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Aflac (AFL) Q2 Earnings Beat on Strong Investment Income
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Aflac Incorporated (AFL - Free Report) reported second-quarter 2024 adjusted earnings per share of $1.83, which beat the Zacks Consensus Estimate by 15.1%. Also, the bottom line increased 15.8% year over year.
Aflac’s revenues decreased from $5.2 billion in the year-ago quarter to $5.1 billion in the quarter under review. However, the top line beat the consensus mark by 17.4%.
The better-than-expected quarterly results were supported by lower benefits and claims, operating expenses and higher investment income, signaling its effective investment strategies. Moreover, premium sales figures improved in both segments. However, a decline in net earned premiums in the Japan segment partially offset the positives.
Aflac Incorporated Price, Consensus and EPS Surprise
Adjusted net investment income increased 15.8% year over year to $1 billion.
Total net benefits and claims of $1.9 billion decreased 8.4% year over year in the second quarter. Total acquisition and operating expenses decreased 4.1% year over year to $1.2 billion.
Pre-tax earnings rose 10.6% year over year to $2 billion in the second quarter.
Inside AFL’s Segments
Aflac Japan: The segment’s adjusted revenues decreased 9.7% year over year to $2.4 billion in the quarter under review. This beat the Zacks Consensus Estimate by a small margin. Total net earned premiums of $1.7 billion dropped 16.9% 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 4.7%.
Adjusted net investment income increased 13.8% year over year to $725 million due to higher variable investment income, the impact of the weakening Yen and lower hedge costs. Pre-tax adjusted earnings of the segment amounted to $864 million, which increased 5.1% year over year in the second quarter. This metric beat the consensus mark by 11.6%.
New annualized premium sales of $108 million improved 4.5% year over year due to strong new first-sector sales. The benefit ratio of the segment was 66.9% in the second quarter.
Aflac U.S.: The segment’s adjusted revenues increased 1.3% year over year to $1.7 billion in the quarter under review. However, this missed the Zacks Consensus Estimate by 0.6%. Total net earned premiums climbed 2.1% year over year to $1.5 billion due to sales recovery. This metric missed the Zacks Consensus Estimate by 0.2%.
Adjusted net investment income of $218 million climbed 7.4% year over year on the back of increased variable investment income and a move toward higher-yielding fixed-income investments. Moreover, the metric beat the Zacks Consensus Estimate by 3.7%. Pretax adjusted earnings of the segment were $383 million, up 3.8% year over year in the second quarter thanks to lower expenses, partly offset by higher benefits recognized. The metric beat the Zacks Consensus Estimate by 8.1%.
Aflac’s U.S. sales of $331 million rose 2% year over year. The second-quarter benefit ratio came in at 46.7%.
Financial Position (as of Jun 30, 2024)
Aflac exited the second quarter with total cash and cash equivalents of $6.1 billion, which increased from $4.3 billion at 2023-end. Total assets fell to $120.2 billion from $126.7 billion at 2023-end.
Adjusted debt increased to $7.2 billion from $6.8 billion at 2023-end. Adjusted debt to adjusted capitalization, excluding accumulated other comprehensive income, was 19.5%, which improved 20 basis points (bps) from 2023-end. While it has no debt maturities in less than a year, total debt maturities worth $1.8 billion are expected within the next five years.
Total shareholders' equity of $26 billion increased from $22 million at 2023-end.
Adjusted book value per share increased 12.1% year over year to $52.26. Adjusted return on equity, excluding foreign currency impact of 14.8%, improved 90 bps year over year.
Capital Deployment
Aflac bought back 9.3 million shares worth $800 million in the second quarter. It had 59.2 million shares left for buyback as of the second-quarter end.
Management announced dividends of 50 cents per share for the third quarter. The dividend will be paid out on Sep 2, 2024, to shareholders of record as of Aug 21.
Outlook
Aflac estimates improved sales in its Japan business for 2024, buoyed by its focus on third-sector products, introducing these to younger customers and sales campaigns. Management also remains optimistic about profitable growth within its U.S. business. Improving productivity, underwriting discipline and expense management are likely to bolster its margins. New products and distribution strategies are expected to benefit both segments.
It expects the benefit ratio in the Aflac Japan unit to stay within 66-68% in 2024, while the same in Aflac U.S. is likely to be in the 45-47% range.
The expense ratio for Aflac Japan and Aflac U.S. are estimated to stay within 19-21% and 38-40%, respectively, in 2024.
Of the insurance industry players that have reported second-quarter 2024 results so far, the bottom-line results of Marsh & McLennan Companies, Inc. (MMC - Free Report) , Brown & Brown, Inc. (BRO - Free Report) and Kinsale Capital Group, Inc. (KNSL - Free Report) beat the Zacks Consensus Estimate.
