Aflac Q2 Revenue Misses Expectations

AFL reported Q2 revenue of $4.2B, missing the consensus estimate of $4.32B. Despite revenue challenges, AFL's financial health and business performance warrant closer examination. AFL's financial metrics present a mixed picture, with revenue growth facing challenges but profitability maintained through high EBITDA margin of 26.78%. AFL's valuation metrics suggest a modestly overvalued position, with a P/E ratio of 15.46, P/S ratio of 3.2, and P/B ratio of 2.04.

Aflac Incorporated (AFL) reported its second-quarter 2025 financial results, showcasing a mixed performance that warrants a closer examination. The company reported adjusted earnings per share (EPS) of $1.78, surpassing the Zacks Consensus Estimate by 4.1% [1]. However, the bottom line decreased by 2.7% year over year, while adjusted revenues dropped by 11.7% to $4.5 billion, missing the consensus mark by 2.3% [1].

The quarterly results benefited from higher new annualized premium sales in the Japan segment, driven by strong demand for the new Miraito cancer insurance product. Strong sales and persistency rates in the U.S. business also contributed to the upside. However, the upside was partly offset by elevated acquisition and operating expenses, coupled with reduced net investment income in the U.S. segment [1].

Aflac Japan recorded adjusted revenues of $2.5 billion, a 1% year-over-year increase, and beat the Zacks Consensus Estimate of $2.4 billion. Total net earned premiums improved 2.7% year over year to $1.76 billion but marginally missed the consensus mark. Adjusted net investment income totaled $699 million, which slipped 3.6% year over year. The unit's pre-tax adjusted earnings fell 8.6% year over year to $790 million, which outpaced the consensus mark of $750 million [1].

Aflac U.S. reported adjusted revenues of $1.73 billion, growing 2.6% year over year but marginally missing the Zacks Consensus Estimate of $1.74 billion. Total net earned premiums rose 3.4% year over year to $1.5 billion on the back of sales growth and strong persistency rates. Adjusted net investment income of $207 million tumbled 5% year over year in the second quarter. Pre-tax adjusted earnings of the segment inched up 1.3% year over year to $388 million, attributable to higher premiums. The metric beat the consensus mark of $352 million [1].

Aflac's financial position as of June 30, 2025, showed total cash and cash equivalents of $7 billion, which advanced 11.8% from the 2024-end level. Total assets of $124.7 billion increased 6.1% from the figure at 2024-end. Adjusted debt came in at $8.1 billion, up 12.8% from the figure as of Dec. 31, 2024. Adjusted debt to adjusted capitalization, excluding accumulated other comprehensive income, deteriorated 280 basis points from the 2024-end level to 22.5% at the second-quarter end. Total shareholders' equity of $27.2 billion rose 4.2% from the 2024-end figure. Adjusted book value per share increased 9.6% year over year to $50.86. Adjusted return on equity, excluding foreign currency impacts, was 16.4%, which deteriorated 110 bps year over year [1].

Despite revenue challenges, Aflac's financial health and business performance warrant closer examination. The company's valuation metrics suggest a modestly overvalued position, with a P/E ratio of 15.46, P/S ratio of 3.2, and P/B ratio of 2.04.

References:

[1] https://finance.yahoo.com/news/aflac-q2-earnings-beat-estimates-175900250.html