Aflac Inc Reports Record Earnings in Q4 2023
Strong Financial Results in Japan and U.S.
Aflac Incorporated concluded the fourth quarter of 2023 with its highest adjusted earnings per diluted share in company history at $6.23. The insurer, which operates in Japan and the United States, reported strong financial results in both regions. Aflac Japan saw a 10.9% increase in sales and a profit margin of 30.5%, while Aflac U.S. experienced a 5% increase in sales and a profit margin of 22.7%. The company also emphasized its sound capital management with $2.8 billion of liquidity and a repurchase of $2.8 billion of its own stock.
Key Takeaways
- Record adjusted earnings per diluted share of $6.23 for Aflac Incorporated in Q4 2023.
- Aflac Japan reported a 10.9% increase in sales with a 30.5% profit margin.
- Aflac U.S. saw a 5% increase in sales and a 22.7% profit margin.
- The company repurchased $2.8 billion of its own stock and paid dividends of $245 million in Q4 2023.
- Aflac Japan and Aflac U.S. have set sales targets for the end of 2026 and 2025, respectively.
- Aflac’s liquidity remained strong at nearly $2.8 billion by the end of 2023.
Company Outlook
Aflac Japan targets sales between ¥67 billion and ¥73 billion by 2026. Aflac U.S. aims for sales of at least $1.8 billion by 2025. The company expects organic capital generation to remain between $2.6 billion and $3 billion annually.
Bearish Highlights
- Aflac Japan’s total adjusted revenues in yen decreased by 3.6% to ¥1.5 trillion.
- Net earned premiums in Japan declined 5.9% to ¥1.1 trillion.
- The company’s commercial real estate watch list is elevated, primarily due to exposure to transitional real estate.
Bullish Highlights
- Adjusted net investment income in Japan increased by 4% to ¥365.6 billion.
- Aflac U.S. reported total adjusted revenues up 2.1% to $6.6 billion, with net earned premiums increasing 1.9% to $5.7 billion.
- Adjusted net investment income in the U.S. increased 8.6% to $820 million.
Misses
- Aflac Japan’s sales target was lowered from ¥80 billion to between ¥67 billion and ¥73 billion.
- The COVID-19 pandemic negatively impacted the distribution system in both the U.S. and Japan.
Q&A Highlights
- Aflac plans to transfer about 10% of Aflac Japan’s balance sheet to Aflac Bermuda through internal reinsurance.
- The yen-dollar exchange rate does not affect Aflac’s hedging strategy as they focus on long-term economic exposure to the yen.
- The company is not an FX trader but uses various methods for long-term risk reduction.
Aflac Incorporated has expressed satisfaction with their results and the outlook for 2024. They are addressing the aging population in Japan with inexpensive savings plans and are looking to add new products. They also remain confident in their distribution and product offerings in the Japanese market. Aflac’s capital and liquidity position prevent them from being a forced seller, and they are actively working with borrowers on their commercial real estate watch list to manage maturities and avoid foreclosures. The company’s disciplined approach to underwriting and expense management is expected to positively impact their financial metrics over time.
