AFL Q2 Deep Dive: Japan Cancer Product Launch Drives Growth, U.S. Margin Discipline Maintained

August 12, 2025 at 23:57 PM EDT

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Supplemental insurance provider Aflac (NYSE: AFL) announced better-than-expected revenue in Q2 CY2025, with sales up 3.5% year on year to $4.54 billion. Its non-GAAP profit of $1.73 per share was 1.4% above analysts’ consensus estimates.

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Aflac (AFL) Q2 CY2025 Highlights:

Revenue: $4.54 billion vs analyst estimates of $4.40 billion (3.5% year-on-year growth, 3% beat)
Adjusted EPS: $1.73 vs analyst estimates of $1.71 (1.4% beat)
Adjusted Operating Income: $1.20 billion vs analyst estimates of $1.21 billion (26.4% margin, 0.7% miss)
Market Capitalization: $55.38 billion

StockStory’s Take

Aflac’s second quarter saw a strong positive market reaction, reflecting the company’s solid operational performance and revenue growth above Wall Street expectations. Management attributed the results largely to the success of the new Miraito cancer insurance product in Japan, which spurred a 53% increase in cancer policy sales and contributed to a 23.2% year-over-year sales rise in the region. In the U.S., momentum in group life, disability, and network dental products supported steady premium growth, while strategic underwriting and expense management helped preserve margins. CEO Dan Amos emphasized, “Our ability to maintain strong premium persistency is a testament to our strategy, Aflac’s reputation and our customer recognition of the value of our products.”

Looking forward, Aflac’s guidance is shaped by continued investment in digital transformation, product refreshes, and disciplined capital deployment. Management expects sustained momentum from new product launches in Japan, particularly in cancer and medical insurance, and aims to expand coverage among younger and first-time buyers. The company is also focused on scaling its U.S. dental and group benefits businesses, with management noting that “our focus will be on recruiting and driving higher productivity across our field.” CFO Max Broden cautioned that technology and marketing costs will remain elevated, but said Aflac is “well positioned for a solid third quarter,” supported by ongoing efficiency initiatives and stable regulatory capital ratios.

Key Insights from Management’s Remarks

Management attributed the quarter’s performance to robust product innovation in Japan, strong persistency in both markets, and ongoing investment in digital tools to improve customer experience and operational efficiency.

Japan cancer product launch: The rollout of Miraito, a flexible and customizable cancer insurance product, was credited with driving a 53% increase in cancer policy sales and broadening appeal to younger demographics. Management highlighted that Miraito’s modular coverage options and integrated support services differentiate it from traditional offerings.
Distribution channel expansion: Miraito became available across all planned channels in Japan by late April, including agencies, banks, and alliance partners. Management noted that this broad rollout contributed to sales growth across both new and existing customers.
Persistency and underwriting discipline: Both Japan and U.S. operations maintained high premium persistency, which management linked to stricter underwriting standards and improved customer retention strategies. Persistency in Japan climbed to 93.7%, while the U.S. segment reached 79.2%.
U.S. group and dental momentum: In the United States, growth in group life, disability, and network dental products helped offset slower individual sales. Management expects continued expansion in these areas, describing dental as a “door opener” for supplemental coverage cross-sell opportunities.
Digital transformation initiatives: Japan accelerated digitalization efforts, deploying generative AI tools and launching digital human avatars for 24/7 customer service. Management expects these technologies to improve efficiency and reduce operational costs over time.

Drivers of Future Performance

Aflac’s outlook is driven by the continued scaling of new products, digital transformation, and prudent capital allocation in an evolving regulatory and competitive landscape.

Product refresh and pipeline: Management plans further product launches in Japan, with a new medical insurance product expected within a year. The success of Miraito is expected to continue supporting sales, and management is focusing on cross-selling bundled products to drive growth among younger and new customers.
U.S. business scaling: The company prioritizes growth in group benefits, dental, and direct-to-consumer platforms. Management sees a stronger second half for U.S. sales, contingent on improved recruiting and field productivity, and expects dental product momentum to persist following operational enhancements.
Expense and capital management: Elevated technology and marketing spending will persist, especially in Japan, as digitalization continues. However, management seeks to balance these investments with cost efficiencies and prudent capital deployment through dividends and buybacks, while closely monitoring regulatory capital ratios and macroeconomic risks.

Catalysts in Upcoming Quarters

In upcoming quarters, the StockStory team will monitor (1) the sustained sales momentum of Miraito and potential impact of new medical product launches in Japan, (2) the scaling and profitability of U.S. group and dental benefits businesses, and (3) progress in digital transformation initiatives, particularly AI-enabled customer service and cost efficiency. Persistent capital discipline and evolving regulatory developments will also be critical signposts.

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