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Can Declining Premiums Affect Aflac's (AFL) Q3 Earnings?
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Aflac Incorporated (AFL - Free Report) is set to report its third-quarter 2022 results on Oct 31, after the closing bell.
In the last reported quarter, the leading insurance provider reported adjusted earnings per share of $1.46, beating the Zacks Consensus Estimate by 13.2% due to better returns from alternative investments resulting in strong variable investment income. Improved sales in the Aflac U.S. segment, resulting from productivity gains and continued growth-related investments, and reduced benefits and expenses, contributed to the upside.
However, the results were partly offset by softness in the Japan segment, which has been grappling with persistent weakness in sales recovery due to volatilities inflicted by the COVID-19 pandemic.
The Zacks Consensus Estimate for third-quarter earnings per share of $1.22 has witnessed no movement in the past week. The estimate figure suggests a decrease of 20.3% from the prior-year reported number. Our estimate for third-quarter earnings of $1.23 per share suggests a 19.8% year-over-year decline. Aflac beat the consensus estimate in each of the prior four quarters, the average being 9%. This is depicted in the graph below:
Both the Zacks Consensus Estimate and our estimate for third-quarter revenues of $4.6 billion indicate an 11.6% decrease from the year-ago reported figure.
Factors to Note
AFL’s U.S. operations in the third quarter are likely to have benefited from the Fed interest rate hikes but Japan’s operations are likely to have been affected by a lower interest rate environment. As such, the Zacks Consensus Estimate for net investment income of $830 indicates a 16.2% year-over-year decrease. This is expected to have been partially offset by improved returns from alternative investments.
Further, the Zacks Consensus Estimate for total net earned premiums is pegged at $3,733 million, signaling a decline from $4,372 million reported a year ago. Our estimate suggests an 11.9% year-over-year decline to $3,850.2 million in the third quarter. We expect the metric to decline 2.9% and 16.2% year over year in Aflac U.S. and Aflac Japan, respectively. These are anticipated to have led to a year-over-year decrease in the bottom line for AFL.
The Zacks Consensus Estimate for pre-tax income in Aflac U.S. is pegged at $296 million, indicating a decline from $358 million a year ago. Our estimate for the metric is pegged at $292.2 million for the quarter under review.
Similarly, the consensus mark for pre-tax income in Aflac Japan is pegged at $718 million, signaling a decrease from $976 million in the year-ago period. We expect the metric to be $717.7 million for the third quarter. Our estimate suggests consolidated adjusted pre-tax income to decline 24.8% year over year to $971.9 million, making an earnings beat uncertain.
However, owing to Aflac’s multiple cost-curbing efforts, expenses are likely to have decreased in the third quarter. A decline in operations is likely to have reduced costs, which are expected to have partially offset the fall in the bottom line. Our estimate for benefits and expenses suggests a 6.6% year-over-year decrease.
The company is expected to have made substantial investments in core technology platforms or digital capabilities. Among these platforms, AFL has been steadfast in upgrading its dental and vision platforms so that it can manage higher volumes. The investments have been aimed at boosting operational efficiencies and triggering accretive growth in earned premiums in the long run.
Earnings Whispers
Our proven model does not conclusively predict an earnings beat for Aflac this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. That is not the case here, as you will see below.
Earnings ESP: The company has an Earnings ESP of -0.21%. This is because the Most Accurate Estimate is currently pegged lower than the Zacks Consensus Estimate of $1.22 per share.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Aflac currently carries a Zacks Rank #3.
Stocks to Consider
While an earnings beat looks uncertain for Aflac, here are some companies in the Finance space that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around:
The Zacks Consensus Estimate for Atlas’ bottom line for the to-be-reported quarter is pegged at 40 cents per share, which has witnessed one upward estimate revision and no downward movement in the past 30 days. The consensus estimate for revenues is pegged at $436.8 million.
EverQuote, Inc. (EVER - Free Report) has an Earnings ESP of +4.88% and is a Zacks #2 Ranked player.
The Zacks Consensus Estimate for EverQuote’s bottom line has been unchanged over the past week. EVER beat earnings estimates in three of the past four quarters and missed once, with an average surprise of 24.6%.
Trean Insurance Group, Inc. has an Earnings ESP of +11.11% and a Zacks Rank of 3.
The Zacks Consensus Estimate for Trean Insurance’s bottom line for the to-be-reported quarter is pegged at 9 cents per share, which has been unchanged over the past week. The consensus mark for TIG’s revenues is pegged at $68.4 million, indicating 20.1% year-over-year growth.
Image: Bigstock
Can Declining Premiums Affect Aflac's (AFL) Q3 Earnings?