Marsh & McLennan reported second-quarter 2024 adjusted earnings per share of $2.41, which beat the Zacks Consensus Estimate by 0.8%. The bottom line advanced 10% year over year. Consolidated revenues rose 6% year over year to $6.2 billion. The figure also improved 6% on an underlying basis. The top line, however, fell short of the consensus mark by 1%. MMC’s adjusted operating income was $1.72 billion, which grew 11% year over year. Adjusted operating margin improved 130 bps year over year to 29%.
The Risk and Insurance Services segment’s revenues were $4.02 billion, which advanced 8% year over year and 7% on an underlying basis. Adjusted operating income advanced 12% year over year to $1.34 billion. Revenues of Marsh, a unit within the segment, improved 8% year over year and 7% on an underlying basis to $3.27 billion. In the United States/Canada, underlying revenues grew 6% year over year. International operations also witnessed underlying revenue growth of 7%.
Brown & Brown’s second-quarter adjusted earnings of 93 cents per share beat the Zacks Consensus Estimate by 6.8%. The bottom line increased 17.7% year over year. Total revenues of $1.2 billion beat the consensus estimate by 3.3%. The top line improved 12.5% year over year. The upside can be primarily attributed to commission and fees, which grew 11.4% year over year to $1.1 billion.
Organic revenues improved 10% to $1 billion. Investment income more than doubled year over year to $22 million. Adjusted EBITDAC was $420 million, up 17.3% year over year. EBITDAC margin expanded 150 bps year over year to 35.7%.
Kinsale Capital delivered second-quarter net operating earnings of $3.75 per share, which outpaced the Zacks Consensus Estimate by 6.5%. The bottom line increased 30.4% year over year. Operating revenues jumped 45.1% year over year to $378 million. Revenues beat the consensus estimate of $377 million. Gross written premiums of $529.8 million rose 20.9% year over year. Net written premiums climbed 17.9% year over year to $430.2 million.
Net investment income increased 48.3% year over year to $35.8 million. Kinsale Capital’s underwriting income was $76.1 million, which grew 23.6% year over year. The combined ratio deteriorated 100 bps to 77.7% in the quarter under review. The expense ratio deteriorated 10 bps to 21.1, while the loss ratio deteriorated 60 bps to 56.6.
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Aflac (AFL) Q2 Earnings Beat on Strong Investment Income
Aflac Incorporated (AFL - Free Report) reported second-quarter 2024 adjusted earnings per share of $1.83, which beat the Zacks Consensus Estimate by 15.1%. Also, the bottom line increased 15.8% year over year.
Aflac’s revenues decreased from $5.2 billion in the year-ago quarter to $5.1 billion in the quarter under review. However, the top line beat the consensus mark by 17.4%.
The better-than-expected quarterly results were supported by lower benefits and claims, operating expenses and higher investment income, signaling its effective investment strategies. Moreover, premium sales figures improved in both segments. However, a decline in net earned premiums in the Japan segment partially offset the positives.
Aflac Incorporated Price, Consensus and EPS Surprise
Aflac Incorporated price-consensus-eps-surprise-chart | Aflac Incorporated Quote
Q2 Performance
Adjusted net investment income increased 15.8% year over year to $1 billion.
Total net benefits and claims of $1.9 billion decreased 8.4% year over year in the second quarter. Total acquisition and operating expenses decreased 4.1% year over year to $1.2 billion.
Pre-tax earnings rose 10.6% year over year to $2 billion in the second quarter.
Inside AFL’s Segments
Aflac Japan: The segment’s adjusted revenues decreased 9.7% year over year to $2.4 billion in the quarter under review. This beat the Zacks Consensus Estimate by a small margin. Total net earned premiums of $1.7 billion dropped 16.9% 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 4.7%.
Adjusted net investment income increased 13.8% year over year to $725 million due to higher variable investment income, the impact of the weakening Yen and lower hedge costs. Pre-tax adjusted earnings of the segment amounted to $864 million, which increased 5.1% year over year in the second quarter. This metric beat the consensus mark by 11.6%.
New annualized premium sales of $108 million improved 4.5% year over year due to strong new first-sector sales. The benefit ratio of the segment was 66.9% in the second quarter.
Aflac U.S.: The segment’s adjusted revenues increased 1.3% year over year to $1.7 billion in the quarter under review. However, this missed the Zacks Consensus Estimate by 0.6%. Total net earned premiums climbed 2.1% year over year to $1.5 billion due to sales recovery. This metric missed the Zacks Consensus Estimate by 0.2%.
