Aflac reports earnings hit, but Wall Street takes it in stride

While Aflac reports earning hit, Wall Street takes it in stride.

By Doug Bailey

Battered by a weak yen, higher interest rates, and post-pandemic conditions worldwide, Aflac Monday reported somewhat weaker than expected financial results, depending on whose consensus you consult, but Wall Street seemed to take it in stride.

Shares of Aflac, the nation’s largest supplier of supplemental insurance, have climbed more than 12% since the beginning of the year, while the S&P's 500 index dropped 19%. In trading Tuesday, shares hit $66.30, a climb of nearly 21% in the last 12 months.

The adjusted earnings per share of $1.15 for the third quarter ending Sept. 30, were short of the average analyst estimate of $1.22, and declined from $1.46 in Q2 and from $1.53 in the year-ago quarter.

Q3 revenue of $4.82 billion, exceeded the $4.58 billion consensus, but declined from $5.40 billion in Q2 and from $5.24 billion in Q3 2021.

Company execs bullish

Nevertheless, company executives were bullish on the company’s outlook and investors seemed to agree.

“As we communicated in the second quarter, we anticipated a sharp third quarter increase in COVID claims in Japan, and we experienced that increase,” Aflac Chairman and CEO Dan Amos said in a conference call with analysts on Tuesday. “We are now seeing more normalized COVID claims during the fourth quarter.”

Amos called the quarterly results “solid” despite the elevated COVID-19 claims.

“Overall, I am pleased with where we stand at the beginning of the fourth quarter,” he said. “We remain on track for another good year of financial results, and we expect continued sales momentum…”

Aflac’s U.S. market posted strong profit margins of 19.3%, and an 11.8% growth in sales for the quarter, and 15.2 percent in year-to-date growth.

Productivity improvement cited

“I am encouraged by the continued improvement in the productivity of our sales associates and brokers with the strength of both channels approaching pre-pandemic levels, as we enter what trends to be our strongest quarter of the year,” said Amos. “We are seeing success in our efforts to reengage better in sales associates. And at the same time, we are seeing strong growth through brokers. These results reflect continued adaptation of the pandemic conditions, growth in our core products and investments and build-out of our growth initiatives.”

Moreover, the company said it was well-poised and prepared should the country lapse into recession.

“Generally speaking, when you enter into weak economic conditions, you would find some weakness in loss ratios related to disability, short and long term,” said Fred Crawford, president and COO. “That has not traditionally been the case with our more voluntary sold, small business, short-term disability. Right now, we're not a company that is particularly exposed to the disability volatility that comes with a recession.”

Following the investor conference call, analysts at Morgan Stanley raised Aflac’s target price from $67.00 to $69.00. Morgan Stanley's price target indicates a potential upside of 5.97% from the company's previous close.

Doug Bailey is a journalist and freelance writer who lives outside of Boston. He can be reached at doug.bailey@innfeedback.com.