Aflac Q2 2025: Investment Losses Skew GAAP Earnings, Core Operations Stable

Aflac, a name familiar from its ubiquitous duck mascot, is a major player in the supplemental insurance market, providing policies that help cover expenses and income gaps not handled by major medical insurance. With a massive presence in both Japan and the United States, the company's financial health is a key indicator for the insurance sector. We're diving into their latest quarterly 10-Q filing for the second quarter ended June 30, 2025, to see what's driving their performance.

At first glance, the numbers might raise an eyebrow. Aflac reported net earnings of $599 million, a steep decline from the $1.76 billion earned in the same quarter of 2024. However, this headline figure tells an incomplete story, heavily influenced by the swings of the investment market.

A Tale of Two Earnings Figures

The significant drop in net earnings is primarily due to a swing of over $1.1 billion in net investment gains and losses. Aflac posted a net investment loss of $421 million in Q2 2025, a stark contrast to the $696 million gain it enjoyed in Q2 2024.

To provide a clearer view of its core business performance, Aflac reports a non-GAAP (Generally Accepted Accounting Principles) measure called "adjusted earnings." This metric excludes volatile items like investment gains and losses. Looking at this figure, Aflac's performance appears much more stable:

• Adjusted Earnings: $957 million in Q2 2025, compared to $1.04 billion in Q2 2024.
• Adjusted Diluted EPS: $1.78 in Q2 2025, a slight dip from $1.83 in Q2 2024.

This indicates that while market fluctuations hit the bottom line hard, the fundamental insurance operations remained relatively resilient.

To better understand how Aflac generates revenue and where the money goes, the following flow diagram visualizes the company's income statement for the first six months of 2025.

Performance by Segment

Aflac's business is dominated by its two main segments: Aflac Japan and Aflac U.S.

Aflac Japan, the company's largest segment, saw its pretax adjusted earnings decrease to $790 million from $864 million in the prior year's quarter. In yen terms, the company cited lower income from floating-rate investments as a key factor. The fluctuating yen-to-dollar exchange rate also continues to be a major variable in their reported results.

Aflac U.S. presented a more stable picture. Pretax adjusted earnings edged up slightly to $388 million from $383 million in Q2 2024. The segment saw a 3.4% increase in net earned premiums, driven by growth in group life, disability, and consumer markets businesses. This growth was largely offset by higher claims, but the expanding premium base is a positive signal for the domestic operation.

Capital Returns Remain a Priority

Despite the volatile GAAP earnings, Aflac demonstrated continued confidence in its financial strength through robust shareholder returns.

• Dividends: The company increased its quarterly cash dividend to $0.58 per share, a 16% increase from the $0.50 paid in the same quarter last year.
• Share Repurchases: Aflac remains committed to its buyback program, spending $1.73 billion to repurchase its own stock in the first half of 2025. As of June 30, 2025, the company still had authorization to repurchase an additional 30.9 million shares.

The Bottom Line

While Aflac's headline net earnings were significantly impacted by investment market performance, its core insurance business shows resilience. The company's adjusted earnings provide a more stable view of its operational health, with the U.S. segment demonstrating steady growth. For investors, the key takeaway is the importance of looking beyond the GAAP net income to understand the underlying drivers of the business. Aflac's commitment to increasing dividends and buying back shares signals a strong, long-term outlook from management, even as it navigates a challenging investment environment.