Aflac sells supplemental health and life insurance that helps customers in Japan and the United States pay for illness, lost income and other financial needs. In the third quarter of 2026, net profit fell to $303 million from $1.64 billion a year earlier, largely because Aflac recorded investment losses while changing its portfolio. Those changes aim to increase future interest income, but Japan’s softer insurance sales and worsening private loans mean that better bond income alone will not settle the company’s operating challenges.
Analysis period: July–September 2026, with January–September comparisons. Research cutoff: November 6, 2026, New York time. The latest company operating materials used are dated November 5, 2026.
1. Bond sales explain most of the profit fall, but adjusted earnings also slipped
Aflac accepted investment losses to improve future income; its insurance business did not suffer a comparable collapse. The company sells policies whose benefits may be paid many years later. It invests the money collected along the way, making the return on its bonds an important part of its ability to fund those promises.
Management says it replaced $2.3 billion of Japanese government bonds during the quarter to benefit from higher yields. It estimates that the quarter’s changes will add more than $30 million to future annual investment income, with portfolio changes during 2026 adding more than $80 million annually. These are management’s estimates of income at the new investment pace, not extra cash already earned during the quarter.
Source: Aflac’s third-quarter prepared remarks, CFO update dated November 4, 2026, p. 6.
Selling an older bond for less than its recorded cost brings the loss into current earnings. Aflac reported $842 million of net losses from investment sales and redemptions in the quarter. Together with currency and derivative losses and credit charges, this produced $1.072 billion of net investment losses, compared with a $275 million gain a year earlier. That $1.347 billion reversal accounts for most of the $1.494 billion decline in pretax profit.
The distinction matters for revenue too. Insurers include investment gains and losses in reported revenue. Aflac’s 31.0% revenue decline therefore does not mean customers bought 31.0% less insurance.
| Consolidated results, USD millions except per-share amounts | Third quarter 2026 | Third quarter 2025 | First nine months 2026 | First nine months 2025 |
|---|---|---|---|---|
| Net earned insurance premiums | 3,304 | 3,372 | 9,866 | 10,223 |
| Net investment income | 1,003 | 1,067 | 2,943 | 3,103 |
| Net investment gains / (losses) | -1,072 | 275 | -1,176 | -1,109 |
| Total revenue | 3,271 | 4,740 | 11,734 | 12,298 |
| Pretax profit | 500 | 1,994 | 2,720 | 2,961 |
| Net profit | 303 | 1,639 | 2,147 | 2,267 |
| Diluted earnings per share, USD | 0.61 | 3.08 | 4.24 | 4.21 |
| Management’s adjusted earnings | 1,214 | 1,327 | 2,998 | 3,190 |
Source: Aflac’s September 2026 Form 10-Q, consolidated statements of earnings, p. 1; MD&A reconciliation, pp. 88–89. Adjusted earnings are a non-GAAP measure; the complete bridge appears in the calculation notes.
Removing the items specified in management’s adjustment gives a smaller decline, but still a decline: adjusted earnings fell 8.5% in the quarter and 6.0% over nine months. This measure retains gains from revising expected insurance claims. Those revisions reduced quarterly benefit expense by $453 million, versus $580 million a year earlier. Separately, revisions to the timing of profit recognition on policies with limited payment periods increased premium revenue by $52 million this year, compared with a $55 million reduction last year.
These entries change when earnings are recognized; they do not represent new premium collections. The annual review incorporated more favorable assumptions about death rates among Japanese cancer policyholders and more favorable illness-related claims assumptions in the United States. They support the economics of existing policies, but the quarter’s adjusted profit is not simply a repeatable total from current sales and current claims.
Source: Form 10-Q, p. 1 and Note 7, “Cash Flow Assumptions,” p. 64.
Aflac also reduced the tax benefits it expects to use from capital losses. It recorded a $215 million allowance against related deferred tax assets: $51 million reduced net profit and $164 million reduced equity through other comprehensive income. In plain language, management no longer expects enough eligible capital gains to use all those tax deductions before they expire. This is a real limit on the tax value of the losses, even though the allowance itself is not a current cash tax payment.
