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Aflac (AFL) Q4 Earnings Beat on Lower Benefits and Expenses
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Aflac Incorporated (AFL - Free Report) reported fourth-quarter 2022 adjusted earnings per share (EPS) of $1.29, which beat the Zacks Consensus Estimate of $1.21 and our estimate of $1.22. The bottom line increased 0.8% year over year.
AFL’s revenues dropped 26.2% year over year to $4,010 million in the quarter under review and were lower than our estimate of $4,467 million as well. The top line missed the consensus mark by 10.7%.
Strong fourth-quarter earnings were supported by reduced benefits and expenses, and improved profit levels from the U.S. businesses. The positives were partially offset by lower net investment income and weaker performance in the Japan unit.
Aflac Incorporated Price, Consensus and EPS Surprise
Adjusted 2022 EPS declined 10.3% from a year ago to $5.33. Total revenues fell 11.8% to $19,502 million. While net earned premiums decreased 13.5% to $15,263 million, net investment income fell 4.2% to $3,656 million.
Q4 Performance
Adjusted net investment income fell 5.9% year over year to $840 million.
Total net benefits and claims of $2,028 million declined 21.4% year over year in the fourth quarter, a bit lower than our estimate of $2,034.5 million. Total acquisition and operating expenses dropped 9.9% year over year to $1,458 million.
Total benefits and expenses of $3,486 million fell 17% year over year but were above our estimate of $3,359.5 million.
Segmental Update
Aflac Japan
The segment’s adjusted revenues decreased 22.7% year over year to $2,775 million in the quarter under review but beat our estimate of a 25.7% decline. Total net earned premiums of $2,164 million dropped 22.9% year over year due to limited pay products attaining paid-up status and reducing in force. The figure, however, beat the Zacks Consensus Estimate of $2,080.4 million.
Adjusted net investment income plunged 21.7% year over year to $604 million.
Pretax adjusted earnings of the segment amounted to $704 million, which tumbled 20.6% year over year in the fourth quarter.
New annualized premium sales of $115 million improved 11.4% year over year. The benefit ratio of the segment was 66.2% in the fourth quarter.
Aflac U.S.
The segment reported adjusted revenues of $1,621 million, which climbed 0.1% year over year in the quarter under review. Total net earned premiums slid 0.2% year over year to $1,388 due to reduced year-to-date persistency. The figure beat the Zacks Consensus Estimate by 1.2%.
Adjusted net investment income of $192 million slipped 2.5% year over year. Pretax adjusted earnings of the segment were $340 million, up 30.3% year over year in the fourth quarter due to reduced benefits recognized.
Aflac U.S. sales of $545 million grew 17.4% year over year. The fourth-quarter benefit ratio came in at 40.8%.
Financial Position (as of Dec 31, 2022)
Aflac exited the fourth quarter with total cash and cash equivalents of $3,943 million, which declined from $5,051 million at 2021-end. Total investments and cash of $117.4 billion declined from $143 billion at 2021-end. Total assets dropped to $131 billion from $157.5 billion a year ago.
Adjusted debt decreased to $7,105 million at the fourth-quarter end from $7,568 million a year ago.
Total shareholders' equity of $22,365 million plunged from $33,253 million a year ago.
Adjusted debt to adjusted capitalization came in at 23.3%, which improved 60 basis points (bps) year over year.
While it has no debt maturities in less than a year, total debt maturities worth $1,334 million are expected within the next five years.
Adjusted book value per share increased 9.7% year over year to $43.51.
Adjusted return on equity of 11.8% deteriorated 130 bps year over year.
Capital Deployment
Aflac bought back 8.9 million shares worth $600 million in the fourth quarter. It had 116.6 million shares left for buyback as of 2022-end.
Management announced dividends of 42 cents per share for the first quarter of 2023, marking a 5% increase. The dividend will be paid out on Mar 1, 2023, to its shareholders of record as of Feb 15.
Outlook
Aflac estimates improved sales in its Japan business for 2023, buoyed by improving pandemic conditions, product launches and product updates. The benefit ratio normalized in the fourth quarter and the momentum is expected to continue.
Management also remains optimistic about strong sales results within its U.S. business. Improving productivity, contributions from platforms like network dental and vision and group life, and disability are expected to continue supporting the results.
Chicago-based Cboe Global Markets is one of the largest stock exchange operators by volume in the United States. The Zacks Consensus Estimate for CBOE’s 2022 earnings indicates a 14.2% year-over-year increase.
Headquartered in New York, American International is a leading global insurance organization. The Zacks Consensus Estimate for AIG’s 2022 earnings has increased 1.8% in the past 30 days.
Based in Los Angeles, Ares Capital specializes in rescue financing of middle-market companies. The Zacks Consensus Estimate for ARCC’s 2022 earnings suggests 18.1% year-over-year growth.
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Aflac (AFL) Q4 Earnings Beat on Lower Benefits and Expenses
Aflac Incorporated (AFL - Free Report) reported fourth-quarter 2022 adjusted earnings per share (EPS) of $1.29, which beat the Zacks Consensus Estimate of $1.21 and our estimate of $1.22. The bottom line increased 0.8% year over year.