Aflac Incorporated (AFL - Free Report) is set to report its third-quarter 2022 results on Oct 31, after the closing bell.
In the last reported quarter, the leading insurance provider reported adjusted earnings per share of $1.46, beating the Zacks Consensus Estimate by 13.2% due to better returns from alternative investments resulting in strong variable investment income. Improved sales in the Aflac U.S. segment, resulting from productivity gains and continued growth-related investments, and reduced benefits and expenses, contributed to the upside.
However, the results were partly offset by softness in the Japan segment, which has been grappling with persistent weakness in sales recovery due to volatilities inflicted by the COVID-19 pandemic.
Let’s see how things have shaped up prior to the third-quarter earnings announcement.
The Trend in Estimate Revision
The Zacks Consensus Estimate for third-quarter earnings per share of $1.22 has witnessed no movement in the past week. The estimate figure suggests a decrease of 20.3% from the prior-year reported number. Our estimate for third-quarter earnings of $1.23 per share suggests a 19.8% year-over-year decline. Aflac beat the consensus estimate in each of the prior four quarters, the average being 9%. This is depicted in the graph below:
Aflac Incorporated Price and EPS Surprise
Aflac Incorporated price-eps-surprise | Aflac Incorporated Quote
Both the Zacks Consensus Estimate and our estimate for third-quarter revenues of $4.6 billion indicate an 11.6% decrease from the year-ago reported figure.
Factors to Note
AFL’s U.S. operations in the third quarter are likely to have benefited from the Fed interest rate hikes but Japan’s operations are likely to have been affected by a lower interest rate environment. As such, the Zacks Consensus Estimate for net investment income of $830 indicates a 16.2% year-over-year decrease. This is expected to have been partially offset by improved returns from alternative investments.
Further, the Zacks Consensus Estimate for total net earned premiums is pegged at $3,733 million, signaling a decline from $4,372 million reported a year ago. Our estimate suggests an 11.9% year-over-year decline to $3,850.2 million in the third quarter. We expect the metric to decline 2.9% and 16.2% year over year in Aflac U.S. and Aflac Japan, respectively. These are anticipated to have led to a year-over-year decrease in the bottom line for AFL.
The Zacks Consensus Estimate for pre-tax income in Aflac U.S. is pegged at $296 million, indicating a decline from $358 million a year ago. Our estimate for the metric is pegged at $292.2 million for the quarter under review.
Similarly, the consensus mark for pre-tax income in Aflac Japan is pegged at $718 million, signaling a decrease from $976 million in the year-ago period. We expect the metric to be $717.7 million for the third quarter. Our estimate suggests consolidated adjusted pre-tax income to decline 24.8% year over year to $971.9 million, making an earnings beat uncertain.
However, owing to Aflac’s multiple cost-curbing efforts, expenses are likely to have decreased in the third quarter. A decline in operations is likely to have reduced costs, which are expected to have partially offset the fall in the bottom line. Our estimate for benefits and expenses suggests a 6.6% year-over-year decrease.
The company is expected to have made substantial investments in core technology platforms or digital capabilities. Among these platforms, AFL has been steadfast in upgrading its dental and vision platforms so that it can manage higher volumes. The investments have been aimed at boosting operational efficiencies and triggering accretive growth in earned premiums in the long run.
Earnings Whispers
Our proven model does not conclusively predict an earnings beat for Aflac this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. That is not the case here, as you will see below.
Earnings ESP: The company has an Earnings ESP of -0.21%. This is because the Most Accurate Estimate is currently pegged lower than the Zacks Consensus Estimate of $1.22 per share.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Aflac currently carries a Zacks Rank #3.
Stocks to Consider
While an earnings beat looks uncertain for Aflac, here are some companies in the Finance space that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around:
Atlas Corp. has an Earnings ESP of +10.00% and it currently sports a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Atlas’ bottom line for the to-be-reported quarter is pegged at 40 cents per share, which has witnessed one upward estimate revision and no downward movement in the past 30 days. The consensus estimate for revenues is pegged at $436.8 million.
EverQuote, Inc. (EVER - Free Report) has an Earnings ESP of +4.88% and is a Zacks #2 Ranked player.
The Zacks Consensus Estimate for EverQuote’s bottom line has been unchanged over the past week. EVER beat earnings estimates in three of the past four quarters and missed once, with an average surprise of 24.6%.
Trean Insurance Group, Inc. has an Earnings ESP of +11.11% and a Zacks Rank of 3.
The Zacks Consensus Estimate for Trean Insurance’s bottom line for the to-be-reported quarter is pegged at 9 cents per share, which has been unchanged over the past week. The consensus mark for TIG’s revenues is pegged at $68.4 million, indicating 20.1% year-over-year growth.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.