COLUMBUS, Ga., Nov. 1, 2023
/PRNewswire/ -- Aflac Incorporated (NYSE: AFL) today reported its
third quarter results.
Total revenues were $5.0 billion
in the third quarter of 2023, compared with $4.7 billion in the third quarter of 2022. Net
earnings were $1.6 billion, or
$2.64 per diluted share, compared
with $1.8 billion, or $2.82 per diluted share a year ago.
Net earnings in the third quarter of 2023 included net
investment gains of $423 million, or
$0.71 per diluted share, compared
with net investment gains of $199
million, or $0.31 per diluted
share a year ago. These net investment gains were driven by net
gains on certain derivatives and foreign currency activities of
$381 million, largely driven by
changes in exchange rates, a $47
million gain from an increase in the fair value of equity
securities and $24 million of net
gains from sales and redemptions. Net investment losses included a
$29 million increase in the company's
current expected credit losses (CECL) reserves and impairments.
Adjusted earnings* in the third quarter were $1.1 billion, compared with $910 million in the third quarter of 2022,
reflecting an increase of 20.3%. Adjusted earnings per diluted
share* increased 27.8% to $1.84 in
the quarter. Variable investment income ran $13 million, or
$0.02 per share, below the company's
long-term return expectations. The weaker yen/dollar exchange rate
negatively impacted adjusted earnings per share by $0.06.
The average yen/dollar exchange rate in the third quarter of
2023 was 144.97, or 5.4% weaker than the average rate of 137.08 in
the third quarter of 2022. For the first nine months, the average
exchange rate was 138.38, or 8.5% weaker than the rate of 126.65 a
year ago.
Total investments and cash at the end of September 2023 were $111.3
billion, compared with $114.5
billion at September 30, 2022.
The decline in the carrying amount of the portfolio is principally
driven by the rise in interest rates and weakening of yen exchange
rates.
Shareholders' equity was $22.7
billion, or $38.63 per share,
at September 30, 2023, compared with
$19.9 billion, or $31.97 per share, at September 30, 2022. Shareholders' equity at the
end of the third quarter included a cumulative decrease of
$866 million for the effect of
the change in discount rate assumptions on insurance reserves,
compared with a corresponding cumulative decrease of $4.1 billion at September 30, 2022 and a net unrealized loss on
investment securities and derivatives of $427 million, compared with a net unrealized gain
of $1.1 billion at September 30, 2022. Shareholders' equity at the
end of the third quarter also included an unrealized foreign
currency translation loss of $4.5
billion, compared with an unrealized foreign currency
translation loss of $4.4 billion at
September 30, 2022. The annualized
return on average shareholders' equity in the third quarter was
29.1%.
For the first nine months of 2023, total revenues were down 1.8%
to $14.9 billion, compared with
$15.2 billion in the first nine
months of 2022. Net earnings were $4.4
billion, or $7.28 per diluted
share, compared with $4.2 billion, or
$6.57 per diluted share, for the
first nine months of 2022. Adjusted earnings for the first nine
months of 2023 were $3.0 billion, or
$4.97 per diluted share, compared
with $2.8 billion, or $4.35 per diluted share, in 2022. Excluding the
negative impact of $0.17 per share
from the weaker yen/dollar exchange rate, adjusted earnings per
diluted share increased 18.2% to $5.14 for the first nine months of 2023.
Shareholders' equity excluding AOCI (or adjusted book value*)
was $28.4 billion, or $48.44 per share at September 30, 2023, compared with $27.5 billion, or $44.00 per share, at September 30, 2022. The annualized adjusted
return on equity excluding foreign currency impact* in the third
quarter was 16.1%.
AFLAC JAPAN
In yen terms, Aflac Japan's net earned premiums were ¥285.3
billion for the quarter, or 2.8% lower than a year ago, mainly due
to limited pay products reaching paid-up status and a reinsurance
transaction in the first quarter partially offset by an unlock of
future deferred profit liability assumptions. Adjusted net
investment income increased 7.2% to ¥98.9 billion, mainly due to
higher variable investment income and floating rate income. Total
adjusted revenues in yen declined 0.5% to ¥385.4 billion. Pretax
adjusted earnings in yen for the quarter increased 11.4% on a
reported basis to ¥126.4 billion, primarily due to lower benefits
and expenses partially offset by decreased revenue during the
quarter. Pretax adjusted earnings increased 7.0% on a
currency-neutral basis. The pretax adjusted profit margin for the
Japan segment increased to 32.8%,
compared with 29.3% a year ago.
For the first nine months, net earned premiums in yen were
¥855.7 billion, or 5.0% lower than a year ago. Adjusted net
investment income increased 0.9% to ¥267.8 billion. Total adjusted
revenues in yen were down 3.6% to ¥1.1 trillion. Pretax adjusted
earnings were ¥344.1 billion, or 4.9% higher than a year ago.
In dollar terms, net earned premiums decreased 7.2% to
$2.0 billion in the third quarter.
Adjusted net investment income increased 2.4% to $679 million. Total adjusted revenues declined by
4.9% to $2.7 billion. Pretax adjusted
earnings increased 6.4% to $869
million.
For the first nine months, net earned premiums in dollars were
$6.2 billion, or 12.4% lower than a
year ago. Adjusted net investment income decreased 6.7% to
$1.9 billion. Total adjusted revenues
were down 11.1% to $8.2 billion.
Pretax adjusted earnings were $2.5
billion, or 3.2% lower than a year ago.
For the quarter, total new annualized premium sales (sales)
increased 12.4% to ¥15.6 billion, or $108
million, primarily reflecting the continued rollout of the
new cancer product through alliance partners, driven largely by a
23% increase in cancer insurance sales. For the first nine months,
total new sales increased 16.6% to ¥44.9 billion, or $325 million.
AFLAC U.S.
