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Aflac's (AFL) Q4 Earnings and Revenues Surpass Estimates

Zacks Equity Research

  Aflac Inc. ’s AFL fourth-quarter earnings per share of $1.02 beat the Zacks Consensus Estimate by 8.51% and also increased 27.5% year over year.

The company’s results largely reflect the impact of tax reform on the effective tax rate, overall strong net investment income and favorable benefit ratios.

Total revenues in the fourth quarter increased 1.1% year over year to $5.48 billion and beat the Zacks Consensus Estimate by 0.2%.

Annualized adjusted return on equity, excluding foreign currency impact, in the fourth quarter was 14.6%, up 150 basis points year over year.

Further, total acquisition and operating expenses climbed 4.3% year over year to $1.48 billion.

Aflac Incorporated Price, Consensus and EPS Surprise

Aflac Incorporated Price, Consensus and EPS Surprise | Aflac Incorporated Quote

Strong Segmental Results

Aflac Japan

Led by a 7.7% rise in net investment income to $602 million, total revenues inched up 0.5% year over year to $3.7 billion, offset by a 0.7% decline in premium income to $3.1 billion. Pre-tax operating earnings increased 6.8% from the prior-year quarter to $798 million.

Aflac U.S.

Total revenues increased 2.4% year over year to $1.6 billion, led by a 2.7% increase in premium income to $1.4 billion and 0.5% growth in net investment income to $183 million, driven by higher income from floating rate assets, partially offset by the drawdown of excess capital in the U.S. segment.

Pre-tax operating earnings from the U.S. segment were $274 million, down 4.9% year over year.

Share Repurchase Update

The company purchased 8.5 million shares worth $378 million during the fourth quarter.

The board of directors declared first-quarter dividend of 27 cents per share, payable on Mar 1, 2019 to shareholders of record at the close of business as of Feb 20, 2019.

Solid Financial Position

Total investments and cash as of Dec 31, 2018 were $126.2 billion, up 2.1% year over year.

At the end of the fourth quarter of 2018, total assets were $140.4 billion, up 2.3% year over year.

Shareholders' equity was $21.3 billion, as of Dec 31, 2018, up 3.4% year over year.

2019 Guidance

The company expects to achieve earnings per share in the range of $4.10-$4.30.

Aflac anticipates that in its Japan business, net earned premium of third sector and first sector protection products combined will grow in the 1-2% range. Sales are expected to decline in low-to-mid single digits.
Coming to the U.S. segment, Aflac anticipates growth in earned premium within 2-3% and stable sales improvement for the full year.

The company anticipates $1.3-$1.7 billion of share buyback in 2019.

Zacks Rank

Currently, Aflac has a Zacks Rank #2 (Buy).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here .

Performance of Other Insurers

Among the other players from the insurance industry that have reported fourth-quarter earnings so far, the bottom line of Reinsurance Group of America, Inc. RGA, MGIC Investment Corporation MTG and W.R. Berkley Corp. WRB beat the respective Zacks Consensus Estimate by 2.1%, 13.5% and 19.7%.

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