Aflac Incorporated Announces Third Quarter Results, Reports Third Quarter Net Earnings of $1.6 Billion, Declares Fourth Quarter Cash Dividend

For the first nine months of 2022, total revenues were down 7.1% to $15.5 billion, compared with $16.7 billion in the first nine months of 2021. Net earnings were $4.0 billion, or $6.25 per diluted share, compared with $3.3 billion, or $4.82 per diluted share, for the first nine months of 2021. Adjusted earnings for the first nine months of 2022 were $2.6 billion, or $4.03 per diluted share, compared with $3.2 billion, or $4.65 per diluted share, in 2021. Excluding the negative impact of $0.23 per share from the weaker yen/dollar exchange rate, adjusted earnings per diluted share decreased 8.4% to $4.26 for the first nine months of 2022.

Shareholders' equity excluding AOCI (or adjusted book value*) was $27.7 billion, or $44.34 per share at September 30, 2022, compared with $25.9 billion, or $39.06 per share, at September 30, 2021. The annualized adjusted return on equity excluding foreign currency impact* in the third quarter was 11.4%.

AFLAC JAPAN

In yen terms, Aflac Japan's net earned premiums were ¥309.9 billion for the quarter, or 4.1% lower than a year ago, mainly due to limited pay products reaching paid-up status and constrained sales from the impact of pandemic conditions. Adjusted net investment income increased 9.8% to ¥92.2 billion, mainly due to a weaker yen on the dollar-denominated investment income. Total adjusted revenues in yen declined 1.2% to ¥403.3 billion. Pretax adjusted earnings in yen for the quarter declined 19.2% on a reported basis to ¥86.9 billion, primarily due to a 940 basis point increase in the benefit ratio resulting from a wider scope of "deemed hospitalization" that was in effect through most of the third quarter. Pretax adjusted earnings decreased 27.9% on a currency-neutral basis. The pretax adjusted profit margin for the Japan segment decreased to 21.6%, compared with 26.3% a year ago.

For the first nine months, net earned premiums in yen were ¥939.5 billion, or 4.2% lower than a year ago. Adjusted net investment income increased 8.1% to ¥265.3 billion. Total adjusted revenues in yen were down 1.7% to ¥1.2 trillion. Pretax adjusted earnings were ¥298.8 billion, or 4.0% lower than a year ago.

In dollar terms, net earned premiums decreased 23.6% to $2.2 billion in the third quarter. Adjusted net investment income decreased 13.1% to $663 million. Total adjusted revenues declined by 21.4% to $2.9 billion. Pretax adjusted earnings declined 35.5% to $630 million.

For the first nine months, net earned premiums in dollars were $7.4 billion, or 18.4% lower than a year ago. Adjusted net investment income decreased 8.6% to $2.1 billion. Total adjusted revenues were down 16.4% to $9.5 billion. Pretax adjusted earnings were $2.4 billion, or 18.0% lower than a year ago.

For the quarter, total new annualized premium sales (sales) increased 10.2% to ¥13.9 billion, or $100 million, reflecting the  August launch of a new cancer product through the agency channel. For the first nine months, total new sales decreased 4.1% to ¥38.5 billion, or $301 million.

AFLAC U.S.

Aflac U.S. net earned premiums declined 1.3% to $1.4 billion in the third quarter, impacted by lower year-to-date persistency. Adjusted net investment income decreased 3.1% to $185 million. Total adjusted revenues were down 1.1% to $1.6 billion. Pretax adjusted earnings were $309 million, 13.7% lower than a year ago, which was driven by elevated general expenses reflecting, in part, platform and growth investments, as well as the amortization of deferred acquisition costs driven by a slight drop in persistency. The pretax adjusted profit margin for the U.S. segment was 19.3%, compared with 22.2% a year ago.

For the first nine months, net earned premiums declined 1.0% to $4.2 billion. Adjusted net investment income increased 1.1% to $563 million. Total adjusted revenues were down 0.1% to $4.9 billion. Pretax adjusted earnings were $984 million, or 19.1% lower than a year ago.

Aflac U.S. sales increased 11.8% in the quarter to $334 million, reflecting continued improvement from investment in growth initiatives as well as productivity gains. For the first nine months of the year, total new sales increased 15.2% to $938 million.

CORPORATE AND OTHER

For the quarter, total adjusted revenues increased 1.4% to $73 million, primarily due to higher adjusted net investment income from higher interest rates and an increase in amortized hedge income, partially offset by higher tax credits expense and a reduction in total premiums as a result of significant yen weakening. Pretax adjusted earnings were a loss of $59 million, compared with a loss of $41 million a year ago, resulting from higher other adjusted expenses, interest expense, and benefits and claims (including the impact from "deemed hospitalization" benefits), partially offset by slightly higher total adjusted revenue.

