Industry Overview - The Zacks Accident and Health Insurance industry is expected to benefit from increased underwriting exposure and prudent underwriting standards among key players like Aflac, Unum Group, Trupanion, Globe Life, and AMERISAFE [1] - The industry has maintained profitability due to solid reserves, prudent claims management, and stable loss trends, although a softer performance is predicted for 2025 [2] - The global workers' compensation insurance market is projected to grow significantly between 2024 and 2032, driven by rising awareness of the benefits of coverage [3] Trends Impacting the Industry - Pricing pressure is anticipated to continue due to inflation, rising medical costs, and demographic changes, with workers' compensation insurance pricing expected to increase at a CAGR of 5.3% from 2022 to 2026 [4] - Claims frequency is improving due to better safety measures and working conditions, with a notable increase in the number of workers aged 75 and older expected to rise by 96.5% over the next decade [5] - The adoption of technology, including AI and data analytics, is accelerating in the industry, potentially reducing workers' compensation claim expenses by about 45% [6] Industry Performance - The Zacks Accident and Health Insurance industry ranks 95, placing it in the top 39% of 251 Zacks industries, indicating positive near-term prospects [7][8] - The industry has outperformed the Finance sector and the Zacks S&P 500 composite, with a collective gain of 29.6% over the past year compared to 5.8% and 2.2% respectively [10] Current Valuation - The industry is currently trading at a trailing 12-month price-to-book (P/B) ratio of 1.84X, significantly lower than the Zacks S&P 500 composite's 7.89X and the sector's 4.17X [13] Company Highlights - **Trupanion**: Positioned for growth in the underpenetrated pet insurance market, with a projected earnings increase of 130.4% in 2025 [19][20] - **Aflac**: Focused on strategic growth investments and digital solutions, with a long-term earnings growth rate of 4.8% [23][24] - **Unum Group**: Expected to see sales growth of 5-10% in 2025, with a long-term earnings growth rate of 7.2% [27][29] - **Globe Life**: Positive revenue trends driven by premium growth, with expected earnings increases of 10% and 9.8% in 2025 and 2026 respectively [32][34] - **AMERISAFE**: Benefits from a niche focus and a strong balance sheet, with a consistent record of dividend payments since 2013 [36][37]

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Financial Performance - Total revenues for Q1 2025 were $3.4 billion, down from $5.4 billion in Q1 2024, primarily due to net investment losses of $963 million compared to net investment gains of $951 million in the prior year [295]. - Net earnings in Q1 2025 were $29 million, or $0.05 per diluted share, significantly lower than $1.9 billion, or $3.25 per diluted share, in Q1 2024 [295]. - Adjusted earnings for Q1 2025 were $906 million, or $1.66 per diluted share, compared to $961 million, or $1.66 per diluted share, in Q1 2024, with the weaker yen/dollar exchange rate negatively impacting adjusted earnings per diluted share by $0.01 [297]. - Net earnings for Q1 2025 were $29 million, compared to $1,879 million in Q1 2024, resulting in adjusted earnings of $906 million for Q1 2025, down from $961 million in Q1 2024 [308]. - Adjusted earnings per diluted share for Q1 2025 were $1.66, consistent with Q1 2024, while adjusted earnings excluding current period foreign currency impact were $914 million, also consistent with Q1 2024 [308]. Shareholders' Equity - Shareholders' equity at March 31, 2025, was $26.3 billion, or $48.55 per share, an increase from $26.1 billion, or $47.45 per share, at December 31, 2024 [298]. - Shareholders' equity excluding accumulated other comprehensive income (AOCI) was $28.2 billion, or $51.98 per share, at March 31, 2025, down from $29.1 billion, or $52.87 per share, at December 31, 2024 [299]. - The annualized return on average shareholders' equity in Q1 2025 was 0.4% [298]. Investment Performance - Net investment losses in Q1 2025 included $888 million from derivatives and foreign currency, $61 million from equity securities, and an increase in credit loss allowances of $55 million [296]. - The company's net investment gains for Q1 2025 were $963 million, compared to a loss of $951 million in Q1 2024, with adjusted net investment gains of $924 million in Q1 2025 [310]. - The effective income tax rate for the combined U.S. and Japanese operations was 80.3% for Q1 2025, significantly higher than 13.4% for the same period in 2024 [324]. Aflac Japan Performance - Aflac Japan's net earned premiums decreased by 7.4% to $1,681 million for the three months ended March 31, 2025, compared to $1,816 million in the same period of 2024 [339]. - Total adjusted revenues for Aflac Japan fell by 8.1% to $2,272 million, down from $2,473 million year-over-year [339]. - Pretax adjusted earnings for Aflac Japan decreased by 10.9% to $722 million, compared to $810 million in the prior year [339]. - Annualized premiums in force in Aflac Japan decreased by 2.7% to ¥1.20 trillion as of March 31, 2025, from ¥1.23 trillion as of March 31, 2024 [342]. - Aflac Japan's premium persistency improved to 93.8% as of March 31, 2025, compared to 93.4% in the previous year [351]. Aflac U.S. Performance - Aflac U.S. net earned premiums increased by 1.8% to $1.502 billion in Q1 2025, driven by growth initiatives in group life and disability [371]. - Aflac U.S. new annualized premium sales rose by 3.5% to $309 million in Q1 2025, primarily due to sales of group products [379]. - Aflac U.S. premium persistency improved to 79.3% in Q1 2025, up from 78.7% in Q1 2024 [375]. - The total adjusted revenues for Aflac U.S. increased by 1.3% to $1.721 billion in Q1 2025, reflecting the growth in net earned premiums [371]. Investment Strategy - The company’s investment strategy focuses on fixed maturity securities to provide a reliable stream of investment income, aligning cash flows with liability needs [310]. - The Company maintains a diversified portfolio of investments, including fixed maturity securities and growth assets, to optimize risk-adjusted returns [393]. - The Company utilizes third-party asset managers for loan sourcing and management, ensuring experienced oversight for loan workouts [401]. Cash Flow and Liquidity - The Company generated $589 million from operating activities for the three-month period ended March 31, 2025, down from $849 million in 2024 [469]. - The Company reported a net change in cash and cash equivalents of $(998) million for the three-month period ended March 31, 2025, compared to an increase of $792 million in 2024 [469]. - Aflac Ventures has deployed approximately $290 million of the $400 million committed to support business development needs as of March 31, 2025 [475]. - The Company plans to maintain higher than historical levels of liquidity and capital at the Parent Company to address hedge costs and mitigate against long-term weakening of the Japanese yen [460]. Shareholder Returns - The Company returned $1.2 billion to shareholders through treasury stock purchases and dividends during the three-month period ended March 31, 2025, compared to $1.0 billion in the same period of 2024 [479]. - Cash dividends paid to shareholders were $0.58 per share in Q1 2025, an increase of 16% compared to $0.50 per share in Q1 2024 [485].

