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    AFL
    Earnings call· Dec 2025(Q4 FY25)

    AFLAC Q4 FY25 earnings call AFL

    Feb 5, 2026 Source

    Executive summary

    Aflac Q4 FY25 — Strong Japan Sales and Capital Returns Amidst Shifting Premium Trends

    Aflac reported strong Q4 FY25 results, highlighted by robust sales growth in Japan, particularly from new cancer insurance products, and significant capital returns to shareholders. While the U.S. segment also saw solid new sales, both segments faced pressures on earned premiums and benefit ratios. The company is actively managing its product portfolio and distribution channels to adapt to market shifts and maintain financial strength, with a focus on capital efficiency and strategic investments in growth initiatives.

    Highlights

    5

    • Aflac Japan sales increased 15.7% for Q4 and 16% for FY25, driven by the Miraito cancer insurance product.

    • Aflac U.S. generated nearly $1.6 billion in new sales in 2025, with over one-third coming from Q4.

    • Aflac Incorporated deployed a record $3.5 billion to repurchase 33 million shares and paid $1.2 billion in dividends in 2025, totaling nearly $4.8 billion returned to shareholders.

    • Aflac Japan achieved a solid pretax margin of 31.3% for the quarter, despite a 30 basis point year-over-year decrease.

    • The Board approved a 5.2% increase in the first quarter of 2026 dividend, marking 43 consecutive years of increases.

    Concerns

    5

    • Aflac Japan's net earned premiums in yen terms declined 1.9% for the quarter, with underlying earned premiums down 1.2%.

    • Aflac U.S. premium persistency declined slightly by 10 basis points year-over-year to 79.2%.

    • Aflac U.S. total benefit ratio increased 230 basis points to 48.6% compared to Q4 2024, driven by prior year endorsements and higher claims.

    • Underlying earned premiums in Japan are expected to decline 1% to 2% in 2026, indicating continued pressure on in-force premium growth.

    • The expense ratio in Aflac U.S. increased 10 basis points to 40.4%, primarily due to timing of spend and scaling new business lines.

    Guidance & targets

    8
    CategoryTargetConfidence
    Aflac Japan Underlying Earned Premiums
    decline 1% to 2%
    high materiality
    High
    Aflac Japan Expense Ratio
    20% to 23%
    medium materiality
    High
    Aflac Japan Benefit Ratio
    60% to 63%
    high materiality
    High
    Aflac Japan Pretax Profit Margin
    33% to 36%
    high materiality
    High
    Aflac U.S. Net Earned Premium Growth
    lower end of 3% to 6% range
    high materiality
    High
    Aflac U.S. Benefit Ratio
    48% to 52%
    high materiality
    High
    Aflac U.S. Expense Ratio
    36% to 39%
    medium materiality
    High
    Aflac U.S. Pretax Profit Margin
    17% to 20%
    high materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Aflac Japan
    Sales driven by new cancer insurance product Miraito. Persistency remains strong despite an uptick in lapse and reissue activity from new product introductions. Pretax margin was solid despite a slight year-over-year decrease.
    Sales increase Q4: 15.7%Sales increase FY25: 16%Miraito sales increase: 35.6%Premium persistency: 93.1% (for the year)Underlying earned premiums decline: 1.2%Benefit ratio: 65% (down 150 bps YoY)Expense ratio: 22% (up 120 bps YoY)Adjusted net investment income (yen terms): down 3.9%
    		declined 1.9%-1.9%—31.3% pretax margin
    Aflac U.S.
    Strong new sales for the year, with significant growth in group and direct-to-consumer channels. Benefit ratio increased due to prior year endorsements and higher claims. Expense ratio increased due to timing of spend and scaling new business lines.
    New sales FY25: nearly $1.6 billionPremium persistency: 79.2% (down 10 bps YoY)Total benefit ratio: 48.6% (up 230 bps YoY)Expense ratio: 40.4% (up 10 bps YoY)Adjusted net investment income: down 2.8%Group life and disability sales FY25: up 11.3%Network dental product sales FY25: up 48.8%Direct-to-consumer sales FY25: up 10.5%Traditional group benefits sales (Aflac Group chassis) FY25: up 11.7%Total group sales: 14%
    		up 4%4%—17.4% pretax margin
    Corporate and Other
    Pretax adjusted loss recorded, with total premiums decreasing on closed blocks of business. Net investment income improved due to lower volume of tax credit investments and higher asset balances.
    Adjusted net investment income: $1 million higher than last year
    		———pretax adjusted loss of $31 million

    Operational metrics

    21
    Net earnings per diluted share
    $2.64
    Q4 FY25

    GAAP net earnings per diluted share.