Aflac U.S. net earned premiums increased 3.2% to $1.4 billion in the third quarter compared to the
prior year, reflecting the strong contribution from growth
initiatives. Adjusted net investment income increased 13.0% to
$209 million, largely due to higher
variable investment income and a shift to higher-yielding
fixed-income investments as well as increased floating rate income.
Total adjusted revenues were up 3.9% to $1.7
billion. Pretax adjusted earnings were $478 million, 38.6% higher than a year ago,
primarily due to lower benefits driven by actuarial assumption
unlocks and higher adjusted net investment income, partially offset
by higher adjusted expenses. Higher expenses reflected ongoing
investments in the U.S. platform, as well as a write-off of certain
capitalized software development costs in the third quarter of
2023. The pretax adjusted profit margin for the U.S. segment was
28.8%, compared with 21.6% a year ago.
For the first nine months, net earned premiums increased 2.2% to
$4.3 billion. Adjusted net investment
income increased 8.2% to $609
million. Total adjusted revenues were up 2.4% to
$5.0 billion. Pretax adjusted
earnings were $1.2 billion, or 17.5%
higher than a year ago.
Aflac U.S. sales increased 7.5% in the quarter to $359 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 6.4% to $998 million.
CORPORATE AND OTHER
For the quarter, total adjusted revenues increased 57.5% to
$115 million compared to the prior
year, primarily due to the reinsurance transaction in the first
quarter of 2023 resulting in an increase to total net earned
premiums, partially offset by lower net investment income driven by
a higher volume of tax credit investments. Pretax adjusted earnings
were a loss of $49 million, compared
with a loss of $56 million a year
ago, reflecting the increase in adjusted revenue, partially offset
by higher total net benefit and claims and other adjusted
expenses.
For the first nine months, total adjusted revenues increased
103.2% to $384 million. Pretax
adjusted earnings were a loss of $107
million, compared with a loss of $173
million a year ago.
DIVIDEND AND CAPITAL RETURNED TO SHAREHOLDERS
The board of directors declared the fourth quarter dividend of
$0.42 per share, payable on
December 1, 2023 to shareholders of record at the close of
business on November 15, 2023, and the first quarter 2024
dividend of $0.50 per share, payable
on March 1, 2024 to shareholders of
record at the close of business on February
21, 2024.
In the third quarter, Aflac Incorporated deployed $700 million in capital to repurchase 9.4 million
of its common shares. At the end of September 2023, the company had 86.4 million
remaining shares authorized for repurchase.
OUTLOOK
Commenting on the company's results, Chairman and Chief
Executive Officer Daniel P. Amos
stated: "Aflac delivered very strong earnings for both the quarter
and the first nine months. We have continued to actively
concentrate on numerous initiatives in the U.S. and Japan around new products and distribution
strategies to set the stage for future growth.
"Looking at our operations in Japan, I am pleased that our sales results
reflect improvements through agencies and alliances, including
Japan Post, Dai-ichi Life and Daido
Life. While it's too soon to provide details about the new
medical product we introduced in mid-September, early indications
show that it is being well-received. Additionally, we see products
like WAYS and Child Endowment as door-openers to gain new
customers, which increases opportunities to sell our third sector
products.
"In the U.S., I remain encouraged by the continued improvement
in the productivity of our agents and brokers as well as
contribution from our growth initiatives, including group life and
disability; network dental and vision; and consumer markets. As we
enter into the fourth quarter, which is typically our strongest
quarter of the year, we continue to work toward accelerating our
momentum and reinforcing our leading position.
"We continue to generate strong capital and cash flows while
maintaining our commitment to prudent liquidity and capital
management. I am very pleased that 2023
marks 41 consecutive years of dividend increases, a record
we treasure. Additionally, I am very happy with the Board's
decision to increase the first quarter 2024 dividend 19%. We also
remained in the market repurchasing shares at the historically high
levels of the first three quarters of this year. We intend to
continue our balanced approach of investing in growth initiatives
and to drive long-term operating efficiencies while preserving the
strength of underlying cash flows, which supports our dividend
track record and tactical share repurchase."
All relevant prior-year amounts have been adjusted for the
adoption of accounting guidance on January
1, 2023 related to accounting for long-duration
insurance contracts.
*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), a Fortune 500 company, has
helped provide financial protection and peace of mind for more than
67 years to millions of policyholders and customers through its
subsidiaries in the U.S. and Japan. In the U.S., Aflac is the No. 1
provider of supplemental health insurance products.1 In
Japan, Aflac Life Insurance Japan
is the leading provider of cancer and medical insurance policies in
force. The Company takes pride in being there for its policyholders
when they need us most, as well as being included in 2023 in the
World's Most Ethical Companies by Ethisphere for 17 consecutive
years, Fortune's World's Most Admired Companies for 22 years and
Bloomberg's Gender-Equality Index for the fourth consecutive year.
In addition, the Company became a signatory of the Principles for
Responsible Investment (PRI) in 2021 and has been included in the
Dow Jones Sustainability North America Index (2022) for nine years.
To find out how to get help with expenses health insurance doesn't
cover, get to know us at aflac.com or aflac.com/espanol. Investors
may learn more about Aflac Incorporated and its commitment to
corporate social responsibility and sustainability at
investors.aflac.com under "Sustainability."
1 LIMRA 2022
U.S. Supplemental Health Insurance Total Market Report
|
A copy of Aflac's financial 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 November
2, 2023.