Core Points - Aflac is expanding its partnership with Empathy to include the Empathy LifeVault™ service for group term life insurance certificate holders starting July 1, 2025 [1][3] - LifeVault is a digital platform designed for legacy planning, making it easier for Aflac customers to manage essential documents related to their life insurance policies [2][3] - The partnership aims to provide comprehensive support for families dealing with loss and planning for the future, enhancing Aflac's commitment to customer care [3][4] Company Overview - Aflac is a leading provider of supplemental health insurance in the U.S. and has been recognized as the No. 1 provider in this sector [5] - The company has a long-standing reputation for ethical practices, being included in the World's Most Ethical Companies for 19 consecutive years and Fortune's World's Most Admired Companies for 24 years [5] - Aflac's services are designed to provide financial protection and peace of mind to millions of policyholders [5] Empathy Overview - Empathy is a technology company focused on transforming how people navigate life's toughest moments, serving over 40 million people across North America [7] - The company partners with seven of the top ten U.S. life insurance carriers and handles one in five life insurance claims nationwide [7] - Empathy has received $90 million in funding from top-tier venture firms and global insurance leaders, emphasizing its innovative approach to bereavement and legacy planning [7]

Core Viewpoint - Aflac Inc's stock declined by 3.6% to $104.83 following lower-than-expected first-quarter earnings and revenue due to investment losses, despite strong growth in Japan. However, there are indications of a potential short-term rally as the stock shows a historically bullish signal [1]. Group 1: Stock Performance - Aflac's shares are currently within one standard deviation of their 50-day moving average, having been above this trendline in at least eight of the last ten trading days and spending 80% of the last six months above it [2]. - Historical data indicates that in the past five years, when similar conditions occurred, Aflac's stock was higher one month later 71% of the time, with an average gain of 4% [2]. Group 2: Analyst Sentiment - Among the 16 analysts covering Aflac stock, 13 maintain a "hold" or worse rating, suggesting there is significant potential for upgrades if the stock moves higher [3].

