Aflac's Third-Quarter Net Earnings Drop to $303 Million After $1.1 Billion of Portfolio-Repositioning Losses, While Adjusted EPS Edges Down 2.4% to $2.43 and Japan's Margin Narrows

Aflac Incorporated has reported results for the third quarter of 2026, the three months ended September 30. The earnings release, filed with the U.S. Securities and Exchange Commission as Exhibit 99.1, is dated November 4, 2026, with a call the following morning. Aflac sells supplemental health and life insurance in Japan and the United States. Percentages and differences that are not in the release are calculated here and labelled. The release does not report the solvency margin ratio or a consolidated benefit ratio, so this article does not cover them.

Net earnings and adjusted earnings

Net earnings were $303 million, or $0.61 per diluted share, down from $1.6 billion, or $3.08 per share, in the third quarter of 2025. The release attributes the drop to net investment losses of $1.1 billion, or $2.15 per share, which came mainly from realized losses on portfolio repositioning. Total revenues were $3.3 billion, down 31.0%, because net investment losses are included in revenue. The release also records a $51 million tax valuation allowance, or $0.10 per share, on deferred tax assets tied to capital loss carryforwards. GAAP return on equity was 4.1%.

Aflac's preferred measure, adjusted earnings, tells a different story. Adjusted earnings were $1.2 billion, down 8.5%, and adjusted earnings per diluted share were $2.43, down 2.4%. Excluding the effect of currency, adjusted EPS was $2.46, down 1.2%. Adjusted earnings include $453 million of reserve remeasurement gains. Adjusted return on equity was 17.8% as reported and 23.7% excluding foreign currency remeasurement. The release does not explain the two ROE figures in more detail, so this article cites both as published.

For the nine months, net earnings were $2.1 billion, or $4.24 per diluted share, against $4.21 a year earlier, and adjusted earnings were $3.0 billion, or $5.92 per diluted share, flat year over year. Excluding currency, nine-month adjusted EPS was $6.02, up 1.7%. Nine-month revenues were $11.7 billion, down 4.6%.

What portfolio repositioning means

Realized losses on repositioning arise when an insurer sells investments for less than their carrying value, often to reinvest in assets the insurer considers better suited to its needs. These losses are real accounting charges, which is why net earnings fell so far, but they are excluded from adjusted earnings. The release does not say which assets were sold or what was bought, so this article does not describe the strategy. Net investment income was $1.0 billion, down 6.0%, and adjusted net investment income was $957 million, down 5.1%, so investment income did decline alongside the repositioning.

Aflac Japan

Aflac Japan's net earned premiums were ¥240 billion, or $1.5 billion, down 2.0% in yen and 9.3% in dollars. The gap between the two reflects exchange rates, since the yen weakened against the dollar over the period, which is an inference from the percentages and not a statement in the release. The release says premiums were affected by an external reinsurance deal in the first quarter and an internal reinsurance deal in the third quarter, and that Aflac Japan ceded roughly ¥500 billion of reserves on an FSA basis for cancer policies to Aflac Re Bermuda.

Pretax adjusted earnings were ¥152.3 billion, or $961 million, down 15.2% in yen and 21.0% in dollars. The pretax adjusted margin was 44.4% against 52.2%, and the benefit ratio, which is benefits paid and reserved as a share of premiums, rose to 49.2% from 39.3%. New sales were ¥18.8 billion, or $118 million, down 4.0%, and persistency, the share of policies kept in force, was 92.9%, down 40 basis points. The release as used here does not give a reason for the higher benefit ratio, and it would be speculation to name one.

Aflac U.S.

The U.S. business did better. Net earned premiums were $1.54 billion, up 3.3%, and pretax adjusted earnings were $493 million, up 31.5%. The pretax adjusted margin was 27.7% against 21.7%, and the benefit ratio improved to 40.7% from 45.6%. New sales were $403 million, up 3.5%, and persistency was 79.7%, up 70 basis points. Corporate and other pretax adjusted earnings were $72 million against $69 million.

Comparing the segments in dollars, calculated here, Aflac Japan's $961 million of pretax adjusted earnings was about twice Aflac U.S.'s $493 million, but Japan's contribution fell while the U.S. grew.

Balance sheet and capital return

Shareholders' equity was $29.3 billion, or $59.08 per share, and adjusted book value was $26.9 billion, or $54.21 per share. Aflac returned $1.1 billion to shareholders in the quarter, made up of $804 million of share repurchases and $305 million of dividends, which together equal $1,109 million, calculated here. The board declared a quarterly dividend of $0.61 per share, payable December 1, 2026 to holders of record on November 18, 2026, and the release says this marks 44 consecutive years of dividend increases.

Management view

Chief executive Daniel Amos said in the release that Aflac delivered solid adjusted earnings for the quarter and for the first nine months.

Reading the quarter

Three things stand out. First, most of the shortfall in net earnings comes from realized losses on repositioning the portfolio, which adjusted earnings exclude. Second, Aflac Japan's margin is lower, and the cause is not explained in the release. Third, Aflac U.S. is improving in both margin and benefit ratio. The release gives no outlook, and this article does not forecast. Policyholders should look at the company's financial strength ratings and claims-paying record, and investors should read the full release. This article is general information and not investment advice.