For the first nine months, total adjusted revenues decreased 7.8% to $189 million. Pretax adjusted earnings were a loss of $179 million, compared with a loss of $144 million a year ago.

DIVIDEND AND CAPITAL RETURNED TO SHAREHOLDERS

The board of directors declared the fourth quarter dividend of $0.40 per share, payable on December 1, 2022 to shareholders of record at the close of business on November 16, 2022.

In the third quarter, Aflac Incorporated deployed $650 million in capital to repurchase 11.1 million of its common shares. At the end of September 2022, the company had 25.6 million remaining shares authorized for repurchase.

OUTLOOK

Commenting on the company's results, Chairman and Chief Executive Officer Daniel P. Amos stated: "The company generated solid earnings for the first nine months, despite the weakening yen. Pandemic conditions in Japan and the U.S. continued to move toward normalcy, contributing to positive sales growth in both segments in the third quarter and momentum into the fourth quarter.

"Looking at our operations in Japan, sales continued to improve in the quarter with the launch of our new cancer insurance product through agencies in August, generating an increase of 10.2%. Persistency remained strong in the third quarter. We continue to monitor evolving pandemic conditions, as this impacts our ability to meet face-to-face with customers, which continues to be key to a recovery in sales. We believe our benefit ratio will normalize in the fourth quarter given the narrowed scope for "deemed hospitalization" introduced toward the end of the third quarter. Taking these factors into account, we continue to expect stronger sales in the fourth quarter, assuming that productivity continues to improve at Japan Post and that we execute on our product introduction and refreshment plans. 

"In the U.S., I am encouraged by the continued improvement in the productivity of our agents and brokers as we enter what is typically our strongest quarter of the year. This led to a strong third quarter that produced an 11.8% increase in sales. We continue to work toward reinforcing our leading position and generating stronger sales for the fourth quarter.

"As always, we are committed to prudent liquidity and capital management. We continue to generate strong investment results while remaining in a defensive position as we monitor evolving economic conditions. In addition, we have taken proactive steps in recent years to defend cash flow and deployable capital against a weakening yen. With the fourth quarter's declaration, 2022 will mark the 40th consecutive year of dividend increases. We treasure our track record of dividend growth and remain committed to extending it, supported by the strength of our capital and cash flows. At the same time, we remain in the market repurchasing shares with a tactical approach, focused on integrating the growth investments we have made in our platform to improve our strength and leadership position."

*See Non-U.S. GAAP Financial Measures section for an explanation of foreign exchange and its impact on the financial statements and definitions of the non-U.S. GAAP financial measures used in this earnings release, as well as a reconciliation of such non-U.S. GAAP financial measures to the most comparable U.S. GAAP financial measures.

ABOUT AFLAC INCORPORATED

Aflac Incorporated (NYSE: AFL) is a Fortune 500 company helping provide protection to more than 50 million people through its subsidiaries in Japan and the U.S., paying cash fast when policyholders get sick or injured. For more than six decades, insurance policies of Aflac Incorporated's subsidiaries have given policyholders the opportunity to focus on recovery, not financial stress. In the U.S., Aflac is the number one provider of supplemental health insurance products¹. Aflac Life Insurance Japan is the leading provider of medical and cancer insurance in Japan, where it insures 1 in 4 households. In 2021, Aflac Incorporated was proud to be included as one of the World's Most Ethical Companies by Ethisphere for the 16th consecutive year. Also in 2021, the company was included in the Dow Jones Sustainability North America Index and became a signatory of the Principles for Responsible Investment (PRI). In 2022, Aflac Incorporated was included on Fortune's list of World's Most Admired Companies for the 21st time and Bloomberg's Gender-Equality Index for the third consecutive year. To find out how to get help with expenses health insurance doesn't cover, get to know us at aflac.com or aflac.com/español. Investors may learn more about Aflac Incorporated and its commitment to ESG and social responsibility at investors.aflac.com under "Sustainability."

¹ LIMRA 2021 U.S. Supplemental Health Insurance Total Market Report

A copy of Aflac's Financial Analysts Briefing (FAB) supplement for the quarter can be found on the "Investors" page at aflac.com.

Aflac Incorporated will webcast its quarterly conference call via the "Investors" page of aflac.com at 8:00 a.m. (ET) on Tuesday, November 1, 2022.

Note: Tables within this document may not foot due to rounding.

AFLAC INCORPORATED AND SUBSIDIARIES CONDENSED INCOME STATEMENT
(UNAUDITED – IN MILLIONS, EXCEPT FOR SHARE AND PER-SHARE AMOUNTS)
NINE MONTHS ENDED SEPTEMBER 30,		2022		2021		% Change
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