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)
|
|
|
|
|
|
|
|
THREE MONTHS ENDED
SEPTEMBER 30,
|
|
2023
|
|
2022
|
|
% Change
|
Total
revenues
|
|
$
4,950
|
|
$
4,704
|
|
5.2 %
|
Benefits and claims,
net
|
|
1,860
|
|
2,076
|
|
(10.4)
|
Total acquisition and
operating expenses
|
|
1,285
|
|
1,299
|
|
(1.1)
|
Earnings before income
taxes
|
|
1,805
|
|
1,329
|
|
35.8
|
Income taxes
|
|
236
|
|
(452)
|
|
|
Net earnings
|
|
$
1,569
|
|
$
1,781
|
|
(11.9) %
|
Net earnings per share
– basic
|
|
$ 2.65
|
|
$ 2.83
|
|
(6.4) %
|
Net earnings per share
– diluted
|
|
2.64
|
|
2.82
|
|
(6.4)
|
Shares used to compute
earnings per share (000):
|
|
|
|
|
|
|
Basic
|
|
591,246
|
|
629,350
|
|
(6.1) %
|
Diluted
|
|
593,596
|
|
631,946
|
|
(6.1)
|
Dividends paid per
share
|
|
$ 0.42
|
|
$ 0.40
|
|
5.0 %
|
|
All relevant prior-year
amounts have been adjusted for the adoption of accounting guidance
on January 1, 2023 related to accounting for long-duration
insurance contracts.
|
AFLAC INCORPORATED
AND SUBSIDIARIES CONDENSED INCOME STATEMENT
|
(UNAUDITED – IN
MILLIONS, EXCEPT FOR SHARE AND PER-SHARE AMOUNTS)
|
|
|
|
|
|
|
|
NINE MONTHS ENDED
SEPTEMBER 30,
|
|
2023
|
|
2022
|
|
% Change
|
Total
revenues
|
|
$ 14,923
|
|
$ 15,192
|
|
(1.8) %
|
Benefits and claims,
net
|
|
6,108
|
|
6,833
|
|
(10.6)
|
Total acquisition and
operating expenses
|
|
3,843
|
|
4,028
|
|
(4.6)
|
Earnings before income
taxes
|
|
4,972
|
|
4,331
|
|
14.8
|
Income taxes
|
|
581
|
|
109
|
|
|
Net earnings
|
|
$
4,391
|
|
$
4,222
|
|
4.0 %
|
Net earnings per share
– basic
|
|
$ 7.31
|
|
$ 6.60
|
|
10.8 %
|
Net earnings per share
– diluted
|
|
7.28
|
|
6.57
|
|
10.8
|
Shares used to compute
earnings per share (000):
|
|
|
|
|
|
|
Basic
|
|
600,991
|
|
639,862
|
|
(6.1) %
|
Diluted
|
|
603,419
|
|
642,597
|
|
(6.1)
|
Dividends paid per
share
|
|
$ 1.26
|
|
$ 1.20
|
|
5.0 %
|
|
All relevant prior-year
amounts have been adjusted for the adoption of accounting guidance
on January 1, 2023 related to accounting for long-duration
insurance contracts.
|
AFLAC INCORPORATED
AND SUBSIDIARIES CONDENSED BALANCE SHEET
|
(UNAUDITED – IN
MILLIONS, EXCEPT FOR SHARE AMOUNTS)
|
|
|
|
|
|
|
|
SEPTEMBER
30,
|
|
2023
|
|
2022
|
|
% Change
|
Assets:
|
|
|
|
|
|
|
Total investments and
cash
|
|
$ 111,306
|
|
$ 114,528
|
|
(2.8) %
|
Deferred policy
acquisition costs
|
|
8,771
|
|
8,666
|
|
1.2
|
Other assets
|
|
5,034
|
|
5,521
|
|
(8.8)
|
Total
assets
|
|
$ 125,111
|
|
$ 128,715
|
|
(2.8) %
|
Liabilities and
shareholders' equity:
|
|
|
|
|
|
|
Policy
liabilities
|
|
$
86,028
|
|
$
92,586
|
|
(7.1) %
|
Notes payable and lease
obligations
|
|
6,961
|
|
7,518
|
|
(7.4)
|
Other
liabilities
|
|
9,453
|
|
8,665
|
|
9.1
|
Shareholders'
equity
|
|
22,669
|
|
19,946
|
|
13.7
|
Total liabilities and
shareholders' equity
|
|
$ 125,111
|
|
$ 128,715
|
|
(2.8) %
|
Shares outstanding at
end of period (000)
|
|
586,897
|
|
623,868
|
|
(5.9) %
|
|
All relevant prior-year
amounts have been adjusted for the adoption of accounting guidance
on January 1, 2023 related to accounting for long-duration
insurance contracts.
|
NON-U.S. GAAP FINANCIAL MEASURES
This document includes references to the Company's financial
performance measures which are not calculated in accordance with
United States generally accepted
accounting principles (U.S. GAAP) (non-U.S. GAAP). The financial
measures exclude items that the Company believes may obscure the
underlying fundamentals and trends in insurance operations because
they tend to be driven by general economic conditions and events or
related to infrequent activities not directly associated with
insurance operations.
Due to the size of Aflac Japan, where the functional currency is
the Japanese yen, fluctuations in the yen/dollar exchange rate can
have a significant effect on reported results. In periods when the
yen weakens, translating yen into dollars results in fewer dollars
being reported. When the yen strengthens, translating yen into
dollars results in more dollars being reported. Consequently, yen
weakening has the effect of suppressing current period results in
relation to the comparable prior period, while yen strengthening
has the effect of magnifying current period results in relation to
the comparable prior period. A significant portion of the Company's
business is conducted in yen and never converted into dollars but
translated into dollars for U.S. GAAP reporting purposes, which
results in foreign currency impact to earnings, cash flows and book
value on a U.S. GAAP basis. Management evaluates the Company's
financial performance both including and excluding the impact of
foreign currency translation to monitor, respectively, cumulative
currency impacts and the currency-neutral operating performance
over time. The average yen/dollar exchange rate is based on the
published MUFG Bank, Ltd. telegraphic transfer middle rate
(TTM).