Source: Form 10-Q, Note 10, p. 74.
The resulting business picture is a profitable insurer undertaking a costly portfolio change, with less help from insurance estimate revisions than in the unusually favorable prior-year quarter.
2. Japan’s new products are helping, but they have not stopped the premium base shrinking
Japan’s savings and medical products are offsetting part of the slowdown in cancer sales. The comparison is demanding: Aflac launched Miraito cancer insurance in March 2025, lifting sales in the following quarters. In 2026, refreshed Tsumitasu savings-type life insurance and Anshin Palette medical insurance have become more important contributors.
New annualized premium sales estimate a year’s premiums from newly sold policies. They are a measure of new business, not the revenue collected or earned during that quarter. The longer comparison shows both sides of the story: third-quarter sales remained above 2024, but they fell from 2025, and the slowdown was already visible in the second quarter of 2026.
| Aflac Japan, Japanese yen billions | Third quarter 2024 | Third quarter 2025 | Third quarter 2026 |
|---|---|---|---|
| New annualized premium sales | 17.522 | 19.586 | 18.807 |
| New cancer, medical and other health premium sales | 11.925 | 15.871 | 13.278 |
| Annualized premiums on existing policies at quarter-end | 1,216.7 | 1,185.7 | 1,159.5 |
Source: Aflac’s third-quarter 2026 financial supplement, p. 28. These are local-currency comparisons, avoiding changes caused solely by translating yen into dollars.
Total new sales fell 4.0% in the third quarter after falling 5.6% in the second quarter. Nevertheless, first-nine-month sales rose 3.0%, helped by a strong first quarter. Cancer’s share of quarterly sales fell from 70.0% to 55.5%, while Tsumitasu’s share rose from 14.6% to 25.2% and medical and other health rose from 10.7% to 14.9%.
Management’s purpose for the savings products is to reach younger customers and create opportunities to sell health protection later. The broader product range is bringing in business, but the reported sales mix does not establish the profit earned from each product. The decisive near-term task is to turn this broader reach into enough continuing premiums to offset older policies leaving the paying customer base.
Sources: Form 10-Q, Aflac Japan sales and product strategy, pp. 97–98; financial supplement, pp. 28–29.
The shrinking premium base needs careful interpretation. Some customers finish their required payment period while retaining insurance coverage. That reduces future premium collections without being a cancellation. Aflac identifies this as the main reason annualized premiums on existing Japanese policies fell 2.2% from September 2025.
Quarterly earned premiums in yen also fell 2.0%, but this measure includes additional effects. Aflac transferred premiums and claims to its Bermuda subsidiary and to an outside reinsurer. The internal transfer reduces the Japan segment’s figures while moving activity elsewhere within Aflac. It does not remove that business from the consolidated group. Profit-timing revisions on limited-payment policies also helped this year’s comparison. These disclosed effects prevent treating the remaining difference as a clean measure of customer growth.
Source: Form 10-Q, Japan operating-results discussion, pp. 94–95; Note 8, pp. 67–69.
The June 2026 cyber incident added a more immediate obstacle. Aflac paused direct mail and outbound customer calls to prioritize customer support, reducing sales activity during the third quarter. Normal marketing had resumed by September-end. Management quantified quarterly cybersecurity expenses and enhancements in Japan at $40 million.
Japan’s customer retention measure, premium persistency, was 92.9%, down from 93.3% a year earlier. The filing does not attribute that entire change to the incident. Aflac’s existing scale—about 22 million individual policies, including 14 million cancer policies—and its agency, bank and alliance distribution provide a substantial base from which to restart marketing.
Sources: Form 10-Q, pp. 95–98; CFO prepared remarks, November 4, 2026, p. 4.
Restoring marketing does not close the legal and customer-service issue. Aflac Japan’s customer notice says approximately 4.4 million people’s information was exposed, including bank-account information for about 220,000. The 10-Q says the potential loss from the Japan incident cannot yet be reasonably estimated. It reports the same estimation limit for pending disputes and regulatory communications arising from the separate June 2025 U.S. incident.
