Aflac Q2 Net Earnings up 37.7% While Adjusted Profit Declines
Aflac reported a 37.7% rise in net earnings for Q2, driven by lower investment losses, but adjusted earnings fell 7.7% due to currency headwinds and higher claims in the US segment.
Aflac (NYSE:AFL) posted second-quarter net earnings of $825 million, a 37.7% increase year over year, according to data reported by GN markets/earnings. This growth was primarily fueled by a reduction in investment losses, which dropped to $153 million from $421 million in the same period last year. However, the company’s adjusted earnings, a metric that strips out one-time items, declined 7.7% to $883 million. The divergence highlights how operational performance and investment market conditions are currently moving in opposite directions for the insurer.
Currency effects significantly distorted the reported figures. The average yen-to-dollar rate of 159.45 was 9.3% weaker than a year earlier, costing the company $0.05 per share in adjusted earnings. Excluding this foreign exchange impact, first-half adjusted earnings per share actually rose 4.1% to $3.57. Meanwhile, the U.S. business showed top-line growth, with net earned premiums increasing 2.3% to $1.5 billion and sales climbing 2.6% to $349 million, driven by group voluntary benefits, dental, and vision plans.
Japan Operations Face Margin Pressure
In Japan, pretax adjusted margins widened to 34.3% from 32.0%, aided by lower claims costs relative to premiums. Yen-based pretax adjusted earnings rose 3.4%, indicating operational improvement despite the weaker currency. New products, including the refreshed Tsumitasu life policy and Anshin Palette medical product, contributed to a 7.0% increase in first-half sales, which reached ¥37.3 billion. However, net earned premiums in yen fell 3.7% due to new external reinsurance deals and older limited-pay policies reaching paid-up status.
Premium persistency, the measure of customer retention, slipped to 92.7% from 93.7% over the same period. Even after stripping out currency effects, Japan’s pretax adjusted earnings declined 2.1%. New sales in the quarter dipped 5.6% against a tough comparison period for the Miraito cancer product, which launched in March 2025. These figures suggest that while profitability improved through cost management, the underlying growth in the Japanese market remains fragile.
US Segment Margins Narrow Amidst Rising Claims
The U.S. segment experienced a 4.6% drop in pretax adjusted earnings to $370 million, with margins narrowing from 22.5% to 20.9%. This compression resulted from claims and benefits taking a larger share of premiums. Corporate and Other segments swung to a $10 million pretax adjusted loss from a $20 million gain a year earlier, largely because interest expense rose 21.6% to $62 million. Adjusted book value per share, excluding foreign currency remeasurement, decreased to $41.22 at June 30 from $42.97 a year earlier.
Shareholder Returns Remain a Priority
Despite the mixed earnings picture, Aflac returned $1.3 billion to shareholders in the quarter, including $983 million in buybacks. The company declared a third-quarter dividend of $0.61, payable September 1 to holders of record on August 19, 2026. Management noted 43 consecutive years of dividend increases through 2025 and stated the board is on a path to extend this streak in 2026, signaling continued confidence in the firm’s cash flow generation capacity.