The company defines the non-U.S. GAAP financial measures
included in this earnings release as follows:
- Adjusted earnings are adjusted revenues less benefits and
adjusted expenses. Adjusted earnings per share (basic or diluted)
are the adjusted earnings for the period divided by the weighted
average outstanding shares (basic or diluted) for the period
presented. The adjustments to both revenues and expenses account
for certain items that cannot be predicted or that are outside
management's control. Adjusted revenues are U.S. GAAP total
revenues excluding adjusted net investment gains and losses.
Adjusted expenses are U.S. GAAP total acquisition and operating
expenses including the impact of interest cash flows from
derivatives associated with notes payable but excluding any
nonrecurring or other items not associated with the normal course
of the Company's insurance operations and that do not reflect the
Company's underlying business performance. Management uses adjusted
earnings and adjusted earnings per diluted share to evaluate the
financial performance of the Company's insurance operations on a
consolidated basis and believes that a presentation of these
financial measures is vitally important to an understanding of the
underlying profitability drivers and trends of the Company's
insurance business. The most comparable U.S. GAAP financial
measures for adjusted earnings and adjusted earnings per share
(basic or diluted) are net earnings and net earnings per share,
respectively.
- Adjusted earnings excluding current period foreign currency
impact are computed using the average foreign currency exchange
rate for the comparable prior-year period, which eliminates
fluctuations driven solely by foreign currency exchange rate
changes. Adjusted earnings per diluted share excluding current
period foreign currency impact is adjusted earnings excluding
current period foreign currency impact divided by the weighted
average outstanding diluted shares for the period presented. The
Company considers adjusted earnings excluding current period
foreign currency impact and adjusted earnings per diluted share
excluding current period foreign currency impact important because
a significant portion of the Company's business is conducted in
Japan and foreign exchange rates
are outside management's control; therefore, the Company believes
it is important to understand the impact of translating foreign
currency (primarily Japanese yen) into U.S. dollars. The most
comparable U.S. GAAP financial measures for adjusted earnings
excluding current period foreign currency impact and adjusted
earnings per diluted share excluding current period foreign
currency impact are net earnings and net earnings per share,
respectively.
- Adjusted return on equity is adjusted earnings divided by
average shareholders' equity, excluding accumulated other
comprehensive income (AOCI). Management uses adjusted return on
equity to evaluate the financial performance of the Company's
insurance operations on a consolidated basis and believes that a
presentation of this financial measure is vitally important to an
understanding of the underlying profitability drivers and trends of
the Company's insurance business. The Company considers adjusted
return on equity important as it excludes components of AOCI, which
fluctuate due to market movements that are outside management's
control. The most comparable U.S. GAAP financial measure for
adjusted return on equity is return on average equity (ROE) as
determined using net earnings and average total shareholders'
equity.
- Adjusted return on equity excluding foreign currency impact is
adjusted earnings excluding the current period foreign currency
impact divided by average shareholders' equity, excluding AOCI. The
Company considers adjusted return on equity excluding foreign
currency impact important as it excludes changes in foreign
currency and components of AOCI, which fluctuate due to market
movements that are outside management's control. The most
comparable U.S. GAAP financial measure for adjusted return on
equity excluding foreign currency impact is ROE as determined using
net earnings and average total shareholders' equity.
- Amortized hedge costs/income represent costs/income incurred or
recognized as a result of using foreign currency derivatives to
hedge certain foreign exchange risks in the Company's Japan segment or in Corporate and other. These
amortized hedge costs/ income are estimated at the inception of the
derivatives based on the specific terms of each contract and are
recognized on a straight-line basis over the term of the hedge. The
Company believes that amortized hedge costs/income measure the
periodic currency risk management costs/income related to hedging
certain foreign currency exchange risks and are an important
component of net investment income. There is no comparable U.S.
GAAP financial measure for amortized hedge costs/ income.
- Adjusted book value is the U.S. GAAP book value (representing
total shareholders' equity), less AOCI as recorded on the U.S. GAAP
balance sheet. Adjusted book value per common share is adjusted
book value at the period end divided by the ending outstanding
common shares for the period presented. The Company considers
adjusted book value and adjusted book value per common share
important as they exclude AOCI, which fluctuates due to market
movements that are outside management's control. The most
comparable U.S. GAAP financial measures for adjusted book value and
adjusted book value per common share are total book value and total
book value per common share, respectively.
- Adjusted book value including unrealized foreign currency
translation gains and losses is adjusted book value plus unrealized
foreign currency translation gains and losses. Adjusted book value
including unrealized foreign currency translation gains and losses
per common share is adjusted book value plus unrealized foreign
currency translation gains and losses at the period end divided by
the ending outstanding common shares for the period presented. The
Company considers adjusted book value including unrealized foreign
currency translation gains and losses, and its related per share
financial measure, important as they exclude certain components of
AOCI, which fluctuate due to market movements that are outside
management's control; however, it includes the impact of foreign
currency as a result of the significance of Aflac's Japan operation. The most comparable U.S. GAAP
financial measures for adjusted book value including unrealized
foreign currency translation gains and losses and adjusted book
value including unrealized foreign currency translation gains and
losses per common share are total book value and total book value
per common share, respectively.
- Adjusted net investment income is net investment income
adjusted for i) amortized hedge cost/income related to foreign
currency exposure management strategies and certain derivative
activity, and ii) net interest cash flows from foreign currency and
interest rate derivatives associated with certain investment
strategies, which are reclassified from net investment gains and
losses to net investment income. The Company considers adjusted net
investment income important because it provides a more
comprehensive understanding of the costs and income associated with
the Company's investments and related hedging strategies. The most
comparable U.S. GAAP financial measure for adjusted net investment
income is net investment income.
