Supplemental insurance provider Aflac (NYSE: AFL) missed Wall Street’s revenue expectations in Q4 CY2025, with sales flat year on year at $4.28 billion. Its non-GAAP profit of $1.57 per share was 7.3% below analysts’ consensus estimates.

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StockStory’s Take

Aflac’s fourth quarter saw a positive market response despite missing Wall Street’s revenue and non-GAAP profit expectations, with management attributing performance to product launches and shifting sales dynamics across Japan and the U.S. The Japan business delivered a notable 15.7% sales increase driven by new cancer and medical products, while the U.S. segment benefitted from persistent premium growth and disciplined underwriting. CEO Daniel Amos highlighted that strong persistency and sales “offset the impact of reinsurance and policies reaching paid-up status.” Management noted higher group sales in the U.S. and an expanded distribution network in Japan as sources of resilience amid flat overall revenue.

Looking ahead, Aflac’s management anticipates continued momentum from recent product introductions and a focus on broadening distribution channels in both major markets. CFO Max Broden outlined expectations for modest net earned premium growth in the U.S. and a slight decline in Japan, with product mix shifts and higher expense ratios shaping 2026 profitability. The company’s strategic investments in automation and technology are aimed at improving efficiency and scaling new business lines. Virgil Miller, President of Aflac U.S., stated, “We are investing in a unified experience through platform and technology and also how we go to market,” suggesting ongoing transformation in the company’s approach to sales and customer engagement.

Key Insights from Management’s Remarks

Management attributed the quarter’s results to strong product launches in Japan and ongoing growth in U.S. group benefits, while emphasizing capital discipline and investment in technology.

• Japan product launches boost sales: The Miraito cancer insurance product and Anshin Palette medical policy drove double-digit sales growth in Japan, meeting consumer demand for new health protection offerings. Management credited these products with “remarkable” uptake and noted early positive reception for both.

• Distribution channel expansion: In Japan, sales grew across all distribution channels, including agencies, banks, and alliance partners. Management cited the ability to “be where the customer wants to buy insurance” as a competitive advantage, especially as the company targets younger and more affluent customers with repriced products like Tsumitasu.

• U.S. group benefits outpace individual: U.S. group sales—including life, disability, dental, and vision products—saw faster growth than traditional voluntary benefits. President Virgil Miller reported that group products made up 20% of new sales and highlighted strong broker relationships as a key driver.

• Persistency remains a strength: Both Japan and U.S. segments maintained strong policy persistency rates, supporting steady premium income. In Japan, a persistency rate of 93.1% was noted, while the U.S. segment held at 79.2%, helping to stabilize earned premium trends.

• Investment in technology and automation: Management discussed ongoing deployment of automation and artificial intelligence (AI) in claims and enrollment processes. Over 60% of claims in the traditional business are now automated, though final adjudication always includes human oversight. These investments are expected to drive efficiency without diminishing the company’s high-touch approach.

Drivers of Future Performance

Aflac’s outlook is shaped by new product adoption, distribution investments, and evolving product mix, as well as ongoing efficiency initiatives aimed at offsetting margin pressures.

• Japan product mix impact: Management expects the rollout of new products like Miraito and Anshin Palette, along with repriced savings products, to drive ongoing sales growth. However, overall premium growth will remain limited due to the large existing in-force block and high persistency, with underlying premiums expected to decline 1% to 2% in 2026.

• U.S. group business scaling: The company is prioritizing growth in group benefits, including life, disability, dental, and vision, which carry higher benefit ratios but provide opportunities for market share gains. Increased investment in unified digital platforms and enrollment technology is aimed at supporting these lines and improving agent efficiency.

• Expense and benefit ratio management: Higher expense ratios are expected as new businesses scale and the company invests in technology. The U.S. benefit ratio is guided higher due to mix shift toward group products and increased benefit endorsements, while Japan’s benefit ratio is expected to decline due to actuarial updates and product mix changes.

Catalysts in Upcoming Quarters

Looking forward, the StockStory team will be watching (1) whether recent product launches in Japan and U.S. continue to gain traction and drive new premium growth, (2) how expense and benefit ratios trend as group products scale and technology investments increase, and (3) the pace of expansion in digital distribution and agent recruitment. Progress on automation initiatives and the response to evolving interest rate environments will also be important indicators of execution.

Aflac currently trades at $117.79, up from $113.62 just before the earnings. At this price, is it a buy or sell? The answer lies in our full research report (it’s free).

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