Aflac Incorporated Reports Significant Q2 Net Earnings Declines and Declares Third Quarter Dividend

Aflac Incorporated Reports Substantial Decline in Q2 Earnings

Aflac Incorporated (NYSE: AFL) recently released its financial results for the second quarter of 2025, marking a notable downturn in net earnings compared to the previous year. Total revenues amounted to $4.2 billion, a significant decrease from $5.1 billion reported in the same quarter of 2024. This drop can primarily be attributed to net investment losses aggregating $421 million, contrasting with prior year investment gains of $696 million.

Net earnings for Q2 2025 reached $599 million, corresponding to a diluted share of $1.11. In stark comparison, the company reported $1.8 billion, or $3.10 per diluted share, during the second quarter of 2024, illustrating the substantial impact of adverse investment circumstances. The reported net earnings were particularly affected by losses stemming from derivatives and foreign currency activities, as well as current expected credit losses (CECL).

Financial Breakdown

The second quarter of 2025's financials reveal that Aflac incurred net investment losses of $421 million, equating to $0.78 per diluted share, which starkly contrasts the previous year’s net gains of $696 million, or $1.23 per diluted share. Despite the challenges, adjusted earnings were recorded at $957 million, though a decline of 7.5% when compared to the previous year's adjusted earnings.

Moreover, variable investment income fell short by $35 million compared to the long-term return expectations, demonstrating the turbulence faced by investment portfolios. The average yen-to-dollar exchange rate improved slightly during this period, impacting adjusted earnings positively by $0.04 per share.

Shareholders' equity at the end of June 2025 was valued at $27.2 billion, or $50.86 per share, showing a growth compared to June 2024 which recorded $26.0 billion or $46.40 per share. Notably, this included increased earnings from changes in discount rate assumptions linked to insurance reserves.

Aflac Japan and Aflac U.S.

In Japan, net earned premiums reported at ¥254.6 billion indicated a 4.8% decrease compared to the previous year. Adjacent to this, adjusted net investment income fell 10.5%, reflecting impacts from fluctuating floating rates and currency translations. Meanwhile, total adjusted revenues also fell 6.2% to ¥357.5 billion. Despite these declines, new annualized premium sales surged by 23.2% to ¥20.7 billion, attributed to strong consumer interest in Aflac's latest cancer insurance product.

On the U.S. front, net earned premiums experienced a 3.4% increase to $1.5 billion compared to the previous year, thanks to improved sales performance. Adjusted net investment income took a hit, declining 5.0% to $207 million, marking the consequences of a prevailing low-interest environment.

Dividend Declaration

The board of directors acted to declare a third-quarter dividend of $0.58 per share scheduled for distribution on September 2, 2025, demonstrating Aflac's commitment to returning capital to shareholders despite the challenging earnings environment. In conjunction with this announcement, the company shares a strategic intent focused on generating long-term value through profitable growth initiatives in both U.S. and Japan markets.

Looking Ahead

Throughout the conference call following the announcement, Aflac's Chairman and CEO, Daniel P. Amos emphasized an optimistic outlook amidst hardships. He indicated the company would persist in concentrating on profitable growth through strategic distribution channels and enhanced product offerings. He expressed confidence in Aflac’s ability to adapt to changing market conditions while safeguarding its financial strength and continuing its impressive track record of dividend increases.

As the company navigates through these challenging times, stakeholders can expect continued efforts to bolster profitability and shareholder returns, ensuring Aflac remains a stalwart in the insurance landscape, particularly in its core markets of Japan and the U.S.