Supplemental insurance specialist Aflac (AFL -0.27%) reported third-quarter results on Wednesday, Oct. 30, that revealed a substantial contrast in performance metrics. While its adjusted earnings per share (EPS) of $2.16 exceeded analyst predictions of $1.69, total revenue for the quarter came in at $2.95 billion, significantly trailing the $4.3 billion forecast.
The quarter highlighted operational efficiency offset by significant foreign currency impacts, leading to a net loss of $93 million compared to $1.57 billion in earnings from the previous year.
| Metric | Q3 2024 | Analyst Estimate | Q3 2023 | Change (YOY) |
|---|---|---|---|---|
| Adjusted EPS | $2.16 | $1.69 | $1.84 | 17.4% |
| Revenue | $2.95 billion | $4.3 billion | $4.95 billion | (40.4%) |
| Net income (loss) | ($93 million) | N/A | $1.57 billion | N/A |
Source: Aflac. Note Analyst consensus estimates for the quarter provided by FactSet. YOY = Year over year.
The Business of Aflac
Aflac, an insurance industry stalwart, primarily operates in the U.S. and Japan, focusing on supplemental insurance products. In Japan, it is known for providing cancer-related insurance, while in the U.S., it emphasizes health coverage. The company's product innovation, including new insurance lines in Japan, underscores its commitment to meeting client needs, but recent currency volatility in the Japanese market presents ongoing challenges.
Digitally transforming operations remains a key focus for Aflac, employing artificial intelligence (AI) to streamline claims processes. Despite external challenges, product diversity and robust distribution aid resilience in maintaining its market position.
Third Quarter Highlights
During the quarter, Aflac reported a notable rise in adjusted EPS, attributed to operational success despite currency woes. The yen/dollar exchange rate at 147.95 presented a challenge, causing significant exchange losses impacting the bottom line.
Both its U.S. and Japan segments reflected mixed performance. Aflac Japan saw a pretax adjusted earnings increase of 25.5% due to lower expenses but faced a 10.5% drop in net premiums. In contrast, U.S. net premiums grew by 2.8%, driven by increased sales and better customer retention.
The company reported $1.4 billion in net investment losses, starkly contrasting a $423 million gain in the prior year. This impact was largely due to the volatile financial market environment.
Its strategic focus includes expanding its product lineup in Japan and addressing increased benefits claims in the U.S. Despite these operational challenges, the Aflac Duck campaign continues to support brand recognition efforts effectively.
Looking Ahead
While providing no specific guidance for the remainder of the fiscal year, Aflac management did say it remains optimistic, focusing on innovation and channel expansion in Japan to draw in younger demographics. It aims to invest in AI technology to bolster operational efficiencies further, which could yield gradual improvements in service and productivity.
While foreign exchange volatility poses risks, the company is committed to maintaining shareholder returns through dividends and share buybacks. Investors should observe its ongoing tech adoption, regulatory environment impacts, and product segment performance in the upcoming quarters.
