Q2 2026 Aflac Inc Earnings Call Transcript
Key Points
- Aflac Inc (AFL) reported solid second-quarter 2026 results with adjusted earnings per diluted share of $1.75, reflecting focused execution of its strategy.
- Aflac Japan's first-half sales increased 7% year-over-year, driven by strong performance of Tsumitas and Anshin Palette products, and the company expects full-year sales to exceed 2025.
- Aflac US generated a 2.6% increase in sales and a 2.3% increase in net earned premium, with strong momentum in group voluntary and network dental/vision products.
- The company executed $4.8 billion in portfolio repositioning trades, expected to boost net investment income by over $50 million annually with limited capital impact.
- Aflac Inc (AFL) returned $1.3 billion to shareholders in Q2 through dividends and share repurchases, maintaining its 43-year dividend increase streak.
- The company raised its Japan internal reinsurance target to 30% of FSA reserves, allowing for further risk reduction and balance sheet efficiency to drive higher ROE.
- Aflac Japan's pretax margin improved 230 basis points year-over-year to 34.3%, with a strong expense ratio of 20.2% despite inflationary pressures.
- Capital positions remain strong with estimated regulatory ESR of 226% (240% including USP) and combined RBC slightly above 600%.
- Aflac Japan sales declined 5.6% in Q2 2026 due to a tough comparison with the prior year's Miraito launch, though first-half sales were up 7%.
- Aflac US net earned premium growth for 2026 is now expected to be just below the guidance range of 3% to 6%, revised from previous low-end guidance.
- The US total benefit ratio increased 220 basis points year-over-year to 49.5%, driven by higher incurred group disability claims in the quarter.
- Variable investment income ran $72 million or $0.11 per diluted share below long-term return expectations in Q2.
- Japan's benefit ratio is expected to be at the high end of the 60% to 63% guidance range for 2026, due to elevated lapse and reissue activity on newer products.
- Adjusted book value per share, excluding foreign currency remeasurement, decreased 4.1% in the quarter.
- Corporate and other reported a pretax adjusted loss of $10 million, down from a $20 million gain last year, due to lower investment income and higher interest expense.
- Japan FSA booked securities impairments of JPY15.8 billion and additional valuation allowances, though within expectations.
Good day and welcome to the Aflac Incorporated second-quarter 2026 earnings conference call. (Operator Instructions) Please note, this (technical difficulty) is being recorded.
I would now like to turn the conference over to David Young, Senior Vice President, Capital Markets. Please go ahead.
Good morning and welcome. Thank you for joining us for Aflac Incorporated second-quarter 2026 earnings call. This morning, Dan Amos, Chairman, CEO of Aflac Incorporated, will provide an overview of our results and operations in Japan and the United States. Then Max Broden, Senior Executive Vice President and CFO of Aflac Incorporated, will provide more detail on this quarter's financial results, including our capital and liquidity. These topics are also addressed in the materials we posted with our earnings release, financial supplement, and quarterly CFO video update on investors.aflac.com.
For Q&A today, we are also joined by Virgil Miller, President of Aflac Incorporated and Aflac US
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