- Adjusted net investment gains and losses are net investment
gains and losses adjusted for i) amortized hedge cost/income
related to foreign currency exposure management strategies and
certain derivative activity, ii) net interest cash flows from
foreign currency and interest rate derivatives associated with
certain investment strategies, which are both reclassified to net
investment income, and iii) the impact of interest cash flows from
derivatives associated with notes payable, which is reclassified to
interest expense as a component of total adjusted expenses. The
Company considers adjusted net investment gains and losses
important as it represents the remainder amount that is considered
outside management's control, while excluding the components that
are within management's control and are accordingly reclassified to
net investment income and interest expense. The most comparable
U.S. GAAP financial measure for adjusted net investment gains and
losses is net investment gains and losses.
RECONCILIATION OF
NET EARNINGS TO ADJUSTED EARNINGS
|
(UNAUDITED – IN
MILLIONS, EXCEPT FOR PER-SHARE AMOUNTS)
|
|
|
|
|
|
|
|
THREE MONTHS ENDED
SEPTEMBER 30,
|
|
2023
|
|
2022
|
|
% Change
|
|
|
|
|
|
|
|
Net earnings
|
|
$ 1,569
|
|
$
1,781
|
|
(11.9) %
|
|
|
|
|
|
|
|
Items impacting net
earnings:
|
|
|
|
|
|
|
Adjusted net
investment (gains) losses
|
|
(504)
|
|
(222)
|
|
|
Other and
non-recurring (income) loss
|
|
(3)
|
|
(1)
|
|
|
Income tax (benefit)
expense on items excluded
from adjusted earnings 1
|
|
33
|
|
(648)
|
|
|
|
|
|
|
|
|
|
Adjusted
earnings
|
|
1,095
|
|
910
|
|
20.3 %
|
Current period foreign
currency impact 2
|
|
33
|
|
N/A
|
|
|
Adjusted earnings
excluding current period foreign
currency impact 3
|
|
$ 1,128
|
|
$ 910
|
|
24.0 %
|
|
|
|
|
|
|
|
Net earnings per
diluted share
|
|
$
2.64
|
|
$ 2.82
|
|
(6.4) %
|
|
|
|
|
|
|
|
Items impacting net
earnings:
|
|
|
|
|
|
|
Adjusted net
investment (gains) losses
|
|
(0.85)
|
|
(0.35)
|
|
|
Other and
non-recurring (income) loss
|
|
(0.01)
|
|
—
|
|
|
Income tax (benefit)
expense on items excluded
from adjusted earnings 1
|
|
0.06
|
|
(1.03)
|
|
|
|
|
|
|
|
|
|
Adjusted earnings per
diluted share
|
|
1.84
|
|
1.44
|
|
27.8 %
|
Current period foreign
currency impact 2
|
|
0.06
|
|
N/A
|
|
|
Adjusted earnings per
diluted share excluding
current period foreign currency impact
3
|
|
$
1.90
|
|
$ 1.44
|
|
31.9 %
|
|
|
All relevant prior-year
amounts have been adjusted for the adoption of accounting guidance
on January 1, 2023 related to accounting for long-duration
insurance contracts.
|
|
|
1
|
Primarily reflects
release of $695 million in deferred taxes in the third quarter of
2022.
|
2
|
Prior period foreign
currency impact reflected as "N/A" to isolate change for current
period only.
|
3
|
Amounts excluding
current period foreign currency impact are computed using the
average foreign currency exchange rate for the comparable
prior-year period, which eliminates fluctuations driven solely by
foreign currency exchange rate changes.
|
RECONCILIATION OF
NET EARNINGS TO ADJUSTED EARNINGS
|
(UNAUDITED – IN
MILLIONS, EXCEPT FOR PER-SHARE AMOUNTS)
|
|
|
|
|
|
|
|
NINE MONTHS ENDED
SEPTEMBER 30,
|
|
2023
|
|
2022
|
|
% Change
|
|
|
|
|
|
|
|
Net earnings
|
|
$
4,391
|
|
$
4,222
|
|
4.0 %
|
|
|
|
|
|
|
|
Items impacting net
earnings:
|
|
|
|
|
|
|
Adjusted net
investment (gains) losses
|
|
(1,363)
|
|
(923)
|
|
|
Other and
non-recurring (income) loss
|
|
(38)
|
|
(1)
|
|
|
Income tax (benefit)
expense on items excluded
from adjusted earnings 1
|
|
12
|
|
(501)
|
|
|
|
|
|
|
|
|
|
Adjusted
earnings
|
|
3,001
|
|
2,797
|
|
7.3 %
|
Current period foreign
currency impact 2
|
|
100
|
|
N/A
|
|
|
Adjusted earnings
excluding current period foreign
currency impact 3
|
|
$
3,101
|
|
$
2,797
|
|
10.9 %
|
|
|
|
|
|
|
|
Net earnings per
diluted share
|
|
$
7.28
|
|
$
6.57
|
|
10.8 %
|
|
|
|
|
|
|
|
Items impacting net
earnings:
|
|
|
|
|
|
|
Adjusted net
investment (gains) losses
|
|
(2.26)
|
|
(1.44)
|
|
|
Other and
non-recurring (income) loss
|
|
(0.06)
|
|
—
|
|
|
Income tax (benefit)
expense on items excluded
from adjusted earnings 1
|
|
0.02
|
|
(0.78)
|
|
|
|
|
|
|
|
|
|
Adjusted earnings per
diluted share
|
|
4.97
|
|
4.35
|
|
14.3 %
|
Current period foreign
currency impact 2
|
|
0.17
|
|
N/A
|
|
|
Adjusted earnings
excluding current period foreign
currency impact 3
|
|
$
5.14
|
|
$
4.35
|
|
18.2 %
|
|
All relevant prior-year
amounts have been adjusted for the adoption of accounting guidance
on January 1, 2023 related to accounting for long-duration
insurance contracts.
|
|
|
1
|
Primarily reflects
release of $695 million in deferred taxes in the third quarter of
2022.
|
2
|
Prior period foreign
currency impact reflected as "N/A" to isolate change for current
period only.
|
3
|
Amounts excluding
current period foreign currency impact are computed using the
average foreign currency exchange rate for the comparable
prior-year period, which eliminates fluctuations driven solely by
foreign currency exchange rate changes.
