10-QPeriod: Q1 FY2020

AFLAC INC Quarterly Report for Q1 Ended Mar 31, 2020

Filed April 30, 2020For Securities:AFL

Summary

Aflac Incorporated reported net earnings of $566 million for the first quarter of 2020, a decrease from $928 million in the prior year, primarily due to a significant increase in net investment losses. Total revenues declined to $5.2 billion from $5.7 billion year-over-year. The company experienced a substantial unrealized loss on its fixed maturity securities, contributing to a significant drop in total comprehensive income. Despite market volatility and the ongoing impact of COVID-19, Aflac Japan's pretax adjusted earnings increased slightly, while Aflac U.S. pretax adjusted earnings saw a marginal increase. The company maintained strong liquidity and capital positions, with substantial cash reserves and available credit facilities, and took steps to manage its capital allocation strategically.

Financial Highlights

33 data points
Beta

Revenue

$5.16B

Net Income

$566.00M

11.0% Net Margin

EPS (Diluted)

$0.78

Total Assets

$151.62B

Cash & Equivalents

$4.15B

Free Cash Flow

$1.41B

Financial Statements
Beta
Revenue$5.16B
SG&A Expenses$779.00M
Operating Income$1.18B
Interest Expense$55.00M
Net Income$566.00M
EPS (Basic)$0.78
EPS (Diluted)$0.78
Shares Outstanding (Basic)724.37M
Shares Outstanding (Diluted)727.51M

Key Highlights

  • 1Net earnings decreased to $566 million from $928 million in Q1 2019, driven by higher net investment losses.
  • 2Total revenues decreased to $5.2 billion from $5.7 billion.
  • 3Total comprehensive income significantly decreased to a loss of $2,709 million from a gain of $3,258 million, largely due to a $4,605 million unrealized loss on fixed maturity securities.
  • 4Aflac Japan's pretax adjusted earnings increased by 2.5% to $855 million, while Aflac U.S.'s pretax adjusted earnings increased by 0.9% to $326 million.
  • 5The company repurchased 10.0 million shares of its common stock for $449 million during the quarter.
  • 6The company maintained strong liquidity, with $4.1 billion in cash and cash equivalents at quarter-end, and had no borrowings under its significant revolving credit facilities.
  • 7COVID-19's impact on sales was significant, with Aflac Japan sales down an estimated 65% and Aflac U.S. sales down an estimated 55% in April 2020 compared to the prior year.

Frequently Asked Questions

In the first quarter of 2020, Aflac reported a net earnings of $566 million, or $0.78 per diluted share, a decrease from $928 million, or $1.23 per diluted share, in the same period of 2019. This decline was primarily driven by a substantial increase in net investment losses.

The COVID-19 pandemic had a significant impact, particularly on sales. Face-to-face sales interactions were greatly reduced due to social distancing measures and work-from-home directives. This led to an estimated sales decline of 65% for Aflac Japan and 55% for Aflac U.S. in April 2020 compared to the prior year. The company is closely monitoring the impact on its business, financial condition, results of operations, liquidity, and capital position.

Aflac's investment portfolio experienced a challenging quarter, marked by significant net investment losses. This was primarily due to a substantial unrealized loss of $4,605 million on fixed maturity securities available for sale, contributing to a large negative swing in total comprehensive income. The company also recorded $145 million in credit losses and experienced declines in certain sector investments impacted by the pandemic.

Aflac maintained a strong liquidity and capital position entering the COVID-19 crisis. As of March 31, 2020, the company held $4.1 billion in cash and cash equivalents and had no borrowings under its significant revolving credit facilities totaling $1 billion and ¥100 billion. The company also took proactive steps to support liquidity and capital resources, including issuing senior notes totaling ¥57.0 billion in March 2020 and $1 billion in April 2020.