Adjusted net investment income of $218 million climbed 7.4% year over year on the back of increased variable investment income and a move toward higher-yielding fixed-income investments. Moreover, the metric beat the Zacks Consensus Estimate by 3.7%. Pretax adjusted earnings of the segment were $383 million, up 3.8% year over year in the second quarter thanks to lower expenses, partly offset by higher benefits recognized. The metric beat the Zacks Consensus Estimate by 8.1%.
Aflac’s U.S. sales of $331 million rose 2% year over year. The second-quarter benefit ratio came in at 46.7%.
Financial Position (as of Jun 30, 2024)
Aflac exited the second quarter with total cash and cash equivalents of $6.1 billion, which increased from $4.3 billion at 2023-end. Total assets fell to $120.2 billion from $126.7 billion at 2023-end.
Adjusted debt increased to $7.2 billion from $6.8 billion at 2023-end. Adjusted debt to adjusted capitalization, excluding accumulated other comprehensive income, was 19.5%, which improved 20 basis points (bps) from 2023-end. While it has no debt maturities in less than a year, total debt maturities worth $1.8 billion are expected within the next five years.
Total shareholders' equity of $26 billion increased from $22 million at 2023-end.
Adjusted book value per share increased 12.1% year over year to $52.26. Adjusted return on equity, excluding foreign currency impact of 14.8%, improved 90 bps year over year.
Capital Deployment
Aflac bought back 9.3 million shares worth $800 million in the second quarter. It had 59.2 million shares left for buyback as of the second-quarter end.
Management announced dividends of 50 cents per share for the third quarter. The dividend will be paid out on Sep 2, 2024, to shareholders of record as of Aug 21.
Outlook
Aflac estimates improved sales in its Japan business for 2024, buoyed by its focus on third-sector products, introducing these to younger customers and sales campaigns. Management also remains optimistic about profitable growth within its U.S. business. Improving productivity, underwriting discipline and expense management are likely to bolster its margins. New products and distribution strategies are expected to benefit both segments.
It expects the benefit ratio in the Aflac Japan unit to stay within 66-68% in 2024, while the same in Aflac U.S. is likely to be in the 45-47% range.
The expense ratio for Aflac Japan and Aflac U.S. are estimated to stay within 19-21% and 38-40%, respectively, in 2024.
Zacks Rank & Key Picks
Aflac currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performances of Other Insurers
Of the insurance industry players that have reported second-quarter 2024 results so far, the bottom-line results of Marsh & McLennan Companies, Inc. (MMC - Free Report) , Brown & Brown, Inc. (BRO - Free Report) and Kinsale Capital Group, Inc. (KNSL - Free Report) beat the Zacks Consensus Estimate.
Marsh & McLennan reported second-quarter 2024 adjusted earnings per share of $2.41, which beat the Zacks Consensus Estimate by 0.8%. The bottom line advanced 10% year over year. Consolidated revenues rose 6% year over year to $6.2 billion. The figure also improved 6% on an underlying basis. The top line, however, fell short of the consensus mark by 1%. MMC’s adjusted operating income was $1.72 billion, which grew 11% year over year. Adjusted operating margin improved 130 bps year over year to 29%.
The Risk and Insurance Services segment’s revenues were $4.02 billion, which advanced 8% year over year and 7% on an underlying basis. Adjusted operating income advanced 12% year over year to $1.34 billion. Revenues of Marsh, a unit within the segment, improved 8% year over year and 7% on an underlying basis to $3.27 billion. In the United States/Canada, underlying revenues grew 6% year over year. International operations also witnessed underlying revenue growth of 7%.
Brown & Brown’s second-quarter adjusted earnings of 93 cents per share beat the Zacks Consensus Estimate by 6.8%. The bottom line increased 17.7% year over year. Total revenues of $1.2 billion beat the consensus estimate by 3.3%. The top line improved 12.5% year over year. The upside can be primarily attributed to commission and fees, which grew 11.4% year over year to $1.1 billion.
Organic revenues improved 10% to $1 billion. Investment income more than doubled year over year to $22 million. Adjusted EBITDAC was $420 million, up 17.3% year over year. EBITDAC margin expanded 150 bps year over year to 35.7%.
Kinsale Capital delivered second-quarter net operating earnings of $3.75 per share, which outpaced the Zacks Consensus Estimate by 6.5%. The bottom line increased 30.4% year over year. Operating revenues jumped 45.1% year over year to $378 million. Revenues beat the consensus estimate of $377 million. Gross written premiums of $529.8 million rose 20.9% year over year. Net written premiums climbed 17.9% year over year to $430.2 million.
Net investment income increased 48.3% year over year to $35.8 million. Kinsale Capital’s underwriting income was $76.1 million, which grew 23.6% year over year. The combined ratio deteriorated 100 bps to 77.7% in the quarter under review. The expense ratio deteriorated 10 bps to 21.1, while the loss ratio deteriorated 60 bps to 56.6.