    Adjusted earnings per diluted share
    $1.57increased 0.6% year-over-year (excluding FX)
    Q4 FY25

    Adjusted earnings per diluted share, excluding the effect of foreign currency.

    Net earnings per diluted share
    $6.82
    FY25

    GAAP net earnings per diluted share for the full year.

    Adjusted earnings per diluted share
    $7.49
    FY25

    Adjusted earnings per diluted share for the full year.

    Adjusted book value per share
    increased 0.5%
    Q4 FY25

    Excluding foreign currency remeasurement.

    Adjusted Return on Equity (ROE)
    11.7%
    Q4 FY25

    Adjusted ROE for the quarter.

    Adjusted Return on Equity (ROE) ex-FX
    14.5%
    Q4 FY25

    Adjusted ROE for the quarter, excluding foreign currency remeasurement.

    Remeasurement gains on reserves
    $36 million
    Q4 FY25

    Total remeasurement gains on reserves, reducing benefits.

    Variable investment income
    $12 million below expectations
    Q4 FY25

    Variable investment income ran below long-term return expectations.

    Tax credit investments impact on NII
    -$43 million
    Q4 FY25

    Negative impact on net investment income for U.S. GAAP purposes, with an associated credit to the tax line.

    Total earnings benefit from tax credit investments
    $13 million
    Q4 FY25

    Net earnings benefit from tax credit investments.

    Adjusted leverage
    21.4%
    Q4 FY25

    Leverage ratio is impacted by yen-dollar exchange rate due to 63% of debt held in yen, part of enterprise hedging program.

    Holding company unencumbered liquidity
    $4.1 billion$3.1 billion above minimum
    Q4 FY25

    Minimum liquidity balance at the holding company was lowered by $750 million to $1 billion after creating PCAP trusts.

    Middle market loans charge-offs
    $22 million
    Q4 FY25

    Charge-offs recorded on portfolio of first lien senior secured middle market loans.

    U.S. statutory mortgage loan valuation allowance
    $3 million
    Q4 FY25

    Recorded as an unrealized loss.

    Japan FSA net realized gains for securities impairments
    JPY 380 million
    Q4 FY25
    Japan FSA valuation allowance on real estate loans
    JPY 87 million
    Q4 FY25

    Related to transitional real estate loans, well within expectations and limited impact on regulatory earnings and capital.

    Aflac Japan balance sheet ceded to Bermuda
    6%
    To date

    Ceded to Bermuda reinsurance affiliate, with significant capacity for further ceding.

    AI claims automation
    more than 60%
    Current

    Percentage of claims automated using machine learning techniques; final adjudication always involves a person.

    Software credit portfolio exposure
    1.5%
    Current

    Middle market loans are first lien senior secured with small average sizes. Investment-grade exposure carries an A- rating.

    Career recruiting conversion rate
    16%higher than normal
    FY25

    Percentage of new recruits converted into sellers.

    Industry KPIs

    10
    MetricValueDetails
    Capital returns$4.8 billionUSD
    ROE operating ROE11.7% (adjusted); 14.5% (adjusted ex-FX)%
    Book value per shareincreased 0.5%%
    Net investment incomedown 3.9% (Japan); down 2.8% (U.S.)%
    Retention persistency93.1% (Japan); 79.2% (U.S.)%
    Life specific when present35.6% (Miraito sales increase)%
    Net premiums written earneddeclined 1.9% (Japan); up 4% (U.S.)%
    Broker specific when present14% (total group sales growth)%
    Statutory regulatory capitalabove 970% (SMR); 253% (ESR); 575% (RBC)%
    Prior year reserve development$36 millionUSD

    Deals & partnerships

    1
    N/ACreation of two off-balance sheet precapitalized trusts (PCAPs)$2 billion

    The full PCAP facility remains undrawn. These trusts issued securities commonly referred to as PCAPs.

    Risks & headwinds

    5
    Potential for increased surrenders of interest-sensitive savings products in JapanOngoing

    Not quantified, but acknowledged as a risk

    Mitigation: Closely monitoring and preparing the company for potential impacts from rising yen interest rates.

    Uptick in lapse and reissue activity in JapanQ4 FY25

    Caused reported lapsation to increase

    Mitigation: Overall lapses remain within expectations; tied to new product introductions like Miraito.

