To understand Aflac (NYSE:AFL), the first thing you have to realize is that the company does much more than just offer supplemental insurance in the U.S. market. Aflac's primary business is in Japan, where it serves a larger market and produces more of its revenue and profit than its domestic operations do. Coming into Tuesday's fourth-quarter financial report, Aflac investors wanted to see continuing signs of solid growth in revenue and earnings, but the insurer didn't produce the growth in operating earnings that it had hoped to achieve. Let's look more closely at Aflac to see what its results say about the company going forward.

Aflac duck mascot in Duckprints event.

Image source: Aflac.

Aflac posts mixed results

Aflac's fourth-quarter results showed the impact of the different conditions the insurer faces in its worldwide operations. Total revenue jumped 12% to $5.96 billion, which was nearly double the growth rate that most investors were expecting to see in Aflac's top line. Net earnings, however, were up only 3% from year-ago levels. Using Aflac's favored operating earnings measure and adjusting for currency impacts, the insurer's bottom-line figure of $1.46 per share was $0.17 less than the consensus forecast among those following the stock.

Taking a closer look at Aflac's results, the company once again managed to get a boost from the stronger yen. It only took 109.10 yen to translate to $1 in the fourth quarter of 2016, compared to 121.54 yen in the year-ago quarter. That 11% advantage was critical in helping to support Aflac's performance, working out to $0.08 per share of additional earnings. For the full year, the weak dollar had a $0.34-per-share upward influence on the bottom line at Aflac.

In the Japan segment, Aflac ran into some challenges when you measure its results in yen. Premium income was up 0.2% from the year-ago period, but net investment income was down almost 8%, pushing total revenue down by about 1%. Pretax operating earnings fell 14% in yen terms. The anticipated scaling back of first-sector child-endowment policies led to that division suffering a 60% drop in sales, but third-sector sales of cancer, medical, and income support products were up slightly by 2%.

Aflac's U.S. unit saw slightly better results. Premium income was up 2.2% in the quarter, and net investment income climbed 4%, pushing total revenue up by 2.6% from the year-ago period. Pretax operating earnings jumped by more than 10%, although the company suffered some weakness in new premium sales, which fell slightly during the quarter.

CEO Daniel Amos was happy overall with Aflac's results. "While we were disappointed with sales results for Aflac U.S. in 2016," Amos noted, "I want to reiterate that we believe the strategy for growth we adopted in both our career and broker channels is the right one as we look ahead." The CEO believes that it can produce 4% to 6% annual growth in third-sector Japanese product sales and 3% to 5% growth in the U.S. market.

Can Aflac do even better in 2017?

Aflac is also optimistic about its immediate future. As Amos pointed out, even the low interest rate environment in Japan hasn't prevented Aflac from reporting good results from its operations in the island nation. Moreover, Aflac's balance sheet remains sound, and the company is working toward bringing its foreign profits home for reinvestment or return to shareholders through buybacks and dividends.

Indeed, Aflac still thinks that 2017 will be good on the earnings front. The insurer reiterated its December guidance in predicting operating earnings of between $6.40 and $6.65 per share. The only caveat is that foreign currency movement could result in a missed forecast. But Aflac appears to be comfortable with its ability to grow earnings both through organic business efforts and by reducing the outstanding share count through stock buybacks -- thereby boosting per-share metrics because of there being fewer shares.

Aflac investors didn't react immediately to the results, keeping the stock unchanged in after-hours trading following the announcement. Over time, though, Aflac appears to have the momentum to keep producing solid performance in 2017 and beyond.