The insurance company best known for its talking duck earned $832 million in the second quarter, a 17% increase over the prior-year period.

Aflac (NYSE:AFL) increased its earnings guidance for the full year after a stronger than anticipated launch of a new product in Japan, and continued gains in premiums in its domestic business lines.

Aflac's second quarter: By the numbers


Q2 2018

Q2 2017

Year-Over-Year Change

Total revenue

$5.6 billion

$5.4 billion


Benefits and claims

$3.0 billion

$3.0 billion


Total acquisition and operating expenses

$1.4 billion

$1.3 billion


Earnings before taxes

$1.1 billion

$1.0 billion


Net income

$832 milllion

$713 million


Diluted EPS




Data source: Aflac. Numbers may not add up perfectly due to rounding. EPS = earnings per share.

What happened this quarter?

  • Aflac Japan's premium income declined 1.7% compared to the year-ago when measured in Japanese yen, but increased 0.2% when measured in dollars because the U.S. dollar depreciated against the yen during the quarter. In all, favorable currency fluctuation added about $0.01 to its reported earnings per share this quarter.
  • Aflac Japan's "third sector" policies, which include profitable cancer, medical, and income support insurance, saw meaningful sales growth. The company said that sales increased 14% to $265 million on an annualized premium basis. In prepared remarks on the conference call, Aflac's chief executive officer, Daniel Amos, said that the business is supporting a new cancer product with TV ads and "the largest direct mail campaign we've ever done."
  • Aflac's smaller U.S. business reported a 2.7% increase in premium income in the second quarter compared to the year-ago period. A combination of higher net investment income generated by the company's investment portfolio and increased premium volume led to a 3% increase in pre-tax adjusted earnings for the domestic business.
  • A lower corporate tax rate helped drive a large increase in net income year over year. Net income grew by 16.7% year over year versus an 8.2% increase in pre-tax income, due to a lower corporate tax rate.

What management had to say

Aflac Japan's new cancer insurance policy is performing better than expected, thanks to its expanded distribution network that includes more than 20,000 post office locations in the island nation. Daniel Amos, Aflac's CEO, explained on the conference call that the "new cancer product launch marked the first introduction that we've had access to all 20,000-plus Japan post outlets at the same time."

Aflac logo

Image source: Aflac

He added that "the results there were bigger than we had anticipated. In fact this quarter reflected the highest production ever in Japan post in terms of a fee." In addition to post offices, Aflac Japan relies on more than 10,000 sales agencies, including 90% of banks in the country, to sell its policies. Cancer policies remain central to its Japanese business, as it had 15 million cancer policies in force, and 24 million total policies in force, at the end of 2017.

Management was upbeat about its ability to drive U.S. sales growth through the independent agent sales channel. "We are fortunate to have such a strong independent field force which is truly unique within our industry. These career sales agents are best positioned within the industry to reach and therefore succeed with the smaller employers and groups with fewer than 100 employees," Amos said. 

Looking ahead

Aflac increased its guidance for the full year on the back of successful sales efforts in the first half of the year. The company is now guiding for currency-neutral earnings in the range of $3.90 to $4.06 per diluted share, an increase from a previous range of $3.72 to $3.88 per share.

Share repurchases will likely continue to play a role in driving per-share earnings growth in excess of profit growth. The company anticipates share repurchases of $1.1 to $1.4 billion in 2018, implying that it could repurchase $500 million to $800 million of stock in the next two quarters after buying back $602 million of stock in the first half of the year.