10-QPeriod: Q2 FY2021

AFLAC INC Quarterly Report for Q2 Ended Jun 30, 2021

Filed July 29, 2021For Securities:AFL

Summary

Aflac Incorporated (AFL) reported solid financial results for the second quarter and first half of 2021, demonstrating resilience and recovery. The company saw a notable increase in net earnings and earnings per share, largely driven by a significant rebound in net investment gains compared to a challenging period in 2020. Total revenues also showed an increase, supported by growth in both Aflac Japan and Aflac U.S. segments. Operationally, Aflac Japan experienced a strong recovery in new business sales, particularly in its 'third sector' products like medical and cancer insurance, benefiting from new product launches and a favorable comparison to the pandemic-impacted prior year. Aflac U.S. also reported a substantial increase in sales, reflecting the economic reopening and continued investment in digital initiatives. The company maintained a strong capital and liquidity position, continuing its commitment to prudent capital management and share repurchases.

Financial Highlights

34 data points
Beta

Revenue

$5.56B

Net Income

$1.10B

19.9% Net Margin

EPS (Diluted)

$1.62

Total Assets

$161.49B

Cash & Equivalents

$5.47B

Free Cash Flow

$962.00M

Financial Statements
Beta
Revenue$5.56B
SG&A Expenses$881.00M
Operating Expenses$1.54B
Operating Income$1.34B
Interest Expense$62.00M
Net Income$1.10B
EPS (Basic)$1.63
EPS (Diluted)$1.62
Shares Outstanding (Basic)678.05M
Shares Outstanding (Diluted)680.92M

Key Highlights

  • 1Net earnings for Q2 2021 increased to $1.1 billion, or $1.62 per diluted share, compared to $805 million, or $1.12 per diluted share, in Q2 2020.
  • 2First half 2021 net earnings were $2.4 billion, or $3.49 per diluted share, significantly up from $1.4 billion, or $1.89 per diluted share, in the same period of 2020.
  • 3Aflac Japan's new annualized premium sales increased by 38.4% in Q2 2021 and 15.7% in the first half of 2021 (in yen terms) compared to the prior year.
  • 4Aflac U.S. saw a substantial increase in new annualized premium sales, up 64.1% in Q2 2021 compared to Q2 2020, reflecting economic reopening.
  • 5The company repurchased $1.2 billion of its common stock in the first six months of 2021, with $76.5 million shares remaining authorized for repurchase.
  • 6Shareholders' equity increased to $33.7 billion ($50.20 per share) at June 30, 2021, compared to $29.4 billion ($41.21 per share) at June 30, 2020.
  • 7Aflac Japan maintained a strong Solvency Margin Ratio (SMR), and Aflac U.S. maintained a high Risk-Based Capital (RBC) ratio.

Frequently Asked Questions

The primary driver of Aflac's increased profitability in the second quarter of 2021 was a significant rebound in net investment gains, which swung from a loss of $170 million in Q2 2020 to a gain of $89 million in Q2 2021. This was supported by strong performance in equity securities and a favorable shift in credit loss allowances.

Aflac Japan experienced a strong recovery in sales. In yen terms, new annualized premium sales increased by 38.4% in the second quarter of 2021 and 15.7% in the first half of 2021 compared to the same periods in 2020. This growth was driven by the launch of a new medical product and favorable comparisons to the prior year, which was impacted by pandemic conditions.

Aflac maintains a strong capital and liquidity position, with shareholders' equity growing to $33.7 billion at June 30, 2021. The company is committed to prudent capital management, including ongoing share repurchases ($1.2 billion in the first half of 2021) and dividend payments. Both Aflac Japan and Aflac U.S. maintain strong solvency and capital ratios, respectively.

Aflac continues to monitor the evolving impact of COVID-19. While pandemic conditions in 2020 negatively affected sales, the company saw a recovery in 2021 due to economic reopening and favorable year-over-year comparisons. Claims related to COVID-19 have not materially impacted financial results so far in 2021, being offset by reduced non-COVID-19 medical claims. The company has accelerated digital initiatives to improve operations and customer service in response to the pandemic.