Aflac, Inc. :AFL-US: Earnings Analysis: Q3, 2017 By the Numbers : November 8, 2017

Aflac, Inc. reports financial results for the quarter ended September 30, 2017.

We analyze the earnings along side the following peers of Aflac, Inc. – Unum Group, CNO Financial Group, Inc., Cigna Corporation, Assurant, Inc. and Principal Financial Group, Inc. (UNM-US, CNO-US, CI-US, AIZ-US and PFG-US) that have also reported for this period.


  • Summary numbers: Revenues of USD 5514 million, Net Earnings of USD 716 million.
  • Year-on-year change in operating cash flow of 13.03% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth from operating margin improvements as well as from unusual items

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income (See complete table at the end of this report):

2017-09-30 2017-06-30 2017-03-31 2016-12-31 2016-09-30
Relevant Numbers (Quarterly)
Revenues (mil) 5514 5437 5319 5969 5740
Revenue Growth (%YOY) -3.94 -0.98 -3.11 12.01 10.66
Earnings (mil) 716 713 592 751 629
Earnings Growth (%YOY) 13.83 30.11 -19.02 2.88 10.93
Net Margin (%) 12.99 13.11 11.13 12.58 10.96
EPS 1.8 1.79 1.47 1.83 1.53
Return on Equity (%) 3.29 3.41 2.9 3.47 2.77
Return on Assets (%) 2.11 2.12 1.8 2.19 1.76

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Market Share Versus Profits

Revenues History
Earnings History

AFL-US’s change in revenue this period compared to the same period last year of -3.94% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that AFL-US is holding onto its market share. Also, for comparison purposes, revenues changed by 1.42% and earnings by 0.42% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

Insurance companies sometimes tradeoff for improvements in premiums earned by relaxing standards in underwriting policies. A quick way to check against such activity is to compare the changes in loan loss provisions as well any chnages in the level of policy claims. If either of these checks point to a decline in the underwriting standards, it is quite possible that the company’s performance is a result of underwriting policy changes that could have a longer term impact compared to the shorter term pop in premiums earned.

Premiums Earned Percent History
Loss Ratio History

The company’s earnings have gone up year-on-year. But this growth has not come as a result of improvement in premiums earned as a percent of total revenues or any underwriting policy improvements in its operations – premiums earned as percent of revenues are currently at 84.29%, while the loan loss ratio is 81.09%. For comparison, these were 85.80% and 79.40% respectively in the immediate last period.

Premiums Earned Percent Versus Loss Ratio

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

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Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings

AFL-US’s change in operating cash flow of 13.03% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.


The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating margins after interest from 18.29% to 20.71% and (2) One-time items. The company’s pretax margins are now 19.50% compared to 16.78% for the same period last year.

EBIT Margin Versus PreTax Margin

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Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

Access our Ratings and Scores for Aflac, Inc.

Company Profile

Aflac, Inc. operates as a holding company, which engages in the provision of management services. It operates through the Aflac Japan and Aflac United States segments. The Aflac Japan segment offers life insurance, death benefits, and cash surrender values. The Aflac U.S. segment sells voluntary supplemental insurance products for people who already have major medical or primary insurance coverage. The company was founded by John Amos, Daniel Paul Amos, and William Amos on November 17, 1955 and is headquartered in Columbus, GA.

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