Aflac strengthens solvency with strong Japan ratio

Particularly, its medical and cancer insurance business profile remains strong.

Aflac Incorporated Group's risk-adjusted capitalisation is at the strongest level, as measured by Best’s Capital Adequacy Ratio (BCAR), with solid NAIC risk-based capital in the US and excellent solvency ratios in Japan. 

Despite unrealised foreign currency losses, the group's strong operating performance has supported its capitalisation, leading to an 18% increase in GAAP equity in the second half of 2024. 

Aflac's diverse investment portfolio, managed internally and through respected external managers, includes some exposure to commercial mortgages and real estate loans, AM Best said. Although delinquencies and foreclosures have risen since 2023, these investments represent a small portion of Aflac’s assets.

The group's financial flexibility is bolstered by its publicly traded parent company and its reinsurance subsidiary, Aflac Re, which assumes liabilities from older cancer policies in Japan. Aflac maintains modest financial and operating leverages relative to its ratings.

Aflac’s strong operating margins in Japan and the US markets continue, with a return on equity exceeding 20% in 2023. 

Lower benefit utilisation in the US segment has positively impacted earnings, though higher administrative expenses have partially offset this. 

The group faces challenges in reversing premium declines and growing new sales in a competitive market, but the premium decrease in 2023 showed improvement from prior years. Aflac remains focused on client retention, product enhancements, and operational improvements.

Aflac's enterprise risk management capabilities are deeply embedded in its strategy, contributing positively to its balance sheet, operational performance, and business profile. The ERM program effectively identifies, manages, and mitigates risks across the organisation.

Aflac's strong business profile is supported by its leading position in the Japanese market, particularly in medical and cancer insurance, and its solid presence in the US supplemental medical insurance market. 

The company’s partnership with Japan Post and ongoing product refreshes in Japan further strengthen its competitive position. Investments in the US segment are aimed at positioning Aflac for future growth.