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Why Is Aflac (AFL) Up 2.4% Since Last Earnings Report?
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A month has gone by since the last earnings report for Aflac (AFL - Free Report) . Shares have added about 2.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Aflac due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Aflac Q2 Earnings Beat on Strong U.S. Business, Lower Costs
Aflac reported second-quarter 2022 adjusted earnings per share (EPS) of $1.46, which beat the Zacks Consensus Estimate by 13.2% and our estimate of $1.30. The bottom line, however, declined 8.2% year over year.
Total revenues of Aflac amounted to $5,400 million, which decreased 2.9% year over year in the second quarter. Yet, the top line surpassed the consensus mark by 12.3% and our estimate of $4,939.2 million.
The quarterly results benefited from better returns from alternative investments resulting in strong variable investment income. Improved sales in the Aflac U.S. segment resulting from productivity gains and continued growth-related investments, and reduced benefits and expenses contributed to the upside. However, the results were partly offset by softness in the Japan segment, which has been grappling with persistent weakness in sales recovery stemming from volatilities inflicted by the COVID-19 pandemic.
Q2 Performance
Adjusted net investment income of $920 million fell 6.4% year over year in the quarter under review.
Total net benefits and claims decreased 13.4% year over year to $2,298 million. Meanwhile, total acquisition and operating expenses of $1,401 million fell 8.9% year over year.
Total benefits and expenses were $3,699 million, down 11.7% year over year during the second quarter. The figure was lower than our estimate of $4,040.7 million.
Aflac Japan
The segment reported adjusted revenues of $3,151 million, which plunged 16.8% year over year. The figure, however, fell short of the Zacks Consensus Estimate of $3,221 million and our estimate of $3,399.7 million.
Net earned premiums of $2,419 million decreased 19% year over year in the second quarter on account of limited pay products attaining paid-up status and pandemic-induced adversities on sales. The figure, however, lagged the Zacks Consensus Estimate of $2,502 million and our estimate of $2,602.5 million.
Adjusted net investment income fell 8.7% year over year to $723 million due to increased floating rate income. The figure was lower than our estimate of $788.4 million.
Pretax adjusted earnings of the segment totaled $860 million, down 14.3% year over year in the quarter under review. The figure, however, outpaced the Zacks Consensus Estimate of $771 million and our estimate of $777.9 million.
New annualized premium sales declined 6.4% year over year to $98 million. Second-quarter benefit ratio of the segment came in at 67.4%.
Aflac U.S.
Total adjusted revenues of the segment inched up 1% year over year to $1,628 million during the second quarter. The figure, however, exceeded the Zacks Consensus Estimate of $1,614 million and our estimate of $1,588.5 million.
Net earned premiums amounted to $1,394 million, which dipped 1% year over year due to reduced year-to-date persistency. The figure beat the Zacks Consensus Estimate of $1,378 million and our estimate of $1,339 million.
Adjusted net investment income improved 2.1% year over year to $193 million in the quarter under review. The figure was lower than the consensus mark of $194 million and our estimate of $214.3 million.
Pretax adjusted earnings of $349 million slumped 15.5% year over year due to elevated incurred benefits and higher expenses. The figure surpassed the Zacks Consensus Estimate of $306 million and our estimate of $296.7 million.
Aflac U.S. sales of $305 million improved 15.6% year over year. Second-quarter benefit ratio came in at 45.4%.
Financial Position (as of Jun 30, 2022)
Aflac exited the second quarter with total cash and cash equivalents of $5,173 million, which decreased 5.4% year over year.
Total investments and cash of $121.4 billion declined 17.2% year over year. Total assets fell 16% year over year to $135.6 billion.
Adjusted debt totaled $7,089 million at the end of the second quarter, which decreased 8.1% year over year.
Total shareholders' equity of $26.4 billion plunged 21.8% year over year.
Adjusted debt to adjusted capitalization improved 130 basis points (bps) year over year to 22.9% at the second-quarter end.
While it has no debt maturities in less than one year, $2,466 million of total debt maturities is expected within the next five years.
Adjusted book value per share increased 10.9% year over year to $42.45. Adjusted return on equity declined 200 bps year over year to 14.9%.
Capital Deployment
Aflac bought back 11.2 million shares worth $650 million. As of Jun 30, 2022, it had 36.6 million shares left for buyback.
Management announced a dividend of 40 cents per share in the third quarter of 2022. The dividend will be paid out on Sep 1, 2022, to shareholders of record as of Aug 24.
Outlook
Aflac anticipates improved sales within its Aflac Japan segment in the second half of 2022, with the expectation of moderation of pandemic-linked volatilities, productivity improvements at Japan Post and continuous execution of product introduction and refreshment plans.
How Have Estimates Been Moving Since Then?
It turns out, estimates review flatlined during the past month.
VGM Scores
Currently, Aflac has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Aflac has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Aflac belongs to the Zacks Insurance - Accident and Health industry. Another stock from the same industry, Amerisafe (AMSF - Free Report) , has gained 6% over the past month. More than a month has passed since the company reported results for the quarter ended June 2022.
Amerisafe reported revenues of $76.9 million in the last reported quarter, representing a year-over-year change of +0.3%. EPS of $0.68 for the same period compares with $1.04 a year ago.
Amerisafe is expected to post earnings of $0.58 per share for the current quarter, representing a year-over-year change of -43.1%. Over the last 30 days, the Zacks Consensus Estimate has changed -3.3%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Amerisafe. Also, the stock has a VGM Score of D.