Sources: Aflac Japan’s incident FAQ, sections describing affected information and notices completed July 30, 2026; Form 10-Q, Note 14, pp. 81–82.
Japan remains highly profitable, although its quarterly pretax adjusted margin fell to 44.4% from 52.2%. The main reason was smaller gains from revising benefit reserves, with cyber-related costs also weighing on expenses. Over nine months, the margin changed much less, from 38.5% to 37.9%. The quarter therefore combines a difficult comparison with softer new business, rather than showing an equivalent fall in the profitability of every policy.
Higher future bond income is useful because current investment growth is less strong than the yen figures suggest. Japan’s quarterly adjusted investment income rose 3.7% in yen, partly because dollar income translated into more yen. Holding that currency effect constant, the company reports a 1.6% decline: lower floating-rate income and higher expenses offset some of the gains from fixed-rate investments.
Source: Form 10-Q, Japan operating results and currency comparison, pp. 94–96. Japan’s margins are calculated in yen, and the currency-neutral investment-income change is management’s non-GAAP comparison.
Management still expects full-year Japanese sales to exceed 2025. Resumed marketing supports that objective, but stronger health-product sales and retention would provide firmer evidence that the premium-paying policy base is stabilizing.
Source: November 5 management prepared remarks, p. 7. The full-year sales expectation is management’s forecast, not a reported result.
3. U.S. customers are adding premiums, while accounting changes magnify profit growth
U.S. premiums are growing, while revised claim estimates amplified the increase in adjusted profit. Employers and employees are buying more group products, and more existing premium business is staying with Aflac. Earned premiums rose 3.3% in the quarter, while annualized premiums on existing policies rose 4.4% to $6.8 billion.
| Aflac U.S., USD millions except percentages | Third quarter 2026 | Third quarter 2025 | First nine months 2026 | First nine months 2025 |
|---|---|---|---|---|
| Earned premiums | 1,544 | 1,495 | 4,638 | 4,501 |
| Pretax adjusted earnings | 493 | 375 | 1,226 | 1,121 |
| Pretax adjusted profit margin | 27.7% | 21.7% | 23.0% | 21.7% |
| Gains from revising benefit reserves | 161 | 71 | 217 | 110 |
| New annualized premium sales | 403 | 390 | 1,070 | 1,038 |
Source: Form 10-Q, Aflac U.S. operating results and sales, pp. 101–103. Segment profit and margins use management’s adjusted basis. Reported sales growth uses unrounded source amounts.
Aflac’s annual update to future claims assumptions generated $138 million of quarterly gains, compared with $60 million last year. That $78 million increase alone was about two-thirds of the segment’s $118 million profit increase. Other reserve revisions account for the remainder of the gains shown in the table. Meanwhile, benefits and claims before reserve revisions rose from $752 million to $790 million, partly because the growing group business generated more claims.
Expenses also benefited from a prior-year technology charge that did not recur and from recording more qualifying policy-selling costs as an asset to be charged against future periods. Spreading those costs over the policies’ lives lowers today’s expense; it does not eliminate the cost. This makes premium growth and retention more useful guides to progress than extending the quarter’s 27.7% profit margin into future quarters.
Source: Form 10-Q, pp. 101–102 and Note 6, p. 58.
The competitive backdrop supports Aflac’s move into group benefits, but it also shows that growth is available to competitors. LIMRA’s October 5 report found that first-half 2026 group workplace supplemental-health sales increased 10%, while individual worksite sales fell 3%. These are industry figures for the first half, not a third-quarter comparison with Aflac’s broader product range.
For a same-quarter reference, Unum’s Colonial Life business reported premium growth of 3.0% and new-sales growth of 6.4% in the third quarter. Aflac U.S. reported premium growth of 3.3% and sales growth of 3.5%. The product mixes differ, so this is evidence of active competition rather than a market-share calculation.
Sources: LIMRA’s first-half 2026 workplace-benefits survey release, October 5, 2026, supplemental-health section; Unum’s third-quarter results, November 3, 2026, Colonial Life section; Aflac Form 10-Q, pp. 101–103.
