Why did GAAP net earnings fall so sharply in Q4 2025 if adjusted earnings held up better?

GAAP net earnings include net investment gains and losses, which are excluded from adjusted earnings. Q4 2024 benefited from about $1.0 billion of net investment gains versus $537 million in Q4 2025. Adjusted earnings declined only 5.4% to $818 million, so the GAAP decline is mostly a comparison against an unusually strong prior-year investment result.

How much of the EPS growth came from share buybacks rather than operating growth?

Substantially all of Q4 per-share growth came from buybacks. Adjusted earnings fell 5.4% in dollars, but adjusted EPS rose 0.6%, implying the diluted share count fell about 5.9% year over year. Aflac repurchased 7.2 million shares for $800 million in Q4 and $3.5 billion for the full year, with 114.3 million shares remaining under authorization.

What are the key risks in the U.S. segment heading into 2026?

The U.S. benefit ratio rose 230 basis points year over year to 48.6% in Q4, driven by prior-year endorsements, higher claims on the individual voluntary block, and higher benefit ratios in group life and disability. The expense ratio also rose as growth initiatives scaled, adding about 60 basis points. Management's 2026 guidance calls for a 17% to 20% pretax margin, so investors will be watching whether margin compression continues.

How exposed is Aflac to the yen and interest rates?

Japan is the dominant profit engine, and yen translation affects reported results. Management notes that about 63% of debt is denominated in yen, which intentionally offsets the translation effect on Japan's U.S. dollar economic value. Adjusted leverage was 21.4%, within the 20% to 25% target. Japan's 2026 guidance points to a 33% to 36% pretax margin, while underlying premiums are expected to decline 1% to 2%.

Is the dividend at risk given the GAAP earnings decline?

The board declared a $0.61 per share Q1 2026 dividend, a 5.2% increase, extending a 43-year streak of annual increases. Cash returns in Q4 totaled about $1.1 billion, including $800 million in buybacks and $303 million in dividends. Management cites strong capital ratios, with an estimated regulatory ESR of 253% in Japan and a combined U.S. RBC ratio of 575%, which support continued capital returns.

AFL 8-K: Earnings & Results & Regulation FD

01—Abstract

Summary

Summary of the 8-K filed February 4, 2026. Cited figures are marked; the original filing is the authoritative source.

Aflac reported fourth-quarter 2025 net earnings of $1.4 billion^a, or $2.64 per diluted share, down from $1.9 billion ($3.42) a year earlier, but this decline was driven largely by net investment gains of $537 million in Q4 2025 versus $1.0 billion in Q4 2024.

Adjusted earnings, the company's preferred measure of insurance operating performance, were $818 million^b ($1.57 per diluted share), down 5.4% in dollars but up 0.6% per share, as share count reduction offset the earnings decline. For full-year 2025, adjusted earnings per diluted share rose 3.9% to $7.49 (3.5% excluding FX), while GAAP net earnings fell 33% to $3.6 billion ($6.82 per share) because of lower net investment gains. Total revenues declined 9.3% to $17.2 billion for the year.

Segment performance was mixed. Aflac Japan's pretax adjusted earnings declined 4.7%^c in dollars for Q4 and 1.5% for the year, with a strong 31.3% pretax margin, supported by Miraito cancer insurance sales that rose 16.0% for the year. Aflac U.S. net earned premiums grew 4.0% in Q4 and 2.9% for the year, but its Q4 pretax margin fell to 17.4% from 19.7% on higher benefits and expenses.

Shareholders' equity rose 13% to $29.5 billion^d, driven by discount-rate-related AOCI gains, while adjusted book value excluding foreign currency remeasurement was roughly flat per share. Management reiterated a 5.2% increase in the Q1 2026 dividend to $0.61 per share, extending a 43-year streak of dividend increases, and repurchased $800 million of stock in Q4 and $3.5 billion for the year. For 2026, management guided Japan's underlying earned premiums down 1% to 2%, a benefit ratio of 60% to 63%, and a pretax margin of 33% to 36%.

For U.S., it guided net earned premium growth at the lower end of 3% to 6%, a benefit ratio of 48% to 52%, an expense ratio of 36% to 39%, and a pretax margin of 17% to 20%. Investors should note that Q4 benefited from roughly $36 million of reserve remeasurement gains and that the U.S. benefit ratio rose 230 basis points year over year.

02—Key points

Key Highlights

Q4 2025 net earnings were $1.4 billion ($2.64 per diluted share), down 27.5% from the prior year, mainly due to lower net investment gains ($537M vs. $1.0B).
Q4 adjusted EPS rose 0.6% to $1.57 despite a 5.4% decline in adjusted earnings to $818M, aided by a 5.9% lower weighted diluted share count.
Full-year 2025 adjusted EPS grew 3.9% to $7.49 (3.5% ex-FX), while GAAP EPS fell 29.2% to $6.82 on lower investment gains.
Aflac Japan delivered a 31.3% Q4 pretax margin and 16.0% full-year sales growth to ¥74.4B, led by the Miraito cancer product.
Aflac U.S. Q4 pretax margin fell to 17.4% from 19.7% on higher benefits, while net earned premiums grew 4.0%.
Adjusted ROE was 11.7% for Q4 (14.5% excluding FX remeasurement), with book value per share at $56.85 on discount-rate-driven AOCI gains.
Q1 2026 dividend of $0.61 per share (up 5.2%) was declared, and $3.5B of shares were repurchased in 2025; 2026 segment guidance was largely reaffirmed.

03—Questions

Frequently Asked Questions

Why did GAAP net earnings fall so sharply in Q4 2025 if adjusted earnings held up better?
GAAP net earnings include net investment gains and losses, which are excluded from adjusted earnings. Q4 2024 benefited from about $1.0 billion of net investment gains versus $537 million in Q4 2025. Adjusted earnings declined only 5.4% to $818 million, so the GAAP decline is mostly a comparison against an unusually strong prior-year investment result.
How much of the EPS growth came from share buybacks rather than operating growth?
Substantially all of Q4 per-share growth came from buybacks. Adjusted earnings fell 5.4% in dollars, but adjusted EPS rose 0.6%, implying the diluted share count fell about 5.9% year over year. Aflac repurchased 7.2 million shares for $800 million in Q4 and $3.5 billion for the full year, with 114.3 million shares remaining under authorization.
What are the key risks in the U.S. segment heading into 2026?
The U.S. benefit ratio rose 230 basis points year over year to 48.6% in Q4, driven by prior-year endorsements, higher claims on the individual voluntary block, and higher benefit ratios in group life and disability. The expense ratio also rose as growth initiatives scaled, adding about 60 basis points. Management's 2026 guidance calls for a 17% to 20% pretax margin, so investors will be watching whether margin compression continues.
How exposed is Aflac to the yen and interest rates?
Japan is the dominant profit engine, and yen translation affects reported results. Management notes that about 63% of debt is denominated in yen, which intentionally offsets the translation effect on Japan's U.S. dollar economic value. Adjusted leverage was 21.4%, within the 20% to 25% target. Japan's 2026 guidance points to a 33% to 36% pretax margin, while underlying premiums are expected to decline 1% to 2%.
Is the dividend at risk given the GAAP earnings decline?
The board declared a $0.61 per share Q1 2026 dividend, a 5.2% increase, extending a 43-year streak of annual increases. Cash returns in Q4 totaled about $1.1 billion, including $800 million in buybacks and $303 million in dividends. Management cites strong capital ratios, with an estimated regulatory ESR of 253% in Japan and a combined U.S. RBC ratio of 575%, which support continued capital returns.

04—Continue

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