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Aflac (AFL) Q1 Earnings Beat on Lower Benefits & Expenses
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Aflac Incorporated (AFL - Free Report) reported strong first-quarter 2024 results, supported by lower benefits and claims, operating expenses and higher investment income, signaling its effective investment strategies. Improving profit levels from both the Japan and U.S. operations were major tailwinds. However, premium sales figures decreased in both the segments.
It reported first-quarter 2024 adjusted earnings per share of $1.66, which beat the Zacks Consensus Estimate by 5.1%. Also, the bottom line increased from $1.55 per share reported in the year-ago period.
Aflac’s revenues increased 13.3% year over year to $5.4 billion in the quarter under review. The top line beat the consensus mark by 25.9%.
Aflac Incorporated Price, Consensus and EPS Surprise
Adjusted net investment income increased 10.5% year over year to $934 million.
Total net benefits and claims of $2 billion decreased 6.5% year over year in the first quarter. Total acquisition and operating expenses decreased 4% year over year to $1.3 billion.
Pre-tax earnings surged 61.7% year over year to $2.2 billion in the first quarter.
Inside AFL’s Segments
Aflac Japan: The segment’s adjusted revenues decreased 11.4% year over year to $2.8 billion in the quarter under review. This missed the Zacks Consensus Estimate by 3.9%. Total net earned premiums of $1.8 billion dropped 16.3% year over year due to limited pay products attaining paid-up status and the implementation of a reinsurance transaction earlier. This metric missed the Zacks Consensus Estimate by 5.2%.
Adjusted net investment income increased 6.1% year over year to $648 million due to higher variable investment income, the impact of the weakening Yen and lower hedge costs. Pre-tax adjusted earnings of the segment amounted to $810 million, which increased 2.8% year over year in the first quarter. This metric beat the estimate by 3.6%.
New annualized premium sales of $87 million deteriorated 5.1% year over year due to weaker first-sector sales. The benefit ratio of the segment was 67% in the first quarter.
Aflac U.S.: The segment’s adjusted revenues increased 2.3% year over year to $1.7 billion in the quarter under review. This missed the Zacks Consensus Estimate by 0.8%. Total net earned premiums climbed 3.3% year over year to $1.4 billion due to sales recovery. This metric beat the Zacks Consensus Estimate by 0.8%.
Adjusted net investment income of $206 million climbed 4.6% year over year on the back of increased variable investment income and a move toward higher-yielding fixed-income investments. However, the metric missed the Zacks Consensus Estimate by 5.6%. Pretax adjusted earnings of the segment were $356 million, up 1.1% year over year in the first quarter thanks to lower expenses, partly offset by higher benefits recognized. The metric beat the Zacks Consensus Estimate by 1.7%.
Aflac’s U.S. sales of $298 million fell 5.2% year over year. The first-quarter benefit ratio came in at 46.5%.
Financial Position (as of Mar 31, 2024)
Aflac exited the first quarter with total cash and cash equivalents of $5.1 billion, which increased from $4.3 billion at 2023-end. Total assets fell to $124.7 billion from $126.7 billion at 2023-end.
Adjusted debt increased to $7.4 billion from $7.1 billion at 2023-end. Adjusted debt to adjusted capitalization, excluding accumulated other comprehensive income, came in at 20.4%, which improved 10 basis points (bps) from 2023-end. While it has no debt maturities in less than a year, total debt maturities worth $1.8 billion are expected within the next five years.
Total shareholders' equity of $23.5 billion increased from $22 million at 2023-end.
Adjusted book value per share increased 12.4% year over year to $50.22. Adjusted return on equity, excluding foreign currency impact of 14.3%, improved 10 bps year over year.
Capital Deployment
Aflac bought back 9.3 million shares worth $750 million in the first quarter. It had 68.5 million shares left for buyback as of the first-quarter end.
Management announced dividends of 50 cents per share for the second quarter. The dividend will be paid out on Jun 3, 2024, to shareholders of record as of May 22.
Outlook
Aflac estimates improved sales in its Japan business for 2024, buoyed by sales campaigns commencing in the second quarter. Management also remains optimistic about profitable growth within its U.S. business. Improving productivity, underwriting discipline and expense management are likely to bolster its margins. New products and distribution strategies are expected to benefit both segments.
It expects the benefit ratio in the Aflac Japan unit to stay within 66-68% in 2024, while the same in Aflac U.S. is likely to be in the 45-47% range.
Zacks Rank & Key Picks
Aflac currently has a Zacks Rank #3 (Hold).
Investors interested in the broader Finance space can look at some better-ranked stocks like Brown & Brown, Inc. (BRO - Free Report) , Oscar Health, Inc. (OSCR - Free Report) and Old Republic International Corporation (ORI - Free Report) . While Brown & Brown currently sports a Zacks Rank #1 (Strong Buy), Oscar Health and Old Republic carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Brown & Brown’s 2024 full-year earnings is pegged at $3.62 per share, which indicates 28.8% year-over-year growth. The estimate jumped by 2 cents over the past week. BRO beat earnings estimates in each of the past four quarters, with an average surprise of 11.9%.
The Zacks Consensus Estimate for Oscar Health’s 2024 full-year earnings indicates an 81.2% year-over-year improvement. It beat earnings estimates in three of the past four quarters and missed once. Also, the consensus mark for OSCR’s 2024 full-year revenues suggests 42.7% year-over-year growth.
The consensus mark for Old Republic’s 2024 full-year earnings indicates a 3.8% year-over-year increase. The earnings estimate has witnessed one upward estimate revision in the past week against no movement in the opposite direction. Furthermore, the consensus estimate for ORI’s 2024 full-year revenues suggests 6.8% year-over-year growth.
