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Aflac Q3 Earnings Top Estimates on Lower Benefits & Expenses
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Aflac Incorporated (AFL - Free Report) reported third-quarter 2024 adjusted earnings per share of $2.16, which beat the Zacks Consensus Estimate by 27.1%. Also, the bottom line increased 17.4% year over year.
Aflac’s revenues decreased from $5 billion in the year-ago quarter to $2.9 billion in the quarter under review. The top line missed the consensus mark by 36.6%.
Strong quarterly earnings were supported by lower operating expenses and higher investment income, signaling the company’s effective investment strategies. While lower benefits and claims aided the Aflac Japan segment, higher benefits from incurred claims and lower remeasurement gains impacted the Aflac U.S. segment, partially offsetting the positives.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
Aflac Incorporated Price, Consensus and EPS Surprise
Adjusted net investment income increased 2.3% year over year to $936 million.
Total net benefits and claims of $1.6 billion decreased 14.2% year over year in the third quarter. Total acquisition and operating expenses decreased 1.8% year over year to $1.3 billion.
Pre-tax earnings plunged 94.9% year over year to $92 million in the third quarter.
Inside AFL’s Segments
Aflac Japan: The segment’s adjusted revenues decreased 10.6% year over year to $2.4 billion in the quarter under review and missed the Zacks Consensus Estimate by 5%. Total net earned premiums of $1.7 billion dropped 13.4% year over year due to changes in deferred profit liability, limited pay products attaining paid-up status and the implementation of a reinsurance transaction earlier.
Adjusted net investment income decreased 2.5% year over year to $662 million. Pre-tax adjusted earnings of the segment amounted to $1.1 billion, which increased 23.5% year over year in the third quarter. This metric beat the consensus mark by 35.5%.
New annualized premium sales of $117 million improved 12.3% year over year due to strong new first-sector sales. The benefit ratio of the segment was 49.2% in the third quarter.
Aflac U.S.: The segment’s adjusted revenues increased 1.4% year over year to $1.7 billion in the quarter under review. However, this missed the Zacks Consensus Estimate by 0.9%. Total net earned premiums climbed 2.8% year over year to $1.5 billion due to sales recovery and improving persistency.
Adjusted net investment income of $210 million climbed 0.5% year over year. Pretax adjusted earnings of the segment were $350 million, down 26.8% year over year in the third quarter due to higher benefits recognized. The metric missed the Zacks Consensus Estimate by 4.7%.
Aflac’s U.S. sales of $379 million rose 5.5% year over year. The third-quarter benefit ratio came in at 47.6%.
Financial Position (As of Sept. 30, 2024)
Aflac exited the third quarter with total cash and cash equivalents of $5.6 billion, which increased from $4.3 billion at 2023-end. Total assets rose to $128.4 billion from $126.7 billion at 2023-end.
Adjusted debt increased to $7.7 billion from $6.8 billion at 2023-end. Adjusted debt to adjusted capitalization, excluding accumulated other comprehensive income, was 23.7%, which deteriorated 130 basis points (bps) from 2023-end. While the company had 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 $24.8 billion increased from $22 million at 2023-end.
Adjusted book value per share decreased 2% year over year to $51.21. Adjusted return on equity, excluding foreign currency impacts of 17%, improved 140 bps year over year.
Capital Deployment
Aflac bought back 4.9 million shares worth $500 million in the third quarter. It had 54.3 million shares left for buyback as of the third-quarter end.
Management announced dividends of 50 cents per share for the fourth quarter. The dividend will be paid out on Dec. 2, 2024, to shareholders of record as of Nov. 20.
Outlook
Aflac estimates improved sales in its Japan business for 2024, buoyed by its focus on third-sector products and introducing these to younger customers. Management 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.
AFL expects a benefit ratio of 62-63% for the Aflac Japan unit in 2024. The same in Aflac U.S. is likely to be 45-47%.
The expense ratio for Aflac Japan and Aflac U.S. is estimated at 19-21% and 38-40%, respectively, for 2024.
Of the insurance industry players that have reported third-quarter 2024 results so far, the bottom-line results of Marsh & McLennan Companies, Inc. (MMC - Free Report) , The Hartford Financial Services Group, Inc. (HIG - Free Report) and AMERISAFE, Inc. (AMSF - Free Report) beat the Zacks Consensus Estimate.
Marsh & McLennan reported third-quarter 2024 adjusted earnings per share of $1.63, which beat the Zacks Consensus Estimate by 1.2%. The bottom line increased 3.8% year over year. Consolidated revenues rose 6% year over year to $5.7 billion. The figure also improved 5% on an underlying basis. The top line, however, fell 0.2% short of the consensus mark.
Hartford Financial reported third-quarter 2024 adjusted operating earnings of $2.53 per share, which beat the Zacks Consensus Estimate by 1.6%. The bottom line increased 10.5% year over year. Operating revenues of HIG amounted to $4.7 billion, which improved 10.9% year over year in the quarter under review. The top line beat the consensus mark by 1.1%.
AMERISAFE reported third-quarter adjusted earnings per share of 58 cents, which beat the Zacks Consensus Estimate by 3.6%. However, the bottom line dipped 4.9% year over year.
Operating revenues declined 0.2% year over year to $74.7 million. The top line missed the consensus mark by a whisker.
