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1. Company Snapshot

1.a. Company Description

Aflac Incorporated, through its subsidiaries, provides supplemental health and life insurance products.It operates through two segments, Aflac Japan and Aflac U.S. The Aflac Japan segment offers cancer, medical, nursing care income support, GIFT, and whole and term life insurance products, as well as WAYS and child endowment plans under saving type insurance products in Japan.The Aflac U.S. segment provides cancer, accident, short-term disability, critical illness, hospital indemnity, dental, vision, long-term care and disability, and term and whole life insurance products in the United States.


It sells its products through sales associates, brokers, independent corporate agencies, individual agencies, and affiliated corporate agencies.The company was founded in 1955 and is based in Columbus, Georgia.

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1.b. Last Insights on AFL

Aflac Incorporated's recent performance was driven by strong sales in Japan and higher U.S. margins, which fueled shareholder returns through an increased buyback plan of 130.9M shares. The company's Q2 earnings beat estimates with $1.78 per share, despite declining revenue and EPS. Aflac's solid balance sheet and impressive dividend growth history are notable. The company's acceleration of digitalization and rising underwriting exposure are expected to drive growth, although pricing pressure remains a concern due to rising medical costs and inflation.

1.c. Company Highlights

2. Aflac's 2025 Earnings: A Strong Performance in a Challenging Environment

Aflac Incorporated reported adjusted earnings per diluted share of $1.57 for the fourth quarter, a 0.6% increase year-over-year, and $7.49 for the full year. The company's net earnings per diluted share were $2.64 for the quarter and $6.82 for the year. The Japan segment saw a 1.9% decline in net earned premiums in yen terms, while the underlying earned premiums declined 1.2%. The total benefit ratio in Japan came in at 65% for the quarter, down 150 basis points year-over-year. In the U.S., net earned premiums were up 4%, with a total benefit ratio of 48.6%. Aflac's adjusted leverage was 21.4% for the quarter, within its target range of 20% to 25%.

Publication Date: Feb -06

📋 Highlights
  • Earnings Performance: Fourth-quarter net EPS at $2.64 vs. adjusted $1.57 (+0.6% YoY), annual net EPS $6.82 vs. adjusted $7.49 (flat YoY).
  • Japan Sales Growth: Q4 sales +15.7% YoY, 2025 sales +16% YoY, driven by Miraito cancer insurance; persistency 93.1% for 2025.
  • U.S. Sales & Premiums: 2025 new sales $1.6B, persistency 79.2%, net earned premiums +2.9% YoY; group policies/policies grew 14%.
  • Shareholder Returns: $3.5B in share repurchases and $1.2B in dividends in 2025, totaling $4.8B returned to shareholders.
  • Capital Position: SMR >970%, ESR 253%, unencumbered liquidity $4.1B, and adjusted leverage 21.4% in Q4 (within target range).

Segment Performance

In Japan, sales increased 15.7% for the fourth quarter and 16% for 2025, driven by the cancer insurance product Miraito. Premium persistency in Japan remained strong at 93.1% for the year. Aflac U.S. generated nearly $1.6 billion in new sales in 2025, with strong premium persistency of 79.2% and a 2.9% increase in net earned premiums. The company's capital position remains strong, with an SMR above 970% and an estimated regulatory ESR of 253%.

Outlook and Guidance

For 2026, Aflac expects underlying earned premiums in Japan to decline 1% to 2%, with an expense ratio in the 20% to 23% range and a benefit ratio in the 60% to 63% range. In the U.S., the company expects net earned premium growth to be in the lower end of the 3% to 6% range, with a benefit ratio in the 48% to 52% range and an expense ratio in the 36% to 39% range. Analysts estimate next year's revenue growth at 1.5%. The actual EPS for the quarter came in at $1.57, relative to estimates of $1.69.

Valuation and Dividend Yield

Aflac's Price-to-Book Ratio (P/B) is 2.17, and its Dividend Yield is 1.97%. The company's Return on Equity (ROE) is 15.39%. These metrics suggest that the company is trading at a reasonable valuation, with a relatively attractive dividend yield. The P/B ratio is a relevant metric for insurance companies, as it reflects the company's book value relative to its market capitalization.

Operational Highlights

Aflac is exploring AI applications, particularly in Japan, to improve distribution and product innovation. In the U.S., AI is being used to assist in claims processing, with over 60% of claims automated using machine learning techniques. The company is also investing in unifying channels and enhancing products, with a focus on the career channel and group sales. Group sales have grown significantly, driven by brokers, with a 14% growth in group policies and products.

3. NewsRoom

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Aflac Incorporated (AFL) Q4 2025 Earnings Call Transcript

Feb -05

Source: seekingalpha.com

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Aflac Q4 Earnings Miss Estimates on Lower Investment Income

Feb -05

Source: zacks.com

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Aflac (AFL) Q4 Earnings: Taking a Look at Key Metrics Versus Estimates

Feb -05

Source: zacks.com

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Aflac (AFL) Lags Q4 Earnings Estimates

Feb -04

Source: zacks.com

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Aflac Incorporated Announces Fourth Quarter Results, Reports Fourth Quarter Net Earnings of $1.4 Billion, Reiterates Increase in First Quarter Dividend of 5.2%

Feb -04

Source: prnewswire.com

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Aflac Incorporated to Present at the UBS Financial Services Conference 2026

Feb -03

Source: prnewswire.com

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Aflac Gears Up for Q4 Earnings: Can Higher Premiums Help it Quack?