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Aflac (AFL) Q1 Earnings Beat on Lower Benefits & Expenses
Aflac Incorporated (AFL - Free Report) reported strong first-quarter 2024 results, supported by lower benefits and claims, operating expenses and higher investment income, signaling its effective investment strategies. Improving profit levels from both the Japan and U.S. operations were major tailwinds. However, premium sales figures decreased in both the segments.
It reported first-quarter 2024 adjusted earnings per share of $1.66, which beat the Zacks Consensus Estimate by 5.1%. Also, the bottom line increased from $1.55 per share reported in the year-ago period.
Aflac’s revenues increased 13.3% year over year to $5.4 billion in the quarter under review. The top line beat the consensus mark by 25.9%.
Aflac Incorporated Price, Consensus and EPS Surprise
Aflac Incorporated price-consensus-eps-surprise-chart | Aflac Incorporated Quote
Q1 Performance
Adjusted net investment income increased 10.5% year over year to $934 million.
Total net benefits and claims of $2 billion decreased 6.5% year over year in the first quarter. Total acquisition and operating expenses decreased 4% year over year to $1.3 billion.
Pre-tax earnings surged 61.7% year over year to $2.2 billion in the first quarter.
Inside AFL’s Segments
Aflac Japan: The segment’s adjusted revenues decreased 11.4% year over year to $2.8 billion in the quarter under review. This missed the Zacks Consensus Estimate by 3.9%. Total net earned premiums of $1.8 billion dropped 16.3% year over year due to limited pay products attaining paid-up status and the implementation of a reinsurance transaction earlier. This metric missed the Zacks Consensus Estimate by 5.2%.
Adjusted net investment income increased 6.1% year over year to $648 million due to higher variable investment income, the impact of the weakening Yen and lower hedge costs. Pre-tax adjusted earnings of the segment amounted to $810 million, which increased 2.8% year over year in the first quarter. This metric beat the estimate by 3.6%.
New annualized premium sales of $87 million deteriorated 5.1% year over year due to weaker first-sector sales. The benefit ratio of the segment was 67% in the first quarter.
Aflac U.S.: The segment’s adjusted revenues increased 2.3% year over year to $1.7 billion in the quarter under review. This missed the Zacks Consensus Estimate by 0.8%. Total net earned premiums climbed 3.3% year over year to $1.4 billion due to sales recovery. This metric beat the Zacks Consensus Estimate by 0.8%.
Adjusted net investment income of $206 million climbed 4.6% year over year on the back of increased variable investment income and a move toward higher-yielding fixed-income investments. However, the metric missed the Zacks Consensus Estimate by 5.6%. Pretax adjusted earnings of the segment were $356 million, up 1.1% year over year in the first quarter thanks to lower expenses, partly offset by higher benefits recognized. The metric beat the Zacks Consensus Estimate by 1.7%.
Aflac’s U.S. sales of $298 million fell 5.2% year over year. The first-quarter benefit ratio came in at 46.5%.
Financial Position (as of Mar 31, 2024)
Aflac exited the first quarter with total cash and cash equivalents of $5.1 billion, which increased from $4.3 billion at 2023-end. Total assets fell to $124.7 billion from $126.7 billion at 2023-end.
Adjusted debt increased to $7.4 billion from $7.1 billion at 2023-end. Adjusted debt to adjusted capitalization, excluding accumulated other comprehensive income, came in at 20.4%, which improved 10 basis points (bps) from 2023-end. While it has no debt maturities in less than a year, total debt maturities worth $1.8 billion are expected within the next five years.
Total shareholders' equity of $23.5 billion increased from $22 million at 2023-end.
Adjusted book value per share increased 12.4% year over year to $50.22. Adjusted return on equity, excluding foreign currency impact of 14.3%, improved 10 bps year over year.
Capital Deployment
Aflac bought back 9.3 million shares worth $750 million in the first quarter. It had 68.5 million shares left for buyback as of the first-quarter end.
Management announced dividends of 50 cents per share for the second quarter. The dividend will be paid out on Jun 3, 2024, to shareholders of record as of May 22.
Outlook
Aflac estimates improved sales in its Japan business for 2024, buoyed by sales campaigns commencing in the second quarter. Management also remains optimistic about profitable growth within its U.S. business. Improving productivity, underwriting discipline and expense management are likely to bolster its margins. New products and distribution strategies are expected to benefit both segments.
It expects the benefit ratio in the Aflac Japan unit to stay within 66-68% in 2024, while the same in Aflac U.S. is likely to be in the 45-47% range.
Zacks Rank & Key Picks
Aflac currently has a Zacks Rank #3 (Hold).
Investors interested in the broader Finance space can look at some better-ranked stocks like Brown & Brown, Inc. (BRO - Free Report) , Oscar Health, Inc. (OSCR - Free Report) and Old Republic International Corporation (ORI - Free Report) . While Brown & Brown currently sports a Zacks Rank #1 (Strong Buy), Oscar Health and Old Republic carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Brown & Brown’s 2024 full-year earnings is pegged at $3.62 per share, which indicates 28.8% year-over-year growth. The estimate jumped by 2 cents over the past week. BRO beat earnings estimates in each of the past four quarters, with an average surprise of 11.9%.
The Zacks Consensus Estimate for Oscar Health’s 2024 full-year earnings indicates an 81.2% year-over-year improvement. It beat earnings estimates in three of the past four quarters and missed once. Also, the consensus mark for OSCR’s 2024 full-year revenues suggests 42.7% year-over-year growth.
The consensus mark for Old Republic’s 2024 full-year earnings indicates a 3.8% year-over-year increase. The earnings estimate has witnessed one upward estimate revision in the past week against no movement in the opposite direction. Furthermore, the consensus estimate for ORI’s 2024 full-year revenues suggests 6.8% year-over-year growth.