AFL’s revenues dropped 26.2% year over year to $4,010 million in the quarter under review and were lower than our estimate of $4,467 million as well. The top line missed the consensus mark by 10.7%.
Strong fourth-quarter earnings were supported by reduced benefits and expenses, and improved profit levels from the U.S. businesses. The positives were partially offset by lower net investment income and weaker performance in the Japan unit.
Aflac Incorporated Price, Consensus and EPS Surprise
Aflac Incorporated price-consensus-eps-surprise-chart | Aflac Incorporated Quote
2022 Performance
Adjusted 2022 EPS declined 10.3% from a year ago to $5.33. Total revenues fell 11.8% to $19,502 million. While net earned premiums decreased 13.5% to $15,263 million, net investment income fell 4.2% to $3,656 million.
Q4 Performance
Adjusted net investment income fell 5.9% year over year to $840 million.
Total net benefits and claims of $2,028 million declined 21.4% year over year in the fourth quarter, a bit lower than our estimate of $2,034.5 million. Total acquisition and operating expenses dropped 9.9% year over year to $1,458 million.
Total benefits and expenses of $3,486 million fell 17% year over year but were above our estimate of $3,359.5 million.
Segmental Update
Aflac Japan
The segment’s adjusted revenues decreased 22.7% year over year to $2,775 million in the quarter under review but beat our estimate of a 25.7% decline. Total net earned premiums of $2,164 million dropped 22.9% year over year due to limited pay products attaining paid-up status and reducing in force. The figure, however, beat the Zacks Consensus Estimate of $2,080.4 million.
Adjusted net investment income plunged 21.7% year over year to $604 million.
Pretax adjusted earnings of the segment amounted to $704 million, which tumbled 20.6% year over year in the fourth quarter.
New annualized premium sales of $115 million improved 11.4% year over year. The benefit ratio of the segment was 66.2% in the fourth quarter.
Aflac U.S.
The segment reported adjusted revenues of $1,621 million, which climbed 0.1% year over year in the quarter under review. Total net earned premiums slid 0.2% year over year to $1,388 due to reduced year-to-date persistency. The figure beat the Zacks Consensus Estimate by 1.2%.
Adjusted net investment income of $192 million slipped 2.5% year over year. Pretax adjusted earnings of the segment were $340 million, up 30.3% year over year in the fourth quarter due to reduced benefits recognized.
Aflac U.S. sales of $545 million grew 17.4% year over year. The fourth-quarter benefit ratio came in at 40.8%.
Financial Position (as of Dec 31, 2022)
Aflac exited the fourth quarter with total cash and cash equivalents of $3,943 million, which declined from $5,051 million at 2021-end. Total investments and cash of $117.4 billion declined from $143 billion at 2021-end. Total assets dropped to $131 billion from $157.5 billion a year ago.
Adjusted debt decreased to $7,105 million at the fourth-quarter end from $7,568 million a year ago.
Total shareholders' equity of $22,365 million plunged from $33,253 million a year ago.
Adjusted debt to adjusted capitalization came in at 23.3%, which improved 60 basis points (bps) year over year.
While it has no debt maturities in less than a year, total debt maturities worth $1,334 million are expected within the next five years.
Adjusted book value per share increased 9.7% year over year to $43.51.
Adjusted return on equity of 11.8% deteriorated 130 bps year over year.
Capital Deployment
Aflac bought back 8.9 million shares worth $600 million in the fourth quarter. It had 116.6 million shares left for buyback as of 2022-end.
Management announced dividends of 42 cents per share for the first quarter of 2023, marking a 5% increase. The dividend will be paid out on Mar 1, 2023, to its shareholders of record as of Feb 15.
Outlook
Aflac estimates improved sales in its Japan business for 2023, buoyed by improving pandemic conditions, product launches and product updates. The benefit ratio normalized in the fourth quarter and the momentum is expected to continue.
Management also remains optimistic about strong sales results within its U.S. business. Improving productivity, contributions from platforms like network dental and vision and group life, and disability are expected to continue supporting the results.
Zacks Rank & Other Key Picks
Aflac currently has a Zacks Rank #2 (Buy). Some other top-ranked stocks in the broader finance space are Cboe Global Markets, Inc. (CBOE - Free Report) , American International Group, Inc. (AIG - Free Report) and Ares Capital Corporation (ARCC - Free Report) , each carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Chicago-based Cboe Global Markets is one of the largest stock exchange operators by volume in the United States. The Zacks Consensus Estimate for CBOE’s 2022 earnings indicates a 14.2% year-over-year increase.
Headquartered in New York, American International is a leading global insurance organization. The Zacks Consensus Estimate for AIG’s 2022 earnings has increased 1.8% in the past 30 days.
Based in Los Angeles, Ares Capital specializes in rescue financing of middle-market companies. The Zacks Consensus Estimate for ARCC’s 2022 earnings suggests 18.1% year-over-year growth.