Aflac Q3 2026 Earnings: Portfolio Losses Weigh on GAAP Profit

Aflac (NYSE: AFL) reported Q3 2026 revenue of $3.27 billion, down 31.0% from $4.74 billion, while GAAP diluted EPS fell to $0.61 from $3.08. Net earnings declined to $303 million as portfolio repositioning generated substantial investment losses, while adjusted EPS slipped 2.4% to $2.43 and U.S. segment profitability improved despite weaker results in Japan.

Core Earnings Results

GAAP and adjusted results diverged sharply. Aflac moved from $275 million of net investment gains a year ago to $1.07 billion of net investment losses, an approximately $1.35 billion swing that accounted for most of the decline in reported revenue and net earnings.

Adjusted earnings still fell 8.5%, although adjusted EPS declined by a smaller 2.4% because the diluted share count was 6.3% lower. Adjusted earnings also included $453 million of reserve remeasurement gains. The weaker yen reduced adjusted EPS by $0.03; excluding the current-period currency effect, adjusted EPS was $2.46, down 1.2%.

Consolidated benefits and claims were nearly unchanged at $1.44 billion, while acquisition and operating expenses increased 1.7% to $1.33 billion. This indicates that the steep GAAP profit decline was driven primarily by investment results rather than a broad increase in consolidated insurance claims.

Business and Segment Performance

Aflac’s two main insurance operations moved in opposite directions. U.S. premium growth, lower benefits and lower expenses lifted segment earnings, while Japan’s profitability declined because of reinsurance effects and lower reserve remeasurement gains.

Aflac Japan

Japan’s premium decline reflected an external reinsurance transaction completed in the first quarter, an internal reinsurance transaction involving cancer insurance policies in the third quarter, and limited-pay products reaching paid-up status. Adjusted net investment income increased 3.7% in yen to ¥101.6 billion, supported by higher fixed-rate income and increased income on U.S. dollar-denominated assets after yen translation.

The investment-income increase was not enough to offset higher benefits. Japan’s benefit ratio rose 990 basis points to 49.2%, primarily because reserve remeasurement gains were lower than in the prior-year quarter following the unlocking of actuarial assumptions. The expense ratio also increased 140 basis points to 21.2%.

New annualized premium sales declined 4.0% to ¥18.8 billion. The comparison included elevated prior-year sales following the March 2025 launch of Miraito cancer insurance, partially offset by growth in Tsumitasu savings-type life insurance and Anshin Palette medical insurance.

Aflac U.S.

U.S. net earned premiums rose 3.3%, reflecting improved sales and persistency. Twelve-month rolling premium persistency increased to 79.7% from 79.0%, while quarterly sales grew 3.5% to $403 million, led by network dental and group life and disability products.

Pretax adjusted earnings increased 31.5% as the benefit ratio fell 490 basis points to 40.7% and the expense ratio declined 190 basis points to 37.0%. Management attributed the lower benefits partly to higher reserve remeasurement gains following actuarial assumption updates, alongside higher premiums and lower expenses.

Corporate and Other adjusted revenue increased 5.0% to $360 million, while pretax adjusted earnings rose 4.3% to $72 million. Higher reserve remeasurement gains and new reinsurance transactions helped earnings, but higher expenses and lower adjusted investment income limited the increase.

Portfolio Repositioning Widened the GAAP–Adjusted Earnings Gap

Aflac recorded $1.07 billion of net investment losses, compared with $275 million of gains in Q3 2025. The losses were primarily associated with the strategic repositioning of the investment portfolio and included $842 million from sales and redemptions, $146 million related to derivatives and foreign-currency activities, and $102 million of current expected credit losses. A $19 million increase in the fair value of equity securities provided a partial offset.

The adjusted earnings reconciliation excluded $1.03 billion of adjusted net investment losses, helping explain why adjusted earnings of $1.21 billion were substantially above GAAP net earnings of $303 million. GAAP earnings also included a $51 million, or $0.10 per share, tax valuation allowance related to deferred tax assets associated with capital-loss carryforwards.

The quarter therefore contained two distinct trends: underlying U.S. insurance profitability improved, but portfolio losses and weaker Japan results weighed on consolidated performance. Investors evaluating recurring operations will need to distinguish the investment-loss impact from the reserve remeasurement effects embedded in adjusted results.

Profitability, Capital and the Balance Sheet

Aflac returned $1.1 billion to shareholders during the quarter, consisting of $804 million of share repurchases and $305 million of dividends. Shares outstanding declined 5.7% year over year to 495.7 million, which helped limit the adjusted EPS decline relative to the reduction in adjusted earnings.

The board declared a fourth-quarter dividend of $0.61 per share, payable December 1, 2026, to shareholders of record on November 18. The declaration marked the company’s 44th consecutive year of dividend increases.

Shareholders’ equity increased 2.1% to $29.28 billion at September 30, while GAAP book value per share rose 8.3% to $59.08. Adjusted book value per share increased 1.7% to $54.21, but adjusted book value excluding foreign-currency remeasurement declined 6.4% to $40.73.

Reported equity remained heavily affected by accumulated other comprehensive income. It included a cumulative $12.3 billion increase from changes in discount-rate assumptions, a $5.0 billion unrealized loss on securities and derivatives, and a $4.9 billion foreign-currency translation loss. Total investments and cash declined 8.3% to $100.43 billion, and total assets fell 7.2% to $113.51 billion.

Aflac Japan also ceded approximately ¥500 billion of reserves on an FSA basis for cancer insurance policies to Aflac Re Bermuda. Because Aflac Re Bermuda is consolidated within Corporate and Other, management noted that the reinsurance strategy affected the distribution of reported results between Japan and Corporate and Other.

Recent Insider Transactions

The 10 latest transactions in the supplied Yahoo Finance data were all indirect sales by Japan Post Holdings, identified as a beneficial owner of more than 10% of a class of securities. The transactions occurred from September 29 through October 15, 2026, and had a combined reported value of approximately $29.7 million; this activity alone does not establish the seller’s view of Aflac’s outlook.

Risks for Investors to Monitor

• Investment and credit losses: Portfolio repositioning produced $842 million of realized losses from sales and redemptions, while current expected credit losses reached $102 million. Investment results can create substantial differences between GAAP and adjusted earnings.
• Japan profitability: Japan’s benefit ratio increased 990 basis points and its pretax adjusted margin fell 780 basis points. Reinsurance transactions, product payment status and reserve remeasurement all affected the comparison.
• Foreign-exchange pressure: The average yen-dollar exchange rate was 158.49, with the yen 6.8% weaker than a year earlier. Currency translation reduced adjusted EPS by $0.03 and contributed to lower dollar-reported Japan results.
• Sensitivity to actuarial assumption changes: Consolidated adjusted earnings benefited from $453 million of reserve remeasurement gains. The U.S. segment benefited from higher gains while Japan experienced lower gains, making segment margins sensitive to assumption-unlocking effects.

Summary

Aflac’s Q3 2026 results were shaped by a large gap between GAAP and adjusted performance. Strategic portfolio repositioning drove investment losses and the steep decline in reported profit, while adjusted EPS decreased modestly with support from reserve remeasurement gains and a lower share count. Operationally, improved U.S. premiums, benefits and expenses contrasted with weaker Japan margins, making investment-loss exposure, actuarial remeasurement effects, currency translation and Japan’s profitability the main areas to monitor.