AFLAC Incorporated ((AFL)) has held its Q4 earnings call. Read on for the main highlights of the call.
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The recent earnings call from AFLAC Incorporated highlighted a performance marked by robust earnings growth and substantial capital returns to shareholders. Despite these achievements, challenges were evident in U.S. sales, particularly within the dental segment, as well as in Japan’s net earned premiums. Additionally, the commercial real estate market presented difficulties.
Strong Earnings Growth
AFLAC Incorporated reported impressive earnings for the period, with net earnings per diluted share surging by 23.8% to reach $9.63 and adjusted earnings per diluted share increasing by 15.7% to $7.21. This marks a significant achievement for the company, underlining its strong financial performance.
Aflac Japan’s Performance
The Japan segment was a major contributor, representing more than 70% of pretax adjusted earnings. It achieved a remarkable 15.5% increase in pretax adjusted earnings with a record-breaking pretax profit margin of 36%, highlighting the segment’s successful performance and strategic importance to the company.
Capital Deployment and Shareholder Returns
AFLAC continued its commitment to returning capital to shareholders by repurchasing $2.8 billion worth of shares and delivering $3.9 billion back to shareholders in 2024. This marks the 42nd consecutive year of dividend growth, showcasing its dedication to rewarding investors.
Improved Premium Persistency in the US
In the United States, AFLAC achieved a notable 70 basis point improvement in premium persistency, reaching 79.3%. This improvement indicates a positive trend in customer retention and satisfaction.
Strong Capital Position
The company maintained strong capital ratios, with an SMR above 1150%, ESR above 270%, and a combined RBC estimated to be greater than 650%. These figures underscore AFLAC’s robust financial health and stability.
Decline in US Sales
Despite the strong overall performance, U.S. sales were below expectations in the fourth quarter, leading to a 1% decline for the year. This shortfall highlights challenges that the company faces in maintaining its growth trajectory in the U.S. market.
Challenges in the Dental Segment
A significant 33% decline in dental sales was reported in Q4, attributed to a failed system implementation that eroded trust with brokers and agents. Addressing these issues will be crucial for future growth in this segment.
Japan’s Decline in Net Earned Premiums
The Japan segment experienced a 5.4% decline in net earned premiums, primarily due to internal reinsurance transactions and paid-up policies. This decline indicates potential areas for improvement and strategic adjustments.
Commercial Real Estate Challenges
AFLAC increased its CECL reserve by $40 million in response to distressed property valuations and the foreclosure on two loans, reflecting the challenges posed by the commercial real estate market.
Forward-Looking Guidance
Looking ahead, AFLAC provided guidance for 2025, anticipating Japan’s pretax profit margin to be at the lower end of the 30-33% range. In the U.S., the company expects a benefit ratio at the lower end of the 48-52% range and an expense ratio at the upper end of the 36-39% range. These forecasts suggest a cautious but strategic approach to maintaining profitability and growth.
In summary, AFLAC Incorporated’s earnings call reflected a strong overall performance, with key highlights in earnings growth and capital returns to shareholders. However, challenges in U.S. sales, particularly in the dental segment, and Japan’s net earned premiums were evident. Moving forward, the company aims to navigate these challenges while maintaining its robust financial position.