U.S. premium persistency improved to 79.7% from 79.0%. Retaining more business while adding group sales gives Aflac a sounder source of future revenue than another favorable claims-estimate revision. The business benefit depends on keeping claims and selling costs under control as those group policies grow.
4. Private-loan deterioration is a separate cost from the planned bond changes
Aflac’s smaller loan portfolio contains more troubled loans. Selling low-yielding bonds deliberately is one issue; borrowers struggling to repay is another. Aflac’s transitional real estate loans finance properties undergoing redevelopment or a change in their commercial use. Their repayment can depend on completing that work and obtaining replacement financing.
| Consolidated loan measures, USD millions | September 30, 2026 | December 31, 2025 |
|---|---|---|
| Commercial mortgage and other loans before loss allowances | 9,464 | 10,191 |
| Loans on nonaccrual status | 1,114 | 643 |
| Transitional real estate loans on nonaccrual status | 929 | 545 |
| Allowance for expected losses on loans | 607 | 426 |
Source: Form 10-Q, Note 3, loan composition and payment status, pp. 22–23; balance sheet, p. 3.
Nonaccrual means Aflac has stopped recording interest in the normal way because collection is uncertain. These loans rose to 11.8% of the gross loan portfolio from 6.3%. Most of the increase came from transitional real estate, although middle-market business loans on nonaccrual also rose, from $98 million to $185 million.
During the first nine months, Aflac charged $218 million to earnings for expected loan losses. After $37 million of write-offs net of recoveries, the loan allowance rose from $426 million to $607 million. Aflac was recognizing more expected losses despite the smaller loan portfolio. Aflac also identified $141 million of transitional property loans for potential foreclosure or a negotiated property handover, with $96 million of allowances against those loans.
Source: Form 10-Q, Note 3, pp. 19, 23 and 26–27. The loan-only allowance differs from the wider allowance table, which also includes loan commitments and securities.
The exposure is concentrated enough to matter without defining the entire investment portfolio. Office properties secured $1.311 billion of transitional loans and $227 million of conventional commercial mortgages. Separately, properties Aflac already owned after taking possession were carried at $820 million. Reduced occupancy led to $24 million of impairments on certain owned properties during the first nine months.
Against that weakness, about 98.6% of bonds and other fixed-maturity debt securities by fair value were investment grade, meaning they carried ratings indicating relatively low default risk. The company reported no credit-loss allowance on available-for-sale bonds. Thus, much of the bond valuation decline reflects market-value changes rather than expected defaults, while the private-loan figures show an identifiable credit problem. Loan recoveries and new loss charges will determine how much of the benefit from higher bond income reaches overall profit.
Source: Form 10-Q, Note 3, pp. 19, 21–23 and 30; MD&A investment ratings, p. 109. Investment-grade share is calculated as 100% less the disclosed 1.4% below-investment-grade share by fair value.
5. Lower recorded insurance liabilities cushion bond losses, without creating spendable cash
Aflac’s equity held relatively steady because changes in the value of future insurance obligations offset much of the investment decline. When the interest rate used to value distant claim payments rises, their value in today’s money falls. The policyholder’s contractual benefit does not shrink for that reason.
| Consolidated balance sheet, USD millions | September 30, 2026 | December 31, 2025 |
|---|---|---|
| Available-for-sale bonds, including consolidated investment entities | 60,915 | 64,121 |
| Held-to-maturity bonds, net | 15,999 | 16,120 |
| Cash and cash equivalents | 5,623 | 6,245 |
| Total assets | 113,511 | 116,470 |
| Insurance policy liabilities | 63,517 | 69,583 |
| Securities-lending and repurchase obligations | 6,874 | 3,989 |
| Notes payable and lease obligations | 8,900 | 8,409 |
| Total liabilities | 84,228 | 86,980 |
| Shareholders’ equity | 29,283 | 29,490 |
Source: Form 10-Q, consolidated balance sheets, p. 3. Investment entities required to be consolidated are included throughout.
The nine-month change in discount-rate assumptions produced a $5.353 billion pretax gain outside net earnings, helping explain the $6.066 billion decline in total policy liabilities. That gain is different from the claim-estimate gains that raised earnings. After tax, the discount-rate effect added $4.229 billion to equity, while the accumulated effect of bond valuation changes reduced equity by $3.186 billion.