|
RECONCILIATION OF
NET INVESTMENT (GAINS) LOSSES TO ADJUSTED NET INVESTMENT (GAINS)
LOSSES
|
(UNAUDITED – IN
MILLIONS)
|
|
|
|
|
|
|
|
THREE MONTHS ENDED
SEPTEMBER 30,
|
|
2023
|
|
2022
|
|
% Change
|
|
|
|
|
|
|
|
Net investment (gains)
losses
|
|
$
(423)
|
|
$
(199)
|
|
112.6 %
|
|
|
|
|
|
|
|
Items impacting net
investment (gains) losses:
|
|
|
|
|
|
|
Amortized hedge
costs
|
|
(26)
|
|
(28)
|
|
|
Amortized hedge
income
|
|
25
|
|
19
|
|
|
Net interest cash
flows from derivatives associated
with certain investment
strategies
|
|
(88)
|
|
(26)
|
|
|
Interest rate
component of the change in fair value of foreign
currency swaps on notes
payable1
|
|
8
|
|
13
|
|
|
|
|
|
|
|
|
|
Adjusted net investment
(gains) losses
|
|
$
(504)
|
|
$
(222)
|
|
127.0 %
|
|
|
1
|
Amounts are included
with interest expenses that are a component of adjusted
expenses.
|
RECONCILIATION OF
NET INVESTMENT INCOME TO ADJUSTED NET INVESTMENT
INCOME
|
(UNAUDITED – IN
MILLIONS)
|
|
|
|
|
|
|
|
THREE MONTHS ENDED
SEPTEMBER 30,
|
|
2023
|
|
2022
|
|
% Change
|
|
|
|
|
|
|
|
Net investment
income
|
|
$
1,004
|
|
$
920
|
|
9.1 %
|
|
|
|
|
|
|
|
Items impacting net
investment income:
|
|
|
|
|
|
|
Amortized hedge
costs
|
|
(26)
|
|
(28)
|
|
|
Amortized hedge
income
|
|
25
|
|
19
|
|
|
Net interest cash
flows from derivatives associated
with certain investment
strategies
|
|
(88)
|
|
(26)
|
|
|
|
|
|
|
|
|
|
Adjusted net investment
income
|
|
$
915
|
|
$
885
|
|
3.4 %
|
RECONCILIATION OF
NET INVESTMENT (GAINS) LOSSES TO ADJUSTED NET INVESTMENT (GAINS)
LOSSES
|
(UNAUDITED – IN
MILLIONS)
|
|
|
|
|
|
|
|
NINE MONTHS ENDED
SEPTEMBER 30,
|
|
2023
|
|
2022
|
|
% Change
|
|
|
|
|
|
|
|
Net investment (gains)
losses
|
|
$ (1,101)
|
|
$
(885)
|
|
24.4 %
|
|
|
|
|
|
|
|
Items impacting net
investment (gains) losses:
|
|
|
|
|
|
|
Amortized hedge
costs
|
|
(148)
|
|
(84)
|
|
|
Amortized hedge
income
|
|
92
|
|
44
|
|
|
Net interest cash
flows from derivatives associated
with certain investment
strategies
|
|
(239)
|
|
(36)
|
|
|
Interest rate
component of the change in fair value of foreign
currency swaps on notes
payable1
|
|
32
|
|
38
|
|
|
|
|
|
|
|
|
|
Adjusted net investment
(gains) losses
|
|
$ (1,363)
|
|
$
(923)
|
|
47.7 %
|
|
|
1
|
Amounts are included
with interest expenses that are a component of adjusted
expenses.
|
RECONCILIATION OF
NET INVESTMENT INCOME TO ADJUSTED NET INVESTMENT
INCOME
|
(UNAUDITED – IN
MILLIONS)
|
|
|
|
|
|
|
|
NINE MONTHS ENDED
SEPTEMBER 30,
|
|
2023
|
|
2022
|
|
% Change
|
|
|
|
|
|
|
|
Net investment
income
|
|
$
2,946
|
|
$
2,760
|
|
6.7 %
|
|
|
|
|
|
|
|
Items impacting net
investment income:
|
|
|
|
|
|
|
Amortized hedge
costs
|
|
(148)
|
|
(84)
|
|
|
Amortized hedge
income
|
|
92
|
|
44
|
|
|
Net interest cash
flows from derivatives associated
with certain investment
strategies
|
|
(239)
|
|
(36)
|
|
|
|
|
|
|
|
|
|
Adjusted net investment
income
|
|
$
2,651
|
|
$
2,684
|
|
(1.2) %
|
RECONCILIATION OF
U.S. GAAP BOOK VALUE TO ADJUSTED BOOK VALUE
|
(UNAUDITED - IN
MILLIONS, EXCEPT FOR SHARE AND PER-SHARE AMOUNTS)
|
|
|
|
|
|
|
|
SEPTEMBER
30,
|
|
2023
|
|
2022
|
|
%
Change
|
U.S. GAAP book
value
|
|
$
22,669
|
|
$
19,946
|
|
|
Less:
|
|
|
|
|
|
|
Unrealized foreign
currency translation gains (losses)
|
|
(4,484)
|
|
(4,374)
|
|
|
Unrealized gains
(losses) on securities and derivatives
|
|
(427)
|
|
1,102
|
|
|
Effect of changes in
discount rate assumptions
|
|
(866)
|
|
(4,075)
|
|
|
Pension liability
adjustment
|
|
17
|
|
(158)
|
|
|
Total AOCI
|
|
(5,760)
|
|
(7,505)
|
|
|
Adjusted book
value
|
|
$
28,429
|
|
$
27,451
|
|
|
Add:
|
|
|
|
|
|
|
Unrealized foreign
currency translation gains (losses)
|
|
(4,484)
|
|
(4,374)
|
|
|
Adjusted book value
including unrealized foreign currency
translation gains (losses)
|
|
$
23,945
|
|
$
23,077
|
|
|
|
|
|
|
|
|
|
Number of outstanding
shares at end of period (000)
|
|
586,897
|
|
623,868
|
|
|
|
|
|
|
|
|
|
U.S. GAAP book value
per common share
|
|
$
38.63
|
|
$
31.97
|
|
20.8 %
|
Less:
|
|
|
|
|
|
|
Unrealized foreign
currency translation gains (losses)
per common share
|
|
(7.64)
|
|
(7.01)
|
|
|
Unrealized gains
(losses) on securities and derivatives
per common share
|
|
(0.73)
|
|
1.77
|
|
|
Effect of changes in
discount rate assumptions
per common share
|
|
(1.48)
|
|
(6.53)
|
|
|
Pension liability
adjustment per common share
|
|
0.03
|
|
(0.25)
|
|
|
Total AOCI per common
share
|
|
(9.81)
|
|
(12.03)
|
|
|
Adjusted book value per
common share
|
|
$
48.44
|
|
$
44.00
|
|
10.1 %
|
Add:
|
|
|
|
|
|
|
Unrealized foreign
currency translation gains (losses)
per common share
|
|
(7.64)
|
|
(7.01)
|
|
|
Adjusted book value
including unrealized foreign currency
translation gains (losses) per common
share
|
|
$
40.80
|
|
$
36.99
|
|
10.3 %
|
|
All relevant prior-year
amounts have been adjusted for the adoption of accounting guidance
on January 1, 2023 related to accounting for long-duration
insurance contracts.