Feb -02

Source: zacks.com

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Best Dividend Aristocrats For February 2026

Jan -31

Source: seekingalpha.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (1.40%)

6. Segments

Aflac Japan

Expected Growth: 1.2%

Aflac Japan's growth is expected to be slightly lower than the global growth hypothesis due to the mature nature of the Japanese supplemental insurance market. However, the company's strong brand presence and distribution network will help maintain a stable revenue stream.

Aflac U.S.

Expected Growth: 2.0%

Aflac U.S. is expected to grow at a higher rate than the global growth hypothesis due to the growing demand for supplemental insurance products in the U.S. The segment's strong brand presence and product offerings will enable it to capitalize on this trend.

Unallocated Adjusted net investment gains (losses)

Expected Growth: 1.4%

The growth rate for Unallocated Adjusted net investment gains (losses) is assumed to be in line with the global growth hypothesis, as it is not directly related to the company's core insurance operations. The segment's revenue is driven by market conditions, which are expected to be relatively stable.

Unallocated Net Interest Cash Flows From Derivatives

Expected Growth: 1.0%

The growth rate for Unallocated Net Interest Cash Flows From Derivatives is expected to be lower than the global growth hypothesis, as the segment's revenue is driven by the performance of Aflac's derivatives portfolio, which can be volatile.

Unallocated Amortized Hedge Costs

Expected Growth: 1.4%

The growth rate for Unallocated Amortized Hedge Costs is assumed to be in line with the global growth hypothesis, as it is not directly related to the company's core insurance operations.

Unallocated Amortized Hedge Income

Expected Growth: 1.4%

The growth rate for Unallocated Amortized Hedge Income is assumed to be in line with the global growth hypothesis, as it is not directly related to the company's core insurance operations.

Corporate and Other

Expected Growth: 0.8%

The growth rate for Corporate and Other is expected to be lower than the global growth hypothesis, as the segment's revenue is not directly related to the company's core insurance operations and is largely driven by corporate overhead costs.

7. Detailed Products

Supplemental Insurance

Aflac offers supplemental insurance policies that provide additional financial protection to individuals and families in the event of unexpected medical expenses, accidents, or illnesses.

Life Insurance

Aflac provides life insurance policies that offer a financial safety net for families in the event of a loved one's passing.

Disability Insurance

Aflac's disability insurance policies provide income replacement benefits to individuals who become unable to work due to illness or injury.

Hospital Indemnity Insurance

Aflac's hospital indemnity insurance policies provide a cash benefit to help cover unexpected medical expenses related to hospital stays.

Accident Insurance

Aflac's accident insurance policies provide a cash benefit to help cover unexpected medical expenses related to accidents.

Critical Illness Insurance

Aflac's critical illness insurance policies provide a lump-sum payment to help cover expenses related to a critical illness diagnosis.

Vision Insurance

Aflac's vision insurance policies provide coverage for eye exams, glasses, and contact lenses.

Dental Insurance

Aflac's dental insurance policies provide coverage for routine dental care, including cleanings, fillings, and extractions.

8. Aflac Incorporated's Porter Forces

Forces Ranking

Threat Of Substitutes

Aflac Incorporated operates in the insurance industry, which has a moderate level of substitutes. While there are many insurance providers, Aflac's supplemental insurance products are designed to fill specific gaps in traditional insurance coverage, making them less substitutable.

Bargaining Power Of Customers

Aflac Incorporated's customers are primarily individuals and businesses seeking supplemental insurance coverage. While customers have some bargaining power, Aflac's strong brand recognition and diverse product offerings limit their ability to negotiate prices or terms.

Bargaining Power Of Suppliers

Aflac Incorporated's suppliers are primarily reinsurance companies and other business partners. Aflac's large size and diversified operations give it significant bargaining power over its suppliers, allowing it to negotiate favorable terms and prices.

Threat Of New Entrants

The insurance industry has significant barriers to entry, including regulatory hurdles, capital requirements, and the need for established distribution networks. These barriers limit the threat of new entrants and give Aflac Incorporated a competitive advantage.

Intensity Of Rivalry

The insurance industry is highly competitive, with many established players vying for market share. Aflac Incorporated faces intense competition from other supplemental insurance providers, which can lead to pricing pressure and marketing expenses.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 24.97%
Debt Cost 3.95%
Equity Weight 75.03%
Equity Cost 8.50%
WACC 7.36%
Leverage 33.28%

11. Quality Control: Aflac Incorporated passed 6 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

117.15$

Current Price

117.15$

Potential

-0.00%

Expected Cash-Flows