    Higher claims activity on individual voluntary block in U.S.Q4 FY25

    Contributed to 230 basis point increase in total benefit ratio

    Mitigation: Partially managed through prior year endorsements and active increases in benefit ratios for certain products.

    Increased expense ratio in U.S. due to scaling new business linesQ4 FY25 and ongoing

    Increased expense ratio by 60 basis points in Q4 FY25

    Mitigation: In line with expectations as these businesses (group life and disability, network dental and vision, direct-to-consumer) continue to scale.

    Flat to negative performance of traditional U.S. businessPast few years and ongoing

    Flat to negative for the past few years

    Mitigation: Investing in enhancing products, recruiting, and improving technology and enrollment platforms for the traditional business. Impact from COVID on producer force is being addressed through recruitment.

    What to watch in Q1 FY26

    4

    Japan Underlying Earned Premiums

    within a reasonable future
    Currentexpected to decline 1% to 2% in 2026
    TargetPositive growth (sales exceeding lapses)

    Why it matters

    This metric indicates the inflection point for Japan's core business growth, crucial for long-term profitability.

    But even going into 2026, we still expect that lapses will be greater than total sales. ... once that turns positive, it is eventually when we are going to have net earned premium growth in Japan.

    Q&A highlights

    6

    Given the rise in yen yields, do you expect higher surrenders of interest-sensitive savings products in Japan?

    Management acknowledges the significant rise in yen yields and the potential for increased surrenders or demand, but states they have not experienced this yet and are closely monitoring the situation.

    “We have not experienced that yet, but obviously, it's something that we closely monitor and prepare the company for.”

    asked by Wesley Carmichael · answered by Max Broden

    2 min read6 chapters

    Detailed Narrative

    01

    Japan Product Innovation and Sales Momentum

    Aflac Japan achieved significant sales growth in Q4 and FY25, largely propelled by the success of its Miraito cancer insurance product, which saw a 35.6% sales increase. The recent introduction of the Anshin Palette medical product in late December has also received positive reception. The company continues to leverage its Tsumitasu first sector product, repriced in September, to target younger demographics and promote asset formation, with flexibility to adjust premium rates based on interest rate market conditions.

    02

    U.S. Sales Strategy and Channel Performance

    Aflac U.S. generated nearly $1.6 billion in new sales for 2025, with a substantial portion in Q4. While the core traditional voluntary benefits business has been flat to negative, growth initiatives like group life and disability (up 11.3%), network dental (up 48.8%), and direct-to-consumer (up 10.5%) are driving overall sales. The company is investing in unifying these channels through technology and platform enhancements to provide a consistent customer experience and improve agent efficiency.

    03

    Capital Management and Shareholder Returns

    Aflac demonstrated strong capital deployment in 2025, returning nearly $4.8 billion to shareholders through $3.5 billion in share repurchases (33 million shares) and $1.2 billion in dividends. The company maintains robust capital ratios, including an SMR above 970%, an estimated regulatory ESR of 253% (benefiting 18 points from USP), and a combined RBC of 575%. Unencumbered holding company liquidity stands at $4.1 billion, significantly above the $1 billion minimum.

    04

    Drivers of Japan's Benefit Ratio Improvement

    The expected lower benefit ratio in Japan for 2026 is attributed to three main factors: a 130 basis point reduction in the net premium ratio following actuarial assumption updates in Q3 2025, an increase in lapse and reissue activity associated with new product introductions, and the shrinking of the old 'waste' product block which carried a very high GAAP benefit ratio. Two-thirds of this improvement is expected to be economically driven, not just GAAP accounting.

    05

    U.S. Benefit Ratio Dynamics and Mix Shift

    The U.S. benefit ratio is projected to increase in 2026, driven by active management decisions to increase benefits on certain products (e.g., cancer and accident policies) that saw very low utilization during the pandemic. Additionally, the growing proportion of higher benefit ratio group products (life, disability, dental) in the overall in-force mix contributes to this upward trend, reflecting the success of new business lines.

    06

    Technology and AI Integration

    Aflac is actively exploring and investing in AI to enhance operational efficiency and product innovation. In Japan, AI is being considered for enrollment processes and product development. In the U.S., AI assists in automating over 60% of routine claims processes in the traditional business, providing advice to adjudicators without fully automating final decisions. AI also played a role in accelerating the development of enhanced enrollment platforms for agents.

    AI-generated summary of the company’s earnings call. Not investment advice.