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Why Is Aflac (AFL) Up 2.4% Since Last Earnings Report?
A month has gone by since the last earnings report for Aflac (AFL - Free Report) . Shares have added about 2.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Aflac due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Aflac Q2 Earnings Beat on Strong U.S. Business, Lower Costs
Aflac reported second-quarter 2022 adjusted earnings per share (EPS) of $1.46, which beat the Zacks Consensus Estimate by 13.2% and our estimate of $1.30. The bottom line, however, declined 8.2% year over year.
Total revenues of Aflac amounted to $5,400 million, which decreased 2.9% year over year in the second quarter. Yet, the top line surpassed the consensus mark by 12.3% and our estimate of $4,939.2 million.
The quarterly results benefited from better returns from alternative investments resulting in strong variable investment income. Improved sales in the Aflac U.S. segment resulting from productivity gains and continued growth-related investments, and reduced benefits and expenses contributed to the upside. However, the results were partly offset by softness in the Japan segment, which has been grappling with persistent weakness in sales recovery stemming from volatilities inflicted by the COVID-19 pandemic.
Q2 Performance
Adjusted net investment income of $920 million fell 6.4% year over year in the quarter under review.
Total net benefits and claims decreased 13.4% year over year to $2,298 million. Meanwhile, total acquisition and operating expenses of $1,401 million fell 8.9% year over year.
Total benefits and expenses were $3,699 million, down 11.7% year over year during the second quarter. The figure was lower than our estimate of $4,040.7 million.
Aflac Japan
The segment reported adjusted revenues of $3,151 million, which plunged 16.8% year over year. The figure, however, fell short of the Zacks Consensus Estimate of $3,221 million and our estimate of $3,399.7 million.
Net earned premiums of $2,419 million decreased 19% year over year in the second quarter on account of limited pay products attaining paid-up status and pandemic-induced adversities on sales. The figure, however, lagged the Zacks Consensus Estimate of $2,502 million and our estimate of $2,602.5 million.
Adjusted net investment income fell 8.7% year over year to $723 million due to increased floating rate income. The figure was lower than our estimate of $788.4 million.
Pretax adjusted earnings of the segment totaled $860 million, down 14.3% year over year in the quarter under review. The figure, however, outpaced the Zacks Consensus Estimate of $771 million and our estimate of $777.9 million.
New annualized premium sales declined 6.4% year over year to $98 million. Second-quarter benefit ratio of the segment came in at 67.4%.
Aflac U.S.
Total adjusted revenues of the segment inched up 1% year over year to $1,628 million during the second quarter. The figure, however, exceeded the Zacks Consensus Estimate of $1,614 million and our estimate of $1,588.5 million.
Net earned premiums amounted to $1,394 million, which dipped 1% year over year due to reduced year-to-date persistency. The figure beat the Zacks Consensus Estimate of $1,378 million and our estimate of $1,339 million.
Adjusted net investment income improved 2.1% year over year to $193 million in the quarter under review. The figure was lower than the consensus mark of $194 million and our estimate of $214.3 million.
Pretax adjusted earnings of $349 million slumped 15.5% year over year due to elevated incurred benefits and higher expenses. The figure surpassed the Zacks Consensus Estimate of $306 million and our estimate of $296.7 million.
Aflac U.S. sales of $305 million improved 15.6% year over year. Second-quarter benefit ratio came in at 45.4%.
Financial Position (as of Jun 30, 2022)
Aflac exited the second quarter with total cash and cash equivalents of $5,173 million, which decreased 5.4% year over year.
Total investments and cash of $121.4 billion declined 17.2% year over year. Total assets fell 16% year over year to $135.6 billion.
Adjusted debt totaled $7,089 million at the end of the second quarter, which decreased 8.1% year over year.
Total shareholders' equity of $26.4 billion plunged 21.8% year over year.
Adjusted debt to adjusted capitalization improved 130 basis points (bps) year over year to 22.9% at the second-quarter end.
While it has no debt maturities in less than one year, $2,466 million of total debt maturities is expected within the next five years.
Adjusted book value per share increased 10.9% year over year to $42.45. Adjusted return on equity declined 200 bps year over year to 14.9%.
Capital Deployment
Aflac bought back 11.2 million shares worth $650 million. As of Jun 30, 2022, it had 36.6 million shares left for buyback.
Management announced a dividend of 40 cents per share in the third quarter of 2022. The dividend will be paid out on Sep 1, 2022, to shareholders of record as of Aug 24.
Outlook
Aflac anticipates improved sales within its Aflac Japan segment in the second half of 2022, with the expectation of moderation of pandemic-linked volatilities, productivity improvements at Japan Post and continuous execution of product introduction and refreshment plans.
How Have Estimates Been Moving Since Then?
It turns out, estimates review flatlined during the past month.
VGM Scores
Currently, Aflac has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Aflac has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Aflac belongs to the Zacks Insurance - Accident and Health industry. Another stock from the same industry, Amerisafe (AMSF - Free Report) , has gained 6% over the past month. More than a month has passed since the company reported results for the quarter ended June 2022.
Amerisafe reported revenues of $76.9 million in the last reported quarter, representing a year-over-year change of +0.3%. EPS of $0.68 for the same period compares with $1.04 a year ago.
Amerisafe is expected to post earnings of $0.58 per share for the current quarter, representing a year-over-year change of -43.1%. Over the last 30 days, the Zacks Consensus Estimate has changed -3.3%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Amerisafe. Also, the stock has a VGM Score of D.