|
RECONCILIATION OF
U.S. GAAP RETURN ON EQUITY (ROE) TO ADJUSTED
ROE
|
(EXCLUDING IMPACT OF
FOREIGN CURRENCY)
|
|
|
|
|
|
THREE MONTHS ENDED
SEPTEMBER 30,
|
|
2023
|
|
2022
|
U.S. GAAP ROE - Net
earnings1
|
|
29.1 %
|
|
36.1 %
|
Impact of excluding
unrealized foreign currency translation gains (losses)
|
|
(4.5)
|
|
(5.1)
|
Impact of excluding
unrealized gains (losses) on securities and derivatives
|
|
0.8
|
|
2.7
|
Impact of excluding
effect of changes in discount rate assumptions
|
|
(3.1)
|
|
(7.1)
|
Impact of excluding
pension liability adjustment
|
|
—
|
|
(0.2)
|
Impact of excluding
AOCI
|
|
(6.8)
|
|
(9.7)
|
U.S. GAAP ROE - less
AOCI
|
|
22.3
|
|
26.4
|
Differences between
adjusted earnings and net earnings2
|
|
(6.7)
|
|
(12.9)
|
Adjusted ROE -
reported
|
|
15.6
|
|
13.5
|
Less: Impact of foreign
currency3
|
|
(0.5)
|
|
N/A
|
Adjusted ROE, excluding
impact of foreign currency
|
|
16.1
|
|
13.5
|
|
All relevant prior-year
amounts have been adjusted for the adoption of accounting guidance
on January 1, 2023 related to accounting for long-duration
insurance contracts.
|
|
|
1
|
U.S. GAAP ROE is
calculated by dividing net earnings (annualized) by average
shareholders' equity.
|
2
|
See separate
reconciliation of net income to adjusted earnings.
|
3
|
Impact of foreign
currency is calculated by restating all foreign currency components
of the income statement to the weighted average foreign currency
exchange rate for the comparable prior year period. The impact is
the difference of the restated adjusted earnings compared to
reported adjusted earnings. For comparative purposes, only current
period income is restated using the weighted average prior period
exchange rate, which eliminates the foreign currency impact for the
current period. This allows for equal comparison of this financial
measure.
|
RECONCILIATION OF
U.S. GAAP RETURN ON EQUITY (ROE) TO ADJUSTED
ROE
|
(EXCLUDING IMPACT OF
FOREIGN CURRENCY)
|
|
|
|
|
|
NINE MONTHS ENDED
SEPTEMBER 30,
|
|
2023
|
|
2022
|
U.S. GAAP ROE - Net
earnings1
|
|
27.4 %
|
|
30.4 %
|
Impact of excluding
unrealized foreign currency translation gains (losses)
|
|
(4.0)
|
|
(3.7)
|
Impact of excluding
unrealized gains (losses) on securities and derivatives
|
|
(0.6)
|
|
6.2
|
Impact of excluding
effect of changes in discount rate assumptions
|
|
(1.5)
|
|
(11.5)
|
Impact of excluding
pension liability adjustment
|
|
—
|
|
(0.2)
|
Impact of excluding
AOCI
|
|
(6.1)
|
|
(9.2)
|
U.S. GAAP ROE - less
AOCI
|
|
21.3
|
|
21.3
|
Differences between
adjusted earnings and net earnings2
|
|
(6.7)
|
|
(7.2)
|
Adjusted ROE -
reported
|
|
14.6
|
|
14.1
|
Less: Impact of foreign
currency3
|
|
(0.5)
|
|
N/A
|
Adjusted ROE, excluding
impact of foreign currency
|
|
15.0
|
|
14.1
|
|
All relevant prior-year
amounts have been adjusted for the adoption of accounting guidance
on January 1, 2023 related to accounting for long-duration
insurance contracts.
|
|
|
1
|
U.S. GAAP ROE is
calculated by dividing net earnings (annualized) by average
shareholders' equity.
|
2
|
See separate
reconciliation of net income to adjusted earnings.
|
3
|
Impact of foreign
currency is calculated by restating all foreign currency components
of the income statement to the weighted average foreign currency
exchange rate for the comparable prior year period. The impact is
the difference of the restated adjusted earnings compared to
reported adjusted earnings. For comparative purposes, only current
period income is restated using the weighted average prior period
exchange rate, which eliminates the foreign currency impact for the
current period. This allows for equal comparison of this financial
measure.