The bond accounting also deserves attention. Available-for-sale bonds are carried at current market value. Bonds designated to be held to maturity are generally carried at cost adjusted over time and for credit losses. The latter had a $15.999 billion carrying amount but a $14.329 billion fair value at September-end. That valuation gap is disclosed rather than charged through the same equity line as available-for-sale bonds.
Source: Form 10-Q, pp. 2–3; Note 3, p. 17; Note 7, discount-rate methodology, pp. 62–64. The full equity reconciliation is in the calculation notes.
Aflac’s other asset movements mostly reflect insurance and investing activity. Other investments rose $1.431 billion, mainly because short-term investments increased $1.176 billion and limited partnerships increased $339 million. Short-term investments include securities-lending collateral: money received that comes with an obligation to return it.
Costs already paid to acquire policies but scheduled to become expenses later rose from $9.034 billion to $9.186 billion. These deferred policy acquisition costs are a much larger asset than buildings and equipment, which increased only from $351 million to $356 million. Receivables were nearly unchanged at $833 million versus $835 million. The important asset risks are therefore collecting investments and earning back policy-selling costs over time.
Source: Form 10-Q, p. 3; Note 3, p. 30; Note 6, p. 58.
Management is also moving insurance risk between legal entities to use regulatory capital more efficiently. In July, Aflac Japan transferred 50% of the liabilities on certain cancer policies to Aflac Re Bermuda. On the U.S. GAAP basis, the transaction involved about $2.7 billion of reserves and $1.5 billion of assets. Those internal amounts disappear when preparing consolidated accounts, apart from foreign-currency accounting effects.
Management estimates the transaction will make about $1 billion of capital available for redeployment over time. Its separate description of approximately ¥500 billion of reserves uses Japanese regulatory accounting, so it should not be equated directly with the U.S. GAAP reserve amount. The benefit is greater flexibility over where capital is held, not an equivalent increase in consolidated cash or profit.
Sources: Form 10-Q, Note 8, p. 68; CFO prepared remarks, November 4, 2026, p. 5.
External reinsurance creates a different obligation. Aflac Re received $636 million in March to assume an outside company’s annuity risks, and placed the consideration in a collateral trust. At September-end that trust held $578 million of bonds and $14 million of cash whose use was restricted. Aflac may have to add assets if collateral values fall below the agreed threshold. Insurance reserves and investment assets therefore must be evaluated together when assessing the group’s financial flexibility.
Source: Form 10-Q, Notes 3 and 8, pp. 32 and 68.
6. Cash generation supports the business, while capital returns draw on additional resources
Buybacks and cash dividends exceeded operating cash flow, although Aflac retained substantial liquidity. Premium collections and investment receipts supplied cash for claims and expenses. Over the first nine months, operating cash flow was $2.277 billion, compared with $2.240 billion a year earlier.
The small increase in operating cash flow alongside lower net profit has specific accounting and timing causes. The cash-flow statement adds back investment losses because the related investment transactions belong in investing cash flow. Its policy-liability adjustment was a $70 million reduction, compared with a $732 million reduction last year. That improvement was largely offset by a larger negative “other” adjustment and lower profit. The filing leaves the larger “other” adjustment grouped together, limiting how precisely the remaining cash movements can be explained.
| Consolidated cash movement, USD millions | First nine months 2026 | First nine months 2025 |
|---|---|---|
| Opening cash and cash equivalents | 6,245 | 6,229 |
| Operating cash flow | 2,277 | 2,240 |
| Investing cash flow | 472 | 1,202 |
| Financing cash flow | -3,389 | -2,885 |
| Currency effect | 18 | -18 |
| Closing cash and cash equivalents | 5,623 | 6,768 |
Source: Form 10-Q, consolidated cash-flow statement, p. 8. Cash includes the restricted-use $14 million in the consolidated reinsurance trust; it is not all available for parent-company spending.
