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AFLAC INC earnings calls

AFL · every analyst question and management's answer

Aug 7, 2026 earnings call — Japan sales, reinsurance push and portfolio repositioning

Company repurchased $983 million of stock and paid $309 million dividends in Q2.

Revenue $4.1B (est $4.1B) · EPS $1.75 (est $1.76)

Key quotes

"As part of our ongoing strategy, we continue to promote the importance of third sector protection to new and younger customers with our innovative first sector savings-type life insurance product, Tsumitasu."

— Daniel Amos (CEO·CHAIR) · Tsumitasu and Japan sales

"We have revisited this target and aligned it with an FSA perspective of up to 30% of FSA reserves."

— Max Broden (CFO) · Reinsurance expansion

"What we were able to do this quarter was harvest gains from foreign currency on our dollar portfolio in Aflac Japan and use that to offset losses on some of those older bonds."

— Bradley Dyslin (PRESIDENT) · Portfolio repositioning

Analyst Q&A 8

portfolio changes and Japan product mix

Q (Ryan Krueger · KBW): Analyst asked what portfolio repositioning was done and whether more such moves are possible. He also asked if there is any practical limit on how much Japan sales could come from the first sector product.

A: Management said they repositioned about 5% of the portfolio this quarter, harvesting foreign currency gains in Aflac Japan to offset losses and making adjustments in Aflac U.S. and Bermuda. They see a big opportunity from higher rates and will keep working on this. On first sector sales, there is no fixed limit; first sector in-force is under 20% and the company values the diversification benefit but cautions that too much could raise risk.

"I'm very pleased that we were able to reposition about 5% of our portfolio in a single quarter." — Bradley Dyslin (PRESIDENT)

M&A size and reinsurance limit

Q (Thomas Gallagher · Evercore): Analyst asked whether Aflac will stick to small deals or consider larger strategic M&A. He also asked about the change to a 30% reinsurance ceding limit and whether that was internal or consulted with the FSA, and if it implies faster cadence of reinsurance.

A: Management said they will keep looking at opportunities but will be careful with capital; small deals bought have improved and any larger deal would need to pass a strenuous test. The move to a 30% of FSA reserves ceding limit is an internally imposed limit that they shared externally, and they feel better positioned to execute larger reinsurance transactions now, which improves cost per transaction and creates significant opportunities to improve risk and return.

"I think the answer is we continue to look at opportunities." — Daniel Amos (CEO·CHAIR)

Japan medical sales and U.S. sales channels

Q (Suneet Kamath · Jefferies): Analyst asked why Japan medical sales fell sequentially despite a December product launch and what to expect for the rest of the year. He also asked about U.S. sales this year and channel performance between traditional agency and brokers.

A: Aflac Japan said the new medical product's momentum continued and first-half sales exceeded last year, but Q1 was boosted by launch timing in late December, so Q2 dipped; they expect momentum to continue through Q3 and Q4. In the U.S., sales are roughly in line with expectations though a little below the manager's target, with stronger second-half seasonality and especially a big fourth quarter expected; group products and dental/vision showed strong growth and the agency force remains a focus while pushing brokers on network dental.

"And we expect this momentum to continue through third quarter and fourth quarter." — Koichiro Yoshizumi

policy lapses and U.S. M&A interest

Q (Michael Ward · UBS): Analyst asked if lapses, paid-up or surrenders in Japan rose due to inflation or higher rates. He also asked again about interest in larger U.S. M&A to diversify.

A: Management said they have not seen a significant lapse uptick from inflation or interest rates; a minor uptick in first sector from very low levels and the year-over-year persistency decline is mostly from recent product launches like Miraito, which they expect to normalize as Miraito passes its first year. On M&A, they constantly look and will listen to ideas, weighing financial sense and distribution fit, and will act if it makes disciplined sense.

"So far, we haven't really seen any sort of significant lapse uptick related to either inflation or to interest rates." — Max Broden (CFO)

Japan sales target and capital rule of thumb

Q (Wesley Carmichael · Wells Fargo): Analyst asked whether management is still targeting JPY 80 billion in Japan sales for the year and whether the prior ESR rule of thumb still applies and should include the USP.

A: Management said they would still be happy to reach JPY 80 billion and expect 2026 sales to exceed 2025, noting some direct mail delays are back on track. They also said the prior rule of thumb for ESR continues to be a good guide and that USP should be included when thinking about excess capital and ESR.

"That is -- it continues to be a good rule of thumb for our ESR capital base." — Max Broden (CFO)

inflation effects and cross-sell in Japan

Q (Joel Hurwitz · Dowling & Partners): Analyst asked how much inflation pressures affect Japan operating expenses and other headwinds. He also asked for more color on cross-selling with the Tsumitasu product.

A: Management said Japan inflation is running close to 3%, which makes expense management harder when revenue is shrinking, but the team lowered the expense ratio and they expect a 20% to 23% long-term expense ratio. They noted the Middle East situation is not currently impacting Japan insurance materially but will be monitored for risks to inflation and energy prices. On cross-sell, Tsumitasu attracts younger customers and has driven concurrent sales of cancer and medical above the initially planned 25%.

"Japan inflation is running close to 3% at the moment." — Max Broden (CFO)

capital freed by reinsurance and FX impact

Q (Wilma Jackson Burdis · Raymond James): Analyst asked if moving Japan reinsurance from 10% to 30% would free JPY 5–7 billion of capital and to walk through the components. He also asked if U.S./Japan efforts to support the yen would affect Aflac and the impact if Japan rates rise.

A: Management said Aflac Japan had JPY 10.8 trillion of FSA policy reserves and the capital freed by reinsurance depends heavily on which blocks are ceded, block age, and interest rates, so there is no simple rule of thumb and they referred to the 2021 FAB for reserve differences. On FX, the U.S. dollar portfolio is designed to protect Aflac Japan's economic value in dollar terms, FX moves have only a small ESR impact, and FX gains from the dollar program have been useful for repositioning the portfolio though a stronger yen can reduce those gains over time.

"If you then think about what would that do from a capital free-up standpoint, the capital being freed up is very dependent on many factors, including what blocks are being ceded." — Max Broden (CFO)

benefit ratio, reserve review, reinsurance outlook

Q (Pablo Singzon · JPMorgan): Analyst asked whether the higher benefit ratio year-to-date will affect the third-quarter reserve assumption review and whether lapses mix is a significant factor. He also asked how large the reinsurance business could be medium term.

A: Management said first-half benefit ratio is higher than expected but they still expect to be inside full-year guidance of 60% to 63%, now leaning to the upper end, driven by lapse mix and Miraito maturation; they will do the third-quarter assumption review and set forward-looking assumptions by best estimate. On reinsurance, they executed one external deal, see a significant market and competitive advantages, expect the business to be lumpy and build over time, and view it as a meaningful supplemental business that should not overtake core U.S. and Japan operations.

"We still expect to be inside of our full year guidance range of 60% to 63%, but we now expect to be at the upper end of that range." — Max Broden (CFO)

AI-generated notes on the earnings call transcript. Quotes are taken from the transcript. This is not a FolioObs investment view.

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