10-QPeriod: Q3 FY2023

AFLAC INC Quarterly Report for Q3 Ended Sep 30, 2023

Filed November 2, 2023For Securities:AFL

Summary

Aflac Incorporated reported solid financial performance for the third quarter and the first nine months of 2023. Total revenues increased year-over-year for the quarter, driven by higher net investment income and modest premium growth. Net earnings saw a slight decrease in the third quarter compared to the prior year, primarily due to higher investment gains in the prior year's period and the impact of foreign currency translation. However, for the nine-month period, net earnings and earnings per share showed growth. Aflac Japan continues to be the primary contributor to earnings, though net earned premiums in yen terms decreased due to limited-pay products reaching premium paid-up status and internal reinsurance activity. Aflac U.S. demonstrated strong performance with increased net earned premiums and pretax adjusted earnings, supported by growth initiatives and improved investment income. The company maintained a strong capital position and liquidity. Shareholder equity increased, and the company continued its share repurchase program, returning significant capital to shareholders through dividends and buybacks. The company remains focused on its long-term strategy of providing financial protection and enhancing shareholder value.

Financial Highlights

34 data points
Beta

Revenue

$4.95B

Net Income

$1.57B

31.7% Net Margin

EPS (Diluted)

$2.64

Total Assets

$125.11B

Cash & Equivalents

$5.50B

Free Cash Flow

$1.28B

Financial Statements
Beta
Revenue$4.95B
SG&A Expenses$785.00M
Operating Expenses$1.28B
Operating Income$1.30B
Interest Expense$48.00M
Net Income$1.57B
EPS (Basic)$2.65
EPS (Diluted)$2.64
Shares Outstanding (Basic)591.25M
Shares Outstanding (Diluted)593.60M

Key Highlights

  • 1Total revenues for the third quarter of 2023 were $5.0 billion, up from $4.7 billion in Q3 2022.
  • 2Net earnings for the third quarter of 2023 were $1.6 billion, or $2.64 per diluted share, a decrease from $1.8 billion, or $2.82 per diluted share, in Q3 2022.
  • 3For the first nine months of 2023, net earnings increased to $4.4 billion, or $7.28 per diluted share, from $4.2 billion, or $6.57 per diluted share, in the same period of 2022.
  • 4Aflac Japan's pretax adjusted earnings increased by 6.4% in Q3 2023 compared to Q3 2022, despite a decrease in net earned premiums.
  • 5Aflac U.S. saw a 38.6% increase in pretax adjusted earnings for Q3 2023 compared to Q3 2022, driven by higher premiums and investment income.
  • 6Shareholder equity was $22.7 billion at September 30, 2023, up from $20.1 billion at December 31, 2022.
  • 7The company repurchased $2.1 billion of its common stock in the first nine months of 2023 and has 86.4 million shares remaining under its repurchase authorization.

Frequently Asked Questions

In the third quarter of 2023, Aflac's total revenues increased to $5.0 billion from $4.7 billion in the third quarter of 2022. However, net earnings decreased to $1.6 billion, or $2.64 per diluted share, from $1.8 billion, or $2.82 per diluted share, in the prior year's quarter. This decrease was primarily attributed to higher investment gains in Q3 2022 and the impact of foreign currency translation.

Aflac Japan's pretax adjusted earnings showed a 6.4% increase year-over-year in the third quarter of 2023, despite a decline in net earned premiums in yen terms. Aflac U.S. reported a significant 38.6% increase in pretax adjusted earnings, driven by growth initiatives, higher premiums, and improved investment income.

Aflac maintained a strong capital position, with shareholder equity increasing to $22.7 billion as of September 30, 2023. The company also continued its share repurchase program, buying back $2.1 billion of its common stock in the first nine months of the year, and returned capital to shareholders through dividends. The company holds $5.5 billion in cash and cash equivalents, exceeding its target minimum, indicating robust liquidity.

For the full year 2023, Aflac expects the benefit ratio for Aflac U.S. to be below its outlook range of 47% to 50%. The expense ratio is expected to be slightly above its outlook range of 37% to 40%, partly due to ongoing investments in the U.S. platform and a write-off of capitalized software development costs. The company anticipates the expense ratio will improve over time as its growth businesses scale.

Aflac Japan's financial results are significantly influenced by the yen/dollar exchange rate. The average yen/dollar exchange rate weakened by 5.4% in Q3 2023 compared to Q3 2022, and by 8.5% for the first nine months. This weakening of the yen negatively impacted reported results in U.S. dollars, suppressing year-over-year growth rates for key metrics like net investment income, total adjusted revenues, and pretax adjusted earnings.