10-QPeriod: Q1 FY2021

AFLAC INC Quarterly Report for Q1 Ended Mar 31, 2021

Filed April 29, 2021For Securities:AFL

Summary

Aflac Incorporated (AFL) reported a strong first quarter for 2021, with net earnings more than doubling to $1.3 billion ($1.87 per diluted share) compared to $566 million ($.78 per diluted share) in the prior year. This significant increase was primarily driven by a substantial rebound in net investment gains, which swung from a loss of $463 million in Q1 2020 to a gain of $307 million in Q1 2021. The company's total revenues also saw a healthy increase, reaching $5.9 billion, up from $5.2 billion in the year-ago quarter. The "adjusted earnings," a non-GAAP measure used by management to assess underlying business performance, also showed improvement, increasing to $1.05 billion ($1.53 per diluted share) from $882 million ($1.21 per diluted share) in Q1 2020. Both Aflac Japan and Aflac U.S. segments contributed to the results, with Aflac Japan's "pretax adjusted earnings" growing slightly to $887 million, and Aflac U.S. seeing a notable increase in "pretax adjusted earnings" to $445 million. The company also continued its capital return program, repurchasing $650 million of its common stock during the quarter.

Financial Highlights

34 data points
Beta

Revenue

$5.87B

Net Income

$1.29B

22.0% Net Margin

EPS (Diluted)

$1.87

Total Assets

$158.16B

Cash & Equivalents

$4.99B

Free Cash Flow

$1.37B

Financial Statements
Beta
Revenue$5.87B
SG&A Expenses$832.00M
Operating Expenses$1.53B
Operating Income$1.31B
Interest Expense$62.00M
Net Income$1.29B
EPS (Basic)$1.88
EPS (Diluted)$1.87
Shares Outstanding (Basic)688.94M
Shares Outstanding (Diluted)691.94M

Key Highlights

  • 1Net earnings increased significantly to $1.3 billion in Q1 2021 from $566 million in Q1 2020, primarily due to higher net investment gains.
  • 2Adjusted earnings, a key performance metric for management, rose to $1.05 billion ($1.53 per diluted share) from $882 million ($1.21 per diluted share) in the prior year.
  • 3Total revenues increased to $5.9 billion in Q1 2021 from $5.2 billion in Q1 2020.
  • 4Aflac Japan's pretax adjusted earnings were $887 million, a slight increase from $855 million in the prior year, driven by higher adjusted net investment income.
  • 5Aflac U.S. pretax adjusted earnings saw a substantial increase to $445 million from $326 million in the prior year, primarily due to lower benefit ratios.
  • 6The company repurchased $650 million of its common stock in the first quarter of 2021, demonstrating a commitment to returning capital to shareholders.
  • 7Shareholders' equity increased to $32.1 billion at March 31, 2021, from $26.4 billion at March 31, 2020, with a significant portion attributed to unrealized gains on investment securities.

Frequently Asked Questions

Aflac reported a strong first quarter of 2021, with net earnings of $1.3 billion, a significant increase from $566 million in the first quarter of 2020. This growth was largely driven by improved investment performance, which swung from a net investment loss in the prior year to a net investment gain. Adjusted earnings also showed improvement, reflecting the underlying strength of its insurance operations in both Japan and the U.S.

While the pandemic continued to present challenges, particularly affecting sales in Aflac U.S. due to limited face-to-face interactions, the company noted that pandemic-related claims and reserve increases were more than offset by a reduction in claims for non-COVID-19 medical needs. Management indicated that the company entered the crisis with a strong capital and liquidity position and has been monitoring market conditions and adapting its operations, including accelerating digital initiatives.

Aflac's investment portfolio is primarily focused on fixed maturity securities aimed at generating stable income. The company highlighted that its portfolio was well-positioned entering the crisis and that fundamental credit analysis and de-risking activities contributed to its current quality. While cautious about the recovery path, the company is managing its investments and has seen a significant positive swing in net investment gains in the first quarter of 2021.

Aflac demonstrated its commitment to returning capital to shareholders by repurchasing $650 million of its common stock in the first quarter of 2021. The company also declared a cash dividend of $0.33 per share, an increase from the prior year. These actions, combined with a strong shareholders' equity position, indicate a focus on shareholder returns while maintaining robust capital levels.