Aflac Q4 Earnings Miss Estimates on Lower Investment Income

Aflac Incorporated AFL reported fourth-quarter 2025 adjusted earnings per share (EPS) of $1.57, which missed the Zacks Consensus Estimate by 8.2%. The bottom line improved 0.6% year over year. Adjusted revenues totaled $4.9 billion, which declined 9.9% year over year. The top line beat the consensus mark by 8.7%.

AFL’s quarterly performance was affected by lower net investment, exchange rate and higher operating costs. Nevertheless, the downside was partly offset by higher sales in the U.S. unit.

AFL’s Q4 Performance

Adjusted net investment income declined 4.4% year over year to $920 million in the quarter under review.

Net benefits and claims totaled $1.9 billion, which declined 1.1% year over year. Total acquisition and operating expenses increased 3.5% year over year to $1.4 billion.

Pre-tax earnings decreased 26.4% year over year to $1.6 billion.

Inside Aflac’s Segments

Aflac Japan: The segment’s adjusted revenues dipped 3.6% year over year to $2.3 billion in the fourth quarter and fell short of the Zacks Consensus Estimate of $2.4 billion. Net earned premiums of $1.6 billion slipped 3% year over year and missed the consensus mark of $1.7 billion.  

Adjusted net investment income decreased 5.1% year over year to $631 million. The unit’s pretax adjusted earnings declined 4.7% to $712 million and missed the consensus mark of $773 million.

New annualized premium sales advanced 15.7% year over year to $129 million on the back of solid sales of Miraito, its cancer insurance product.

Aflac U.S.: Adjusted revenues of $1.73 billion grew 3.3% year over year but missed the Zacks Consensus Estimate of $1.76 billion. Net earned premiums advanced 4% year over year to $1.5 billion, attributable to higher sales. The metric marginally missed the consensus mark of $1.52 billion.

Adjusted net investment income totaled $207 million, which inched down 2.8% year over year in the quarter under review. Pretax adjusted earnings of the segment decreased 9.1% year over year to $300 million, reflecting higher benefits and expenses. The metric missed the consensus mark of $306 million.

The unit’s sales totaled $551 million, up 3.1% year over year, on the back of higher sales of group voluntary products.

Full-Year 2025 Update

Adjusted EPS improved 3.5% year over year to $7.46. Total revenues fell 9.3% to $17.2 billion. Net earned premiums increased 0.8% to $13.5 billion.

Financial Position (As of Dec. 31, 2025)

Aflac exited the fourth quarter with total investments and cash of $103.8 billion, which fell 1.3% from the 2024-end level. Total assets of $116.5 billion decreased 0.9% from the year-ago figure.

Adjusted debt amounted to $7.7 billion, up 7.1% from the figure as of Dec. 31, 2024. Adjusted debt to adjusted capitalization, excluding accumulated other comprehensive income, was 21.4%, which deteriorated 170 basis points (bps) from the 2024-end level. The company had pre-funding of debt maturities of $0.4 billion.

Total shareholders' equity of $29.5 billion advanced 13% from the 2024-end figure.

Adjusted book value per share increased 2.3% year over year to $54.06. Adjusted return on equity, excluding foreign currency impacts, was 17.6%, which improved 30 bps year over year.

AFL’s Capital Deployment

Aflac bought back 7.2 million shares worth $800 million in the fourth quarter. It had 114.3 million shares left for buyback as of Dec. 31, 2025.

Management announced a quarterly dividend hike of 5.2% amounting to 61 cents per share. The dividend will be paid out on March 2, 2026, to shareholders of record as of Feb. 18.

AFL’s 2026 Outlook

Aflac currently anticipates a benefit ratio of 60-63% for the Aflac Japan unit in 2026. The metric for the Aflac U.S. unit is projected to be in the 48-52% range.

The expense ratio for Aflac Japan is estimated to be 20-23%. The same for Aflac U.S. is reiterated to be in the band of 36-39%.

Underlying earned premiums are likely to witness a year-over-year decline of 1-2% for the Japan unit in 2026. Net earned premiums for the U.S. unit is likely to be at the lower end of the 3-6% range.

The pretax profit margin for Aflac Japan is estimated to be between 33% and 36%, and the same for Aflac U.S. is projected to be in the range of 17-20% for 2026.

Zacks Rank

Aflac currently has a Zacks Rank #4 (Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Insurers

AXIS Capital Holdings Limited AXS reported fourth-quarter 2025 operating income of $3.25 per share, which outpaced the Zacks Consensus Estimate by 9.4% and rose 9.4% year over year.

Total operating revenues of $1.7 billion beat the Zacks Consensus Estimate by 5.2%. The top line rose nearly 9% year over year on higher premiums earned. Net premiums written rose 13% to $1.4 billion, with an increase of 14% in the Insurance segment, and growth of 5% in the Reinsurance segment.

Chubb Limited CB reported fourth-quarter 2025 core operating income of $7.52 per share, which beat the Zacks Consensus Estimate by 13.9%. The bottom line improved 24.9% year over year.

Total operating revenues also improved 7.4% year over year to $15.3 billion. The top line beat the Zacks Consensus Estimate by 1.7%. Chubb’s strong performance was driven by solid underwriting profit, robust premium growth and record investment income.

American Financial Group, Inc. AFG reported fourth-quarter 2025 net operating earnings per share of $3.65, which beat the Zacks Consensus Estimate by 14.8%. The bottom line increased 17% year over year on underwriting income.

Total revenues of $2 billion decreased 2.7% year over year. The decline was due to lower net investment income. The top line also missed the Zacks Consensus Estimate by 1.4%.
AFG’s robust fourth-quarter earnings were driven by strong underwriting profit, led primarily by the property and transportation segment.

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This article originally published on Zacks Investment Research (zacks.com).

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