Aflac paid $2.787 billion for treasury shares and $898 million in cash dividends, totaling $3.685 billion. That exceeded operating cash flow by $1.408 billion. Net borrowing supplied $511 million, investing activities supplied $472 million, and the cash balance fell $622 million; other financing uses and currency movements complete the reconciliation.
The investing inflow also needs context. It included $2.951 billion of net cash collateral receipts. Excluding that line, investing activity used $2.479 billion. Receiving collateral brings cash in but creates a repayment obligation; it is not an investment gain. Consistent with that, securities-lending and repurchase liabilities rose $2.885 billion. Aflac was both reinvesting in assets and drawing on its wider balance sheet while returning capital.
Source: Form 10-Q, pp. 3 and 8; Note 3, pp. 33–34. Securities-lending collateral, repurchase proceeds and derivative collateral have different movements, so the cash collateral line is not expected to equal the balance-sheet liability change.
Buybacks materially changed the per-share results. The average diluted share count fell 6.1% over nine months. Consequently, diluted earnings per share rose from $4.21 to $4.24 even though total net profit fell 5.3%. Aflac bought shares into treasury rather than reporting a retirement of those shares; new awards and treasury-share issuances partly offset the reduction. This explains the per-share improvement without treating it as growth in the total business.
Source: Form 10-Q, p. 1; Note 11, p. 74. Share-count and equity calculations appear below.
The parent company depends on its insurers for dividends and fees, and regulators limit those transfers to protect policyholders. Subsidiary dividends declared or paid to the parent fell from $3.058 billion to $2.088 billion over nine months. This is a parent-company funding measure; it is eliminated from consolidated cash flow and must not be added to it.
At September-end, management reported $2.7 billion of parent liquidity available without releasing pledged assets, against a $1 billion minimum target. It estimated Japan’s regulatory economic solvency ratio at 225% and combined U.S. risk-based capital slightly above 575%. These ratios compare capital with different regulatory requirements and cannot be compared directly with each other. They provide capacity to absorb adverse developments, while subsidiary dividend restrictions remain relevant to how quickly that capacity can reach the parent.
Sources: Form 10-Q, liquidity and regulatory restrictions, pp. 116–120; CFO prepared remarks, November 4, 2026, p. 6. The 225% Japan ratio is management’s estimate before the separate company-specific parameter adjustment.
Near-term debt maturities appear manageable against those resources. The $300 million face amount of 2.875% notes matured in October 2026. Next are ¥60 billion of 0.932% notes in January 2027 and a ¥11.7 billion floating-rate loan in August 2027. Their September carrying amounts were $380 million and $75 million, respectively. Later note maturities extend through 2054, spreading the repayment schedule.
Borrowing has nevertheless become more expensive. In May, Aflac issued $500 million of 5.150% notes and ¥65.9 billion across four yen-note series carrying coupons from 2.117% to 3.482%. The new dollar notes alone require $25.75 million of annual coupon payments. Total reported interest expense rose from $159 million to $194 million over nine months; $162 million was paid in cash.
Source: Form 10-Q, pp. 1 and 8; Note 9, pp. 69–70. Carrying amounts are net of issuance adjustments and differ from contractual principal. The $300 million October maturity principal is documented in Aflac’s 2025 Form 10-K, Note 9, September 2016 issuance paragraph. The annual coupon calculation uses face value multiplied by the stated rate.
Aflac had no drawings on its $1 billion committed revolving facility or its ¥100 billion committed revolving facility. It also had $2 billion of separate, unused senior-note facilities backed by trusts holding U.S. Treasury principal and interest securities. These are financing options, not cash already on hand. The company reported compliance with all debt and credit-line covenants and no defaults during the nine-month period.
Other funding demands are smaller individually but still use capacity. Lease liabilities totaled $83 million. Unfunded limited-partnership commitments were $2.8 billion, with a further $997 million of disclosed commitments for transitional real estate, middle-market and other loans, subject to the stated underwriting conditions. A renewed Japan technology-services agreement carried ¥37.3 billion, or $237 million, of remaining cost over three years.
Source: Form 10-Q, Note 3, pp. 22–23 and 30; Note 9, pp. 70–73; Note 14, p. 82. Commitment amounts are not assumed to be payable immediately.