|
EFFECT OF FOREIGN
CURRENCY ON ADJUSTED RESULTS1
|
(SELECTED PERCENTAGE
CHANGES, UNAUDITED)
|
|
THREE MONTHS ENDED
SEPTEMBER 30, 2023
|
|
Including
Currency
Changes
|
|
Excluding
Currency
Changes2
|
Net earned
premiums3
|
|
(1.7) %
|
|
2.4 %
|
Adjusted net investment
income4
|
|
3.4
|
|
5.4
|
Total benefits and
expenses
|
|
(6.7)
|
|
(3.0)
|
Adjusted
earnings
|
|
20.3
|
|
24.0
|
Adjusted earnings per
diluted share
|
|
27.8
|
|
31.9
|
|
All relevant prior-year
amounts have been adjusted for the adoption of accounting guidance
on January 1, 2023 related to accounting for long-duration
insurance contracts.
|
|
|
1
|
Refer to previously
defined adjusted earnings and adjusted earnings per diluted
share.
|
2
|
Amounts excluding
currency changes were determined using the same foreign currency
exchange rate for the current period as the comparable period in
the prior year, which eliminates dollar-based fluctuations driven
solely from currency rate changes.
|
3
|
Net of
reinsurance
|
4
|
Refer to previously
defined adjusted net investment income.
|
EFFECT OF FOREIGN
CURRENCY ON ADJUSTED RESULTS1
|
(SELECTED PERCENTAGE
CHANGES, UNAUDITED)
|
|
NINE MONTHS ENDED
SEPTEMBER 30, 2023
|
|
Including
Currency
Changes
|
|
Excluding
Currency
Changes2
|
Net earned
premiums3
|
|
(5.6) %
|
|
(0.6) %
|
Adjusted net investment
income4
|
|
(1.2)
|
|
1.3
|
Total benefits and
expenses
|
|
(8.0)
|
|
(3.2)
|
Adjusted
earnings
|
|
7.3
|
|
10.9
|
Adjusted earnings per
diluted share
|
|
14.3
|
|
18.2
|
|
All relevant prior-year
amounts have been adjusted for the adoption of accounting guidance
on January 1, 2023 related to accounting for long-duration
insurance contracts.
|
|
|
1
|
Refer to previously
defined adjusted earnings and adjusted earnings per diluted
share.
|
2
|
Amounts excluding
currency changes were determined using the same foreign currency
exchange rate for the current period as the comparable period in
the prior year, which eliminates dollar-based fluctuations driven
solely from currency rate changes.
|
3
|
Net of
reinsurance
|
4
|
Refer to previously
defined adjusted net investment income.
|
FORWARD-LOOKING INFORMATION
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 provisions. This document contains cautionary
statements identifying important factors that could cause actual
results to differ materially from those projected herein, and in
any other statements made by company officials in communications
with the financial community and contained in documents filed with
the Securities and Exchange Commission (SEC). Forward-looking
statements are not based on historical information and relate to
future operations, strategies, financial results or other
developments. Furthermore, forward-looking information is subject
to numerous assumptions, risks and uncertainties. In particular,
statements containing words such as "expect," "anticipate,"
"believe," "goal," "objective," "may," "should," "estimate,"
"intends," "projects," "will," "assumes," "potential," "target,"
"outlook" or similar words as well as specific projections of
future results, generally qualify as forward-looking. Aflac
undertakes no obligation to update such forward-looking
statements.
The company cautions readers that the following factors, in
addition to other factors mentioned from time to time, could cause
actual results to differ materially from those contemplated by the
forward-looking statements:
- difficult conditions in global capital markets and the
economy, including inflation and the continued effects caused by
COVID-19
- defaults and credit downgrades of investments
- global fluctuations in interest rates and exposure to
significant interest rate risk
- concentration of business in Japan
- limited availability of acceptable yen-denominated
investments
- foreign currency fluctuations in the yen/dollar exchange
rate
- differing interpretations applied to investment
valuations
- significant valuation judgments in determination of expected
credit losses recorded on the Company's investments
- decreases in the Company's financial strength or debt
ratings
- decline in creditworthiness of other financial
institutions
- concentration of the Company's investments in any particular
single-issuer or sector
- major public health issues, including COVID-19 and any
resulting or coincidental economic effects, on the Company's
business and financial results
- the Company's ability to attract and retain qualified sales
associates, brokers, employees, and distribution partners
- deviations in actual experience from pricing and reserving
assumptions
- ability to continue to develop and implement improvements in
information technology systems and on successful execution of
revenue growth and expense management initiatives
- interruption in telecommunication, information technology
and other operational systems, or a failure to maintain the
security, confidentiality or privacy of sensitive data residing on
such systems
- subsidiaries' ability to pay dividends to the Parent
Company
- inherent limitations to risk management policies and
procedures
- operational risks of third party vendors
- tax rates applicable to the Company may change
- failure to comply with restrictions on policyholder privacy
and information security
- extensive regulation and changes in law or regulation by
governmental authorities
- competitive environment and ability to anticipate and
respond to market trends
- catastrophic events, including, but not limited to, as a
result of climate change, epidemics, pandemics (such as COVID-19),
tornadoes, hurricanes, earthquakes, tsunamis, war or other military
action, terrorism or other acts of violence, and damage incidental
to such events
- ability to protect the Aflac brand and the Company's
reputation
- ability to effectively manage key executive
succession
- changes in accounting standards
- level and outcome of litigation
- allegations or determinations of worker misclassification in
the United States
Analyst and investor contact - David A.
Young, 706.596.3264; 800.235.2667 or dyoung@aflac.com
Media contact - Ines Gutzmer,
762.207.7601 or igutzmer@aflac.com
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SOURCE Aflac Incorporated