Aflac Incorporated (AFL Quick QuoteAFL - Free Report) reported fourth-quarter 2023 adjusted earnings per share (EPS) of $1.25, which missed the Zacks Consensus Estimate by 15%. The bottom line decreased from $1.29 per share reported in the year-ago period.

Aflac’s revenues decreased 5.7% year over year to $3.78 billion in the quarter under review. The top line missed the consensus mark by 15%.

The weak fourth-quarter results were due to higher benefits and claims, lower adjusted net investment income and declining profit levels from the U.S. businesses. However, improving profit levels in the Japan segment partially offset the negatives.

Q4 Performance

Adjusted net investment income declined 5.4% year over year to $795 million.

Total net benefits and claims of $2.1 billion increased 2.4% year over year in the fourth quarter. Total acquisition and operating expenses increased 2.1% year over year to $1.4 billion.

Pre-tax earnings declined 46.3% year over year to $289 million in the fourth quarter.

Inside AFL’s Segments

Aflac Japan

The segment’s adjusted revenues decreased 7.7% year over year to $2.5 billion in the quarter under review. This missed the Zacks Consensus Estimate by 1.5%. Total net earned premiums of $1.8 billion dropped 12.5% year over year due to limited pay products attaining paid-up status and the implementation of a reinsurance transaction earlier. This metric missed the Zacks Consensus Estimate by 3%.

Adjusted net investment income increased 8.4% year over year to $655 million due to higher variable investment income and lower hedge costs. Pre-tax adjusted earnings of the segment amounted to $755 million, which increased 4.9% year over year in the fourth quarter. This metric beat the estimate by 0.4%.

New annualized premium sales of $107 million deteriorated 2.6% year over year. The benefit ratio of the segment was 66.1% in the fourth quarter.

Aflac U.S.

The segment’s adjusted revenues increased 1.1% year over year to $1.6 billion in the quarter under review. This missed the Zacks Consensus Estimate by 1.9%. Total net earned premiums climbed 1.1% year over year to $1.4 billion due to its growth initiatives. This metric missed the Zacks Consensus Estimate by 2%.

Adjusted net investment income of $211 million climbed 9.9% year over year on the back of increased floating rate income, variable investment income and a move toward higher-yielding fixed-income investments. The metric beat the Zacks Consensus Estimate by 3.3%. Pretax adjusted earnings of the segment were $302 million, down 10.9% year over year in the fourth quarter thanks to higher benefits recognized. The metric beat the Zacks Consensus Estimate by 1.8%.

Aflac’s U.S. sales of $559 million grew 2.6% year over year. The fourth-quarter benefit ratio came in at 44.6%.

Full-Year Update

Adjusted 2023 EPS improved 9.9% from a year ago to $6.23. Total revenues fell 2.3% to $18,701 million. While net earned premiums decreased 5.2% to $14,123 million, adjusted net investment income fell 2.1% to $3,447 million.

Financial Position (as of Dec 31, 2023)

Aflac exited the fourth quarter with total cash and cash equivalents of $4.3 billion, which increased from $3.9 billion at 2022-end. Total investments and cash of $113.6 billion decreased from $117.4 billion at 2022-end. Total assets fell to $126.7 billion from $131.7 billion at 2022-end.

Adjusted debt decreased to $6.8 billion at the fourth-quarter end from $7.1 billion at 2022-end.

Total shareholders' equity of $22 billion increased from $20 million at 2022-end.

Adjusted debt to adjusted capitalization, excluding accumulated other comprehensive income, came in at 19.7%, which improved 120 basis points (bps) from 2022-end.

While it has no debt maturities in less than a year, total debt maturities worth $1.3 billion are expected within the next five years.

Adjusted book value per share increased 10.1% year over year to $47.55.

Adjusted return on equity, excluding foreign currency impact of 14.2%, improved 300 bps year over year.

Capital Deployment

Aflac bought back 8.7 million shares worth $700 million in the fourth quarter. It had 77.7 million shares left for buyback as of the fourth-quarter end.

Management announced dividends of 50 cents per share for the fourth quarter of 2023, indicating a rise of 19% year over year. The dividend will be paid out on Mar 1, 2024, to shareholders of record as of Feb 21.

Outlook

Aflac estimates improved sales in its Japan business for 2024, buoyed by product launches, product updates, distribution strategies and Japan Post performance. Its new medical product, which was introduced in mid-September, should continue to enhance results.

Management also remains optimistic about strong sales results within its U.S. business. Improving productivity, contributions from platforms like network, dental and vision and group life, and disability are expected to continue supporting the results. The company expects to surpass the $1.8 billion mark in U.S. sales by 2025-end.

Zacks Rank

Aflac currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Finance Sector Players

Here are some other Finance sector players that have reported fourth-quarter results so far. The bottom-line results of Synchrony Financial (SYF Quick QuoteSYF - Free Report) , Ally Financial Inc. (ALLY Quick QuoteALLY - Free Report) and State Street Corporation (STT Quick QuoteSTT - Free Report) beat the respective Zacks Consensus Estimate.

Synchrony Financial reported fourth-quarter 2023 adjusted EPS of $1.03, which beat the Zacks Consensus Estimate by 7.3%. However, the bottom line declined 18.3% year over year. Net interest income improved 8% year over year to $4.5 billion, beating the consensus mark by 0.3%. Other income amounted to $71 million, which surged 136.7% year over year in the fourth quarter.

Total loan receivables of SYF grew 11.4% year over year to $103 billion. Total deposits were $81.2 billion, which rose 13.1% year over year. Its purchase volume advanced 3% year over year to $49.3 billion in the fourth quarter. Interest and fees on loans of $5.3 billion improved 16.3% year over year. Net interest margin deteriorated 48 basis points year over year to 15.10%. New accounts of 6.2 million slipped 3% year over year.

Ally Financial’s fourth-quarter adjusted earnings of 45 cents per share surpassed the Zacks Consensus Estimate by a penny. However, the bottom line reflects a decline of 58.3% from the year-ago quarter. Total quarterly GAAP net revenues were $2.07 billion, down 6.1% from the prior-year quarter. However, the top line surpassed the Zacks Consensus Estimate of $1.99 billion.

Quarterly net financing revenues of ALLY were down 10.8% from the prior-year quarter to $1.49 billion. The adjusted net interest margin was 3.20%, down 48 basis points year over year. In the reported quarter, the company recorded net charge-offs of $623 million, up 59.7% from the prior-year quarter. As of Dec 31, 2023, total net finance receivables and loans amounted to $135.9 billion, down marginally from the prior-quarter end.

State Street reported fourth-quarter 2023 adjusted earnings of $2.04 per share, which surpassed the Zacks Consensus Estimate of $1.81. The bottom line, however, declined 1.4% from the prior-year quarter. Quarterly total revenues of $3.04 billion declined 3.5% year over year. However, the top line beat the Zacks Consensus Estimate of $2.94 billion.

Net interest revenues were $678 million, down 14.3% year over year. The net interest margin declined 13 basis points to 1.16%. Total fee revenues of STT were relatively stable at $2.37 billion. Provision for credit losses was $20 million, up from $10 million in the prior-year quarter. The return on common equity was 3.1% compared with 11.8% in the year-ago quarter. Assets under management were $4.13 trillion as of Dec 31, 2023, up 18.6% year over year.