The cost of carrying the wider group is also visible in earnings. Corporate and Other, which includes Bermuda reinsurance and parent expenses, generated $62 million of pretax adjusted profit over nine months, down from $132 million. Higher operating and interest costs and lower investment income outweighed improved gains from insurance estimates. The capital benefit from internal reinsurance should therefore be assessed separately from the pressure of corporate costs and lower investment income.
Source: Form 10-Q, Corporate and Other, pp. 105–106. This category includes intercompany eliminations; internal reinsurance premiums are not added again to group revenue.
Aflac has room to finance its obligations, but the current pace of cash distributions relies on more than current operating cash generation. The practical limit is the cash and regulatory capital left after supporting policyholders, investments and debt service.
7. The business can absorb the portfolio reset; sales and credit will determine its payoff
Aflac’s main challenge is converting financial flexibility into steadier operating growth. Its existing insurance business remains profitable, U.S. premiums and retention are improving, and replacing older bonds should increase investment income if management’s estimates are realized. The reported profit decline is much larger than the change in current insurance activity, while adjusted earnings still include substantial benefits from revised claims expectations.
The strongest counterweight is Japan’s continuing decline in the premium-paying policy base, compounded this quarter by weaker cancer sales and interrupted marketing. Rising troubled loans create an additional claim on future earnings. A stronger business outcome would combine renewed Japanese health-product sales, continued U.S. premium growth and loan recoveries that contain further losses. If those conditions fail, higher bond income and capital released through reinsurance would provide support, but less room for expansion and cash distributions.
Reporting basis and calculation notes
Reporting basis: This analysis uses Aflac Incorporated and its consolidated subsidiaries under U.S. GAAP, including investment entities required to be consolidated. The selected filing is Form 10-Q for September 30, 2026, filed November 5, 2026, accession 0001628280-26-070776, CIK 0000004977. Quarterly comparisons cover July 1–September 30; cumulative comparisons cover January 1–September 30. Balance-sheet changes compare September 30, 2026 with December 31, 2025 unless expressly stated otherwise.
Source: SEC submission history; selected Form 10-Q, cover and Note 1, p. 9. SEC company facts were checked against this accession for consolidated assets, liabilities, equity, revenue, earnings, taxes, cash, operating cash flow and share repurchases, using USD units and matching instant or duration contexts.
The information cutoff is November 6, 2026. Supporting company materials reviewed are dated November 4–5; developments after those disclosures have not been independently established. Forecasts and capital estimates remain management statements, and calculations below use rounded published amounts.
Calculation notes: reported profit to management’s adjusted earnings. Positive adjustments are added to reported net profit; negative adjustments are subtracted. Investment and other operating adjustments are pretax, followed by the disclosed tax adjustment. The tax-asset allowance is already a tax item.
| Reconciliation, USD millions | Third quarter 2026 | Third quarter 2025 | First nine months 2026 | First nine months 2025 |
|---|---|---|---|---|
| Reported net profit | 303 | 1,639 | 2,147 | 2,267 |
| Adjusted investment losses / (gains) excluded | 1,026 | -335 | 1,029 | 966 |
| Other and nonrecurring losses / (income) excluded | 0 | 1 | 0 | 54 |
| Tax effect of excluded items | -166 | 22 | -229 | -97 |
| Tax valuation allowance excluded | 51 | 0 | 51 | 0 |
| Adjusted earnings | 1,214 | 1,327 | 2,998 | 3,190 |
Source: Form 10-Q, MD&A, pp. 88–91. The 2025 cumulative “other” adjustment includes a pension-settlement charge, partly offset by other items. The measure retains reserve revisions, deferred-profit revisions and normal operating expenses, including Japan’s cyber-related expenses.
The investment adjustment excludes realized gains and losses and specified valuation changes, while keeping certain hedging costs and derivative interest in operating results. That is why the excluded investment amount differs from the full investment-loss line in the income statement. The filing’s investment reconciliation identifies those amounts separately.
