On April 30, 2025, Aflac Inc (AFL, Financial) released its 8-K filing detailing its first-quarter financial results. The company reported total revenues of $3.4 billion, a significant decrease from $5.4 billion in the same quarter of the previous year. Net earnings also saw a sharp decline, falling to $29 million, or $0.05 per diluted share, compared to $1.9 billion, or $3.25 per diluted share, a year ago. These results were primarily impacted by net investment losses of $963 million, a stark contrast to the net investment gains of $951 million in the first quarter of 2024.

Company Overview

Aflac Inc offers supplemental health insurance and life insurance in the United States and Japan. The company has expanded its product offerings to include accident, dental and vision, disability, and long-term-care insurance. Aflac markets its products through independent distributors, selling the majority of its policies directly to consumers at their workplaces and also reaching customers through digital mediums. The company operates through two main segments: Aflac Japan, which generates the majority of its revenue, and Aflac U.S.

Performance and Challenges

Aflac Inc's performance in the first quarter of 2025 was marked by significant challenges, particularly in its investment portfolio. The company faced net investment losses driven by net losses on derivatives and foreign currency activities, a decrease in the fair value of equity securities, and reserves for expected credit losses. These factors contributed to a substantial decline in net earnings, highlighting the volatility and risks associated with investment income in the insurance industry.

Financial Achievements

Despite the challenges, Aflac Inc reported adjusted earnings of $906 million, a decrease of 5.7% from the previous year. Adjusted earnings per diluted share remained flat at $1.66, slightly surpassing the analyst estimate of $1.65. This stability in adjusted earnings per share is crucial for maintaining investor confidence and reflects the company's ability to manage its core insurance operations effectively amidst external pressures.

Key Financial Metrics

The company's balance sheet showed a shareholders' equity of $26.3 billion, or $48.55 per share, as of March 31, 2025, up from $23.5 billion, or $41.27 per share, a year earlier. This increase was influenced by changes in discount rate assumptions on insurance reserves. However, the company also reported a net unrealized loss on investment securities and derivatives of $1.3 billion, compared to a net unrealized gain of $1.1 billion in the previous year.

Segment Performance

Aflac Japan's net earned premiums in yen terms decreased by 5.0%, primarily due to internal cancer reinsurance transactions and limited-pay policies reaching paid-up status. In dollar terms, net earned premiums decreased by 7.4% to $1.7 billion. Aflac U.S. saw a 1.8% increase in net earned premiums to $1.5 billion, driven by improved sales and persistency.

Dividend and Share Repurchase

The board of directors declared a second-quarter dividend of $0.58 per share, reflecting a 16% increase from the previous year. Aflac Inc also repurchased 8.5 million of its common shares, deploying $900 million in capital for share repurchases during the quarter.

"I am pleased that Aflac delivered very solid adjusted earnings for the quarter," stated Aflac Incorporated Chairman and Chief Executive Officer Daniel P. Amos. "We continue to focus on more profitable growth through our stronger underwriting discipline and improving the productivity of agents and brokers."

Analysis

Aflac Inc's first-quarter results underscore the challenges faced by insurance companies in managing investment portfolios amidst volatile market conditions. The significant decline in net earnings highlights the impact of investment losses, while the stability in adjusted earnings per share reflects the company's resilience in its core operations. Moving forward, Aflac Inc's focus on profitable growth and disciplined underwriting will be crucial in navigating the current economic landscape and maintaining shareholder value.

Explore the complete 8-K earnings release (here) from Aflac Inc for further details.