and total adjusted revenues fell 1.6% to $3.1B.

Aflac U.S. net earned premiums drifted down 1.0% Y/Y to $1.4B due to lower persistency. Adjusted net investment income of $193M rose 2.1% Y/Y and total adjusted revenues ticked up 0.1% to $1.6B.

Earlier, Aflac declared a quarterly dividend of $0.40 per share.

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