Core Viewpoint - Aflac Incorporated reported weaker-than-expected first-quarter 2025 results, with adjusted earnings per share (EPS) of $1.66, missing estimates by 1.2%, while revenues decreased to $4.3 billion, missing consensus by 1.3% [1][2] Financial Performance - Adjusted net investment income decreased by 2.2% year over year to $913 million [3] - Total net benefits and claims declined by 3.2% year over year to $1.9 billion [3] - Total acquisition and operating expenses increased by 4.1% year over year to $1.3 billion [3] - Pre-tax earnings plummeted by 93.3% year over year to $145 million [3] Segment Analysis - **Aflac Japan**: Adjusted revenues decreased by 8.1% year over year to $2.3 billion, missing estimates by 5.3%. Total net earned premiums dipped by 7.4% year over year to $1.7 billion [4] - **Aflac U.S.**: Adjusted revenues increased by 1.3% year over year to $1.7 billion, but missed estimates by 1.4%. Total net earned premiums climbed by 1.8% year over year to $1.4 billion [6] Investment and Capital Management - Aflac bought back 8.5 million shares worth $900 million in the first quarter, with 38.8 million shares remaining for buyback [11] - The company announced a dividend of 58 cents per share for the second quarter, payable on June 2, 2025 [11] Financial Position - As of March 31, 2025, total cash and cash equivalents decreased to $5.2 billion from $6.2 billion at the end of 2024 [8] - Total assets increased to $120.3 billion from $117.6 billion at the end of 2024 [8] - Adjusted debt increased to $7.5 billion from $7.2 billion at the end of 2024, with a debt to adjusted capitalization ratio of 20.7% [9] Future Outlook - Aflac anticipates improved sales in its Japan business for 2025, focusing on third-sector products and targeting younger customers [12] - The company expects a benefit ratio of 64-66% for Aflac Japan and 48-52% for Aflac U.S. in 2025 [13]

Financial Data and Key Metrics Changes - Aflac reported net earnings per diluted share of $0.05, significantly impacted by net investment losses compared to net investment gains in Q1 2024 [5] - Adjusted earnings per diluted share remained unchanged at $1.66 year over year [5][13] - Adjusted return on equity (ROE) was 12.7% excluding foreign currency remeasurement, indicating a solid performance [13] - Adjusted book value per share, excluding foreign currency remeasurement, increased by 2.2% [13] Business Line Data and Key Metrics Changes - Aflac Japan experienced a 12.6% year-over-year sales increase, driven by significant contributions from Sumitas and a 6.3% increase in cancer insurance sales [5][6] - Aflac US saw a 3.5% year-over-year increase in sales, with strong performance in group life, disability, and network dental [8] - Net earned premiums in Aflac Japan declined by 5%, while underlying earned premiums adjusted for deferred profit liability and reinsurance declined by 1.4% [14] - In the US, net earned premiums increased by 1.8%, with persistency rising by 60 basis points year over year to 79.3% [17] Market Data and Key Metrics Changes - Aflac Japan's total benefit ratio was 65.8%, down 120 basis points year over year, while the US total benefit ratio was 47.7%, up 120 basis points year over year [15][18] - Persistency in Japan remained solid at 93.8%, up 40 basis points year over year [16] - The expense ratio in Japan increased to 19.6%, primarily due to higher technology expenses, while the US expense ratio decreased to 37.6% [16][19] Company Strategy and Development Direction - Aflac aims to appeal to younger customers through products like Sumitas, which has been successful in reaching this demographic [6] - The company is focused on maintaining strong premium persistency and driving profitable growth through stronger underwriting discipline [8] - Aflac continues to leverage its strong capital and cash flows while maintaining prudent liquidity and capital management [10] - The company is committed to reinforcing its leading position in the life insurance markets of Japan and the US [12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the demand for Aflac's products, emphasizing the importance of being a partner in health for policyholders [9] - The company is optimistic about the growth potential in both Japan and the US, with plans to continue capital deployment and maintain a strong dividend track record [11][12] - Management acknowledged the challenges posed by macroeconomic factors but remains committed to long-term capital management strategies [36] Other Important Information - Aflac repurchased $900 million worth of its own stock and paid $317 million in dividends during Q1 2025 [23] - The company ended the quarter with strong capital ratios, including an estimated regulatory ESR above 250% [24] - Aflac Japan's cancer insurance sales are expected to grow, supported by the launch of a new cancer product in March 2025 [52] Q&A Session Summary Question: Why did the ESR ratio decline in Q1? - Management explained that the decline was due to the strengthening yen, partially offset by higher Japan interest rates and significant dividends flowing from Aflac Japan to Aflac Inc [32] Question: How should capital planning be approached given recent macro changes? - Management stated that capital management is designed with a long-term view, and they do not plan to change their approach significantly despite recent volatility [36] Question: What are the expectations for the new cancer product sales? - Management expressed confidence in the new cancer product's growth, anticipating continued sales increases throughout 2025 [52] Question: How is the competitive landscape for medical insurance in Japan? - Management acknowledged increased competition but emphasized Aflac's pioneering position and unique services that provide a competitive advantage [56] Question: How does the company view the impact of the yen on its operations? - Management noted that while a strengthening yen introduces volatility, it also leads to higher future dividends in dollar terms from Aflac Japan, which offsets some negative impacts [95]