Source: Form 10-Q, investment-adjustment reconciliation, p. 89. A weaker yen reduced quarterly adjusted earnings by $14 million and cumulative adjusted earnings by $49 million under the company’s comparison method; the table retains those currency effects.
Calculation notes: profit to operating cash. The table reconciles net profit with cash generated by operations. Selling-policy costs are first recorded as assets and then expensed over time; the cash statement removes the new assets and adds back the expense already included in profit.
| Operating cash reconciliation, USD millions | First nine months 2026 | First nine months 2025 |
|---|---|---|
| Net profit | 2,147 | 2,267 |
| Receivable movements | 10 | -28 |
| New deferred policy acquisition costs | -836 | -796 |
| Amortization of those costs | 659 | 655 |
| Policy-liability movements | -70 | -732 |
| Income-tax liability movements | 20 | 92 |
| Investment losses added back | 1,176 | 1,109 |
| Other adjustments, net | -829 | -327 |
| Operating cash flow | 2,277 | 2,240 |
Source: Form 10-Q, p. 8. Financial-asset purchases, collateral movements and policy obligations are assessed directly because they are central to this insurer’s cash needs.
Calculation notes: equity and share count. Equity is the difference between recorded assets and liabilities. The table shows why it declined slightly despite positive earnings.
| Equity movement, USD millions | First nine months 2026 |
|---|---|
| Opening shareholders’ equity | 29,490 |
| Net profit | 2,147 |
| Other comprehensive income, after tax | 961 |
| Dividends recorded in retained earnings, net | -614 |
| Increase in additional paid-in capital | 129 |
| Increase in treasury-stock cost, net of reissues | -2,830 |
| Closing shareholders’ equity | 29,283 |
Source: Form 10-Q, pp. 3–5 and Note 11. Common-stock capital remained $136 million at the reported precision.
Retained earnings increased from $54,682 million to $56,215 million: opening balance + $2,147 million profit − $614 million net dividend entries. Dividends enter equity when declared, which differs from when they are paid. Cash dividends were $898 million, with another $31 million delivered through treasury shares. The $614 million equity entry therefore is not the measure of cash distributed during the period.
Additional paid-in capital increased $129 million, comprising $87 million of share-based compensation, $4 million from option exercises and $38 million from treasury-share reissues. Treasury-stock cost increased by $2,830 million: $2,855 million of purchases recorded in equity less $25 million of cost removed for reissued shares. The cash-flow statement separately reports $2,787 million paid for treasury shares; the equity amount is not substituted for that cash amount.
Other comprehensive income increased equity by $961 million: a $4,229 million discount-rate benefit, less $3,186 million from bond valuation changes, $78 million from currency translation, $3 million from derivatives and $1 million from pension adjustments. These are after-tax changes and already include the tax allowance recorded outside earnings.
Outstanding shares fell from 518.690 million to 495.651 million: add 0.940 million newly issued shares, subtract 24.669 million treasury-share purchases and add 0.690 million treasury shares reissued. The diluted nine-month average declined from 539.052 million to 506.285 million. Dividing net profit by those averages gives approximately $4.21 and $4.24 per diluted share, respectively.
Source: Form 10-Q, pp. 1, 3–5 and 8; Notes 11–12, pp. 74–80.
Calculation notes: balance-sheet and credit checks. At September 30, assets of $113,511 million equal liabilities of $84,228 million plus equity of $29,283 million. At December 31, 2025, $116,470 million equals $86,980 million plus $29,490 million. Available-for-sale bond totals include $3,966 million and $3,636 million, respectively, held through consolidated investment entities.
The loan allowance check is $426 million opening allowance + $218 million provision − $37 million write-offs net of recoveries = $607 million closing allowance. Nonaccrual percentages use loans before allowances: $1,114 million ÷ $9,464 million = 11.8%, versus $643 million ÷ $10,191 million = 6.3%. Other loan and security allowances are excluded from this loan-only reconciliation.
Source: Form 10-Q, p. 3; Note 3, pp. 19 and 22–27. Percentage growth elsewhere is the current amount divided by the comparable prior-period amount, less one; percentage-point changes are simple differences between percentages.
This analysis is for information and business understanding. It is not investment advice.