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Aflac Q3 Earnings Top Estimates on Lower Benefits & Expenses
Aflac Incorporated (AFL - Free Report) reported third-quarter 2024 adjusted earnings per share of $2.16, which beat the Zacks Consensus Estimate by 27.1%. Also, the bottom line increased 17.4% year over year.
Aflac’s revenues decreased from $5 billion in the year-ago quarter to $2.9 billion in the quarter under review. The top line missed the consensus mark by 36.6%.
Strong quarterly earnings were supported by lower operating expenses and higher investment income, signaling the company’s effective investment strategies. While lower benefits and claims aided the Aflac Japan segment, higher benefits from incurred claims and lower remeasurement gains impacted the Aflac U.S. segment, partially offsetting the positives.
Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.
Aflac Incorporated Price, Consensus and EPS Surprise
Aflac Incorporated price-consensus-eps-surprise-chart | Aflac Incorporated Quote
Q3 Performance
Adjusted net investment income increased 2.3% year over year to $936 million.
Total net benefits and claims of $1.6 billion decreased 14.2% year over year in the third quarter. Total acquisition and operating expenses decreased 1.8% year over year to $1.3 billion.
Pre-tax earnings plunged 94.9% year over year to $92 million in the third quarter.
Inside AFL’s Segments
Aflac Japan: The segment’s adjusted revenues decreased 10.6% year over year to $2.4 billion in the quarter under review and missed the Zacks Consensus Estimate by 5%. Total net earned premiums of $1.7 billion dropped 13.4% year over year due to changes in deferred profit liability, limited pay products attaining paid-up status and the implementation of a reinsurance transaction earlier.
Adjusted net investment income decreased 2.5% year over year to $662 million. Pre-tax adjusted earnings of the segment amounted to $1.1 billion, which increased 23.5% year over year in the third quarter. This metric beat the consensus mark by 35.5%.
New annualized premium sales of $117 million improved 12.3% year over year due to strong new first-sector sales. The benefit ratio of the segment was 49.2% in the third quarter.
Aflac U.S.: The segment’s adjusted revenues increased 1.4% year over year to $1.7 billion in the quarter under review. However, this missed the Zacks Consensus Estimate by 0.9%. Total net earned premiums climbed 2.8% year over year to $1.5 billion due to sales recovery and improving persistency.
Adjusted net investment income of $210 million climbed 0.5% year over year. Pretax adjusted earnings of the segment were $350 million, down 26.8% year over year in the third quarter due to higher benefits recognized. The metric missed the Zacks Consensus Estimate by 4.7%.
Aflac’s U.S. sales of $379 million rose 5.5% year over year. The third-quarter benefit ratio came in at 47.6%.
Financial Position (As of Sept. 30, 2024)
Aflac exited the third quarter with total cash and cash equivalents of $5.6 billion, which increased from $4.3 billion at 2023-end. Total assets rose to $128.4 billion from $126.7 billion at 2023-end.
Adjusted debt increased to $7.7 billion from $6.8 billion at 2023-end. Adjusted debt to adjusted capitalization, excluding accumulated other comprehensive income, was 23.7%, which deteriorated 130 basis points (bps) from 2023-end. While the company had 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 $24.8 billion increased from $22 million at 2023-end.
Adjusted book value per share decreased 2% year over year to $51.21. Adjusted return on equity, excluding foreign currency impacts of 17%, improved 140 bps year over year.
Capital Deployment
Aflac bought back 4.9 million shares worth $500 million in the third quarter. It had 54.3 million shares left for buyback as of the third-quarter end.
Management announced dividends of 50 cents per share for the fourth quarter. The dividend will be paid out on Dec. 2, 2024, to shareholders of record as of Nov. 20.
Outlook
Aflac estimates improved sales in its Japan business for 2024, buoyed by its focus on third-sector products and introducing these to younger customers. Management 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.
AFL expects a benefit ratio of 62-63% for the Aflac Japan unit in 2024. The same in Aflac U.S. is likely to be 45-47%.
The expense ratio for Aflac Japan and Aflac U.S. is estimated at 19-21% and 38-40%, respectively, for 2024.
Zacks Rank
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 third-quarter 2024 results so far, the bottom-line results of Marsh & McLennan Companies, Inc. (MMC - Free Report) , The Hartford Financial Services Group, Inc. (HIG - Free Report) and AMERISAFE, Inc. (AMSF - Free Report) beat the Zacks Consensus Estimate.
Marsh & McLennan reported third-quarter 2024 adjusted earnings per share of $1.63, which beat the Zacks Consensus Estimate by 1.2%. The bottom line increased 3.8% year over year. Consolidated revenues rose 6% year over year to $5.7 billion. The figure also improved 5% on an underlying basis. The top line, however, fell 0.2% short of the consensus mark.
Hartford Financial reported third-quarter 2024 adjusted operating earnings of $2.53 per share, which beat the Zacks Consensus Estimate by 1.6%. The bottom line increased 10.5% year over year. Operating revenues of HIG amounted to $4.7 billion, which improved 10.9% year over year in the quarter under review. The top line beat the consensus mark by 1.1%.
AMERISAFE reported third-quarter adjusted earnings per share of 58 cents, which beat the Zacks Consensus Estimate by 3.6%. However, the bottom line dipped 4.9% year over year.
Operating revenues declined 0.2% year over year to $74.7 million. The top line missed the consensus mark by a whisker.