Financial Data and Key Metrics Changes - Aflac reported net earnings per diluted share of $0.05, significantly impacted by net investment losses compared to net investment gains in Q1 2024 [6] - Adjusted earnings per diluted share remained unchanged at $1.66 year-over-year [6][13] - Adjusted return on equity (ROE) was 12.7% excluding foreign currency remeasurement, indicating a solid performance [13] Business Line Data and Key Metrics Changes - Aflac Japan experienced a 12.6% year-over-year sales increase, driven by significant contributions from Sumitas and a 6.3% increase in cancer insurance sales [6][8] - Aflac US saw a 3.5% year-over-year increase in sales, with strong performance in group life, disability, and network dental [9][17] - Net earned premiums for Aflac Japan declined by 5%, while underlying earned premiums adjusted for deferred profit liability and other factors declined by 1.4% [14] Market Data and Key Metrics Changes - Aflac Japan's total benefit ratio was 65.8%, down 120 basis points year-over-year, while the U.S. total benefit ratio was 47.7%, up 120 basis points year-over-year [15][18] - Persistency in Japan improved to 93.8%, up 40 basis points year-over-year, while U.S. persistency increased to 79.3%, up 60 basis points year-over-year [16][17] Company Strategy and Development Direction - The company aims to appeal to younger customers through products like Sumitas and is focused on cross-selling medical and cancer policies [7][9] - Aflac continues to emphasize strong capital and cash flow management while maintaining a commitment to liquidity and capital ratios [10][11] - The company is strategically deploying capital, having repurchased $900 million in stock and paid $317 million in dividends in Q1 2025 [11][23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the underlying strengths of the business and potential for continued growth in both Japan and the U.S. [12] - The company is closely monitoring economic trends and adjusting its capital management strategies accordingly [38][41] - Management highlighted the importance of maintaining strong premium persistency and adapting to market conditions [10][11] Other Important Information - Aflac Japan launched a new cancer insurance product in March 2025, which is expected to contribute positively to sales [54] - The company has a robust hedging strategy in place to manage foreign currency exposure, particularly related to the yen [26][97] Q&A Session Summary Question: Why did the ESR ratio decline in Q1? - Management explained that the decline was due to the strengthening yen, partially offset by higher Japan interest rates and dividends flowing to Aflac Inc. [32][33] Question: How should we think about capital planning given recent macro changes? - Management indicated that capital management is designed with a long-term view and is not expected to change significantly despite macroeconomic volatility [37][41] Question: What are the expectations for the new cancer product sales? - Management expressed confidence that the new cancer product will continue to grow, with expectations for sales in 2025 to exceed those of 2024 [54][100] Question: How is the competitive landscape for medical insurance in Japan? - Management acknowledged increased competition but emphasized Aflac's pioneering position in cancer insurance and ongoing efforts to maintain market share [58][59] Question: How are remeasurement gains expected to trend? - Management noted that significant remeasurement gains are typically unlocked in the third quarter, with smaller adjustments in other quarters [63][66] Question: Is there any anti-U.S. sentiment affecting sales in Japan? - Management stated that there is no observable anti-American sentiment affecting the business, citing strong economic ties between the U.S. and Japan [116][117]

Forward-Looking Statements and Non-GAAP Financial Measures The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" to encourage companies to provide prospective information, so long as those informational statements are identified as forward-looking and are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those included in the forward-looking statements. The company desires to take advantage of these ...

Core Viewpoint - Aflac reported quarterly earnings of $1.66 per share, slightly missing the Zacks Consensus Estimate of $1.68 per share, indicating a -1.19% earnings surprise [1]. Financial Performance - Aflac's revenues for the quarter ended March 2025 were $4.32 billion, which was 1.26% below the Zacks Consensus Estimate and a decrease from $5.44 billion year-over-year [2]. - Over the last four quarters, Aflac has surpassed consensus EPS estimates two times and topped revenue estimates only once [2]. Stock Performance - Aflac shares have increased approximately 5% since the beginning of the year, contrasting with a -5.5% decline in the S&P 500 [3]. - The current Zacks Rank for Aflac is 3 (Hold), suggesting that the stock is expected to perform in line with the market in the near future [6]. Earnings Outlook - The consensus EPS estimate for the upcoming quarter is $1.74 on revenues of $4.4 billion, while for the current fiscal year, the estimate is $6.84 on revenues of $17.62 billion [7]. - The trend of estimate revisions for Aflac is currently mixed, which may change following the recent earnings report [6]. Industry Context - The Insurance - Accident and Health industry, to which Aflac belongs, is currently ranked in the top 36% of over 250 Zacks industries, indicating a favorable outlook compared to the bottom 50% [8].